EXHIBIT 10.16
EMPLOYMENT AGREEMENT
THIS AGREEMENT, by and between AVON PRODUCTS, INC., a New York
corporation (the "Corporation"), and JAMES E. PRESTON (the
"Executive"), dated as of this 1st day of November, 1995.
W I T N E S S E T H:
WHEREAS, the Corporation and the Executive have previously
entered into an Employment Agreement dated as of November 5, 1992
("1992 Agreement"), the term of which expires as of October 31,
1995; and
WHEREAS, the Corporation and the Executive desire to enter
into a new Employment Agreement effective as of November 1, 1995
succeeding the 1992 Agreement; and
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and other good and valuable consideration,
the Corporation and the Executive do hereby agree as follows:
1. Employment. The Corporation shall continue to employ the
Executive and the Executive agrees to continue to serve as an
executive of the Corporation, in such capacities and upon such
conditions as are hereinafter set forth.
2. Term. This Agreement is effective as of November 1, 1995
and shall expire as of May 7, 1998 ("Agreement Expiration Date").
The Executive's employment, however, may be terminated at an
earlier date subject to the obligations of the parties upon such
termination as are set forth hereinafter.
3. Position and Duties.
(a) Position. The Executive shall continue to serve as
Chairman of the Board and Chief Executive Officer of the
Corporation, provided that at any time subsequent to May 1, 1997,
if the Corporation's Board of Directors so elects, the Executive
shall serve as Chairman of the Board with another officer of the
Corporation concurrently serving as the Chief Executive Officer of
the Corporation.
(b) Business Time. The Executive agrees to devote his
full business time during normal business hours to the business and
affairs of the Corporation and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him
hereunder, to the extent necessary to discharge such
responsibilities, except for
(i) time spent in managing his personal, financial and
legal affairs and serving on corporate, civic or charitable boards or
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committees, in each case only if and to the extent not substantially
interfering with the performance of such responsibilities, and
(ii) periods of vacation to which he is entitled.
The Executive's continuing to serve on any boards and
committees on which he is serving or with which he is otherwise
associated immediately preceding the date hereof, or his service on
any other boards and committees of which the Corporation has
knowledge and does not object, in writing, within thirty (30) days
after first becoming aware of such service, shall not be deemed to
interfere with the performance of the Executive's services to the
Corporation.
The Executive specifically is directed to continue to serve on
the boards of which he is currently a member as of the date of this
Agreement and to be absent from the Corporation's offices for such
periods as may be necessary for him to properly discharge his
responsibilities as a director.
4. Compensation. The Executive shall be entitled to the
following compensation for as long as the Executive remains an
employee of the Corporation;
(a) Base Salary. The Executive shall continue to
receive a base salary (the "Base Salary") payable in equal bi-
weekly installments at an annual rate of $610,000 through December
31, 1996. His Base Salary for the year 1997 will be at an annual
rate of $1,000,000 and for periods subsequent to 1997 at an annual
rate of $1,100,000. Such Base Salary shall not serve to reduce any
other obligation of the Corporation hereunder.
(b) Annual Bonus. For each fiscal year of the
Corporation during which he is employed by the Corporation the
Executive shall be eligible to receive an annual bonus ("Annual
Bonus") under the Corporation's Management Incentive Plan or
successor annual incentive award plan. Such Annual Bonus shall be
determined on the basis of an annual target bonus opportunity of
(a) 50% of the Base Salary paid the Executive with respect to the
years 1995 and 1996, and (b) at least 70% of the Base Salary paid
the Executive with respect to years subsequent to 1996. Each
Annual Bonus (or portion thereof) shall be paid in cash in February
of the year next following the year for which the Annual Bonus (or
prorated portion) is earned or awarded, unless electively deferred
by the Executive pursuant to any deferral programs or arrangements
that the Corporation may make available to the Executive.
