EXHIBIT 10.28
COMPLETE RESTATEMENT AND AMENDMENT
OF
AVERY DENNISON CORPORATION
EXECUTIVE DEFERRED RETIREMENT PLAN
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December 23, 1994
TABLE OF CONTENTS
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PAGE
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ARTICLE 1: PURPOSE 1
ARTICLE 2: DEFINITIONS AND CERTAIN PROVISIONS 1
ARTICLE 3: ADMINISTRATION OF THE PLAN 7
ARTICLE 4: PARTICIPATION 8
4.1 ELECTION TO PARTICIPATE
4.2 EMPLOYER AUGMENTATION CONTRIBUTION
4.3 DEFERRAL ACCOUNTS
4.4 VALUATION OF ACCOUNTS
4.5 STATEMENT OF ACCOUNTS
4.6 EMPLOYER SPECIAL CONTRIBUTIONS
ARTICLE 5: BENEFITS 16
5.1 RETIREMENT BENEFIT
5.2 DISABILITY
5.3 TERMINATION BENEFIT
5.4 SURVIVOR BENEFITS
5.5 EMERGENCY BENEFIT
5.6 SMALL BENEFIT
5.7 WITHHOLDING; UNEMPLOYMENT TAXES
5.8 MAXIMUM PAYOUT PERIOD
5.9 DISCOUNTED CASH OUT ELECTION
ARTICLE 6: BENEFICIARY DESIGNATION 25
ARTICLE 7: AMENDMENT OR TERMINATION OF PLAN 26
ARTICLE 8: MISCELLANEOUS 26
8.1 GENERAL CREDITOR
8.2 OBLIGATIONS TO EMPLOYER
8.3 NONASSIGNABILITY
8.4 EMPLOYMENT NOT GUARANTEED
8.5 PROTECTIVE PROVISIONS
8.6 GENDER, SINGULAR & PLURAL
8.7 CAPTIONS
8.8 VALIDITY
8.9 NOTICE
8.10 APPLICABLE LAW
COMPLETE RESTATEMENT AND AMENDMENT OF
AVERY DENNISON CORPORATION
EXECUTIVE DEFERRED RETIREMENT PLAN
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ARTICLE I
PURPOSE
The purpose of this Executive Deferred Retirement Plan (the "Plan") is
to provide a means whereby Avery Dennison Corporation, a Delaware corporation
(the "Company"), may afford financial security to a select group of key
management employees of the Company and its subsidiaries who have rendered and
continue to render valuable services to the Company or its subsidiaries which
constitute an important contribution towards the Company's continued growth and
success, by providing for additional future compensation so that these employees
may be retained and their productive efforts encouraged.
ARTICLE 2
DEFINITIONS AND CERTAIN PROVISIONS
Annual Base Salary. "Annual Base Salary" means with respect to a
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Participant for any Plan Year such Participant's fixed, basic, straight time,
and regularly recurring wages and salary, any payments for overtime hours,
vacation pay, compensation paid in lieu of vacation, and holiday pay; but
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excluding all Bonus, long-term incentive cash awards, other discretionary
bonuses, severance allowances, forms of incentive compensation, Savings Plan or
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other qualified plan contributions made by the Company, Retirement Plan or other
qualified plan benefits, retainers, insurance premiums or benefits,
reimbursements, and all other payments.
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Authorization Form. "Authorization Form" means the authorization form
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which an Eligible Employee files with the Company to participate in a Benefit
Unit under the Plan.
Beneficiary. "Beneficiary" means the person or persons designated as
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such in accordance with Article 6.
Benefit Deferral Period. "Benefit Deferral Period" means that period
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of four (4) or eight (8) Plan Years as determined pursuant to Article 4 over
which a Participant defers all or a portion of such Participant's Direct Cash
Compensation with respect to a Benefit Unit.
Benefit Unit. "Benefit Unit" means a unit enrolled in by a Participant
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pursuant to Article 4 providing the benefits described in Article 5. Each
Benefit Unit will be covered by a separate Authorization Form.
Bonus. "Bonus" means with respect to a Participant for any Plan Year
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the bonus paid to the Participant in such Plan Year under the Bonus Plan on
account of services rendered to the Company during the immediately preceding
Plan Year.
Bonus Plan. "Bonus Plan" means all annual bonus plans sponsored by the
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Company from time to time.
Committee. "Committee" means the deferred compensation plan committee
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appointed to administer the Plan pursuant to Article 3.
Cumulative Deferral Amount. "Cumulative Deferral Amount" means with
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respect to each Benefit Unit the total cumulative amount by which a
Participant's Direct Cash Compensation will be reduced over the Benefit Deferral
Period.
Declared Rate. "Declared Rate" means the following rates of interest
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for Deferral Options A and B, respectively:
2
Option A. "Declared Rate" means with respect to any Plan
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Year the one hundred twenty (120) month rolling average rate of ten-year United
States Treasury Notes. The one hundred twenty (120) month rolling average rate
will be determined by an outside source selected by the Committee once for each
Plan Year. This rate will be determined for each Plan Year as of the end of the
month of October of the preceding Plan Year and will be the average of the rates
in effect at the end of each month (as so indicated in "Yield & Yield Spreads-
U.S. Government Securities by Maturity" published by Salomon Brothers unless the
Committee elects to use another outside source) for the one hundred twenty (120)
months ending with that October.
Option B. "Declared Rate" means with respect to any quarter
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of a Plan Year a rate of return (positive or negative) that is based on the
actual performance of a specific Pacific Mutual Life Insurance Contract
investment fund. At the end of each quarter of a Plan Year, Pacific Mutual Life
Insurance Company will report to the Company the actual gross performance of
each investment fund. The rate of return determined based on such gross
performance for an investment fund, less an administrative charge of 0.2%, will
be the Declared Rate for the investment fund for the quarter. At the discretion
of the Committee, the Declared Rate may be determined on a monthly basis.
The Declared Rate choices for Option B are:
Declared Rate 1. This rate is based on the performance of the
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Money Market Fund.
Declared Rate 2. This rate is based on the performance of the
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Managed Bond Fund.
Declared Rate 3. This rate is based on the performance of the
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Equity Index Fund.
