AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 7, 1998
REGISTRATION NO. 333-41299
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
AVON PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
----------------------
<TABLE>
<S> <C> <C>
NEW YORK 2844 13-0544597
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification Number)
</TABLE>
----------------------
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)
----------------------
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)
----------------------
Copy to:
MICHAEL W. WEIR, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
----------------------
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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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
<S> <C> <C> <C> <C>
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(2)
- -----------------------------------------------------------------------------------------------------------------------------------
6.55% Notes due 2007 $100,000,000 100.1655% $100,165,500 $29,548.83
===================================================================================================================================
<FN>
(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.
(2) THE REGISTRATION FEE WAS PREVIOUSLY PAID.
</FN>
</TABLE>
----------------------
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.
<PAGE>
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
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON FEBRUARY 9, 1998 UNLESS EXTENDED.
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 February 9, 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 Notes will be payable from August 1, 1997 or from the most
recent Interest Payment Date to which interest has been paid. Interest on the
Old Notes will be payable on February 1, 1998. Interest on the New Notes will be
payable, semi-annually in arrears on February 1 and August 1 of each year,
commencing August 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."
----------------------
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.
----------------------
The date of this Prospectus is January 7, 1998.
<PAGE>
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.
2
<PAGE>
TABLE OF CONTENTS
Page
Notice to Investors..........................................................2
Incorporation of Certain Documents
by Reference..............................................................3
Available Information........................................................4
Cautionary Statement for Purposes of
the "Safe Harbor" Statement under
the Private Securities Litigation
Reform Act of 1995........................................................4
Summary......................................................................5
No Cash Proceeds to the Company.............................................13
Consolidated Ratio of Earnings
to Fixed Charges.........................................................13
Recent Developments.........................................................13
The Exchange Offer..........................................................15
Selected Financial Data.....................................................23
Management's Discussion and Analysis
of Financial Condition and Results of
Operations...............................................................24
The Company.................................................................40
Description of the Notes....................................................43
Certain United States Income Tax
Considerations...........................................................49
Plan of Distribution........................................................50
Validity of the New Notes...................................................50
Experts.....................................................................50
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).
3
<PAGE>
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.
4
<PAGE>
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.
<TABLE>
<CAPTION>
THE EXCHANGE OFFER
<S> <C>
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
5
<PAGE>
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 February 9, 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
6
<PAGE>
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."
7
<PAGE>
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 Agreement. 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
8
<PAGE>
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
9
<PAGE>
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 August 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. The
interest on the Old Notes will be payable on February 1,
1998.
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
10
<PAGE>
laws and regulations, it currently intends to make a market
in the 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
------- -------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA: ($ in millions, except ratios)
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:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- -------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Ratio of Earnings
to Fixed Charges........... 7.0 6.6 8.3 7.9 6.2 6.1 6.2
</TABLE>
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 1997'S fourth quarter earnings is in the range of
$1.00 to $1.05 per share. In 1996, 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 December 22, 1997 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
February 9, 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 certificated 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, 15th Floor
New York, NY 10001 Confirm by Telephone:
Attn.: Global Trust Services, (212) 946-3083
Kathleen Perry
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
------- -------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA: ($ in millions, except ratios)
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.
23
<PAGE>
(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>
24
<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 the prior year primarily due to increased average working capital
borrowings in 1997.
Interest income decreased $.9 million versus the comparable period of the
prior year primarily due to lower interest rates in Brazil.
25
<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
26
<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 in 1997 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.
27
<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 the prior 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 in the 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 in 1997.
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.
28
<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
29
<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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<PAGE>
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
34
<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,
35
<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,
36
<PAGE>
1996 and 1995, there were no borrowings under these facilities. In addition, as
of December 31, 1996 and 1995, there were international lines of credit totaling
$357.0 million and $320.0 million, respectively, of which $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.
37
<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
38
<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
39
<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.
40
<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 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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<PAGE>
"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.
50
<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.
51
<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, 15th Floor
New York, NY 10001
Attn.: Global Trust Services
Kathleen Perry
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.
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 January 7, 1998, 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.
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.
- -------------------
* Previously filed.
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
II-3
<PAGE>
plan's annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934) that is 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 amendment to the 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 7th day of January, 1998.
AVON PRODUCTS, INC.
By: /s/ Ward M. Miller, Jr.
-----------------------------------
Ward M. Miller, Jr.
Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and January 7, 1998
- -------------------------- Chief Executive Officer
James E. Preston (principal executive officer)
* Executive Vice President and January 7, 1998
- -------------------------- Chief Financial and
Edwina D. Woodbury Administrative Officer
(principal financial officer)
* Vice President and Controller January 7, 1998
- -------------------------- (principal accounting officer)
Michael R. Mathieson
* Director January 7, 1998
- --------------------------
Brenda C. Barnes
* Director January 7, 1998
- --------------------------
Richard S. Barton
* Director January 7, 1998
- --------------------------
Remedios Diaz Oliver
* Director January 7, 1998
- --------------------------
Edward T. Fogarty
II-5
<PAGE>
* Director January 7, 1998
- --------------------------
Stanley C. Gault
* Director January 7, 1998
- --------------------------
George V. Grune
Director
- --------------------------
Charles S. Locke
* Director January 7, 1998
- --------------------------
Ann S. Moore
Director
- --------------------------
Charles R. Perrin
* Director January 7, 1998
- --------------------------
Paula Stern
By: /s/ Ward M. Miller, Jr.
-----------------------------
Ward M. Miller, Jr.
Senior Vice President,
General Counsel and Secretary
</TABLE>
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 January 7, 1998,
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
- ------------------
* Previously filed.
II-7
AVON PRODUCTS, INC.,
as Issuer
and
THE CHASE MANHATTAN BANK,
as Trustee
----------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of January 7, 1998
To Indenture of Avon Products, Inc.
Dated as of August 1, 1997
---------------------------
6.55% Notes due 2007
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of January 7, 1998, between
AVON PRODUCTS, INC., a New York corporation, as Issuer (the "Company"), and THE
CHASE MANHATTAN BANK, a New York banking corporation, as Trustee (the
"Trustee"), under the Indenture referred to hereinafter.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee executed and delivered an
Indenture dated as of August 1, 1997 (the "Indenture"), providing for the
issuance of $100,000,000 principal amount of 6.55% Notes due 2007 of the Company
(the "Securities");
WHEREAS, for all purposes of this First Supplemental Indenture, except
as otherwise defined or unless the context otherwise requires, capitalized terms
used in this First Supplemental Indenture and defined in the Indenture have the
meaning specified in the Indenture;
WHEREAS, pursuant to Section 901 of the Indenture, the Company and the
Trustee have agreed to enter into this First Supplemental Indenture to amend the
provisions of Sections 203, 205, 302 and 305 of the Indenture;
WHEREAS, the parties hereto are entering into this First Supplemental
Indenture, in connection with the filing with the Commission of a Registration
Statement on Form S-4 in respect of the Securities, for the purpose of amending
the Indenture to allow Exchange Securities to be issued thereunder in minimum
denominations of $1,000 and integral multiples thereof;
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by a Board Resolution and all acts, conditions and
requirements necessary to make this First Supplemental Indenture a valid and
binding agreement in accordance with its terms and for the purposes herein set
forth have been done and taken, and the execution and delivery of this First
Supplemental Indenture have otherwise been in all respects duly authorized;
NOW THEREFORE, in consideration of the above premises, each party
hereto agrees, for the benefit of the other party and for the equal and
proportionate benefit of the Holders of the Securities, as follows:
-2-
<PAGE>
ARTICLE I
AMENDMENTS
Section 1.1 The first sentence of the eleventh paragraph of the "Form
of Reverse of Security" appearing in Section 203 of the Indenture is hereby
amended to add to the end of such sentence, before the period, the following:
"; provided, that Exchange Securities may be issued in registered form
without coupons in denominations of $1,000 and any integral multiple thereof."