(c) Incentive and Savings Plans; Retirement and Death
Benefit Programs. The Executive shall be entitled to participate
in all incentive and savings plans and programs, including stock
option plans and other equity-based compensation plans, and in all
employee retirement, executive retirement and executive death
benefit plans (including the SERP and SLIP) on a basis no less
favorable than that basis available to senior officers of the
Corporation The Executive is entitled to a death benefit under the
SLIP of $2,000,000 and has accumulated the maximum 35 years of
creditable services under the SERP, as of the date of the
Agreement.
(d) Other Benefit Plans. The Executive and his spouse,
as the case may be, shall be entitled to participate in or be
covered under all medical, dental, disability, group life,
severance, accidental death and travel accident insurance plans and
programs of the Corporation and any Affiliated Companies at the
most favorable level of participation and providing the highest
levels of benefits available to them.
(e) Other Perquisites. The Executive shall also be
entitled to continue to receive all forms of perquisite
compensation that he has been provided immediately prior to the
date of this Agreement.
(f) Enhanced SERP Benefits. The provisions of this
subsection (f) shall apply notwithstanding anything to the contrary
in the SERP. Calculations of the Executive's SERP benefits shall
include credit for hypothetical Base Salary and bonus compensation
for the years 1992 through 1996, as set forth in Section 5(a) of
the 1992 Agreement.
5. Termination.
(a) Disability. The Corporation may terminate the
Executive's employment upon the Executive's Disability, by giving
to the Executive written notice of its intention to terminate his
employment, and his employment with the Corporation shall terminate
effective on the 90th day after receipt of such notice if the
Executive shall fail to return to full-time performance of his
duties within ninety (90) days after such receipt.
(b) Voluntary Termination by Executive. Notwithstanding
anything in this Agreement to the contrary, the Executive may, upon
not less than thirty (30) days' written notice to the Corporation,
voluntarily terminate employment for any reason (including
retirement under the terms of the Corporation's retirement plan as
in effect from time to time), provided that any termination by the
Executive pursuant to Section 5(d) on account of Constructive
Termination shall not be treated as a voluntary termination under
this Section 5(b). The Executive will voluntarily retire effective
as of the Agreement Expiration Date, at which time he will have
attained age 65, and such retirement will be deemed to constitute
voluntary termination for the purpose of the Agreement.
(c) Termination by the Corporation. The Corporation at
any time may terminate the Executive's employment for Cause or
without Cause.
(d) Constructive Termination. The Executive at any time
may terminate his employment for Constructive Termination.
(e) Notice of Termination. Any termination by the
Corporation for Cause or by the Executive for Constructive
Termination shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 14(c). For
purposes of this Agreement, a "Notice of Termination" means a
written notice given, in the case of a termination for Cause,
within ten (10) business days of the Corporation's having actual
knowledge of the events giving rise to such termination, and in the
case of a termination for Constructive Termination, within 180 days
of the Executive's having actual knowledge of the events giving
rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under
the provision so indicated, and (iii) if the termination date is
other than the date of receipt of such notice, specifies the
termination date of this Agreement (which date shall be not more
than fifteen (15) days after the giving of such notice). The
failure by the Executive to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of
Constructive Termination shall not waive any right of the Executive
hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
(f) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the case of
a termination for which a Notice of Termination is required, the
date of receipt of such Notice of Termination or, if later, the
date specified therein, as the case may be and (ii) in all other
cases, the actual date on which the Executive's employment
terminates.
6. Obligations of the Corporation Upon Termination. Upon
termination of the Executive's employment with the Corporation, the
Corporation shall have the following obligations (including the
obligation to pay the cost of all benefits provided by the
applicable benefit plan to the Executive and the Executive's family
under this Section 6 except normal employee contributions required
by the applicable benefit plan of other participating executives
with comparable responsibilities), provided, however, that any item
paid or payable under this Agreement shall be reduced by any amount
paid or payable to the Executive and the Executive's family with
respect to the same type of payment under any severance program
maintained by the Corporation. For this purpose, any payment under
any severance program maintained by the Corporation made over time
shall be discounted to present value at the Interest Rate before
reducing any payment under this Agreement by any amount paid or
payable to the Executive under such a program.
