8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 27, 2006

Avon Products, Inc.

(Exact name of registrant as specified in its charter)

New York	1-4881	13-0544597
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
1345 Avenue of the Americas
New York, New York 10105-0196
(Address of principal executive offices) (Zip Code)

(212) 282-5000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN THE REPORT

Item 1.01. Entry into a Material Definitive Agreement

2006 Annual Cash Bonus Performance Goals

On March 27, 2006, the Compensation Committee of the Board of Directors (the “Committee”) designated the Chairman and Chief Executive Officer, the President and Chief Operating Officer, the Executive Vice President, Finance and Technology and Chief Financial Officer, two Executive Vice Presidents, and three Senior Vice Presidents for participation in the Executive Incentive Plan. The Committee also established as performance goals the achievement of pre-established levels of total revenue and operating profit (with additional Commercial Business Unit revenue and operating profit measures for an Executive Vice President and a Senior Vice President with regional responsibilities). The Committee established target bonuses so that a participant under the Executive Incentive Plan would be entitled to receive from 65% to 175% of base salary as a target bonus, depending on management level, with a payout ranging from 0% to 200% of target bonus depending upon the attainment of total performance goals. The Committee has the discretion to reduce, but not increase, the amount of a participant’s bonus under the Executive Incentive Plan.

Other executive officers participate in the Management Incentive Plan, which generally has similar financial measures and bonus opportunities.

2006-2007 Turnaround Incentive Plan

On March 27, 2006, the Committee approved the Avon Products, Inc. 2006-2007 Turnaround Incentive Plan (the “Plan”). The Plan is designed to focus key executives on new recalibrated financial and strategic objectives over the performance period from January 1, 2006 through December 31, 2007. The Plan covers the Chief Executive Officer, all other executive officers and other key executives. Actual payouts may range from 0% to 200% of the target award, depending on the achievement of operating profit measures, together with the achievement of initiatives under the Company’s four-point turnaround plan announced in November 2005. Target awards were set at 67% of the average of earned base salary for 2006 and 2007.

The foregoing does not constitute a complete summary of the terms of the Plan, and reference is made to the complete text of the Plan, which is attached hereto as Exhibit 10.1.

Restricted Stock Unit Award Agreement for Chief Executive Officer

The Committee approved a grant of equity-based awards for Andrea Jung, the Chairman and Chief Executive Officer, effective as of March 31, 2006, with a grant date value equivalent to 500% of Ms. Jung’s base salary, in the form of 50% stock options and 50% restricted stock units. The stock options will be granted pursuant to the form of U.S. Stock Option Agreement under the Avon Products, Inc. 2005 Stock Incentive Plan, previously filed with the Securities and Exchange Commission on a Form 8-K on September 6, 2005. The restricted stock units vest 100% on the third anniversary of the grant date, subject to the satisfaction of cumulative revenue and operating profit performance measures for the fiscal years 2006 through 2008. Such restricted stock units will be granted pursuant to the form of performance contingent restricted stock unit award agreement for the Chief Executive Officer that is attached hereto as Exhibit 10.2 and incorporated herein by reference.

(Page 2 of 4 Pages)

Item 9.01. Financial Statements and Exhibits

(d)      Exhibits

Exhibit 10.1      Avon Products, Inc. 2006-2007 Turnaround Incentive Plan, effective as of January 1, 2006

Exhibit 10.2      Form of Performance Contingent Restricted Stock Unit Award Agreement under the Avon Products, Inc. 2005 Stock Incentive Plan for the Chief Executive Officer

(Page 3 of 4 Pages)

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AVON PRODUCTS, INC.
	(Registrant)
By	/s/ Gilbert L. Klemann, II
	Gilbert L. Klemann, II
	Senior Vice President and General Counsel

Date: March 31, 2006

(Page 4 of 4 Pages)

