<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
AVERY DENNISON CORPORATION
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
AVERY DENNISON CORPORATION
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
- ----------------- -----------------------------------------------------------
[LOGO OF AVERY Avery Dennison Corporation
DENNISON] 150 North Orange Grove Boulevard
Pasadena, California 91103
- ----------------- -----------------------------------------------------------
NOTICE OF To the Stockholders:
ANNUAL MEETING The Annual Meeting of Stockholders of Avery Dennison
OF STOCKHOLDERS Corporation will be held at 150 North Orange Grove
To be held Boulevard, Pasadena, California on Thursday, April 25,
April 25, 1996 1996 at 1:30 P.M. for the following purposes:
1. To elect three directors to hold office for a term of
three years and until their successors are elected and
have qualified;
2. To consider and vote upon a proposal to approve an
amendment to the Company's 1990 Stock Option and
Incentive Plan for Key Employees; and
3. To transact such other business as may properly come
before the meeting and any adjournments thereof.
In accordance with the Bylaws, the Board of Directors has
fixed the close of business on Tuesday, February 27, 1996,
as the record date for the determination of stockholders
entitled to vote at the Annual Meeting and to receive
notice thereof.
All stockholders are cordially invited to attend the
meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Robert G. van Schoonenberg
Secretary
Pasadena, California
Dated: March 8, 1996
-----------------------------------------------------------
Whether or not you presently plan to attend the Annual
Meeting, in order to ensure your representation please
complete, sign and date the enclosed proxy as promptly as
possible and return it in the enclosed envelope (to which
no postage need be affixed if mailed in the United
States). If you attend the meeting and wish to vote in
person, your proxy will not be used.
-----------------------------------------------------------
<PAGE>
AVERY DENNISON CORPORATION
150 NORTH ORANGE GROVE BOULEVARD
PASADENA, CALIFORNIA 91103
PROXY STATEMENT
This proxy statement is furnished to the stockholders on behalf of the Board
of Directors of Avery Dennison Corporation, a Delaware corporation
(hereinafter called the "Company"), for solicitation of proxies for use at the
Annual Meeting of Stockholders to be held on Thursday, April 25, 1996 at 1:30
P.M. and at any and all adjournments thereof. A stockholder giving a proxy
pursuant to the present solicitation may revoke it at any time before it is
exercised by giving a subsequent proxy or by delivering to the Secretary of
the Company a written notice of revocation prior to the voting of the proxy at
the Annual Meeting. If you attend the meeting and wish to vote your shares in
person, your proxy will not be used. Votes cast by proxy or in person at the
Annual Meeting will be tabulated by the election inspectors appointed for the
meeting and will determine whether or not a quorum is present. Under the
Company's Bylaws and Delaware law: (1) shares represented by proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum; (2) there is no cumulative voting and
the director nominees receiving the highest number of votes, up to the number
of directors to be elected, are elected and, accordingly, abstentions, broker
non-votes and withholding of authority to vote will not affect the election of
directors; and (3) proxies that reflect abstentions as to a particular
proposal will be treated as voted for purposes of determining the approval of
that proposal and will have the same effect as a vote against that proposal,
while proxies that reflect broker non-votes will be treated as unvoted for
purposes of determining approval of that proposal and will not be counted as
votes for or against that proposal. The Company has retained D.F. King & Co.,
Inc. to assist in soliciting proxies for this meeting at a fee estimated at
$10,000 plus out of pocket expenses. Expenses incident to the preparation and
mailing of the notice of meeting, proxy statement and form of proxy are to be
paid by the Company. This proxy statement is to be mailed to stockholders on
or about March 8, 1996.
The purpose of the meeting and the matters to be acted upon are set forth in
the foregoing attached Notice of Annual Meeting. In addition to the election
of directors, an amendment to the Company's 1990 Stock Option and Incentive
Plan for Key Employees (the "1990 Plan") will be submitted for approval by the
Company's stockholders. The 1990 Plan previously has been approved by the
stockholders, but is proposed to be amended to extend the period of
exercisability, following retirement, for options granted on or after November
30, 1995 (i) to the full term of the option for the Chief Executive Officer
and Chief Operating Officer; (ii) to the lesser of five years or the full term
of the option for options granted to participants in the Company's Second
Amended and Restated Key Executive Long-Term Incentive Plan or any successor
plan; and (iii) to the lesser of three years or the full term of the option
for all other optionees. As of the date of this statement, management knows of
no other business which will be presented for consideration at the meeting.
However, if any such business shall properly come before the meeting, votes
will be cast pursuant to said proxies in respect of any such other business in
accordance with the best judgment of the persons acting under said proxies.
See "GENERAL -- Stockholder Proposals" below.
ELECTION OF DIRECTORS (PROXY ITEM 1)
The Bylaws of the Company presently provide for twelve directors, divided
into three classes. However, two directors, Messrs. Lawrence R. Tollenaere and
F. Daniel Frost, are retiring from the Board and will not seek reelection upon
expiration of their current terms immediately prior to the 1996 Annual
Meeting. Therefore, the Board of Directors has amended the Bylaws, effective
immediately prior to the 1996 Annual Meeting, to reduce
1
<PAGE>
the number of directors to ten. In order to balance the number of directors in
each of the three classes of directors, as contemplated by the Bylaws, Mr.
Charles D. Miller has resigned as a director in the class of directors which
was elected to serve until the 1997 Annual Meeting, contingent upon his
election at the 1996 Annual Meeting as one of the class of directors elected
to serve until 1999.
Three directors are to be elected at the 1996 Annual Meeting and will hold
office until the 1999 Annual Meeting and until their successors are elected
and have qualified. It is intended that the persons so appointed in the
enclosed proxy will, unless authority is withheld, vote for the election of
the three nominees proposed by the Board of Directors, all of whom are
presently directors of the Company. In voting for the election of directors
each share has one vote for each position to be filled. All of the nominees
have consented to being named herein and to serve if elected. In the event
that any of them should become unavailable prior to the Annual Meeting, the
proxy will be voted for a substitute nominee or nominees designated by the
Board of Directors, or the number of directors may be reduced accordingly.
The following information, which has been provided by the directors, shows
for each of the nominees for election to the Board of Directors and for each
director whose term continues, his or her name, age, and principal occupation
or employment during the past five years, the name of the corporation or other
organization, if any, in which such occupation or employment is or was carried
on, the period during which such person has served as a director of the
Company and the year in which each continuing director's present term as
director expires.
1996 NOMINEES
[PHOTO OF CHARLES D. MILLER, age 68. Since November 1983, Mr. Miller has
CHARLES D. served as Chairman and Chief Executive Officer of Avery Dennison
MILLER] Corporation. Prior to 1983, he served as President and Chief
Executive Officer. He is a director of Great Western Financial
Corporation, Nationwide Health Properties, Inc., Pacific Mutual
Life Insurance Company, Edison International, and Davidson &
Associates, Inc. He has been a director of Avery Dennison
Corporation since January 1975.
[PHOTO OF RICHARD M. FERRY, age 58. Since May 1991, Mr. Ferry has been
RICHARD M. Chairman and Chief Executive Officer of Korn/Ferry International,
FERRY] an international executive search firm. Prior to 1991, he served
as President of Korn/Ferry International. He is a director of Dole
Food Company and Pacific Mutual Life Insurance Company. He has
been a director of Avery Dennison Corporation since December 1985.
[PHOTO OF DWIGHT L. ALLISON, JR., age 66. Since October 1986, Mr. Allison
DWIGHT L. has been a private investor. From January 1977 to September 1986,
ALLISON, Mr. Allison served in various senior executive positions
JR.] (including Chairman and CEO, Vice Chairman and President) with The
Boston Company, a trust banking and financial management firm. Mr.
Allison has been a director of Avery Dennison Corporation since
October 1990. Mr. Allison also served as a director of Dennison
Manufacturing Company from 1974 to October 1990.
2
<PAGE>
CONTINUING DIRECTORS
[PHOTO OF SIDNEY R. PETERSEN, age 65. During the past five years, Mr.
SIDNEY R. Petersen has been a private investor. In 1984, he retired as
PETERSEN] Chairman and Chief Executive Officer of Getty Oil Company,
positions which he had held since 1980. He is a director of Global
Natural Resources, Inc., Group Technologies Corporation, Union
Bank and NICOR, Inc. He has been a director of Avery Dennison
Corporation since December 1981. His present term expires in 1997.
[PHOTO OF JOHN C. ARGUE, age 64. Over the past five years, Mr. Argue has
JOHN C. been Of Counsel and formerly Senior Partner of the law firm of
ARGUE] Argue Pearson Harbison & Myers. Since October 1992, Mr. Argue has
been Chairman of Rose Hills Memorial Park Association. Mr. Argue
is a director of CalMat Co., Coast Savings Financial, Inc. and TCW
Funds, Inc., a registered investment company. He is also a trustee
of the TCW/DW family of funds and the TCW/DW Term Trust 2000,
TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003. Mr. Argue is an
advisory director (Chairman of advisory directors) of LAACO Ltd.
He has been a director of Avery Dennison Corporation since January
1988. His present term expires in 1997.
[PHOTO OF JOHN B. SLAUGHTER, age 62. Since August 1988, Dr. Slaughter has
JOHN B. served as President of Occidental College. Dr. Slaughter is a
SLAUGHTER] director of Atlantic Richfield Company, International Business
Machines Corporation, Northrop Grumman Corporation and Monsanto
Company. He has been a director of Avery Dennison Corporation
since December 1988. His present term expires in 1997.
[PHOTO OF FRANK V. CAHOUET, age 63. Since June 1987, Mr. Cahouet has been
FRANK V. Chairman, President and Chief Executive Officer of Mellon Bank
CAHOUET] Corporation. From September 1986 through June 1987, Mr. Cahouet
served as President of the Federal National Mortgage Association.
He is a director of Mellon Bank Corporation, Saint Gobain
Corporation and Teledyne, Inc. Mr. Cahouet has been a director of
Avery Dennison Corporation since February 1983. His present term
expires in 1998.
[PHOTO OF PETER W. MULLIN, age 55. Over the past five years, Mr. Mullin has
PETER W. been Chairman and Chief Executive Officer of Mullin Consulting,
MULLIN] Inc., formerly known as Management Compensation Group, Los
Angeles, Inc., an executive compensation, benefit planning and
corporate insurance consulting firm, and related entities. He has
been a director of Avery Dennison Corporation since January 1988.
His present term expires in 1998.
3
<PAGE>
[PHOTO OF JOAN T. BOK, age 66. Since February 1984, Mrs. Bok has been
JOAN T. Chairman of the Board of New England Electric System, a public
BOK] utility holding company and supplier of electricity, and from July
1988 to February 1989 she served as Chairman, President and Chief
Executive Officer. She is a director of Monsanto Company, John
Hancock Mutual Life Insurance Company and New England Electric
System, and its subsidiaries, New England Power Company,
Massachusetts Electric Company, and The Narragansett Electric
Company. Mrs. Bok has been a director of Avery Dennison
Corporation since October 1990. Mrs. Bok also served as a director
of Dennison Manufacturing Company from 1984 to October 1990. Her
present term expires in 1998.
[PHOTO OF PHILIP M. NEAL, age 55. Since December 1990, Mr. Neal has been
PHILIP M. President and Chief Operating Officer of Avery Dennison
NEAL] Corporation. From March 1990 to December 1990, he served as
Executive Vice President. He has been a director of Avery Dennison
Corporation since December 1990. His present term expires in 1998.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of the Company's common stock
beneficially owned by each director of the Company and each of the executive
officers named in the table on page 9, and the aggregate number of such shares
beneficially owned by all directors and executive officers as of December 31,
1995.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
---- ------------ --------
<S> <C> <C>
Lawrence R. Tollenaere......................... 84,501(2)(3) (4)
F. Daniel Frost................................ 18,097(5) (4)
Charles D. Miller.............................. 671,958(6) 1.25%
Sidney R. Petersen............................. 20,384(2)(7) (4)
Frank V. Cahouet............................... 26,267(2)(8) (4)
Richard M. Ferry............................... 20,000(2) (4)
John C. Argue.................................. 20,440(2)(9) (4)
Peter W. Mullin................................ 21,200(2) (4)
John B. Slaughter.............................. 18,000(2)(10) (4)
Philip M. Neal................................. 225,838(11) (4)
Dwight L. Allison, Jr. ........................ 39,332(12) (4)
Joan T. Bok.................................... 18,113(13) (4)
Kim A. Caldwell................................ 74,791(14) (4)
R. Gregory Jenkins............................. 122,025(15) (4)
Donald L. Thompson............................. 66,068(16) (4)
All Directors and Executive Officers as a Group
(30 persons, including those named)........... 1,878,593(17) 3.44%
</TABLE>
- ----------
(1) Except as otherwise indicated and subject to applicable community
property and similar statutes, the persons listed as beneficial owners of
the shares have sole voting and/or investment power with respect to such
shares.
(2) Includes 18,000 shares with respect to which each of Messrs. Tollenaere,
Petersen, Cahouet, Ferry, Argue, Mullin and Slaughter holds options
exercisable within 60 days from December 31, 1995.
(3) Includes 2,569 shares held jointly with Mrs. Lawrence R. Tollenaere, as
to which Mr. Tollenaere has shared voting and investment power. Also
includes 15,000 shares held in trust, as to which Mr. Tollenaere shares
the authority to vote and to dispose of the shares.
(4) Less than 1%.
(5) Includes 1,000 shares with respect to which Mr. Frost holds options
exercisable within 60 days from December 31, 1995.
(6) Includes 503,578 shares with respect to which Mr. Miller holds options
exercisable within 60 days from December 31, 1995. Also includes 158,237
shares held in the Miller Family Trust, as to which Mr. Miller has sole
authority to vote and to dispose of the shares. Also includes 2,000
shares held in The Candyman Trust, as to which Mr. Miller, as co-trustee,
shares the authority to vote and to dispose of the shares. Does not
include 524 shares held by Mrs. Charles D. Miller, as to which Mr. Miller
disclaims any beneficial ownership.
(7) Includes 2,384 shares held in the Petersen Family Trust, as to which Mr.
Petersen, as co-trustee, shares the authority to vote and to dispose of
the shares.
(8) Does not include 5,250 shares held in trust by Mrs. Frank V. Cahouet, as
to which Mr. Cahouet disclaims any beneficial ownership. Includes 5,250
shares held in trust with respect to which Mr. Cahouet has sole voting
and disposition power.
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(9) Includes 2,200 shares held in trust with respect to which Mr. Argue has
sole voting power but no disposition power. Also includes 200 shares held
in trust with respect to which Mr. Argue has the authority to vote and
dispose of the shares.
(10) Does not include 104 shares held by Mrs. John B. Slaughter, as to which
Dr. Slaughter disclaims any beneficial ownership.
(11) Includes 182,658 shares with respect to which Mr. Neal holds options
exercisable within 60 days from December 31, 1995. Does not include 1,107
shares held by Mr. Neal's son, as to which Mr. Neal disclaims any
beneficial ownership.
(12) Includes 30,492 shares held in a trust in which Mr. Allison is the
primary beneficiary and Mr. and Mrs. Allison are co-trustees with shared
voting power. Also includes 840 shares held in a trust in which Mrs.
Dwight L. Allison, Jr. is the primary beneficiary and Mr. and Mrs.
Allison are co-trustees with shared voting power. Includes 8,000 shares
with respect to which Mr. Allison holds options exercisable within 60
days from December 31, 1995.
(13) Includes 14,000 shares with respect to which Mrs. Bok holds options
exercisable within 60 days from December 31, 1995.
(14) Includes 61,000 shares with respect to which Mr. Caldwell holds options
exercisable within 60 days from December 31, 1995.
(15) Includes 95,885 shares with respect to which Mr. Jenkins holds options
exercisable within 60 days from December 31, 1995.
(16) Includes 56,575 shares with respect to which Mr. Thompson holds options
exercisable within 60 days from December 31, 1995. Does not include 103
shares held by Mrs. Donald L. Thompson, as to which Mr. Thompson disclaims
any beneficial ownership.
(17) Includes 1,398,362 shares with respect to which all executive officers
and directors as a group hold options exercisable within 60 days from
December 31, 1995.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
During 1995, there were eight meetings of the full Board of Directors and
ten meetings of committees of the Board. All directors of the Company attended
at least 75% of the aggregate number of meetings of the Board and meetings of
Board committees of which they were members held during the time they served
on the Board or Committee.