(a) Death and Retirement. If the Executive's employment
is terminated by reason of the Executive's death, this Agreement
shall terminate without further obligations to the Executive's
legal representatives under this Agreement other than payment of
the Accrued Obligations. Unless otherwise directed by the
Executive (or, in the case of a Qualified Plan, as may be required
by such plan) all Accrued Obligations shall be paid to the
Executive, his beneficiaries or his estate, as applicable, in a
lump sum in cash within thirty (30) days of the Date of
Termination. In the event of the retirement of the Executive, he
and his family shall be entitled to benefits generally available
upon retirement to other senior officers of the Corporation. In
the event of the Executive's death, his family shall be entitled to
receive benefits generally available to the surviving families of
other senior officers of the Corporation.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, the Executive,
and the Executive's spouse shall be entitled to continue to
participate in or be covered under the benefit plans and programs
referred to in Section 4(d) or, at the Corporation's option, to receive
equivalent benefits by alternate means, at least equal to those
described in Section 4(d). Unless otherwise directed by the Executive
(or, in the case of any Qualified Plan, as may be required by such
plan), the Executive shall also be paid all Accrued Obligations in a
lump sum in cash within thirty (30) days of the Date of Termination. In
addition, the Executive and the Executive's spouse shall be entitled to
receive disability and other benefits generally available to other
senior officers of the Corporation.
(c) Termination by the Corporation for Cause and
Voluntary Termination by Executive. If the Executive's employment
shall be terminated for Cause or voluntarily terminated by the
Executive (other than on account of Constructive Termination), the
Corporation shall pay the Executive the Accrued Obligations. The
Executive shall be paid all such Accrued Obligations in a lump sum
in cash within thirty (30) days of the Date of Termination and the
Corporation shall have no further obligations to the Executive
under this Agreement, unless otherwise required by a Qualified Plan
or specified pursuant to a valid election to defer the receipt of
all or a portion of such payments made in accordance with any plan
of deferred compensation sponsored by the Corporation.
(d) Other Termination of Employment. If the Corporation
terminates the Executive's employment other than for Cause or
Disability, or the Executive terminates his employment for
Constructive Termination, the Corporation shall pay or provide the
Executive the following:
(A) Cash Payment. The Corporation shall pay to the
Executive in a lump sum in cash within fifteen (15) days after
the Date of Termination the aggregate of the following amounts
(other than amounts payable from Qualified Plans, non-
qualified retirement plans and deferred compensation plans,
which amounts shall be paid in accordance with the terms of
such plans):
(1) all Accrued Obligations;
(2) a cash amount equal to two (2) times the
sum of
(I) the Executive's annual Base Salary
at the greater of the rate in effect as of the date
when the Notice of Termination was given or the
rate payable, or prospectively payable, to the
Executive for the year 1997 (one million dollars)
as provided in Section 4(a); and
(II) the greater of (x) the Annual Bonus
earned by or awarded to the Executive for the last
fiscal year of the Corporation ending prior to the
Date of Termination or (y) the annual target bonus
opportunity percentage applied to the rate of Base
Salary payable, or prospectively payable, to the
Executive for the year 1997 (70%) as provided in
Section 4(b).
In the event such Date of Termination occurs prior to May
1, 1997 and such date is within one hundred eighty (180)
days of a Change of Control Date, the cash amount
determined under Section 6(d)(A)(2) shall be three (3)
times the sum of (I) and (II) above.
