EXHIBIT 10.14
AVON PRODUCTS, INC.
AMENDED AND RESTATED
BENEFIT PROTECTION TRUST
This Amended and Restated Trust Agreement made as of
this 21st day of April, 1995, by and among Avon Products, Inc.,
a New York corporation (the "Company"), Chemical Bank, a banking
corporation organized under the laws of the State of New York
(the "Trustee"), and Buck Consultants, Inc. (the "Consulting
Firm"), providing for the continuation of the trust known as the
Avon Products Inc. Benefit Protection Trust (the "Trust") to
provide a source for payments required to be made to executives
(the "Executives") under the agreements listed on Exhibit A (the
"Agreements")
WITNESSETH THAT:
WHEREAS, the Trust was established by that certain
Trust Agreement dated as of August 3, 1989 between the Company
as grantor and the Trustee as successor by merger to
Manufacturers Hanover Trust Company, as trustee (the "Original Trust
Agreement"); and
WHEREAS, the Original Trust Agreement was amended by
an agreement between the Company and Trustee dated as of June 8,
1994 (the Original Trust Agreement, as so amended, the "Amended
Trust Agreement");
WHEREAS, the Company and the Trustee desire to amend
and restate the Amended Trust Agreement as set forth below; and
WHEREAS, the Company shall make contributions of cash
and/or other property to the Trust, and may obtain a Letter of
Credit, in each case to aid the Company in accumulating funds to
satisfy the Company's obligations under the Agreements;
NOW, THEREFORE, in consideration of the mutual under-
takings of the parties and other good and valuable consider-
ation, the parties hereto do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as
follows:
Section 1: Definitions
(a) "Adjustment Date" means each of the following
days: (i) any date on which a Potential Change of Control oc-
curs; (ii) any date on which a Change of Control occurs; (iii)
the first day of each fiscal quarter of the Company after the
occurrence of a Change of Control; (iv) any date following a
Change of Control on which the Trustee notifies the Consulting
Firm pursuant to Section 4 of an insufficiency in the funds
available in the Benefit Contribution Account and under any
Letter of Credit; and (v) any date following a Change of Control
on which the Trustee notifies the Consulting Firm that it has
used Trust Assets to pay compensation, expenses, fees or taxes
pursuant to Section 9.
(b) "Benefit Contribution Account" has the meaning
set forth in Section 6(b).
(c) "Benefit Contributions" has the meaning set
forth in Section 3(a).
(d) "Board" means the Board of Directors of the Company.
(e) "Change of Control" means:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of voting securities of the Company where
such acquisition causes such Person to own 20% or more of
the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not be
deemed to result in constitute a Change of Control: (A)
any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company, (D) any acquisition by any corporation pursu-
ant to a transaction which complies with all of clauses
(A), (B) and (C) of subsection (iii) below; or (iv) any
acquisition by any corporation pursuant to a transaction
that complies with clauses (i), (ii) and (iii) of subsec-
tion (c) below; and provided, further, that if any Person's
beneficial ownership of the Outstanding Company Voting
Securities reaches or exceeds 20% as a result of a
transaction described in clause (i) or (ii) above, and such
Person subsequently acquires beneficial ownership of
additional voting securities of the Company, such subse-
quent acquisition shall be treated as an acquisition that
causes such Person to own 20% or more of the Outstanding
Company Voting Securities or
(ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by
a vote of at least two-thirds of the directors then
comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect
to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) the approval by the shareholders of the
Company of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of
the assets of the Company (a "Business Combination") or, if
consummation of such Business Combination is subject, at
the time of such approval by Shareholders, to the consent
of any government or governmental agency, the obtaining of
such consent (either explicitly or implicitly by
consummation); excluding, however, such a Business Combi-
nation pursuant to which (A) all or substantially all of
the individuals and entities who were the beneficial owners
of the Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out-
standing shares of common stock of the corporation result-
ing from such Business Combination or the combined voting
power of the then outstanding voting securities of such
corporation except to the extent that such ownership ex-
isted prior to the Business Combination, and (C) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(f) "Code" means the Internal Revenue Code of 1986,
as amended.
(g) "Contributions" means the Initial Contribution and all
other contributions of cash and/or property to the Trust, whenever made.
(h) "ERISA" means the Employee Retirement IncomeSecurity Act of
1974, as amended.
(i) "Executives" has the meaning set forth in the first
paragraph of this Agreement.
(j) "Fee Contribution Account" has the meaning set
forth in Section 6(b).
(k) "Fee Contributions" has the meaning set forth in
Section 3(a).
(l) "Insolvent" has the meaning set forth in Section 5(a).
(m) "Letter of Credit" means any letter of credit that may be
obtained subsequent to the execution of this Trust Agreement pursuant to
an agreement between the Company and one or more banking institutions
providing for an irrevocable letter of credit in favor of the Trustee,
in its capacity as Trustee ofthe Trust.
(n) "Minimum Required Funding" has the meaning set forth in
Section 3(c).