Standing committees of the Board of Directors include the following:
The Audit Committee, which is composed of the following directors: Lawrence
R. Tollenaere (Chairman), Frank V. Cahouet, Sidney R. Petersen, John C. Argue,
Dwight L. Allison, Jr. and Joan T. Bok, met twice during 1995. The functions
of the Audit Committee are to aid the directors in undertaking and fulfilling
their responsibilities for financial reporting to the stockholders; to support
and encourage efforts to improve the financial controls exercised by
management and to ensure their adequacy for purposes of public reporting; and
to provide better avenues of communication between the Board of Directors,
management and the external and internal auditors.
The Compensation and Executive Personnel Committee, which is composed of the
following directors: F. Daniel Frost (Chairman), Sidney R. Petersen, Lawrence
R. Tollenaere, Frank V. Cahouet and John C. Argue, met five times during 1995.
Richard M. Ferry and Peter W. Mullin also served on this Committee during
1995. The functions of the Compensation and Executive Personnel Committee are
to review new or modified programs in the areas of executive salary and
incentive compensation, deferred compensation, and stock plans; to review and
make recommendations to the Board concerning management's proposed option
grants, cash incentive awards and other direct and indirect compensation
matters; and to monitor equal opportunity and affirmative action programs and
practices.
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The Ethics and Conflict of Interest Committee, which is composed of the
following directors: Frank V. Cahouet (Chairman), John B. Slaughter, Joan T.
Bok and Philip M. Neal, did not meet during 1995. The functions of the Ethics
and Conflict of Interest Committee are to survey, monitor and provide counsel
on a continuing basis as to the business relationships, affiliations and
financial transactions of directors, officers and key employees, as they may
relate to possible conflicts of interest or violations of the Company's Legal
and Ethical Conduct Policy; to monitor compliance with the Foreign Corrupt
Practices Act in connection with the Company's relationship to domestic and
foreign governments, political parties and the agencies, instrumentalities and
officials of each; and to report and make recommendations to the full Board in
all instances where it is believed that possible violations of Company policy
or that Act could exist.
The Finance Committee, which is composed of the following directors: Sidney
R. Petersen (Chairman), Frank V. Cahouet, F. Daniel Frost, Charles D. Miller,
Richard M. Ferry, Peter W. Mullin, Dwight L. Allison, Jr. and Philip M. Neal,
met once during 1995. The functions of the Finance Committee are to assist the
Board in consideration of matters relating to the financial affairs and
capital requirements of the Company; to provide an overview of the financial
planning and policies of the Company; and to review proposed budgets, proposed
acquisitions, bank loans and changes in the financial structure of the
Company.
The Nominating Committee, which is composed of the following directors: John
C. Argue (Chairman), F. Daniel Frost, Charles D. Miller and Richard M. Ferry,
met once during 1995. The functions of the Nominating Committee are to review
the qualifications of candidates for board membership, to review the status of
a director when his or her principal position and/or primary affiliation
changes, to recommend to the Board of Directors candidates for election by
stockholders at annual meetings, to recommend candidates to fill vacancies in
directorships, to recommend to the Board of Directors the removal of a
director, if in the Company's best interest, and to make recommendations to
the Board of Directors concerning selection, tenure, retirement, and
composition of the Board of Directors. Stockholders desiring to make
recommendations concerning new directors must submit the candidate's name,
together with biographical information and the candidate's written consent to
nomination, to: Secretary, Nominating Committee of the Board of Directors,
Avery Dennison Corporation, 150 North Orange Grove Boulevard, Pasadena,
California 91103. Stockholders wishing to nominate new directors for election
at an annual meeting must comply with the requirements described under the
heading "GENERAL -- Stockholder Proposals" on p. 29.
The Strategic Planning Committee, which is composed of the following
directors: Charles D. Miller (Chairman), Frank V. Cahouet, F. Daniel Frost,
John C. Argue, Peter W. Mullin, Richard M. Ferry, Philip M. Neal, and John B.
Slaughter, met once during 1995. The functions of the Strategic Planning
Committee are to review the Company's long-term strategic plan, objectives,
programs, and proposed acquisition candidates and divestitures; to review
steps being taken to improve shareholder value; and to make recommendations to
the Board of Directors on any of these matters.
The Executive Committee, which is composed of the following directors: F.
Daniel Frost (Chairman), Charles D. Miller, Lawrence R. Tollenaere and Philip
M. Neal, did not meet during 1995. The function of the Executive Committee is
to act on an interim basis for the full Board and to report all such actions
to the Board for ratification at its next meeting.
Each director who is not an officer of the Company is paid an annual
retainer fee of $30,000 and attendance fees of $1,200 per Board meeting
attended, and $1,200 per committee meeting attended as Chairman of the
committee or $1,000 per committee meeting attended as a member of the
committee. The Chairmen of the Audit and Compensation and Executive Personnel
Committees are each also paid an annual retainer fee of $4,000, and the
Chairmen of the Executive, Finance, Nominating and the Ethics and Conflict of
Interest Committees are each paid an annual retainer fee of $3,000. Under the
Company's Deferred Compensation Plan for Directors, each director may elect to
defer payment of all or specified portions of such fees, in which case the
director is entitled to interest accruals on the amounts so deferred at the
prime rate in effect at the end of the Company's preceding fiscal year
(adjusted annually), plus one-quarter of one percent. Directors are also
eligible to participate in two additional deferred compensation plans. Under
the Directors Deferred Compensation Plan, fees which are
7
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deferred accrue interest at a "Declared Rate" (adjusted annually) equal to
Moody's Long-Term Corporate Bond Index Rate plus, if the director ceases to be
a director by reason of death, disability or normal retirement or elects to
receive a preretirement benefit, 6% per annum. Under the Directors Variable
Deferred Compensation Plan, fees which are deferred either accrue interest at
a fixed rate based on the 120-month rolling average of ten-year U.S. Treasury
Notes (plus, if the director ceases to be a director by reason of death,
disability or normal retirement, 25% of such rate per annum), or accrue at the
actual rate of return (less an administrative fee) of one of four investment
funds managed by an insurance company. Benefits payable by the Company under
these plans are secured with assets placed in an irrevocable trust.
Directors are also eligible to participate in the Retirement Plan for
Directors, whereby individuals who serve on the Company's Board of Directors
after 1982 and subsequently terminate their service as a director with at
least five years' tenure, are entitled to receive an annual benefit from the
Company equal to the annual director retainer fee plus 12 times the regular
meeting fee, as such fees are in effect on the date of termination, payable to
the director (or to his surviving spouse of at least one year or other
designated beneficiary) for the number of full or partial years the director
served on the Company's Board. Following the death of the director's surviving
spouse, or if there is no surviving spouse living at the time of the death of
the director, any benefits will be paid to one or more secondary beneficiaries
designated by the director prior to his or her death until the first to occur
of (i) receipt of the maximum benefit to which the director would have been
entitled had he or she survived,(ii) the death of the secondary beneficiaries,
if natural persons or (iii) benefits have been paid under the plan to the
director, surviving spouse, and/or the secondary beneficiaries for a combined
period of ten years.
Non-employee directors also participate in the 1988 Stock Option Plan for
Non-Employee Directors, pursuant to which options to purchase a total of
20,000 shares of Company common stock were granted in 1995 to the non-employee
directors eligible to receive grants under such plan. The option price for
each such option granted is 100% of the fair market value of Company common
stock on the date of grant. All options granted have a term of ten years, and
become exercisable in two cumulative installments of 50% of the number of
shares with respect to which the option was initially granted, on each of the
first and second anniversaries of the grant date, except that all options
owned by a director which are unexercisable on the date the director retires
at or after age 72 will become fully exercisable on the date of such
retirement. The plan calls for each non-employee director to receive an option
grant with respect to 5,000 shares upon joining the Board of Directors, and
automatic annual grants thereafter to each continuing non-employee director
with respect to 2,000 shares.
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table and accompanying notes show for the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company for 1995, the compensation paid by the Company to such persons for
services in all capacities during 1995 and the preceding two fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- --------------------- --------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) (1) ($) (1) ($) ($) (#) (2) (3) ($) (4) (5)
------------------ ---- -------- ---------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles D. Miller 1995 $731,667 $1,000,000 -- -- 100,000 -- $177,728
Chairman and Chief 1994 695,000 850,000 -- -- 167,000 $217,000 167,904
Executive Officer 1993 683,333 555,000 -- -- 73,400 -- 120,038
Philip M. Neal 1995 $471,333 $ 600,000 -- -- 50,000 -- $ 62,936
President and Chief 1994 440,000 500,000 -- -- 83,000 $137,400 54,014
Operating Officer 1993 428,333 325,000 -- -- 37,200 -- 42,642
Kim A. Caldwell 1995 $311,667 $ 175,000 -- -- 23,000 -- $ 28,981
Senior Group Vice 1994 289,084 251,000 -- -- 44,000 $127,200 28,708
President, 1993 271,000 165,000 -- -- 16,700 -- 19,405
Worldwide Materials
R. Gregory Jenkins 1995 $285,000 $ 225,000 -- -- 20,000 -- $ 38,517
Senior Vice President, 1994 267,000 200,000 -- -- 33,000 $83,400 35,960
Finance and Chief 1993 262,000 150,000 -- -- 14,600 -- 27,975
Financial Officer
Donald L. Thompson 1995 $286,000 $ 236,000 -- -- 21,000 -- $ 19,202
Group Vice President, 1994 252,084 161,000 -- -- 36,000 $28,700 17,295
Office Products 1993 219,250 85,000 -- -- 8,500 -- 14,595
</TABLE>
- ----------
(1) Amounts shown include amounts earned but deferred at the election of
executive officers under the Company's deferred compensation plans and the
Company's Employee Savings Plan, a qualified defined contribution plan
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code").
(2) Amounts for 1994 consist of options granted in February and December 1994.
The December grant was a result of a decision by the Board of Directors to
change the date of grants from the regular meeting of the Board in each
February to the date of the regular meeting of the Board in each December
and consequently the two grants in 1994 represent grants with respect to
two years of service. Amounts for each of 1995 and 1993 consist of only
one option grant.
(3) Amounts for 1994 consist of cash payments under the Company's Key
Executive Long-Term Incentive Plan for the cycle which was completed on
December 31, 1993. The determination of cash payments, if any, under the
Company's Amended and Restated Key Executive Long-Term Incentive Plan for
the cycle which was completed on December 31, 1995 will not be made until
the second quarter of 1996.
(4) Amounts consist of (i) Company contributions to deferred compensation
plans and Company contributions to the Company's Employee Savings Plan, a
401(k) plan; (ii) Company contributions to the Company's Stock Holding and
Retirement Enhancement Plan, a leveraged employee stock ownership plan
which offsets benefits under the Retirement Plan for Employees of Avery
Dennison Corporation; and (iii) interest earned on deferred compensation
accounts above 120% of the applicable federal rate ("above market
interest"). These amounts for 1995 are $47,312, $4,419 and $125,997,
respectively for Mr. Miller; $28,682, $4,419 and $29,835, respectively for
Mr. Neal; $16,835, $4,419 and $7,727, respectively for Mr. Caldwell;
$12,232, $4,419 and $21,866, respectively for Mr. Jenkins; and $13,368,
$4,419 and $1,415, respectively for Mr. Thompson.
(5) A substantial portion of above market interest earned on deferred
compensation accounts for Mr. Caldwell (who is under age 55) will not be
payable in the event that his employment terminates other than by reason
of death, disability or retirement.
9
<PAGE>
OPTION GRANTS
The following table shows information regarding options granted in 1995 to
each of the named executive officers under the 1990 Plan pursuant to the
Company's Second Amended and Restated Key Executive Long-Term Incentive Plan
(the "LTIP").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
NUMBER OF
SECURITIES % OF
UNDERLYING TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE
GRANTED EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME (#) (1) (2) FISCAL YEAR ($/SH) DATE PRESENT VALUE ($) (3)
---- ----------- ------------- -------- ---------- ---------------------
<S> <C> <C> <C> <C> <C>
Charles D. Miller 100,000 11.41% $47.2500 11/30/2005 $971,250
Philip M. Neal 50,000 5.71% 47.2500 11/30/2005 485,625
Kim A. Caldwell 23,000 2.63% 47.2500 11/30/2005 223,388
R. Gregory Jenkins 20,000 2.28% 47.2500 11/30/2005 194,250
Donald L. Thompson 21,000 2.40% 47.2500 11/30/2005 203,963
</TABLE>
- ----------
(1) Non-qualified stock options were granted at fair market value for a term
of ten years under the 1990 Plan pursuant to the LTIP. The options vest
nine years and nine months from the date of grant, but are eligible for
accelerated vesting, beginning three years from the date of grant, if the
Company meets the "return on total capital" (as defined in the LTIP) test
set forth in the LTIP. This test generally measures the Company's return
on total capital against that of a specified group of other companies
approved by the Compensation and Executive Personnel Committee.
(2) The Compensation and Executive Personnel Committee may accelerate the time
at which an option becomes exercisable, and in the event of a "change of
control" of the Company (as defined in the option agreement) options
become immediately exercisable. However, no option will be accelerated to
the extent that such acceleration would subject the optionee to the excise
tax under Section 4999 of the Code.
(3) Option grant date values were determined using a Black-Scholes option
pricing model adapted for use in valuing executive stock options. In
determining the Black-Scholes value, the following underlying assumptions
were used: (i) stock price volatility is measured as the standard
deviation of the Company's stock price over the three years prior to grant
(ranges from .1816 to .2838); (ii) dividend yield is measured as the
twelve month average ratio of dividends to month-end closing price (for
the month in which the dividend was declared) prior to grant of the option
(ranges from 2.66% to 2.86%); (iii) the risk-free rate of return
represents the weekly average of the ten-year Treasury bond rates for the
52 weeks immediately preceding the grant date of the options (ranges from
6.60% to 7.06%); (iv) option term represents the period from the date of
grant of each option to the expiration of the term of each option (10
years); (v) vesting restrictions are reflected by reducing the value of
the option determined by the Black-Scholes model by 5% for each full year
of vesting restrictions, assuming that exercisability of the options was
accelerated to the fifth anniversary of the option grant date as a result
of meeting the performance condition described in footnote (1) as of that
date (i.e., 25%). In the event that the performance condition described in
footnote (1) is met later than the fifth anniversary of the grant date, or
is not met during the term of the options, the grant date present value of
the options would be lower. In the event that such performance condition
is not met at all and the options become exercisable nine years and nine
months after the options are granted, the grant date present value of the
options would be $600,000 for Mr. Miller; $300,000 for Mr. Neal; $138,000
for Mr. Caldwell; $120,000 for Mr. Jenkins; and $126,000 for Mr. Thompson.
The Black-Scholes option pricing model establishes a cash equivalent value
for an option on the date of grant. The Company's use of such model is not
intended to forecast any future appreciation in the price of the Company's
stock. In addition, no gain to the optionees is possible without
appreciation in the price of the Company's common stock, which will
benefit all stockholders. If the market price of the stock does not exceed
the exercise price of the options at some time after the options become
exercisable or if they terminate unvested or unexercised, the value of the
options will ultimately be zero.
10
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows for each of the named executive officers the
shares acquired on exercise of options during 1995, the difference between the
option exercise price and the market value of the underlying shares on the
date of such exercise, and (as to outstanding options at December 31, 1995)
the number of unexercised options and the aggregate unrealized appreciation on
"in-the-money", unexercised options held at such date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR- FISCAL YEAR-
END (#) END ($) (2)
--------------- ----------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) (1) UNEXERCISABLE UNEXERCISABLE
---- --------------- ---------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Charles D. Miller -- -- 503,578/340,400 $13,408,990/$5,099,588
Philip M. Neal 23,000 556,500 182,658/170,200 $ 4,837,501/$2,552,200
Kim A. Caldwell 17,000 423,000 61,000/ 83,700 $ 1,563,813/$1,274,263
R. Gregory Jenkins 16,500 359,063 95,885/ 67,600 $ 2,529,249/$1,012,975
Donald L. Thompson 5,000 101,719 51,950/ 63,750 $ 1,386,250/$ 877,000
</TABLE>
- ----------
(1) Market value of the common stock at the exercise date minus the exercise
price of the options exercised. Amounts in this column represent the value
realized by the named executive upon the exercise of stock options granted
in prior years. All options had exercise prices equal to the market price
of the Company's stock on the date the options were granted, and vested on
the basis of the executive's continued employment with the Company. Thus,
the amount realized upon exercise of the options resulted directly from
appreciation in the Company's stock price during the executives' tenure
with the Company.