Section 1.2 The proviso to the first sentence of Section 205 is hereby
deleted in its entirety and replaced by the following:
"; provided, however, that the term "Restricted Security"
shall not include any Exchange Securities or any Securities as
to which restrictions have been terminated in accordance with
Section 305."
Section 1.3 Section 302 of the Indenture is hereby amended to add to
the end of such section, before the period, the following:
"; provided, that Exchange Securities may be issued in registered form
without coupons in denominations of $1,000 and any integral multiple thereof."
Section 1.4 The last sentence of the sixth paragraph of Section 305(a)
of the Indenture is hereby deleted in its entirety and replaced by the
following:
"Exchange Securities and other Securities which are not
Restricted Securities, as well as Securities which are issued
upon registration of transfer of, or in exchange for,
Securities which are not Restricted Securities, shall not bear
such legend."
ARTICLE II
MISCELLANEOUS PROVISIONS
Section 2.1 Except as specifically amended and supplemented by, or to
the extent inconsistent with, this First Supplemental Indenture, the Indenture
shall remain in full force and effect and is hereby ratified and confirmed.
Section 2.2 THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS FIRST
SUPPLEMENTAL INDENTURE.
-3-
<PAGE>
Section 2.3 The Trustee accepts the modification of the Indenture as
hereby effected but only upon the terms and conditions set forth in the
Indenture as amended and supplemented by this First Supplemental Indenture.
Section 2.4 The parties may sign any number of counterparts of this
First Supplemental Indenture. Each such counterpart shall be an original, but
all of them together represent the same agreement.
Section 2.5 Except as otherwise provided in the Indenture, the Trustee
shall not be responsible in any manner whatsoever for or in respect of the
validity or sufficiency of this First Supplemental Indenture or for or in
respect of the recitals contained herein.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first written above.
AVON PRODUCTS, INC.
as Issuer
By: /s/ Ward M. Miller, Jr.
---------------------------------
Name: Ward M. Miller, Jr.
Title: Senior Vice President,
General Counsel and
Secretary
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ Kathleen Perry
--------------------------------
Name: Kathleen Perry
Title: Second Vice President
-5-
Exhibit 5.1
January 7, 1998
Avon Products, Inc.,
1345 Avenue of the Americas,
New York, NY 10105-0196.
Dear Sirs:
In connection with the registration under the Securities Act of 1933
(the "Act") of $100 million principal amount of 6.55% Notes due 2007 (the "New
Notes") of Avon Products, Inc., a New York corporation (the "Company"), to be
issued in exchange for the Company's outstanding 6.55% Notes due 2007 pursuant
to (i) the Indenture, dated as of August 1, 1997, between the Company and The
Chase Manhattan Bank, as trustee (the "Trustee"), as amended to date (the
"Indenture") and (ii) the Registration Rights Agreement, dated as of August 1,
1997 (the "Registration Rights Agreement"), by and among the Company and Morgan
Stanley & Co. Incorporated, Chase Securities Inc. and J.P. Morgan
<PAGE>
Avon Products, Inc. -2-
Securities Inc., we, as your special counsel, have examined such corporate
records, certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, we advise you that, in our opinion,
the New Notes have been duly authorized by the Company; and when the Securities
and Exchange Commission declares the Company's Registration Statement on Form
S-4 (File No. 333-41299) effective and the New Notes have been duly executed,
authenticated, issued and delivered in accordance with the terms of the
Registration Rights Agreement and the Indenture, the New Notes will constitute
valid and legally binding obligations of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of New York, and we are expressing no opinion
as to the effect of the laws of any other jurisdiction.
<PAGE>
Avon Products, Inc. -3-
In connection with the foregoing, we have assumed that at the time of
the issuance and delivery of the New Notes there will not have occurred any
change in law affecting the validity, legally binding character or
enforceability of the New Notes and that the issuance and delivery of the New
Notes, all of the terms of the New Notes and the performance by the Company of
its obligations thereunder will comply with applicable law and with each
requirement or restriction imposed by any court or governmental body having
jurisdiction over the Company and will not result in a default under or a breach
of any agreement or instrument then binding upon the Company.
In rendering the foregoing opinion, we have relied as to certain
matters on information obtained from public officials, officers of the Company
and other sources believed by us to be responsible, and we have assumed (i) that
the Indenture has been duly authorized, executed and delivered by the Trustee,
(ii) that the New Notes will conform to the specimens thereof examined by us,
(iii) that the Trustee's certificates of authentication of the New Notes will be
manually signed by one of the Trustee's authorized officers and (iv) that the
signatures on all
<PAGE>
Avon Products, Inc. -4-
documents examined by us are genuine, assumptions which we have not
independently verified.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity of
the New Notes" in the Prospectus. In giving such consent, we do not hereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act.
Very truly yours,
SULLIVAN & CROMWELL
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement (No. 333-41299) 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
January 6, 1998
LETTER OF TRANSMITTAL
FOR
6.55% NOTES DUE 2007
OF
AVON PRODUCTS, INC.
PURSUANT TO THE
EXCHANGE OFFER
IN RESPECT OF
ALL OF ITS OUTSTANDING 6.55% NOTES DUE 2007
FOR
6.55% NOTES DUE 2007
---------------
PURSUANT TO THE PROSPECTUS DATED JANUARY 7, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON FEBRUARY 9, 1998 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE
"EXPIRATION DATE").
To: The Chase Manhattan Bank, Exchange Agent
By Mail or Hand/Overnight Courier: By Facsimile:
The Chase Manhattan Bank (212) 946-8161
450 West 33rd Street, 15th Floor
New York, NY 10001 Confirm by Telephone:
Attention: Global Trust Services, (212) 946-3083
Ms. Kathleen Perry
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below). As used herein, the term
"holder" means a holder of Old Notes (as defined below), including any
participant ("DTC Participant") in the book-entry transfer facility system of
The Depository Trust Company
<PAGE>
("DTC"), whose name appears on a security position listing as the owner of the
Old Notes. As used herein, the term "certificates" means physical certificates
representing Old Notes.
To participate in the Exchange Offer (as defined below), holders must tender
by (a) book-entry transfer pursuant to the procedures set forth in the
Prospectus under "The Exchange Offer--Book-Entry Transfer" or (b) forwarding
certificates herewith. Holders who are DTC Participants tendering by book-entry
transfer may execute such tender through the Automated Tender Offer Program
("ATOP") of DTC. A holder using ATOP should transmit its acceptance to DTC on or
prior to the Expiration Date (as defined in the Prospectus). DTC will verify
such acceptance, execute a book-entry transfer of the tendered Old Notes into
the account of The Chase Manhattan Bank (the "Exchange Agent") at DTC and then
send to the Exchange Agent a Book-Entry Confirmation (as defined below),
including an Agent's Message (as defined below) confirming that DTC has received
an express acknowledgment from such holder that such holder has received and
agrees to be bound by this Letter of Transmittal and that the Company (as
defined below) may enforce this Letter of Transmittal against such holder. The
Book-Entry Confirmation must be received by the Exchange Agent in order for the
tender relating thereto to be effective. Book-entry transfer to DTC in
accordance with DTC's procedures does not constitute delivery of the Book-Entry
Confirmation to the Exchange Agent.