EXHIBIT INDEX

Exhibit No.	Description
10.1	Avon Products, Inc. 2006-2007 Turnaround Incentive Plan, effective as of January 1, 2006
10.2	Form of Performance Contingent Restricted Stock Unit Award Agreement under the Avon Products, Inc. 2005 Stock Incentive Plan for the Chief Executive Officer

EX-10.1

EXHIBIT 10.1

AVON PRODUCTS, INC.
2006-2007 TURNAROUND INCENTIVE PLAN

I. PURPOSE. The primary objective of this Avon Products, Inc. 2006-2007 Turnaround Incentive Plan is to link a portion of the total pay of eligible participants to the business growth success of Avon Products, Inc. and its Affiliates during 2006-2007.

II. DEFINITIONS. As used in this Plan, the following terms shall have the following meanings:

     “Affiliate” means (a) an entity that directly or through one or more intermediaries is controlled by Avon Products, Inc., and (b) any entity in which Avon Products, Inc. has a significant equity interest, as determined by Avon Products, Inc.

     “Annual Earned Base Salary” means the average of a Participant’s Earned Base Salary over the years 2006-2007. “Earned Base Salary” for any year means the weighted average salary of a Participant based on the number of days in the year at each salary level. Assignment premiums are not included for expatriates and third country nationals. If a Participant does not have Earned Base Salary for the full period 2006-2007, Annual Earned Base Salary shall be the average of a Participant’s annualized Earned Base Salary for each year.

     “Board” means the Board of Directors of the Company.

     “Cause” means:

(a)	the failure or refusal by the Participant to perform his or her normal duties (other than any such failure resulting from the Participant’s incapacity due to physical or mental illness), which has not ceased within ten (10) days after a written demand for substantial performance is delivered to the Participant by the Company, which demand identifies the manner in which the Company believes that the Participant has not performed such duties;
(b)	the engaging by the Participant in willful misconduct or an act of moral turpitude which is materially injurious to the Company, monetarily or otherwise; or
(c)	the conviction of the Participant of, or the entering of a plea of nolo contendere by the Participant with respect to, a felony.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Committee” means the Compensation Committee of the Board of Directors.

     “Company” means Avon Products, Inc. and, unless the context requires otherwise, its Affiliates.

     “Participant” means an employee or former employee of the Company meeting the requirements of Article IV hereof.

     “Performance Period” means January 1, 2006 through December 31, 2007.

     “Performance Period Bonus” means the bonus payable to a Participant with respect to the Performance Period as determined pursuant to Article V.

     “Plan” means this Avon Products, Inc. 2006-2007 Turnaround Incentive Plan.

     “Senior Executives” means employees who either: (a) are the Chief Executive Officer; (b) are considered a Section 16 officer for purposes of the Securities Exchange Act of 1934, as amended; (c) directly report to the Chief Executive Officer; or (d) are in salary level A02 and above.

III. ADMINISTRATION.

     The administration and operation of the Plan shall be supervised by the Committee with respect to all matters. The Committee may delegate responsibility for the day-to-day administration and operation of the Plan to such employees of the Company as it shall designate from time to time. The Committee shall interpret and construe any and all provisions of the Plan and any determination made by the Committee under the Plan shall be final and conclusive; provided that any determination with respect to issues relating to the Chief Executive Officer or Chief Operating Officer shall be made by the independent members of the Board. Neither the Board nor the Committee, nor any member of the Board, nor any employee of the Company shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan (other than acts of willful misconduct) and the members of the Board and the Committee and the employees of the Company shall be entitled to indemnification and reimbursement by the Company to the maximum extent permitted by law in respect of any claim, loss, damage or expense (including counsel’s fees) arising from their acts, omissions and conduct in their official capacity with respect to the Plan.