(2) Market value of the common stock at December 31, 1995 minus the exercise
price of "in-the-money" options.
11
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS
Under the LTIP, key executives recommended by the Company's Chief Executive
Officer and designated by the Compensation and Executive Personnel Committee
of the Board of Directors (the "Committee") are eligible to receive annual
grants of stock options and to earn a deferred cash incentive award based on
the financial performance of the Company and, in some cases, its business
units. Participants in the LTIP are eligible to earn a deferred cash incentive
award after the end of each three-year performance cycle, which cycles begin
every other year (e.g., 1991, 1993 and 1995). Option grants pursuant to the
LTIP are made under the 1990 Plan.
The following table shows, for each of the named executive officers, the
estimated future payouts, if any, under the LTIP for the performance cycle
which began in 1995. Threshold amounts are the minimum amounts which could be
paid under the LTIP and assume that the minimum level of performance is
achieved with respect to only one of the two pre-established performance
objectives (return on total capital and earnings per share) during the
performance cycle. If such performance is not achieved, amounts would be zero.
In addition, maximum awards would not be paid unless the Company achieved pre-
established objectives substantially in excess of these objectives.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUT UNDER
NUMBER OF SHARES, OTHER PERIOD UNTIL NON-STOCK PRICE BASED PLANS (3) (4)
UNITS OR OTHER MATURATION OR ------------------------------------
NAME RIGHTS (#) PAYOUT (2) THRESHOLD ($) TARGET ($) MAXIMUM ($)
---- ----------------- ------------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Charles D. Miller -- 3 years $231,525 $661,500 $1,323,000
Philip M. Neal -- 3 years $150,337 $429,534 $ 859,068
Kim A. Caldwell -- 3 years $ 97,240 $277,830 $ 555,660
R. Gregory Jenkins -- 3 years $ 90,757 $259,308 $ 518,616
Donald L. Thompson -- 3 years $ 89,986 $257,103 $ 514,206
</TABLE>
- ----------
(1) Each listed executive officer has been designated by the Committee as a
participant in the LTIP for the performance cycle which began in 1995 and
is eligible to receive a deferred cash incentive award after the end of
that cycle of a percentage of his base salary in effect at the end of the
performance cycle. The threshold (minimum), target and maximum awards are
28 percent, 80 percent and 160 percent of the executive's base salary,
respectively. The amount of the executive's award will depend on the
Company's actual performance during the performance cycle versus the pre-
established performance objectives. See "Report of Compensation and
Executive Personnel Committee on Executive Compensation" for a more
detailed description of the LTIP.
(2) The performance cycle began on January 1, 1995 and ends on December 31,
1997.
(3) Estimated future payouts under the LTIP are calculated using projected
salaries for the executive officers at December 31, 1997, the end of the
performance cycle.
(4) Upon a "change of control" (as defined in the LTIP) of the Company, each
executive will be entitled to receive a cash payment equal to his target
award based on his annual base salary rate in effect at the time of the
change of control. However, no such payment will be made to the extent
that the payment would be subject to the excise tax under Section 4999 of
the Code.
12
<PAGE>
RETIREMENT PLAN
The Company provides retirement benefits for employees under the Retirement
Plan for Employees of Avery Dennison Corporation (the "Retirement Plan") and
the Benefit Restoration Plan (the "BRP"), described below. Benefits under the
Retirement Plan are based on compensation and are calculated separately for
each year of service using the formula 1.25% times compensation up to the
breakpoint (currently $24,312, which is the average of the Social Security
wage bases for the preceding 35 years) plus 1.75% times compensation in excess
of the breakpoint. The results of the calculation for each year of service are
added together to determine the annual single life annuity Retirement Plan
benefit for an employee at normal retirement (age 65). The benefit is not
subject to deductions for Social Security payments or other offsets.
Amounts payable under the Retirement Plan may be reduced in accordance with
certain Code provisions which, as applied to plan years beginning on or after
December 1, 1994, limited the amount of compensation used to determine annual
benefit accruals under the Retirement Plan to the first $150,000 of covered
compensation and which limited the annual pension benefit payable under the
Retirement Plan to $120,000. The Company established the BRP in 1995 to
provide for the payment of supplemental retirement benefits to eligible
employees, including each of the individuals listed in the table on page 9,
whose Retirement Plan benefits are limited under the foregoing Code
provisions. The BRP is an unfunded excess benefit plan which is administered
by the Company. Benefits are payable under the BRP in amounts equal to the
amount by which a participant's benefits otherwise payable under the
Retirement Plan, with respect to periods from and after December 1, 1994, are
reduced under the applicable provisions of the Code.
Compensation covered by the Retirement Plan includes both salary and bonus
amounts, less amounts deferred at the election of employees under the
Company's deferred compensation plans and the Company's Employee Savings Plan.
However, the BRP covers compensation without deduction of amounts deferred
under such plans. Hence the retirement benefits payable to each of the
individuals listed in the table on page 9 under the Retirement Plan and the
BRP, taken together, will be based (for each year of service from and after
December 1, 1994) on the sum of the salary and bonus amounts (including all
deferred amounts), earned in each such year. The estimated annual benefits
payable to each of these individuals at normal retirement are $176,949 for Mr.
Miller, $256,847 for Mr. Neal, $243,683 for Mr. Caldwell, $117,709 for Mr.
Jenkins, and $149,833 for Mr. Thompson, respectively. These estimated benefits
do not include any assumption for annual increases in compensation.
Benefits under the Company's Retirement Plan and the BRP are coordinated
with benefits from the Stock Holding and Retirement Enhancement Plan (the
"SHARE Plan"), a leveraged employee stock ownership plan. Under this
arrangement, the pension benefit to which an employee would otherwise be
entitled under the Retirement Plan and the BRP ("basic pension benefit") is
provided first under the SHARE Plan and then, to the extent necessary, under
the Retirement Plan and the BRP. If the sum of the Retirement Plan benefit
accrued before adoption of the SHARE Plan and the SHARE Plan benefit exceeds
the basic pension benefit, the employee receives the higher benefit.
The Supplemental Executive Retirement Plan (the "SERP"), adopted in 1983, is
designed to provide its participants with additional incentives to further the
Company's growth and development and as an inducement to remain in its
service. Participants designated by the Committee of the Board of Directors
are offered benefits under this plan to supplement those to which they may be
entitled at the time of their retirement. The Committee has designated Charles
D. Miller as a participant in this plan. Mr. Miller's participation has been
set to commence upon his retirement at or after age 65 at a benefit level
which, when added to the benefits to which he will be entitled from the
Retirement Plan, the BRP and the SHARE Plan at the time of his retirement,
Company contributions to the Employee Savings Plan and Social Security, will
equal 62.5% of his final three-year average compensation, plus an additional
0.5% of such compensation for each year of employment after age 65 (or during
which termination compensation payments under his October 24, 1990 agreement
with the Company are being made). Assuming retirement at age 70, and certain
modest increases in compensation over the next two years, Mr. Miller's
estimated annual retirement benefit under the SERP would be $530,000. Survivor
and disability
13
<PAGE>
benefits are also payable under the SERP under certain circumstances. Benefits
payable under the SERP are secured with assets placed in an irrevocable trust.
The cost of benefits payable under the SERP will be recovered from the
proceeds of life insurance purchased by the Company if assumptions made as to
life expectancy, policy dividends, and other factors are realized.
OTHER INFORMATION
On October 24, 1990, the Company entered into an agreement with Mr. Miller,
providing that if Mr. Miller's employment with the Company is terminated for
any reason other than cause, retirement at or after age 70 or voluntary
resignation or following a "change of control" of the Company (as defined in
the agreement), the Company must for three years thereafter or until he
reaches age 70, whichever first occurs, pay Mr. Miller (or his beneficiary,
should he die before all such payments have been made) annual termination
compensation equal to the highest compensation (salary plus bonus) paid to him
in any of the three previous years (half of his average annual compensation
over this period for disability termination) and continue coverage during such
period for Mr. Miller, and to the extent possible for his spouse, under
existing life, accident, medical and dental plans. Amounts to which Mr. Miller
would be entitled under this agreement are reduced to the extent of any
compensation he earns from any new employment. If he dies while receiving
disability termination payments, or if his employment is terminated by death,
his spouse will be entitled to receive such disability termination payments,
as well as medical and dental benefits, until her death or September 1, 1997,
whichever first occurs. Following a change of control, payments to which Mr.
Miller would otherwise be entitled under other plans on account of a change of
control are to be limited to an aggregate amount equal to 2.99 times the "base
amount" as defined in Section 280G of the Code. If Mr. Miller's employment is
terminated for any reason other than cause, he will be entitled to purchase
the Company automobile, if any, then being provided for his use at the
depreciated book value thereof, and to have assigned to him at no cost
(although Mr. Miller must reimburse the Company for the cash value of the
policy, if any), and with no apportionment of prepaid premiums, any assignable
insurance policy then owned by the Company relating specifically to him (paid
up to age 70).
On October 23, 1990, Mr. Neal entered into an agreement with the Company
substantially the same as that of Mr. Miller described above, except (i) Mr.
Neal receives no benefits from the Company except those provided under other
Company plans under the agreement if his employment is terminated by death or
disability, (ii) the period of compensation following termination other than
for cause, voluntary resignation or retirement (at or after age 65) or
following a change of control is 18 months or until age 65, whichever first
occurs, (iii) Mr. Neal must use his best efforts to secure new employment
following termination and compensation earned from such employment offsets
payments due under this agreement, and (iv) following a change of control Mr.
Neal's rights will be governed by the Company's Executive Employment Security
Policy described below, instead of this agreement.
Messrs. Neal and Jenkins have been designated by the Committee as
participants under the Company's Executive Employment Security Policy (the
"Policy"). The Policy provides that if within three years of a "change of
control" of the Company, as defined in the Policy, the employment of an
officer is terminated for reasons other than cause, death, disability, normal
retirement at or after age 65 or voluntary resignation (except for resignation
following a reduction in status or compensation), the officer will be entitled
to receive, for a period of one, two or three years, depending on length of
service (but in no event after the officer's 65th birthday), monthly
termination indemnity payments equal to one-twelfth of the highest annual
compensation (salary plus bonus) paid to such officer within the previous
three years. During this period the officer and his spouse are entitled to the
benefits provided under the Company's then existing life, accident, medical
and dental insurance plans, reduced to the extent they are provided by another
employer or under another group plan, and to the benefit of continued accrual
of benefits provided under the Company's Retirement Plan. During this period
the officer must use his best efforts to secure new employment, and
termination indemnity payments will be reduced by half the amount of any
compensation he receives from new employment. Messrs. Caldwell and Thompson
have been designated by the Committee as participants under the Company's 1985
Executive Employment Security Policy. This policy is in all respects identical
to the Policy except that it prohibits participants from receiving termination
compensation in excess of an amount which would subject such compensation to
the excise tax provided in Section 4999 of the Code.
14
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act") requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities
(collectively, "Insiders"), to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange. Insiders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations from certain
Insiders that no other reports were required for such Insiders, the Company
believes that, during the 1995 fiscal year, all Section 16(a) filing
requirements applicable to Insiders were complied with, except that one
report, covering one transaction, was filed late by Susan B. Garelli.
REPORT OF COMPENSATION AND EXECUTIVE PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
The Committee has furnished the following report on executive compensation.
OVERALL POLICY
The Company's executive compensation program is designed to be closely
linked to Company performance and returns to stockholders. To this end, the
Company developed several years ago overall compensation strategy and specific
compensation plans that tie a significant portion of executive compensation to
the Company's success in meeting specified performance goals and to
appreciation in the Company's stock price. The overall objectives of this
strategy are to attract and retain the best possible executive talent, to
motivate these executives to achieve the goals inherent in the Company's
business strategy, to link executive and stockholders interests through equity
based plans and finally to provide a compensation package that recognizes
individual contributions as well as overall business results.
Each year the Committee, which is comprised exclusively of non-employee
directors, conducts a review of the Company's executive compensation program.
This review includes an assessment of the effectiveness of the Company's
compensation program and a comparison of the Company's executive compensation
and performance to comparable public corporations, including companies within
the Peer Group described under "Stockholder Return Performance". The Company
retains from time to time the services of executive compensation consultants
to provide to the Company and the Committee comparative data, benefit design
advice and analysis of the cost of incentives provided.
The Committee determines the compensation of the Company's 20 executive
officers, including the individuals whose compensation is detailed in this
proxy statement, and sets policies for and reviews the compensation awarded to
another approximately 46 highly compensated executives. This is designed to
ensure consistency throughout the executive compensation program. In reviewing
the individual performance of the 20 executive officers (other than Mr.
Miller), the Committee takes into account the detailed performance reviews and
recommendations of Mr. Miller.
The key elements of the Company's executive compensation program consist of
base salary, annual bonus, stock options, and, for certain executives,
participation in the Company's LTIP. The Committee's policies with respect to
each of these elements, including the basis for the compensation paid and
awarded to Mr. Miller, the Company's Chairman and Chief Executive Officer, are
discussed below. In addition, while the elements of compensation described
below are considered separately, the Committee takes into account the full
compensation package afforded by the Company to the individual.
Under the 1993 Omnibus Budget Reconciliation Act ("OBRA"), income tax
deductions of publicly-traded companies may be limited to the extent total
compensation for certain executive officers exceeds $1 million (less the
amount of any "excess parachute payments" as defined in Section 280G of the
Code) in any one year, except for compensation payments which qualify as
"performance-based." The Committee has designed the
15
<PAGE>
Company's compensation programs to conform with the OBRA legislation and
related regulations so that total compensation paid to any employee will not
exceed $1 million in any one year, except for compensation payments which
qualify as "performance-based." However, the Company may pay compensation
which is not deductible in limited circumstances when sound management of the
Company so requires. In furtherance of the Company's intention to design
compensation programs to conform with the OBRA legislation, at the Company's
1994 Annual Meeting the Company requested and received stockholder approval of
the Company's Amended and Restated Long-Term Incentive Plan (the predecessor
of the LTIP), the Company's Senior Executive Incentive Compensation Plan and
certain amendments to the 1990 Plan, all of which are designed to conform with
the OBRA legislation.
BASE SALARIES
Base salaries for new executive officers are initially determined by
evaluating the responsibilities of the position to be held and the experience
of the individual, and by reference to the competitive marketplace for
executive talent, including a comparison to base salaries for comparable
positions at other companies. The Company participates each year in two
nationwide salary surveys of between approximately 350 and 400 large public
companies performed by nationally recognized compensation consulting firms.
The Committee uses the data compiled from these surveys to assist it in
establishing base salaries. In general, base salaries and total compensation
for executives are targeted to a range that is within the third quartile (the
fourth quartile being the highest) of the compensation paid by such other
companies. Mr. Miller's base salary is also targeted in this range, and his
total compensation is targeted to a range within the fourth quartile. In
addition, in establishing salary levels within that range, the Committee
considers the competitiveness of the executives' entire compensation package.
For 1995, salary levels were within or below this range, based on competitive
salary data compiled in 1994 and updated for use in 1995.
Annual salary adjustments are determined by evaluating the performance of
the Company and of each executive officer, reviewing base salaries for
comparable positions at other companies contained in the salary surveys
described above, and, for selected senior executives, including Mr. Miller,
comparing the total compensation packages of the executives, including base
salary, with those of the companies in the Peer Group described under
"Stockholder Return Performance". In addition, the Committee takes into
account any new responsibilities. In the case of executive officers with
responsibility for a particular business unit, such unit's financial results
are also considered. The Committee, where appropriate, also considers non-
financial performance measures. These include increases in market share,
manufacturing efficiency gains, and improvements in product quality, customer
service, working capital management, employee safety, relations with employees
and leadership development.