If the tender is not made pursuant to the book-entry transfer procedures,
certificates, as well as this Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be received
by the Exchange Agent at its address set forth herein on or prior to the
Expiration Date in order for such tender to be effective.
Holders of Old Notes whose certificates for such Old Notes are not
immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date or
who cannot complete the procedures for book-entry transfer on or 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" in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its sole discretion, in which event the term "Expiration
Date" shall mean the latest time and date to which the Exchange Offer is
extended. The Company shall notify the holders of the Old Notes of any extension
by means of a press release or other public announcement prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
-2-
<PAGE>
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, list the certificate numbers, principal
amounts and number of beneficial holders on a separately executed schedule and
affix the schedule to this Letter of Transmittal. See Instruction 3.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES TENDERED
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT OF OLD
NOTES NUMBER OF
NAME(S) AND ADDRESS(ES) OF REGISTERED TENDERED (IF BENEFICIAL HOLDERS
HOLDER(S) CERTIFICATE LESS THAN ALL FOR WHICH OLD NOTES
(PLEASE FILL IN, IF BLANK) NUMBER(S)* ARE TENDERED)** ARE HELD
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED $
===================================================================== ==============================================
<FN>
* Need not be completed by holders tendering by book-entry transfer.
** 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. All Old Notes held shall be deemed tendered unless a lesser number is specified in this
column. See Instruction 4.
</FN>
</TABLE>
-3-
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (DEFINED IN INSTRUCTION 1)
ONLY)
__
/_/ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH
DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------
DTC Account Number:
----------------------------------------------------
Transaction Code Number:
-----------------------------------------------
__
/_/ CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s) of Old Notes:
--------------------------
Window Ticket Number (if any):
-----------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------
Name of Institution which Guaranteed Delivery:
-------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution:
-----------------------------------------
DTC Account Number:
----------------------------------------------------
Transaction Code Number:
-----------------------------------------------
__
/_/ CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER AND
NON-EXCHANGED OR UNTENDERED OLD NOTES ARE TO BE RETURNED BY CREDITING
THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
__
/_/ CHECK HERE IF YOU ARE A BROKER-DEALER WHO HOLDS OLD NOTES ACQUIRED FOR
YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE
ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO FOR USE IN CONNECTION WITH RESALES OF NEW NOTES
RECEIVED FOR YOUR OWN ACCOUNT IN EXCHANGE FOR SUCH OLD NOTES.
Name:
------------------------------------------------------------------
Address:
---------------------------------------------------------------
Area Code and Telephone Number: Contact Person:
--------------- ---------
Principal Amount of Old Notes so Held:$
--------------------------------
-4-
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Avon Products, Inc., a New York
corporation (the "Company"), the aggregate principal amount of Old Notes
indicated in this Letter of Transmittal, upon the terms and subject to the
conditions set forth in the Company's Prospectus dated January 7, 1998 (as the
same may be amended or supplemented from time to time, the "Prospectus"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal,
which together constitute the Company's offer (the "Exchange Offer") to exchange
$100 million principal amount of its 6.55% Notes due 2007, which have been
registered under the Securities Act of 1933, as amended (the "New Notes"), for
$100 million principal amount of its issued and outstanding 6.55% Notes due
2007, of which $100 million aggregate principal amount was outstanding on the
date of the Prospectus (the "Old Notes" and, together with the New Notes, the
"Notes").
Subject to, and effective upon, the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all right, title and interest in and to such Old Notes as are being
tendered hereby and hereby irrevocably constitutes and appoints the Exchange
Agent as attorney-in-fact of the undersigned with respect to such Old Notes
(with full knowledge that the Exchange Agent is also acting as agent of the
Company in connection with the Exchange Offer), with full power of substitution
(such power of attorney being an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (i)
deliver certificates for Old Notes to the Company together with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company,
upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes
to be issued in exchange for such Old Notes, (ii) present certificates for such
Old Notes for transfer, and to transfer the Old Notes on the books of the
Company, and (iii) receive for the account of the Company all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms and conditions of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and to acquire New Notes issuable upon exchange of such tendered Old
Notes, and that, when the Old Notes are accepted for exchange, the Company will
acquire good, marketable and unencumbered title thereto, free and clear of all
security interests, liens, restrictions, charges, encumbrances, conditional sale
agreements or other obligations relating to their sale or transfer, and not
subject to any adverse claim when the same are accepted by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the exchange, assignment and transfer of the Old Notes tendered hereby,
and the undersigned will comply with any obligations it may have under the
Registration Rights Agreement (as defined in the Prospectus). The undersigned
further agrees that acceptance of any tendered Old Notes by the Company and the
issuance of New Notes in exchange therefor shall constitute performance in full
by the Company of its obligations under the Registration Rights Agreement and
that the Company shall have no further obligations or liabilities thereunder
(except in certain limited circumstances).
The undersigned hereby further represents that any New Notes acquired in
exchange for Old Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is the undersigned, that neither the holder of such Old Notes nor any
such other person is participating, or intends to participate, or has an
arrangement or understanding with any person to participate in the distribution
(within the meaning of the Securities Act of 1933, as amended, the "Securities
Act") of such New Notes and that neither the holder of such Old Notes nor any
such other person is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued in exchange for the Old Notes pursuant to the
Exchange Offer may be offered for resale,
-5-
<PAGE>
resold and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
provisions of the Securities Act), provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders are not
participating, do not intend to participate, and have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the Company does not intend to request the SEC to consider, and
the SEC has not considered, the Exchange Offer in the context of a no-action
letter, and there can be no assurance that the staff of the SEC would make a
similar determination with respect to the Exchange Offer as in other
circumstances. If any holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff of
the SEC and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. If
the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes acquired as a result of market-making or other
trading activities (a "Participating Broker-Dealer"), it represents that the Old
Notes to be exchanged for the New Notes were acquired by it as a result of
market-making or other trading activities and acknowledges that it will deliver
a prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, such Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of New Notes received in exchange for Old Notes which were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities, for a period ending 90 days after the Expiration Date
or, if earlier, when all such New Notes have been disposed of by such
Participating Broker-Dealer. Any person, including any Participating
Broker-Dealer, who is an "affiliate" may not rely on such interpretive letters
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. In that regard,
each Participating Broker-Dealer by tendering such Old Notes and executing this
Letter of Transmittal, agrees that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in the Prospectus untrue in any
material respect or which causes the Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
therein, in light of the circumstances under which they were made, not
misleading, such Participating Broker-Dealer will suspend the sale of New Notes
pursuant to the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to the Participating Broker-Dealer or the
Company has given notice that the sale of the New Notes may be resumed, as the
case may be. If the Company gives such notice to suspend the sale of the New
Notes, it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use the Prospectus in connection
with the resale of New Notes by the number of days during the period from and
including the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the supplemented or
amended Prospectus necessary to permit resales of the New Notes or to and
including the date on which the Company has given notice that the sale of New
Notes may be resumed, as the case may be.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter of Transmittal and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal of Tenders" section of the Prospectus.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive any interest on such Old Notes, and the undersigned hereby waives the
right to receive any interest on such Old Notes in connection with the Exchange
Offer.
-6-
<PAGE>
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed above in the box entitled "Description of Old
Notes Tendered," if they are not already set forth in such box, as they appear
on the certificates representing such Old Notes. The certificate number(s) of
the Old Notes that the undersigned wishes to tender should be indicated in the
appropriate boxes above.