Declared Rate 4. This rate is based on the performance of the
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International Equity Fund.
3
Deferrals will not necessarily be invested by the Company in the foregoing
investment funds, even though the actual performance of the investment fund will
be used to measure the Declared Rate.
Deferral Account. "Deferral Account" means the account maintained on
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the books of account of the Company for each Benefit Unit pursuant to Section
4.3.
Deferral Option. "Deferral Option" means the two deferral options
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which are available under the Plan, Option A and Option B, as described in
Articles 4 and 5.
Direct Cash Compensation. "Direct Cash Compensation" means for any
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date within a Plan Year the sum of (a) the Participant's Annual Base Salary as
of the first day of the Plan Year plus (b) the Participant's Bonus paid in such
Plan Year, but before reduction pursuant to this Plan.
Disability. "Disability" means any inability on the part of an
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Employee, commencing before age 64 1/2, as determined by the Committee, in its
complete and sole discretion, to perform the substantial and material duties of
his or her job due to injury or sickness lasting for more than one hundred
eighty (180) consecutive days. Disability for purposes of this Plan shall be
deemed to commence as of the first day following the end of such one hundred
eighty (180) day period. If an Employee makes application for disability
benefits under the Social Security Act, as now in effect or as hereafter
amended, and qualifies for such benefits, the Employee shall be presumed to
suffer from a Disability under this Plan. The Committee may require the Employee
to submit to an examination by a physician or medical clinic selected by the
Committee. On the basis of such medical evidence and in the absence of
qualification for disability benefits under the Social Security Act, the
determination of the Committee as to whether or not a condition of Disability
exists shall be conclusive. To constitute Disability, the same must commence
after the Employee has become a Participant in the Plan.
4
Discounted Cash Out Election. "Discounted Cash Out Election" means the
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written election by a Participant or Beneficiary in a form acceptable to the
Committee to receive all or part of the Participant's Deferral Account pursuant
to the terms and conditions of Section 5.9.
Early Retirement. "Early Retirement" means with respect to any Benefit
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Unit the termination of a Participant's employment with Employer for reasons
other than death (a) between ages 55 and 65, and (b) after fifteen (15) years of
employment with Employer and (c) after completing deferrals of one hundred
percent (100%) of the Cumulative Deferral Amount for such Benefit Unit,
excluding deferrals under Options A and B which are elected as a percentage of
Bonus.
Eligible Employee. "Eligible Employee" means an Employee who is
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eligible to participate in Option A or Option B as provided in Section 4.1.
Emergency Benefit. "Emergency Benefit" means the benefit that is
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payable pursuant to Section 5.5 of the Plan.
Employee. "Employee" means any person employed by the Employer on a
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regular full-time salaried basis, including officers of the Employer.
Employer. "Employer" means the Company and any of its wholly-owned
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subsidiaries.
Employer Augmentation Contribution. "Employer Augmentation
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Contribution" means the contribution made by the Employer pursuant to Section
4.2 of the Plan.
Employer Special Contribution. "Employer Special Contribution" means
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an Employer contribution to a Deferral Account required by Section 4.6 hereof.
5
New Corporate Officer. "New Corporate Officer" means a Participant
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with an Outstanding Benefit Unit who becomes a corporate officer of the Company.
Non-Overlapping Benefit Deferral Period. "Non-Overlapping Benefit
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Deferral Period" means the portion of the Benefit Deferral Period with respect
to an Overlapping Benefit Unit remaining after the expiration of the Benefit
Deferral Period with respect to the Outstanding Benefit Unit with which the
Overlapping Benefit Unit overlaps.
Normal Retirement. "Normal Retirement" means with respect to any
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Benefit Unit the termination of a Participant's employment with Employer for
reasons other than death (a) on or after the Participant attains age 65 and (b)
after completing deferrals of one hundred percent (100%) of the Cumulative
Deferral Amount for such Benefit Unit, excluding deferrals under Options A and B
which are elected as a percentage of Bonus.
Outstanding Benefit Unit. "Outstanding Benefit Unit" means a Benefit
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Unit, or a Benefit Unit under the Company's Executive Deferred Compensation
Plan, with respect to which the Benefit Deferral Period has not_yet expired.
Overlapping Benefit Unit. "Overlapping Benefit Unit" means an
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Outstanding Benefit Unit entered into by a Participant at a time when the
Participant is a Participant in another Outstanding Benefit Unit.
Participant. "Participant" means an Eligible Employee who has filed a
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completed and executed Authorization Form with the Committee and is
participating in the Plan in accordance with the provisions of Article 4.
Plan Year. "Plan Year" means the fiscal year beginning December 1 and
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ending November 30.
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Rabbi Trust. "Rabbi Trust" means the trust described in Section 8.1.
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Retirement Age. "Retirement Age" means the age attained by a
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Participant on the birthday that precedes the date when Participant ceases to be
an Employee.
Retirement Benefit. "Retirement Benefit" means benefits payable to a
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Participant for a Benefit Unit when Participant has satisfied all of the
requirements for Normal or Early Retirement (as defined in Article 2) with
respect to that Benefit Unit.
Retirement Plan. "Retirement Plan" means the Retirement Plan for the
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Employees of Avery Dennison Corporation, as amended from time to time.
Savings Plan. "Savings Plan" means the Avery Dennison Corporation
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Employee Savings Plan, as amended from time to time.
Survivor Benefit. "Survivor Benefit" means those Plan benefits that
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become payable upon the death of a Participant pursuant to the provisions of
Section 5.4.
Termination Benefit. "Termination Benefit" means the lump sum amount
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payable to a Participant who ceases to be an Employee pursuant to the provisions
of Section 5.3.
ARTICLE 3
ADMINISTRATION OF THE PLAN
A deferred compensation plan committee consisting of three or more
members shall be appointed by the Company's Chairman and Chief Executive Officer
to administer the Plan and establish, adopt, or revise such rules and
regulations as it may deem necessary or advisable for the administration of the
Plan and to interpret the provisions of the Plan, with any
7
such interpretations to be conclusive. All decisions of the committee shall be
by vote of at least a majority of its members and shall be final and binding.