(o) "Notice of Insolvency" has the meaning set forth
in Section 5(c).
(p) "Potential Change of Control" means:
(i) the commencement of a tender or exchange offer by any
third person (other than a tender or exchange offer which, if
consummated, would not result in a Change of Control) for 20% or more of
the then outstanding shares of common stock or combined voting power of
the Company's then outstanding voting securities;
(ii) the execution of an agreement by the Company, the
consummation of which would result in the occurrence of a Change of
Control;
(iii) the public announcement by any person (including the
Company) of an intention to take or to consider taking actions which if
consummated would constitute a Change of Control other than through a
contested election for directors of the Company; or
(iv) the adoption by the Board, as a result of other
circumstances, including circumstances similar or related to the
foregoing, of a resolution to the effect that, for purposes of this
Trust Agreement, a Potential Change of Control has occurred.
(q) "Required Funding Amount" as of a given date means the
present value of the aggregate maximum amount of all Required Payments
that could become due under the Agreements, as determined by the
Consulting Firm as of such date, taking into account any Required
Payments that have previously been made and using the assumptions set
forth on Exhibit B hereto. The Company may amend Exhibit B hereto at any
time and from time to time before a Change of Control. After a Change
of Control, Exhibit B may be amended only with the consent of the
Consulting Firm and the Trustee.
(r) "Required Payment" means any cash payments that become due
under an Agreement upon or after a Change of Control as a result of the
termination of the Executive's employment (whether such termination
occurs before or after the Change of Control) or the imposition of the
tax imposed under Section 4999 of the Code or any similar tax that may
hereafter be imposed, but excluding any payments that would be made from
any other grantor trust created by the Company.
(s) "Trust" has the meaning set forth in the first paragraph of
this Trust Agreement.
(t) "Trust Assets" means all contributions to the Trust by the
Company and any amounts drawn by the Trustee under any Letter of Credit,
together with any earnings thereon and other increases thereof, reduced
by any losses and distributions from the Trust and any other reductions
thereof.
Section 2: Establishment of Trust
(a) Contributions. The Company has previously made an initial
contribution under the Original Trust Agreement, which, together with
all future Contributions and any amounts drawn by the Trustee under any
Letter of Credit, shall constitute the principal of the Trust to be
held, administered and disposed of by the Trustee in accordance with
this Trust Agreement.
(b) Grantor Trust. The Trust is intended to be a grantor
trust of which the Company is the grantor, within the meaning of
Section 671 of the Code, and shall be construed accordingly. The Trust
is notdesigned or intended to qualify under Section 401(a) of the Code.
(c) Trust Assets. The Trust Assets shall be held separate
and apart from other funds of the Company and shall be used exclusively
for the uses and purposes herein set forth. The
Executives shall not have any preferred claim on, nor any
beneficial ownership interest in, any of the Trust Assets before
the Trust Assets are paid to the Executives pursuant to the
terms of this Trust Agreement, and all rights created under the
Agreements and this Trust Agreement shall be mere unsecured
contractual rights of the Executives against the Company. The
Trust Assets shall at all times be subject to the claims of the
Company's general creditors under Federal and state law in ac-
cordance with Section 5.
(d) Amendment of Exhibit A. Exhibit A may be amended
by the Company from time to time before a Change of Control to
add or delete Agreements. After the occurrence of a Potential
Change of Control, however, no Agreement may be deleted from
Exhibit A unless the Executive who is a party to such consent
has given his or her written content thereto to the Trustee and
the Consulting Firm. Exhibit A may not be amended after a
Change of Control.
Section 3: Funding
(a) Contributions. The Company shall make additional
Contributions to the Trust in accordance with Sections 3(c) and
9 of this Trust Agreement, and such other Contributions as the
Board deems appropriate from time to time. The Trustee shall be
responsible only for Contributions actually received by it
hereunder, and the Trustee shall have no duty or responsibility
with respect to the timing, amounts and sufficiency of the
Contributions made or to be made by the Company hereunder,
except as otherwise provided in Section 3(c), Section 4 and
Section 9 of this Agreement. All Contributions shall be
classified as intended to provide funding either for the payment
of compensation, expenses and taxes pursuant to Section 9 of
this Trust Agreement ("Fee Contributions") or for payments to
Executives pursuant to Section 4 of this Trust Agreement
("Benefit Contributions"). The previously made initial
contribution, all additional Contributions pursuant to Section
9, and any other Contributions by the Company that the Board so
designates, shall be considered Fee Contributions. All other
Contributions and all amounts drawn by the Trustee on any Letter
of Credit shall be considered Benefit Contributions.
(b) Letter of Credit. Prior to a Change of Control,
the Trustee shall draw upon any Letter of Credit only when and
to the extent so directed by the Company.
