EXHIBIT 10.14
AVON PRODUCTS, INC.
AMENDED AND RESTATED
BENEFIT PROTECTION TRUST
This Amended and Restated Trust Agreement made as of
this 21st day of April, 1995, by and among Avon Products, Inc.,
a New York corporation (the "Company"), Chemical Bank, a banking
corporation organized under the laws of the State of New York
(the "Trustee"), and Buck Consultants, Inc. (the "Consulting
Firm"), providing for the continuation of the trust known as the
Avon Products Inc. Benefit Protection Trust (the "Trust") to
provide a source for payments required to be made to executives
(the "Executives") under the agreements listed on Exhibit A (the
"Agreements")
WITNESSETH THAT:
WHEREAS, the Trust was established by that certain
Trust Agreement dated as of August 3, 1989 between the Company
as grantor and the Trustee as successor by merger to
Manufacturers Hanover Trust Company, as trustee (the "Original Trust
Agreement"); and
WHEREAS, the Original Trust Agreement was amended by
an agreement between the Company and Trustee dated as of June 8,
1994 (the Original Trust Agreement, as so amended, the "Amended
Trust Agreement");
WHEREAS, the Company and the Trustee desire to amend
and restate the Amended Trust Agreement as set forth below; and
WHEREAS, the Company shall make contributions of cash
and/or other property to the Trust, and may obtain a Letter of
Credit, in each case to aid the Company in accumulating funds to
satisfy the Company's obligations under the Agreements;
NOW, THEREFORE, in consideration of the mutual under-
takings of the parties and other good and valuable consider-
ation, the parties hereto do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as
follows:
Section 1: Definitions
(a) "Adjustment Date" means each of the following
days: (i) any date on which a Potential Change of Control oc-
curs; (ii) any date on which a Change of Control occurs; (iii)
the first day of each fiscal quarter of the Company after the
occurrence of a Change of Control; (iv) any date following a
Change of Control on which the Trustee notifies the Consulting
Firm pursuant to Section 4 of an insufficiency in the funds
available in the Benefit Contribution Account and under any
Letter of Credit; and (v) any date following a Change of Control
on which the Trustee notifies the Consulting Firm that it has
used Trust Assets to pay compensation, expenses, fees or taxes
pursuant to Section 9.
(b) "Benefit Contribution Account" has the meaning
set forth in Section 6(b).
(c) "Benefit Contributions" has the meaning set
forth in Section 3(a).
(d) "Board" means the Board of Directors of the Company.
(e) "Change of Control" means:
(i) 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 Company 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 Company Voting
Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not be
deemed to result in constitute a Change of Control: (A)
any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company, (D) any acquisition by any corporation pursu-
ant to a transaction which complies with all of clauses
(A), (B) and (C) of subsection (iii) below; or (iv) any
acquisition by any corporation pursuant to a transaction
that complies with clauses (i), (ii) and (iii) of subsec-
tion (c) below; and provided, further, that if any Person's
beneficial ownership of the Outstanding Company 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 Company, such subse-
quent acquisition shall be treated as an acquisition that
causes such Person to own 20% or more of the Outstanding
Company Voting Securities or
(ii) 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 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; or
(iii) 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 (a "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 Combi-
nation pursuant to which (A) all or substantially all of
the individuals and entities who were the beneficial owners
of the Outstanding Company 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 Company Voting Securities, (B) 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 out-
standing shares of common stock of the corporation result-
ing 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 ex-
isted prior to the Business Combination, and (C) 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
(iv) approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(f) "Code" means the Internal Revenue Code of 1986,
as amended.
(g) "Contributions" means the Initial Contribution and all
other contributions of cash and/or property to the Trust, whenever made.
(h) "ERISA" means the Employee Retirement IncomeSecurity Act of
1974, as amended.
(i) "Executives" has the meaning set forth in the first
paragraph of this Agreement.
