EXHIBIT 10.12
THE AVON PRODUCTS, INC.
DEFERRED COMPENSATION PLAN
(as amended and restated as of January 1, 1996)
THE AVON PRODUCTS, INC. DEFERRED COMPENSATION PLAN
1. Purpose: Under the terms of the Plan, a director or an
elected or appointed officer of Avon Products, Inc. (the "Company") may
defer receipt of all or part of his or her award payable under the
Management Incentive Plan, or other annual incentive award for a
particular calendar year (collectively referred to as "Annual Bonus").
In addition, a director or officer may defer receipt of all or part of
his or her cash award otherwise payable in 1997 under the 1994 Long Term
Incentive Plan or otherwise payable in future years under the 1997 Long
Term Incentive Plan or other Long Term Incentive Plans (collectively
referred to as "LTIP Bonus"). In addition, if an eligible officer or
director is a participant in the Avon Employees' Savings and Stock
Ownership Plan or its successor (the "Savings Plan"), he (i) may elect
to defer receipt of all or a portion of those before-tax contributions,
and (ii) shall be credited with those matching contributions, which
would have been made to the Savings Plan had his compensation not been
reduced by the deferral of compensation, or limited by maximum
contribution levels or the limitation on annual compensation set forth
under Code Section 401(a)(17).
2. Eligibility: All Officers and directors of the Company may
participate in the Plan (collectively referred to as the
"Participants"). Notwithstanding the foregoing, the continued Plan
participation of a Participant may be suspended in accordance with
Section 14.
3. Deferral of Annual Bonus: Each Participant may elect to defer
all or a portion of his Annual Bonus for each calendar year. The amount
or percentage of the Annual Bonus to be deferred for a calendar year is
at the discretion of the Participant, except that the elected amount or
percentage must be at least equal to the lesser of $1,000 or 100% of the
cash portion of such Bonus. An election by a Participant to defer all
or part of such Bonus must be made prior to the end of the calendar year
for which the Annual Bonus is paid. (For example, the Annual Bonus for
1996 will be paid in 1997, but the election to defer has to be made in
1996.) Each such election is only valid for the calendar year in which
it is made and a new election must be made for each subsequent calendar
year in which the Participant chooses to participate. The election must
include an election of the method of payment as specified in Section 9
or 9A.
3A. LTIP Bonus The amount or percentage of an LTIP Bonus to be
deferred will be elected at the discretion of the Participant in the
same manner as described in Section 3, with separate elections required
for each Long Term Incentive Plan, and in each instance to include an
election as to the method of payment as specified in either Sections 9
or Section 9A.
4. Deferral of Savings Plan Contributions: Each Participant (I)
may elect to defer receipt of all or a portion of the Before-Tax
Participant Contributions (as defined in the Savings Plan) which would
have been permitted to be made under the Savings Plan for a Plan year,
as if subsections (a) through (d) below applied, in excess of the
Before-Tax Participant Contributions actually made by such Participant
to the Savings Plan for such Plan Year, and (ii) shall be credited with
those matching contributions which would have been made under Section
3.3 of the Savings Plan for a Plan Year in excess of those matching
contributions actually made to the Savings Plan for such Plan Year, as
if
(a) the limitations of Code Section 415 were not applicable, and
(b) the limitations of Code Section 401(a)(17) were not
applicable, and
(c) the limitations of Code Section 402(g) were not applicable,
and
(d) the definition of compensation under the Savings Plan included
any compensation electively deferred by a member for the Plan Year (as
that term is defined in the Savings Plan) to a deferred compensation
plan or program maintained by the Company.
The election to defer pursuant to this Section 4 must be made
independently from any bonus deferral election pursuant to Sections 3 or
3A, and prior to the performance of the services to which the
compensation deferral relates. Each such election is valid only for the
present calendar year, and a new election must be made for each
subsequent year in which the officer or director chooses to participate
in the Plan.
5. Crediting of Deferred Amounts: The Company shall establish
and maintain individual accounts under the name of each Participant who
elects to defer compensation under Sections 3, 3A or 4 above. Bonus
deferrals under either Section 3 or Section 3A will be credited to a
Participant's account as of the date the Annual Bonus or LTIP Bonus,
whichever is applicable, would otherwise be payable. Deferred
compensation under Section 4 will be credited to a Participant's account
as of the date of withholding, along with associated matching
contributions.