(c) Required Funding. As soon as practicable fol-
lowing each Adjustment Date, but in no event later than fifteen
business days thereafter, (i) the Consulting Firm shall de-
termine and notify the Company and the Trustee of the Required
Funding Amount as of that Adjustment Date, and (ii) the Trustee
shall determine and notify the Company and the Consulting Firm
of the amounts in the Benefit Contribution Account and the Fee
Contribution Account as of that Adjustment Date. If, as of the
Adjustment Date, the amount in the Fee Contribution Account is
less than One Hundred Thousand Dollars ($100,000), then within
ten business days after receiving notice thereof, the Company
shall make additional Fee Contributions so as to cause the
amount in the Fee Contribution Account to equal or exceed One
Hundred Thousand Dollars ($100,000). If, as of any Adjustment
Date on which a Potential Change of Control occurs, the amount
then held in the Benefit Contribution Account is not equal to at
least eighty percent (80%) of the Required Funding Amount
("Minimum Required Funding"), then within thirty days after
receiving such notice the Company shall make additional Benefit
Contributions and/or the Trustee shall draw down such amount
under any Letter of Credit, or a combination thereof, so as to
provide funding of the Benefit Contribution Account that will
equal or exceed the Minimum Required Funding. Within thirty
days after receiving such notice with respect to any other Ad-
justment Date, the Trustee may draw from any Letter of Credit
such additional amount (if any) as may be necessary to provide
the Benefit Contribution Account with the Minimum Required
Funding as of that Adjustment Date (or such higher level of
funding up to 100% of the Required Funding Amount as of the
Adjustment Date as the Trustee in its discretion shall then deem
appropriate).
(d) Distributions. Notwithstanding any other provision of
this Trust Agreement to the contrary, at any time and
from time to time before a Change of Control, the Company may
direct the Trustee to distribute to the Company, and upon such
direction the Trustee shall distribute to the Company, any por-
tion of the Trust Assets (in cash or in kind, as directed by the
Company), so long as Trust Assets having a value of at least
$1,000 remain in the Trust. After a Change of Control, if, as
of any Adjustment Date, the amount, if any, in the Benefit
Contribution Account exceeds 150 percent of the Required Funding
Amount, the Company may elect, by so notifying the Trustee
within 45 days after the Adjustment Date, to eliminate such
excess by requiring the Trustee to distribute Trust Assets to
the Company; provided, however, that any such distribution shall
be made exclusively from the Benefit Contribution Account.
(e) Duty to Inform of Trigger Event; Notification of
Trigger Event by Executives. The Company shall have the duty to
inform the Trustee and the Consulting Firm whenever a Change of
Control or Potential Change of Control (as the case may be)
occurs. If within any period of sixty consecutive days any two
Executives give the Trustee written notice that a Change of
Control or Potential Change of Control (as the case may be) has
occurred, setting forth the factual basis for that assertion,
and the Trustee determines that there is a reasonable basis on
which to conclude that a Change of Control or Potential Change
of Control (as the case may be) has occurred, the Trustee shall
so notify the Company and the Consulting Firm and, unless within
five business days thereafter the Company delivers to the
Trustee and the Consulting Firm an opinion of outside legal counsel
to the Company (which opinion may be based upon representations of
fact, as long as such counsel does not know that such representations
are untrue) that a Change of Control or Potential Change of Control
(as the case may be) has not occurred, then a Change of Control or
Potential Change of Control (as the case may be) will be deemed to have
occurred. The Trustee shall give prompt notice of the occurrence of a
Change of Control or Potential Change of Control (as the case may be)
to all Executives.
Section 4: Payments to Executives
The Trustee shall make all Required Payments that
become due under the Agreements directly to the Executives;
provided, that the Trustee shall withhold from such Required
Payments any Federal, state, local and foreign taxes that are
required by applicable laws and regulations to be withheld and
shall deliver and pay over any such withheld amounts to the
appropriate taxing authorities, all in accordance with the Com-
pany's instructions. In determining that a Required Payment has
become due, the Trustee shall be entitled to rely upon the
certification of an Executive that all conditions to the Execu-
tive's right to receive the Required Payment have been met. Upon
receiving such a certification, the Trustee shall request that
the Consulting Firm determine, and the Consulting Firm shall
determine, the amount of Required Payment, and the Trustee shall
be entitled to rely on such determination. Such determination
by the Consulting Firm shall be itemized as to the dollar values
of the various principal forms of compensation due under the
applicable Agreement, including the amount to be paid as a "Tax
Reimbursement Payment" (related to any excise taxes that may be
imposed on the Executive), which amount may separately be paid
at a later date in accordance with the terms of the Agreement.
All payments by the Trustee pursuant to this Section 4 shall be
made from the Benefit Contribution Account to the extent of the
positive balance thereof, and thereafter from amounts drawn upon
the Letter of Credit. If the funds available in the Benefit
Contribution Account and under any Letter of Credit are
insufficient to make such payment, the Trustee shall promptly so
notify the Company, the Consulting Firm and the Executive, and
the Company shall make such payment to the extent of such
insufficiency. The Trustee shall have no duty or responsibility
with respect to the Company's obligation to make benefit payments
under the Agreements. In no event shall a payment by the Trustee
pursuant to this Section 4 be made from the Fee Contribution Account.