If tendered Old Notes are not exchanged pursuant to the Exchange Offer for
any reason, or if certificates are submitted for more Old Notes than are
tendered or accepted for exchange, certificates of such unexchanged or
untendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the expiration
or termination of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may not be required to accept for exchange any of
the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions" below, the undersigned hereby directs that
the New Notes be delivered to the undersigned at the address shown above in the
box entitled "Description of Old Notes Tendered."
-7-
<PAGE>
HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 16)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by the registered holder exactly as name(s) appear(s) on
certificates for the Old Notes hereby tendered or on a security position
listing, or by any person authorized to become the registered holder by
endorsements and documents transmitted herewith (including such opinions of
counsel, certifications and other information as may be required by the Company,
the Trustee for the Old Notes or the Exchange Agent to comply with the
restrictions on transfer applicable to the Old Notes). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
o
-------------------------------------------------------------------------------
o
-------------------------------------------------------------------------------
(SIGNATURE OF HOLDER)
Date:
--------------------
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
Tax Identification or Social Security Number:
-----------------------------------
GUARANTEE OF SIGNATURE
(SEE INSTRUCTIONS 2 AND 5)
o
-------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date:
--------------------
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
-8-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if the New Notes and/or any Old Notes that are not tendered
are to be issued in the name of someone other than the registered holder of the
Old Notes whose name appears above.
Issue
[_] New Notes
[_] Old Notes not tendered
to:
Name:
-------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-----------------------------------------------
Tax Identification or Social Security Number:
---------------------------------
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if the New Notes and/or any Old Notes that are not tendered
are to be sent to someone other than the registered holder of the Old Notes
whose name appears above, or to such registered holder at an address other than
that shown above.
Mail
[_] New Notes
[_] Old Notes not tendered
to:
Name:
-------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-----------------------------------------------
Tax Identification or Social Security Number:
---------------------------------
-9-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER OF AVON PRODUCTS, INC.
TO EXCHANGE ITS 6.55% NOTES DUE 2007 FOR ALL OF ITS OUTSTANDING 6.55% NOTES
DUE 2007
1. BOOK-ENTRY TRANSFER; DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES;
GUARANTEED DELIVERY PROCEDURES
To tender in the Exchange Offer, holders must tender by (a) forwarding
certificates herewith or (b) book-entry transfer, pursuant to the procedures set
forth in "The Exchange Offer--Procedures for Tendering" and "--Book-Entry
Transfer" in the Prospectus. Holders who are DTC Participants tendering by
book-entry transfer may execute such tender through DTC's ATOP system. A holder
using ATOP should transmit its acceptance to DTC on or prior to the Expiration
Date. DTC will verify such acceptance, execute a book-entry transfer of the
tendered Old Notes into the Exchange Agent's account at DTC and then send to the
Exchange Agent a Book-Entry Confirmation, including an Agent's Message
confirming that DTC has received an express acknowledgment from such holder that
such holder has received and agrees to be bound by this Letter of Transmittal
and that the Company may enforce this Letter of Transmittal against such holder.
The Book-Entry Confirmation must be received by the Exchange Agent in order for
the tender relating thereto to be effective. Book-entry transfer to DTC in
accordance with DTC's procedures does not constitute delivery of the Book-Entry
Confirmation to the Exchange Agent. The term "Book-Entry Confirmation" means a
timely confirmation of a book-entry transfer of Old Notes into the Exchange
Agent's account at DTC. The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by the Letter of Transmittal (including the
representations contained herein) and that the Company may enforce the Letter of
Transmittal against such participant.
If the tender is not made pursuant to the book-entry transfer procedures,
certificates, as well as this Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be received
by the Exchange Agent at its address set forth herein on or prior to the
Expiration Date in order for such tender to be effective. 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.
Holders of Old Notes whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive 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 of Old Notes and the
amount of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the Expiration Date, the certificates for all physically tendered Old
Notes, or a Book-Entry Confirmation, and any other documents required by this
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) a properly executed Letter of Transmittal, as well as
the certificates for all physically tendered Old Notes in proper form for
transfer or Book-Entry Confirmation, as the case may be, and all other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
within three NYSE trading days after the Expiration Date.
-10-
<PAGE>
The Notice of Guaranteed Delivery must be delivered by hand, overnight
courier or mail, or transmitted by facsimile transmission, to the Exchange Agent
on or prior to the Expiration Date, and must include a guarantee by an Eligible
Institution in the form set forth in such notice. For Old Notes to be properly
tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must
receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As
used herein and in the Prospectus, "Eligible Institution" means a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible
guarantor institution," including (as such terms are defined therein) (i) a
bank; (ii) a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. 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 PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. DO NOT SEND THIS LETTER OF
TRANSMITTAL OR ANY OLD NOTES TO THE COMPANY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by book-entry transfer through ATOP or execution
of a Letter of Transmittal (or facsimile thereof), waives any right to receive
any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES.
No signature guarantee on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC whose
name appears on a security position listing as the owner of the Old Notes) of
Old Notes tendered herewith, unless such holder has completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" above; or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature on
this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE.
If the space provided in the box captioned "Description of Old Notes
Tendered" is inadequate, the certificate number(s) and/or the principal amount
of Old Notes and any other required information should be listed on a separate
signed schedule which is attached to this Letter of Transmittal.
4. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY BOOK-
ENTRY TRANSFER); WITHDRAWAL RIGHTS
Tenders of Old Notes will be accepted only 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 or exchanged, the
untendered or unexchanged principal amount of the holder's remaining Old Notes
must be $100,000 or any integral multiple of $1,000 in excess thereof. If less
than all of the Old Notes evidenced by a submitted certificate are to be
tendered, the tendering holder(s) should fill in the aggregate principal amount
of Old Notes to be tendered in the box
-11-
<PAGE>
above entitled "Description of Old Notes--Aggregate Principal Amount of Old
Notes Tendered (If Less than All are Tendered)." A reissued certificate
representing the balance of untendered Old Notes will be sent to such tendering
holder, unless otherwise provided in the appropriate box on this Letter of
Transmittal, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED
TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE
INDICATED.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to the Expiration Date. In order for a withdrawal to be
effective prior to that time, a written or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent at one of its addresses
set forth above prior to the Expiration Date. Any such notice of withdrawal must
specify the name of the person having deposited the Old Notes to be withdrawn,
the aggregate principal amount of Old Notes to be withdrawn and (if certificates
for such Old Notes have been tendered) the name of the registered holder of the
Old Notes as set forth on the certificate for the Old Notes, if different from
that of the person who tendered such Old Notes. If certificates for the Old
Notes have been delivered or otherwise identified to the Exchange Agent, then
prior to the physical release of such certificates for the Old Notes, the
tendering holder must submit the serial numbers shown on the particular
certificates for the Old Notes to be withdrawn and the signature on the notice
of withdrawal must be guaranteed by an Eligible Institution, except in the case
of Old Notes tendered for the account of an Eligible Institution. If Old Notes
have been tendered pursuant to the procedures for book-entry transfer set forth
in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus, the
notice of withdrawal must specify the name and number of the account at the
book-entry transfer facility system of DTC to be credited with the withdrawal of
Old Notes, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by written or facsimile transmission. Withdrawals of
tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not
be deemed 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 retendered. Properly withdrawn Old Notes may be retendered
at any subsequent time on or prior to the Expiration Date by following the
procedures described in the Prospectus under "The Exchange Offer--Procedures for
Tendering."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any employees, agents, affiliates or assigns of the
Company, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give such notification. Any Old Notes which have been
tendered but which are withdrawn will be returned to the holder thereof without
cost to such holder as promptly as practicable after withdrawal.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES
If this Letter of Transmittal is signed by the holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates or on a securities position listing without any
change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates or securities positions listings, it will be necessary to complete,
sign and submit as many separate copies of this Letter as there are different
registrations.