IV. ELIGIBILITY AND PARTICIPATION.

     Senior Executives are eligible to participate in the Plan. Such Senior Executives shall become participants in the Plan only after approval for participation by the Committee. Senior Executives who are approved for participation in the Plan by the Committee on the date hereof will participate in the Plan effective as of January 1, 2006, except if such employee became a Senior Executive subsequent to January 1, 2006. In such case, such Senior Executive will participate as of a date specified by the Committee and such Participant’s Performance Period Bonus will be prorated for the actual period of participation of such Participant during the Performance Period. Senior Executives who are approved for participation in the Plan by the Committee after the date hereof will become participants in the Plan as of a date specified

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by the Committee at the time of approval for participation in the Plan, which shall not be earlier than the date hereof. In such case, such Participant’s Performance Period Bonus will be prorated for the actual period of participation of such Participant during the Performance Period.

     In addition, officers who are not Senior Executives (“Officers”) are also eligible to participate in the Plan. Such Officers shall become participants in the Plan only after the selection and approval of the Chief Executive Officer. The Chief Executive Officer, however, generally may only select officers in salary levels A03 and A04 and only in rare circumstances may select officers in salary levels A05 and A06. Officers who are initially approved by the Chief Executive Officer (the “Initial List”) will participate in the Plan effective as of a date specified by the Chief Executive Officer. If such date is after January 1, 2006, such Participant’s Performance Period Bonus will be prorated for the actual period of participation of such Participant during the Performance Period. Officers who are approved by the Chief Executive Officer after the approval of the Initial List will become participants in the Plan as of a date specified by the Chief Executive Officer, which shall not be earlier than the date hereof. In such case, such Participant’s Performance Period Bonus will be prorated for the actual period of participation of such Participant during the Performance Period.

V. PERFORMANCE PERIOD BONUS.

     5.1. Performance Goals. The Performance Period Bonus will be assessed against performance measures determined by the Committee, which performance measures shall be related to the Company’s four point turnaround plan announced in November 2005. The Committee may determine that the Performance Period Bonus shall not be payable unless certain operating profit goals are attained.

     5.2. Performance Period Bonus. The Committee has established a target award of 67% of each Participant’s Annual Earned Base Salary to be paid as a Performance Period Bonus upon attainment of target performance measures and the maximum percentage of each Participant’s Annual Earned Base Salary in the event the target performance measures are exceeded. The minimum and maximum may range from 0% to 200% of the target award.

     5.3. Determination of Achievement of Performance Goals. The Committee shall determine the level of achievement of the performance goals as soon as practicable after the end of the Performance Period and will approve the final payout of the Performance Period Bonuses.

     5.4. Payment of Performance Period Bonus.

(a) Except as provided herein, Participants who remain actively employed until the last day of the Performance Period shall be entitled to receive the Performance Period Bonus, if any, determined in accordance with this Article V.

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(i)	A Participant whose job is eliminated on or after January 1, 2007 but before the end of the Performance Period will be eligible for a prorated Performance Period Bonus, subject to the approval of the Compensation Committee with respect to Participants who are Senior Executives and subject to the approval of the Chief Executive Officer with respect to other Participants.
(ii)	A Participant who retires at any time during the Performance Period will be eligible for a prorated Performance Period Bonus, subject to the approval of the Compensation Committee with respect to Participants who are Senior Executives and subject to the approval of the Chief Executive Officer with respect to other Participants. A Participant who is a U.S. employee will be considered to have retired if the Participant terminates employment after attaining age 65 or after becoming eligible for early or Rule of 85 retirement under the Avon Products, Inc.Personal Retirement Account Plan. For those Participants located outside of the U.S., Participants will be considered to have retired based on the local policies, practices or benefit plans applicable to the Participant’s location.
(iii)	A Participant who dies or becomes permanently disabled during the Performance Period will be eligible for a prorated Performance Period Bonus.

