EXHIBIT 1.1
AVON PRODUCTS, INC.
ZERO COUPON CONVERTIBLE SENIOR NOTES DUE 2020
PURCHASE AGREEMENT
July 7, 2000
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July 7, 2000
Salomon Smith Barney Inc.
Banc of America Securities LLC
Chase Securities Inc.
Deutsche Bank Securities Inc.
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Avon Products, Inc.
Zero Coupon Convertible Senior Notes Due 2020
Ladies and Gentlemen:
AVON PRODUCTS, INC., a New York corporation (the "Company"), proposes to
issue and sell to the several purchasers named in Schedule A hereto (the
"Initial Purchasers") $735,820,000 principal amount at maturity of its Zero
Coupon Convertible Senior Notes Due 2020 (the "Initial Securities") and to
grant to the Initial Purchasers the option described in Section 2 to purchase
all or part of an additional $ 105,118,000 aggregate principal amount at
maturity of the Company's Zero Coupon Convertible Senior Notes Due 2020 to
cover over-allotments, if any (the "Option Securities"). The Initial
Securities, together with the Option Securities, are collectively referred to
herein as the "Securities". The Securities are to be issued pursuant to the
provisions of an Indenture to be dated as of July 12, 2000 (the "Indenture")
between the Company and The Chase Manhattan Bank, as Trustee (the "Trustee").
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), to qualified
institutional buyers in compliance with the exemption from registration
provided by Rule 144A under the Securities Act and in offshore transactions in
reliance on Regulation S under the Securities Act ("Regulation S").
The Securities will be convertible into shares of common stock, par value
$.25 per share, of the Company (the "Common Stock") in accordance with the
terms of the Securities and the Indenture, at the initial conversion rate
specified in Schedule B hereto. Upon the third, eighth and thirteenth
anniversaries of the original issuance date of the Securities, each holder of
Securities may require the Company to purchase such Securities for a price to
be paid, at the Company's option, in cash or (subject to certain limitations)
shares of Common Stock, or any combination thereof, at a purchase price equal
to the issue price of the Securities plus the accrued
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original issue discount thereon to the date of such purchase. If prior to such
date of purchase the Securities have been converted to semiannual coupon notes
following the occurrence of a Tax Event (as defined in the Indenture), such
purchase price will be equal to the Restated Principal Amount (as defined in
the Indenture) plus accrued and unpaid interest (in lieu of any original issue
discount) from the most recent date to which interest was paid or, if interest
has not been paid, from the date of such conversion through such date of
purchase. Upon a Fundamental Change (as defined in the Indenture) occurring
prior to July 12, 2003, each holder of Securities may require the Company to
repurchase such holder's Securities (subject to certain restrictions described
below) at a repurchase price equal to the issue price of the Securities plus
the accrued original issue discount thereon to the date of such repurchase. The
Company may, at its option, pay all or a portion of the repurchase price in
common stock, as long as the Company's common stock is then listed on a
national securities exchange or traded on the Nasdaq National Market. The fair
market value of the common stock for such purpose shall be 97.5% of the Market
Price (as defined in the Indenture) of the Company's common stock. If prior to
such date of repurchase the Securities have been converted to semiannual coupon
notes following the occurrence of a Tax Event, the Company will be required to
repurchase such Securities at a price equal to the Restated Principal Amount
plus accrued and unpaid interest (in lieu of any original issue discount) from
the most recent date to which interest was paid or, if interest has not been
paid, from the date of such conversion through such date of repurchase.
The holders of the Securities will be entitled to the benefits of a
Registration Rights Agreement dated the Closing Date (as defined in Section 4)
between the Company and the Initial Purchasers, substantially in the form
attached hereto as Exhibit D (the "Registration Rights Agreement") pursuant to
which the Company has agreed, among other things, to use its reasonable best
efforts to file a registration statement (the "Registration Statement") with
the Securities and Exchange Commission (the "Commission") registering resales
of the Securities and the shares of Common Stock issuable upon conversion
thereof.
In connection with the sale of the Securities, the Company has prepared a
final offering memorandum (the "Memorandum") including or incorporating by
reference a description of the terms of the Securities, the terms of the
offering and a description of the Company. As used herein and, unless otherwise
stated, the term "Memorandum" shall include the documents incorporated by
reference therein. The terms "supplement," "amendment" and "amend" as used
herein with respect to the Memorandum shall include all documents deemed to be
incorporated by reference in the Memorandum that are filed subsequent to the
date of such Memorandum with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and prior to the termination of
the offering of the Securities.
1. Representations and Warranties. The Company represents and warrants to,
and agrees with, you that:
(a) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Memorandum complied or
will comply when so filed in all material respects with the Exchange Act
and the applicable rules and regulations of the Commission thereunder and
(ii) the Memorandum, in the form used by the Initial Purchasers to confirm
sales and on the Closing Date, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
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statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in the
Memorandum based upon information furnished to the Company in writing by
or on behalf of any Initial Purchaser expressly for use therein.
(b) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Memorandum and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(c) Each significant subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business in all
material respects as described in the Memorandum and is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole; all of the
issued shares of capital stock of each significant subsidiary of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and, except for Avon Products Company Limited (the
Company's Japanese subsidiary), are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims.
For purposes of this Purchase Agreement, a "significant subsidiary" is any
subsidiary of the Company that generates 5% or more of the Company's
revenue or income or that holds 5% or more of the Company's assets.
(d) This Agreement has been duly authorized, executed and delivered
by the Company.