With respect to the base salary granted to Mr. Miller in 1995, the Committee
took into account a comparison of base salaries of chief executive officers of
the other companies contained in the salary surveys described above; the total
compensation packages of the executives, including base salary, of the
companies in the Peer Group described under "Stockholder Return Performance",
the Company's success in meeting several financial goals in 1994, including
return on total capital ("ROTC") and earnings per share ("EPS"); the
performance of the Company's common stock; and the assessment by the Committee
of Mr. Miller's individual performance, including his leadership with respect
to the development of long-term business strategies for the Company to improve
its economic value, succession planning and management continuity. The
Committee also took into account the longevity of Mr. Miller's service to the
Company and its belief that Mr. Miller is an excellent representative of the
Company to the public by virtue of his stature in the community and the
industries in which the Company operates. Mr. Miller was granted a base salary
of $750,000 for 1995 (effective May 1995), an increase of 7.9% over his
$695,000 base salary for 1994.
16
<PAGE>
ANNUAL BONUS
The Company's executive officers, other than Messrs. Miller and Neal, are
eligible for an annual cash bonus under the Company's Executive Incentive
Compensation Plan (the "Executive Bonus Plan"). Under the Executive Bonus
Plan, individual and corporate performance objectives are established at the
beginning of each year. Eligible executives are assigned threshold, target and
maximum bonus levels. The Company performance measure for bonus payments is
based on several financial goals, including, in 1995, ROTC and EPS. For
executive officers with responsibility for a particular group, each of which
consists of several business units, the performance measure is based on the
group's net income and ROTC. The Committee weighs these financial goals very
heavily. Each of the specified financial performance measures is given
approximately equal weight. In 1995, the Company exceeded each of its targeted
financial goals. The Committee also considers the individual non-financial
performance measures described above under "Base Salaries" in determining
bonuses under the Executive Bonus Plan, but to a much lesser extent than the
financial goals described above.
Messrs. Miller and Neal are eligible for an annual cash bonus under the
Company's Senior Executive Incentive Compensation Plan (the "Senior Executive
Bonus Plan") which was approved by stockholders in 1994 as part of the
Company's policy to design the Company's compensation programs to conform with
the OBRA legislation and related regulations. Payments under the Senior
Executive Bonus Plan are based solely on the achievement of one or more of the
following pre-established objective performance goals: ROTC, EPS, return on
sales, economic value added, return on equity, net income, cash flow, sales
and total shareholder return (defined as cumulative shareholder return,
including the reinvestment of dividends, on the Company's common stock),
subject to the Committee's discretion to decrease awards which would otherwise
be payable under the Senior Executive Bonus Plan. In addition, no bonuses are
payable to the chief executive officer, chief operating officer or chief
financial officer (who is currently a participant in the Executive Bonus Plan)
unless the Company's pre-tax return on stockholders' equity exceeds a minimum
threshold and, in such event, the total of such executives' bonuses may not
exceed a specified percentage of the Company's pre-tax return on stockholders'
equity in excess of that minimum threshold. In 1995, the Company substantially
exceeded each of its targeted performance goals (ROTC and EPS) under the
Senior Executive Bonus Plan. Based on this performance, Mr. Miller was awarded
a bonus of $1,000,000, a 17.6% increase over the bonus paid in 1994.
STOCK OPTIONS
Under the 1990 Plan, stock options are granted to the Company's executive
officers. The size of stock option awards is determined by the Committee using
as a guideline a formula which takes into account competitive compensation
data and the executive's total cash compensation opportunity (base salary and
bonus opportunity). The formula does not take into account the amount of stock
options previously awarded to the executive officers although the Committee
may do so. In the event of poor Company or individual performance, the
Committee can elect not to award options or grant options on fewer shares.
Stock options are designed to align the interests of executives with those
of the stockholders. The Committee believes that significant equity interests
in the Company held by the Company's management align the interests of
stockholders and management. The Company has adopted a stock ownership
philosophy for officers and directors which encourages each officer and
director to achieve and maintain certain specified levels of stock ownership
during his or her tenure with the Company. In furtherance of this philosophy,
the Company maintains a policy which limits the percentage of shares of the
Company's common stock which should be sold during each year.
Stock options are granted with an exercise price equal to the market price
of the common stock on the date of grant and with a ten-year term. Options for
LTIP participants (including the individuals whose compensation is detailed in
this proxy statement) vest nine years and nine months from the date of grant,
subject to accelerated vesting beginning three years from the date of grant if
the Company meets the ROTC test set forth in the LTIP. Options for the rest of
the Company's executives vest 25% per year over four years. This approach is
designed to promote the creation of stockholder value over the long-term since
the full benefit of the compensation
17
<PAGE>
package cannot be realized unless stock price appreciation occurs over a
number of years. In addition, in 1995 the Committee amended the 1990 Plan,
subject to stockholder approval of the amendment at the Annual Meeting, to
extend the period of exercisability following retirement to provide incentive
to executives who are nearing retirement to maximize long-term stockholder
value for a period extending beyond their employment with the Company.
In 1995, Mr. Miller received options to purchase 100,000 shares with an
exercise price of $47.25 per share. Mr. Miller now owns directly 158,237
shares of the Company's common stock and, with the 1995 grant, holds options
to purchase an additional 843,978 shares, of which options to purchase 503,578
shares were exercisable at December 31, 1995.
LTIP
Under the LTIP, key executives recommended by the Company's Chief Executive
Officer and designated by the Committee are eligible to receive annual grants
of stock options, as described above, and to earn a deferred cash incentive
award based on the financial performance of the Company and, in some cases,
its business units. Participants in the LTIP are eligible to earn a deferred
cash incentive award after the end of each three-year performance cycle, which
cycles begin every other year (e.g., 1991, 1993 and 1995). Option grants
pursuant to the LTIP are made under the 1990 Plan and are described above
under "Stock Options".
During 1995, the Committee designated each of the executive officers whose
compensation is detailed in this proxy statement, and certain other
executives, as participants in the LTIP for the performance cycle which began
in 1995. The determination of cash payouts, if any, under the Company's
Amended and Restated Key Executive Long-Term Incentive Plan (the predecessor
of the LTIP) for the performance cycle begun in 1993 and ended in 1995 is not
expected to be made until the second quarter of 1996.
Each of the most senior group of executives who is designated as a
participant in the LTIP (including Mr. Miller and the other executives whose
compensation is detailed in this proxy statement) ("Senior Executives") is
eligible to receive (after the end of the performance cycle (1997)) a deferred
cash incentive award of a percentage of his base salary in effect at the end
of the cycle. The threshold (i. e., minimum), target and maximum awards are 28
percent, 80 percent and 160 percent of the executive's base salary,
respectively. The award is based on the Company's achievement of certain pre-
established ROTC and EPS objectives, each of which is given equal weight. The
threshold award of 28 percent of base salary will be earned if the Company
meets at least 80 percent of either the ROTC or the EPS objective. The target
award of 80 percent of base salary will be earned if the Company achieves 100
percent of each of the ROTC and EPS objectives. The maximum award will be
earned only if the Company achieves pre-established objectives substantially
in excess of these objectives.
Participants other than Senior Executives ("Other Participants") are divided
into categories under the LTIP based on their positions with the Company.
Target and threshold awards are based on the Company's achievement of certain
pre-established ROTC and EPS objectives (each of which is given equal weight)
or, for executives who are responsible for a business unit, the unit's
achievement of pre-established ROTC and net income objectives (each of which
is given equal weight). Threshold awards for Other Participants, ranging from
10.5 percent to 21 percent of base salary (depending on the category), will be
earned if at least 80% percent of one of the applicable objectives is met.
Target awards ranging from 30 percent to 60 percent of base salary will be
earned if 100 percent of both objectives is achieved. Maximum awards ranging
from 60 percent to 120 percent of base salary, depending on the category, will
be earned only if the Company achieves pre-established objectives
substantially in excess of these objectives and, for executives who are
responsible for a business unit, such business unit reaches certain levels of
achievement of its ROTC and net income objectives. In addition, for Other
Participants, the Committee may, in its discretion, provide for deferred cash
incentive awards in excess of the awards which would be made based on the
formulae contained in the LTIP.
18
<PAGE>
CONCLUSION
Through the programs described above, a very significant portion of the
Company's executive compensation is linked directly to individual and Company
performance and stock price appreciation. In 1995, approximately 50% of the
Company's executive compensation (over 60% for the individuals listed in the
table on page 9) consisted of these performance-based variable elements. In
the case of Mr. Miller, approximately 70% of his 1995 compensation consisted
of performance-based variable elements. The Committee intends to continue the
policy of linking executive compensation to Company performance and returns to
stockholders, recognizing that the ups and downs of the business cycle from
time to time may result in an imbalance for a particular period.
February 22, 1996
F. Daniel Frost, Chairman
John C. Argue
Frank V. Cahouet
Sidney R. Petersen
Lawrence R. Tollenaere
STOCKHOLDER RETURN PERFORMANCE
The first graph below compares the Company's cumulative stockholder return
on its common stock, including the reinvestment of dividends, with the return
on the Standard & Poor's 500 Stock Index (the "S&P 500 Index") and the average
return, weighted by market capitalization, of a peer group of companies (the
"Peer Group"). In addition, the Company has included the median return of the
Peer Group in the graph because, under the Company's LTIP, Company performance
is measured against the performance of other companies using a percentile
approach in which each company is given equal weight regardless of its size.
19
<PAGE>
The Peer Group is comprised of AMETEK, Inc., Avery Dennison Corporation,
Ball Corporation, Bemis Company, Inc., Boise Cascade Corporation, W.H. Brady
Co., Cabot Medical Corporation, Champion International Corporation, A.T. Cross
& Company, Deere & Company, The Dexter Corporation, Dover Corporation, Dresser
Industries, Inc., Echlin Inc., Engelhard Corporation, Ennis Business Forms,
Inc., Ethyl Corporation, Federal-Mogul Corporation, Ferro Corporation, H.B.
Fuller Company, The B.F. Goodrich Company, W.R. Grace & Co., Harris
Corporation, Harsco Corporation, Hercules Inc., Hunt Manufacturing Co.,
Illinois Tool Works Inc., Imo Industries Inc., James River Corporation of
Virginia, Johnson Controls, Inc., Masco Corporation, Maytag Corporation, The
Mead Corporation, Metromedia International Group (formerly The Actava Group
Inc.), Moore Corporation Limited, Nashua Corporation, National Service
Industries, Inc., Olin Corporation, Pentair, Inc., Pittway Corporation,
Premark International, Inc., The Sherwin-Williams Company, The Standard
Register Company, Teledyne, Inc., Thomas & Betts Corporation, The Timken
Company, Union Carbide Corporation, Valhi, Inc., Wallace Computer Services,
Inc., Westvaco Corporation, and Witco Corporation. Scott Paper Co., which was
acquired in December 1995 by Kimberly-Clark, is removed from all periods.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1)
OF AVERY DENNISON, S&P 500 INDEX AND PEER GROUP,
WEIGHTED AVERAGE (2) AND MEDIAN
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Peer Group Peer
Measurement Period Avery S&P (Weighted Group
(Fiscal Year Covered) Dennison 500 Index Average) (Median)
- ------------------ ---------- --------- ---------- -------
<S> <C> <C> <C> <C>
Measurement Pt- 12/31/90 100 100 100 100
FYE 12/31/91 122 130 126 131
FYE 12/31/92 142 140 148 142
FYE 12/31/93 150 154 187 167
FYE 12/31/94 187 156 195 167
FYE 12/31/95 271 215 263 214
</TABLE>
- ----------
(1) Assumes $100 invested on December 31, 1990 and the reinvestment of
dividends.
(2) Weighted average is weighted by market capitalization.
20
<PAGE>
During 1995, the Company undertook an exhaustive analysis of the composition
of the Peer Group which had not been revised since 1989. The Company
determined that the Peer Group was no longer an appropriate benchmark against
which to compare its performance and executive compensation (due, in part, to
the Company's significant increase in size as a result of the merger of Avery
International Corporation and Dennison Manufacturing Company in 1990). As a
result of this analysis, the Company selected a new peer group (the "Updated
Peer Group") which is comprised of companies which the Company believes to be
more comparable in terms of size, industry, research and development
investment, international balance, and product lines. The graph below compares
the Company's cumulative stockholder return on its common stock, including the
reinvestment of dividends, with the return on the S&P 500 Index and the
average return, weighted by market capitalization, of the Updated Peer Group.
The Company has also included the median return of the Updated Peer Group in
the graph for the same reason as the median return of the Peer Group is
included in the first graph.
The Updated Peer Group is comprised of Air Products & Chemicals Inc.,
Armstrong World Industries Inc., Arvin Industries Inc., Avery Dennison
Corporation, Baker-Hughes, Inc., Bemis Company, Inc., Boise Cascade
Corporation, Cabot Corporation, Crane Co., Danaher Corporation, Dresser
Industries, Inc., Eaton Corporation, Ecolab Inc., Engelhard Corporation, Ethyl
Corporation, Federal-Mogul Corporation, Ferro Corporation, H. B. Fuller
Company, The B. F. Goodrich Co., W. R. Grace & Co., Great Lakes Chemical
Corporation, Harris Corporation, Harsco Corporation, Hercules Inc., Illinois
Tool Works Inc., Ingersoll-Rand Co., James River Corporation of Virginia, Mark
IV Industries Inc., The Mead Corporation, Moore Corporation Ltd., Morton
International Inc., Nacco Industries, Nalco Chemical Co., Newell Companies,
Olin Corporation, P.P.G. Industries Inc., Parker-Hannifin Corporation, Pentair
Inc., Pitney Bowes Inc., Premark International Inc., Rubbermaid Inc., Sequa
Corporation, The Sherwin-Williams Co., Snap-on Inc., Sonoco Products Co.,
Stanley Works, Tecumseh Products Co., Union Camp Corporation, Union Carbide
Corporation, Westvaco Corporation, and Witco Corporation. Scott Paper Co.,
which was acquired in December 1995 by Kimberly-Clark, is removed from all
periods, and Baker-Hughes, Inc. is added to all periods.
21
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1)
OF AVERY DENNISON, S&P 500 INDEX AND UPDATED PEER GROUP,
WEIGHTED AVERAGE (2) AND MEDIAN
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Updated
Peer Group Updated
Measurement Period Avery S&P (Weighted Peer Group
(Fiscal Year Covered) Dennison 500 Index Average) (Median)
- --------------------- -------- --------- ---------- ---------
- -
<S> <C> <C> <C>
Measurement Pt- 12/31/1990 100 100 100 100
FYE 12/31/1991 122 130 135 136
FYE 12/31/1992 142 140 157 157
FYE 12/31/1993 150 154 189 177
FYE 12/31/1994 187 156 193 178
FYE 12/31/1995 271 215 250 228
</TABLE>
- ----------
(1) Assumes $100 invested on December 31, 1990 and the reinvestment of
dividends.
(2) Weighted average is weighted by market capitalization.
Stock price performance of the Company reflected in the above graphs is not
necessarily indicative of future price performance.
22
<PAGE>
COMPENSATION AND EXECUTIVE PERSONNEL COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Effective as of December 31, 1995, Peter W. Mullin and Richard M. Ferry were
no longer members of the Committee. Peter W. Mullin, who was a member of the
Committee during 1995, is the chairman and chief executive officer and a
director of Mullin Insurance Services, Inc. ("MINC") and PWM Insurance
Services, Inc. ("PWM"), executive compensation and benefit consultants and
insurance agents. Mr. Mullin is also the majority stockholder of MINC and the
principal stockholder of PWM. During 1995, the Company paid insurance
companies premiums for life insurance placed by MINC and PWM in 1995 and prior
years in connection with various Company employee benefit plans. In 1995, MINC
and PWM earned commissions from such insurance companies in an aggregate
amount of approximately $408,900 for the placement and renewal of this
insurance, in which Mr. Mullin had direct and indirect interests approximating
$334,900.
Richard M. Ferry, who was a member of the Committee during 1995, is co-
founder, chairman and chief executive officer, a director and a stockholder of
Korn/Ferry International ("Korn/Ferry"), an executive search firm. During
1995, Korn/Ferry received an aggregate of approximately $667,600 in payments
from the Company for worldwide executive search services, in which Mr. Ferry
had an indirect interest approximating $49,737. In addition, Korn/Ferry and
PWM have interests in Strategic Compensation Associates ("SCA"). During 1995,
the Company paid SCA a total of $233,300 for consulting assignments, in which
Mr. Ferry and Mr. Mullin had indirect interests approximating $8,132 and
$47,387, respectively.
VOTING SHARES
Stockholders of record at the close of business on February 27, 1996, are
entitled to notice of, and to vote at, the Annual Meeting. There were
52,798,966 shares of common stock of the Company outstanding on February 27,
1996.