(b)	A Participant: (i) who is involuntarily terminated by the Company for Cause prior to payment of the Performance Period Bonus; (ii) whose job is eliminated on or before December 31, 2006; or (iii) who voluntarily terminates employment (excluding retirement or permanent disability) at any time during the Performance Period, is not eligible for a Performance Period Bonus.
(c)	Payment of Performance Period Bonuses shall be made in cash and shall be paid in February 2008, except to the extent that such Participant elected to defer the receipt of a portion of his or her Performance Period Bonus in accordance with subsection (d) hereof.
(d)	A U.S. participant may defer the receipt of all or a portion of his or her Performance Period Bonus to the Avon Products, Inc. Deferred Compensation Plan (the “DCP”), provided that such deferral election is made in compliance with Section 409A of the Code. Such deferred amounts shall then be subject to the terms of the DCP.

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VI. GENERAL PROVISIONS.

     6.1. Amendment and Termination. The Committee may at any time amend, suspend, discontinue or terminate the Plan; provided, however, that no such amendment, suspension, discontinuance or termination made after the end of the Performance Period shall adversely affect the rights of any Participant to any Performance Period Bonus. All determinations concerning the interpretation and application of this Section 6.1 shall be made by the Committee.

     6.2. Designation of Beneficiary. In the event a Participant dies while entitled to a payment under the Plan, such payments shall be made to the Participant’s estate.

     6.3. Rights Unsecured. The right of any Participant to receive a Performance Period Bonus under the Plan shall constitute an unsecured claim against the general assets of the Company.

     6.4. Withholding Taxes. The Company shall have the right to deduct from each Performance Period Bonus any federal, state and local taxes required by such laws to be withheld with respect to any payment under the Plan.

6.5. Miscellaneous.

(a)	No Right of Continued Employment. Nothing in this Plan shall be construed as conferring upon any Participant any right to continue in the employment of the Company.
(b)	No Limitation on Corporate Actions. Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking any corporate action which is deemed by it to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any awards made under the Plan. No employee, Participant or other person shall have any claim against the Company or any of its subsidiaries or Affiliates as a result of any such action.
(c)	Nonalienation of Benefits. Except as expressly provided herein, no Participant shall have the power or right to transfer, anticipate, or otherwise encumber the Participant’s interest under the Plan. The Company’s obligations under this Plan are not assignable or transferable except to a corporation which acquires all or substantially all of the assets of the Company or any corporation into which the Company may be merged or consolidated. The provisions of the Plan shall inure to the benefit of each Participant and his or her heirs, executors, administrators or successors in interest.
(d)	Severability. If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without

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	regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.
(e)	Governing Law. The Plan shall be construed in accordance with and governed by the laws of the State of New York, without reference to the principles of conflict of laws.
(f)	Headings. Headings are inserted in this Plan for convenience of reference only and are to be ignored in a construction of the provisions of the Plan.

[Signature on Next Page]

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     IN WITNESS WHEREOF, the Company has caused the Plan to be executed on the 27th day of March, 2006.

AVON PRODUCTS, INC.
By:	/s/ Andrea Jung
	Title: Chairman and Chief Executive Officer

Date: March 27, 2006

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EX-10.2

EXHIBIT 10.2

AVON PRODUCTS, INC.
2005 STOCK INCENTIVE PLAN

PERFORMANCE CONTINGENT
RESTRICTED STOCK UNIT AWARD AGREEMENT
FOR CHIEF EXECUTIVE OFFICE

     1. Grant of Performance Contingent Restricted Stock Unit Award. Pursuant to the provisions of its 2005 Stock Incentive Plan (the “Plan”), Avon Products, Inc. (the “Company”) has awarded you (the “Grantee”) Performance Contingent Restricted Stock Units (the “RSUs”), representing the right to receive in the future shares of Stock (the “Shares”) as set forth in the Grantee’s grant notification. These RSUs are subject to the terms and conditions set forth below, as well as those terms and conditions set forth in the Plan, all of which are hereby incorporated by this reference. All capitalized terms used in this Performance Contingent Restricted Stock Unit Award Agreement (this “Agreement”) shall have the meaning set forth in the Plan.