(3) a cash amount equal to the difference
between (I) the sum of the maximum payments the Executive
would have received for all awards (or other similar
rights) outstanding at the Date of Termination and
granted to the Executive under any long-term incentive
compensation or performance plan of the Corporation if he
had continued in the employ of the Corporation through
the Agreement Expiration Date and the Corporation had met
its maximum performance goals under each such award and
the maximum amount payable under each such award was paid
and (II) any amounts actually paid under any such plan
with respect to such awards. The cash amount payable
pursuant to this paragraph shall include the maximum
payment value of all outstanding Performance Units
awarded the Executive under the Corporation's 1994 Long-
Term Incentive Plan reduced by any amounts actually paid
or payable under such plan with respect to such units;
(4) a cash amount equal to the present value,
calculated using the Interest Rate, of the difference
between
(I) the lump sum value of the retirement
benefits (including, without limitation, any
pension, retiree life, or retiree medical benefits)
that would have been payable or available to the
Executive under any Qualified Plan, under the SERP,
and under any other supplemental retirement, life
(other than the SLIP) or medical plan or
arrangement, whether or not qualified, maintained
by the Corporation or an Affiliated Company based
on the age and service the Executive would have
attained or completed had the Executive continued
in the Corporation's employ until the Agreement
Expiration Date, determined using, where
compensation is a relevant factor, his pensionable
compensation at the Date of Termination (or, if
greater, at the rate in effect on the date on which
occurred an event giving rise to a Constructive
Termination), with such lump sum value being
calculated using, where applicable, assumptions
contained in the respective plans; and
(II) the lump sum value of the retirement
benefits (including, without limitation, any
pension, retiree life, or retiree medical benefits)
that are payable or available to the Executive
under any Qualified Plan, under the SERP, and under
any other supplemental retirement, life (other than
the SLIP) or medical plan or arrangement, whether
or not qualified, maintained by the Corporation or
an Affiliated Company based on the age and service
the Executive has attained or completed as of the
Executive's Date of Termination determined using,
where compensation is a relevant factor, his
pensionable compensation at the Date of Termination
(or, if greater, at the rate in effect on the date
on which occurred an event giving rise to a
Constructive Termination), with such lump sum value
being calculated using, where applicable,
assumptions contained in the respective plans.
The retirement benefits which would have become
payable under such plans include, without limitation, the
additional benefits attributable to such additional
service which would have been rendered during such period
and the benefits which would have vested under such plans
as a result of such service, but which were otherwise
forfeited. Notwithstanding the foregoing, in lieu of any
cash payment in respect of retiree life or retiree
medical coverage for which the Executive would have
qualified by remaining in the Corporation's employ until
the Agreement Expiration Date, the Corporation may
arrange at its option or shall arrange at the election of
the Executive for such coverage to continue for the
Executive (or may secure equivalent conversion coverage)
and shall pay the cost of such coverage. Any election by
the Executive pursuant to the immediately preceding
sentence shall be made in writing and delivered to the
Corporation prior to the Date of Termination.
(B) SLIP Coverage. The Executive shall continue to
be covered under the SLIP and his beneficiaries shall continue
to be eligible to receive such supplemental life allowance as
if he had continued in the employ of the Corporation until the
Agreement Expiration Date reduced by the face amount of any
fully paid whole life insurance policy the Executive receives
pursuant to the SLIP.
(C) Other Benefit Continuation. The Corporation
shall provide for the continued participation of the Execu-
tive, and his spouse, as the case may be, until the Agreement
Expiration Date, in the plans described in Section 4(d) on the
same terms as described in Section 4(d). In lieu of continued
participation in medical and life insurance programs referred
to the foregoing, the Executive may elect by written notice
delivered to the Corporation prior to the Date of Termination,
to receive an amount equal to the annual cost to the
Corporation (based on premium rates) of providing such
coverage.
(e) Discharge of Corporation's Obligations. Subject to
the performance of its obligations under Sections 6, 7, 8 and 11,
the Corporation shall have no further obligations to the Executive
under this Agreement in respect of any termination by the Executive
for Constructive Termination or by the Corporation other than for
Cause or Disability.
