AVON PRODUCTS, INC.
1993 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
DATE OF GRANT: DECEMBER 10, 1997
1. Grant of Option. Pursuant to the provisions of the Avon
Products, Inc. 1993 Stock Incentive Plan (the 'Plan'), Avon Products,
Inc. (the 'Company'), on the above date has granted to James E. Preston
(the 'Optionee') the right and option to purchase from the Company a
total of One Hundred and Fifty-Five Thousand and Five Hundred and Thirty
(155,530) shares of Common Stock of the Company at the exercise price of
$60.50 per share (the 'Option'). This Option is subject to the terms
and conditions of the Plan and those set forth in this Agreement. All
capitalized terms used herein shall have the meaning set forth in the
Plan, unless the context requires a different meaning.
2. Exercise of Option
(a) Except as otherwise provided in this Agreement, this
Option shall be exercisable in its entirety commencing May 6, 1999 and
shall continue to be exercisable, in whole or in part, subject to the
terms of Section 3 hereof. The Option may become exercisable at a date
earlier than May 6, 1999 in the event of the Optionee's termination of
employment due to death, permanent disability, involuntary termination
by the Company other than for cause, or voluntary termination with the
consent of the Company's Board of Directors. Except in the case of
death, however, this Option may not be exercisable prior to December 10,
(b) In accordance with the Plan, this entire Option shall be
immediately cashed out effective as of the date of any 'Change in
Control', regardless of whether or not otherwise exercisable. For this
purpose, the 'Change in Control Price' shall be the higher of (i) the
highest price paid for a share of Stock as reported on the New York
Stock Exchange Composite Tape during the 12 month period ending with the
effective date of Change in Control or (ii) the highest cash tender
offer price for a share of Stock during such period. In the event that
a tender offer for Stock consists of a combination of cash and
securities, the Change in Control Price calculated under (ii) would be
based solely on the cash price equivalent of such offer
(c) Shares may be purchased by giving the Company's Corporate
Secretary or Assistant Secretary written notice of exercise, specifying
the number of shares to be purchased. The notice of exercise shall
designate one of the following methods of purchase:
(i) tender to the Company of a check for the full exercise
price of the shares with respect to which such Option or portion thereof
is exercised, or
(ii) instructions to the Company to deliver all the shares
being exercised to a broker-dealer with whom an arrangement has been
made to deliver the full exercise price to the Company. The Company may
establish special terms and conditions for this 'cashless' exercise, and
at any time may terminate availability of this form of purchase.
3. Expiration of Option. The Option shall expire or terminate and
may not be exercised to any extent by the Optionee as of the first to
occur of the following events:
(a) December 10, 2007.
(b) The Optionee's Termination of Employment for Cause (as
defined below) or the Optionee's voluntary termination of employment
without consent of the Company's Board of Directors; or
(c) The Optionee's intentional material violation of any non-
disclosure or non-compete covenant applicable to the Optionee
as set forth in his employment agreement.
Retirement prior to attainment of age 66 shall be deemed to
constitute voluntary termination of employment for purposes of this
Agreement. 'Permanent Disability' shall have the same meaning as that
provided by the Company's Long Term Disability Plan regardless of
whether or not the Optionee is covered by such a plan.
'Cause' shall have the same meaning as that provided by the
Optionee's employment agreement dated as of November 1, 1995.
4. Tax Withholding. No distribution of shares may be made to the
Optionee until the Company has received all amounts required for
federal, state or local tax withholding. The method of discharging such
obligation shall be elected with the notice of exercise and may include
(i) payment by check or (ii) use of a 'cashless exercise' using a
broker-dealer in a manner similar to that described in Section 2(c)(ii)
hereof. The method of withholding shall be subject to such rules as the
Committee may adopt from time-to-time. It is recognized by both parties
that, based on current laws, the difference between the Fair Market
Value of the shares purchased by an option exercise and the exercise
price of such shares generally will constitute ordinary taxable income
for federal income and 'Medicare' tax purposes and for most state and
local income tax purposes.
5. Notice. Any notices required to be given hereunder to the
Company shall be addressed to the Secretary or Assistant Secretary of
the Company at the Company's headquarters offices in New York City, New
York. Any notice required to be given hereunder to the Optionee shall
be addressed to the Optionee at his current address shown on the
Company's records. Notice shall be sent by mail, express delivery or,
if practical, by hand delivery.
6. Other Provisions. The provisions set forth in Section 5 of the
Plan are specifically incorporated by reference in this Agreement,
including but not limited to those pertaining to the following matters:
a. Changes in Capitalization; Merger; Liquidation
b. Right to Terminate Employment
c. Non-alienation of Benefits
d. Choice of Law
IN WITNESS WHEREOF, the Company, by its duly authorized officer,
and the Optionee, have entered this Agreement as of the Date of Grant
first above written.
AVON PRODUCTS, INC.
/s/ James E. Preston /s/ Ward M. Miller, Jr.
James E. Preston Ward M. Miller, Jr.
Senior Vice President, General
Counsel and Secretary