Section 5: Trust Assets Subject to Claims of Creditors
(a) Definition of Insolvency. The Company shall be
considered "Insolvent" if (i) it is unable to pay its debts as
they mature, or (ii) it is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) Trust Assets Subject to Claims of Creditors. At
all times while the Trust is in existence, the Trust Assets
shall be subject to the claims of general creditors of the
Company under Federal and state law as set forth below. Not-
withstanding the provisions of Section 4, whenever the Trustee
has actual knowledge in its capacity as Trustee that the Company
is Insolvent, or has received a Notice of Insolvency, the
Trustee shall suspend making payments to the Executives and
shall hold the Trust Assets for the benefit of the Company's
general creditors, and shall promptly notify the Executives that
it is doing so. During any period when payments to the
Executives are suspended under this Section 5, the Trustee may
nonetheless pay compensation, expenses, fees and taxes in ac-
cordance with Section 9, unless it receives a court order to
the contrary. If the Company subsequently ceases to be In-
solvent without the entry of a court order concerning the dis-
position of the Trust Assets, the Company shall give notice to
the Trustee, the Consulting Firm and the Executives (i) stating
that the Company is no longer Insolvent and (ii) setting forth
the extent to which the Company has made directly to the Ex-
ecutives any Required Payments that became due during the period
that the Trustee had suspended payments. The Trustee shall
thereupon resume payments pursuant to Section 4, including
payments that became due and were not paid during the period of
suspension.
(c) Notice of Insolvency. A "Notice of Insolvency"
means a written notice from the Board of Directors or the Chief
Executive Officer of the Company that the Company is Insolvent,
or a written notice from a person claiming to be a creditor of
the Company (which person the Trustee considers to be reliable
and responsible) alleging that the Company is Insolvent. The
Board of Directors and the Chief Executive Officer of the Com-
pany shall have the duty to give the Trustee a Notice of Insol-
vency immediately upon the Company's becoming Insolvent. The
Trustee shall be entitled to rely upon a Notice of Insolvency
from the Board of Directors or the Chief Executive Officer of
the Company and shall have no duty at any time to inquire
whether the Company is Insolvent, except in response to a Notice
of Insolvency from a person claiming to be a creditor of
the Company. The Trustee may in all events rely upon such evi-
dence concerning the Company's solvency as may be furnished to
it by the Company that provides a reasonable basis for making a
determination of whether the Company is Insolvent.
Section 6: Accounting by the Trustee and the Consulting Firm;
Provision of Information By the Company
(a) Recordkeeping. The Trustee shall keep accurate
and detailed records of all investments, receipts, disburse-
ments, and all other transactions required to be done, including
such specific records as shall be agreed upon in writing between
the Company and the Trustee. Within sixty days following the
close of each calendar year and within sixty days after the
removal or resignation of the Trustee, the Trustee shall deliver
to the Company and the Consulting Firm a written statement of
its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments
purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being
shown separately), showing all cash, securities and other
property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be, and the
book and fair market value of any such asset.
(b) Accounts. The Benefit Contributions, together
with the earnings thereon, and the Fee Contributions, together
with the earnings thereon, shall be reflected by the Trustee in
two separate accounts called the "Benefit Contribution Account"
and the "Fee Contribution Account," respectively. Whenever it
is necessary under this Trust Agreement to determine the amount
in either the Benefit Contribution Account or the Fee Contribu-
tion Account, the Trustee shall determine the value of the as-
sets in that account in its discretion, and may consult with
such experts as it deems necessary to determine such value.
(c) Provision of Information. The Company shall
furnish the Trustee and the Consulting Firm with copies of the
Agreements and any and all amendments thereto. Exhibit C sets
forth the names and addresses of each Executive currently cov-
ered by an Agreement together with his or her current annual
rate of salary, most recent Annual Bonus, and the target value
of his or her Performance Units award the Company's 1994 Long-
Term Incentive Plan. The Company shall amend Exhibit C as of
April 1 of each year and in any event as and when necessary to
ensure that it is complete and accurate at all times. The Com-
pany shall promptly provide the Trustee and the Consulting Firm
with any and all other information that they reasonably request
or that the Company believes would be useful to them in carrying
out their duties hereunder, and shall promptly update such
information as and when it changes.
(d) Inspection of Records. This Trust Agreement and
the Exhibits hereto, as amended from time to time, and all ac-
counts, books and records maintained pursuant to this Section 6
shall be open to inspection and audit at all reasonable times by
the Company and the Executives.
Section 7: Investment Authority
(a) Trustee Discretion. Except as otherwise spe-
cifically provided in this Trust Agreement, the Trustee shall
have full discretion in and sole responsibility for investment,
management and control of the Trust Assets. Notwithstanding the
foregoing, the Trust Assets shall be invested solely in one or
more money market mutual funds consisting primarily of U.S.