(j) "Fee Contribution Account" has the meaning set
forth in Section 6(b).
(k) "Fee Contributions" has the meaning set forth in
Section 3(a).
(l) "Insolvent" has the meaning set forth in Section 5(a).
(m) "Letter of Credit" means any letter of credit that may be
obtained subsequent to the execution of this Trust Agreement pursuant to
an agreement between the Company and one or more banking institutions
providing for an irrevocable letter of credit in favor of the Trustee,
in its capacity as Trustee ofthe Trust.
(n) "Minimum Required Funding" has the meaning set forth in
Section 3(c).
(o) "Notice of Insolvency" has the meaning set forth
in Section 5(c).
(p) "Potential Change of Control" means:
(i) the commencement of a tender or exchange offer by any
third person (other than a tender or exchange offer which, if
consummated, would not result in a Change of Control) for 20% or more of
the then outstanding shares of common stock or combined voting power of
the Company's then outstanding voting securities;
(ii) the execution of an agreement by the Company, the
consummation of which would result in the occurrence of a Change of
Control;
(iii) the public announcement by any person (including the
Company) of an intention to take or to consider taking actions which if
consummated would constitute a Change of Control other than through a
contested election for directors of the Company; or
(iv) the adoption by the Board, as a result of other
circumstances, including circumstances similar or related to the
foregoing, of a resolution to the effect that, for purposes of this
Trust Agreement, a Potential Change of Control has occurred.
(q) "Required Funding Amount" as of a given date means the
present value of the aggregate maximum amount of all Required Payments
that could become due under the Agreements, as determined by the
Consulting Firm as of such date, taking into account any Required
Payments that have previously been made and using the assumptions set
forth on Exhibit B hereto. The Company may amend Exhibit B hereto at any
time and from time to time before a Change of Control. After a Change
of Control, Exhibit B may be amended only with the consent of the
Consulting Firm and the Trustee.
(r) "Required Payment" means any cash payments that become due
under an Agreement upon or after a Change of Control as a result of the
termination of the Executive's employment (whether such termination
occurs before or after the Change of Control) or the imposition of the
tax imposed under Section 4999 of the Code or any similar tax that may
hereafter be imposed, but excluding any payments that would be made from
any other grantor trust created by the Company.
(s) "Trust" has the meaning set forth in the first paragraph of
this Trust Agreement.
(t) "Trust Assets" means all contributions to the Trust by the
Company and any amounts drawn by the Trustee under any Letter of Credit,
together with any earnings thereon and other increases thereof, reduced
by any losses and distributions from the Trust and any other reductions
thereof.
Section 2: Establishment of Trust
(a) Contributions. The Company has previously made an initial
contribution under the Original Trust Agreement, which, together with
all future Contributions and any amounts drawn by the Trustee under any
Letter of Credit, shall constitute the principal of the Trust to be
held, administered and disposed of by the Trustee in accordance with
this Trust Agreement.
(b) Grantor Trust. The Trust is intended to be a grantor
trust of which the Company is the grantor, within the meaning of
Section 671 of the Code, and shall be construed accordingly. The Trust
is notdesigned or intended to qualify under Section 401(a) of the Code.
(c) Trust Assets. The Trust Assets shall be held separate
and apart from other funds of the Company and shall be used exclusively
for the uses and purposes herein set forth. The
Executives shall not have any preferred claim on, nor any
beneficial ownership interest in, any of the Trust Assets before
the Trust Assets are paid to the Executives pursuant to the
terms of this Trust Agreement, and all rights created under the
Agreements and this Trust Agreement shall be mere unsecured
contractual rights of the Executives against the Company. The
Trust Assets shall at all times be subject to the claims of the
Company's general creditors under Federal and state law in ac-
cordance with Section 5.
