AVON PRODUCTS, INC. COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS Effective May 1, 1997 (Restated June 1, 2000) I. GENERAL PROVISIONS 1.1 Purpose The purpose of the Avon Products, Inc. Compensation Plan for Non-Employee Directors (the "Plan") is to provide a comprehensive revised compensation program which will attract and retain qualified individuals who are not employed by Avon Products, Inc. or its subsidiaries (the "Company") to serve on the Company's Board of Directors. In particular, the Plan aligns the interests of such directors with those of the Company's shareholders by providing that a significant portion of such compensation is directly linked to increases in the value of the Company's Common Stock. 1.2 Relationship to 2000 Stock Incentive Plan The Company's 2000 Stock Incentive Plan ("2000 Plan") which was approved by the Company's shareholders at the Annual Meeting of Shareholders on May 4, 2000, provides for the award of stock incentives, including stock options and restricted stock, to key employees of the Company including non-employee directors. 1.3 Definitions Capitalized words and phrases in this Plan shall have the same meaning as the definitions set forth in the 2000 Stock Incentive Plan to the extent they are defined therein. II. ANNUAL RETAINER AND MEETING FEES 2.1 Annual Retainer Each non-employee director shall be entitled to receive an annual retainer consisting of (a) $25,000 payable in cash and (b) Restricted Stock having a value as of the date of grant of approximately $25,000. The cash portion shall be payable in quarterly installments of $6,250 each. 2.2 Annual Restricted Stock Award As part of the Annual Retainer compensation, each non-employee director will receive an award of shares of Restricted Stock immediately following each Annual Meeting of Shareholders. The number of shares so granted each year will be determined by dividing the sum of $25,000 by the closing price of a share of the Company's Common Stock on the New York Stock Exchange averaged over 10 consecutive trading days, ending with the trading day immediately preceding the applicable Annual Meeting. All grants of Restricted Stock shall be subject to the terms and conditions set forth in Article IV below. 2.3 Meeting Fees Each non-employee director shall receive a fee of $1,000, payable in cash, for each meeting of a committee of the Board of Directors that he or she attends and each special meeting of the Board of Directors that he or she attends. No fee is payable with respect to attendance at a regular meeting of the Board of Directors, including the annual organizational meeting occurring immediately after an Annual Meeting of Shareholders. 2.4 Retainer Fee for Committee Chairs A non-employee director appointed to chair any committee of the Board of Directors shall be paid an annual retainer of $3,000 in cash, such payment to be made within 30 days following the effective date of appointment. 2.5 Deferred Cash Alternative Each non-employee director annually may elect to have all or a part of his or her cash compensation, including annual retainers and meeting fees, deferred for payment in accordance with the provisions of the Deferred Compensation - Stock Credit Plan. All such elections for each year shall be made prior to the beginning of the year. III. STOCK OPTIONS 3.1 Annual Grants of Stock Options As of the close of business on the date of each Annual Meeting of Shareholders, each non-employee director who then continues as a director (whether or not re-elected at any such meeting) shall be granted an Option to purchase 4,000 shares. All Options granted pursuant to the Plan shall be non-qualified Options and shall expire ten (10) years from the date of grant. 3.2 Option Exercise Price The per share price to be paid to exercise an Option shall be the "Fair Market Value" of the Stock on the date of grant in accordance with the 2000 Plan. 3.3 Vesting and Exercise of Options Each Option will become exercisable one year after the date of grant and may be exercised for a period of ten (10) years after the date of grant. In the event of death, a vested Option may be exercised by the estate of the non- employee director. 3.4 Method of Exercise and Purchase An Option shall be exercised by giving written notice to the Secretary, or an Assistant Secretary, of the Company specifying the number of shares to be purchased and the particular grant being exercised. Such notice shall be accompanied by a check as payment of the exercise price of the shares with respect to which such Option, or portion thereof, is exercised. Alternatively, such notice may include an election to have such shares delivered to a broker-dealer with whom arrangements have been made to immediately sell the shares and withhold from the net sale proceeds the full purchase price amount to be delivered to the Company. The Company may also require payment of all withholding taxes to exercise an Option, whether or not a broker-dealer arrangement has been used. IV. RESTRICTED STOCK 4.1 Annual Retainer Grants of Restricted Stock At the close of business on the date of each Annual Meeting of Shareholders, each non- employee director who then continues as a director (whether or not re- elected at any such meeting) shall be granted shares of Restricted Stock. The number of shares of Restricted Stock to be granted will have a Fair Market Value of $25,000 on the date of grant. The Fair Market Value per share shall be deemed to be the closing price of a share of Company Common Stock as reported on the New York Stock Exchange averaged over the ten trading days next preceding the date of grant. A fractional share resulting from such calculation will be rounded to the nearest whole share. 4.2 Restrictions and Terms and Conditions All shares of Restricted Stock granted under this Plan may not be sold, traded, assigned, transferred or otherwise encumbered until and unless restrictions are removed. The Company shall retain custody of all shares until restrictions are removed or may hold such shares by book entry registration. Each director granted Restricted Stock shall have all the rights of a Shareholder with respect to such shares, including the right to vote such shares and receive dividends and other distributions. 4.3 Removal of Restrictions No shares of Restricted Stock will become free of restrictions and non-forfeitable for a director until the termination of the director's services as a member of the Company's Board of Directors. Shares shall become non-forfeitable at the earliest to occur of: (a) the director's death or permanent disability, (b) mandatory retirement, pursuant to Company policy, effective at the end of the term of service during which the director has attained age 70, (c) resignation, or failure to stand for re-election, prior to such mandatory retirement provided that such action must have the consent of at least 80% of all directors then on the Board, with the affected director abstaining, or (d) the occurrence of a Change of Control as defined in the 2000 Stock Incentive Plan. Termination of service as a director for any other reason shall result in forfeiture of his or her shares of Restricted Stock. Forfeiture of shares will also result with respect to a director who, without the Company's written consent, becomes employed by, or provides consulting services to, a company substantially engaged in a business which is competitive to a principal business conducted by the Company. V. ADDITIONAL PROVISIONS 5.1 The Plan shall be administered by the Compensation Committee of the Board of Directors which shall have the power to interpret the Plan and amend it from time to time as it deems proper. To the fullest extent practicable, however, the terms and conditions of the 2000 Stock Incentive Plan shall be applicable to this Plan. 5.2 The number of shares of Stock covered by any Option or award of Restricted Stock shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a split or subdivision of shares, a combination of shares, or the payment of a stock dividend. 5.3 All Options shall become fully exercisable and all shares of Restricted Stock will become vested, upon the occurrence of a Change of Control as defined in the 2000 Stock Incentive Plan. 5.4 The Plan shall be governed by and subject to the laws of the State of New York and applicable Federal laws.
Compensation Plan for Non-Employee Directors
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