<PAGE
government securities with a rating of "AAA" from Standard &
Poor's (including, without limitation, such money market mutual
funds with respect to which the Trustee or one or more of its
affiliates provide services, including investment management
services). All rights associated with Trust Assets shall be
exercised by the Trustee or the person designated by the
Trustee, and shall in no event be exercisable by the Executives.
(b) Powers of Trustee. Except as otherwise specifi-
cally provided in this Trust Agreement, the Trustee is autho-
rized and empowered:
(i) To purchase, hold, sell, invest and reinvest the
Trust Assets, together with income therefrom;
(ii) To hold, manage and control all property at any
time forming part of the Trust Assets;
(iii) To sell, convey, transfer, exchange and other-
wise dispose of the Trust Assets from time to time in such
manner, for such consideration and upon such terms and
conditions as it shall determine;
(iv) To make payments from the Trust as provided
hereunder;
(v) To cause any property of the Trust to be issued,
held or registered in the individual name of the Trustee,
or in the name of its nominee, or in such form that title
will pass by deliver; provided, that the records of the
Trustee shall indicate the true ownership of such property;
and
(vi) To do all other acts necessary or desirable for
the proper administration of the Trust Assets as though the
absolute owner thereof, and to exercise all the further
rights, powers, options and privileges granted, provided
for or vested in trustees generally under applicable
federal or New York law, as amended from time to time, it
being intended that, except as herein otherwise provided,
the powers conferred upon the Trustee herein shall not be
construed as being in limitation of any authority conferred
by law, but shall be construed as in addition thereto.
Notwithstanding the foregoing, the Trustee shall not have any
power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of
Section 301.7701-2 of the Procedure and Administrative Regulations
promulgated pursuant to the Code.
Section 8: Responsibility and Authority of Trustee and
Consulting Firm
(a) Prudence, etc. The Trustee shall carry out its
duties hereunder solely in the best interests of the Executives
and their beneficiaries, and shall use the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of like
character and with like aims. The Trustee shall not be liable
for any act or failure to act under this Agreement, if any such
action were taken or omitted, as the case may be, in good faith
or in accordance with the express provisions of this Agreement
The Trustee's duties and obligations shall be limited to those
expressly imposed upon it by this Agreement, notwithstanding any
reference to the Agreements. In no event, however, shall the
Trustee be liable for special, consequential or punitive
damages.
(b) Consulting Firm Not Fiduciary. It is not in-
tended that the Consulting Firm be a fiduciary with respect to
the Trust, and the Consulting Firm shall have no liability to
the Company or any Executive as a result of the exercise of its
discretion in determining the Required Funding Amount under this
Trust Agreement, except to the extent such exercise involves
negligence or misconduct on the part of the Consulting Firm.
(c) Counsel. The Trustee and the Consulting Firm may
consult with legal counsel (who may also be counsel for the
Company) with respect to any of its duties or obligations hereunder,
and shall be fully protected in acting or refraining
from acting in accordance with the advice of such counsel, and
the Company shall be responsible for the payment of any such
expenses and compensation.
(d) Consultants. The Trustee and the Consulting Firm
may employ suitable agents, including attorneys, accountants,
financial consultants, and other experts, and the Company shall
be responsible for the payment of their expenses and
compensation.
Section 9: Compensation, Expenses, Fees and Taxes
The Trustee and the Consulting Firm shall each be entitled
to receive such reasonable compensation for their services as shall be
agreed upon by the Company and the Trustee or the Consulting Firm, as
the case may be. The Trustee and the Consulting Firm shall also
beentitled to receive their reasonable expenses incurred with respect
to the administration of the Trust, including without limitation fees
incurred pursuant to Sections 8(c) and (d) of this Trust Agreement and
any expenses incurred in the course of appointing a successor Trustee
pursuant to Section 10(b) or a successor Consulting Firm pursuant to
Section 11(b). Such compensation and expenses shall be
paid by the Company and if not so paid, shall be paid by the
Trustee from the Trust Assets. To the extent that any taxes are
payable by the Trust to any Federal, state, local or foreign
taxing authorities on account of earnings on or transactions
involving Trust Assets, such taxes shall be paid by the
Company and if not so paid, shall be paid by the Trustee from
the Trust Assets. In the event any Trust Assets are used pur-
suant to the preceding sentences to pay compensation, expenses,
or taxes, such payments shall be made from the Fee Contribution
Account to the extent of the positive balance therein, and then
from the Benefit Contribution Account to the extent of the pos-
itive balance therein; and (ii) Trustee shall notify the Company
and the Consulting Firm of such payments, and the Company shall
promptly contribute to the Trust the amount of such payments,
plus interest thereon at a rate equal to the short-term
applicable Federal rate, as defined in Section 1274(d) of the
Code, or any successor thereto, from the date of such use
through the date of the Contribution.
