Compensation Plan for Non-Employee Directors
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
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-
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
(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.