     2. Nature of RSUs; Issuance of Shares. These RSUs represent a right to receive Shares on the Vesting Date (as defined below) but do not represent a current interest in the Shares. If all the terms and conditions hereof and of the Plan are met, then the Grantee shall be issued certificates for the respective number of Shares on the Vesting Date. In lieu of issuance of Shares, the Company reserves the right to instead make a cash payment to the Grantee equal to the Fair Market Value of the Shares determined as of the Vesting Date.

     3. Restrictions on Transfer of RSUs. These RSUs may not be sold, tendered, assigned, transferred, pledged or otherwise encumbered.

     4. Vesting of RSUs; Voting; Dividends.

     (a) Subject to Section 5, vesting of the RSUs shall occur on the date set forth in the Grantee’s grant notification (such date the “Vesting Date”). Vesting is contingent upon (i) the Grantee being employed on the Vesting Date by the Company or its Subsidiaries and (ii) satisfaction by the Company of the revenue and operating profit performance measures set forth in the grant notification (the “Performance Measures”).

     (b) The Grantee does not have the right to vote any of the Shares or to receive dividends on them prior to the date such Shares are to be issued to the Grantee pursuant to the terms hereof. However, unless otherwise determined by the Committee, the Grantee shall be entitled to “Dividend Equivalent Rights” so that the Grantee will receive cash payments in respect of the Shares in amounts that would otherwise be payable as dividends with respect to such number of shares of the Stock, when and as dividends are paid.

     5. Termination of Employment. If the Grantee’s employment is terminated other than for Cause or other than voluntarily by the Grantee, a portion of the RSUs referred to in Section 4(a) above shall become vested and the appropriate number of such vested Shares shall be issued upon such termination, provided that the Company has satisfied the Performance Measures on a pro-rata basis during the pro-rata period of service. The number of Shares shall be determined by multiplying the full number of Shares subject to the RSU by a fraction, which shall be the number of complete months of employment from the date of grant (the “Grant Date”) to the date of termination, divided by the number of months from the Grant Date to the Vesting Date. In the event of termination of employment by reason of death, the number of Shares to be distributable to the Grantee’s estate or designated beneficiary upon such termination shall be determined in the same manner, subject to the satisfaction of the Performance Measures on a pro-rata basis during the pro-rata period of service.

     In the event of termination by the Company for Cause, or the Grantee’s voluntary termination of employment, all portions of the RSUs not otherwise vested as of the date of termination shall be forfeited. “Cause” shall have the same meaning as that provided in the Company’s severance pay plan. In addition, termination for Cause shall include any termination due to acts of dishonesty or gross misconduct on the part of the Grantee which result, or are intended to result, in damage to the Company’s business or reputation.

     An unpaid/long-term leave of absence of the Grantee shall not constitute a termination of employment of the Grantee. During an unpaid/long-term leave of absence, the RSUs shall continue to vest as set forth in the grant notification referred to in Section 4(a) of this Agreement.

     For purposes of this Agreement, the Grantee’s employment by a Subsidiary shall be considered terminated on the date on which the Company sells or otherwise divests its equity interest in such Subsidiary.

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     The RSUs provided under this grant shall not be paid if the Company has not satisfied the Performance Measures, except as otherwise provided under this Section 5 above.

     6. Non-Competition/Non-Solicitation/Non-Disclosure. The Grantee agrees that, at any time prior to the vesting of the RSUs granted hereunder, and for a period of one year after the later of vesting of the RSUs or termination of the Grantee’s employment with the Company for any reason whatsoever (including Retirement or Disability), he or she shall not, without the prior written consent of the Company, engage in any of the following activities:

     (a) The Grantee shall not directly or indirectly engage or otherwise participate in any business which is competitive with any significant business of the Company or any Subsidiary, including without limitation, the Grantee’s acceptance of employment with, entrance into a consulting or advisory arrangement with, rendering services to or otherwise facilitating the business of Amway Corporation/Alticor Inc., Gryphon Development/Limited Brands, Inc., L’Oréal Group/Cosmair, Inc., Mary Kay Inc., Reckitt Benckiser PLC, Revlon, Inc., Sara Lee Corporation, The Estée Lauder Companies Inc., The Procter & Gamble Company, Tupperware Corporation, the Unilever Group (N.V. and PLC), or any of their affiliates;