6. Interest: Interest will be accrued from the date in which the
funds are credited to a Participant's account. Except as provided
below, interest on amounts deferred with respect to calendar years
before 1990 will be compounded annually at an interest rate equal to
Moody's Composite Bond Average (determined as of the date of deferral
and on each anniversary thereof) plus four percentage points, or such
higher rates as the Company may deem appropriate. Amounts deferred with
respect to calendar years after 1989 shall bear interest at a rate
determined by the Company, but in no event shall such interest rate be
less than equal to the average annual yield on long term (30 years) U.S.
treasury bonds (the "T-Bill Rate") as reported in the Federal Reserve
Bulletin (determined as of the date of deferral and on each anniversary
thereof). The Company shall have the right to lower any interest rate
payable on a prospective basis, but not below the T-Bill Rate. Interest
will continue to be credited and compounded until the Valuation Date (as
defined below) preceding the final payment made to a Participant or a
Participant's beneficiary.
7. Valuation of Accounts: The value of each Participant's
account, including accrued interest will be calculated on December 31 of
each year (the "Valuation Date").
8. Hardship Withdrawals: At any time prior to commencement of
benefits pursuant to Sections 9 or 9A, a Participant may request a
withdrawal of all or a portion of the amounts he has previously deferred
under the Plan. Such a request shall be approved by the Company only
upon a finding that the Participant has suffered a hardship as defined
under the Savings Plan, or as defined by any regulations promulgated
under Code Section 401(k). In the event such a withdrawal is approved,
payment of all or a portion of the amounts deferred by a Participant,
together with annual interest compounded as of the date such withdrawal
is approved, shall be made as soon as practicable to the Participant.
Any benefits otherwise payable hereunder shall be adjusted for such
financial hardship payment.
9. Payment of Deferred Compensation: Except as modified by
Sections 9A, 10 or 11 below, a Participant's account shall be payable in
cash in a single payment on January 15 of the first full calendar year
following severance of employment or, if so elected, in annual
installments commencing on January 15 of the first full calendar year
following severance of employment and continuing on each subsequent
January 15 for the period elected. For purposes of this Plan, severance
of employment means severance for any reason including, but not limited
to, death, retirement, resignation or disability under the Company's
Long Term Disability Plan. If severance is due to disability, as
defined under the Company's Long Term Disability Plan, the Participant,
with the Company's consent, may elect to receive all or a portion of the
accrued account upon such Disability; otherwise, the Participant's
account will continue to accrue interest on the deferred amounts and
will not become payable until final separation from the Company.
A Participant shall elect prior to retirement or termination
of employment to receive his or her account in a single payment or in
annual installments up to a maximum of 15 annual installments. A
Participant may change his or her payout election at any time up to the
effective date of retirement or termination of employment but may not
make any change thereafter, with no payment to be made prior to the date
indicated by the preceding paragraph.
Should a participant elect installment payments, the amount of
the first installment payment will be a fraction of the value of the
Participant's deferred compensation account on the preceding Valuation
Date, the numerator of which is one (1) and the denominator of which is
the total number of annual installments elected. (If a Participant
elects one installment, the Participant's entire account balance will be
distributed in a single sum on the distribution date.) The amount of
each subsequent payment will be a fraction of the remaining value of the
Participant's deferred compensation account on the Valuation Date
preceding each subsequent installment date, the numerator of which is
one (1) and the denominator of which is the total number of installments
elected minus the number of installments previously paid. Interest
shall continue to accrue on the unpaid balance of the account.
9A. In-Service Payment Option Effective with respect to any
deferral of Annual Bonus, or LTIP Bonus otherwise payable in 1997 or
subsequent years, and/or any Savings Plan Contributions Deferral for
1997 or subsequent years, a Participant can elect prior to the year in
which the payment(s) would otherwise be made, to have payment of a
specified portion of his or her deferred account (allocated solely to
such compensation) payable on January 15th of an irrevocably designated
subsequent year. Such "In-Service" deferred compensation payment will
be made at such time notwithstanding that the Participant may not have
by then terminated employment. If, however, a Participant in fact
terminates employment for any reason prior to such designated date,
including death, such In-Service deferred amount will in all cases be
distributed in a lump sum as of the January 15th next following such
termination.