Members of the Committee shall be eligible to participate in the Plan while
serving as members of the Committee, but a member of the Committee shall not
vote or act upon any matter which relates solely to such member's interest in
the Plan as a Participant.
ARTICLE 4
PARTICIPATION
4.1 Election to Participate. Any Eligible Employee may enroll in a
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Benefit Unit under the Plan effective as of the first day of a Plan Year by
filing a completed and fully executed Authorization Form with the Committee
during enrollment periods established by the Committee. Pursuant to said
Authorization Form, the Eligible Employee shall irrevocably elect a Cumulative
Deferral Amount by which the aggregate Direct Cash Compensation of such
Participant will be reduced over the Benefit Deferral Period.
(a) Option A. In order to participate in Option A, an Employee
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must be at Salary Grade 12 or above, or selected by the Committee. Under
Option A, an Eligible Employee must elect (i) a specific dollar amount of
Annual Base Salary and/or (ii) a specific dollar amount and/or percentage
of Bonus to be deferred each Plan Year for four years or eight years. If an
Eligible Employee specifies a dollar amount of Bonus to be deferred and the
dollar amount of Bonus is not equal to his actual Bonus payment in any Plan
Year, the shortfall will be deducted from his Annual Base Salary over the
remainder of the Plan Year in which such Bonus shortfall occurs. The first
Bonus payment that an Eligible Employee may defer will be the Bonus he will
earn in fiscal year 1992 which is payable in fiscal year 1993. The minimum
annual deferral under Option A is $2,000. Deferrals made under Option A may
not be switched to Option B.
8
(b) Option B. In order to participate in Option B, an Employee
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must be salary grade 12 or above, or be selected by the Committee. Under
Option B, an Eligible Employee may elect to defer (i) a specific dollar
amount from his Annual Base Salary and/or (ii) a specific dollar amount
and/or percentage of Bonus for either four years or eight years. If an
Eligible Employee specifies a dollar amount of Bonus to be deferred, and
the dollar amount of Bonus is not equal to his actual Bonus payment in any
Plan Year, the shortfall will be deducted from his Annual Base Salary over
the remainder of the Plan Year in which such Bonus shortfall occurs. The
first Bonus payment that an Eligible Employee may defer will be the Bonus
he will earn in fiscal year 1992 which is payable in fiscal year 1993. The
minimum annual deferral under Option B is $2,000. Deferrals made under
Option B may not be switched to Option A.
(c) Maximum Deferral. The maximum amount of Direct Cash
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Compensation that may be deferred under Option A plus Option B shall be (i)
100% of current Annual Base Salary for an Eligible Employee who defers for
four years; and (ii) 150% of current Annual Base Salary for an Eligible
Employee who defers for eight years.
(d) Accelerated Reduction. Prior to the beginning of any Plan
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Year in any Benefit Deferral Period as to which there are two or more Plan
Years remaining, a Participant may elect in a written notice filed with the
Committee to increase the amount of the reduction of Direct Cash
Compensation otherwise provided for any of the Plan Years remaining in such
Benefit Deferral Period; provided, however, that any such increase in the
reduction of Direct Cash Compensation for any remaining Plan Years in the
Benefit Deferral Period shall not increase the Cumulative Deferral Amount
for the Benefit Deferral Period, but shall act to shorten the length of the
Benefit Deferral Period, unless the Participant elects in such written
notice to apply the increased reduction in Direct Cash Compensation for any
Plan Year as a credit against the reductions in Direct Cash Compensation
that otherwise would have resulted in subsequent Plan Years in the Benefit
Deferral Period. In the event a
9
Participant elects to increase the previously elected reduction of Direct
Cash Compensation pursuant to this Section 4.1(d), the Participant, in his
sole discretion, shall determine the allocation of any such increase as
between said Participant's Annual Base Salary and Bonus paid during the
year of such increase.
(e) Maximum Reduction in Direct Cash Compensation. A Participant
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may not elect a Cumulative Deferral Amount or an increase in reduction of
Direct Cash Compensation pursuant to Section 4.1(d), or any combination of
the two, that would cause the aggregate total reduction in Direct Cash
Compensation in any Plan Year with respect to all Benefit Units to exceed
one hundred percent (100%) of the excess of (i) the Direct Cash
Compensation otherwise payable during such Plan Year, over (ii) the sum of
amounts required by federal, state or local law to be withheld by the
Employer from such Direct Cash Compensation. In the event that a
Participant elects a Cumulative Deferral Amount or increase in reduction of
Direct Cash Compensation in an amount in excess of the amount allowable
pursuant to the previous sentence, the elected amount shall automatically
be reduced to comply with such limitation.
(f) Enrollment in Benefit Unit. For purposes of the Plan, a
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Benefit Unit shall be deemed to be a Benefit Unit in which a Participant is
enrolled only as of and after the first day of the Benefit Deferral Period
with respect to such Benefit Unit.
4.2 Employer Augmentation Contribution. For each Plan Year in a
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Benefit Deferral Period, the Employer shall contribute to the Deferral Accounts
of a Participant an aggregate amount equal to four and one-quarter percent
(4.25%) of the Participant's annual deferrals under this Plan for the Plan Year
(the "Employer Augmentation Contribution"). The Employer Augmentation
Contribution shall be credited to the Deferral Accounts of a Participant, at a
rate equal to four and one-quarter percent (4.25%) of the Participant's
deferrals, at the same time as the Participant's deferrals are credited to his
Deferral Accounts. The Employer Augmentation Contribution is intended to
compensate for the loss
10
of any future benefits from the Retirement Plan and the Savings Plan which
result from the reduction in the Participant's Direct Cash Compensation pursuant
to this Plan. No Employer Augmentation Contribution will be made to any
Participant's Deferral Account for any Plan Year in which the Participant is
receiving an Employer Special Contribution.
4.3 Deferral Accounts. The Committee shall establish and maintain a
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separate Deferral Account for each of a Participant's Benefit Units. The amount
by which a Participant's Direct Cash Compensation is reduced pursuant to Section
4.1 with respect to each Benefit Unit shall be credited by the Employer to the
Participant's Deferral Account for such Benefit Unit no later than the first day
of the month following the month in which such Direct Cash Compensation would
otherwise have been paid. The amount of Employer Augmentation Contribution
provided for by Section 4.2 with respect to each Benefit Unit shall be credited
to the Deferral Account for such Benefit Unit in accordance with Section 4.2.
