EMPLOYMENT AGREEMENT
THIS AGREEMENT, by and between AVON PRODUCTS, INC., a New York
corporation (the 'Corporation'), and ANDREA JUNG (the 'Executive'),
dated as of this 11th day of December, 1997.
W I T N E S S E T H:
WHEREAS, the Corporation desires to recognize the Executive's
commitment to the Corporation and to confirm the right of the Executive
to certain employment, compensation and severance benefits; and
NOW, THEREFORE, in consideration of the promises 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 employ the Executive and the
Executive agrees to serve as an executive of the Corporation, in such
capacities and upon such conditions as are hereinafter set forth.
2. Term. The Executive shall be considered an at-will employee
and her employment may be terminated by either party subject to the
obligations of the parties upon such termination as may be set forth
hereinafter.
3. Position and Duties.
(a) Position. The Executive shall serve as President,
effective January 5, 1998.
(b) Business Time. The Executive agrees to devote her full
business time during normal business hours to the business and affairs
of the Corporation and to use her best efforts to perform faithfully and
efficiently the responsibilities assigned to her hereunder, to the
extent necessary to discharge such responsibilities. The Executive's
continuing to serve on any boards and committees on which she is serving
or with which she is otherwise associated immediately preceding the date
hereof, or her 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.
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 receive a base salary
(the 'Base Salary') payable in equal bi-weekly installments at an annual
rate of $500,000, effective as of January 1, 1998. The Corporation
shall review the Base Salary periodically and in light of such review
may increase (but not decrease) the Base Salary taking into account any
change in the Executive's responsibilities, increases in compensation of
other executives with comparable responsibilities, performance of the
Executive and other pertinent factors, and such adjusted Base Salary
shall then constitute the 'Base Salary' for purposes of this Agreement.
Neither the Base Salary nor any increase in Base Salary after the date
hereof shall serve to limit or reduce any other obligation of the
Corporation hereunder.
(b) Annual Bonus.
(I) In General. For each fiscal year of the Corporation
during which she 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 at least sixty
percent (60%) of the Base Salary paid the Executive with respect to
such fiscal year, which annual target bonus opportunity may be
increased but not decreased except for annual reductions of up to
ten percent (10%) that apply to all officers of the Corporation.
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.
(ii) Change of Control. Notwithstanding the foregoing,
the Annual Bonus awarded to the Executive for each fiscal year of
the Corporation ending during the period commencing on the Change
of Control Date and ending on the third anniversary thereof or
during the pendency of a Potential Change of Control, shall not be
less than the largest bonus earned by or awarded to the Executive
for any the of three fiscal years of the Corporation ending before
such Potential Change of Control or Change of Control Date, as
applicable, or for the fiscal year in which such Potential Change
of Control or Change of Control Date occurs. For a fiscal year of
the Corporation that commences but does not end before the third
anniversary of a Change of Control Date, the Annual Bonus earned by
or awarded to the Executive for that portion of such fiscal year
shall not be less than a ratable portion (based on the total days
elapsed in that fiscal year) of the Annual Bonus that would have
been payable to the Executive had that entire fiscal year ended
before the third anniversary of a Change of Control Date.
(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 generally available to executives of the Corporation holding
comparable positions or having comparable responsibilities who become an
elected or appointed officer of the Corporation on or after the date on
which the Executive first became an elected or appointed officer of the
Corporation. As of January 1, 1998, the Executive is entitled to a
death benefit under the SLIP of $750,000. As of January 1, 1998, the
Executive will have accumulated four (4) years of Creditable Service
under the SERP.
(d) Other Benefit Plans. The Executive, her spouse and their
eligible dependents (as defined in, and to the extent permitted by, the
applicable plan), 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 her and her dependents.
(e) Other Perquisites. The Executive shall also be entitled
to:
(I) prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the policies and
procedures of the Corporation providing the highest level of
reimbursement on the least restrictive basis available;
(ii) paid vacation and fringe benefits in accordance with
the most favorable policies of the Corporation; and
(iii) all forms of perquisite benefits made available to
senior officers of the Corporation.
(f) Effect of Change of Control on Benefit Plans and
Other Perquisites. Without limiting the generality of Sections 4(c),
4(d) and 4(e) hereof, during the pendency of a Potential Change of
Control or during the period commencing on a Change of Control Date and
ending on the third anniversary thereof, the benefits provided for in
such Sections may not be diminished from the highest level previously
provided or available to the Executive immediately prior to the
Potential Change of Control or within the ninety-day period prior to the
Change of Control Date, as applicable.