(e) The Securities have been duly authorized and, when executed and
authenticated and delivered in accordance with the provisions of the
Indenture and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent transfer or
similar laws affecting creditors' rights generally and general principles
of equity, and the holders thereof will be entitled to the benefits of the
Indenture, pursuant to which such Securities are to be issued, and the
Registration Rights Agreement.
(f) Upon issuance and delivery of the Securities in accordance with
this Agreement and the Indenture, the Securities will be convertible at
the option of the holder thereof into shares of Common Stock in accordance
with the terms of the Securities and the Indenture; the shares of Common
Stock issuable upon such conversion of the
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Securities have been duly authorized and reserved for issuance upon such
conversion by all necessary corporate action and such shares, when issued
upon such conversion, will be validly issued and will be fully paid and
non-assessable; the shares of Common Stock issuable at the Company's
option upon purchase of the Securities by the Company at the option of the
holder thereof will have been, prior to the issuance thereof, duly
authorized by all necessary corporate action, and such shares if and when
issued in accordance with the terms of the Securities and the Indenture,
will be validly issued, fully paid and non-assessable; and the issuance of
such shares upon such conversion or purchase will not be subject to the
preemptive or other similar rights of any securityholder of the Company.
(g) Each of the Indenture and the Registration Rights Agreement has
been duly authorized and, when executed and delivered by the Company and
assuming due authorization, execution and delivery by the Trustee (in the
case of the Indenture) and by the Initial Purchasers (in the case of the
Registration Rights Agreement), will be a valid and binding agreement of
the Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
transfer or similar laws affecting creditors' rights generally and general
principles of equity and except as rights to indemnification and
contribution under the Registration Rights Agreement may be limited under
applicable law.
(h) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement, the Indenture and
the Registration Rights Agreement will not contravene any provision of
applicable law or the certificate of incorporation or by-laws of the
Company or, except to the extent that any such contravention would not
have a material adverse effect on the Company and its subsidiaries, taken
as a whole, any agreement or other instrument binding upon the Company or
any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the
Indenture and the Registration Rights Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities and by Federal and
state securities laws with respect to the Company's obligations under the
Registration Rights Agreement.
(i) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Memorandum.
(j) Each of the Company and its subsidiaries owns or possesses all
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, and trade names, in each case to the extent
disclosed in the Memorandum as being material to the business of the
Company and its
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subsidiaries, taken as a whole (collectively, the "Intellectual
Property"), to the extent required by it for the employment thereof in
connection with their respective businesses as currently operated by them,
and neither the Company nor, to the Company's knowledge, any of its
subsidiaries has received any written notice of infringement of asserted
rights of others with respect to any of the Intellectual Property that if
taken to a final judgment could have a material adverse effect on the
Company and its subsidiaries, taken as a whole. To the knowledge of the
Company, the use of such Intellectual Property in connection with the
business and operations of the Company or its subsidiaries does not
infringe on the rights of any person.
(k) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company
or any of its subsidiaries is subject other than proceedings accurately
described in all material respects in the Memorandum and proceedings that
are not reasonably expected by the Company to have a material adverse
effect on the Company and its subsidiaries, taken as a whole, or on the
power or ability of the Company to perform its obligations under this
Agreement, the Indenture or the Registration Rights Agreement or to
consummate the transactions contemplated by the Memorandum.
(l) To the knowledge of the Company, the Company and its subsidiaries
(i) are in compliance with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure
to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(m) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(n) The Company is not, and after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Memorandum, will not be an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(o) Neither the Company nor, to the Company's knowledge, any
affiliate (as defined in Rule 501(b) of Regulation D under the Securities
Act, an "Affiliate") of the Company has directly, or through any agent,
(i) sold, offered for sale, solicited offers to
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buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the
Securities in a manner that would require the registration under the
Securities Act of the Securities or (ii) solicited an offer to buy,
offered or sold the Securities by means of any form of general
solicitation or general advertising in connection with the offering of the
Securities (as those terms are used in Regulation D under the Securities
Act), or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act.
(p) Neither the Company nor, to the Company's knowledge, its
Affiliates or any person acting on its or their behalf has engaged or will
engage in any directed selling efforts (within the meaning of Regulation
S) with respect to the Securities, and the Company and its Affiliates and
any person acting on its or their behalf have complied and will comply
with the offering restrictions requirement of Regulation S, except that no
representation, warranty or agreement is made by the Company in this
paragraph with respect to the Initial Purchasers.
(q) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers in the manner
contemplated by this Agreement to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture Act
of 1939, as amended.
(r) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
(s) None of the Company, its subsidiaries, or any of their respective
officers, or directors has taken, directly or indirectly, any action
designed to cause or to result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale
of the Securities.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to
the several Initial Purchasers, and each Initial Purchaser, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective principal amount of Securities at the price set
forth in Schedule A hereto opposite its name (such purchase prices together
referred to as the "Purchase Price").
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the Initial Purchasers to purchase any or all of the
Option Securities (in multiples of $1,000 principal amount at maturity) at the
price set forth in Schedule B hereto plus accrued Original Issue Discount, if
any, from the Closing Date (as defined below) to the Date of Delivery. The
option hereby granted may be exercised only once and will expire 30 days after
the date hereof and may be exercised in whole or in part only for the purpose
of covering over-allotments that may be made in connection with the offering
and distribution of the Securities upon notice by the Initial Purchasers to the
Company setting forth the principal amount at maturity of the Option Securities
as to which the Initial Purchasers are then exercising the option and the time
and date
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of payment and delivery for such Option Securities. Such time and date
of delivery (a "Date of Delivery") shall be determined by the Initial
Purchasers, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as
hereinafter defined.