Section 10: Resignation and Replacement of Trustee
(a) Resignation or Removal. The Trustee may resign
at any time during the term of this Trust by delivering to the
Company a written notice of its resignation, and the Company may
remove the Trustee at any time by delivering to the Trustee a
written notice of such removal; provided, that any such res-
ignation or removal shall not take effect unless and until a
successor Trustee has been appointed in accordance with Section
10(b). After a Change of Control, the Trustee shall resign
pursuant to the preceding sentence if, during any period of
three months, two-thirds or more of the Executives give notice
to the Trustee demanding such resignation. If, within 180 days
of the delivery of notice of such resignation or removal, a
successor Trustee shall not have been appointed, the Trustee may
apply to any court of competent jurisdiction for the appointment
of a successor Trustee.
(b) Successor Trustee. In the event that the Trustee
gives notice of its resignation, or the Company gives notice of
its removal of the Trustee, in accordance with Section 10(a), a
bank or trust company shall be appointed successor Trustee.
Before a Change of Control, such appointment shall be made by
the Company, and after a Change of Control, it shall be made by
the Consulting Firm. The Company shall promptly notify the
Consulting Firm of the name and address of a successor Trustee
appointed by it, and the Consulting Firm shall promptly notif
the Executives of the name and address of every successor
Trustee. The appointment of a successor Trustee shall become
final upon the giving of such notices, unless a Change of
Control has previously occurred, in which event the appointment
of a successor Trustee shall become final thirty days after the
Executives are so notified unless more than one-third of the
Executives have given the Consulting Firm written notice of
their objection to the appointment. When the appointment of a
successor Trustee becomes final, the Trustee shall thereupon
deliver to the successor Trustee all property of this Trust,
together with such records and documents as may
be reasonably required to enable the successor Trustee to properly
administer the Trust, reserving such funds as it reasonably
deems necessary to cover its unpaid bills and expenses.
(c) Succession. Upon appointment of a successor
Trustee, all right, title and interest of the resigning or re-
moved Trustee in the Trust Assets and all rights and privileges
under this Trust Agreement theretofore vested in the resigning
or removed Trustee shall vest in the successor Trustee where
applicable, and the resigning or removed Trustee shall have no
further obligations under this Trust Agreement; provided, how-
ever, that the resigning or removed Trustee shall execute, ac-
knowledge and deliver all documents and written instruments that
are necessary to transfer and convey the right, title and
interest in the Trust Assets, and all rights and privileges to
the successor Trustee.
(d) Accounting. Nothing in this Trust Agreement
shall be interpreted as depriving the Trustee or the Company of
the right to have a judicial settlement of the Trustee's ac-
counts, and upon any proceeding for a judicial settlement of the
Trustee's accounts or for instructions the only necessary
parties thereto will be the Trustee and the Company.
Section 11: Resignation and Replacement of Consulting Firm
(a) Resignation or Removal. The Consulting Firm may
resign at any time during the term of this Trust by delivering
to the Company a written notice of its resignation, and the
Company may remove the Consulting Firm at any time by delivering
to the Consulting Firm a written notice of such removal. After a
Change of Control, the Trustee shall remove the Consulting Firm
if, during any period of three months, two-thirds or more of the
Executives give notice to the Trustee requesting such removal.
No such resignation or removal shall take effect unless and
until a successor Consulting Firm has been appointed in
accordance with Section 11(b).
(b) Successor Consulting Firm. In the event that the
Consulting Firm gives notice of its resignation, or the Company
or the Trustee gives notice of its removal of the Consulting
Firm, in accordance with Section 11(a), a firm of compensation
or retirement plan consultants or certified public accountants
shall be appointed the successor Consulting Firm. Before a
Change of Control, such appointment shall be made by the
Company, and after a Change of Control, it shall be made by the
Trustee. The Company shall promptly notify the Trustee of the
name and address of a successor Consulting Firm appointed by it,
and the Trustee shall promptly notify the Executives of the name
and address of every successor Consulting Firm. The appointment
of a successor Consulting Firm shall become final upon the
giving of such notices, unless a Change of Control has
previously occurred, in which event the appointment of a successor
Consulting Firm shall become final thirty days after the
Executives are so notified unless more than one-third of the
Executives have given the Trustee written notice of their ob-
jection to the appointment. When the appointment of a successor
Consulting Firm becomes final, the Consulting Firm shall
thereupon deliver to the successor Consulting Firm all records
and documents in its possession as may be reasonably required to
enable the successor Consulting Firm properly to carry out its
duties under this Trust Agreement.
Section 12: Amendment or Termination
(a) Amendment. This Trust Agreement may be amended
at any time and from time to time before a Change of Control by
a written instrument executed by the Trustee, the Company and
the Consulting Firm. This Trust Agreement may not be amended
after a Change of Control.