When this Letter of Transmittal is signed by the holder or holders of the
Old Notes specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the holder, then endorsements of
-12-
<PAGE>
any certificates transmitted hereby or separate bond powers are required.
Signatures on such certificate(s) must be guaranteed by an Eligible Institution.
In connection with any tender of Old Notes in definitive certificated form,
if this Letter of Transmittal is signed by a person other than the registered
holder or holders of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name or names of the registered holder or holders
appear(s) on the certificate(s), and the signatures on such certificate(s) must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates 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.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this instruction 5 must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
If New Notes are to be issued in the name of a person other than the
registered holder, or if New Notes are to be sent to someone other than the
registered holder or to an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. Certificates for Old
Notes not exchanged will be returned by mail or, if tendered by book-entry
transfer, by crediting the account indicated above maintained at DTC unless the
appropriate boxes on this Letter of Transmittal are completed. See Instruction
4.
7. TAX IDENTIFICATION NUMBER.
Under U.S. federal income tax law, a holder whose tendered Old Notes are
accepted for exchange is required to provide the Exchange Agent (as payor) with
such holder's correct taxpayer identification number ("TIN") on the Substitute
Form W-9 below which, in the case of a tendering holder who is an individual, is
his or her Social Security Number. In the case of a tendering holder who is an
individual who does not have and is not eligible to obtain a Social Security
Number (e.g., a resident alien), the correct taxpayer identification number is
such holder's IRS individual taxpayer identification number ("ITIN"). If the
Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Old Notes
exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 3 of the Substitute Form W-9 should be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
-13-
<PAGE>
The holder is required to give the Exchange Agent the TIN (e.g., social
security number, employer identification number or IRS individual taxpayer
identification number) of the registered owner of the Old Notes or of the last
transferee appearing on the transfers attached to, or endorsed on, the Old
Notes. If the Old Notes are registered in more than one name or are not in the
name of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding requirements. Such holders should nevertheless complete the attached
Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid
possible erroneous backup withholding. A foreign person may qualify as an exempt
recipient by submitting a properly completed IRS Form W-8 (Certificate of
Foreign Status), signed under penalties of perjury, attesting to that holder's
exempt status. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
8. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged are to be delivered to, or are
to be registered or issued in the name of, any person other than the holder of
the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the transfer of Old Notes
to the Company or its order pursuant to the Exchange Offer, the amount of any
such transfer taxes (whether imposed on the 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 herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 8, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER OF
TRANSMITTAL.
9. DETERMINATION OF VALIDITY.
The Company will determine, in its sole discretion, all questions as to the
form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Old Notes, which determination shall be
final and binding on all parties. The Company reserves the absolute right to
reject any and all tenders determined by it not to be in proper form or the
acceptance of which, or exchange for which, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus under the caption "The Exchange Offer" or any conditions or
irregularity in any tender of Old Notes of any particular holder whether or not
similar conditions or irregularities are waived in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither the Company, any
employees, agents, affiliates or assigns of the Company, the Exchange Agent, nor
any other person shall be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
10. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter of
Transmittal, shall waive any right to receive notice of the acceptance of their
Old Notes for exchange.
-14-
<PAGE>
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
11. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
If any certificates representing Old Notes have been lost, destroyed or
stolen, the holder should promptly notify the Exchange Agent. The holder will
then be instructed as to the steps that must be taken in order to replace the
certificates. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
certificates have been followed.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus, the Notice of Guaranteed Delivery and this
Letter of Transmittal, may be directed to the Exchange Agent, at the address and
telephone number indicated on the front of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF OR AGENT'S
MESSAGE IN LIEU THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
-15-
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 7)
PAYER'S NAME: THE CHASE MANHATTAN BANK
SUBSTITUTE
FORM W-9
Department of the Treasury Internal Revenue Service
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
PART 1 -- Enter your TIN in the appropriate box. For individuals, your social
security number (SSN). For individuals who do not have and are not eligible to
obtain a Social Security Number, this is your IRS individual taxpayer
identification number (ITIN). For other entities it is your employer
identification number (EIN).
Social security number, Employer identification number OR IRS individual
taxpayer identification number:
-----------------------------------------------
PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because: (a) I am exempt
from backup withholding, or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report interest or dividends on your tax return. However, if
after being notified by the IRS that you are subject to backup withholding, you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out such item (2).
If exempt recipient, write "EXEMPT" in the space below. See the accompanying
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
PART 3--
Awaiting TIN [_]
SIGNATURE DATE
-------------------------------------------- ------------------
NAME (Please Print)
-----------------------------------------------------------
BUSINESS NAME (If different) (Please Print)
------------------------------------
ADDRESS (Please Print)
--------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature Date
------------------------------------------- --------------------
Name (Please Print)
------------------------------------------------------------
Address (Please Print)
---------------------------------------------------------
-1-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
HOW TO GET A TIN
If you don't have a taxpayer identification number (a "TIN"), apply for one
immediately. To apply, get Form SS-5, Application for a Social Security Number
Card (for individuals), from you local office of the Social Security
Administration, or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), from you local IRS office. For
individuals who do not have and are not eligible to obtain a Social Security
Number, apply for an IRS taxpayer identification number on Form W-7 which is
available from your local IRS office.
If you do not have a TIN, write "Applied For" in the space for the TIN in Part
1, sign and date the form, and give it to the requester. Generally, you will
then have 60 days to get a TIN and give it to the requester. If the requester
does not receive your TIN within 60 days, backup withholding, if applicable,
will begin and continue until you furnish your TIN.
NOTE: Writing "Applied For" on the form means that you have already applied for
a TIN or that you intend to apply for one soon.
As soon as you receive your TIN, complete a Form W-9, include your TIN, sign and
date the form, and give it to the requester.
SPECIFIC INSTRUCTIONS
NAME. If you are an individual, you must generally enter the name shown on your
social security card. However, if you have changed your last name, for instance,
due to marriage, without informing the Social Security Administration of the
name change, please enter you first name, the last name shown on your social
security card, and your new last name.
SOLE PROPRIETOR. You must enter your individual name (enter either your social
security number ("SSN") or your employer identification number ("EIN") in Part
1). You may also enter your business name or "doing business as" name on the
business name line. Enter your name as shown on your social security card and
business name as it was used to apply for your EIN on Form SS-4.
PART I -- TIN
You must enter your TIN in the appropriate box. If you are a sole proprietor,
you may enter either your SSN or your EIN. Also see the chart on the attached
page for further clarification of name and TIN combinations. If you do not have
a TIN, follow the instructions under "How to Get a TIN" above.
PART II -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are not exempt from backup withholding.
Corporations are exempt from backup withholding for certain payments. If you are
exempt from backup withholding, you should still complete this form to avoid
possible erroneous backup withholding. Enter your correct TIN in Part I, write
"Exempt" in the space provided, and sign and date the form.
If you are a nonresident alien or a foreign entity not subject to backup
withholding, give the requester a completed Form W-8, Certificate of Foreign
Status.
The following is a list of payees exempt from backup withholding. For interest
and dividends, all listed payees are exempt except the payee in item (ix). For
broker transactions, payees listed in items (i) through (xiii), and a person
registered under the Investment Advisors Act of 1940 who regularly acts as a
broker are exempt.
