SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
AVON PRODUCTS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[LOGO--AVON]
March 25, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders, which will be held at 10:00 a.m. on Thursday, May 7, 1998 in the
Grand Salon at the Essex House, 160 Central Park South, New York City.
The business and operations of Avon will be reviewed at the Annual Meeting.
We hope that you will be able to attend.
Whether or not you plan to attend the Annual Meeting, please complete,
sign, date and return the enclosed proxy card in the enclosed postage-prepaid
envelope so that your shares will be voted at the meeting.
Sincerely yours,
[LOGO]
Chairman and Chief Executive Officer
<PAGE>
AVON PRODUCTS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 1998 Annual Meeting of Shareholders of Avon Products, Inc. ("Avon")
will be held in the Grand Salon at the Essex House, 160 Central Park South, New
York, New York 10019, on Thursday, May 7, 1998 at 10:00 a.m. for the following
purposes:
(1) To elect four (4) directors to three-year terms expiring in 2001; (2) To
elect three (3) directors to two-year terms expiring in 2000;
(3) To act upon a proposal to ratify the appointment of Coopers & Lybrand
L.L.P. as Avon's independent accountants for 1998;
(4) To transact such other business as properly may come before the meeting.
The Board of Directors has fixed the close of business on March 18, 1998 as
the record date for the purpose of determining the shareholders who are entitled
to notice of, and to vote at, the Annual Meeting and any adjournment or
postponement thereof.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN
TO ATTEND THE ANNUAL MEETING.
Ward M. Miller, Jr.
Senior Vice President,
General Counsel and Secretary
March 25, 1998
New York, New York
<PAGE>
AVON PRODUCTS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
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PROXY STATEMENT
This Proxy Statement is furnished by and on behalf of the Board of
Directors of Avon Products, Inc. ("Avon" or the "Company") in connection with
the solicitation of proxies for use at the Annual Meeting of Shareholders of the
Company to be held on May 7, 1998 in the Grand Salon at the Essex House, New
York, New York 10019 and at any adjournment or postponement thereof (the "Annual
Meeting"). This Proxy Statement and the enclosed proxy card will be first mailed
on or about March 25, 1998 to the shareholders of record of Avon on the Record
Date, as defined below (the "Shareholders").
THE BOARD OF DIRECTORS URGES YOU TO MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
SHARES ENTITLED TO VOTE
Proxies will be voted as specified by Shareholders. Unless contrary
instructions are specified, if the enclosed proxy card is executed and returned
(and not revoked) prior to the Annual Meeting, the Shares represented thereby
will be voted FOR election as directors of the nominees listed in this Proxy
Statement, and FOR ratification of the appointment of Coopers & Lybrand L.L.P.
as Avon's independent accountants for 1998. The submission of a signed proxy
will not affect a Shareholder's right to attend, and to vote in person at, the
Annual Meeting. Shareholders who execute a proxy may revoke it at any time
before it is voted by filing a written revocation with the Secretary of Avon,
executing a proxy bearing a later date or attending and voting in person at the
Annual Meeting.
Only Shareholders of record as of the close of business on March 18, 1998
(the "Record Date") will be entitled to vote at the Annual Meeting. As of the
close of business on the Record Date, there were 131,876,352 shares of Avon's
common stock, par value $.25 per share ("Common Stock"), outstanding ("Shares").
Holders of Shares are entitled to vote cumulatively for the election of
directors and to cast one vote per Share on all other matters.
According to New York law, any corporate action taken at a shareholders
meeting is based on the votes cast. "Votes cast" means the votes actually cast
"for" or "against" a particular proposal, whether by signed proxy or in person.
Therefore, under New York law, abstentions and broker non-votes are not
considered in determining whether a proposal is approved by shareholders.
Directors are elected by a plurality of the votes cast; shareholder approval of
each other proposal to be considered at the Annual Meeting requires the
affirmative vote of a majority of the votes cast at the Annual Meeting.
In accordance with Company policy, all shareholder proxies, ballots and
voting materials that identify the votes of specific shareholders will be kept
permanently confidential, except as may be required by law, for all matters
other than contested elections. In addition, all proxy cards and other voting
materials will be returned by shareholders to an independent vote tabulator, and
the tabulation process and results of shareholder votes will be inspected by
independent inspectors of election.
<PAGE>
PROPOSALS 1 AND 2--ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Effective from and
after the date of the Annual Meeting, the Board has fixed the number of
directors at 13 with four directors in the class whose term expires in 2001 (the
"Class of 2001"), five directors in the class whose term expires in 2000 (the
"Class of 2000") and four directors in the class whose term expires in 1999 (the
"Class of 1999"). Board members serve three-year terms unless otherwise
specified. The terms of five current directors, Richard S. Barton, Edward T.
Fogarty, Stanley C. Gault, George V. Grune and Charles R. Perrin will expire at
the Annual Meeting. The terms of the other incumbent directors will continue
until either the 1999 or year 2000 Annual Meeting. At the Annual Meeting,
Shareholders will elect four members to the Class of 2001 and three members to
the Class of 2000. The elections to the different classes will be conducted as
two separate elections. PROPOSAL 1: The Board of Directors has nominated Richard
S. Barton, Edward T. Fogarty, George V. Grune and Charles R. Perrin for election
to the Class of 2001 at the Annual Meeting, each to serve for a three-year term
to expire at the Annual Meeting in 2001. PROPOSAL 2: The Board of Directors has
nominated Stanley C. Gault, Andrea Jung and Susan J. Kropf for election to the
Class of 2000, each to serve for a two-year term to expire at the Annual Meeting
in 2000.
All Shares represented by properly executed proxies received in response to
this solicitation will be voted for the election of directors as specified
therein by the Shareholders. Unless otherwise specified in the proxy, it is the
intention of the persons named on the enclosed proxy card to vote FOR the
election of Richard S. Barton, Edward T. Fogarty, George V. Grune and Charles R.
Perrin to the Class of 2001 and FOR the election of Stanley C. Gault, Andrea
Jung and Susan J. Kropf to the Class of 2000. Each nominee of the Company has
consented to serve as a director of the Company if elected. If at the time of
the Annual Meeting any nominee is unable or declines to serve as a director, the
discretionary authority provided in the enclosed proxy card may be exercised to
vote for a substitute candidate designated by the Board of Directors. The Board
of Directors has no reason to believe that any of its nominees will be unable or
decline to serve as a director.
Shareholders may withhold their votes from the entire slate of nominees by
so indicating in the space provided on the enclosed proxy card. Shareholders may
withhold their votes from any particular nominee by writing that nominee's name
in the space provided for that purpose on the enclosed proxy card.
In voting for the election of directors, Shareholders are entitled to vote
cumulatively. Each Shareholder is entitled to cast in each election the number
of votes equal to the number of Shares held of record by such person, multiplied
by the number of directors to be elected in such election. Because the election
of directors to the Class of 2001 and the election of directors to the Class of
2000 are two separate elections, Shareholders are entitled to cumulate votes
with respect to the election of directors to the Class of 2001, but they may not
cumulate votes they are entitled to cast for the election of directors to the
Class of 2001 with the votes they are entitled to cast for the election of
directors to the Class of 2000, nor vice versa. In the election of four
directors to the Class of 2001, Shareholders will be entitled, under cumulative
voting, to a total of four votes per Share held of record by them, and they may
cast all of such votes in this election for a single nominee, or distribute them
among any two or more nominees, as they see fit. Similarly, in the election of
three directors to the Class of 2000, Shareholders will be entitled, under
cumulative voting, to a total of three votes per Share held of record by them,
and they may cast all of such votes in this election for a single nominee, or
distribute them among any two or more nominees, as they see fit. Shareholders
may (but need not) cumulate their votes in the election of directors by
indicating the distribution of their votes among the nominees in the space
provided on the enclosed proxy card. If votes are not so distributed on the
proxy, the persons appointed therein may exercise the right to vote the Shares
represented by such proxy cumulatively in such Class election and may distribute
the votes represented by such proxy among one or more of the nominees listed
below (or any substitute candidates) for such Class in any manner they see fit.