The Company hereby agrees that, without the prior written consent of
Salomon Smith Barney Inc. on behalf of the Initial Purchasers, it will not,
during the period beginning on the date hereof and continuing to and including
the Closing Date (as defined below), offer, sell, contract to sell or otherwise
dispose of, any debt of the Company or warrants to purchase debt of the Company
substantially similar to the Securities (other than the sale of the Securities
under this Agreement).
3. Terms of Offering. The Initial Purchasers have advised the Company that
they will make an offering of the Securities purchased by the Initial
Purchasers hereunder on the terms to be set forth in the Memorandum, as soon as
practicable after this Agreement is entered into as in their judgment is
advisable.
4. Payment and Delivery. Payment for the Securities shall be made to the
Company in Federal or other funds immediately available in New York City
against delivery of such Securities for the respective accounts of the several
Initial Purchasers at 10:00 a.m., New York City time, on July 12, 2000, at the
offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York, or at
such other time on the same or such other date, as shall be mutually agreed
upon in writing. The time and date of such payment are herein referred to as
the "Closing Date."
Certificates for the Securities shall be in definitive form or global
form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date. The certificates evidencing the Securities shall
be delivered to you on the Closing Date for the respective accounts of the
several Initial Purchasers, with any transfer taxes payable in connection with
the transfer of the Securities to the Initial Purchasers duly paid, against
payment of the Purchase Price therefor plus accrued interest, if any, to the
date of payment and delivery.
5. Conditions to the Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers to purchase and pay for the Securities on
the Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded the Company or any of
the Company's securities by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
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(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Memorandum (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Securities on the terms and in
the manner contemplated in the Memorandum.
(b) The Initial Purchasers shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an officer of the
Company reasonably satisfactory to the Initial Purchasers, to the effect
set forth in Section 5(a)(i) and to the effect that the representations
and warranties of the Company contained in this Agreement are true and
correct as of the Closing Date (as if made on the Closing Date) and that
the Company has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied hereunder on or
before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Initial Purchasers shall have received on the Closing Date an
opinion of Davis Polk & Wardwell, outside counsel for the Company, dated
the Closing Date, to the effect set forth in Exhibit A. Such opinion shall
be rendered to the Initial Purchasers at the request of the Company and
shall so state therein.
(d) The Initial Purchasers shall have received on the Closing Date an
opinion from the General Counsel of the Company, dated the Closing Date,
to the effect set forth in Exhibit B. Such opinion shall be rendered to
the Initial Purchasers at the request of the Company and shall so state
therein.
(e) The Initial Purchasers shall have received on the Closing Date an
opinion and letter of Shearman & Sterling, counsel for the Initial
Purchasers, dated the Closing Date, to the effect set forth in Exhibit C.
(f) The Initial Purchasers shall have received on the Closing Date a
letter, dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers and PricewaterhouseCoopers LLP,
from PricewaterhouseCoopers LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Memorandum; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier than
the date hereof.
(g) The Company and the Initial Purchasers shall have entered into
the Registration Rights Agreement.
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(h) Except as set forth on Schedule C, at the date of this Agreement,
the Initial Purchasers shall have received an agreement substantially in
the form of Exhibit E hereto signed by each executive officer or director
of the Company listed on Schedule C.
(i) On the Closing Date, the Securities shall have been designated
for trading on PORTAL.
The several obligations of the Initial Purchasers to purchase and pay for
the Option Securities hereunder are also subject to the delivery to the Initial
Purchasers on the Date of Delivery of such documents as they may reasonably
request as to the good standing of the Company, the due authorization and
issuance of the Option Securities and other matters related to the issuance of
the Option Securities.
6. Covenants of the Company. In further consideration of the agreements of
the Initial Purchasers contained in this Agreement, the Company covenants with
each Initial Purchaser as follows:
(a) To furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date
of this Agreement and during the period mentioned in Section 6(c), as many
copies of the Memorandum, any documents incorporated by reference therein
(excluding the Exhibits thereto) and any supplements and amendments
thereto as you may reasonably request.
(b) Before amending or supplementing (other than through the filing
of periodic reports under the Exchange Act that are to be incorporated by
reference in the Memorandum) the Memorandum, to furnish to you a copy of
each such proposed amendment or supplement and not to use any such
proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to the
date on which all of the Securities shall have been sold by the Initial
Purchasers, any event shall occur or condition exist as a result of which
it is necessary to amend or supplement the Memorandum in order to make the
statements therein, in the light of the circumstances when the Memorandum
is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Initial Purchasers, it is necessary to amend or supplement
the Memorandum to comply with applicable law, forthwith to prepare and
furnish, at its own expense, to the Initial Purchasers, either amendments
or supplements to the Memorandum so that the statements in the Memorandum
as so amended or supplemented will not, in the light of the circumstances
when the Memorandum is delivered to a purchaser, be misleading or so that
the Memorandum, as amended or supplemented, will comply with applicable
law.