The Deferral Account for a Benefit Unit shall be debited by the amount of any
payments made by the Employer to the Participant or the Beneficiary with respect
to such Benefit Unit pursuant to this Plan.
(a) Interest on Deferral Accounts. Various types of returns will
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be credited on Deferral Accounts prior to commencement of payment of
benefits depending on the Deferral Option which a Participant chooses, as
described below.
(i) Option A. Under Option A, the Declared Rate for Option A
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established by Article 2 shall be credited monthly to the Deferral
Account at the rate of one-twelfth (1/12) of the Declared Rate, and
all such interest shall be compounded to the Deferral Account
annually.
(ii) Option B. Under Option B, a Participant may elect to
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credit the deferrals to any combination of Declared Rates in 25%
increments, as long as the total does not exceed 100% of the
deferrals. The Participant's Deferral Accounts will be credited
11
with a rate of return (positive or negative) based on the Declared
Rate(s) which he elects. The rate of return (positive or negative)
will be credited monthly to Deferral Accounts at one-third of the
quarterly Declared Rate(s). Notwithstanding the foregoing provision or
any other provision of this Plan, the Committee, in its sole
discretion, may credit a Participant's Deferral Accounts based on
monthly Declared Rate (s).
A Participant may change his Declared Rate(s) election under Option B
twice a year effective as of the following June 1 and December 1 of each year by
filing a written notice with the Committee at least 30 days in advance. Under
Option B, Deferral Accounts are subject to greater investment risk because the
actual performance of the investment fund that is chosen to measure the Declared
Rate may be either positive or negative and either more or less than the Option
A Declared Rate. Deferral Account balances will not necessarily be invested in
these investment funds by the Company, even though the actual performance of the
investment fund that is chosen to measure the Declared Rate will determine the
rate of return (positive or negative) on the Participant's Deferral Account.
4.4 Valuation of Accounts. The value of a Deferral Account as of any
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date shall equal the amounts theretofore credited to such account, plus the
interest deemed to be earned on such account in accordance with Section 4.3
through the day preceding such date, less the amounts theretofore debited to
such account.
4.5 Statement of Accounts. The Committee shall submit to each
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Participant, within one hundred twenty (120) days after the close of each Plan
Year, a statement in such form as the Committee deems desirable setting forth
the balance standing to the credit of each Participant in each of his Deferral
Accounts. Each statement of account shall show the Participant's deferrals, the
Employer Augmentation Contributions, and the interest credited to the
Participant's Deferral Account.
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4.6 Employer Special Contributions. Beginning with the 1995 Plan
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Year, a Participant who meets the eligibility requirements set forth in Section
4.6(a) below shall be entitled to annual Employer contributions for each Plan
Year in the Benefit Deferral Period to the Participant's Deferral Account with
respect to an Outstanding Benefit Unit in an amount to be determined
in accordance with Section 4.6(b) below ("Employer Special Contributions").
(a) Eligibility Requirements. No Employer Special Contribution
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shall be made to a Participant's Deferral Account with respect to an
Outstanding Benefit Unit for a particular Plan Year unless:
(i) the Participant was a corporate officer of the Employer
on the date of the Authorization Form with respect to the Outstanding
Benefit Unit, except as provided in Section 4.6(e) below; and
(ii) the Cumulative Deferral Amount for the Outstanding
Benefit Unit plus the product of (A) the maximum pre-tax contribution
allowable for the Participant under the Savings Plan for the first
Plan Year in the Benefit Deferral Period for such Outstanding Benefit
Unit (or, for Participants who are not eligible to participate in the
Savings Plan during the first Plan Year of the Benefit Deferral
Period, the maximum pre-tax contribution that would be allowable for
such Participant under the Savings Plan if the Participant were
eligible) and (B) the number of Plan Years in such Benefit Deferral
Period, is at least equal to the product of (X) six percent (6%) times
(Y) the Participant's Annual Base Salary on the date of the
Authorization Form with respect to the Outstanding
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Benefit Unit times (Z) the number of Plan Years in the Benefit
Deferral Period (excluding the 1993 Plan Year); and
(iii) the Participant is employed by the Employer on the
last day of the Plan Year in question.
(b) Amount of Employer Special Contributions. The amount of an
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Employer Special Contribution for a particular Plan Year shall equal
three percent (3%) of (i) the Participant's combined Annual Base Salary and
Bonus which would have been paid during the Plan Year before reduction for
contributions to this Plan and the Savings Plan minus (ii) an amount which
is equal to the limit on annual compensation (as adjusted from time to
time) which may be taken into account under the Savings Plan for such Plan
Year pursuant to Section 401(a)(17) of the Internal Revenue Code of 1986,
as amended ("Code").
(c) Timing of Employer Special Contributions. The Employer
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Special Contributions shall be credited to the Deferral Account for the
Outstanding Benefit Unit for each of the Plan Years in the Benefit Deferral
Period as of the last day of the Plan Year.
(d) Special Provisions for Overlapping Benefit Units. The
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foregoing provisions of this Section 4.6 will apply to all Outstanding
Benefit Units, including any Overlapping Benefit Unit; provided, however,
that (i) the Employer Special Contributions relating to the Overlapping
Benefit Unit shall not begin until the first Plan Year of the Non-
Overlapping Benefit Deferral Period, and (ii) in order to be eligible for
Employer Special Contributions during the Non-Overlapping Benefit Period,
the Participant will be deemed to have met the eligibility requirement set
forth in Section 4.6(a)(ii) if the Cumulative Deferral Amount for the
Overlapping Benefit Unit plus the product of (A) the maximum pre-tax
contribution allowable for the Participant under the Savings Plan for the
first Plan Year in the Benefit Deferral Period for such Overlapping
Benefit Unit (or, for Participants who are not eligible to participate in
the Savings Plan during the first Plan Year of the Benefit Deferral
Period, the maximum pre-tax contribution that would be allowable
14
for such Participant under the Savings Plan if the Participant were
eligible) and (B) the number of Plan Years in the Benefit Deferral Period,
is at least equal to the product of (X) six percent (6%) times (Y) the
Participant's Annual Base Salary on the date of the Authorization Form with
respect to the Outstanding Benefit Unit times (Z) the number of Plan Years
in the Non-Overlapping Benefit Deferral Period.