Set forth below is certain information furnished to the Company by each
nominee and each director continuing in office after the Annual Meeting.
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YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
AS DIRECTORS OF THE NOMINEES LISTED BELOW.
NOMINEES FOR THE BOARD OF DIRECTORS FOR THREE-YEAR TERM EXPIRING 2001
RICHARD S. BARTON
Director of Avon since 1994 Age: 49
Mr. Barton is the Chairman and Chief Executive Officer of Adatom
Corporation, which sells name brand products through retail
electronic stores. Mr. Barton was formerly President, United
States Customer Operations of Xerox Corporation, which
manufactures, markets and services document processing products
and systems. He had been appointed to that position in October
1993 after two years as President, Chairman and Chief Executive
Officer of Xerox Canada Inc. He had joined Xerox in 1971 and held
a number of field and regional sales positions, becoming
Executive Assistant to the President of Xerox in 1985 and later
Vice President, Marketing Operations for the United States
Marketing Group. Mr. Barton is a director of US Wireless Data,
the American Management Association and U.S. Chamber of Commerce.
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EDWARD T. FOGARTY
Director of Avon since 1995 Age: 61
Mr. Fogarty is the former Chairman of Tambrands, Inc., the
manufacturer of Tampax tampons, and its Chief Executive Officer
from May 1994 to September 1997. Previously, he was President,
Colgate USA/Canada/Puerto Rico, for the Colgate-Palmolive Company
from 1989-1994. From 1983-1989, he was Senior Vice President and
General Manager, Consumer Products Division, at Corning Inc. Mr.
Fogarty is a director of UST, Inc.
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GEORGE V. GRUNE
Director of Avon since 1991 Age: 68
Mr. Grune has been Chairman and Chief Executive Officer and a
director of The Reader's Digest Association, Inc. since August
11, 1997, having previously served in that position from 1984 to
1994. He had been with this global publishing and direct mail
marketing company since 1960. Since 1994 he has also been
Chairman of the Dewitt Wallace-Reader's Digest Fund and the Lila
Wallace-Reader's Digest Fund. Mr. Grune is a director of
Bestfoods, The Chase Manhattan Bank and Federated Department
Stores, Inc. He is the Chairman Emeritus of the Boys & Girls
Clubs of America, Inc.
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<PAGE>
CHARLES R. PERRIN
Director of Avon since 1996 Age: 52
Mr. Perrin was elected Vice Chairman and Chief Operating Officer
of the Company effective January 5, 1998 and has been a member of
the Board of Directors since May 1996. Mr. Perrin was Chairman of
the Board and Chief Executive Officer of Duracell International,
Inc., a manufacturer of batteries and related products from 1994
to December 1996. He joined Duracell in 1985, becoming President
of Duracell North America in 1988 and President and Chief
Operating Officer in 1992. Prior to 1985 he had held a series of
sales, marketing and general management positions with
Chesebrough Ponds, Inc., and previously was with General Foods
Corporation. Mr. Perrin is a director of the New Israel Fund,
Datahr Rehabilitation Institute, the Cosmetic, Toiletry and
Fragrance Association and the World Wildlife Fund National
Council.
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NOMINEES FOR THE BOARD OF DIRECTORS FOR TWO-YEAR TERM EXPIRING 2000
STANLEY C. GAULT
Director of Avon since 1985 Age: 72
Mr. Gault is the former Chairman of the Board of The Goodyear
Tire & Rubber Company, a manufacturer of tires, chemicals,
polymers, plastic film and other rubber products. Mr. Gault was
Chairman and Chief Executive Officer of that Company from
1991-1995. Previously, he was Chairman of the Board and Chief
Executive Officer of Rubbermaid Incorporated from May 1, 1980 to
May 1, 1991. He also is a director of The Timken Company, H.
Freelander and Wal-Mart Stores, Inc. He is a trustee and Chairman
of the Board of The College of Wooster and a director of the
National Association of Manufacturers.
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ANDREA JUNG
Director of Avon as of January 1998 Age 39
Ms. Jung was elected President of the Company and a member of the
Board of Directors effective January 5, 1998. She had been
elected an Executive Vice President of the Company in March 1997
concurrently continuing as President, Global Marketing, a
position she held from July 1996 to the end of 1997. Ms. Jung
joined the Company in January 1994 as President, Product
Marketing for Avon U.S. Previously she was Executive Vice
President, Neiman Marcus and a Senior Vice President for I.
Magnin. Ms. Jung is a director of the Zale Corporation, Donna
Karan International, Inc., and the Fragrance Foundation, and a
trustee of the Fashion Institute of Technology.
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<PAGE>
SUSAN J. KROPF
Director of Avon as of January 1998 Age 49
Mrs. Kropf was elected an Executive Vice President of the Company
and President, Avon North America in March 1997 and a member of
the Board of Directors of the Company effective January 5, 1998.
She had been appointed President of the Company's New and
Emerging Markets in July 1996 and previously was Senior Vice
President, Eastern Europe and during 1993 and 1994 Senior Vice
President, Global Product Management. Mrs. Kropf joined the
Company in 1971 and held various positions in manufacturing,
marketing and product development prior to 1993. Mrs. Kropf is a
director of The Mead Corporation and Greenpoint Financial
Corporation.
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MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE--TERM
EXPIRING 2000
REMEDIOS DIAZ OLIVER
Director of Avon since 1992 Age: 59
Mrs. Diaz Oliver has been President and Chief Executive Officer
of All American Containers, Inc., which is engaged in the sale
and distribution of glass, plastic and metal containers and
closures, since October 1991. Prior thereto, Mrs. Diaz Oliver
founded and was the Chief Executive Officer and President of
American International Container, Inc. from 1977 to 1991. Mrs.
Diaz Oliver is a director of U.S. West, Inc., Barnett Banks,
Inc., Barnett Banks of South Florida, Florida Chamber of
Commerce, American Cancer Society, Infants In Need, Jackson
Memorial Trauma Center, University of Miami-School of Medicine
(Carlos J. Finlay), National Hispanic Leadership Agenda, Linda
Ray Center, Women in International Trade and Hamilton Foundation.
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PAULA STERN, Ph.D
Director of Avon since 1997 Age 52
Dr. Stern is President of The Stern Group, an economic analysis
and trade advisory firm established in 1988. She previously had
been with the U.S. International Trade Commission from 1978 to
1986, and was its Chairwoman 1984-1986. Dr. Stern is a director
of Harcourt General, Wal-Mart Stores, Inc. and Westinghouse
Electric Corporation/CBS.
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5
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE--TERM
EXPIRING 1999
BRENDA C. BARNES
Director of Avon since 1994 Age: 44
Ms. Barnes retired at the end of 1997 as President and Chief
Executive Officer of Pepsi-Cola North America, where she was
responsible for the beverage business in the United States and
Canada, including production, sales and distribution. Ms. Barnes
previously held sales, marketing and general management positions
at Wilson Sporting Goods, Frito-Lay and Pepsi-Cola in her 22
years with PepsiCo. She is a director of Sears & Roebuck, Inc.
and is on the Board of Trustees for Augustana College.
