AVERY DENNISON CORPORATION
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EXECUTIVE EMPLOYMENT SECURITY POLICY
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The following Policy shall be applicable to such officers of the Company as
shall be selected by the Compensation Committee of the Company's Board and
notified thereof as hereinafter provided. This Policy shall not apply to any
officer of the Company who is a party to a separate employment agreement with
the Company or a subsidiary thereof, unless such employment agreement expressly
provides that this Policy shall be applicable to said Officer, and said
Agreement has been approved by the Compensation Committee, and he is provided
with notice hereunder.
This Policy shall be operative only for a period of three (3) years after a
Change of Control. This Policy shall not be applicable, and no payments shall
be made pursuant to it, unless a Change of Control occurs.
1. DEFINITIONS.
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For purposes of this Policy the following terms shall have the meaning set
forth in this Paragraph 1:
A. "Board" shall mean the Board of Directors of the Company.
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B. "Cause" shall mean (i) willful refusal by Participant to follow a
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lawful written order of the Board, (ii) willful misconduct, dishonesty or
reckless disregard of his duties by Participant, or (iii) the conviction of
Participant of any felony involving moral turpitude.
C. "Change of Control" shall mean a change in control of the Company of a
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nature that would be required to be reported in response to Item 5(f) of
Schedule 14A, Regulation 240.14a-101, promulgated under the Securities Exchange
Act of 1934 as in effect on the date of this Policy or, if Item 5(f) is no
longer in effect, any regulation issued by the Securities and Exchange
Commission pursuant
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to the Securities Exchange Act of 1934 which serves similar purposes;
provided that, without limitation, a Change of Control shall be deemed to have
occurred if and when (a) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial
owner, directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company's then
outstanding securities or (b) individuals who were members of the Board
immediately prior to a meeting of the shareholders of the Company involving a
contest for the election of directors shall not constitute a majority of the
Board following such election.
D. "Company" shall mean Avery Dennison Corporation.
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E. "Compensation Committee" shall mean the Compensation Committee of the
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Board.
F. "Conflict of Interest" is defined in Paragraph 9 hereof.
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G. "Participant" shall mean an officer of the Company who has been
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selected by the Compensation Committee to participate under this Policy, who has
been so notified by the Compensation Committee, and who has acknowledged such
notification pursuant to Paragraph 13 hereof. Participants shall mean all
officers of the Company so selected and notified, and who have so acknowledged
notification.
H. "Period of Employment" shall mean the number of months of employment of
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a Participant by the Company. "Period of Employment" is used to ascertain the
number of months for which Termination Indemnity payments will be paid pursuant
to the terms hereof. Prior service may be included within the Period of
Employment at the discretion of the Compensation Committee if a termination
allowance was not paid at the time prior service ended. Period of Employment
shall include disability and military leaves of absence but exclude other leaves
of absence unless such leaves of absence are for the convenience of the Company
and are approved by the Compensation Committee. Earned but accrued vacation
credits shall not be included within "Period of Employment".
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I. "Termination Indemnity Payments" shall mean those Termination
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Indemnity Payments provided by the terms of this Agreement.
J. "Total Compensation" shall mean the amount per annum equal to the
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highest annual compensation (salary plus bonus) paid to Participant by Company
during any of Company's three (3) fiscal years immediately preceding termination
of employment. "Monthly Total Compensation" shall mean one twelfth (1/12) of
Total Compensation.
2. TERMINATION OF EMPLOYMENT BY THE COMPANY.
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Within three years after a Change of Control of Company, in the event of
termination by the Company of the active employment of any Participant (except
where the basis for such termination is Cause, death, disability or normal
retirement at age sixty-five [65]), such Participant shall be entitled to
receive and the Company shall be obligated to pay as Termination Indemnity
Payments an amount equal to the Participant's Monthly Total Compensation for the
number of months following such termination indicated in Paragraph 6 below, less
one half (1/2) of all salary, bonus, other remuneration and the fair market
value to Participant of fringe benefits, the Participant may receive from new
employment during the period he is entitled to Termination Indemnity Payments.