PRINCIPAL STOCKHOLDERS
Whenever in this proxy statement information is presented as to "beneficial
ownership", please note that such ownership indicates only that the person
shown, directly or indirectly, has or shares with others the power to vote (or
to direct the voting of) or the power to dispose of (or to direct the
disposition of) such shares; he or she may or may not have any economic
interest in the shares. The reporting of information herein does not
constitute an admission that any such person is, for the purpose of Section 13
or 16 of the 1934 Act, the "beneficial owner" of the shares shown herein.
To the knowledge of the Company, the following was the only person or group
who, as of December 31, 1995, owned beneficially 5% or more of the outstanding
common stock of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------- ------------------ --------
<S> <C> <C>
R. Stanton Avery.................................... 2,691,224 (1) 5.07%
150 No. Orange Grove Blvd.
Pasadena, CA 91103
</TABLE>
- ----------
(1) Does not include 10,377 shares held by Mrs. R. Stanton Avery, as to which
Mr. Avery disclaims any beneficial ownership. Includes 137,736 shares held
by The Durfee Foundation, as to which Mr. Avery as a director of that
foundation shares the authority to vote and to dispose of the shares, but
in which Mr. Avery has no economic interest. Also includes 1,690,224
shares held by the testamentary trust created by the will of Dorothy
Durfee Avery. As the sole trustee, Mr. Avery has the right to vote and to
dispose of the shares; he is also entitled to receive the trust income
during his lifetime.
The Company's Employee Savings Plan and SHARE Plan (collectively, the
"Plans") together owned a total of 6,160,251 shares of Company common stock on
December 31, 1995, or 11.6% of Common Stock then outstanding. Although the
Company is the Administrator of the Plans, each plan was established and is
administered to achieve the different purposes for which it was created for
the exclusive benefit of its participants, and employees participating in the
Plans are entitled to vote all shares allocated to their accounts.
Accordingly, such plans do not constitute a "group" within the meaning of
Section 13(d) of the 1934 Act.
23
<PAGE>
THE 1990 STOCK OPTION AND INCENTIVE PLAN FOR KEY EMPLOYEES (PROXY ITEM 2)
PROPOSED AMENDMENTS
Upon the recommendation of the Committee, the Board of Directors has
adopted, subject to stockholder approval, an amendment to the 1990 Plan to
extend the period of exercisabilty, following retirement, for options granted
on or after November 30, 1995 (i) to the full term of the option for the Chief
Executive Officer and Chief Operating Officer; (ii) to the lesser of five
years or the full term of the option for options granted to participants in
the LTIP or any successor plan; and (iii) to the lesser of three years or the
full term of the option for all other optionees.
DESCRIPTION OF THE 1990 PLAN
In January 1990 the Company's Board of Directors adopted the 1990 Plan and
in March 1990 the stockholders approved it. In February 1991 and January 1994,
the Board of Directors adopted certain amendments to the 1990 Plan which were
approved by the stockholders in March 1991 and April 1994, respectively. The
1990 Plan succeeds the Company's 1988 Stock Option and Stock Appreciation
Rights Plan for Key Employees ("1988 Plan"), which covered 4,000,000 shares of
the Company's Common Stock. The 1988 Plan was adopted by the Board of
Directors and then approved by the stockholders in March 1988 as a successor
to the expired 1973 Amended Stock Option and Stock Appreciation Rights Plan
("1973 Plan").
The principal purpose of the 1990 Plan is to provide incentives for officers
and key employees of the Company and its subsidiaries through granting of
options under the 1990 Plan, thereby stimulating their personal and active
interest in the Company's development and financial success, and inducing them
to remain in the Company's employ. Options granted pursuant to the Company's
LTIP are granted under the 1990 Plan (see "Report of Compensation and
Executive Personnel Committee on Executive Compensation" for a description of
the LTIP).
Under the 1990 Plan, 7,950,000 shares of Common Stock (or their equivalent
in other equity securities) are authorized for issuance upon exercise of
options and stock appreciation rights ("SAR's") under the 1973 Plan and the
1988 Plan and stock options, SAR's and other awards under the 1990 Plan. The
Company has no outstanding SAR's, restricted stock or forms of award other
than stock options. As of December 31, 1995, a total of 4,819,865 shares were
subject to outstanding stock options held by approximately 490 officers and
key employees under the 1990 Plan, the 1988 Plan and the 1973 Plan. Assuming
that all outstanding options are exercised, 688,926 shares remained available
for the grant of new stock options, SAR's, restricted stock, dividend
equivalents, performance awards and stock payments under the 1990 Plan as of
December 31, 1995. On February 27, 1996, the closing price of a share of the
Company's Common Stock on the New York Stock Exchange Composite Tape was
$54.875.
The shares available under the 1990 Plan upon exercise of stock options,
SAR's and other awards, and issuance as restricted stock, may be either
previously unissued shares or issued shares which have been repurchased by the
Company, and may be equity securities of the Company other than Common Stock.
The 1990 Plan provides for appropriate adjustments in the number and kind of
shares subject to the 1990 Plan and to outstanding grants thereunder in the
event of a stock split, stock dividend or certain other types of
recapitalizations, including restructuring.
If any portion of a stock option, SAR or other award terminates or lapses
unexercised, or is canceled upon grant of a new option, SAR or other award
(which may be at a higher or lower exercise price than the option, SAR or
other award so canceled), or if restricted stock is repurchased by the
Company, the shares which were subject to the unexercised portion of such
option, SAR or other award, or the restricted stock repurchased, will continue
to be available for issuance under the 1990 Plan. The Company has not repriced
any stock option or other award under the 1990 Plan.
The principle features of the 1990 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1990 Plan itself.
Copies of the 1990 Plan will be available at the Annual Meeting and can also
be obtained by making written request of the Company's Secretary.
24
<PAGE>
ADMINISTRATION
The 1990 Plan is administered by the Committee, which consists of at least
three members of the Board, none of whom is an officer or employee of the
Company. The Committee is authorized to select from among the eligible
employees the individuals to whom options, SAR's, restricted stock purchase
rights and other awards are to be granted and to determine the number of
shares to be subject thereto and the terms and conditions thereof, consistent
with the 1990 Plan. The Committee is also authorized to adopt, amend and
rescind rules relating to the administration of the 1990 Plan.
The 1990 Plan also authorizes the Committee to delegate all or specified
administrative duties and authority, except the authority to make grants or
awards, to the Chief Executive Officer or the Secretary of the Company, or
both. In addition, the Committee may in its discretion grant to the Chief
Executive Officer of the Company authority to make grants or awards under the
1990 Plan to employees other than executive officers, subject to such
limitations as the Committee may impose.
PAYMENT FOR SHARES
The exercise or purchase price for all options, SAR's, restricted stock and
other rights to acquire Company Common Stock, together with any applicable tax
required to be withheld, must be paid in full in cash at the time of exercise
or purchase or may, with the approval of the Committee, be paid in whole or in
part in Common Stock of the Company owned by the optionee and having a fair
market value on the date of exercise equal to the aggregate exercise price of
the shares so to be purchased. The Committee may also provide, in the terms of
an option or other right, that the purchase price may be payable within thirty
days after the date of exercise. The Committee may also authorize other lawful
consideration to be applied to the exercise or purchase price of an award.
This may also include services rendered, or the difference between the
exercise price of presently exercisable options and the fair market value of
the Common Stock covered by such options on the date of exercise.
AMENDMENT AND TERMINATION
Amendments of the 1990 Plan to increase the number of shares as to which
options, SAR's restricted stock and other awards may be granted (except for
adjustments resulting from stock splits, etc.) require the approval of the
Company's stockholders. In all other respects the 1990 Plan can be amended,
modified, suspended or terminated by the Board of Directors, unless such
action would otherwise require stockholder approval as a matter of applicable
law, regulation, or rule. Amendments of the Plan will not, without the consent
of the participant, affect such person's rights under an award previously
granted, unless the award itself otherwise expressly so provides. No
termination date is specified for the 1990 plan.
ELIGIBILITY
Options, SAR's, restricted stock and other awards under the 1990 Plan may be
granted to individuals who are then officers or other employees of the Company
or any of its present or future subsidiaries (as defined in Section 425 of the
Code) and who are determined by the Committee to be key employees.
Approximately 480 officers and other employees are eligible to participate in
the 1990 Plan. More than one option, SAR, restricted stock grant or other
award may be granted to a key employee, but the aggregate fair market value
(determined at the time of grant) of shares with respect to which an Incentive
Stock Option is first exercisable by an optionee during any calendar year
cannot exceed $100,000, and the Committee may not grant options to any
optionee during any calendar year covering more than 200,000 shares.
AWARDS UNDER THE 1990 PLAN
The 1990 Plan provides that the Committee may grant or issue stock options,
SAR's, restricted stock, dividend equivalents, performance awards, stock
payments and other stock related benefits, or any combination thereof. Each
grant or issuance will be set forth in a separate agreement with the person
receiving the award and will indicate the type, terms and conditions of the
award.
25
<PAGE>
Nonqualified stock options ("NQSO's") will provide for the right to purchase
Common Stock at a specified price which may be less than fair market value on
the date of grant (but not less than par value), and usually will become
exercisable in installments after the grant date. NQSO's may be granted for
any reasonable term.
Incentive stock options ("ISO's"), if granted, will be designed to comply
with the provisions of the Code and will be subject to restrictions contained
in the Code, including exercise prices equal to at least 100% of fair market
value of Common Stock on the grant date and a ten year restriction on their
term, but may be subsequently modified to disqualify them from treatment as an
incentive stock option.
Restricted stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Committee. Restricted stock, typically, may be repurchased by the Company
at the original purchase price if the conditions or restrictions are not met.
In general, restricted stock may not be sold, or otherwise transferred or
hypothecated, until restrictions are removed or expire. Purchasers of
restricted stock, unlike recipients of options, will have voting rights and
will receive dividends prior to the time when the restrictions lapse.
Stock appreciation rights may be granted in connection with stock options or
other awards, or separately. SAR's granted by the Committee in connection with
stock options or other awards typically will provide for payments to the
holder based upon increases in the price of the Company's Common Stock over
the exercise price of the related option or other awards, but alternatively
may be based upon criteria such as book value. There are no restrictions
specified in the 1990 Plan on the exercise of SAR's or the amount of gain
realizable therefrom, although they can be imposed by the Committee in SAR
agreements. The Committee may elect to pay SAR's in cash or in Common Stock or
in a combination of cash and Common Stock.
Dividend equivalents may be credited to a participant in the 1990 Plan. They
represent the value of the dividends per share paid by the Company, calculated
with reference to the number of shares covered by the stock options, SAR's or
other awards held by the participant.
Performance awards may be granted by the Committee on an individual or group
basis. Generally, these awards will be based upon specific agreements and may
be paid in cash or in Common Stock or in a combination of cash and Common
Stock. Performance awards may include "phantom" stock awards that provide for
payments based upon increases in the price of the Company's Common Stock over
a predetermined period. Performance awards may also include bonuses which may
be granted by the Committee on an individual or group basis and which may be
payable in cash or in Common Stock or in a combination of cash and Common
Stock.
Stock payments may be authorized by the Committee in the form of shares of
Common Stock or an option or other right to purchase Common Stock as part of a
deferred compensation arrangement in lieu of all or any part of compensation,
including bonuses, that would otherwise be payable to a key employee in cash.
MISCELLANEOUS PROVISIONS
Options and other rights to acquire Common Stock of the Company granted
under the 1990 Plan may provide for their termination upon dissolution or
liquidation of the Company, the merger or consolidation of the Company into
another corporation, the acquisition by another corporation of all or
substantially all of the Company's assets, or the acquisition by another
corporation of 80% or more of the Company's then outstanding voting stock; but
in such event the Committee may also give optionees and other grantees the
right to exercise their outstanding options or rights in full during some
period prior to such event, even though the options or rights have not yet
become fully exercisable. Options and other rights granted under the 1990 Plan
currently provide that in the event of a "change of control" of the Company
(as defined in the option or grant agreement) all previously unexercisable
options and rights become immediately exercisable unless such options or
rights, or portions thereof, are determined by the Committee to constitute,
when exercised, "excess parachute payments" (as defined in Section 280G of the
Code).
26
<PAGE>
The 1990 Plan specifies that the Company may make loans to Plan participants
to enable them to exercise options, purchase shares or realize the benefits of
other awards granted under the Plan. The terms and conditions of such loans,
if any are made, are to be set by the Committee.
In consideration of the granting of a stock option, SAR, dividend
equivalent, performance award or right to purchase restricted stock, the
employee must agree in the written agreement embodying such award to remain in
the employ of the Company or a subsidiary of the Company for at least one year
after the award is granted.
The 1990 Plan formerly provided that, subject to the respective option
agreements, stock options cannot be exercised after one year from the date the
optionee's employment terminates by reason of death or disability, nor more
than two years after retirement. The provision was amended in September 1995,
subject to stockholder approval at the Annual Meeting. See "Reasons for
Amendment" below. Option agreements may also provide for immediate termination
in the event the optionee terminates employment in violation of any employment
agreement or is discharged for good cause.
No option, SAR or other right granted under the 1990 Plan may be assigned or
transferred by the optionee, except by will or the laws of intestate
succession or to a properly designated beneficiary. During the lifetime of the
holder of any option or right, the option or right may be exercised only by
the holder, or his guardian or legal representative.
The Company requires participants to discharge withholding tax obligations
in connection with the exercise of any option or other right granted under the
1990 Plan, or the lapse of restrictions on restricted stock, as a condition to
the issuance or delivery of stock or payment of other compensation pursuant
thereto. Shares held by or to be issued to a participant may also be used to
discharge tax withholding obligations related to exercise of options or
receipt of other awards, subject to the discretion of the Committee to
disapprove such use. In addition, the Committee may grant to employees a cash
bonus in the amount of any tax related to awards.
FEDERAL INCOME TAX CONSEQUENCES
The tax consequences of the 1990 Plan under current federal law are
summarized in the following discussion which deals with the general tax
principles applicable to the 1990 Plan, and is intended for general
information only. In addition, the tax consequences described below are
subject to the limitation of OBRA. Under OBRA, which became law in August
1993, income tax deductions of publicly-traded companies may be limited to the
extent total compensation (including base salary, annual bonus, stock option
exercises and non-qualified benefits paid in 1994 and thereafter) for certain
executive officers exceeds $1 million (less the amount of any "excess
parachute payments" as defined in section 280G of the Code) in any one year.
However, under OBRA, the deduction limit does not apply to qualified
"performance-based" compensation established by an independent compensation
committee which is adequately disclosed to, and approved by, stockholders. In
particular, stock options and stock appreciation rights will satisfy the
performance-based exception if the awards are made by a qualifying
compensation committee, the plan sets the maximum number of shares that can be
granted to any particular employee within a specified period and the
compensation is based solely on an increase in the stock price after the grant
date (i.e., the option exercise price is equal to or greater than the fair
market value of the stock subject to the award on the grant date). The Company
believes that it has complied with the requirements of the performance-based
compensation exclusion under OBRA, including option pricing requirements and
requirements governing the administration of the 1990 Plan so that
deductibility of compensation paid to top executives thereunder is not
expected to be disallowed. Alternative minimum tax and state and local income
taxes are not discussed below, and may vary depending on individual
circumstances and from locality to locality.
Nonqualified Stock Options. For Federal income tax purposes, the recipient
of NQSO's granted under the 1990 Plan will not have taxable income upon the
grant of the option, nor will the Company then be entitled to any deduction.
Generally, upon exercise of NQSO's the optionee will realize ordinary income,
and the Company will be entitled to a deduction, in an amount equal to the
difference between the option exercise price and the
27
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fair market value of the stock at the date of exercise. An optionee's basis
for the stock for the purpose of determining his gain or loss on his
subsequent disposition of the shares generally will be the fair market value
of the stock on the date of exercise of the NQSO.
Incentive Stock Options. There is no taxable income to an employee when an
ISO is granted to him or when that option is exercised; however, the amount by
which the fair market value of the shares at the time of exercise exceeds the
option price will be an "item of tax preference" for the optionee. Gain
realized by an optionee upon sale of stock issued on exercise of an ISO is
taxable at capital gains rates, and no tax deduction is available to the
Company, unless the optionee disposes of the shares within two years after the
date of grant of the option or within one year of the date the shares were
transferred to the optionee. In such event the difference between the option
exercise price and the fair market value of the shares on the date of the
option's exercise will be taxed at ordinary income rates, and the Company will
be entitled to a deduction to the extent the employee must recognize ordinary
income. An ISO exercised more than three months after an optionee's retirement
from employment, other than by reason of death or disability, will be taxed as
an NQSO, with the optionee deemed to have received income upon such exercise
taxable at ordinary income rates. The Company will be entitled to a tax
deduction equal to the ordinary income, if any, realized by the optionee.