(i) a corporation;
(ii) an organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
account, or a custodial account under Section 403(b)(7) of the Code if the
account satisfies the requirements of Section 401(f)(2) of the Code;
(iii) the United States or any of its agencies or instrumentalities;
(iv) a state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities;
(v) a foreign government or any of its political subdivisions, agencies or
instrumentalities;
(vi) an international organization or any of its agencies or instrumentalities;
(vii) a foreign central bank of issue;
(viii) a dealer in securities or commodities required to register in the United
States or a possession of the United States;
<PAGE>
(ix) a futures commission merchant registered with the Commodity Futures Trading
Commission;
(x) a real estate investment trust;
(xi) an entity registered at all times during the tax year under the Investment
Company Act of 1940;
(xii) a common trust fund operated by a bank under Section 584(a) of the Code;
(xiii) a financial institution;
-1-
<PAGE>
(xiv) a middleman known in the investment community as a
nominee or who is listed in the most recent publication of the American Society
of Corporate Secretaries, Inc., Nominee List; or
(xv) a trust exempt from tax under Section 664 or described in Section 4947.
PRIVACY ACT NOTICE -- Section 6109 requires you to give your TIN to persons who
must report certain payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your TIN to a requester, you are subject to a penalty of $50 for each
such failure unless your failure is due to reasonable cause and not to willful
neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis which results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
-2-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper name and Identification Number to Give the
Requester. Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000.
<TABLE>
<CAPTION>
- --------------------------------------------------------------- -------------------------------------------------------------
GIVE THE GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C>
1. Individual The individual 6. Sole proprietorship The owner3
2. Two or more individuals The actual owner of the 7. A valid trust, estate, or Legal entity4
(joint account) account or, if combined pension trust
funds, the first individual on
the account1
3. Custodian account of a The minor2
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee1 8. Corporate The corporation
saving trust account
(grantor is also trustee)
b. So-called trust account The actual owner1 9. Association, club, The organization
is not a legal or valid religious, charitable,
trust under State law educational or other tax-
exempt organization
5. Sole Proprietorship The Owner3 10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
- --------------------------------------------------------------- -------------------------------------------------------------
<FN>
1 List first and circle the name of the person whose number you furnish.
If only one person on a joint account has a social security number, that
person's number must be furnished.
2 Circle the minor's name and furnish the minor's social security number.
3 You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number.
4 List first and circle the name of the legal trust, estate or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
</FN>
</TABLE>
-3-
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
6.55% NOTES DUE 2007
OF
AVON PRODUCTS, INC.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Avon Products, Inc., a New York corporation (the
"Company"), made pursuant to the Prospectus, dated January 7, 1998 (as the same
may be amended or supplemented from time to time the "Prospectus"), if
certificates for the outstanding 6.55% Notes due 2007 of the Company (the "Old
Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit the Old
Notes, the Letter of Transmittal and all other required documents to reach The
Chase Manhattan Bank (the "Exchange Agent") on or prior to 5:00 p.m., New York
City time, on the Expiration Date of the Exchange Offer. This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail, or
transmitted by facsimile transmission, to the Exchange Agent as set forth below.
See "The Exchange Offer--Procedures for Tendering" in the Prospectus.
Capitalized terms used herein but not defined herein have the respective
meanings given to them in the Prospectus.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON FEBRUARY 9, 1998 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
- -------------------------------------------------------------------------------
To: The Chase Manhattan Bank, Exchange Agent-
By Mail or Hand/Overnight Delivery: By Facsimile:
The Chase Manhattan Bank (212) 946-8161
450 West 33rd Street, 15th Floor
New York, NY 10001 Confirm by Telephone:
Attention: Global Trust Services, (212) 946-3083
Ms. Kathleen Perry
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON THE LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Old Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures."
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<PAGE>
PLEASE SIGN AND COMPLETE
Signature(s) of Owner(s) or Authorized Signatory:
-----------------------------
Name(s) of Registered Holder(s):
----------------------------------------------
Principal Amount of Old Notes Tendered:*
--------------------------------------
- -------------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Certificate No(s). of Old Notes (if available):
-------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Area Code and Telephone No.:
--------------------------------------------------
If Old Notes will be tendered by book-entry transfer provide the following
information:
Signature:
--------------------------------------------------------------------
Date: DTC Account Number:
------------------- --------------------------
Date:
----------------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) of Old Notes
exactly as its (their) name(s) appear on certificates for Old Notes or on a
security position listing as the owner of Old Notes, or by person(s) authorized
to become holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
----------------------------------------------------------------------
----------------------------------------------------------------------
Capacity:
---------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD BE
SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
- ------------------------
* Must be in denominations of 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 in excess thereof.
-2-
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") as an "eligible
guarantor institution," including (as such terms are defined therein): (i) a
bank; (ii) a broker, dealer, municipal securities broker, municipal securities
dealer, government securities broker or government securities dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association recognized program (each of the
foregoing being referred to as an "Eligible Institution"), hereby guarantees to
deliver to the Exchange Agent at the address set forth above, either the Old
Notes tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Old Notes to the Exchange Agent's account at The
Depository Trust Company, pursuant to the procedure for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letters of Transmittal (or facsimile thereof or
Agent's Message in lieu thereof) and any other required documents within three
New York Stock Exchange trading days after the Expiration Date.
The undersigned acknowledges that it must deliver the Letter of Transmittal (or
Agent's Message in lieu thereof) and Old Notes tendered hereby to the Exchange
Agent within the time period set forth above and that failure to do so could
result in financial loss to the undersigned.
Name of Firm:
-----------------------------------------------------------------
- -------------------------------------------------------------------------------
Authorized Signature
Address:
----------------------------------------------------------------------
Name:
-------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
Title:
------------------------------------------------------------------------
Area Code and Telephone No.: Date:
----------------------- -----------------
DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD BE
SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL.
-3-
Exhibit 99.3
January 7, 1998
EXCHANGE AGENT AGREEMENT
The Chase Manhattan Bank
450 East 33rd Street
New York, N.Y. 10001
Attention: Corporate Trust Services
Ladies and Gentlemen:
Avon Products, Inc., a New York corporation (the "Company"), proposes
to make an offer (the "Exchange Offer") to exchange up to $100,000,000 principal
amount of its 6.55% Notes due 2007 (the "New Notes"), for a like principal
amount of its outstanding 6.55% Notes due 2007 (the "Old Notes"). The terms and
conditions of the Exchange Offer are set forth in a prospectus (the
"Prospectus") included in the Company's registration statement on Form S-4 (File
No. 333-41299), as amended (the "Registration Statement"), filed with the
Securities and Exchange Commission (the "SEC"), and proposed to be distributed
to all record holders of the Old Notes. The Old Notes and the New Notes are
collectively referred to herein as the "Notes." Capitalized terms used herein
and not defined shall have the respective meanings ascribed to them in the
Prospectus or accompanying Letter of Transmittal.
The Company hereby appoints The Chase Manhattan Bank to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Chase Manhattan Bank.
The Exchange Offer is expected to be commenced by the Company on or
about January 8, 1998. The Letter of Transmittal accompanying the Prospectus (or
in the case of book entry securities, either the Letter of Transmittal or the
Automated Tender Offer Program ("ATOP") system) is to be used by the holders of
the Old Notes to accept the Exchange Offer and contains instructions with
respect to the delivery of certificates for Old Notes tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
February 9, 1998, or on such later date or time to which the Company may extend
the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions
set forth in the Prospectus, the Company expressly reserves the right to extend
the Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (confirmed in writing) or written notice to you before 9:00 A.M., New York
City time, on the next business day after the previously scheduled Expiration
Date.