(d) To endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under
this Agreement, including: (i) the
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fees, disbursements and expenses of the Company's counsel and the
Company's accountants in connection with the issuance and sale of the
Securities and all other fees or expenses (excluding fees or expenses of
the Initial Purchasers' counsel) in connection with the preparation of the
Memorandum and all amendments and supplements thereto, including all
printing costs associated therewith, and the delivering of copies thereof
to the Initial Purchasers, in the quantities herein above specified, (ii)
all costs and expenses related to the transfer and delivery of the
Securities to the Initial Purchasers, including any transfer or other
taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky or legal investment memorandum in connection with the offer and sale
of the Securities under state securities laws and all expenses in
connection with the qualification of the Securities for offer and sale
under state securities laws as provided in Section 6(d) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Initial Purchasers in connection with such qualification and in connection
with the Blue Sky or legal investment memorandum, (iv) any fees charged by
rating agencies for the rating of the Securities, (v) all document
production charges and expenses of counsel to the Initial Purchasers (but
not including their fees for professional services) in connection with the
preparation of this Agreement, (vi) the costs and charges of the Trustee
and any transfer agent, registrar or depositary, (vii) the cost of the
preparation, issuance and delivery of the Securities, (viii) the costs and
expenses of the Company relating to investor presentations undertaken in
connection with the marketing of the offering of the Securities, (ix) any
fees and expenses payable in connection with the initial and continued
designation of the Securities as PORTAL securities under the PORTAL Market
Rules pursuant to NASD Rule 5322 and (x) all other costs and expenses
incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 8,
and the last paragraph of Section 10, the Initial Purchasers will pay all
of their costs and expenses, including fees and disbursements of their
counsel, transfer taxes payable on resale of any of the Securities by them
and any advertising expenses connected with any offers they may make.
(f) Except as contemplated by the Registration Rights Agreement, not
to sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) reasonably
likely to be integrated with the sale of the Securities under the rules
and interpretations of the Commission in a manner which would require the
registration under the Securities Act of the Securities.
(g) Except as contemplated by the Registration Rights Agreement, not
to solicit any offer to buy or offer or sell the Securities by means of
any form of general solicitation or general advertising (as those terms
are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(h) While any of the Securities remain "restricted securities" within
the meaning of the Securities Act, to make available, upon request, to any
seller of such Securities the information specified in Rule 144A(d)(4)
under the Securities Act, unless the Company is then subject to Section 13
or 15(d) of the Exchange Act.
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(i) Not to engage and not to permit its Affiliates or any person
acting on its or their behalf (other than the Initial Purchasers) to
engage in any directed selling efforts (as that term is defined in
Regulation S) with respect to the Securities, and the Company and its
Affiliates and each person acting on its or their behalf (other than the
Initial Purchasers) will comply with the offering restrictions requirement
of Regulation S.
(j) During the period of two years after the Closing Date, not to
resell and not to permit any of its affiliates (as defined in Rule 144
under the Securities Act), to resell any of the Securities which
constitute "restricted securities" under Rule 144 that have been
reacquired by any of them.
(k) To reserve and keep available at all times, free of preemptive
rights, Common Stock for the purpose of enabling the Company to satisfy
any obligations to issue Common Stock upon conversion of the Securities.
(l) To use its best efforts to cause all shares of Common Stock
issuable upon conversion of the Securities to be listed on the New York
Stock Exchange in accordance with its rules and regulations.
(m) During a period of 30 days from the date of the Memorandum, not
to, without the prior written consent of Salomon Smith Barney Inc. (i)
offer, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock, or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise, except (i) the Securities offered in connection with the
Memorandum, (ii) the Common Stock issuable upon conversion of the
Securities (iii) the issuance by the Company of shares of Common Stock
upon the exercise of an option or a warrant or the conversion of a
security outstanding on the date of the Memorandum, (iv) the issuance by
the Company of Common Stock as consideration in the acquisition of the
stock or assets of another entity or in connection with any joint venture,
partnership or strategic alliance into which Avon enters during this
period, (v) the issuance or sale (directly or indirectly by, or
attributable to, Avon) of any securities of the type described above
pursuant to existing employee benefit or compensation plans or agreements,
(vi) the sale, directly or indirectly, by any executive officer or
director of Avon of Common Stock in connection with any exercise of an
option, including, but not limited to, through the "cashless exercise"
method; or (vii) in connection with any transaction entered into by any
executive officer or director of Avon for reasons other than speculation,
including, but not limited to, payment of tuition and other dependent care
expenses, unforseen financial obligations and the purchase of any
residence or other real property.
(n) To fully comply with the provisions set forth in Rule
903(b)(3)(iii)(4) of Regulation S of the Securities Act as such provisions
have been interpreted by the Commission in the context of offerings such
as the offering of the Securities.
11
<PAGE>
7. Offering of Securities; Restrictions on Transfer. (a) Each Initial
Purchaser, severally and not jointly, represents, warrants, and agrees that
such Initial Purchaser is a qualified institutional buyer as defined in Rule
144A under the Securities Act (a "QIB"). Each Initial Purchaser, severally and
not jointly, agrees with the Company that (i) it will not solicit offers for,
or offer or sell, such Securities by any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act and (ii) it will solicit offers for such
Securities only from, and will offer such Securities only to, persons that it
reasonably believes to be (A) QIBs and (B) in the case of offers outside the
United States, to persons other than U.S. persons ("foreign purchasers," which
term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other
than an estate or trust)) in reliance upon Regulation S under the Securities
Act that, in each case, in purchasing such Securities are deemed to have
represented and agreed as provided in the Memorandum under the caption "Notice
to Investors".