10. Death of a Participant In the event of a Participant's death
prior to termination of employment, the Participant's designated
beneficiary will receive payment of the account as of the January 15th
of the year next following, in the payout manner which the Participant
had elected, i.e. either in a lump sum or in annual installment payments
commencing as of such January 15th. The unpaid portion of an account
allocated to an In-Service payout election, however, will in all cases
be distributed in a lump sum as of the January 15th next following the
Participant's death.
In the event that a Participant dies after severance of
employment, the balance of the Participant's unpaid account shall
continue to be paid to the Participant's designated beneficiary in the
manner of payment previously elected by the Participant.
In the event that a Participant is not survived by a
designated beneficiary, or such designated beneficiary subsequently dies
before all installment payments have been made, remaining account
payments will be made to the Participant's surviving spouse, if any,
otherwise to the Participant's estate.
11. Change of Control: Notwithstanding the foregoing, upon the
occurrence of a Change of Control (as defined below), the Plan shall
automatically terminate and the total deferred amount, plus interest,
then standing to the credit of each Participant under the Plan
(including a Participant who has terminated employment with the Company
and elected to receive distributions in installments) shall be paid to
such Participant in a single lump sum as soon as practicable but in no
event later than fifteen (15) business days following such Change of
Control. Any payment made after such fifteenth business day shall bear
additional interest from the date of such Change of Control until the
date of payment at the highest rate of interest applicable to any
deferral in effect under the Plan at the time of such Change of Control.
(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 Company 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
Company, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, 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
Person subsequently acquires beneficial ownership of additional voting
such securities of the Company, 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 of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to the effective date of this
provision 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 of Directors; or
(c) 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 ("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 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 Corporation Voting
Securities, (ii) 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 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 of
Directors, providing for such Business Combination; or
(d) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, no Change of Control shall be
deemed to have occurred with respect to an individual by reason of any
actions or events in which such individual participates in a capacity
other than in his capacity as officer or employee of the Company (or as
a member of the Board of Directors of the Company or a Subsidiary, where
applicable).
12. Administration of the Plan: The Company shall be the
administrator of the Plan and shall have the discretionary authority to
determine all questions arising in connection with the Plan including
its interpretation, and may adopt procedural rules and may employ and
rely on such legal counsel, accountants, and agents as it may deem
advisable to assist in the administration of the Plan. Decisions of the
Company shall be conclusive and binding on all persons.
13. Amendment or Termination of the Plan: The Company reserves
the right, at any time, and from time to time, and retroactively as
deemed necessary or appropriate, to amend or modify in whole or in part
any or all of the provisions of the Plan, including the right to
discontinue contributions, provided that no such amendment or
modification shall adversely affect the benefits accrued under the Plan
prior to the effective date of such amendment or modification. The
Company may terminate the Plan for any reason at any time, provided that
such termination shall not adversely affect the benefits accrued under
the Plan prior to such effective date of such termination.
14. Suspension of Deferrals: Notwithstanding any other provision
of this Plan, a Participant shall be suspended from continued
participation under this Plan for the twelve (12) month period
immediately following the date on which the Participant receives any
hardship distribution from any Company Savings Plan qualified under Code
Section 401(k).
15. No Employment Rights: The existence of the Plan or of a
deferral agreement does not constitute a contract for continued
employment between a Participant and the Company. The Company reserves
the right to modify a Participant's compensation and to terminate a
Participant for any reason at any time, notwithstanding the existence of
this program or of a deferral agreement. The Company reserves the right
not to grant awards to Participants for any reason.
16. Segregation of Monies Not Required: Nothing contained in
this Plan or in a deferral agreement shall require the Company to
segregate any monies from their general funds, or to create any trusts,
or to make any special deposits for any amounts to be paid to any
Participant, beneficiary or contingent beneficiary. Neither the
Participant, his beneficiary, contingent beneficiary, heirs or personal
representatives shall have any right, title or interest in or to any
funds of the Company on account of this program or on account of having
completed a deferral agreement.
17. Restriction on Transfer: The right to receive any benefits
under this Plan may not be transferred, assigned, subject to
garnishment, attachment or other legal equitable process without the
prior written consent of the Company.
18. Application of Law: The provisions of this Plan shall be
construed in accordance with the Employee Retirement Income Security Act
of 1974, as amended, and to the extent not superseded thereby, in
accordance with the laws of the State of New York.