(b) Irrevocable. Except as provided in Section 3(d),
the Trust shall be irrevocable and may be terminated only upon
the receipt by the Trustee of a certification from the
Consulting Firm that (i) all liabilities to the Executives under
the Agreements have been satisfied or (ii) it has received the
signed consent to the termination of the Trust of each Executive
who remains entitled to payments pursuant to the Agreements;
provided, that if the Company or the Consulting Firm notifies
the Trustee that any payment made from the Trust or to be made
pursuant to the Agreements is being contested, litigated or
otherwise disputed, the Trust shall remain in effect until such
contest, litigation or dispute is resolved. Upon
such a termination of the Trust, the Trustee shall promptly
transfer the Trust Assets (if any) to the Company.
Section 13: Protection of the Trustee and the Consulting Firm.
(a) The Company agrees, to the extent permitted by
applicable law, to indemnify each of the Trustee and the Con-
sulting Firm against and hold it harmless from any claim or
liability that may be asserted against it by the Company or any
other party, except on account of the Trustee's or the Con-
sulting Firm's (as the case may be) own gross negligence or
willful breach of its obligations under this Trust Agreement.
Without limiting the generality of the foregoing, it shall not
be considered a breach for the Trustee or the Consulting Firm,
as the case may be, in good faith: (a) to rely upon a certi-
fication of an authorized representative of the Company, or (in
the case of the Trustee) the Consulting Firm, with respect to
any instruction, direction or approval of the Company until a
subsequent certification is filed with it; (b) to act upon any
instrument, certificate, or paper believed by it to be genuine
and to be signed or presented by the proper person or persons
(and except as set forth in Sections 3(e) and 5(c), neither the
Trustee nor the Consulting Firm shall be under any duty to make
any investigation or inquiry as to any statement contained in
any such writing but may accept the same as conclusive evidence
of the truth and accuracy of the statements therein contained);
or (c) in the case of the Trustee, to make distributions in
accordance with the terms of this Trust Agreement and infor-
mation or directions furnished to the Trustee by the Executives,
the Consulting Firm or the Company. In addition, the Company
agrees to indemnify the Trustee for, and hold it harmless
against, and defend it against any and all liabilities, losses,
costs or expenses (including reasonable attorneys' fees) of
whatsoever kind and nature which may be imposed on, incurred by
or asserted against it at any time by reason of (i) accepting
any property contributed to the Trust in the Company's
discretion or retaining such property as a Trust Asset at the
Company's direction, or (ii) carrying out in good faith the
responsibilities delegated to it under this Agreement, or by
reason of any act or failure to act under this Agreement, if any
such action was taken or omitted, as the case may be, in good
faith or in accordance with the express provisions of this Trust
Agreement; provided, that with respect to subclause (ii), the
Trustee shall not be indemnified against any liability or
expense for any action or inaction taken or omitted by the
Trustee which, under the circumstances, the Trustee knows or has
reason to know constitutes a violation of the law or a breach of
its fiduciary duties. The Trustee shall not be required to give
any bond or any other security for the faithful performance of
its duties under this Trust Agreement, except as required by
law.
(b) Litigation. Neither the Trustee nor the Consulting
Firm shall be required to undertake or to defend any
litigation arising in connection with this Trust Agreement,
unless it be first indemnified by the Company against its pro-
spective costs, expenses and liability including counsel fees,
and the Company hereby agrees to indemnify the Trustee and the
Consulting Firm for such costs, expenses, and liability includ-
ing counsel fees. The Company agrees to indemnify the Trustee
and the Consulting Firm for any and all costs and expenses (in-
cluding counsel fees) and shall hold the Trustee and the Con-
sulting Firm harmless from any liability which may arise in
connection with any disputes or litigation in connection with
the Trust.
Section 14: Notices
All notices, consents and other communications here-
under shall be in writing and shall be given by hand delivery or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company:
Avon Products, Inc.
Nine West 57th Street
New York, NY 10019-2683
Attention: General Counsel
If to the Consulting Firm:
Buck Consultants, Inc. Two
Pennsylvania Plaza
Attention: John J. Ponzini
If to the Trustee:
Chemical Bank
4 New York Plaza
4th Floor
New York, New York 10004
Attention: Richard Hauptman
If to the Executives:
To the addresses set forth in Exhibit C
or to such other address as a party shall have furnished to the
others in writing in accordance herewith. Notice and communi-
cations shall be effective when actually received by the addressee.
Section 15: Severability and Alienation
(a) Severability. Any provision of this Trust
Agreement prohibited by law shall be ineffective to the extent
of any such prohibition without invalidating or in any other way
limiting the remaining provisions hereof.
(b) No Alienation. The rights and benefits of the
Executives under this Trust Agreement, and the payments to the
Executives from the Trust Assets, may not be anticipated, as-
signed, alienated or subject to attachment, garnishment, levy,
execution or other legal or equitable process except as required
by law. Any attempt by a Executive to anticipate, alienate,
assign, sell, transfer, pledge, encumber or charge the same
shall be void. The Trust Assets shall not in any manner be
subject to the debts, contracts, liabilities, engagements or
torts of any Executive, and payments hereunder shall not be
considered assets of any Executive in the event of insolvency or
bankruptcy.