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The Company expressly reserves the right, in its sole discretion, to
amend or terminate the Exchange Offer, and not to accept for exchange any Old
Notes not theretofore accepted for exchange. The Company will give oral
(confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer", in the Letter of Transmittal accompanying the Prospectus or as
specifically set forth herein; provided, however, that in no way will your
general duty to act in good faith and without gross negligence or willful
misconduct be limited by the foregoing.
2. You will establish an account with respect to the Old Notes at
The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may, until the Expiration Date, make book-entry delivery of
the Old Notes by causing the Book-Entry Transfer Facility to transfer such Old
Notes into your account in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. In every case, however, a Letter of Transmittal
(or a manually executed facsimile thereof) or an Agent's Message, properly
completed and duly executed, with any required signature guarantees and any
other required documents must be transmitted to and received by you prior to the
Expiration Date or the guaranteed delivery procedures described in the Exchange
Offer must be complied with.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Notes (and confirmation of book-entry transfers of Old
Notes into your account at the Book-Entry Transfer Facility) and any other
documents delivered or mailed to you by or for holders of the Old Notes, to
ascertain whether: (i) the Letters of Transmittal, certificates and any such
other documents are duly executed and properly completed in accordance with
instructions set forth therein and that such book-entry confirmations are in due
and proper form and contain the information required to be set forth therein,
(ii) the Old Notes have otherwise been properly tendered, (iii) the Old Notes
tendered in part are tendered in principal amounts of $100,000 and integral
multiples of $1,000 in excess thereof and that if any Old Notes are tendered for
exchange in part, the untendered principal amount thereof is $100,000 or any
integral multiple of $1,000 in excess thereof, and (iv) holders have provided
their Tax Identification Number or required certification. In each case where
the Letter of Transmittal or any other document has been improperly completed or
executed, or where book-entry confirmations are not in due and proper form or
omit certain information, or any of the certificates for Old Notes are not in
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proper form for transfer or some other irregularity in connection with the
acceptance of the Exchange Offer exists, you will endeavor to inform the
presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
4. With the approval of the Chairman, the President, any Vice
President, the Secretary or any Assistant Secretary (such approval, if given
orally, to be confirmed in writing) or any other person designated by such an
officer in writing, you are authorized to waive any irregularities in connection
with any tender of Old Notes pursuant to the Exchange Offer.
5. At the written request of the Company or its counsel, you shall
notify tendering holders of Old Notes in the event of any extension, termination
or amendment of the Exchange Offer. In the event of any such termination, you
will return all tendered Old Notes to the persons entitled thereto, at the
request and expense of the Company.
6. Tenders of Old Notes may be made only as set forth in the Letter
of Transmittal and in the section of the Prospectus captioned "The Exchange
Offer," and Old Notes shall be considered properly tendered to you only when
tendered in accordance with the procedures set forth therein. Notwithstanding
the provisions of this paragraph 6, Old Notes which the Chairman, the President,
any Vice President, the Secretary or any Assistant Secretary or any other
officer of the Company designated by any such person shall approve as having
been properly tendered shall be considered to be properly tendered (such
approval, if given orally, shall be confirmed in writing). New Notes are to be
issued in exchange for Old Notes pursuant to the Exchange Offer only (i) against
deposit with you prior to the Expiration Date or, in the case of a tender in
accordance with the guaranteed delivery procedures outlined in Instruction 1 of
the Letter of Transmittal, within three New York Stock Exchange trading days
after the Expiration Date of the Exchange Offer, together with executed Letters
of Transmittal and any other documents required by the Exchange Offer or (ii) in
the event that the holder is a participant in The Depository Trust Company
("DTC") system, by the utilization of DTC's ATOP and any evidence required by
the Exchange Offer.
7. You shall advise the Company with respect to any Old Notes
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Old Notes.
8. You shall accept tenders:
(a) in cases where the Old Notes are registered in two or more names
only if signed by all named holders;
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(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old Notes
provided that customary transfer requirements, including those regarding any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Notes when so indicated and as
permitted in the Letter of Transmittal and deliver certificates for Old Notes to
the Security Registrar for split-up and return any untendered Old Notes to the
holder (or such other person as may be designated in the Letter of Transmittal)
as promptly as practicable after expiration or termination of the Exchange
Offer.
9. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will notify you (such notice if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date, of
all Old Notes properly tendered and you, on behalf of the Company, will exchange
such Old Notes for New Notes and cause such Old Notes to be canceled. Delivery
of New Notes will be made on behalf of the Company by you at the rate of $1,000
principal amount of New Notes for each $1,000 principal amount of the Old Notes
tendered promptly after notice (such notice if given orally, to be confirmed in
writing) of acceptance of said Old Notes by the Company; provided, however, that
in all cases, Old Notes tendered pursuant to the Exchange Offer will be
exchanged only after timely receipt by you of certificates for such Old Notes
(or confirmation of book-entry transfer into your account at the Book- Entry
Transfer Facility), a properly completed and, except as described in the section
of the Prospectus captioned "The Exchange Offer--Procedures for Tendering", duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other required documents. Unless otherwise
instructed by the Company, you shall issue New Notes only in denominations of
$1,000 or any integral multiple thereof.
10. Tenders, pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and upon the conditions set forth in the Prospectus
and the Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time on or prior to the Expiration Date in accordance
with the terms of the Exchange Offer.
11. The Company shall not be required to exchange any Old Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Old Notes tendered
shall be given (and confirmed in writing) by the Company to you.
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12. If, pursuant to the Exchange Offer, the Company does not accept
for exchange all or part of the Old Notes tendered because of an invalid tender,
the occurrence of certain other events set forth in the Prospectus or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Old Notes (or effect
appropriate book-entry transfer), together with any related required documents
and the Letters of Transmittal relating thereto that are in your possession, to
the persons who deposited them (or effected such book-entry transfer).
13. All certificates for reissued Old Notes, unaccepted Old Notes or
for New Notes (other than those effected by book-entry transfer) shall be
forwarded by (a) first-class certified mail, return receipt requested, under a
blanket surety bond obtained by you protecting you and the Company from loss or
liability arising out of the nonreceipt or nondelivery of such certificates or
(b) by registered mail insured by you separately for the replacement value of
each of such certificates.
14. As soon as practicable after the Expiration Date, you shall
arrange for cancellation of the Old Notes submitted to you or returned by DTC in
connection with ATOP. Such Old Notes shall be cancelled and retired by you as
you are instructed by the Company (or a representative designated by the
Company) in writing.
15. You are not authorized to pay or offer to pay any concessions,
commissions or other solicitation fees to any broker, dealer, commercial bank,
trust company or other nominee or to engage or use any person to solicit
tenders.
16. As Exchange Agent hereunder, you:
(a) shall have no duties or obligations other than those
specifically set forth in the Prospectus, the Letter of Transmittal or herein or
as may be subsequently agreed to in writing by you and the Company;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any of
the certificates for the Old Notes deposited with you pursuant to the Exchange
Offer, and will not be required to and will make no representation as to the
validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter, telegram or
other
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document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also as to the
truth and accuracy of any information contained therein, which you shall in good
faith believe to be genuine or to have been signed or represented by a proper
person or persons;
(f) may rely on and shall be protected in acting upon written or
oral instructions from any officer of the company;
(g) may consult with your counsel with respect to any questions
relating to your duties and responsibilities, and the written opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by you hereunder in good faith
and in accordance with the written opinion of such counsel; and
(h) shall not advise any person tendering Old Notes pursuant to
the Exchange Offer as to whether to tender or refrain from tendering all or any
portion of Old Notes or as to the market value, decline or appreciation in
market value of any Old Notes that may or may not occur as a result of the
Exchange Offer or as to the market value of the New Notes;
provided, however, that in no way will your general duty to act in good faith
and without gross negligence or willful misconduct be limited by the foregoing.