3. TERMINATION OF EMPLOYMENT BY THE PARTICIPANT.
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During the three (3) years after a Change of Control of Company, if the
Board fails to reelect a Participant to his then existing or reasonably
comparable office, or if a change not acceptable to a Participant is made that
affects a substantial reduction in his compensation or benefits (except for (i)
a general reduction of compensation or benefits affecting all Participants and
resulting from a severe economic down-turn in the financial position of the
Company, or (ii) for normal retirement at age sixty-five [65] of such
Participant) such Participant shall have the right by written notice to the
Company to terminate his active employment as of the last day of the month in
which such written notice is delivered to the Company, and such Participant
shall be entitled to receive and the Company shall be obligated to pay as
Termination Indemnity Payments an amount equal to the Participant's Monthly
Total
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Compensation for the number of months following such termination indicated
in Paragraph 6 below, less one half (1/2) of all salary, bonus, other
remuneration and the fair market value to Participant of fringe benefits, the
Participant may receive from new employment during the period he is entitled to
Termination Indemnity Payments. Except as provided above in this paragraph, no
Termination Indemnity Payments will be paid pursuant to the terms of this Policy
to any Participant whose employment at Company is terminated by voluntary
resignation (unless otherwise determined by the Compensation Committee).
4. DEATH/DISABILITY/RETIREMENT:
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CONTINUATION OF BENEFITS IN CASE OF DEATH.
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Participant shall not receive payments under this Policy on account of
termination of employment because of death or disability or upon normal
retirement at age sixty-five (65) or thereafter. Should a Participant covered
by this Policy die after commencement of payments to him of the Termination
Indemnity Payments but before such Termination Indemnity Payments are paid in
full, the balance the Participant would have received had he lived shall be paid
in installments as designated in writing by such Participant; or if there is not
effective written designation then to his spouse; or if there is neither an
effective written designation nor a surviving spouse, then to his estate.
Designation of a beneficiary or beneficiaries to receive the balance of any
Termination Indemnity Payments hereunder shall be made by written notice to the
Company and the Participant may revoke or change any such designation of
beneficiary at any time by a later written notice to the Company.
5. CAUSE.
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In the event the Participant's employment is terminated for Cause,
Participant shall not receive any payments under this Policy.
6. TERMINATION INDEMNITY PAYMENTS.
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Termination Indemnity Payments shall be computed and paid in accordance
with the following schedule:
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Period of Employment Termination Indemnity Payments
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(Amount equal to 100% of Monthly
Total Compensation for the number
of months set forth below)
Less than one year 12 months
One year or more 24 months
Three years or more 36 months
The maximum period of Termination Indemnity Payments shall be thirty-six
(36) months or age sixty-five (65), whichever comes first.
Payments of the Monthly Termination Indemnity Payments hereunder shall
be made at the regular pay period of the Company or in such other manner as may
be agreed upon by the Participant entitled to receive such payments and the
Compensation Committee. Payments made to a Participant hereunder as Termination
Indemnity Payments shall be deemed to be compensation for services rendered for
all purposes and shall be subject to applicable Federal, State and local tax
withholding and deduction requirements.
If during the period a Participant is receiving Termination Indemnity
Payments under this Policy such Participant makes false statements or conducts
himself in a fraudulent or dishonest manner which materially and adversely
affects the Company, the Board may terminate all payments hereunder.
7. OTHER COMPANY EMPLOYMENT BENEFITS.
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Participants entitled to receive Termination Indemnity Payments under
this Policy shall be entitled to participate in certain employee insurance plans
(as described below) during the period the Termination Indemnity Payments
provided for herein are being paid. During the period a Participant is
receiving payments hereunder, he shall be treated as a continuing employee for
purposes of participation in and accrual of rights and benefits under all of the
Company's life, accident, medical and dental insurance plans of Participant and
his spouse; however, he shall not be entitled to medical or dental coverages for
himself or his spouse if such medical or dental coverages are provided under any
other group plan or by another employer. In the event that such participation in
one or more of such Plans is not possible, Company shall arrange to provide
Participant with benefits substantially similar to those which Participant would
have been
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entitled to receive under such Plans if he had continued as an employee at the
Total Compensation level; however, he shall not be entitled to medical or dental
coverages for himself or his spouse if such medical or dental coverages are
provided under any other group plan or by another employer. Benefits of
continued participation in the Company Retirement Plan and any retirement plans
hereafter adopted in which Participant was entitled to participate prior to date
of termination (hereinafter referred to as the "Plans") shall continue,
provided, however, that if Participant's continued participation is not possible
under the general terms and provisions of the Plans, Company shall arrange to
provide Participant with benefits substantially similar to those which
Participant would have been entitled to receive under the Plans if he had
continued as an employee for the full term provided in Paragraph 6 above at the
Participant's Total Compensation level. This paragraph is not intended to limit
Participant's vested rights under any of Company's retirement plans to a period
of three (3) years or until age sixty-five (65); rather, such rights shall
continue pursuant to the terms of said Plans. Participants receiving Termina-
tion Indemnity Payments hereunder shall not be entitled to continued
participation in or accrual of benefits under any Company stock option or
restricted stock plan. No stock option shall be granted to such Participant
under any Company stock option plan after the termination of active employment;
however, such Participant shall have the benefits of the rights vested as of the
date of termination of active employment pursuant to the terms of said plans.