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CHARLES S. LOCKE
Director of Avon since 1986 Age: 69
Mr. Locke retired in 1994 as Chairman of the Board, Chief
Executive Officer and a director of Morton International, Inc., a
manufacturer and marketer of specialty chemicals and salt, which
was formed in 1989. From 1980 to 1989, Mr. Locke was Chairman of
the Board, Chief Executive Officer and a director of its
predecessor company, Morton Thiokol, Inc. Mr. Locke is a director
of NICOR, Inc. and its subsidiary, Northern Illinois Gas Company,
Thiokol Corporation and Whitman Corporation. He was an Avon
director from 1980 to 1985 and has served again on the Board
since August 1986.
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ANN S. MOORE
Director of Avon since 1993 Age: 47
Mrs. Moore was appointed publisher of People Magazine in July
1991 and President in September 1993, assuming executive
responsibility for all magazine operations of the Time Inc.
weekly. Mrs. Moore joined Time Inc. in 1978 in Corporate Finance.
Since then, she has held consumer marketing positions at Sports
Illustrated, Fortune, Money and Discover, moving to general
management of Sports Illustrated in 1983 and becoming founding
publisher of Sports Illustrated for Kids in 1989. She serves on
the boards of a number of non-profit organizations, including
Gilda's Club, a social and emotional support community for
families with cancer.
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<PAGE>
JAMES E. PRESTON
Director of Avon since 1977 Age: 64
Mr. Preston was elected Chairman of the Board of the Company in
January 1989 and has been Chief Executive Officer of Avon since
1988, holding the additional position of President from that time
until November 1993. He joined the Company in 1964. Mr. Preston
serves on the boards of The Reader's Digest Association, Inc.,
Woolworth Corporation and the ARAMARK Corporation. In addition,
he serves on the board of The Business Council of New York State,
Catalyst, The Salvation Army of Greater New York Advisory Board
and the Board of Trustees of Spelman College. Mr. Preston is also
a member of the New York City Partnership and Chamber of
Commerce. He is Chairman of the World Federation of Direct
Selling Associations for a three year term beginning September,
1996. He is a past Chairman of the U.S. Direct Selling
Association and the Cosmetic, Toiletry and Fragrance Association
and continues to be active in both organizations.
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<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Company's Board of Directors held eleven meetings in 1997. The Board
has the following regular committees: Audit Committee, Compensation Committee,
Finance Committee and Nominating and Directors' Activities Committee. No
director attended less than 75% of the aggregate number of meetings of the Board
and the Board Committees on which he or she served.
The Audit Committee, composed of Charles S. Locke, as Chair, Richard S.
Barton, Remedios Diaz Oliver, Edward T. Fogarty and Paula Stern, met three times
in 1997. The responsibilities of the Audit Committee include, in addition to
such other duties as the Board may specify: (i) making recommendations to the
Board with respect to the appointment of independent accountants; (ii) reviewing
the timing and scope of the independent accountants' audit examination and the
related fees; (iii) reviewing the audit results, including any material comments
on internal controls or accounting matters by the Company's independent
accountants and the Company's responses thereto; (iv) reviewing the periodic
comments and recommendations of the Company's independent accountants and the
Company's responses thereto; (v) reviewing the scope and effectiveness of
internal auditing activities; (vi) reviewing and making recommendations to the
Board with respect to material changes in accounting policies and procedures;
(vii) reviewing the procedures designed to assure compliance by Company
employees with the Company's policy on standards of business conduct; (viii)
reviewing the internal accounting controls with the Company's financial
management; (ix) monitoring the Company's compliance with environmental rules
and regulations; and (x) meeting with the independent accountants, internal
auditors and Company management at least three times per year.
The Compensation Committee, composed of Brenda C. Barnes, as Chair, Edward
T. Fogarty, George V. Grune, Ann S. Moore and Charles R. Perrin met five times
in 1997. The responsibilities of the Compensation Committee include, in addition
to such other duties as the Board may specify: (i) reviewing management's
recommendations for compensation of officers of the Company and its affiliates
and approving such compensation for all senior officers of the Company; (ii)
making recommendations to the Board with respect to compensation for any
employee of the Company who also is a director of the Company; (iii) reviewing
and approving (or recommending to the Board for approval) the adoption,
modification or amendment of employee benefit plans; (iv) reviewing and
approving (or recommending to the Board for approval) incentive plans for all
officers and key employees of the Company, and approving awards under those
plans for all senior officers of the Company; (v) reviewing and approving (or
recommending to the Board for approval) awards under the Company's 1993 Stock
Incentive Plan; (vi) reviewing the existing compensation and benefit plans for
employees and making recommendations to the Board with respect to changes where
warranted; and (vii) reviewing the Company's management development and
succession planning programs.
The Finance Committee, composed of Stanley C. Gault, as Chair, Richard S.
Barton, Remedios Diaz Oliver and Paula Stern met four times in 1997. The
responsibilities of the Finance Committee include, in addition to such other
duties as the Board may specify: (i) reviewing with management on a regular
basis the financial matters of the Company and its subsidiaries, including
capital needs, credit ratings, funding activities and investment of surplus
funds; (ii) studying proposed actions in connection with financial strategy and
procedures and making recommendations to the Board as appropriate; (iii)
reviewing the financial terms of proposed acquisitions and sales or other
dispositions of divisions or subsidiaries of the Company and making
recommendations to the Board as appropriate; (iv) reviewing proposals for and
making recommendations to the Board with respect to all offerings of the
Company's equity securities; (v) reviewing the funding programs of the Company
and providing guidance and general parameters for the Company's debt and lease
commitments; (vi) reviewing, approving and recommending Board action with
respect to total permitted indebtedness; and (vii) reviewing the management of
the Company's employee benefit trust funds.
The Nominating and Directors' Activities Committee, composed of Ann S.
Moore, as Chair, Brenda C. Barnes, George V. Grune and Charles R. Perrin, met
five times in 1997. The responsibilities of the Nominating and Directors'
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Activities Committee include, in addition to such other duties as the Board may
specify, reviewing and making presentations and recommendations to the Board
with respect to: (i) Board policies regarding the size and composition of the
Board and qualifications for Board membership; (ii) prospective candidates for
Board membership; (iii) candidates to fill vacancies on the Board that occur
between annual meetings of shareholders;(iv) the slate of nominees for director
to be proposed for election by shareholders at annual meetings; (v) the number
of Board committees and their composition; and (vi) changes or additions to
Board and committee procedures. Shareholders may submit nominations of
candidates for election to the Board of Directors. Additional information
regarding the shareholder nomination procedure will be provided upon request to
the Secretary of the Company.
Mr. Perrin became Vice Chairman and Chief Operating Officer of the Company
effective January 5, 1998 at which time he ceased to be a non-management
director and thereafter no longer was a member of any Board Committee.
Directors who are officers or employees of the Company or any subsidiary of
the Company receive no remuneration for services as a director. Effective on and
after May 1, 1997, each non-management director receives an Annual Retainer
consisting of $25,000 plus an annual grant of shares of the Company's Common
Stock having a market value as of the date of grant of approximately $25,000,
based on the average mean price of Common Stock as reported on the New York
Stock Exchange for the preceding ten trading days. The first such grant was made
immediately after the 1997 Annual Meeting of Shareholders with subsequent grants
to be made immediately after future Annual Meetings. All shares so granted to a
non-management director will be restricted as to transfer until he or she
retires from the Board, but will immediately be entitled to regular dividends
and eligible for voting rights similar to all other outstanding shares of Common
Stock.
In addition to the Annual Retainer, each non-management director receives a
fee of $1,000 for each special meeting of the Board of Directors and each
committee meeting attended, and an annual retainer of $3,000 for acting as Chair
of any committee of the Board. The Company has adopted a compensation plan for
its non-management directors permitting them by individual election to defer all
or a portion of their fees. The value of such deferred fees, depending upon
elections made by such director, increase or decrease proportionately with the
price of the Common Stock or earn interest at a rate based on the prime rate.