(b) Each Initial Purchaser, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) such Initial Purchaser understands that no action has been or
will be taken in any jurisdiction by the Company that would permit a
public offering of the Securities, or possession or distribution of the
Memorandum or any other offering or publicity material relating to the
Securities, in any country or jurisdiction where action for that purpose
is required;
(ii) such Initial Purchaser will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells or
delivers Securities or has in its possession or distributes the Memorandum
or any such other material, in all cases at its own expense;
(iii) the Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except (A) in accordance with Rule
144A or Regulation S under the Securities Act, (B) pursuant to
registration of the Securities under the Securities Act, or (C) pursuant
to another exemption from the registration requirements of the Securities
Act;
(iv) such Initial Purchaser will not engage in hedging transactions
with regard to the Securities prior to the expiration of the distribution
compliance period pursuant to Regulation S, unless in compliance with the
Securities Act;
(v) such Initial Purchaser has offered the Securities and will offer
and sell the Securities (A) as part of their distribution at any time and
(B) otherwise until 1 year after the later of the commencement of the
offering and the Closing Date, only in accordance with Rule 903 of
Regulation S or as otherwise permitted in Section 7(a) hereof;
accordingly, neither such Initial Purchaser, its Affiliates nor any
persons acting on its or their behalf have engaged or will engage in any
directed selling efforts (within the meaning of Regulation S) with respect
to the Securities, and any such Initial Purchaser,
12
<PAGE>
its Affiliates and any such persons have complied and will comply with the
offering restrictions requirement of Regulation S;
(vi) such Initial Purchaser has (A) not offered or sold, and will not
offer or sell in the United Kingdom, by means of any document, any
Securities other than to persons whose ordinary business is to buy and
sell shares or debentures, whether as a principal or agent, or in
circumstances which do not constitute an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995 (the "Regulations"), (B) complied and will comply with all applicable
provisions of the Financial Services Act 1986 of the United Kingdom and
the Regulations with respect to anything done by them in relation to the
Securities in, from, or otherwise involving the United Kingdom, and (C)
only issued or passed on and will only issue and pass on to any persons in
the United Kingdom any document received by it in connection with the
issue of the Securities if that person is of a kind described in Article
9(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1988; and
(vii) such Initial Purchaser agrees that, at or prior to confirmation
of sales of the Securities, it will have sent to each distributor, dealer
or person receiving a selling concession, fee or other remuneration that
purchases Securities from it during the restricted period a confirmation
or notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") or any state
securities laws and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. Persons (i) as
part of their distribution at any time or (ii) otherwise until one
year following the closing of this offering except in either case in
accordance with Regulation S (or Rule 144A if available) under the
Securities Act. Terms used above shall have the meaning given to them
by Regulation S."
Terms used in this Section 7(b) have the meanings given to them by Regulation S.
(c) The Company and each Initial Purchaser agree that upon issuance the
Zero Coupon Convertible Senior Notes due 2020 will bear the legend set forth in
Paragraph 4 of the "Notice to Investors - Investor Representations and
Restrictions on Resale" section of the Memorandum.
8. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Initial Purchaser and each person, if any, who controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Memorandum (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or
13
<PAGE>
omission or alleged untrue statement or omission based upon information
furnished to the Company in writing by or on behalf of any Initial Purchaser
expressly for use therein.
(b) Each Initial Purchaser agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such Initial Purchaser, but only with
reference to information furnished to the Company in writing by or on behalf of
any Initial Purchaser expressly for use in the Memorandum or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of
the indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual or
potential conflicting interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Salomon Smith Barney
Inc., in the case of parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
14
<PAGE>
(d) To the extent the indemnification provided for in Section 8(a) or 8(b)
is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other hand from the offering of the Securities or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company on the
one hand and of the Initial Purchasers on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other hand in connection with the offering of the Securities
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of the Securities (before deducting expenses, but after
deduction of the discounts and commissions received by the Initial Purchasers)
received by the Company and the total discounts and commissions received by the
Initial Purchasers, in each case as set forth in the Memorandum, bear to the
aggregate offering price of the Securities. The relative fault of the Company
on the one hand and of the Initial Purchasers on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Initial Purchasers' respective obligations to contribute pursuant to this
Section 8 are several in proportion to the respective principal amount of
Securities they have purchased hereunder, and not joint.
(e) The Company and the Initial Purchasers agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation that does not take account
of the equitable considerations referred to in Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Section 8(d) shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities resold by
it in the initial placement of such Securities were offered to investors
exceeds the amount of any damages that such Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section 8
and the representations, warranties and other statements of the Company
contained in this Agreement
15
<PAGE>
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Initial Purchaser or any person controlling any Initial Purchaser or by or
on behalf of the Company, its officers or directors or any person controlling
the Company and (iii) acceptance of and payment for any of the Securities.
9. Termination. This Agreement shall be subject to termination by notice
given by Salomon Smith Barney Inc. on behalf of the Initial Purchasers to the
Company, if (a) after the execution and delivery of this Agreement and prior to
the Closing Date (i) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock Exchange, the
American Stock Exchange, the National Association of Securities Dealers, Inc.,
(ii) trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses (a)(i) through (iv) of this
Section 9, such event, singly or together with any other such event, makes it,
in your judgment, impracticable to market the Securities on the terms and in
the manner contemplated in the Memorandum.
10. Effectiveness; Defaulting Initial Purchasers. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, any one or more of the Initial Purchasers shall
fail or refuse to purchase Securities that it or they have agreed to purchase
hereunder on such date, and the aggregate principal amount of Securities which
such defaulting Initial Purchaser or Initial Purchasers agreed but failed or
refused to purchase is not more than one-tenth of the aggregate principal
amount of Securities to be purchased on such date, the other Initial Purchasers
shall be obligated severally in the proportions that the principal amount of
Securities set forth opposite their respective names in Schedule A bears to the
aggregate principal amount of Securities set forth opposite the names of all
such non-defaulting Initial Purchasers, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase on such date;
provided that in no event shall the principal amount of Securities that any
Initial Purchaser has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such principal amount of Securities without the written consent of such Initial
Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase Securities which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of
Securities with respect to which such default occurs is more than one-tenth of
the aggregate principal amount of Securities to be purchased on such date, and
arrangements satisfactory to you and the Company for the purchase of such
Securities are not made within 36 hours after such default, this Agreement
shall terminate without liability on the part of any non-defaulting Initial
Purchaser or of the Company. In any such case either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Memorandum or in
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not
16
<PAGE>
relieve any defaulting Initial Purchaser from liability in respect of any
default of such Initial Purchaser under this Agreement.