(e) Special Provisions for New Corporate Officers.
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A New Corporate Officer who otherwise meets the eligibility
requirements set forth in Section 4.6(a) shall be entitled to the Employer
Special Contributions provided for in this Section 4.6 as of the first day
of the Plan Year immediately following the Plan Year in which the
Participant becomes a New Corporate Officer; provided, however, that_for
purposes of determining whether the requirement of Section 4.6(a)(ii) has
been met, (i) the Company will add to the Cumulative Deferral Amount for
the Outstanding Benefit Unit any additional Cumulative Deferral Amount that
the New Corporate Officer may elect pursuant to any new Benefit Unit which
shall be offered to the New Corporate Officer at the time he or she becomes
a New Corporate Officer, and (ii) the Annual Base Salary to be used for the
New Corporate Officer shall be such New Corporate Officer's Annual Base
Salary on the date that he or she becomes a New Corporate Officer. The
Company shall be required to offer a new Benefit Unit to the New Corporate
Officer if his or her Outstanding Benefit Units at the time he or she
becomes a New Corporate Officer would not otherwise qualify such New
Corporate Officer for Employer Special Contributions under this Section
4.6(a).
(f) Termination of Employer Special Contributions. The
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Employer's obligation to make Employer Special Contributions shall cease
upon the Participant's termination of employment with the Company for any
reason or upon the Participant's termination pursuant to Section 5.3(b) of
the Outstanding Benefit Unit.
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(g) Plan Years 1993 and 1994. Nothing in this Section 4.6 shall
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be construed to alter Savings Plan Alternative Contributions and interest
thereon previously credited to Participants' Deferral Accounts in the 1993
and 1994 Plan Years.
ARTICLE 5
BENEFITS
5.1 Retirement Benefit. A Participant is eligible for a Retirement
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Benefit under this Plan with respect to a Benefit Unit when he has satisfied all
of the requirements for Normal Retirement or Early Retirement (as defined in
Article 2) with respect to the Benefit Unit. The Retirement Benefit for a
Benefit Unit will be based on the total value of the Deferral Account for the
Benefit Unit. In addition to the interest credited under Section 4.3(a)(i),
Deferral Accounts under Option A will be credited with additional interest equal
to 25% of the Declared Rate for each Plan Year prior to commencement of payment
of the Retirement Benefit.
The Retirement Benefit will be paid beginning on the date and in the
manner which the Participant elects when he enrolls in a Benefit Unit. This
election may not be changed at any time by the Participant. A Participant may
elect to receive his Retirement Benefit at retirement or on a specified date
after retirement in either a lump sum or installments over a specified number of
years or a combination of a lump sum payment and installment payments; provided,
however, that the maximum payout period for Retirement Benefits shall be subject
to Section 5.8. In the event a payout election period exceeds the maximum period
permitted by Section 5.8, the elected payout period shall be reduced to the
maximum period permitted by Section 5.8. All installment payments will be
calculated on an annual basis but_paid in such intervals as may be determined by
the Committee, provided that such intervals shall not be less frequent than
quarterly.
Under Option A, if a Participant elects to receive his Retirement
Benefit in installment payments, interest will continue to be credited
16
on the unpaid Deferral Account balance at a rate equal to 125% of the average of
the Declared Rates for the five Plan Years prior to payment of the initial
installment of the Retirement Benefit.
Under Option B, if a Participant elects to receive his Retirement
Benefit in installment payments, the payments will be made in such intervals as
may be determined by the Committee, provided that such intervals shall not be
less frequent than quarterly, based on the Deferral Account balance at the
beginning of the payment period. The payments will be redetermined annually by
dividing the Participant's current Deferral Account balance at the beginning of
the year by the number of remaining years in the payment period based on the
Participant's retirement payment election. The rate of return (positive or
negative) during any payment year will be credited during the year on the unpaid
Deferral Account balance at the applicable Declared Rate(s). A Participant may
continue to change his Declared Rate(s) election twice a year, effective as of
the following June 1 or December 1 of each year by filing a written notice with
the Company at least 30 days in advance, as long as he has a remaining Deferral
Account balance.
5.2 Disability. If a Participant suffers a Disability, Participant
----------
deferrals and Employer Augmentation Contributions that otherwise would have been
credited to the Participant's Deferral Accounts will cease during such
Disability. The Participant's Deferral Accounts will continue to earn interest
at the Declared Rate(s) which he has chosen. The Participant's Deferral Account
balances will be distributed as a Retirement Benefit, Termination Benefit or
Survivor Benefit, whichever is applicable, beginning on the date and in the form
which the Participant elected in his Authorization Form. In the sole discretion
of the Committee, the Employer may commence payments on an earlier date. For the
sole purpose of determining eligibility to receive Retirement Benefits,
deferrals which a Participant failed to make during a period of Disability will
be disregarded in determining whether the Participant has completed deferrals of
the full Cumulative Deferral Amount for a Benefit Unit. If a Participant
recovers from a Disability and returns to employment with the Employer during
the Benefit Deferral Period for a Benefit Unit, the Participant shall resume
making deferrals
17
for the remaining years of the Benefit Deferral Period, but the Benefit Deferral
Period shall not be extended on account of the Disability.
5.3 Termination Benefit.
-------------------
(a) Certain Terminations of Employment. With respect to any
----------------------------------
Benefit Unit, if a Participant (i) ceases to be an Employee for any reason
other than death, Disability or Normal or Early Retirement, or (ii) fails
to return to the status of an Employee within sixty (60) days following
recovery from a Disability prior to Normal or Early Retirement, the
Employer shall pay to the Participant in one lump sum an amount (the
"Termination Benefit" ) equal to the value of the Deferral Account for such
Benefit Unit. In computing the Termination Benefit, the value of the
Deferral Account will be based on interest at the applicable Declared Rate,
not including the value of the additional interest referred to in Section
5.1. The Participant shall be entitled to no further benefits under this
Plan for such Benefit Units.