Such Participant shall not be entitled to continued participation in the Company
Savings Plan.
A Participant receiving Termination Indemnity Payments under this Policy
shall be entitled to purchase at depreciated book value the automobile (if any)
which Company was providing for the use of such Participant. Also, such
Participant shall have the option to have assigned to him any assignable
insurance policy owned by Company which relates specifically to such
Participant. Company shall have no obligation to pay off any loans against such
insurance policies and such former Participant shall reimburse the Company for
the cash value of such insurance policies (if any).
8. OTHER EMPLOYMENT.
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After ceasing active employment with the Company or a subsidiary of the
Company, and during the period the Participant is eligible to receive any
Termination Indemnity Payments hereunder, such
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Participant has an obligation to use his best efforts to seek other employment,
and shall have the right to accept other employment or engage in other business
activities subject to the restriction set forth in Paragraph 9 below (relating
to Conflict of Interest). One half (1/2) of all salary, bonus, other remunera-
tion and the fair market value to Participant of fringe benefits from any such
new employment shall be deducted from or set off against Termination Indemnity
Payments and other benefits provided in this Policy.
9. CONFLICT OF INTEREST.
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During the period a Participant is entitled to receive Termination
Indemnity Payments hereunder, such Participant shall not, without the prior
written consent of the Company, engage directly or indirectly (including, by way
of example only, as a principal, partner, venturer, employee or agent), nor have
any direct or indirect interest, in any business which competes with the Company
or any of its subsidiaries in any area of the world in which the Company or such
subsidiary engages in business at the time of termination of the Participant's
active employment with the Company. Included within the meaning of an indirect
interest for purposes of this Policy would be, by way of example only, an
interest in any such business held through a nominee, agent, option or other
device. The foregoing clause does not apply to an investment by any Participant
in the stock of a publicly held corporation if the market value of such
investment at the time the Participant acknowledges this Policy and the
provisions hereof (if then owned) or when acquired by such Participant (if
acquired after the date of such acknowledgment) does not exceed One Hundred
Thousand Dollars ($100,000) or to any investment by such Participant in a mutual
fund.
If Participant directly or indirectly discloses to any third person any
confidential records or information, trade secrets or customer list relating to
Company's business, Participants's right to Termina-tion Indemnity Payments
hereunder shall terminate immediately (in addition to any other remedies that
Company may have).
10. CONSULTATION FOR COMPANY.
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During the period Participant is entitled to receive Termination
Indemnity Payments hereunder, he shall be available at reasonable times and
upon reasonable notice to consult with and advise other officers and executives
of the Company regarding the business and affairs of the Company; provided,
however, that
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such consultation and advice shall be scheduled and arranged so that it does not
interfere unreasonably with any other employment or business activities of
Participant.
11. AMENDMENT OR TERMINATION OF POLICY.
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The Company reserves the right to alter, amend or revoke this Policy
prospectively at any time prior to a Change of Control, by notice to the
Participants, but no such alteration, amendment or revocation shall be made
after a Change of Control except with the express prior written consent and
agreement of such Participant. Nothing herein shall entitle any Participant to
continued employment with the Company or to continued tenure in any specific
office or position.