     (b) The Grantee shall not solicit or aid in the solicitation of any employees of the Company or any Subsidiary to leave their employment; or

     (c) The Grantee shall not, unless compelled pursuant to an order of a court or other body having jurisdiction over such matter, communicate or divulge any secret or confidential information, knowledge or data, including without limitation any trade secrets, relating to the Company or a Subsidiary, and their respective businesses, obtained by the Grantee during his or her employment by the Company or a Subsidiary and which is not otherwise publicly known (other than by reason of an unauthorized act by the Grantee), to anyone other than the Company and those designated by it.

     In the event the Company determines that the Grantee has breached any term of this Section 6 or any non-disclosure, non-compete or non-solicitation covenant set forth in his or her severance agreement, employment contract or any Company policy, in addition to any other remedies the Company may have available to it, unless otherwise determined by the Committee, (i) all unvested RSUs granted hereunder shall be forfeited, (ii) if shares of Stock have been issued to the Grantee in respect of vested RSUs hereunder, the Grantee shall forfeit all such

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shares of Stock so issued to the Grantee hereunder and (iii) if cash has been paid to the Grantee in lieu of shares of Stock in respect of vested RSUs hereunder, the Grantee shall pay to the Company all such cash so paid in lieu of shares of Stock to the Grantee hereunder; provided, however, that if the Grantee no longer holds shares of Stock issued to the Grantee hereunder, the Grantee shall pay to the Company in cash the Fair Market Value of any such shares of Stock on the date such shares of Stock were issued to the Grantee hereunder.

     7. No Right to Employment, etc.

      (a) The execution and delivery of this Agreement and the granting of the RSUs hereunder shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Company to employ the Grantee for any specific period.

      (b) The award of the RSUs hereunder does not entitle the Grantee to any benefit other than that specifically granted under this Agreement, nor to any future grants or other benefits under the Plan or any similar plan. Any benefits granted under this Agreement and the Plan are not part of the Grantee’s ordinary compensation, and shall not be considered as part of such compensation in the event of severance, redundancy or resignation. The Grantee understands and accepts that the benefits granted under this Agreement and the Plan are entirely at the grace and discretion of the Company and that the Company retains the right to amend or terminate the Plan, and/or the Grantee’s participation therein, at any time, at the Company’s sole discretion and without notice.

     8. Change of Capitalization. If, prior to the time the restrictions imposed by Section 4 on the RSUs awarded hereunder lapse, the Company shall be reorganized, or consolidated or merged with another corporation, the appropriate amount of any stock, securities or other property exchangeable for shares of Stock pursuant to such reorganization, consolidation or merger shall be appropriately substituted for the Shares hereunder.

     9. Application of Laws. The granting of these RSUs and the delivery of Shares hereunder shall be subject to all applicable laws, rules and regulations.

     10. Taxes. By accepting this grant, the Grantee hereby irrevocably elects to satisfy any taxes required to be withheld by the Company on the date of delivery of any Shares hereunder by authorizing the Company to withhold a sufficient number of Shares (or cash in lieu thereof if the RSUs are to be settled in cash) to satisfy such tax

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obligation; provided, however, that if the Grantee elects pursuant to the Company’s Deferred Compensation Plan to defer the delivery of any Shares payable hereunder, the Grantee hereby irrevocably elects to satisfy all applicable FICA and FUTA taxes due upon the applicable Vesting Date with respect to such Shares for which delivery is being deferred by delivering cash to the Company in an amount sufficient to satisfy all such FICA and FUTA taxes.

     IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the Grantee have executed this Agreement as of the Grant Date.

AVON PRODUCTS, INC.	GRANTEE
By:	Name: Andrea Jung
Title:

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