5. Termination.
(a) Disability. The Corporation may terminate the Executive's
employment after having established the Executive's Disability, by
giving to the Executive written notice of its intention to terminate her
employment, and her 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 her 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).
(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 her 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 60 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 her 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 the Severance Plan. For this purpose, any
payment under this Agreement or the Severance Plan 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 the Severance Plan.
(a) Death and Retirement. If the Executive's employment is
terminated by reason of the Executive's death or on or after the
attainment of age sixty-five (65), 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, her beneficiaries or her 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, she and
her family shall be entitled to benefits generally available upon
retirement to executives with comparable responsibilities or positions
and their families. In the event of the Executive's death, her family
shall be entitled to receive benefits generally available to the
surviving families of executives with comparable responsibilities or
positions.
(b) Disability. If the Executive's employment is terminated
by reason of the Executive's Disability, the Executive, the Executive's
spouse and their eligible dependents (as defined in, and to the extent
permitted by, the applicable plan) shall be entitled for a period of two
years after the Date of Termination (or, if the Date of Termination
occurs within three years after a Change of Control Date, until the
earlier to occur of the Executive's 65th birthday or the third
anniversary of the Change of Control Date, if later) 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 family shall be entitled to
receive disability and other benefits generally available to
executives with comparable responsibilities or positions.
Notwithstanding the foregoing, in the event that the Date of Termination
occurs during the pendency of a Potential Change of Control or during
the three year period commencing on a Change of Control, the benefits
provided to the Executive and her family shall not be less than the
benefits generally available to executives with comparable
responsibilities or positions immediately prior to the Potential Change
of Control or within the ninety-day period prior to the Change of
Control Date, as applicable.
(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 Not Related to Change
of Control or Potential Change of Control. If the Corporation (I)
terminates the Executive's employment other than for Cause or
Disability, or the Executive terminates her employment for Constructive
Termination, and (ii) the Date of Termination occurs during a period
which is not during the pendency of a Potential Change of Control or the
three year period commencing on a Change of Control Date, the
Corporation shall pay or provide to 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 plus, in the case of
termination without Cause, two weeks of Base Salary in lieu of
notice;
(2) the present value, discounted at the Interest
Rate as if paid monthly from the Date of Termination in arrears
of the lesser of (I) thirty-six (36) months of the Executive's
Base Salary at the rate in effect on the Date of Termination,
and (II) the Executive's Base Salary (at the same rate) through
the end of the month in which the Executive attains age sixty-
five (65);
(3) a bonus equal to the Executive's target annual
bonus for the year of termination; and
(4) if the Date of Termination is on or after August
1st of the year of termination, a prorated bonus based on
earned salary for that year (not to exceed the Executive's
target bonus award for such year and, if the Executive's bonus
is subject to the discretion of the Board, in the discretion of
the Board).
(B) Benefit Continuation. The Corporation shall provide
for the continued participation of the Executive, her spouse and
their eligible dependents (as defined in the applicable plan), as
the case may be, for a period of two years after the Date of
Termination, in the plans described in Section 4(d) on the same
terms as described in Section 4(d) and in the SERP and SLIP on the
same terms described in Section 4(c), and the Executive shall
receive Creditable Service (as defined in the SERP) for that period
(with Average Final Compensation, as defined in the SERP, to be
determined as of the Date of Termination) for purposes of the SERP
and SLIP.
(e) Other Termination of Employment Occurring Within Three
Years Following Change of Control. If the Corporation (i) terminates
the Executive's employment other than for Cause or Disability, or the
Executive terminates her employment for Constructive Termination and
(ii) the Date of Termination occurs during the three (3) year period
commencing on the Change of Control Date, 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 three (3) 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 Change of Control
Date;
(II) the greater of the (x) Annual Bonus
earned by or awarded to the Executive for the last fiscal year
of the Corporation ending prior to the Change of Control Date
or (y) the Annual Bonus earned by or awarded to the Executive
for the fiscal year of the Corporation which includes the
Change of Control Date; and
(III) the present value, calculated using
the Interest Rate, of (without duplication) the annualized
value of the fringe benefits described under Section 4(e) of
this Agreement,
provided, however, that in no event shall the Executive be
entitled to receive under this clause (2) more than the greater of
(I) product obtained by multiplying the amount determined as
herein above provided in this clause by a fraction, the numerator
of which shall be the number of months (including fractions of a
month) which at the Date of Termination remain until the Executive
attains age sixty-five (65) or if earlier, the third anniversary of
the Change of Control Date and the denominator of which shall be
thirty-six (36) and (II) an amount equal to the cash payment that
would have been payable under Section 6(d)(A) hereof had the Change
of Control not occurred.