12. TERMINATION OF TERMINATION INDEMNITY PAYMENTS.
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The Termination Indemnity Payments and all other benefits to which any
Participant is entitled hereunder shall terminate immediately if following
termination of active employment such person (1) breaches the Conflict of
Interest provisions in Paragraph 9 hereof, or (2) fails or refuses to consult
with and advise officers and other executives of the Company in accordance with
Paragraph 10 hereof, or (3) makes false statements or conducts himself in a
manner that in the reasonable discretion of the Board materially and adversely
affects the Company per Paragraph 6 hereof, or (4) reaches his sixty-fifth
(65th) birthday.
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13. ACKNOWLEDGEMENT BY COMPANY OFFICERS.
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Each officer of the Company to whom this Policy is to be applicable
shall be informed thereof by letter substantially in the form attached as
Exhibit "A" hereto and, as a condition to entitlement by each such officer to
payments hereunder, such officer shall acknowledge in writing substantially
similar to the form of letter attached as Exhibit "B" hereto that the
Participant understands and agrees to be bound by the provisions of this Policy.
A list of the Participants shall be maintained by the Secretary of the Company.
14. OTHER PROVISIONS.
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This Policy shall become effective as of November 19, 1987. The
Termination Indemnity Payments provided hereby supersede and replace any and all
other termination compensation to which any Participant is or might become
entitled under any other policies or practices of the Company, except
termination compensation covered by an agreement in effect on the effective date
hereof which has separately been approved by the Compensation Committee. The
rights and obligations of the Company under this Policy shall inure to the
benefit of and shall be binding upon the Company's successors and assigns.
References in this Policy to the male gender shall include the female gender. In
any action at law or in equity to enforce any of the provisions or rights under
this Policy, the unsuccessful party to such litigation as determined by the
court in a final judgment or decree shall pay the successful party or parties
all costs, expenses and reasonable attorneys fees incurred therein by such party
or parties (including without limitation such costs, expenses and fees on any
appeals) and if such successful party shall recover judgment or any such action
or proceedings, such costs, expenses and attorneys fees shall be included as
part of such judgment. Paragraphs or other headings contained in this Policy are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Policy. To the full extent controllable by stipulation of
the parties, this Policy shall be interpreted and enforced under California law.
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Note: This Policy is intended to remain outside the provisions of Section 67
- ---- of the Tax Reform Act of 1984, as originally enacted (adding Sections
280G and 4999 and amending Sections 275(a) and 3121(v) of the Internal
Revenue Code) (the "1984 Act"). Notwithstanding any other term or
provision contained in this Policy, no Termination Indemnity Payment
shall be made to any Participant in an amount which would subject any
portion of such Termination Indemnity Payment, or any such Termination
Indemnity Payment theretofore received by the Participant, to the excise
tax provided in Section 67 of the 1984 Act.
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Exhibit "A"
PERSONAL AND CONFIDENTIAL
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(Date)
(Addressee)
Re: Avery Dennison Corporation
Executive Employment Security Policy
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Dear ______________________:
You have been designated as one of the officers of Avery Dennison Corporation
(the "Company") covered by the above referenced Executive Employment Security
Policy (the "Policy"), a copy of which is enclosed. This letter constitutes
the notice to you required by Paragraph 13 of the Policy.
Under Paragraph 13 of the Policy, your entitlement to any benefits which you may
eventually qualify to receive under the Policy is subject to the written
acknowledgment of your understanding of and agreement to the terms and
conditions of the Policy. Enclosed for this purpose are two copies of a form
letter for use. Please complete, date and sign both copies of that letter and
return one signed copy to the Secretary of the Company while retaining the other
copy for your personal records.
Very truly yours,
(Secretary)
Encl.
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Exhibit "B"
PERSONAL AND CONFIDENTIAL
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Date: ______________________________
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103
Attn: Secretary
Re: Avery Dennison Corporation
Executive Employment Security Policy
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Gentlemen:
This will acknowledge receipt of the Avery Dennison Corporation Executive
Employment Security Policy which was enclosed in your letter of
____________________________________.
I have read this Policy and understand and agree to all of its terms and
conditions.
I hereby designate ____________________________________________ as my
beneficiary(ies) to receive the balance of any Termination Indemnity Payments to
which I am entitled under the Policy but which remain unpaid at the date of my
death. I understand that I may revoke or change this designation of
beneficiary(ies) at any time by a later written notice to the Company.
Very truly yours,
(Name of Participant)
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