(d) Amendment of Exhibit A. Exhibit A may be amended
by the Company from time to time before a Change of Control to
add or delete Agreements. After the occurrence of a Potential
Change of Control, however, no Agreement may be deleted from
Exhibit A unless the Executive who is a party to such consent
has given his or her written content thereto to the Trustee and
the Consulting Firm. Exhibit A may not be amended after a
Change of Control.
Section 3: Funding
(a) Contributions. The Company shall make additional
Contributions to the Trust in accordance with Sections 3(c) and
9 of this Trust Agreement, and such other Contributions as the
Board deems appropriate from time to time. The Trustee shall be
responsible only for Contributions actually received by it
hereunder, and the Trustee shall have no duty or responsibility
with respect to the timing, amounts and sufficiency of the
Contributions made or to be made by the Company hereunder,
except as otherwise provided in Section 3(c), Section 4 and
Section 9 of this Agreement. All Contributions shall be
classified as intended to provide funding either for the payment
of compensation, expenses and taxes pursuant to Section 9 of
this Trust Agreement ("Fee Contributions") or for payments to
Executives pursuant to Section 4 of this Trust Agreement
("Benefit Contributions"). The previously made initial
contribution, all additional Contributions pursuant to Section
9, and any other Contributions by the Company that the Board so
designates, shall be considered Fee Contributions. All other
Contributions and all amounts drawn by the Trustee on any Letter
of Credit shall be considered Benefit Contributions.
(b) Letter of Credit. Prior to a Change of Control,
the Trustee shall draw upon any Letter of Credit only when and
to the extent so directed by the Company.
(c) Required Funding. As soon as practicable fol-
lowing each Adjustment Date, but in no event later than fifteen
business days thereafter, (i) the Consulting Firm shall ▇▇-
▇▇▇▇▇▇▇ and notify the Company and the Trustee of the Required
Funding Amount as of that Adjustment Date, and (ii) the Trustee
shall determine and notify the Company and the Consulting Firm
of the amounts in the Benefit Contribution Account and the Fee
Contribution Account as of that Adjustment Date. If, as of the
Adjustment Date, the amount in the Fee Contribution Account is
less than One Hundred Thousand Dollars ($100,000), then within
ten business days after receiving notice thereof, the Company
shall make additional Fee Contributions so as to cause the
amount in the Fee Contribution Account to equal or exceed One
Hundred Thousand Dollars ($100,000). If, as of any Adjustment
Date on which a Potential Change of Control occurs, the amount
then held in the Benefit Contribution Account is not equal to at
least eighty percent (80%) of the Required Funding Amount
("Minimum Required Funding"), then within thirty days after
receiving such notice the Company shall make additional Benefit
Contributions and/or the Trustee shall draw down such amount
under any Letter of Credit, or a combination thereof, so as to
provide funding of the Benefit Contribution Account that will
equal or exceed the Minimum Required Funding. Within thirty
days after receiving such notice with respect to any other Ad-
justment Date, the Trustee may draw from any Letter of Credit
such additional amount (if any) as may be necessary to provide
the Benefit Contribution Account with the Minimum Required
Funding as of that Adjustment Date (or such higher level of
funding up to 100% of the Required Funding Amount as of the
Adjustment Date as the Trustee in its discretion shall then deem
appropriate).
(d) Distributions. Notwithstanding any other provision of
this Trust Agreement to the contrary, at any time and
from time to time before a Change of Control, the Company may
direct the Trustee to distribute to the Company, and upon such
direction the Trustee shall distribute to the Company, any por-
tion of the Trust Assets (in cash or in kind, as directed by the
Company), so long as Trust Assets having a value of at least
$1,000 remain in the Trust. After a Change of Control, if, as
of any Adjustment Date, the amount, if any, in the Benefit
Contribution Account exceeds 150 percent of the Required Funding
Amount, the Company may elect, by so notifying the Trustee
within 45 days after the Adjustment Date, to eliminate such
excess by requiring the Trustee to distribute Trust Assets to
the Company; provided, however, that any such distribution shall
be made exclusively from the Benefit Contribution Account.