Also effective as of May 1, 1997, the Retirement Plan for
non-management directors was discontinued. Those non-management directors who
had participated in that plan prior to that date had the actuarial value of
their accrued retirement benefits converted to a one-time grant of the
Company's Common Stock, restricted as to transfer in the same manner as an
Annual Retainer grant.
In replacement of such plan, each non-management director receives an
annual grant of options to purchase 2,000 shares of the Company's Stock, at an
exercise price based on the price of a share of Common Stock as reported on the
New York Stock Exchange on the date of grant. The first such grant was made
immediately after the 1997 Annual Meeting with subsequent grants to be made
immediately after future annual Meetings. Each grant of options will have a ten
year term as to exercise but the options covered by any one grant may not be
exercisable until one year after the date of such grant.
Adatom, Inc., of which Mr. Barton is Chairman and a principal shareholder,
has entered into an agreement with the Company licensing use of its proprietary
"electronic catalogue" system for sale of Company products. It is anticipated
that Company payments to Adatom in 1998 would be less than $400,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the following persons served on the Compensation Committee:
Brenda C. Barnes, Edward T. Fogarty, George V. Grune, Ann S. Moore and Charles
R. Perrin. During 1997, Mr. Grune was a director of the Reader's Digest
Association, Inc., of which James E. Preston, an executive officer of the
Company, has been a director since July 1994.
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OWNERSHIP OF SHARES
The following table sets forth certain information as of March 10, 1998
regarding the amount of Common Stock beneficially owned by each director and
director nominee of Avon, each named executive (as defined in the introduction
to the Summary Compensation Table), all directors and executive officers of Avon
as a group and all persons known to Avon who beneficially own more than five
percent of the outstanding shares of Common Stock. All shares shown in the table
reflect sole voting and investment power except as otherwise noted.
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------ -------------------- ---------
The Capital Group Companies, Inc. (1) ........... 7,954,200 6.0
Oppenheimer Capital (2) ........................ 16,639,414 12.6
Travelers Group (3) ............................. 7,464,207 5.7
Richard S. Barton (4) ........................... 4,322 *
Brenda C. Barnes (4)(5) ......................... 8,456 *
Edward T. Fogarty (4) ........................... 5,128 *
Stanley C. Gault (4) ............................ 28,062 *
George V. Grune (4) ............................. 7,672 *
Andrea Jung (6) ................................. 125,282 *
Susan J. Kropf (7) .............................. 85,114 *
Fernando Lezama (8) ............................. 73,391 *
Charles S. Locke (4) ............................ 11,127 *
Ann S. Moore (4)(5) ............................. 6,832 *
Remedios Diaz Oliver (4)(5) ..................... 7,338 *
Charles R. Perrin (4)(5) ........................ 30,090 *
James E. Preston (9) ............................ 858,676 *
Paula Stern (4) ................................. 2,626 *
Edwina D. Woodbury (10) ......................... 57,038 *
All directors and executive officers
as a group [20] ............................... 1,279,322(11) *
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* Indicates less than 1% of the outstanding Shares, inclusive of shares that
may be acquired within 60 days of March 10, 1998 through the exercise of
stock options
(1) The address of The Capital Group Companies, Inc. is 333 South Hope Street,
Los Angeles, CA 90071.
(2) The address of Oppenheimer Capital is Oppenheimer Tower, World Financial
Center, New York, New York 10281.
(3) The address of Travelers Group is 388 Greenwich Street, New York, NY 10013.
(4) Includes 426 restricted shares granted to each non-management director as
part of his or her 1997 Annual Retainer compensation plus additional
restricted shares granted to certain non-management directors upon
discontinuance in 1997 of the Directors' Retirement Plan, as follows: Ms.
Barnes 2,030 shares, Mr. Barton 1,696 shares, Mrs. Diaz Oliver 2,912
shares, Mr. Fogarty 1,102 shares, Mr. Gault 5,636 shares, Mr. Grune 3,246
shares, Mr. Locke 6,701 shares, Mrs. Moore 2,406 shares and Mr. Perrin 664
shares. For all such restricted shares, the director has sole voting but no
investment power. In addition, there is included for each non-management
director 2,000 shares which he or she has the right to acquire within 60
days of March 10, 1998 through the exercise of stock options granted May 1,
1997. Mr. Perrin was a non-management director throughout 1997 but ceased
to be so upon his election as Vice Chairman and Chief Operating Officer
effective January 5, 1998.
(5) Ms. Barnes, Mrs. Moore, Mrs. Diaz Oliver and Mr. Perrin share with their
spouses voting and investment power as to these shares.
(6) Includes 50,000 shares as to which Ms. Jung has sole voting but no
investment power and 43,316 shares as to which Ms. Jung has the right to
acquire within 60 days of March 10, 1998 through the exercise of stock
options.
(7) Includes 38,000 shares as to which Ms. Kropf has sole voting but no
investment power and 31,314 shares as to which Ms. Kropf has the right to
acquire within 60 days of March 10, 1998 through the exercise of stock
options.
(8) Includes 25,000 shares as to which Mr. Lezama has sole voting but no
investment power and 27,129 shares as to which Mr. Lezama has the right to
acquire within 60 days of March 10, 1998 through the exercise of stock
options.
(9) Includes 62,040 shares as to which Mr. Preston disclaims beneficial
ownership and 750,000 shares which Mr. Preston has a right to acquire
within 60 days of March 10, 1998 through the exercise of stock options.
(10) Includes 28,000 shares as to which Ms. Woodbury has sole voting but no
investment power and 25,422 shares as to which Ms. Woodbury has a right to
acquire within 60 days of March 10, 1998 through the exercise of stock
options.
(11) Includes 62,040 shares as to which the directors and executive officers as
a group disclaim beneficial ownership. Includes 10,000 shares as to which
beneficial ownership was shared with others and 989,283 shares which the
directors and executive officers as a group have a right to acquire within
60 days of March 10, 1998 through the exercise of stock options.
10
<PAGE>
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Avon's
executive officers, directors and greater than 10% shareholders ("Reporting
Persons") to file certain reports ("Section 16 Reports") with respect to
beneficial ownership of Avon's equity securities. Based solely on its review of
the Section 16 Reports furnished to the Company by its Reporting Persons and,
where applicable, any written representation by any of them that no Form 5 was
required, all Section 16(a) filing requirements applicable to Avon's Reporting
Persons during and with respect to 1997 have been complied with on a timely
basis.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors sets and administers
the policies which govern annual and long-term executive compensation. The
Committee is composed entirely of outside Directors, whose names are listed
following this report.
OVERVIEW OF COMPENSATION PHILOSOPHY AND PROGRAMS
The Compensation Committee is responsible for the design and implementation
of salary and incentive programs for executive officers and other key executives
which are consistent with Avon's overall compensation philosophy. Key elements
of that philosophy include:
o Assuring that total compensation levels are competitive with those at
peer companies and are commensurate with relative shareholder returns
and financial performance.
o Focusing executives on the financial objectives that support superior
total shareholder returns in the form of stock price appreciation and
dividends.
o Emphasizing long-term financial performance and sustained market value
creation vs. short-term gains.
Working with an independent compensation consulting firm, the Company
periodically evaluates its key executive positions using internal measures of
comparability and relevant peer company market data. In addition, the consulting
firm participates with the Committee in the design of the executive compensation
program and regularly monitors and reports on performance and pay levels for
selected peer companies. These are public companies which compete with Avon in
key markets or key channels for customers and executive talent. These companies
(the "Peer Companies") are listed in footnote (2) of the performance graph set
forth below.