(b) Termination of a Benefit Unit. With the written consent of
-----------------------------
the Committee, a Participant may terminate enrollment in a Benefit Unit by
filing with the Committee a written request to so terminate the Benefit
Unit. Upon termination of enrollment in a Benefit Unit, no further
reductions shall be made in the Participant's Direct Cash Compensation
pursuant to the Authorization Form with respect to such Benefit Unit, and
the Participant shall immediately cease to be eligible for any benefits
with respect to such Benefit Unit, other than the Termination Benefit. No
other benefit shall be payable to either the Participant or any Beneficiary
of such Participant with respect to the terminated Benefit Unit. In its
sole discretion, the Committee may pay the Termination Benefit with respect
to a terminated Benefit Unit on a date earlier than a Participant's
termination of employment with the Employer, with such Termination Benefit
to be calculated as if the Participant had terminated employment with the
Employer on the date of such payment.
18
5.4 Survivor Benefits.
-----------------
(a) Pre-Retirement. If a Participant dies and has not yet
--------------
commenced to receive Retirement Benefit payments with respect to a Benefit
Unit, a Survivor Benefit will be paid to his Beneficiary in annual
installments over five years except as set forth below. The aggregate
Survivor Benefit will be equal to the Deferral Account balance for the
Benefit Unit. The annual Survivor Benefit payments shall be redetermined
each year based upon the value of the Deferral Account at that time, plus
the expected interest based on the interest rate that is established by the
Company each year for the remaining period of installment payments.
Interest will be credited on the unpaid balance in the Deferral Account
under Option A and Option B as follows:
(i) Option A. A Deferral Account under Option A will be
--------
credited with interest for each Plan Year before the Participant's
death equal to 125% of the Declared Rate. If the Deferral Account
credited with interest pursuant to the previous sentence is $50,000 or
less for a Beneficiary, the Company, in its sole discretion, may elect
to pay said amount in a lump sum. If the aforementioned lump sum
payment is not made, or if the Deferral Account for a Beneficiary
exceeds $50,000, said Beneficiaries shall receive their Survivor
Benefits in five (5) annual installments with interest credited after
the Participant's death on the unpaid balance at a rate to be
determined each year by the Company, but in no case less than 7% per
annum. All such interest shall be credited and compounded as is
required for Option A deferrals.
(ii) Option B. A Deferral Account under Option B will be
--------
credited with interest equal to the Declared Rate for each Plan Year
before the Participant's death. If the Deferral Account credited with
interest pursuant to the previous sentence is $50,000 or less for a
Beneficiary, the Company, in its sole discretion, may elect to pay
said amount in a lump sum. If the aforementioned
19
lump sum payment is not made, or if the Deferral Account for a
Beneficiary exceeds $50,000, said Beneficiaries shall receive their
Survivor Benefits in five (5) annual installments with interest
credited after the Participant's death on the unpaid balance at a rate
to be determined each year by the Company, but in no case less than 7%
per annum. All such interest shall be credited and compounded as is
required for Option A deferrals.
(b) Post-Retirement. If a Participant dies after he has commenced
---------------
to receive a Retirement Benefit with respect to a Benefit Unit, his
Beneficiary will be entitled to receive a Survivor Benefit with respect to
the Benefit Unit under Option A and Option B as follows:
(i) Option A. The Participant's Beneficiary will be entitled
--------
to receive the remaining installments of the Retirement Benefit which
would have been paid to the Participant with respect to the Benefit
Unit if the Participant had survived based upon interest that would
have been credited on unpaid amounts if the Participant had survived.
(ii) Option B. The Participant's Beneficiary will be
--------
entitled to receive a Survivor Benefit equal to the Deferral Account
balance for the Benefit Unit, which will be paid in annual
installments over five years. After the Participant's death, interest
will be credited on the unpaid balance in the Deferral Account at a
rate to be determined each year by the Company, but in no event less
than 7% per annum.
(c) Large Survivor Benefit. If the aggregate Deferral Account
----------------------
balances which are payable to a Beneficiary as a Survivor Benefit for all
of the Participant's Benefit Units exceed $500,000, the Survivor Benefit
for each Benefit Unit shall be payable to the Beneficiary over the number
of years (if more than five years) which the Participant elected for
payment of his Retirement Benefit.
20
5.5 Emergency Benefit. In the event that the Committee, upon written
-----------------
petition of the Participant or Beneficiary, determines, in its sole discretion,
that the Participant or Beneficiary has suffered an unforeseeable financial
emergency, the Employer shall pay to the Participant or Beneficiary, as soon as
practicable following such determination, an amount necessary to meet the
emergency not in excess of the Termination Benefit to which the Participant
would have been entitled pursuant to Section 5.3 if said Participant had a
termination of service on the date of such determination (the "Emergency
Benefit"). For purposes of this Plan, an unforeseeable financial emergency is an
unexpected need for cash arising from an illness, casualty loss, sudden
financial reversal, or other such unforeseeable occurrence. An unforeseeable
financial emergency for purposes of this Plan shall exist for any Participant or
Beneficiary who is deemed to be in constructive receipt of income on account of
deferred benefits payable under the terms of the Plan, and in such event all
deferred benefits giving rise to said constructive receipt of income shall be
paid to the Participant or Beneficiary in question. Notwithstanding the
foregoing, the final determination by the Internal Revenue Service ("IRS") or
court of competent jurisdiction, all time for appeal having lapsed, that the
Employer is not the owner of the assets of the Rabbi Trust, with the result that
the income of the Rabbi Trust is not treated as income of the Company pursuant
to Sections 671 through 679 of the Code, or the final determination by (i) the
IRS, (ii) a court of competent jurisdiction, all time for appeal having lapsed,
or (iii) counsel to the Company that a federal tax is payable by the Participant
or Beneficiary with respect to assets of the Rabbi Trust or the Participant's or
Beneficiary's Deferral Accounts prior to the distribution of those assets or
Deferral Accounts to the Participant or Beneficiary shall in any event
constitute an unforeseeable financial emergency entitling such Participant or
Beneficiary to an Emergency Benefit provided for in this Section. Cash needs
arising from foreseeable events such as the purchase of a home or education
expenses for children shall not be considered to be the result of an
unforeseeable financial emergency. The amount of benefits otherwise payable
under the Plan shall thereafter be adjusted to reflect the reduction of a
Deferral Account due to the early payment of the Emergency Benefit.