(e) Duty to Inform of Trigger Event; Notification of
Trigger Event by Executives. The Company shall have the duty to
inform the Trustee and the Consulting Firm whenever a Change of
Control or Potential Change of Control (as the case may be)
occurs. If within any period of sixty consecutive days any two
Executives give the Trustee written notice that a Change of
Control or Potential Change of Control (as the case may be) has
occurred, setting forth the factual basis for that assertion,
and the Trustee determines that there is a reasonable basis on
which to conclude that a Change of Control or Potential Change
of Control (as the case may be) has occurred, the Trustee shall
so notify the Company and the Consulting Firm and, unless within
five business days thereafter the Company delivers to the
Trustee and the Consulting Firm an opinion of outside legal counsel
to the Company (which opinion may be based upon representations of
fact, as long as such counsel does not know that such representations
are untrue) that a Change of Control or Potential Change of Control
(as the case may be) has not occurred, then a Change of Control or
Potential Change of Control (as the case may be) will be deemed to have
occurred. The Trustee shall give prompt notice of the occurrence of a
Change of Control or Potential Change of Control (as the case may be)
to all Executives.
Section 4: Payments to Executives
The Trustee shall make all Required Payments that
become due under the Agreements directly to the Executives;
provided, that the Trustee shall withhold from such Required
Payments any Federal, state, local and foreign taxes that are
required by applicable laws and regulations to be withheld and
shall deliver and pay over any such withheld amounts to the
appropriate taxing authorities, all in accordance with the Com-
pany's instructions. In determining that a Required Payment has
become due, the Trustee shall be entitled to rely upon the
certification of an Executive that all conditions to the Execu-
tive's right to receive the Required Payment have been met. Upon
receiving such a certification, the Trustee shall request that
the Consulting Firm determine, and the Consulting Firm shall
determine, the amount of Required Payment, and the Trustee shall
be entitled to rely on such determination. Such determination
by the Consulting Firm shall be itemized as to the dollar values
of the various principal forms of compensation due under the
applicable Agreement, including the amount to be paid as a "Tax
Reimbursement Payment" (related to any excise taxes that may be
imposed on the Executive), which amount may separately be paid
at a later date in accordance with the terms of the Agreement.
All payments by the Trustee pursuant to this Section 4 shall be
made from the Benefit Contribution Account to the extent of the
positive balance thereof, and thereafter from amounts drawn upon
the Letter of Credit. If the funds available in the Benefit
Contribution Account and under any Letter of Credit are
insufficient to make such payment, the Trustee shall promptly so
notify the Company, the Consulting Firm and the Executive, and
the Company shall make such payment to the extent of such
insufficiency. The Trustee shall have no duty or responsibility
with respect to the Company's obligation to make benefit payments
under the Agreements. In no event shall a payment by the Trustee
pursuant to this Section 4 be made from the Fee Contribution Account.
Section 5: Trust Assets Subject to Claims of Creditors
(a) Definition of Insolvency. The Company shall be
considered "Insolvent" if (i) it is unable to pay its debts as
they mature, or (ii) it is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) Trust Assets Subject to Claims of Creditors. At
all times while the Trust is in existence, the Trust Assets
shall be subject to the claims of general creditors of the
Company under Federal and state law as set forth below. Not-
withstanding the provisions of Section 4, whenever the Trustee
has actual knowledge in its capacity as Trustee that the Company
is Insolvent, or has received a Notice of Insolvency, the
Trustee shall suspend making payments to the Executives and
shall hold the Trust Assets for the benefit of the Company's
general creditors, and shall promptly notify the Executives that
it is doing so. During any period when payments to the
Executives are suspended under this Section 5, the Trustee may
nonetheless pay compensation, expenses, fees and taxes in ac-
cordance with Section 9, unless it receives a court order to
the contrary. If the Company subsequently ceases to be In-
solvent without the entry of a court order concerning the dis-
position of the Trust Assets, the Company shall give notice to
the Trustee, the Consulting Firm and the Executives (i) stating
that the Company is no longer Insolvent and (ii) setting forth
the extent to which the Company has made directly to the Ex-
ecutives any Required Payments that became due during the period
that the Trustee had suspended payments. The Trustee shall
thereupon resume payments pursuant to Section 4, including
payments that became due and were not paid during the period of
suspension.