The total target compensation of executive officers is positioned at the
median of the Peer Companies. Performance based pay--annual and long-term
incentives--represents a substantial portion of total pay when the Company meets
or exceeds aggressive financial and shareholder return objectives.
The elements of the current compensation program for executive officers and
other key employees are further explained below.
11
<PAGE>
BASE SALARY
The base salaries of executive officers are targeted to the median of the
salary levels for comparable officer positions at the Peer Companies. Base
salaries otherwise are not linked to specific Company performance objectives.
ANNUAL INCENTIVE PLAN
Under the annual management incentive plan, cash bonuses range from 0 to
220% of individual target awards which are set as a percentage of salary by
individual and by management level. These bonuses are earned based on the degree
of attainment of performance objectives recommended by management and approved
by the Committee.
With respect to most executive officers, 1997 awards were principally based
on consolidated net income. For 1997 the Company's consolidated net income
performance fell below the target objective, but exceeded the minimum threshold
objective, resulting in an overall award for most executive officers that was
somewhat below 100% of target. Certain executive officers, however, had their
awards principally based on operating income and customer growth objectives
applied to their particular business unit responsibility, rather than the
Company as a whole, and some had a portion of their award based on achievement
of individual performance objectives. As a consequence, awards as a percent of
individual target levels varied among different executive officers ranging from
0% to 150 %of target.
LONG-TERM INCENTIVE COMPENSATION
Effective commencing in 1997, the Committee recommended, and the Board of
Directors approved, a new Long-Term Incentive Plan ("1997 LTIP"), which plan was
approved at the Annual Meeting of Shareholders held May 1, 1997. Approximately
400 executives, including all officers, are eligible to participate in the 1997
LTIP. The purpose of the plan is to tie a substantial portion of the
participant's compensation to the long-term financial performance of the Company
and to align participants' interests with those of the shareholders providing an
equity interest in the Company.
Awards under this new plan principally consist of two forms of "at risk"
compensation, namely stock options and cash based Performance Units. Performance
Units will be earned out over the three-year performance period of 1997-1999
with cash awards payable in early 2000.
The cash value of all Performance Units will be determined immediately
following the conclusion of the 1997-1999 performance period and shall be based
on the degree to which applicable performance objectives have been attained. The
principal performance objective for executive officers consists of cumulative
Earnings Per Share ("EPS") objectives for the three year period which are
applicable to the Performance Units of all participants. Participants who are
with the management of an operating business unit or country unit will have an
additional performance objective based on the cumulative operating profit or
cumulative pre-tax contribution of the applicable unit or country. The actual
cash payment value will be determined by the degree to which objectives have
been obtained or exceeded, ranging from 0% to 200% of a target value of $100 per
unit.
Under the 1997 LTIP, non-qualified stock options are granted annually for a
term of ten years at 100% of the market price on the date of grant. An option
may not be exercised earlier than one year after the grant date and is
thereafter exercisable in cumulative annual portions at the rate of one-third of
the total shares covered by the grant. The number of options previously granted
to a participant are not considered in determining subsequent grants.
12
<PAGE>
DETERMINATION OF CEO COMPENSATION
The CEO's 1997 compensation package consisted of base salary of $1,000,000
and an annual cash bonus.Mr. Preston's annual bonus for 1997 was largely based
on the principal performance objective described above under "Annual Incentive
Plan", namely, consolidated net income growth. Accordingly, the Committee
approved a bonus award of 60.59% of target, resulting in an award to Mr. Preston
of $424,147.
Since Mr. Preston became Chairman, shareholder returns have out-performed
the S&P 500 and the Peer Companies composite. These returns have directly
increased the value of all shareholders' investments, as well as the value of
Mr. Preston's stock-based awards, thus demonstrating the linkage between his
compensation package, approved by this Committee, and overall corporate
performance.
CEO EMPLOYMENT CONTRACT. As discussed below under the caption "Contracts
with Executives", the Company entered into an Employment Contract with Mr.
Preston effective as of November 1, 1995 ("new contract"), succeeding his prior
contract which expired as of that date. In accordance with such new contract,
effective in 1997 his annual salary increased to $1,000,000 and his target bonus
opportunity to 70%. As amended in 1997 such contract provides, that his salary
is to be frozen at that level until May 6, 1999, his anticipated retirement
date. In anticipation of his retirement, however, no awards have been made to
Mr. Preston under the 1997 LTIP.
LIMITATIONS ON THE DEDUCTIBILITY OF COMPENSATION
Pursuant to the 1993 Tax Act, a portion of annual compensation payable to
any of the Company's five highest paid executive officers (apart from stock
options) may not be deductible by the Company for federal income tax purposes to
the extent such officer's overall compensation exceeds $1 million. It is
anticipated that 1998 compensation payable to one executive officer may be
slightly in excess of $1 million, inclusive of performance-based incentive
compensation. The Committee has determined that it is in the best interests of
the Company that it retain the discretion of providing its senior executive
officers with the opportunity of earning appropriate performance-based incentive
compensation notwithstanding that a portion thereof may not be eligible for a
tax deduction under current Internal Revenue Code laws.
Brenda C. Barnes, Chair
Edward T. Fogarty
George V. Grune
Ann S. Moore
13
<PAGE>
FIVE-YEAR PERFORMANCE GRAPH
The following indexed line graph indicates the Company's total return to
shareholders for each of the five years ended December 31, 1993 through 1997, as
compared to total return to shareholders for the Standard & Poor's 500 Composite
Index and an industry composite of Avon peer companies (the "Industry
Composite"). The common stocks of the Industry Composite companies have been
included on a weighted basis to reflect the relative market capitalization of
the companies.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
AVON, S&P 500 INDEX, AND INDUSTRY COMPOSITE(2)
[GRAPHICAL REPRESENTATION OF DATA TABLE BELOW]
Assumes $100 invested on December 31, 1992 in Avon Common Stock, the S&P
500 Index and the Industry Composite. The dollar amounts indicated in the graph
above and in the chart below are as of December 31 in the year indicated.
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Avon $100.0 $ 90.5 $114.8 $149.5 $232.3 $254.7
S&P 500 100.0 110.0 111.5 153.3 188.4 251.2
Industry Composite 100.0 98.2 112.1 165.1 213.9 312.9
- ----------
(1) Total Return assumes reinvestment of dividends.
(2) Industry Composite includes Carter Wallace, Gillette, Johnson & Johnson,
Stanhome, Alberto-Culver, Colgate Palmolive, Kimberly-Clark, Bristol Myers
Squibb, and Procter & Gamble.
14
<PAGE>
TABLES AND PLANS
This section of the proxy statement discloses fiscal 1997 plan and non-plan
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and, of the Company's other executive officers during fiscal 1997, each
of the four persons who were most highly compensated in fiscal 1997 (together,
these five persons are sometimes referred to as the "named executives").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ ------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING LONG-TERM ALL
ANNUAL STOCK OPTIONS/ INCENTIVE OTHER
SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
NAME AND POSITION YEAR ($) ($)(1) (2) ($)(3) (#) ($) ($)(4)
----------------- ---- ----- ------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
James E. Preston ......... 1997 1,000,000 424,147 0 155,530 0 71,970
Chairman and 1996 610,000 561,556 0 0 1,514,063 59,166
Chief Executive Officer 1995 610,000 381,251 0 780,000 0 56,317
Andrea Jung .............. 1997 380,576 139,930 0 12,523 0 5,709
President
Fernando Lezama .......... 1997 332,010 302,422 654,380 29,534 0 0
Executive Vice President
and President Latin
America
Susan J. Kropf ........... 1997 353,803 190,640 0 10,547 0 5,282
Executive Vice President
and President North
America
Edwina D. Woodbury ....... 1997 332,384 122,734 0 15,671 0 4,780
Executive Vice President, 1996 283,913 255,334 316,000 20,000 286,875 5,985
Business Process 1995 257,754 155,217 0 12,800 0 3,779
Redesign
</TABLE>
- ------------
(1) In consideration of a special stock option grant made in 1991, for each of
the years 1992-1996, Mr. Preston's annual base salary was frozen at
$610,000 and his target annual bonus opportunity limited to 50% of such
base salary.