21
5.6 Small Benefit. Notwithstanding anything herein to the contrary,
-------------
in the event the total amount owed to a Participant or a Beneficiary after the
Participant ceases to be an Employee is $50,000 or less, the Company, in its
sole discretion, may elect to distribute any such amount in a single lump sum
payment.
5.7 Withholding; Unemployment Taxes. To the extent required by the
-------------------------------
law in effect at the time payments are made, the Employer shall withhold from
payments made hereunder the minimum taxes required to be withheld by the federal
or any state or local government.
5.8 Maximum Payout Period. Notwithstanding any Eligible Employee's
---------------------
election to the contrary, the maximum number of years over which benefits may be
paid from the Plan shall be limited as follows: (i) Retirement Age 55 receives
lump sum; (ii) Retirement Ages 56 and 57 may receive benefits in a lump sum or
for five years; (iii) Retirement Ages 58 and 59 may receive benefits in a lump
sum or for five or ten years; (iv) Retirement Ages 60 and 61 may receive
benefits in a lump sum or for five, ten, or fifteen years; and (v) Retirement
Ages 62 and above may receive benefits in a lump sum or for five, ten, fifteen
or twenty years.
5.9 Discounted Cash Out Election
----------------------------
(a) During the course of any Plan Year prior to the date on which
a Participant ceases employment with the Company, the Participant may make
one election to receive all or part of the Participant's Deferral Account(s)
in a single lump-sum payment that shall be paid within fifteen (15) days
after the end of the month in which the Participant files a written election
to receive a discounted lump sum payment pursuant to this Section 5.9 (a).
Interest on the amount elected to be withdrawn from such Deferral Accounts
shall cease to accrue at this end of the month in which the Discounted Cash
Out Election is made. The requirements for a valid Discounted Cash Out
Election and the manner of determining the amount
22
to be paid to a Participant who makes a pre-retirement Discounted Cash Out
Election are as follows:
(i) The Discounted Cash Out Election must be for an amount
of $200,000 or greater, unless a Participant has a Deferral Account
for a Benefit Unit worth less than $200,000 at the time of the
Discounted Cash Out Election in which case the amount of the
Discounted Cash Out Election may be equal to 100% of the Deferral
Account for the Benefit Unit in question.
(ii) The amount available for the Discounted Cash Out
Election shall be determined by establishing the value of the
Participant's Deferral Account for the Benefit Unit (including the
rate of interest to be credited pursuant to Section 4.3) as if the
Participant ceased employment with the Company on the last day of the
month during which the Participant executes a written Discounted Cash
Out Election.
(iii) If a Participant elects to receive his entire
Deferral Account for a Benefit Unit via a Discounted Cash Out
Election, the Participant's Deferral Account for the Benefit Unit
shall be deemed fully distributed to the Participant. The amount,
however, actually distributed to the Participant shall be the amount
of the Deferral Account for the Benefit Unit less a penalty equal to
six percent (6%) of the amount otherwise distributable.
(iv) If a Participant elects to receive $200,000, or some
higher dollar amount of his Deferral Account for a Benefit Unit, the
amount elected shall be deemed distributed to the Participant. The
amount, however, actually distributed to the Participant shall be the
elected amount less a penalty equal to six percent (6%) of the elected
amount.
23
(b) During the course of any Plan Year following a Participant's
Early or Normal Retirement date, the Participant or the Beneficiary may
make up to two elections to receive all or part of the Participant's
Deferral Account(s) in single lump sum payments that shall be paid within
fifteen (15) days after the end of the month in which the Participant or
Beneficiary files a written election to receive a discounted lump sum
payment pursuant to this Section 5.9(b). Interest on the amount elected to
be withdrawn from such Deferral Account(s) shall cease to accrue at the end
of the month in which the Discounted Cash Out Election is made. The
requirements for a valid Discounted Cash Out Election and the manner of
determining the amount to be paid to a Participant or Beneficiary who makes
a post-retirement Discounted Cash Out Election are as follows:
(i) The Discounted Cash Out Election must be for an amount
of $200,000 or greater, unless a Participant or Beneficiary has a
Deferral Account for a Benefit Unit worth less than $200,000 at the
time of the Discounted Cash Out Election in which case the amount of
the Discounted Cash Out Election may be equal to 100% of the Deferral
Account for the Benefit Unit in question.
(ii) If a Participant or Beneficiary elects to receive his
entire Deferral Account for a Benefit Unit via a Discounted Cash Out
Election, the Participant's or Beneficiary's Deferral Account for the
Benefit Unit shall be deemed fully distributed to the Participant or
Beneficiary. The amount, however, actually distributed to the electing
Participant or Beneficiary shall be the amount of the Deferral Account
for the_Benefit Unit less a penalty equal to six percent (6%) of the
amount otherwise distributable.
(iii) If a Participant or Beneficiary elects to receive
$200,000 or some higher dollar amount of his Deferral
24
Account, the amount elected shall be deemed fully distributed to the
Participant or Beneficiary. The amount, however, actually distributed
to the Participant or Beneficiary shall be the elected amount less a
penalty equal to six percent (6%) of the elected amount.
(iv) If a Participant or Beneficiary makes a Discounted Cash
Out Election(s) or receives payment(s) of an Emergency Benefit and a
portion of a Deferral Account for a Benefit Unit remains unpaid,
future monthly benefit payments shall be reduced to reflect the
withdrawal of part of the Deferral Account and there shall be no
reduction in the previously scheduled number of monthly benefit
payments.
ARTICLE 6
BENEFICIARY DESIGNATION
Each Participant shall have the right, at any time, to designate any
person or persons as Beneficiary or Beneficiaries to whom payment under this
Plan shall be made in the event of Participant's death prior to complete
distribution to Participant of the benefits due under the Plan. Each Beneficiary
designation shall become effective only when filed in writing with the Committee
during the Participant's lifetime on a form prescribed by the Committee.