7. Vesting or Cash-Out of Stock Options and Restricted
Stock. If the Corporation involuntarily terminates the Executive's
employment for reasons other than for cause, or the Executive
terminates his employment due to Disability or Constructive
Termination, all of his outstanding restricted stock will immediately
become vested and distributed and all of his outstanding stock options
shall become fully vested and exercisable, subject to the terms of
applicable Stock Option Agreements executed by the Corporation and the
Executive. Such stock options shall also become fully vested in the
event of death, disability or early retirement with the consent of the
Board of Directors.
In the event of a Change of Control the Executive shall be
entitled a cash out of outstanding restricted stock, stock options
and any other equity based awards in accordance with the terms of
the Corporation's plans under which such awards were granted and
subject to the terms of applicable Stock Option Agreements executed
by the Corporation and the Executive.
8. Certain Further Payments by the Corporation.
(a) Tax Reimbursement Payment. In the event that any
amount or benefit paid or distributed to the Executive by the
Corporation or any Affiliated Company, whether pursuant to this
Agreement or otherwise (collectively, the "Covered Payments"), is
or becomes subject to the tax (the "Excise Tax") imposed under
Section 4999 of the Code or any similar tax that may hereafter be
imposed, the Corporation shall either pay to the Executive or
contribute for the benefit of the Executive to a "rabbi" trust
established by the Corporation prior to the Change of Control Date,
at the time specified in Section 8(e) below, the Tax Reimbursement
Payment (as defined below). The Tax Reimbursement Payment is
defined as an amount, which when added to the Covered Payments and
reduced by any Excise Tax on the Covered Payments and any federal,
state and local income tax and Excise Tax on the Tax Reimbursement
Payment provided for by this Agreement (but without reduction for
any federal, state or local income or employment tax on such
Covered Payments), shall be equal to the sum of (i) the amount of
the Covered Payments, and (ii) an amount equal to the product of
any deductions disallowed for federal, state or local income tax
purposes because of the inclusion of the Tax Reimbursement Payment
in the Executive's adjusted gross income and the highest applicable
marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement
Payment is to be made.
(b) Determining Excise Tax. For purposes of determining
whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(i) such Covered Payments will be treated as
"parachute payments" within the meaning of Section 280G of the
Code, and all "parachute payments" in excess of the "base
amount" (as defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless, and
except to the extent that, in the opinion of the Corporation's
independent certified public accountants, which, in the case
of Covered Payments made after the Change of Control Date,
shall be the Corporation's independent certified public
accountants appointed prior to the Change of Control Date, or
tax counsel selected by such accountants (the "Accountants"),
such Covered Payments (in whole or in part) either do not
constitute "parachute payments" or represent reasonable
compensation for services actually rendered (within the
meaning of Section 280G(b)(4) of the Code) in excess of the
"base amount", or such "parachute payments" are otherwise not
subject to such Excise Tax, and
(ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(c) Applicable Tax Rates and Deductions. For purposes
of determining the amount of the Tax Reimbursement Payment, the
Executive shall be deemed:
(i) to pay federal income taxes at the highest
applicable marginal rate of federal income taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made,
(ii) to pay any applicable state and local income
taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year (determined without regard to
limitations on deductions based upon the amount of the
Executive's adjusted gross income), and
(iii) to have otherwise allowable deductions for
federal, state and local income tax purposes at least equal to
those disallowed because of the inclusion of the Tax
Reimbursement Payment in the Executive's adjusted gross
income.
(d) Subsequent Events. In the event that the Excise Tax
is subsequently determined by the Accountants to be less than the
amount taken into account hereunder in calculating the Tax
Reimbursement Payment made, the Executive shall repay to the
Corporation, at the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of such prior Tax
Reimbursement Payment that has been paid to the Executive or to
federal, state or local tax authorities on the Executive's behalf
and that would not have been paid if such Excise Tax had been
applied in initially calculating such Tax Reimbursement Payment,
plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Tax Reimbursement
Payment to be refunded to the Corporation has been paid to any
federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been
made to the Executive, and interest payable to the Corporation
shall not exceed interest received or credited to the Executive by
such tax authority for the period it held such portion. The
Executive and the Corporation shall mutually agree upon the course
of action to be pursued (and the method of allocating the expenses
thereof) if the Executive's good faith claim for refund or credit
is denied.