(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
she had continued in the employ of the Corporation through
the earlier to occur of the third anniversary of the Change of
Control Date or the Executive's 65th birthday 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 1997 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 earlier of the expiration of
the third anniversary of the Change of Control Date or the
Executive's 65th birthday, determined using, where compensation
is a relevant factor, her 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
or, where such assumptions are not applicable, the Interest
Rate; and
(II) the present 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, her 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 present value
being calculated using, where applicable, assumptions contained
in the respective plans or, where such assumptions are not
applicable, the Interest Rate.
The incremental 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 earlier of the
third anniversary of the Change of Control Date or the Executive's
65th birthday, 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) Other Benefit Continuation. The Corporation shall
provide for the continued participation of the Executive, her spouse
and their eligible dependents (as defined in the applicable plan), as
the case may be, for a period equal to the greater of two years after
the Date of Termination or until the third anniversary of the Change
of Control 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 three (3) times the annual cost to the Corporation (based on
premium rates) of providing such coverage.
(f) Other Termination of Employment Occurring During Pendency
of Potential Change of Control. If the Corporation (i) terminates the
Executive's employment other than for Cause or Disability, or the
Executive terminates her employment for Constructive Termination
and (ii) the Date of Termination occurs during the pendency of a
Potential Change of Control, the Executive shall be entitled to the
payments and benefits set forth in Section 6(d) hereof. In the
event that a Change of Control occurs before the expiration of the
pendency of the Potential Change of Control during which the Date of
Termination occurred, the Executive shall also be entitled to such
additional cash payments as would have been made under Section 6(e)
hereof as if the Date of Termination had occurred immediately on the
Change of Control Date, in excess of the amount of the cash payment made
to the Executive under Section 6(d) hereof. In addition, in the event
that a Change of Control occurs during the pendency of the Potential
Change of Control during which the Date of Termination occurred, the
Executive shall also be entitled to benefit continuation provided for
under Section 6(e) in excess of the benefit continuation to which she
was entitled under Section 6(d) hereunder. The Executive shall have an
additional thirty (30) days after the Change of Control Date to provide
a written election to the Corporation for a cash payment in lieu of
those benefits for which the Executive has the choice under Section 6(e)
between continued coverage and a cash payment. The cost (based on
premium rates) of the period of coverage previously provided to the
Executive before such election shall be subtracted from any such cash
payment.
(g) 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. Cash-Out of Stock Options and Restricted Stock.
(a) In General. The Executive shall be entitled to receive a
cash out of all of her outstanding restricted stock, stock option and
other equity based awards upon a Change of Control in accordance with
the terms of the Corporation's plans under which such awards were
granted. To the extent that such awards are not cashed out pursuant to
the terms of such plans, they shall become fully vested as of the Change
of Control Date.
(b) Effect of Termination During Pendency of a Potential
Change of Control. If (i) the Executive is terminated during the
pendency of a Potential Change of Control under circumstances giving
rise to payments pursuant to Section 6(f) hereof, (ii) such termination
results in a forfeiture of any of the Executive's restricted stock,
options or other equity based awards under any of the Corporation's
plans, and (iii) prior to the expiration of the pendency of that
Potential Change of Control, a Change of Control occurs, the Executive
shall thereupon be entitled to a cash payment equal to the amount the
Executive would had received under such plans with respect to such
restricted stock, options and other equity based awards as if she had
remained in the Corporation's employ until the Change of Control Date.
Such cash payment shall be made at the same time and in the same manner
as payment would have been made under the applicable plans had the
Executive remained in the Corporation's employ until the Change of
Control Date.
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. In the event that the Executive shall in
good faith give a Notice of Termination for Constructive Termination and
it shall thereafter be determined that Constructive Termination did not
take place, the employment of the Executive shall, unless the
Corporation and the Executive shall otherwise mutually agree, be deemed
to have terminated, at the date of giving such purported Notice of
Termination, by mutual consent of the Corporation and the Executive and,
except as provided in the last preceding sentence, the Executive shall
be entitled to receive only those payments and benefits which she would
have been entitled to receive at such date had she terminated her
employment voluntarily at such date under 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 her
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 two-
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 her 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
If to the Corporation: Avon Products, Inc.
1345 Avenue of the Americas
New York, New York 10105-0196
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
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)Employment Agreement - Avon Products Inc. and Andrea Jung
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