17. You shall take such action as may from time to time be requested
by the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms
as may be approved from time to time by the Company to all persons requesting
such documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided, that such information shall relate
only to the procedures for accepting (or withdrawing from) the Exchange Offer.
The Company will furnish you with copies of such documents at your request.
18. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Katherine O'Hara, Senior Counsel, of
the Company (telephone number (212) 282-7243, facsimile number (212) 282-6509)
and to Judy Chen, Manager Corporate Finance, of the Company (telephone number
(212) 282- 5232, facsimile number (212) 282-6117) and such other person or
persons as the Company may request, daily (and more frequently during the week
immediately preceding
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the Expiration Date and if otherwise requested), up to and including the
Expiration Date, as to the number and aggregate principal amount of Old Notes
which have been duly tendered pursuant to the Exchange Offer and the items
received by you pursuant to the Exchange Offer and this Agreement, separately
reporting and giving cumulative totals as to items properly received and items
improperly received. In addition, you will also inform, and cooperate in making
available to, the Company or any such other person or persons upon oral request
made from time to time prior to the Expiration Date of such other information as
it or he or she reasonably requests. Such cooperation shall include, without
limitation, the granting by you to the Company and such person as the Company
may request of access to those persons on your staff who are responsible for
receiving tenders, in order to ensure that immediately prior to the Expiration
Date the Company shall have received information in sufficient detail to enable
it to decide whether to extend the Exchange Offer. You shall prepare a final
list of all persons whose tenders were accepted, the number and aggregate
principal amount of Old Notes tendered, the number and aggregate principal
amount of Old Notes accepted and the identity of any Participating
Broker-Dealers (as defined in the Letter of Transmittal) and the number and
aggregate principal amount of New Notes delivered to each, and deliver said list
to the Company.
19. Letters of Transmittal, book-entry confirmations and Notices of
Guaranteed Delivery received by you shall be preserved by you for a period of
time at least equal to the period of time you preserve other records pertaining
to the transfer of securities, or one year, whichever is longer, and thereafter
shall be delivered by you to the Company. You shall dispose of unused Letters of
Transmittal and other surplus materials, upon consultation with the Company, in
accordance with your customary procedures.
20. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan, credit
or other agreement with you or for compensation owed to you hereunder.
21. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on the Schedule attached hereto.
22. You hereby acknowledge receipt of the Prospectus and the Letter
of Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
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23. The Company covenants and agrees to indemnify and hold you
harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including reasonable attorneys' fees and expenses
arising out of or in connection with any act, omission, delay or refusal made by
you in reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Old Notes reasonably believed by you in good faith to
be authorized, and in delaying or refusing in good faith to accept any tenders
or effect any transfer of Old Notes; provided, however, that anything in this
Agreement to the contrary notwithstanding, the Company shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of your gross negligence or willful misconduct. In no case
shall the Company be liable under this indemnity with respect to any claim
against you unless the Company shall be notified by you, by letter or cable or
by facsimile which is confirmed by letter, of the written assertion of a claim
against you or of any other action commenced against you, promptly after you
shall have received any such written assertion or notice of commencement of
action. The Company shall be entitled to participate, at its own expense, in the
defense of any such claim or other action, and, if the company so elects, the
Company may assume the defense of any pending or threatened action against you
in respect of which indemnification may be sought hereunder, in which case the
Company shall not thereafter be responsible for the subsequently incurred fees
and disbursements of legal counsel for you under this paragraph so long as the
Company shall retain counsel reasonably satisfactory to you to defend such suit;
provided, that the Company shall not be entitled to assume the defense of any
such action if the named parties to such action include both you and the Company
and representation of both parties by the same legal counsel would, in the
written opinion of your counsel, be inappropriate due to actual or potential
conflicting interests between you and the Company. You understand and agree that
the Company shall not be liable under this paragraph for the fees and expenses
of more than one legal counsel for you.
24. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required, in certain
instances, to deduct thirty-one percent (31%) with respect to interest paid on
the New Notes and proceeds from the sale, exchange, redemption or retirement of
the New Notes from holders who have not supplied their correct Taxpayer
Identification Numbers or required certification. Such funds will be turned over
to the Internal Revenue Service in accordance with applicable regulations.
25. You shall notify the Company of the amount of any transfer taxes
payable in respect of the exchange of Old Notes and, upon receipt of a written
approval from the Company, shall deliver or cause to be delivered, in a timely
manner to each governmental authority to which any transfer taxes are payable in
respect of the exchange
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<PAGE>
of Old Notes, your check in the amount of all transfer taxes so payable, and the
Company shall reimburse you for the amount of any and all transfer taxes payable
in respect of the exchange of Old Notes; provided, however, that you shall
reimburse the Company for amounts refunded to you in respect of your payment of
any such transfer taxes, at such time as such refund is received by you.
26. THIS AGREEMENT AND YOUR APPOINTMENT AS EXCHANGE AGENT HEREUNDER
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE, AND WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
27. This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and its successor and assigns, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement. Without limitation of the foregoing, the parties hereto
expressly agree that no holder of Old Notes or New Notes shall have any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
28. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
29. In case any provision of this Agreement 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.
30. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged.
31. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
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If to the Company, to:
Avon Products, Inc.
1345 Avenue of the Americas
New York, New York 10105-0196
Telephone: (212) 282-5122
Telecopy: (212) 282-6225
Attention: Ward M. Miller, Jr., Esq.
Senior Vice President,
General Counsel and Secretary
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telephone: (212) 558-3941
Telecopy: (212) 558-3588
Attention: Michael W. Weir, Esq.
If to the Exchange Agent, to:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, N.Y. 10001
Telephone: (212) 946-3083
Telecopy: (212) 946-8161
Attention: Global Trust Services, Kathleen Perry
32. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, paragraphs 19, 21, 23 and 25 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for New Notes, funds or property then held by you
as Exchange Agent under this Agreement.
33. This Agreement shall be binding and effective as of the date
hereof.
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Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
AVON PRODUCTS, INC.
By:___________________________________
Name:
Title:
Accepted as of the date
first above written:
THE CHASE MANHATTAN BANK,
as Exchange Agent
By:______________________________
Name:
Title:
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FEE SCHEDULE FOR
EXCHANGE AGENT SERVICES
Covers review of the Letter of Transmittal, DTC ATOP voluntary offering
instruction ("VOI"), the Exchange Agent Agreement and other related
documentation, if any, as required by the Exchange Offer; set-up of records and
accounts; distribution of materials; all operational and administrative charges
and time in connection with the review, receipt and processing of Letters of
Transmittal/VOI, processing delivery of guarantees, legal items, withdrawals,
record keeping, and answering securityholders' inquiries pertaining to the
Exchange Offer.
Flat Fee: $2,500.00
NOTE
These fees are also subject to change should circumstances warrant.
Reimbursement for all out-of-pocket expenses, disbursements (including postage,
telex, fax, photocopying and advertising costs), and reasonable fees of counsel
(including their disbursements and expenses) incurred in the performance of our
duties will be added to the billed fees. Once appointed, if the Exchange Offer
should fail to close for reasons beyond our control, we reserve the right to
charge a fee not to exceed the amount of our acceptance fee and we will require
reimbursement in full for our legal fees and any out-of-pocket expenses related
to our responsibilities under the Exchange Agent Agreement.
Fees for any services not specifically covered in this or any other
applicable schedule will be based on the appraisal of services rendered.
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