In the event that the Excise Tax is later determined by
the Accountants to exceed the amount taken into account hereunder
at the time the Tax Reimbursement Payment is made (including, but
not limited to, by reason of any payment the existence or amount of
which cannot be determined at the time of the Tax Reimbursement
Payment), the Corporation shall make an additional Tax Reimbursement
Payment in respect of such excess (which Tax Reimbursement Payment
shall include any interest or penalty payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
(e) Date of Payment. The portion of the Tax
Reimbursement Payment attributable to a Covered Payment shall be
paid to the Executive or to a "rabbi" trust established by the
Corporation prior to the Change of Control Date within ten (10)
business days following the payment of the Covered Payment. If the
amount of such Tax Reimbursement Payment (or portion thereof)
cannot be finally determined on or before the date on which payment
is due, the Corporation shall either pay to the Executive or
contribute for the benefit of the Executive to a "rabbi" trust
established by the Corporation prior to the Change of Control Date,
an amount estimated in good faith by the Accountants to be the
minimum amount of such Tax Reimbursement Payment and shall pay the
remainder of such Tax Reimbursement Payment (which Tax
Reimbursement Payment shall include interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined, but in no event later than forty-five (45)
calendar days after payment of the related Covered Payment. In the
event that the amount of the estimated Tax Reimbursement Payment
exceeds the amount subsequently determined to have been due, such
excess shall be repaid or refunded pursuant to the provisions of
Section 8(d) above.
9. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or
program provided by the Corporation or any of its Affiliated
Companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise prejudice such rights as the
Executive may have under any other agreements with the Corporation
or any Affiliated Companies, including, but not limited to stock
option or restricted stock agreements. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Corporation or any Affiliated
Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
10. Full Settlement. Except as provided in Section 12(b),
the Corporation's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other
right which the Corporation may have against the Executive or
others whether by reason of the subsequent employment of the
Executive or otherwise. In no event shall the Executive be
obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of
this Agreement.
11. Legal Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the
Corporation shall pay all reasonable attorney fees and expenses
incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim
by reason of litigation, arbitration or settlement.
12. Confidential Information and Noncompetition.
(a) The Executive shall hold in a fiduciary capacity for
the benefit of the Corporation all secret or confidential
information, knowledge or data, including without limitation all
trade secrets, relating to the Corporation or any Affiliated
Companies, and their respective businesses, (i) obtained by the
Executive during his employment by the Corporation or any of its
Affiliated Companies and (ii) which is not otherwise publicly known
(other than by reason of an unauthorized act by the Executive).
After termination of the Executive's employment with the
Corporation, the Executive shall not without the prior written
consent of the Corporation, unless compelled pursuant to an order
of a court or other body having jurisdiction over such matter,
communicate or divulge any such information, knowledge or data to
anyone other than the Corporation and those designated by it. In
no event shall an asserted violation of the provisions of this
Section 12(a) constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
(b) Upon termination of the Executive's employment for
any reason whatsoever prior to a Change of Control, the Executive
shall not, without the prior written consent of the Corporation,
during the three-year period following the Date of Termination
(i) accept employment or enter into a consulting or advisory
arrangement with Amway Corporation, Sara Lee Corporation, Premark
International, Inc., Mary Kay Cosmetics, Inc., or any of their
affiliates; or (ii) directly solicit or aid in the direct
solicitation of any employees of the Corporation or an Affiliated
Company to leave their employment. In the event the Executive
violates the terms of this Section 12(b), all benefit continuation
coverage that the Executive and/or his family members are then
receiving pursuant to the terms of Section 6(d) shall cease. Also,
in the event that this Section 12(b) is determined to be
unenforceable in part, it shall be construed to be enforceable to
the maximum extent permitted by law.