(2) This column would include the value of certain personal benefits only where
the value is greater than the lower of $50,000 or 10% of an executive's
Salary and Bonus for the year. Such threshold was not exceeded for any of
the named executives.
(Footnotes continued on next page)
15
<PAGE>
3) The dollar amount shown equals the number of shares of restricted stock
granted, multiplied by stock price on grant date. The following table
presents information regarding aggregate holdings of restricted stock at
December 31, 1997 for the named executives. Dividends on these shares are
paid at the same time as those on the Company's unrestricted stock. In the
event of a change of control, all shares of restricted stock would be
cashed out. One half of Mr. Lezama's 1997 grant will vest September 1, 1998
and the remainder will vest September 1, 1999.
HOLDINGS OF RESTRICTED SHARES AT 12/31/97
-----------------------------------------------
NUMBER OF AGGREGATE MARKET
RESTRICTED TOTAL NUMBER VALUE OF
SHARES GRANTED OF RESTRICTED RESTRICTED SHARES
NAME IN FISCAL 1997 SHARES HELD AT 12/31/97(A)
---- ---------------- -------------- ---------------
Mr. Preston 0 0 0
Ms. Jung ............... 0 10,000 613,750
Mr. Lezama ............. 10,000 10,000 613,750
Ms. Kropf .............. 0 8,000 491,000
Ms. Woodbury ........... 0 8,000 491,000
- ----------
(a) "Market Value" is determined by reference to the per share closing price on
December 31, 1997 ($61.375).
(4) The amounts in this column include the following: (i) Company matching
contributions to the Employees' Savings and Stock Ownership Plan and/or
Deferred Compensation Plan--Mr. Preston, $14,487; Ms. Jung, $5,709; Ms.
Kropf, $5,282 and Ms. Woodbury, $4,780; (ii) above-market portion of
interest earned on deferred compensation--Mr. Preston $57,483.
OPTION GRANTS
This table presents information regarding options that may be exercised to
purchase shares of the Company's Common Stock.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1997
INDIVIDUAL GRANTS
---------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE GRANT DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
(#)(1) YEAR(2) ($/SH) DATE VALUES (3)
--------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Mr. Preston ............. 155,530 10.9% $60.50 12/10/07 $3,330,986
Ms. Jung ................ 12,523 0.9% 60.50 3/6/07 268,205
Mr. Lezama .............. 10,992 0.8% 60.50 3/6/07 235,416
18,542 1.3% 63.125 6/5/07 414,344
Ms. Kropf ............... 10,547 0.7% 60.50 3/6/07 225,885
Ms. Woodbury ............ 10,671 0.8% 60.50 3/6/07 228,541
5,000 0.3% 63.125 6/5/07 111,731
</TABLE>
- ----------------
(1) The indicated options have a term of 10 years and were granted pursuant to
the Company's 1993 Stock Incentive Plan.
(2) Based on 1,430,319 options granted in fiscal 1997.
(3) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the Grant Date
Present Value of the options set forth in this table. The Company's use of
this model should not be construed as an endorsement of its accuracy at
valuing options. All stock option models require a prediction about the
future movement of the stock price. The following assumptions were made for
purposes of calculating Grant Date Present Values: average option term of
six years, volatility of 26.88% (calculated monthly over the three
preceding calendar years), dividend yield of 2.01% and interest rate of
5.08% (six year Treasury note rate at April 10, 1997). The real value of
options in this table depends upon the actual performance rate of the
Company's stock during the applicable period and upon when they are
exercised.
16
<PAGE>
OPTION EXERCISES AND VALUES
This table presents information regarding options exercised for shares of
the Company's Common Stock during fiscal 1997 and the value of unexercised
options held at December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND 1997 FISCAL YEAR-END OPTION VALUE
NUMBER OF SECURITIES UNDERLYING VALUES OF UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS AT FY-END (#) OPTIONS AT FY-END ($) (2)
ON EXERCISE REALIZED -------------------------------- -----------------------------------
NAME (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Preston ........... 150,000 5,490,749 56,666 848,864 1,901,853 18,937,361
Ms. Jung .............. 0 0 28,762 28,905 917,074 420,529
Mr. Lezama ............ 0 0 18,133 37,401 594,609 214,434
Ms. Kropf ............. 0 0 18,199 25,482 555,259 385,802
Ms. Woodbury .......... 4,867 177,646 10,933 33,272 289,030 444,229
</TABLE>
- ----------
(1) Value Realized is calculated as follows: [(Per Share Closing Sale Price on
Date of Exercise) -(Per Share Exercise Price)] x Number of Shares for
Which the Option was Exercised.
(2) Value of Unexercised, In-the-Money Options at 12/31/97 is calculated as
follows: [(Per Share Closing Sale Price on 12/31/97) -(Per Share Exercise
Price)] x Number of Shares Subject to Unexercised Options. The per share
closing price on 12/31/97 was $61.375.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The following table sets forth information concerning cash based long-term
incentive awards made during 1997 under the 1997 Long-Term Incentive Plan ("1997
LTIP") to each of the named executives.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLANS
NUMBER OF SHARES, OTHER PERIOD -----------------------------------------------
UNITS OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) OR PAYOUT ($) ($) ($)
---- ---------------- ---------------- --------- ------ --------
<S> <C> <C> <C> <C> <C>
Mr. Preston .............. 0 -- -- -- --
Ms. Jung ................. 12,535 3 years 626,750 1,253,500 2,507,000
Mr. Lezama ............... 7,305 3 years 365,250 730,500 1,461,000
Ms. Kropf ................ 7,850 3 years 392,500 785,000 1,570,000
Ms. Woodbury ............. 7,240 3 years 362,000 724,000 1,448,000
</TABLE>
Awards under the 1997 LTIP are made in the form of Performance Units, each
unit having a payout value of $100 if the performance target is exactly
attained, a payout value of $50 per unit if threshold performance is attained
and a payout value of $200 if a maximum performance objective is attained or
exceeded. Units will have no value if the threshold is not attained.
Awards were made in early 1997 for the three-year performance period
1997-1999 inclusive. Performance objectives were established at the time initial
awards were made and are principally based on a cumulative earnings per share
objective for such period. The payout values of units are determined and
distributed in cash in early 2000.
17
<PAGE>
RETIREMENT, DEATH AND SEVERANCE BENEFITS
The following table shows the estimated annual retirement allowance for
life annuity under the Retirement Plan and the Supplemental Plan (which are
defined below) for participants retiring at age 65 whose three-year average
compensation and years of service at retirement would be in the classifications
shown:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT ALLOWANCES AT AGE 65
AVERAGE OF THREE
HIGHEST YEARS' YEARS OF CREDITABLE SERVICE
ANNUAL COMPENSATION ------------------------------------------------------------
IN LAST TEN YEARS 15 20 25 30 35
------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 200,000 .................. 60,000 80,000 100,000 110,000 120,000
300,000 .................. 90,000 120,000 150,000 165,000 180,000
400,000 .................. 120,000 160,000 200,000 220,000 240,000
500,000 .................. 150,000 200,000 250,000 275,000 300,000
600,000 .................. 180,000 240,000 300,000 330,000 360,000
700,000 .................. 210,000 280,000 350,000 385,000 420,000
800,000 .................. 240,000 320,000 400,000 440,000 480,000
900,000 .................. 270,000 360,000 450,000 495,000 540,000
1,000,000 .................. 300,000 400,000 500,000 550,000 600,000
1,100,000 .................. 330,000 440,000 550,000 605,000 660,000
1,200,000 .................. 360,000 480,000 600,000 660,000 720,000
1,300,000 .................. 390,000 520,000 650,000 715,000 780,000
1,400,000 .................. 420,000 560,000 700,000 770,000 840,000
1,500,000 .................. 450,000 600,000 750,000 825,000 900,000
</TABLE>
As of December 31, 1997, Mr. Preston had an average three year compensation
of $1,329,406 and 37 years of creditable service; Ms. Jung had an average three
year compensation of $526,505 and 4 years of creditable service; Mrs. Kropf had
an average three year compensation of $548,497 and 27 years of creditable
service and Ms. Woodbury had an average three year compensation of $480,374 and
20 years of creditable service.