If this Agreement shall be terminated by the Initial Purchasers, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such Initial
Purchasers as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Initial Purchasers in connection
with this Agreement or the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
17
<PAGE>
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
AVON PRODUCTS, INC.
By: /s/ Dennis Ling
------------------------------
Name: Dennis Ling
Title: Group Vice President,
Finance and Treasurer
Accepted as of the date hereof:
Salomon Smith Barney Inc.
Banc of America Securities LLC
Chase Securities Inc.
Deutsche Bank Securities Inc.
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
By: Salomon Smith Barney Inc.
By: /s/ Christina Mohr
------------------------
Name: Christina Mohr
Title: Managing Director
<PAGE>
SCHEDULE A
Initial Purchaser Principal Amount at Maturity of Zero
Coupon Convertible Senior
Notes due 2020 to be Purchased
Salomon Smith Barney Inc. $ 441,495,000
Banc of America Securities LLC $ 58,865,000
Chase Securities Inc. $ 58,865,000
Deutsche Bank Securities Inc. $ 58,865,000
J.P. Morgan Securities Inc. $ 58,865,000
Morgan Stanley & Co. Incorporated $ 58,865,000
-------------
Total................................ $ 735,820,000
<PAGE>
SCHEDULE B
$735,820,000 principal amount at maturity of
Zero Coupon Convertible Senior Notes Due 2020
1. The initial offering price per $1,000 principal amount at maturity of
the Securities shall be $475.66, which represents a yield to maturity of 3.75%
per annum (computed on a semiannual bond equivalent basis).
2. The Securities shall be convertible into shares of common stock, par
value $0.25 per share, of the Company (the "Common Stock") at an initial rate
of 8.2723 shares of Common Stock per $1,000 principal amount at maturity.
3. The purchase price to be paid by the Initial Purchasers for the
Securities shall be $466.1468, being an amount equal to the initial offering
price per $1,000 principal amount at maturity of Securities set forth above,
less $9.5132 per $1,000 principal amount at maturity of Securities.
4. Prior to July 12, 2003, the Securities will not be redeemable.
5. The redemption prices to be supplied on page 19 of the Memorandum (and
correspondingly in the Indenture) shall be:
Accrued
Original Issue Redemption
Note Issue Discount Price
Redemption Date Price (1) At 3.75% (2) (1) + (2)
--------------- --------- ------------ ---------
July 12, 2003................... $ 475.66 $ 56.08 $ 531.74
July 12, 2004................... $ 475.66 $ 76.21 $ 551.87
July 12, 2005................... $ 475.66 $ 97.10 $ 572.76
July 12, 2006................... $ 475.66 $ 118.78 $ 594.44
July 12, 2007................... $ 475.66 $ 141.28 $ 616.94
July 12, 2008................... $ 475.66 $ 164.63 $ 640.29
July 12, 2009................... $ 475.66 $ 188.87 $ 664.53
July 12, 2010................... $ 475.66 $ 214.02 $ 689.68
July 12, 2011................... $ 475.66 $ 240.13 $ 715.79
July 12, 2012................... $ 475.66 $ 267.22 $ 742.88
July 12, 2013................... $ 475.66 $ 295.34 $ 771.00
July 12, 2014................... $ 475.66 $ 324.52 $ 800.18
July 12, 2015................... $ 475.66 $ 354.81 $ 830.47
July 12, 2016................... $ 475.66 $ 386.24 $ 861.90
July 12, 2017................... $ 475.66 $ 418.87 $ 894.53
July 12, 2018................... $ 475.66 $ 452.73 $ 928.39
July 12, 2019................... $ 475.66 $ 487.87 $ 963.53
At stated maturity.............. $ 475.66 $ 524.34 $ 1,000.00
6. The purchase prices and dates to be supplied on page 19 of the
Memorandum (and correspondingly in the Indenture) shall be:
<PAGE>
o $531.74 per note on July 12, 2003;
o $640.29 per note on July 12, 2008; and
o $771.00 per note on July 12, 2013;
These purchase prices equal the issue price plus accrued original issue
discount to the respective purchase dates.
<PAGE>
SCHEDULE C
List of Persons Subject to Lock-up Agreements
Andrea Jung
President, Chief Executive Officer and Director
Susan J. Kropf
Executive Vice President, Chief Operating Officer,
North America and Global Business Operations
Jose Ferreira, Jr.
Executive Vice President, Chief Operating Officer,
International and New Business Development
Fernando Lezama R.
Executive Vice President, Asia Pacific
Robert J. Corti
Executive Vice President and Chief Financial Officer
Ward M. Miller, Jr.
Senior Vice President, General Counsel and Secretary
Jill Kanin-Lovers
Senior Vice President, Human Resources
Janice Marolda
Vice President and Controller
Brenda C. Barnes
Director
Richard S. Barton
Director
Edward T. Fogarty
Director
Stanley C. Gault
Director
Fred Hassan
Director
Ann S. Moore
Director
Paula Stern, Ph.D.
Director
Lawrence A. Weinbach
Director
<PAGE>
A-1
EXHIBIT A
Opinion of Davis Polk & Wardwell
The opinion of Davis Polk & Wardwell, outside counsel for the Company, to
be delivered pursuant to Section 5(c) of the Purchase Agreement, shall be to
the effect that:
(1) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of New York, and
has the corporate power and authority to own its property and to conduct
its business as described in the Memorandum.