Section 16: Governing Law
This Trust Agreement shall be governed by and con-
strued in accordance with the laws of the state of New York,
without reference to principles of conflicts of law.
Section 17: Miscellaneous
(a) Taxes. The Trustee shall be neither individually
nor severally liable for any taxes of any kind levied or
assessed under the existing or future laws against the Trust
Assets. The Trustee shall withhold from each payment to
a Executive any Federal, state, local and foreign taxes that are
required by applicable laws and regulations to be withheld, in
accordance with the Consulting Firm's instructions, and shall
deliver and pay over such amounts to the Company for its payment
to the appropriate taxing authorities. Any tax information
applicable to an Executive shall be supplied to the Consulting
Firm by the Company and the Consulting Firm shall have no
responsibility for the accuracy of that information.
(b) Satisfaction Under Agreements. Any payment to a
Executive by the Trustee in accordance with Section 4 of this
Trust Agreement shall, to the extent thereof, be in full satis-
faction of all claims against the Trustee and the Company under
the Agreements. Nothing in this Trust shall relieve the Company
of its liability to make payments under the Agreements, except
to the extent such liability is met by payments pursuant to
Section 4 of this Trust Agreement.
(c) Headings. Headings in this Trust Agreement are
inserted for convenience of reference only and are not to be
considered in the construction of the provisions hereof.
(d) Counterparts. This Trust Agreement may be ex-
ecuted in several counterparts, each of which shall be deemed an
original, and said counterparts shall constitute but one and the
same instrument.
(e) Successors. This Trust Agreement shall inure to
the benefit of, and be binding upon, the parties hereto and
their successors and assigns.
(f) Actions in Writing. Any action of the Company or
the Consulting Firm pursuant to this Trust Agreement, including
without limitation all orders, requests, directions,
instructions and communications of information, shall be in
writing signed on its behalf by an officer or named designee of
the Company or the Consulting Firm (as the case may be).
(g) Death or Disability of Executive. If at any time
while this Trust is in existence, an Executive should die,
references herein to that Executive shall be deemed to include
the Executive's designated beneficiaries under the relevant
Agreement or, if there are no such beneficiaries, the executor
or administrator of the Executive's estate. If at any time
while this Trust is in existence, a legal guardian should be
appointed for an Executive, references herein to that Executive
shall be deemed to include such legal guardian.
IN WITNESS WHEREOF, the Company, the Trustee and the
Consulting Firm have executed this Trust Agreement as of the
date first above written.
AVON PRODUCTS, INC.
By:/S/ James E. Preston
Name: James E. Preston
Title: Chairman & Chief Executive Office
CHEMICAL BANK
By:/s/ Richard Hauptman
Name: Richard Hauptman
Title: Vice President
BUCK CONSULTANTS, INC.
By:/s/ John J. Ponzihi
Name: John J. Ponzihi
Title: Consulting Actuary
Exhibit A
Agreements Covered by the Avon Products, Inc.,
Benefit Protection Trust (Nine Agreements)
Employment Agreements between Avon Products, Inc.,
and the following officers, such agreements dated as of the
dates indicated:
1. James E. Preston, Chairman and Chief Executive
Officer (dated November 5, 1992)*
2. Edward J. Robinson, President and Chief Oper-
ating Officer (dated September 1, 1994)
3. Gail Blanke-Cusick, Senior Vice President (dated
September 1, 1994)
4. Christina A. Gold, Senior Vice President (dated
September 1, 1994)
5. Susan J. Kropf, Senior Vice President (dated
September 1, 1994)
6. Ward M. Miller, Jr., Senior Vice President and
General Counsel (dated November 3, 1994)
7. Edwina G. Woodbury, Senior Vice President and
Chief Financial Officer (dated September 1, 1994)
8. Marcia L. Worthing, Senior Vice President (dated
September 1, 1994)
Updated as of April 1, 1995
_____________________
* Mr. Preston's agreement by its terms expires October 31,
1995. Prior to that date it will be amended or superceded
by a new agreement.
Exhibit B
The Required Funding Amount shall be determined as of
a given Adjustment Date assuming all cash payments would become
due under an Agreement upon or after Change of Control and
further assuming the Executive's termination of employment oc-
curred as of the Adjustment Date, or if termination occurred
prior to such date, the actual date of termination. The present
value shall be determined, where appropriate, based on the
assumptions specified in the Agreement. If the appropriate
assumptions are not specified in the Agreement, the assumed
interest rate shall equal the interest rate payable on one-year
Treasury Bills in effect on the day that is 30 business days
(where a business day is any day other than Saturday, Sunday or
a legal holiday in the City of New York) prior to the Adjustment
Date, and where mortality assumptions are required, the average
of the applicable factors under the 1984 Buck Mortality Table
shall be used. It shall be further assumed that the amount of
any tax reimbursement payment to the Executive under the
Agreement shall be based on the assumption that the maximum
amount of applicable taxes are payable to the Executive. Any
benefit costs, premiums or other payments to be made under the
Agreement will be based on information provided by the Company.