Stock Appreciation Rights. No taxable income is realized upon the receipt of
an SAR, but upon exercise of the SAR the fair market value of the shares (or
cash in lieu of shares) received must be treated as compensation taxable as
ordinary income to the recipient in the year of such exercise. The Company
will be entitled to a deduction for compensation paid in the same amount which
the recipient realized as ordinary income.
Restricted Stock. Unless an election is made under Section 83(b) of the
Code, an employee to whom restricted stock is issued will not have taxable
income upon issuance and the Company will not then be entitled to a deduction.
However, when restrictions on shares of restricted stock lapse, such that the
shares are no longer subject to repurchase by the Company, the employee will
realize ordinary income and the Company will be entitled to a deduction in an
amount equal to the fair market value of the shares at the date such
restrictions lapse, less the purchase price therefor. If an election is made
under Section 83(b), the employee will realize ordinary income at the date of
issuance equal to the difference between the fair market value of the shares
at that date less the purchase price therefor and the Company will be entitled
to a deduction in the same amount.
Dividend Equivalents. A recipient of a dividend equivalent award will not
realize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time. When a dividend equivalent is paid, the
participant will recognize ordinary income, and the Company will be entitled
to a corresponding deduction.
Performance Awards. A participant who has been granted a performance award
will not realize taxable income at the time of grant, and the Company will not
be entitled to a deduction at that time. When an award is paid, whether in
cash or in Common Stock, the participant will have ordinary income, and the
Company will be entitled to a corresponding deduction.
Stock Payments. A participant who receives a stock payment in lieu of a cash
payment that would otherwise have been made will be taxed as if the cash
payment has been received, and the Company will have a deduction in the same
amount.
Deferred Compensation. Participants who defer compensation generally will
recognize no income, gain or loss for federal income tax purposes when
nonqualified stock options are granted in lieu of amounts otherwise payable,
and the Company will not be entitled to a deduction at that time. When and to
the extent options are exercised, the ordinary rules regarding nonqualified
stock options outlined above will apply.
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REASONS FOR AMENDMENT
The 1990 Plan formerly provided that, subject to the respective option
agreements, stock options cannot be exercised more than two years after
retirement. During 1995, the Board of Directors determined that it was
advisable to extend the period of exercisability, following retirement, for
options granted on or after November 30, 1995 (i) to the full term of the
option for the Chief Executive Officer and Chief Operating Officer; (ii) to
the lesser of five years or the full term of the option for options granted to
participants in the LTIP or any successor plan; and (iii) to the lesser of
three years or the full term of the option for all other optionees in order to
provide incentive to executives who are nearing retirement to maximize long-
term stockholder value for a period extending beyond their employment with the
Company. Accordingly, in September 1995 the Board amended the 1990 Plan to
extend the period of exercisability, following retirement, for options granted
on or after November 30, 1995, as described above, subject to stockholder
approval of the amendment at the Annual Meeting.
REQUIRED VOTE FOR APPROVAL AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Annual Meeting is required to approve this amendment
to the 1990 Plan. Your Board of Directors recommends a vote FOR approval of
the 1990 Plan amendment.
GENERAL
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P. to serve as the
Company's independent accountants for the 1996 fiscal year. One or more
representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting to respond to appropriate questions and will be given an opportunity
to make a statement if they so desire.
STOCKHOLDER PROPOSALS
Stockholder proposals for presentation at the annual meeting scheduled to be
held on April 24, 1997, must be received at the Company's principal executive
offices on or before November 9, 1996. The Company's Bylaws provide that
stockholders desiring to nominate persons for election to the board of
directors or to bring any other business before the stockholders at an annual
meeting must notify the Secretary of the Company thereof in writing 60 to 90
days prior to the first anniversary of the preceding year's annual meeting
(or, if the date of the annual meeting is more than 30 days before or more
than 60 days after such anniversary date, 60 to 90 days prior to such annual
meeting or within 10 days after the public announcement of the date of such
meeting is first made by the Company; or, if the number of directors to be
elected to the board of directors is increased and the Company does not make a
public announcement naming all of the nominees for director or specifying the
size of the increased board at least 70 days prior to the first anniversary of
the preceding year's annual meeting, within 10 days after such public
announcement is first made by the Company (with respect to nominees for any
newly created positions only)). Such notice must include (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act and Rule 14a-11 thereunder, (b) as to any other business
that the stockholder proposes to bring before the meeting, a brief description
of such business, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made, and (c) the name and
record address, and class and number of shares owned beneficially and of
record, of such stockholder and any such beneficial owner.
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ANNUAL REPORT
The Company's 1995 Annual Report to Stockholders has recently been mailed to
all stockholders of record.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED ENVELOPE.
Robert G. van Schoonenberg
Secretary
Dated: March 8, 1996
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APPENDIX A
THE 1990 STOCK OPTION AND
INCENTIVE PLAN FOR
KEY EMPLOYEES OF
AVERY INTERNATIONAL CORPORATION
<PAGE>
THE 1990 STOCK OPTION AND
INCENTIVE PLAN FOR
KEY EMPLOYEES OF
AVERY INTERNATIONAL CORPORATION
TABLE OF CONTENTS
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ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Dividend Equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Grantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 Incentive Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 Non-Qualified Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 Performance Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.21 Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.22 Restricted Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.23 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 Stock Appreciation Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 Stock Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.28 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II - SHARES SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Shares Subject to Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Unexercised Options and Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Effect of Certain Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III - GRANTING OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Disqualification for Stock Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Granting of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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ARTICLE IV - TERMS OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Option Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Option Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Exercise of Option after Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V - EXERCISE OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Partial Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Conditions to Issuance of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Rights as Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI - STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1 Grant of Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Coupled Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Independent Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Payment and Limitations on Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII - AWARD OF RESTRICTED STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Award of Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII - TERMS OF RESTRICTED STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 Restricted Stock Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Consideration to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Rights as Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.4 Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 Repurchase of Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.6 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.7 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IX - PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
STOCK PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1 Performance Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Dividend Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.3 Stock Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.4 Performance Award Agreement, Dividend Equivalent Agreement, Stock Payment Agreement . . . . . . . . 27
9.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 Exercise Upon Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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9.7 Payment on Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.8 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE X - ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Duties and Powers of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Majority Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 Compensation; Professional Assistance; Good Faith Actions . . . . . . . . . . . . . . . . . . . . . 30
10.5 Delegation of Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.6 CEO's Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XI - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.1 Not Transferable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.2 Amendment, Suspension, or Termination of this Plan . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.3 Changes in Common Stock or Assets of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.4 Merger of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.5 Approval of Plan by Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.6 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.7 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.8 Limitations Applicable to Section 16 Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.9 Plan Designation and Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.10 Release of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.11 Effect of Plan Upon Options and Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.12 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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THE 1990 STOCK OPTION AND
INCENTIVE PLAN FOR
KEY EMPLOYEES OF
AVERY INTERNATIONAL CORPORATION
The purposes of this Plan are as follows:
(1) To provide an additional incentive for key Employees to
further the growth, development and financial success of the Company by
personally benefiting through the ownership of Company stock and/or rights
which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain key
Employees considered essential to the long range success of the Company by
offering them an opportunity to own stock in the Company and/or rights which
will reflect the growth, development and financial success of the Company.
ARTICLE I
DEFINITIONS
1.1 General
Wherever the following terms are used in this Plan they shall
have the meaning specified below, unless the context clearly indicates
otherwise.
1.2 Beneficiary
"Beneficiary" shall mean a person properly designated by the
Optionee or Grantee, including his spouse or heirs at law, to exercise such
Optionee's or Grantee's rights under this Plan.
1
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Designation, revocation and redesignation of Beneficiaries must be made in
writing in accordance with rules established by the Committee and shall be
effective upon delivery to the Committee.
1.3 Board
"Board" shall mean the Board of Directors of the Company.
1.4 Code
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5 Committee
"Committee" shall mean the Compensation Committee of the
Board, appointed as provided in Section 10.1.
1.6 Common Stock
"Common Stock" shall mean the common stock of the Company, par
value $1.00 per share, as presently constituted and any equity security of the
Company issued or authorized to be issued in the future, but excluding any
warrants, options or other rights to purchase Common Stock; debt securities of
the Company convertible into Common Stock shall be deemed equity securities of
the Company.
1.7 Company
"Company" shall mean Avery International Corporation.
1.8 Director
"Director" shall mean a member of the Board.
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1.9 Dividend Equivalent
"Dividend Equivalent" shall mean a right to receive a number
of shares of Common Stock or an amount of cash, determined as provided in
Section 9.2 hereof.
1.10 Employee
"Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is then a Subsidiary.
1.11 Expiration Date
"Expiration Date" shall mean the last day of the term of the
Option as established in Section 4.3.
1.12 Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.13 Fair Market Value
"Fair Market Value" of a share of Common Stock as of a given
date shall be (i) the mean between the highest and lowest selling price of a
share of Common Stock on the principal exchange on which shares of Common Stock
are then trading, if any, on such date, or if shares were not traded on such
date, then the weighted average of the means between the highest and lowest
sales upon the nearest date before and the nearest date after such valuation
date; or (ii) if Common Stock is not traded on an exchange, the mean between
the closing representative bid and asked prices for the Common Stock on such
date as reported by NASDAQ or, if NASDAQ is not then in existence, by its
successor quotation system; or (iii) if Common Stock is not publicly
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traded, the Fair Market Value of a share of Common Stock as established by the
Committee acting in good faith.
1.14 Grantee
"Grantee" shall mean an Employee granted a Stock Appreciation
Right, Performance Award, Dividend Equivalent or Stock Payment under this Plan.
1.15 Incentive Stock Option
"Incentive Stock Option" shall mean an option which conforms
to the applicable provisions of Section 422A of the Code and which is
designated as an Incentive Stock Option by the Committee.
1.16 Non-Qualified Stock Option
"Non-Qualified Stock Option" shall mean an Option which is not
an Incentive Stock Option and which is designated as a Non- Qualified Stock
Option by the Committee.
1.17 Option
"Option" shall mean a stock option granted pursuant to this
Plan. An option granted under this Plan shall, as determined by the Committee,
be either a Non-Qualified Stock Option or an Incentive Stock Option.
1.18 Optionee
"Optionee" shall mean an Employee granted an Option under this
Plan.
1.19 Performance Award
"Performance Award" shall mean a cash bonus, stock bonus or
other performance or incentive award that is paid in cash, stock or a
combination of both.
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1.20 Plan
This "Plan" shall mean The 1990 Stock Option and Incentive
Plan for Key Employees of Avery International Corporation.
1.21 Restricted Stock
"Restricted Stock" shall mean Common Stock issued pursuant to
Article VII of this Plan.
1.22 Restricted Stockholder
"Restricted Stockholder" shall mean a person to whom
Restricted Stock has been issued under this Plan.
1.23 Secretary
"Secretary" shall mean the Secretary of the Company.
1.24 Stock Appreciation Right
"Stock Appreciation Right" shall mean a stock appreciation
right granted under this Plan.
1.25 Stock Payment
"Stock Payment" shall mean (a) a payment in the form of shares
of Common Stock, or (b) an option or other right to purchase shares of Common
Stock, as part of a deferred compensation arrangement, made in lieu of all or
any portion of the compensation, including without limitation, salary, bonuses
and commissions, that would otherwise become payable to a key Employee in cash.
1.26 Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken
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chain then owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
1.27 Termination of Employment
"Termination of Employment" shall mean the time when the
employee-employer relationship between the Optionee, the Grantee or the
Restricted Stockholder and the Company or a Subsidiary is terminated for any
reason, including, but not by way of limitation, a termination by resignation,
discharge, death or retirement; but excluding terminations where there is a
simultaneous reemployment or continuing employment by the Company or a
Subsidiary and, at the discretion of the Committee, terminations which result
in a temporary severance of the employee- employer relationship that do not
exceed one year. The Committee, in its absolute discretion, shall determine
the effect of all other matters and questions relating to Termination of
Employment.
1.28 Gender and Number
Wherever the masculine gender is used it shall include the
feminine and neuter and wherever a singular pronoun is used it shall include
the plural, unless the context clearly indicates otherwise.
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ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan
The shares of stock subject to Options, Stock Appreciation
Rights, Restricted Stock Awards, Performance Awards, Dividend Equivalents or
Stock Payments shall be Common Stock, initially shares of the Company's common
stock, par value $1.00 per share, as presently constituted, and the aggregate
number of such shares which may be issued upon exercise of such options or
rights or upon any such awards shall not exceed 4,000,000. Solely for the
purpose of the first sentence of this Section 2.1 shares of Common Stock which
are issued or utilized after March 31, 1988 upon exercise of options or stock
appreciation rights granted under the Company's Amended 1973 Stock Option and
Stock Appreciation Rights Plan for Key Employees and the Company's 1988 Stock
Option and Stock Appreciation Rights Plan for Key Employees shall be considered
shares issued under this Plan. The shares of Common Stock issuable upon
exercise or grant of an Option, Stock Appreciation Right, Performance Award,
Dividend Equivalent or Stock Payment, or as Restricted Stock, may be either
previously authorized but unissued shares or issued shares which have been
repurchased by the Company. If any equity securities of the Company, other
than the Company's common stock, par value $1.00 per share, as presently
constituted, are issued or authorized to be issued the Committee shall
determine, on a fair and equitable basis, the appropriate number of shares of
the Company's present common stock to be deemed issued or issuable
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with respect to such other equity securities for purposes of this Section 2.1.
2.2 Unexercised Options and Other Rights
If any Option, or other right to acquire shares of Common
Stock under any Stock Appreciation Right, Performance Award, Dividend
Equivalent or Stock Payment expires or is cancelled without having been fully
exercised, the number of shares subject to such Option or other right but as to
which such Option or other right was not exercised prior to its expiration or
cancellation may again be optioned, granted or awarded hereunder, subject to
the limitations of Section 2.1. Any shares of Restricted Stock repurchased by
the Company pursuant to Section 8.5 may again be utilized hereunder, subject to
the limitations of Section 2.1.
2.3 Effect of Certain Exercises
If a Stock Appreciation Right is exercised or a Performance
Award based on the increased market value of a specified number of shares of
Common Stock is paid, the number of shares of Common Stock to which such
exercise or payment relates under such Stock Appreciation Right or Performance
Award shall be charged against the maximum number of shares of Common Stock
that may be issued under this Plan. If any shares of Common Stock issuable
pursuant to any Option or other right to acquire shares of Common Stock are
surrendered to the Company as payment for the exercise price of said Option or
other right to acquire shares of Common Stock, the number of shares of Common
Stock issuable but so surrendered shall be charged against the maximum number
of
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shares of Common Stock that may be issued under this Plan. In the event the
Company withholds shares of Common Stock pursuant to Section 11.6 hereof, the
number of shares that would have been issuable but that are withheld pursuant
to the provisions of Section 11.6 shall be charged against the maximum number
of shares of Common Stock that may be issued under this Plan.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility
Options shall be granted to key Employees of the Company or of
a Subsidiary.
3.2 Disqualification for Stock Ownership
No person may be granted an Incentive Stock Option under this
Plan if such person, at the time the Incentive Stock Option is granted, owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any then existing Subsidiary of the
Company unless such Incentive Stock Option conforms to the applicable
provisions of Section 422A of the Code.
3.3 Granting of Options
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Determine which Employees are key
Employees and select from among the key Employees (including those to
whom Options have been previously granted under this Plan) such of
them as in its opinion should be granted Options;
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(ii) Determine the number of shares to be
subject to such Options granted to the selected key Employees;
(iii) Determine whether such Options are to be
Incentive Stock Options or Non-Qualified Stock Options (Incentive
Stock Options or Non-Qualified Stock Options, or both, may be granted
to any key Employee);
(iv) Determine the terms and conditions of such
Options, consistent with this Plan.
(b) Upon the selection of a key Employee to be granted an
Option, the Committee shall instruct the Secretary to issue the Option and may
impose such conditions on the grant of the Option as it deems appropriate.