(2) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(3) The Securities have been duly authorized and executed by the
Company and, when authenticated in accordance with the provisions of the
Indentures and delivered to and paid for by the Initial Purchasers in
accordance with the terms of the Purchase Agreement, the Securities will
be entitled to the benefits of the Indentures and the Registration Rights
Agreement and will be valid and legally binding obligations of the
Company, enforceable in accordance with their terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally and (ii) as such enforcement may be limited by general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity.
(4) Each of the Indenture and the Registration Rights Agreement has
been duly authorized, executed and delivered by, and assuming, in the case
of the Indenture, the due authorization, execution and delivery thereof by
the Trustee and, in the case of the Registration Rights Agreement, the due
authorization, execution and delivery thereof by the Initial Purchasers,
each of the Indenture and the Registration Rights Agreement constitute
valid and legally binding agreements of the Company, enforceable against
the Company in accordance with their respective terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally, (ii) as such enforcement may be limited by general principles
of equity, regardless of whether enforcement is sought in a proceeding at
law or in equity and (iii) as rights to indemnity and contribution under
the Registration Rights Agreement may be limited by applicable law.
(5) The Securities, the Common Stock and the Indenture conform in all
material respects to the descriptions thereof contained in the Memorandum.
(6) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, the Purchase Agreement, the
Indenture and the
<PAGE>
A-2
Registration Rights Agreement will not contravene any provision of
applicable law or the certificate of incorporation or by-laws of the
Company and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under the Purchase
Agreement, the Indenture or the Registration Rights Agreement.
(7) The Company is not, and after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Memorandum, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(8) The statements under the captions "Description of the Notes,"
"Registration Rights" and "Notice to Investors" in the Memorandum, insofar
as such statements constitute a summary of the documents or proceedings
referred to therein, fairly summarize the matters referred to therein.
(9) The statements under the caption "United States Federal Income
Tax Considerations" in the Memorandum, insofar as such statements
constitute a summary of the United States federal tax laws referred to
therein and, subject to the qualifications set forth therein, are accurate
and fairly summarize in all material respects the United States federal
tax laws referred to therein.
(10) Based upon the representations, warranties and agreements of the
Company in Sections 1(n), 1(o), 1(p), 1(r), 6(f), 6(g), 6(h), 6(i) and
6(j) of the Purchase Agreement, the Initial Purchasers in Section 7 of the
Purchase Agreement, and the purchasers of the Securities to whom the
Initial Purchasers initially resell the Securities in the Memorandum (and
the receipt by such purchasers of the Memorandum) it is not necessary in
connection with the offer, sale and delivery of the Securities to the
Initial Purchasers under the Purchase Agreement or in connection with the
initial resale of such Securities by the Initial Purchasers in accordance
with Section 7 of the Purchase Agreement to register the Securities under
the Securities Act of 1933 or to qualify the Indentures under the Trust
Indenture Act of 1939, it being understood that no opinion is expressed as
to any subsequent resale of any Security.
(11) Such counsel has no reason to believe that (except for financial
statements and schedule and other financial and statistical data as to
which such counsel need not express any belief) the Memorandum when issued
contained, or as of the date such opinion is delivered contains, any
untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
With respect to paragraph (11) above, Davis Polk & Wardwell may state that
its belief is based upon its participation in the preparation of the Memorandum
(and any amendments or supplements thereto) and review and discussion of the
contents thereof and
<PAGE>
A-3
review of the documents incorporated by reference therein,
but is without independent check or verification except as specified.
<PAGE>
B-1
EXHIBIT B
Opinion of General Counsel
The opinion of the General Counsel of the Company, to be delivered
pursuant to Section 5(d) of the Purchase Agreement, shall be to the effect
that:
(1) The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or in good standing would
not have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(2) Each significant subsidiary(1) of the Company has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business in all
material respects as described in the Memorandum (which term includes for
purposes of such opinion, all documents incorporated by reference
therein), and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital stock
of each significant subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable, and, except for
Avon Products Company Limited (the Company's Japanese subsidiary), are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(3) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, the Purchase Agreement, the
Indenture and the Registration Rights Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws
of the Company, or any agreement or other instrument binding upon the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole (except to the extent that any such
contravention would not have a material adverse effect (i) on the Company
and its subsidiaries, taken as a whole or (ii) on the power or ability of
the Company to perform its obligations under the Purchase Agreement, the
Indenture or the Registration Rights
--------
1 A "significant subsidiary" is any subsidiary of the Company that generates
5% or more of the Company's revenue or income or that holds 5% or more of
the Company's assets.
<PAGE>
B-2
Agreement or to consummate the transactions contemplated by the
Memorandum), or, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any subsidiary.
(4) The statements under the caption "Item 3 - Legal Proceedings" of
the Company's most recent annual report on Form 10-K, insofar as such
statements constitute a summary of the documents or proceedings referred
to therein, fairly summarize the matters referred to therein.
(5) Each of the Company and its subsidiaries owns or possesses all
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, and trade names, in each case to the extent
disclosed in the Memorandum as being material to the business of the
Company or its subsidiaries, taken as a whole, (collectively, the
"Intellectual Property") to the extent required by it for the employment
thereof in connection with their respective businesses as currently
operated by them, and neither the Company nor, to the knowledge of such
counsel, any of its subsidiaries has received any written notice of
infringement of asserted rights of others with respect to any of the
Intellectual Property that if taken to a final judgment could have a
material adverse effect on the Company and its subsidiaries, taken as a
whole. To the knowledge of such counsel, the use of such Intellectual
Property in connection with the business and operations of the Company or
its subsidiaries does not infringe on the rights of any person.