Benefits under Avon's Employees' Retirement Plan (the "Retirement Plan")
are based on the average of a participant's five highest years' compensation
during the ten years prior to retirement and the number of years of creditable
service, and are offset in part by Social Security benefits. The compensation
covered by the Retirement Plan includes base salary, commissions and annual
incentive bonuses.
The Company's Supplemental Executive Retirement Plan (the "Supplemental
Plan") will pay to four of the named executives and certain other selected
executives a supplemental pension equal to the difference between the annual
amount of a pension calculated under the Supplemental Plan and the amount the
participant will receive under the Retirement Plan. The pension benefit
calculation under the Supplemental Plan is similar to that under the Retirement
Plan except that it takes into account a greater percentage of each
participant's final average earnings computed on the basis of the three highest
years' compensation during the ten years prior to retirement and is not subject
to any offset of Social Security benefits or maximum limitation on qualified
plan benefits but is subject to offset by the benefits provided under the
Retirement Plan. The retirement benefits of Mr. Lezama, who is a resident of
Mexico, are not determined by the "Retirement Plan" or the "Supplemental Plan",
but rather under separate plans applicable to executives employed in Mexico.
Overall his benefits are based on factors that include length of service and
compensation earned over his last few years of employment. Based on his 1997
level of compensation, it is estimated that Mr. Lezama's net annual pension
benefit, assuming age 60 retirement, would be approximately $125,000 based on
the current rate of exchange for Mexican pesos.
18
<PAGE>
CONTRACTS WITH EXECUTIVES
The Company currently has employment contracts ("Employment Contracts")
with four of the named executives, namely Mr. Preston, Ms. Jung, Mrs. Kropf and
Ms. Woodbury.
Mr. Preston is covered by an Employment Contract executed November 1, 1995,
amended by a supplemental agreement dated December 10, 1997. As amended, his
contract will expire as of May 6, 1999, a date which corresponds to the
conclusion of his current three-year term as a Director of the Company. Pursuant
to his contract, Mr. Preston will remain employed on a full-time basis as
Chairman of the Board until that date. It is anticipated, however, that during
1998, the Board of Directors will elect another executive officer to
concurrently serve as the Company's Chief Executive Officer.
The Employment Contracts provide that if the executive's employment is
terminated without cause, the executive generally shall receive a payment equal
to the sum of: (i) the present value of the executive's Base Salary for a period
equal to two or three years (depending upon the executive's position at the
Company); (ii) continuation of benefits for two or three years (depending upon
the executive's position at the Company); and (iii) a bonus payment in an amount
not to exceed the executive's target annual bonus for the year of termination.
Under the terms of the Employment Contracts, such amounts payable upon
termination are generally reduced by any amounts payable under the Company's
regular Severance Plan.
The Employment Contracts also provide that upon the executive's actual or
constructive termination of employment other than for cause in connection with
the occurrence of certain change of control or potential change of control
events (as defined in the Employment Contracts), the executive will receive
payment of an amount equal to the sum of: (a) up to three years' salary and
bonus, (b) the present value of three years' insurance and fringe benefits, and
(c) the cash-out value of all then outstanding stock options, Restricted Shares
and the maximum payout value of their 1997 LTIP Performance Units. Assuming an
actual or potential change of control had occurred on January 2, 1998 and with
termination of the executives immediately thereafter, Mr. Preston would receive
$4,143,753; Ms. Jung would receive $1,890,732; Mrs. Kropf would receive
$1,898,199 and Ms. Woodbury would receive $1,542,822 plus, the amounts referred
to in (b) and (c) above.
The Employment Contracts also provide for reimbursement by the Company of
any excise taxes incurred under Section 4999 of the Internal Revenue Code by
reason of a change of control, and for any income and excise taxes incurred in
connection with such reimbursement. The actual amount of such reimbursements is
difficult to determine due to, among other things, (i) the number of variables
involved, such as the price of the Common Stock at relevant times and the
circumstances and timing of any termination, and (ii) uncertainties regarding
the application of the relevant tax rules.
19
<PAGE>
PROPOSAL 3--RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Unless otherwise directed by the Shareholders, proxies will be voted for
ratification of the appointment by the Board of Directors, upon the
recommendation of the Audit Committee, of Coopers & Lybrand L.L.P., Certified
Public Accountants, as independent accountants for the year 1998. Coopers &
Lybrand L.L.P. began auditing the accounts of the Company in 1989. If the
appointment of Coopers & Lybrand L.L.P. is not ratified by the Shareholders, the
Audit Committee will reconsider its recommendation. The Company is informed that
no member of Coopers & Lybrand L.L.P. has any direct or any material indirect
financial interest in the Company or any of its subsidiaries. A member of the
firm will be present at the Annual Meeting to answer appropriate questions and
to make a statement if he or she desires.
With respect to the proposal to ratify the appointment of Coopers & Lybrand
L.L.P. as independent accountants, Shareholders may direct that their votes be
cast for or against such proposal, or may abstain, by marking the appropriate
box on the proxy card.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
ACCOUNTANTS FOR THE YEAR 1998.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if any other matters are properly brought before the
Annual Meeting, the persons appointed in the accompanying proxy intend to vote
the shares represented thereby in accordance with their best judgment.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies on behalf of Avon will be borne by
Avon. Directors, officers and other employees of Avon may, without additional
compensation except reimbursement for actual expenses, solicit proxies by mail,
in person or by telecommunication. In addition, Avon has retained Morrow & Co.,
Inc. at a fee estimated not to exceed $15,000, plus reasonable out-of-pocket
expenses, to assist in the solicitation of proxies. Avon will reimburse brokers,
fiduciaries, custodians and other nominees for out-of-pocket expenses incurred
in sending Avon's proxy materials to, and obtaining instructions relating to
such materials from, beneficial owners.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any proposal that a Shareholder may desire to have included in the
Company's proxy material for presentation at the 1999 Annual Meeting must be
received by the Company at Avon Products, Inc., 1345 Avenue of the Americas, New
York, New York 10105, Attention: Secretary, on or prior to November 25, 1998.
Upon the written request of any Shareholder to the Shareholder Relations
Department (Attention: Marilyn Reynolds) at the address listed above (telephone
number 212-282-5619), the Company will provide without charge a copy of its
Annual Report on Form 10-K for 1997, as filed with the Securities and Exchange
Commission.
By Order of the Board of Directors
WARD M. MILLER, JR.
Senior Vice President,
General Counsel and Secretary
March 25, 1998
New York, New York
20
<PAGE>
- --------------------------------------------------------------------------------
If your Shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can sign a proxy card with respect to your Shares.
Accordingly, please contact the person responsible for your account and give
instructions for a proxy card to be signed representing your Shares.
- -------------------------------------------------------------------------------
If you have any questions about giving your proxy or require assistance, please
contact our proxy solicitor at:
MORROW & CO., INC.