The filing of a new Beneficiary designation form will cancel all
Beneficiary designations previously filed. Any finalized divorce or marriage
(other than a common law marriage) of a Participant subsequent to the date of
filing of a Beneficiary designation form shall revoke such designation unless in
the case of divorce the previous spouse or a trust for said previous spouse was
not designated as Beneficiary and unless in the case of marriage the
Participant's new spouse or a trust for said new spouse had previously been
designated as Beneficiary.
25
If a Participant fails to designate a Beneficiary as provided above,
or if his Beneficiary designation is revoked by marriage, divorce, or otherwise
without execution of a new designation, or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of the
Participant's benefits, then the Committee shall direct the distribution of such
benefits to the Participant's estate.
ARTICLE 7
AMENDMENT OR TERMINATION OF PLAN
The Chairman and Chief Executive Officer of the Company may amend the
Plan; provided, however, that (i) no such amendment shall be effective to
decrease the benefits accrued by any Participant or Beneficiary of a deceased
Participant (including, but not limited to, the rate of interest credited to the
Deferral Accounts) prior to the Plan Year commencing after the date of such
amendment; (ii) no such amendment shall decrease the Declared Rates established
by Section 4.3(a); (iii) Section 5.1 may not be amended; (iv) the definition of
Declared Rate may not be amended; and (v) the other substantive provisions of
the Plan related to the calculation of benefits or the manner or timing of
payments to be made under the Plan shall not be amended so as to prejudice the
rights of any Participant or Beneficiary of a deceased Participant.
Notwithstanding any terms herein to the contrary, the Company may not
terminate the Plan. The Company shall not have any obligation to, but may, in
its discretion, allow additional deferrals into this Plan.
ARTICLE 8
MISCELLANEOUS
8.1 Unsecured General Creditor. The Company intends to establish
--------------------------
and fund the Avery Dennison Corporation Executive Compensation Trust ("Rabbi
Trust"). The assets of the Rabbi Trust shall be subject to the claims of the
Company's creditors. To the extent any benefits provided under the Plan are
actually paid from the Rabbi Trust, the Employer shall have no further
26
obligation with respect thereto, but to the extent not so paid, such benefits
shall remain the obligation of, and shall be paid by, the Employer. Participants
and their Beneficiaries, heirs, successors, and assigns shall have no legal or
equitable rights, interest, or claims in an specific property or assets of
Employer, nor shall they be beneficiaries of, or have any rights, claims, or
interests in any life insurance policies, annuity contracts, or the proceeds
therefrom owned or which may be acquired by Employer ("Policies"). Apart from
the Rabbi Trust, such Policies or other assets of Employer shall not be held
under any trust for the benefit of Participants, their Beneficiaries, heirs,
successors, or assigns, or held in any way as collateral security for the
fulfilling of the obligations of Employer under this
-
Plan. Any and all of the Employer's assets and Policies shall be, and remain,
the general, unpledged, unrestricted assets of Employer. Employer's obligation
under the Plan shall be merely that of an unfunded and unsecured promise of
Employer to pay money in the future.
8.2 Obligations To Employer. If a Participant becomes entitled to a
-----------------------
distribution of benefits under the Plan, and if at such time the Participant has
outstanding any debt, obligation, or other liability representing an amount
owing to the Employer, then the Employer may offset such amount owed to it
against the amount of benefits otherwise distributable. Such determination shall
be made by the Committee.
8.3 Nonassignability. Neither a Participant nor any other person
----------------
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, hypothecate or convey in advance of actual
receipt the amounts, if any, payable, hereunder, or any part thereof, or
interest therein which are, and all rights to which are, expressly declared to
be unassignable and non-transferable. No part of the amounts payable shall,
prior to actual payment, be subject to seizure or sequestration for the payment
of any debts, judgments, alimony or separate maintenance owed by a Participant
or any other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
27
8.4 Employment Not Guaranteed. Nothing contained in this Plan nor
-------------------------
any action taken hereunder shall be construed as a contract of employment or as
giving any Employee any right to be retained in the employ of the Company.
8.5 Protective Provisions. Each Participant shall cooperate with the
---------------------
Employer by furnishing any and all information requested by the Employer in
order to facilitate the payment of benefits hereunder, taking such physical
examinations as the Employer may deem necessary and taking such other relevant
action as may be requested by the Employer. If a Participant refuses so to
cooperate, the Employer shall have no further obligation to the Participant
under the Plan, other than payment to such Participant of the cumulative
reductions in Direct Cash compensation theretofore made pursuant to this Plan.
If a Participant commits suicide during the two (2) year period beginning on the
later of (a) the first day on which he participates in the Plan or (b) the first
day of the Participant's Benefit Deferral Period for any new Benefit Unit under
the Plan, or if the Participant makes any material misstatement of information
or nondisclosure of medical history, then no benefits with respect to any
affected Benefit Unit will be payable hereunder to such Participant of the
cumulative reductions in Direct Cash Compensation theretofore made pursuant to
this Plan, provided, that in the Employer's sole discretion, benefits may be
payable in an amount reduced to compensate the Employer for any loss, cost,
damage or expense suffered or incurred by the Employer as a result in any way of
any such action, misstatement or nondisclosure.
8.6 Gender, Singular & Plural. All pronouns and any variations
-------------------------
thereof shall be deemed to refer to the masculine, feminine, or neuter, as the
identity of the person or persons may require. As the context may require, the
singular may be read as the plural and the plural as the singular.
8.7 Captions. The captions of the articles, sections, and
--------
paragraphs of this Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
28
8.8 Validity. In the event any provision of this Plan is held
--------
invalid, void, or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Plan.
8.9 Notice. Any notice or filing required or permitted to be given
------
to the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
the Employer, directed to the attention of the Vice President, General Counsel
and Secretary of the Employer. Such notice shall be deemed given as of the date
of delivery or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
8.10 Applicable Law. This Plan shall be governed and construed in
--------------
accordance with the laws of the State of California
29