(6) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any
of its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject other than proceedings
fairly summarized in all material respects in the Memorandum and
proceedings which such counsel believes are not likely to have a material
adverse effect (i) on the Company and its subsidiaries, taken as a whole,
or (ii) on the power or ability of the Company to perform its obligations
under the Purchase Agreement, the Indenture, or the Registration Rights
Agreement or to consummate the transactions contemplated by the
Memorandum.
(7) Each document incorporated by reference in the Memorandum (except
for financial statements and schedules and other financial and statistical
data included therein as to which such counsel need express no opinion),
complied as to form when filed with the Commission in all material
respects with the Exchange Act and the rules and regulations of the
Commission thereunder.
<PAGE>
C-1
EXHIBIT C
Opinion of Shearman & Sterling
The opinion of Shearman & Sterling, counsel for the Initial Purchasers, to
be delivered pursuant to Section 5(e) of the Purchase Agreement, shall be to
the effect that:
(1) the Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of New York, with
corporate power and authority under such laws to own its properties and
conduct its business as described in the Memorandum;
(2) the Purchase Agreement has been duly authorized, executed and
delivered by the Company;
(3) the Securities have been duly authorized by the Company and, when
executed and delivered by the Company and paid for by the Initial
Purchasers in accordance with the provisions of the Purchase Agreement and
authenticated by the Trustee in accordance with the provisions of the
Indenture (which facts such counsel need not determine by an inspection of
the Securities), the Securities will constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law);
(4) the Indenture has been duly authorized, executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law);
(5) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as (i) enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws affecting enforcement of creditors' rights generally, (ii)
enforcement thereof
<PAGE>
A-5
is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and (iii)
any rights to indemnity and contribution may be limited by federal and
state securities laws and public policy considerations;
(6) The Securities, the Common Stock and the Indenture conform in all
material respects to the descriptions thereof contained in the Memorandum;
(7) assuming (a) the accuracy of the representations and warranties
and performance of the covenants of the Company contained in Sections
1(n), 1(o), 1(p), 1(r), 6(f), 6(g), 6(h), 6(i) and 6(j) of the Purchase
Agreement, (b) the accuracy of the Initial Purchasers' representations and
warranties and the performance of the Initial Purchasers' covenants
contained in Section 7 of the Purchase Agreement, (c) the accuracy of the
representations and warranties and performance of the covenants of each of
the purchasers to whom the Initial Purchasers initially resell the
Securities as contemplated by the Memorandum, (d) compliance with the
offering and transfer procedures and restrictions described in the
Memorandum and (e) receipt by the purchasers to whom the Initial
Purchasers initially resell the Securities of a copy of the Memorandum
prior to such sale, no registration of the Securities under the Securities
Act of 1933, as amended, or qualification of the Securities under the
Trust Indenture Act of 1939, as amended, is required for the offer, sale
and delivery of the Securities to the Initial Purchasers or the initial
resale of the Securities by the Initial Purchasers, in each case in the
manner contemplated by the Purchase Agreement and the Memorandum, it being
understood that no opinion is expressed as to any subsequent sale of any
of the Securities; and
(8) the statements in the Memorandum under the captions "Description
of the Notes," "Registration Rights" and "Notice to Investors," insofar as
such statements constitute summaries of legal matters, documents or
proceedings referred to therein, fairly summarize the matters referred to
therein.
Such counsel shall also state, in a separate letter to the
Initial Purchasers dated the Closing Date, that no facts have come to their
attention which gave such counsel reason to believe that the Memorandum (other
than the financial statements and other financial and statistical data
contained therein or omitted therefrom, as to which such counsel need express
no comment), as of its date and as of the date of such counsel's opinion,
contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
<PAGE>
D-1
EXHIBIT D
Registration Rights Agreement
<PAGE>
E-1
EXHIBIT E
FORM OF LOCK-UP AGREEMENT
July 6, 2000
Salomon Smith Barney Inc.
Banc of America Securities LLC
Chase Securities Inc.
Deutsche Bank Securities Inc.
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
As the Initial Purchasers,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Re: Avon Products, Inc.
Proposed Offering of Zero Coupon Senior Convertible Notes Due 2020
------------------------------------------------------------------
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Purchase Agreement (the "Purchase Agreement"), between Avon Products, Inc., a
New York corporation ("Avon" or the "Company"), and each of you as Initial
Purchasers named therein, relating to an offering (the "Offering") of Zero
Coupon Senior Convertible Notes Due 2020 (the "Notes") of the Company.
In order to induce you to enter into the Purchase Agreement, the
undersigned will not, without the prior written consent of Salomon Smith Barney
Inc., (i) offer, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic
<PAGE>
E-2
The Initial Purchasers,
c/o Salomon Smith Barney Inc.
July 6, 2000
Page 2
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise, for a 30-day period after
the date of the offering memorandum (the "Offering Memorandum") in connection
with the Offering.
The foregoing agreement, however, shall not apply (i) to the sale,
directly or indirectly, by the undersigned of Common Stock in connection with
any exercise of a stock option, including, but not limited to, through the
"cashless exercise" method, or (ii) in connection with any transaction entered
into by the undersigned for reasons other than speculation, including, but not
limited to, payment of tuition and other dependent care expenses, unforeseen
financial obligations and the purchase of any residence or other real property.
If for any reason the Purchase Agreement shall be terminated prior to the
Closing Date (as defined in the Purchase Agreement) or the closing contemplated
by the Purchase Agreement does not take place prior to August 15, 2000, the
agreement set forth above shall likewise be terminated.
Yours very truly,
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Print Name:_______________________