Without limiting the generality of the preceding sentence, the Committee may,
in its discretion and on such terms as it deems appropriate, require as a
condition on the grant of an Option to an Employee that the Employee surrender
for cancellation some or all of the unexercised Options, Stock Appreciation
Rights, Performance Awards, Dividend Equivalents, Stock Payments or other
rights which have been previously granted to him under this Plan, the Company's
1988 Stock Option and Stock Appreciation Rights Plan for Key Employees or the
Company's Amended 1973 Stock Option and Stock Appreciation Rights Plan for Key
Employees. An Option the grant of which is conditioned upon such surrender may
have an option price lower (or higher) than the exercise price of such
surrendered Option, Stock Appreciation Right, Performance Award, Dividend
Equivalent or Stock Payment may cover the same (or a
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lesser or greater) number of shares as such surrendered right, may contain such
other terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered right.
ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement
Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized officer of
the Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan. Stock Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422A of the Code.
4.2 Option Price
The price per share of the shares subject to each Option shall
be set by the Committee; provided, however, that in the case of Incentive Stock
Options such price shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is granted, and in the case of
Non-Qualified Stock Options such price shall be no less than the par value of a
share of Common Stock.
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4.3 Option Term
The term of an Option shall be set by the Committee in its
discretion; provided, however, that, in the case of Incentive Stock Options,
the term shall not be more than ten (10) years from the date the Incentive
Stock Option is granted. Notwithstanding anything to the contrary, there shall
be no limitation on the term, as set by the Committee, of a Non-Qualified Stock
Option. The last day of the term of the Option shall be the Option's
Expiration Date.
4.4 Option Vesting
(a) The period during which the right to exercise an Option
in whole or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted. At any time after grant of an
Option the Committee may, in its sole discretion and subject to whatever terms
and conditions it selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at
Termination of Employment shall thereafter become exercisable.
(c) Notwithstanding any other provision of this Plan, in
the case of an Incentive Stock Option, the aggregate Fair Market Value
(determined at the time the Incentive Stock Option is granted) of the shares of
Common Stock with respect to which "incentive stock options" (within the
meaning of Section 422A of the Code) are exercisable for the first time by the
Optionee during any calendar year (under this Plan and all other
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incentive stock option plans of the Company and any Subsidiary) shall not
exceed $100,000.
4.5 Exercise of Option after Termination of Employment
An Option is exercisable by an Optionee only while he is an
Employee. The preceding notwithstanding, the Committee may determine that an
Option may be exercised subsequent to an Optionee's Termination of Employment,
subject to the following limitations:
(a) If the Optionee dies while an Option is exercisable
under the terms of this Plan, the Optionee's Beneficiary may exercise such
rights, to the extent the Optionee could have done so immediately preceding his
death. Any such Option must be exercised within twelve (12) months after the
Optionee's death and the Committee may in its discretion extend the Expiration
Date of such Option to accommodate such exercise; provided, however, that the
term of an Incentive Stock Option may not be extended beyond ten (10) years
from the date of grant.
(b) If the Optionee's employment is terminated due to his
permanent and total disability, as defined in Section 22(e)(3) of the Code, the
Optionee may exercise his Option, to the extent exercisable as of his
Termination of Employment, within twelve (12) months after termination, but no
later than the Option's Expiration Date.
(c) If the Optionee's employment is terminated due to his
retirement at or after age fifty-five (55), the Optionee may exercise his
Option, to the extent exercisable as of his
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Termination of Employment, within twenty-four (24) months after termination,
but not later than the Option's Expiration Date.
(d) If the Optionee's employment is terminated due to his
retirement at or after age fifty-five (55) and such Optionee continues as a
Director, the Optionee may exercise his Option to the same extent as he would
be able to exercise it if he continued to be an Employee, until the earlier of
two (2) years after he ceases to be a Director or the Option's Expiration Date.
(e) If the Optionee's employment is terminated for any
reason other than those set forth in subsections (a) through (d) above, the
Optionee may exercise his Option, to the extent exercisable as of his
Termination of Employment, within three (3) months after Termination of
Employment, but not later than the Option's Expiration Date.
4.6 Consideration
In consideration of the granting of the Option, the Optionee
shall agree, in the written Stock Option Agreement, to remain in the employ of
the Company or a Subsidiary for a period of at least one year after the Option
is granted. Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Optionee any right to continue in the employ of the
Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and the Subsidiaries, which are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever, with
or without good cause.
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ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise
An exercisable Option may be exercised in whole or in part.
However, an Option shall not be exercisable with respect to fractional shares
and the Committee may require, by the terms of the Option, a partial exercise
be with respect to a minimum number of shares.
5.2 Manner of Exercise
All or a portion of an exercisable Option shall be deemed
exercised upon delivery to the Secretary or his office of all of the following:
(a) A written notice complying with the applicable rules
established by the Committee or the Company, stating that the Option, or a
portion thereof, is exercised. The notice shall be signed by the Optionee or
other person then entitled to exercise the Option or such portion;
(b) Full cash payment for the shares with respect to which
the Option, or portion thereof, is exercised. However, at the discretion of
the Committee, the terms of the option may (i) allow a delay in payment up to
thirty (30) days from the date the Option, or portion thereof, is exercised,
(ii) allow payment, in whole or in part, through the delivery of shares of
Common Stock owned by the Optionee (iii) allow payment, in whole or in part,
through the surrender of shares of Common Stock then issuable upon exercise of
the Option; or (iv) allow payment, in
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whole or in part, through the delivery of property of any kind which
constitutes good and valuable consideration;
(c) Such representations and documents as the Committee, in
its absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any
other federal or state securities laws or regulations. The Committee may, in
its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars; and
(d) In the event that the Option shall be exercised
pursuant to Section 4.5(a) by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option.
5.3 Conditions to Issuance of Stock Certificates
The Company shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise of
any Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any state or federal law, or under the
rulings or regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the
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Committee shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following
the exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax.
5.4 Rights as Shareholders
The holders of Options shall not be, nor have any of the
rights or privileges of, shareholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
holders.
5.5 Transfer Restrictions
The Committee, in its absolute discretion, may impose such
restrictions on the transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth
in the respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares. The Committee may require the Employee to
give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive
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Stock Option within (i) two years from the date of granting such Option to such
Employee or (ii) one year after the transfer of such shares to such Employee.
The Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.
ARTICLE VI
STOCK APPRECIATION RIGHTS
6.1 Grant of Stock Appreciation Rights
A Stock Appreciation Right may be granted to any Employee
selected by the Committee to whom an Option may be granted under this Plan. A
Stock Appreciation Right may be granted (a) in connection and simultaneously
with the grant of an Option, (b) with respect to a previously granted Option,
or (c) independent of an Option. A Stock Appreciation Right shall be subject
to such terms and conditions not inconsistent with this Plan as the Committee
shall impose and shall be evidenced by a written Stock Appreciation Right
Agreement, which shall be executed by the Grantee and an authorized officer of
the Company. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of a Stock Appreciation Right to an
Employee that the Employee surrender for cancellation some or all of the
unexercised Options, Stock Appreciation Rights, Performance Awards, Dividend
Equivalents, Stock Payments or other rights which have been previously granted
to him under this Plan, the Company's 1988 Stock Option and Stock
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Appreciation Rights Plan for Key Employees or the Company's Amended 1973 Stock
Option and Stock Appreciation Rights Plan for Key Employees. A Stock
Appreciation Right, the grant of which is conditioned upon such surrender, may
have an exercise price lower (or higher) than the exercise price of the
surrendered Stock Appreciation Right, Option, Performance Award, Dividend
Equivalent may cover the same (or a lesser or greater) number of shares as such
surrendered right, may contain such other terms as the Committee deems
appropriate, and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of such surrendered right.
6.2 Coupled Stock Appreciation Rights
(a) A Coupled Stock Appreciation Right ("CSAR") shall be
related to a particular Option and shall be exercisable only when and to the
extent the related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than
the number of shares subject to the simultaneously or previously granted Option
to which it is coupled.
(c) A CSAR shall entitle the Grantee (or other person
entitled to exercise the Option pursuant to this Plan) to surrender to the
Company unexercised a portion of the Option to which the CSAR relates and to
receive from the Company in exchange therefor an amount determined by
multiplying the difference obtained by subtracting the Option exercise price of
the Option from the Fair Market Value of a share of Common Stock on the date of
exercise of the CSAR by the number of shares of
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Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.
6.3 Independent Stock Appreciation Rights
(a) An Independent Stock Appreciation Right ("ISAR") shall
be unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine. The exercise price per share of Common Stock subject to each ISAR
shall be set by the Committee. An ISAR is exercisable only while the Grantee
is an Employee; provided that the Committee may determine that the ISAR may be
exercised subsequent to Termination of Employment to the extent permitted under
Section 4.5.
(b) An ISAR shall entitle the Grantee (or other person
entitled to exercise the ISAR pursuant to this Plan) to exercise all or a
specified portion of the ISAR (to the extent then exercisable pursuant to its
terms) and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the ISAR
from the Fair Market Value of a share of Common Stock on the date of exercise
of the ISAR by the number of shares of Common Stock with respect to which the
ISAR shall have been exercised, subject to any limitations the Committee may
impose.
6.4 Payment and Limitations on Exercise
(a) Payment of the amount determined under Section 6.2(c)
and 6.3(b) above shall be in cash, in Common Stock or a
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combination of both, as determined by the Committee. To the extent such
payment is effected in Common Stock it shall be made subject to satisfaction of
all provisions of Section 5.3 hereinabove pertaining to Options.
(b) So long as Rule 16b-3 under the Exchange Act, or any
successor thereto, so provides, no CSAR shall be exercisable during the first
six months after it is granted with respect to an outstanding Option, except to
the extent that the Committee in its discretion permits such exercise in the
event of the Grantee's death or disability within the meaning of Section
105(d)(4) of the Code.
(c) So long as Rule 16b-3 under the Exchange Act, or any
successor thereto, so provides, cash payment upon exercise of a Stock
Appreciation Right may only be made if such Stock Appreciation Right is
exercised during the period beginning on the third business day following the
date of the Company's release of its quarterly or annual summary statements of
sales and earnings and ending on the twelfth business day following such date.
6.5 Consideration
In consideration of the granting of a Stock Appreciation
Right, the Grantee shall agree, in the written Stock Appreciation Right
Agreement, to remain in the employ of the Company or a Subsidiary for a period
of at least one year after the Stock Appreciation Right is granted. Nothing in
this Plan or in any Stock Appreciation Right Agreement hereunder shall confer
on any Grantee any right to continue in the employ of the Company
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or any Subsidiary or shall interfere with or restrict in any way the rights of
the Company and the Subsidiaries, which are hereby expressly reserved, to
discharge any Grantee at any time for any reason whatsoever, with or without
good cause.
ARTICLE VII
AWARD OF RESTRICTED STOCK
7.1 Eligibility
Any Employee selected by the Committee to whom an Option may
be granted under this Plan shall be eligible to be awarded Restricted Stock.
7.2 Award of Restricted Stock
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Select from among Employees (including
Employees to whom Options, Stock Appreciation Rights, Performance
Awards, Dividend Equivalents or Stock Payments have previously been
granted and/or shares of Restricted Stock have previously been issued)
such of them as in its opinion should be awarded Restricted Stock; and
(ii) Determine the purchase price and other
terms and conditions applicable to such Restricted Stock, consistent
with this Plan.
(b) The Committee shall establish the purchase price and
form of payment for Restricted Stock; provided, however, that such purchase
price shall be no less than the par value of the
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Common Stock to be purchased. In all cases legal consideration shall be
required for each issuance of Restricted Stock.
(c) Upon the selection of an Employee to be awarded
Restricted Stock, the Committee shall instruct the Secretary to issue such
Restricted Stock and may impose such conditions on the issuance of such
Restricted Stock as it deems appropriate.
ARTICLE VIII
TERMS OF RESTRICTED STOCK
8.1 Restricted Stock Agreement
Restricted Stock shall be issued only pursuant to a written
Restricted Stock Agreement, which shall be executed by the selected Employee
and an authorized officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
8.2 Consideration to the Company
As consideration for the issuance of Restricted Stock, in
addition to payment of the purchase price, the selected Employee shall agree,
in the written Restricted Stock Agreement, to remain in the employ of the
Company or a Subsidiary for a period of at least one year after the Restricted
Stock is issued. Nothing in this Plan or in any Restricted Stock Agreement
hereunder shall confer on any Restricted Stockholder any right to continue in
the employ of the Company or any Subsidiary or shall interfere with or restrict
in any way the rights of the Company and the Subsidiaries, which are hereby
expressly reserved, to
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discharge any Restricted Stockholder at any time for any reason whatsoever,
with or without good cause.
8.3 Rights as Shareholders
Upon delivery of the shares of Restricted Stock to the escrow
holder pursuant to Section 8.6, the Restricted Stockholder shall have all the
rights of a stockholder with respect to said shares, subject to the
restrictions in his Restricted Stock Agreement, including the right to vote the
shares and to receive all dividends and other distributions paid or made with
respect to the shares; provided, however, that in the discretion of the
Committee, any extraordinary distributions with respect to the Common Stock
shall be subject to the restrictions set forth in Section 8.4.
8.4 Restriction
All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide,
which restrictions may include, without limitation, restrictions based on
duration of employment with the Company, company performance and individual
performance; provided, however, that by a resolution adopted after the
Restricted Stock is issued, the Committee may, on such terms and conditions as
it may determine to be appropriate, remove any or all of the restrictions
imposed by the terms of the Restricted Stock Agreement. Restricted Stock may
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not be sold or encumbered until all restrictions are terminated or expire.
8.5 Repurchase of Restricted Stock
The Committee shall provide in the terms of each individual
Restricted Stock Agreement that the Company shall have the right to repurchase
from the Restricted Stockholder the Restricted Stock then subject to
restrictions under the Restricted Stock Agreement immediately upon a
Termination of Employment for any reason at a cash price per share equal to the
price paid by the Restricted Stockholder for such Restricted Stock; provided,
however, that provision may be made that no such right of repurchase shall
exist in the event of a Termination of Employment because of the Restricted
Stockholder's retirement at or after age fifty-five (55), death or total
disability.
8.6 Escrow
The Secretary or such other escrow holder as the Committee may
appoint shall retain physical custody of each certificate representing
Restricted Stock until all of the restrictions imposed under the Restricted
Stock Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.
8.7 Legend
In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions
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under Restricted Stock Agreements, which legend or legends shall make
appropriate reference to the conditions imposed thereby.
ARTICLE IX
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, STOCK PAYMENTS
9.1 Performance Awards
One or more Performance Awards may be granted to any Employee
selected by the Committee to whom an Option may be granted under this Plan.
The value of such Performance Awards may be linked to the market value, book
value or other measure of the value of Common Stock or other specific
performance criteria determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee, or may be based upon the appreciation in the market value, book
value or other measure of the value of a specified number of shares of Common
Stock over a fixed period or periods determined by the Committee. In making
such determinations, the Committee shall consider (among such other factors as
it deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular key Employee.
9.2 Dividend Equivalents
Any Employee selected by the Committee to whom an Option may
be granted under this Plan may be granted "Dividend Equivalents" based on the
dividends declared on Common Stock, to be credited as of dividend payment
dates, during the period between the date an Option, Stock Appreciation Right
or
26
<PAGE>
Performance Award is granted, and the date such Option, Stock Appreciation
Right or Performance Award is exercised, vests or expires, as determined by the
Committee. Such Dividend Equivalents shall be converted to cash or additional
shares of Common Stock by such formula and at such time and subject to such
limitations as may be determined by the Committee.
9.3 Stock Payments
Any Employee selected by the Committee to whom an Option may
be granted under this Plan may receive Stock Payments in the manner determined
from time to time by the Committee. The number of shares shall be determined
by the Committee and may be based upon the Fair Market Value, book value or
other measure of the value of Common Stock on the date such Stock Payment is
made or on any date thereafter.
9.4 Performance Award Agreement, Dividend Equivalent
Agreement, Stock Payment Agreement
Each Performance Award, Dividend Equivalent and/or Stock
Payment shall be evidenced by a written agreement, which shall be executed by
the Grantee and an authorized Officer of the Company and which shall contain
such terms and conditions as the Committee shall determine, consistent with
this Plan.