(c) Notice of Insolvency. A "Notice of Insolvency"
means a written notice from the Board of Directors or the Chief
Executive Officer of the Company that the Company is Insolvent,
or a written notice from a person claiming to be a creditor of
the Company (which person the Trustee considers to be reliable
and responsible) alleging that the Company is Insolvent. The
Board of Directors and the Chief Executive Officer of the Com-
pany shall have the duty to give the Trustee a Notice of Insol-
vency immediately upon the Company's becoming Insolvent. The
Trustee shall be entitled to rely upon a Notice of Insolvency
from the Board of Directors or the Chief Executive Officer of
the Company and shall have no duty at any time to inquire
whether the Company is Insolvent, except in response to a Notice
of Insolvency from a person claiming to be a creditor of
the Company. The Trustee may in all events rely upon such evi-
dence concerning the Company's solvency as may be furnished to
it by the Company that provides a reasonable basis for making a
determination of whether the Company is Insolvent.
Section 6: Accounting by the Trustee and the Consulting Firm;
Provision of Information By the Company
(a) Recordkeeping. The Trustee shall keep accurate
and detailed records of all investments, receipts, disburse-
ments, and all other transactions required to be done, including
such specific records as shall be agreed upon in writing between
the Company and the Trustee. Within sixty days following the
close of each calendar year and within sixty days after the
removal or resignation of the Trustee, the Trustee shall deliver
to the Company and the Consulting Firm a written statement of
its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments
purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being
shown separately), showing all cash, securities and other
property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be, and the
book and fair market value of any such asset.
(b) Accounts. The Benefit Contributions, together
with the earnings thereon, and the Fee Contributions, together
with the earnings thereon, shall be reflected by the Trustee in
two separate accounts called the "Benefit Contribution Account"
and the "Fee Contribution Account," respectively. Whenever it
is necessary under this Trust Agreement to determine the amount
in either the Benefit Contribution Account or the Fee Contribu-
tion Account, the Trustee shall determine the value of the as-
sets in that account in its discretion, and may consult with
such experts as it deems necessary to determine such value.
(c) Provision of Information. The Company shall
furnish the Trustee and the Consulting Firm with copies of the
Agreements and any and all amendments thereto. Exhibit C sets
forth the names and addresses of each Executive currently cov-
ered by an Agreement together with his or her current annual
rate of salary, most recent Annual Bonus, and the target value
of his or her Performance Units award the Company's 1994 Long-
Term Incentive Plan. The Company shall amend Exhibit C as of
April 1 of each year and in any event as and when necessary to
ensure that it is complete and accurate at all times. The Com-
pany shall promptly provide the Trustee and the Consulting Firm
with any and all other information that they reasonably request
or that the Company believes would be useful to them in carrying
out their duties hereunder, and shall promptly update such
information as and when it changes.
(d) Inspection of Records. This Trust Agreement and
the Exhibits hereto, as amended from time to time, and all ac-
counts, books and records maintained pursuant to this Section 6
shall be open to inspection and audit at all reasonable times by
the Company and the Executives.
Section 7: Investment Authority
(a) Trustee Discretion. Except as otherwise spe-
cifically provided in this Trust Agreement, the Trustee shall
have full discretion in and sole responsibility for investment,
management and control of the Trust Assets. Notwithstanding the
foregoing, the Trust Assets shall be invested solely in one or
more money market mutual funds consisting primarily of U.S.