909 Third Avenue
New York, New York 10022
(212) 754-8000
Call Toll-Free 1-800-662-5200
21
<PAGE>
A V O N
<PAGE>
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 14 contains a description in tabular form of a graph entitled
"Performance Graph" which represents the comparison of the cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Standard and Poor's 500 Stock Index and the Industry Composite
Index for the period of each of the years commencing December 31, 1992 and
ending December 31, 1997, which graph is contained in the paper format of this
Proxy Statement being sent to Stockholders.
<PAGE>
AVON PRODUCTS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned shareholder of Avon Products, Inc. (the "Company") hereby
constitutes and appoints Ward M. Miller, Jr., C. Richard Mathews and Martin
P H. Michael, and each of them, as true and lawful attorneys and proxies of
the undersigned, with full power of substitution and resubstitution, to
R vote and act with respect to all shares of the Company's Common Stock, par
value $.25 per share (the "Shares"), the undersigned could vote, and with
O all powers the undersigned would possess, if personally present, at the
Annual Meeting of Shareholders of the Company to be held on May 7, 1998,
X and at any adjournments or postponements thereof (the "Annual Meeting").
Y IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS
MADE, SUCH SHARES WILL BE VOTED FOR PROPOSAL 1 AND 2 (THE ELECTION AS
DIRECTORS OF THE NOMINEES LISTED BELOW). FOR PROPOSAL NO. 3 AND, IN THE
DISCRETION OF THE PROXIES NAMED ABOVE, ON ALL OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.
NOMINEES FOR ELECTION AS DIRECTORS
CLASS OF 2001: RICHARD S. BARTON, EDWARD T. FOGARTY, GEORGE V. GRUNE AND
CHARLES R. PERRIN
CLASS OF 2000: STANLEY C. GAULT, ANDREA JUNG AND SUSAN J. KROPF
Instruction for Cumulative Voting for each class listed above: Unless otherwise
specified in the space provided below, this proxy shall authorize the
proxies listed above to cumulate all votes which the undersigned is
entitled to cast at the Annual Meeting for, and to allocate such votes
among, one or more of the nominees for the Class of 2001 listed above,
as such proxies shall determine, in their sole and absolute
discretion, in order to maximize the number of such nominees elected
to each such class of Avon's Board of Directors. To specify a method
of cumulative voting, write "Cumulate For" and the number of Shares
and the name(s) of the nominee(s) in the space provided below.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
AVON
ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1998
10:00 A.M.
THE GRAND SALON
AT THE ESSEX HOUSE
160 CENTRAL PARK SOUTH
NEW YORK, NEW YORK
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3.
1. Proposal 1
Election of Directors to the Class of 2001 (see reverse).
[ ] FOR [ ] WITHHELD
- ---------------------------------------------------------------------------
To withhold authority for any nominee(s) for the Class of 2000, write the
name(s) of such nominee(s) in the space provided above.
2. Proposal 2
Election of Directors to the Class of 2000 (see reverse)
[ ] FOR [ ] WITHHELD
- ---------------------------------------------------------------------------
To withhold authority for any nominee(s) for the Class of 2001, write the
name(s) of such nominee(s) in the space provided above.
3. Proposal 3
Ratification of the appointment of Coopers & Lybrand as Avon's independent
accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE SIGN, DATE AND MAIL YOUR PROXY PROMPTLY!
Please sign exactly as name appears hereon. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
---------------------------------------------------
---------------------------------------------------
SIGNATURE(S) DATE
THIS PROXY REVOKES ALL PRIOR DATED PROXIES. THE SIGNER HEREBY ACKNOWLEDGES
RECEIPT OF AVON'S PROXY STATEMENT DATED MARCH 25, 1998.
<PAGE>
AVON PRODUCTS, INC.
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
CONFIDENTIAL VOTING INSTRUCTIONS CARD
To: Chase Manhattan Bank, N.A. as Trustee (the "Trustee") under the Avon
Products, Inc. Employee Savings and Stock Ownership Plan (the "Avon Savings
Plan").
THE PROXY FOR WHICH YOUR INSTRUCTIONS ARE REQUESTED IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF AVON PRODUCTS, INC. (THE "COMPANY").
The undersigned, as a participant in the Avon Savings Plan, hereby directs
P Chase Manhattan Bank, N.A., as Trustee, to appoint Ward M. Miller, Jr.,
C. Richard Mathews and Martin H. Michael, and each of them, with full power
R of substitution and resubstitution, to vote and act with respect to all
shares of the Company's Common Stock, par value $.25 per share (the
O "Shares"), credited to the undersigned's Savings Plan account, at the
Annual Meeting of Shareholders of the Company to be held on May 7, 1998,
X and at any adjournments or postponements thereof (the "Annual Meeting").
Y The Avon Savings Plan provides that participants may instruct the Trustee
as to the manner in which the Avon Shares held by it for their accounts
shall be voted at Shareholders' meetings. The enclosed Notice of Annual
Meeting of Shareholders and Proxy Statement for the Annual Meeting is being
provided to you by the Trustee under the Avon Savings Plan. In order to
instruct the Trustee in the voting of your Avon Savings Plan shares, you
must fill in the reverse side of this Confidential Voting Instructions
Card, and date, sign and return the card to the Trustee in the enclosed
envelope so that it is received by May 1, 1998.
Unless your card is received by May 1, 1998, and unless you have specified
your directions, your shares cannot be voted by the Trustee. Please date
and sign on the reverse side.
NOMINEES FOR ELECTION AS DIRECTORS
CLASS OF 2001: RICHARD S. BARTON, EDWARD T FOGARTY, GEORGE V. GRUNE AND
CHARLES R. PERRIN
CLASS OF 2000: STANLEY C. GAULT, ANDREA JUNG AND SUSAN J. KROPF
Instruction for Cumulative Voting for each class listed above: Unless otherwise
specified in the space provided below, these voting instructions shall
authorize the Trustee to authorize the proxies listed above to
cumulate all votes which the undersigned is entitled to cast at the
Annual Meeting for, and to allocate such votes among, one or more of
the nominees for the Class of 2001 listed above and separately for
the Class of 2000 listed above, as such proxies shall determine,
in their sole and absolute discretion, in order to maximize
the number of such nominees elected to each such class of Avon's Board
of Directors. To specify a method of cumulative voting, write
"Cumulate For" and the number of Shares and the name(s) of the
nominee(s) in the space provided below.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
AVON
ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1998
10:00 A.M.
THE GRAND SALON
AT THE ESSEX HOUSE
160 CENTRAL PARK SOUTH
NEW YORK, NEW YORK
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3.
1. Proposal 1
Election of Directors to the Class of 2001 (see reverse).
[ ] FOR [ ] WITHHELD
- ------------------------------------------------------------------------------
To withhold authority for any nominee(s) for the Class of 2001, write the
name(s) of such nominee(s) in the space provided above.
2. Proposal 2
Election of Directors to the Class of 2000 (see reverse)
[ ] FOR [ ] WITHHELD
- ------------------------------------------------------------------------------
To withhold authority for any nominee(s) for the Class of 2000, write the
name(s) of such nominee(s) in the space provided above.
3. Proposal 3
Ratification of the appointment of Coopers & Lybrand as Avon's independent
accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE SIGN, DATE AND MAIL YOUR INSTRUCTIONS PROMPTLY!
Please sign exactly as name appears hereon. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
---------------------------------------------------
---------------------------------------------------
SIGNATURE(S) DATE
THIS PROXY REVOKES ALL PRIOR DATED PROXIES. THE SIGNER HEREBY ACKNOWLEDGES
RECEIPT OF AVON'S PROXY STATEMENT DATED MARCH 25, 1998.