13. Successors.
(a) This Agreement is personal to the Executive and, without
the prior written consent of the Corporation, shall not be assignable by
the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Corporation and its successors. The Corporation
shall require any successor to all or substantially all of the
business and/or assets of the Corporation, whether direct or
indirect, by purchase, merger, consolidation, acquisition of stock,
or otherwise, by an agreement in form and substance satisfactory to
the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the
Corporation would be required to perform if no such succession had
taken place.
14. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
applied without reference to principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(c) Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand-delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: at the address listed on the last
page hereof or such other address as provided to the Corporation in
writing by the Executive.
If to the Corporation: Avon Products, Inc.
9 West 57th Street
New York, New York 10019
Attention: Secretary
(with a copy to the attention of the General Counsel or to such
other address as either party shall have furnished to the other in
writing in accordance herewith). Notice and communications shall be
effective when actually received by the addressee.
(d) Tax Withholding. The Corporation may withhold from
any amounts payable under this Agreement such federal, state or
local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(f) Captions. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect.
(g) Entire Agreement. This Agreement expresses the
entire understanding and agreement of the parties regarding the
terms and conditions governing the Executive's employment with the
Corporation, and all prior agreements governing the Executive's
employment with the Corporation shall have no further effect;
provided, however, that except as specifically provided herein, the
terms of this Agreement do not supersede the terms of any grant or
award to the Executive under the 1970 Stock Option Plan, the 1993
Stock Incentive Plan, any Long Term Incentive Plan, Management
Incentive Plan and any other similar or successor plan or program.
15. Definitions.
(a) "Accountants" shall have the meaning set forth in
Section 8(b).
(b) "Accrued Obligations" shall mean (i) the Executive's
full Base Salary through the Date of Termination, (ii) in the case
of death or retirement, the product of the Annual Bonus paid to the
Executive for the last full fiscal year of the Corporation and a
fraction, the numerator of which is the number of days in the
current fiscal year of the Corporation through the Date of
Termination, and the denominator of which is 365, (iii) any
compensation previously deferred by the Executive (together with
any accrued earnings thereon) and not yet paid by the Corporation
and any accrued vacation pay for the current year not yet paid by
the Corporation, (iv) any amounts or benefits owing to the
Executive or to the Executive's beneficiaries under the then
applicable employee benefit plans or policies of the Corporation
and (v) any amounts owing to the Executive for reimbursement of
expenses properly incurred by the Executive prior to the Date of
Termination and which are reimbursable in accordance with the
reimbursement policy of the Corporation described in Section 4(e).
(c) "Affiliated Company" shall mean any company
controlling, controlled by or under common control with the
Corporation.
(d) "Annual Bonus" shall have the meaning set forth in
Section 4(b).
(e) "Base Salary" shall have the meaning set forth in
Section 4(a).
(f) "Board" shall mean the Board of Directors of the
Corporation.
(g) "Cause" shall mean (i) an act or acts of dishonesty
or gross misconduct on the Executive's part which result or are
intended to result in material damage to the Corporation's business
or reputation or (ii) repeated material violations by the Executive
of his obligations under Section 3 of this Agreement which
violations are demonstrably willful and deliberate on the
Executive's part and which result in material damage to the
Corporation's business or reputation and as to which material
violations the Board has notified the Executive in writing.
(h) "Change of Control" means:
(A) 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 corporation where such acquisition
causes such person to own 20% or more of the combined voting
power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this Subsection (A),
the following acquisitions shall not be deemed to result in a
Change of Control: (i) any acquisition directly from the
Corporation, (ii) any acquisition by the Corporation,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation or (iv) any
acquisition by any corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of Subsection (C)
below; and provided, further, that if any Person's beneficial
ownership of the Outstanding Corporation 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 Corporation, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 20%
or more of the Outstanding Corporation Voting Securities; or
(B) 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 Corporation'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
(C) the approval by the shareholders of the
Corporation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Corporation ("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 Combination pursuant to
which (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding
Corporation 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 Corporation or all or
substantially all of the Corporation'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 Corporation Voting
Securities, (ii) no Person (excluding any employee benefit
plan (or related trust) of the Corporation or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting 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 existed
prior to the Business Combination and (iii) 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
(D) approval by the shareholders of the Corporation
of a complete liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, no Change of Control shall be deemed
to have occurred for purposes of this Agreement (i) by reason of
any actions or events in which the Executive participates in a
capacity other than in his capacity as Executive (or as a director
of the Corporation or a Subsidiary, where applicable) or (ii) if
prior to what otherwise would have been a Change of Control Date,
the Executive is demoted below the position described in Section
3(a) hereof and the Board provides written notification to the
Executive, no later than thirty (30) days thereafter, that a Change
of Control will not be deemed to occur with respect to the
Executive.
(i) "Change of Control Date" shall mean the date on
which a Change of Control shall be deemed to have occurred.
(j) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(k) "Constructive Termination" shall mean any of the
following:
(A) Reduction in Base Salary below the applicable
levels set forth in Section 4(a) or reduction in annual target
bonus opportunity below the levels set forth in Section 4(b).
(B) Any change to a position other than Chairman of
the Board and Chief Executive Officer prior to May 1, 1997,
absent the Executive's written consent, or removal from the
position of Chairman of the Board prior to the Agreement
Expiration Date absent the Executive's written consent.
(C) The occurrence of a Change of Control,
effective as the Change of Control Date, regardless of the
Executive's compensation or position on or after such date.
(D) A change of more than twenty-five (25) miles in
the office or location where the Executive is based, provided
that a change in the Executive's office location prior to a
Change of Control which is directly caused by the relocation
of the Corporation's headquarters office from its present
address of 9 West 57th Street, New York City, must be more
than fifty (50) miles from that address, in order to
constitute an event of Constructive Termination.
(l) "Covered Payments" shall have the meaning set forth
in Section 8(a).
(m) "Date of Termination" shall have the meaning set
forth in Section 5(f).
(n) "Disability" shall mean disability which would
entitle the Executive to receive full long-term disability benefits
under the Corporation's long-term disability plan on terms
substantially similar to those of the long-term disability plan as
in on the date of this Agreement.
(o) "Excise Tax" shall have the meaning as set forth in
Section 8(a).
(p) "Interest Rate" shall mean the interest rate payable
on one year Treasury Bills in effect on the day that is 30 business
days (days other than Saturday, Sunday or legal holidays in the
City of New York) prior to the Date of Termination.
(q) "Notice of Termination" shall have the meaning as
set forth in Section 5(f).
(r) "Qualified Plan" shall mean an employee benefit plan
qualified (or which is intended to be qualified) under
Section 401(a) of the Code.
(s) "SERP" shall mean the Supplemental Executive
Retirement Plan of Avon Products, Inc.
(t) "SLIP" shall mean the Supplemental Life Plan of Avon
Products, Inc.
(u) "Subsidiary" shall mean any majority owned
subsidiary of the Corporation.
(v) "Tax Reimbursement Payment" shall have the meaning
set forth in Section 8(a).
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and the Corporation has caused this Agreement to be executed in its
name on its behalf, and its corporate seal to be hereunto affixed
and attested by its Secretary, all effective as of the day and year
first above written.
AVON PRODUCTS, INC.
By:/S/ Marcia L. Worthing
Marcia L. Worthing, Senior Vice President,
ATTEST: Human Resources, and Corporate Affairs
/s/ Ward M. Miller, Jr.
Ward M. Miller, Senior Vice President,
General Counsel and Secretary
(CORPORATE SEAL)
EXECUTIVE:
/s/ James E. Preston
James E. Preston
Address:
Nodine Pasture Road
P.O. Box 830
Kent, CT 06757