9.5 Term
The term of a Performance Award, Dividend Equivalent and/or
Stock Payment shall be set by the Committee in its discretion.
27
<PAGE>
9.6 Exercise Upon Termination of Employment
A Performance Award, Dividend Equivalent and/or Stock Payment
is exercisable only while the Grantee is an Employee; provided that the
Committee may determine that the Performance Award, Dividend Equivalent and/or
Stock Payment may be exercised subsequent to Termination of Employment to the
extent permitted under Section 4.5.
9.7 Payment on Exercise
Payment of the amount determined under Section 9.1 or 9.2
above shall be in cash, in Common Stock or a combination of both, as determined
by the Committee. To the extent such payment is effected in Common Stock, it
shall be made subject to satisfaction of all provisions of Section 5.3.
9.8 Consideration
In consideration of the granting of a Performance Award,
Dividend Equivalent and/or Stock Payment, the Grantee shall agree, in a written
agreement, to remain in the employ of the Company or a Subsidiary for a period
of at least one year after such Performance Award, Dividend Equivalent and/or
Stock Payment is granted. Nothing in this Plan or in any agreement hereunder
shall confer on any Grantee any right to continue in the employ of the Company
or any Subsidiary or shall interfere with or restrict in any way the rights of
the Company and the Subsidiaries, which are hereby expressly reserved, to
discharge any Grantee at any time for any reason whatsoever, with or without
good cause.
28
<PAGE>
ARTICLE X
ADMINISTRATION
10.1 Compensation Committee
The Compensation Committee shall consist of at least three
Directors, appointed by and holding office at the pleasure of the Board, no one
of whom is then an Employee. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be
filled by the Board.
10.2 Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee
shall have the power to interpret this Plan, the Options, the Stock
Appreciation Rights, the Performance Awards, the Dividend Equivalents, the
Stock Payments, and the Restricted Stock, and to adopt such rules for the
administration, interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Any such grant or
award under this Plan need not be the same with respect to each Optionee,
Grantee, or Restricted Stockholder. Any such interpretations and rules with
respect to Incentive Stock Options shall be consistent with the provisions of
Section 422A of the Code. In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and duties of the
Committee under this Plan.
29
<PAGE>
10.3 Majority Rule
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
10.4 Compensation; Professional Assistance; Good Faith Actions
Expenses and liabilities which members of the Committee incur
in connection with the administration of this Plan shall be borne by the
Company. The Committee may, with the approval of the Board, employ attorneys,
consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company, and its officers and Directors shall be entitled to
rely upon the advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the Committee in good
faith shall be final and binding upon all Optionees, Grantees, Restricted
Stockholders, the Company, and all other interested persons. No members of the
Committee shall be personally liable for any action, determination, or
interpretation made in good faith with respect to this Plan, any Option, any
Stock Appreciation Right, any Performance Award, any Dividend Equivalent, any
Stock Payment, or any Restricted Stock, and all members of the Committee shall
be fully protected by the Company in respect of any such action, determination
or interpretation.
30
<PAGE>
10.5 Delegation of Authority
The Committee may in its discretion delegate to the Chief
Executive Officer of the Company or the Secretary of the Company, or both, any
or all of the administrative duties and authority of the Committee under this
Plan, other than the authority to make grants or awards under this Plan.
10.6 CEO's Fund
Notwithstanding Section 10.5, the Committee may in its
discretion delegate to the Chief Executive Officer of the Company any or all of
its authority to make grants or awards under this Plan pursuant to Articles III
(including the determination of which Employees are key Employees) through IX
inclusive with respect to any key Employee who is not an "Executive Officer" of
the Company (within the meaning of Rule 405 promulgated under the Securities
Act of 1933, as amended), subject to any limitations the Committee may impose.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Not Transferable
Options, Stock Appreciation Rights, Performance Awards,
Dividend Equivalents, Stock Payments and Restricted Stock under this Plan may
not be sold, pledged, assigned, or transferred in any manner other than by will
or the laws of descent and distribution; provided, however, that an Optionee
may designate a Beneficiary to exercise his Option or other rights under this
Plan after his death. No Option, Stock Appreciation Right,
31
<PAGE>
Performance Award, Dividend Equivalent, Stock Payment or Restricted Stock or
interest or right therein shall be liable for the debts, contracts or
engagements of the Optionee, Grantee or Restricted Stockholder or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 11.1 shall prevent transfers by will or by the applicable laws of
descent and distribution. An Option shall be exercised during the Optionee's
lifetime only by the Optionee or his guardian or legal representative. A Stock
Appreciation Right, Performance Award, Dividend Equivalent or Stock Payment
under this Plan shall be exercised during the Grantee's lifetime only by the
Grantee or his guardian or legal representative.
11.2 Amendment, Suspension, or Termination of this Plan
This Plan may be wholly or partially amended or otherwise
modified, suspended, or terminated at any time or from time to time by the
Board. However, without approval of the Company's shareholders given within 12
months before or after the action by the Board or the Committee, no action of
the Committee or Board may, except as provided in Section 11.3, increase the
limits imposed in Section 2.1 on the maximum number of shares
32
<PAGE>
which may be issued under this Plan, and no action of the Committee or Board
may be taken that would otherwise require shareholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension, or termination
of this Plan shall, without the consent of the holder of an Option, Stock
Appreciation Right, Performance Award, Dividend Equivalent, Stock Payment or
Restricted Stock, alter or impair any rights or obligations under any option,
Stock Appreciation Right, Performance Award, Dividend Equivalent, Stock Payment
or Restricted Stock theretofore granted or issued. No Option, Stock
Appreciation Right, Performance Award, Dividend Equivalent, Stock Payment or
Restricted Stock may be granted or awarded during any period of suspension nor
after termination of this Plan, and in no event may any Incentive Stock Option
be granted under this Plan after January 24, 2000.
11.3 Changes in Common Stock or Assets of the Company
In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for cash or a different number or kind of
shares or other securities of the Company, or of another corporation, by reason
of reorganization, merger, consolidation, recapitalization, reclassification,
stock splitup, stock dividend, or combination of shares, appropriate
adjustments shall be made by the Committee in the number and kind of shares for
the purchase of which Options or with respect to which the exercise of Stock
Appreciation Rights, Performance Awards, Dividend Equivalents or Stock Payments
may be granted,
33
<PAGE>
including adjustments of the limitation in Section 2.1 on the maximum number
and kind of shares which may be issued.
In the event of such a change or exchange, other than for
shares or securities of another corporation or by reason of reorganization, the
Committee shall also make an appropriate and equitable adjustment in the number
and kind of shares as to which all outstanding Options, Stock Appreciation
Rights, Performance Awards, Dividend Equivalents or Stock Payments, or portions
thereof then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares, each Optionee's
and each Grantee's proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in an outstanding Option, Stock
Appreciation Right, Performance Award, Dividend Equivalent or Stock Payment may
include a necessary or appropriate corresponding adjustment in Option, Stock
Appreciation Right, Performance Award, Dividend Equivalent or Stock Payment
exercise price, but shall be made without change in the total price applicable
to the Option, Stock Appreciation Right, Performance Award, Dividend Equivalent
or Stock Payment, or the unexercised portion thereof (except for any change in
the aggregate price resulting from rounding-off of share quantities or prices).
Where an adjustment of the type described above is made to an
Incentive Stock Option under this Section, the adjustment will be made in a
manner which will not be considered a "modification" under the provisions of
subsection 425(h)(3) of the Code.
34
<PAGE>
In the event of a spin-off or other substantial distribution
of assets of the Company which has a material diminutive effect upon the Fair
Market Value, the Committee may in its discretion make an appropriate and
equitable adjustment to the Option, Stock Appreciation Right, Performance
Award, Dividend Equivalent or Stock Payment exercise price to reflect such
diminution in the Fair Market Value.
11.4 Merger of the Company
In the event of the merger or consolidation of the Company
with or into another corporation, the exchange of all or substantially all of
the assets of the Company for the securities of another corporation, the
acquisition by another corporation or person of all or substantially all of the
Company's assets or 80% or more of the Company's then outstanding voting stock,
or the liquidation or dissolution of the Company:
(a) At the discretion of the Committee, the terms of an
Option, Stock Appreciation Right, Performance Award, Dividend Equivalent or
Stock Payment may provide that it cannot be exercised after such event.
(b) In its absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide either by the
terms of such Option, Stock Appreciation Right, Performance Award, Dividend
Equivalent or Stock Payment or by a resolution adopted prior to the occurrence
of such event that, for a specified period of time prior to such event, such
Option, Stock Appreciation Right, Performance Award, Dividend Equivalent or
Stock Payment shall be exercisable as to all shares covered
35
<PAGE>
thereby, notwithstanding anything to the contrary in (i) Section 4.4 or Section
6.2(a), (ii) Section 6.4(c) to the extent such Section pertains to the receipt
of Common Stock upon exercise of a Stock Appreciation Right, or (iii) the
provisions of such Option, Stock Appreciation Right, Performance Award,
Dividend Equivalent or Stock Payment.
(c) At the discretion of the Committee, the restrictions
imposed under a Restricted Stock Agreement upon some or all shares of
Restricted Stock may be terminated and/or some or all of such shares may cease
to be subject to repurchase under Section 8.5 after such event.
11.5 Approval of Plan by Shareholders
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
this Plan. Options, Stock Appreciation Rights, Performance Awards, Dividend
Equivalents or Stock Payments may be granted or Restricted Stock may be awarded
prior to such shareholder approval, provided that such Options, Stock
Appreciation Rights, Performance Awards, Dividend Equivalents or Stock Payments
shall not be exercisable and such Restricted Stock shall not vest prior to the
time when this Plan is approved by the shareholders, and provided further that
if such approval has not been obtained at the end of said 12-month period, all
Options, Stock Appreciation Rights, Performance Awards, Dividend Equivalents or
Stock Payments previously granted and all Restricted Stock previously awarded
under this Plan shall thereupon be cancelled and become null and void.
36
<PAGE>
11.6 Tax Withholding
The Company shall be entitled to require payment or deduction
from other compensation payable to each Optionee, Grantee or Restricted
Stockholder of any sums required by federal, state or local tax law to be
withheld with respect to any Option, Stock Appreciation Right, Performance
Award, Dividend Equivalent, Stock Payment or Restricted Stock. The Committee
may in its discretion allow such Optionee, Grantee or Restricted Stockholder to
elect to have the Company withhold shares of Common Stock (or allow the return
of shares of Common Stock) having a Fair Market Value equal to the sums
required to be withheld. If the Optionee, Grantee or Restricted Stockholder
elects to advance such sums directly, written notice of that election shall be
delivered on or prior to such exercise and, whether pursuant to such election
or pursuant to a requirement imposed by the Company, payment in cash or by
check of such sums for taxes shall be delivered within two days after the date
of exercise. If, as allowed by the Committee, the Optionee, Grantee or
Restricted Stockholder elects to have the Company withhold shares of Common
Stock (or allow the return of shares of Common Stock) having a Fair Market
Value equal to the sums required to be withheld, the value of the shares of
Common Stock to be withheld (or returned as the case may be) will be equal to
the Fair Market Value of such shares on the date that the amount of tax to be
withheld is to be determined (the "Tax Date"). Elections by such persons to
have shares of Common Stock withheld for this purpose will be subject to the
following restrictions:
37
<PAGE>
(w) the election must be made on or prior to the Tax Date, (x) the election
must be irrevocable, (y) the election shall be subject to the disapproval of
the Committee, and (z) if the person is an officer of the Company within the
meaning of Section 16 of the Exchange Act, the election shall be subject to
such additional restrictions as the Committee may impose in an effort to secure
the benefits of any regulations thereunder. The Committee shall not be
obligated to issue shares and/or distribute cash to any person upon exercise of
any right until such payment has been received or shares have been so withheld,
unless withholding (or offset against a cash payment) as of or prior to the
date of such exercise is sufficient to cover all such sums due or which may be
due with respect to such exercise.
11.7 Loans
The Committee may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of outstanding
Options, Stock Appreciation Rights, Performance Awards, Dividend Equivalents or
Stock Payments granted under this Plan, or the issuance of Restricted Stock
awarded under this Plan. The terms and conditions of any such loan shall be
set by the Committee.
11.8 Limitations Applicable to Section 16 Persons
(a) Notwithstanding any other provision of this Plan, any
Option, Stock Appreciation Right, Performance Award, Dividend Equivalent or
Stock Payment granted or Restricted Stock awarded to a key Employee who is then
subject to Section 16 of
38
<PAGE>
the Exchange Act is subject to the following additional limitations:
(i) the Option, Stock Appreciation Right,
Performance Award, Dividend Equivalent, Stock Payment, or Restricted
Stock Agreement may provide for the issuance of shares of Common Stock
as a stock bonus for no consideration other than services rendered;
and
(ii) in the event of an Option, Stock
Appreciation Right, Performance Award, Dividend Equivalent, Stock
Payment, or Restricted Stock Agreement under which shares of Common
Stock are or in the future may be issued for any type of consideration
other than services rendered, the amount of such consideration either
(i) shall be equal to the minimum amount (such as the par value of
such shares) required to be received by the Company to comply with
applicable state law, or (ii) shall be equal to or greater than 50% of
the Fair Market Value of the shares of Common Stock on the date of the
grant of the Option, Stock Appreciation Right, Performance Award,
Dividend Equivalent or Stock Payment, or the issuance of the
Restricted Stock.
(b) Notwithstanding any other provision of this Plan, this
Plan, and any Option, Stock Appreciation Right, Performance Award, Dividend
Equivalent or Stock Payment granted, or Restricted Stock awarded, to a key
Employee who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive
rule under Section 16 of the Exchange Act (including any
39
<PAGE>
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. Any such additional limitation shall be
set forth in an annex to this Plan, such annex to be incorporated herein by
this reference and made part of this Plan.
11.9 Plan Designation and Status
Notwithstanding the designation of this document as a Plan for
convenience of reference and to standardize certain provisions applicable to
all types of Options, Stock Appreciation Rights, Performance Awards, Dividend
Equivalents, Stock Payments and Restricted Stock issuances authorized, each of
the Option, Stock Appreciation Right, Performance Award, Dividend Equivalent,
Stock Payment and Restricted Stock shall be deemed to be a separate "plan" for
purposes of Section 16 of the Exchange Act and any applicable state securities
laws.
11.10 Release of Restrictions
Any or all of the foregoing limitations in Sections 11.8(a)
and 11.9 on Options, Stock Appreciation Rights, Performance Awards, Dividend
Equivalents, Stock Payments granted to key Employees, and Restricted Stock
awarded to key Employees shall be suspended if, to the extent, as to such
persons, and for so long as the Securities and Exchange Commission by
regulation or official staff interpretation or a no-action letter issued to the
Company determines that such limitation is not necessary to secure the benefits
otherwise available with respect to a "plan" or particular award, as the case
may be, under any applicable exemptive rule under Section 16 of the Exchange
Act.
40
<PAGE>
11.11 Effect of Plan Upon Options and Compensation Plans
The adoption of this Plan shall not affect any other
compensation or incentive plans in effect for the Company or any Subsidiary.
Nothing in this Plan shall be construed to limit the right of the Company (a)
to establish any other forms of incentives or compensation for employees of the
Company or any Subsidiary, or (b) to grant or assume options or other rights
otherwise than under this Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
11.12 Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Plan.
11.13 Governing Law
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the laws of the State of California.
41
<PAGE>
AMENDMENT NO. 1
TO THE 1990 STOCK OPTION AND INCENTIVE PLAN
FOR KEY EMPLOYEES OF AVERY DENNISON CORPORATION
WHEREAS, Section 11.2 of the 1990 Stock Option and Incentive Plan for Key
Employees of Avery Dennison Corporation (the "Plan") provides that the Plan may
be amended by the Board of Directors of Avery Dennison Corporation (the
"Company"), subject to shareholder approval in certain circumstances; and
WHEREAS, the Board of Directors of the Company has determined that it is
advisable to amend the Plan in certain respects and to submit this amendment to
the Company's shareholders for approval.
NOW, THEREFORE, the Plan is hereby amended effective as of January 1, 1994 in
the following respects:
1. The first sentence of Section 2.1 is hereby deleted in its entirety and
the following is inserted in lieu thereof:
"The shares of stock subject to Options, Stock Appreciation Rights,
Restricted Stock Awards, Performance Awards, Dividend Equivalents or
Stock Payments shall be Common Stock, initially shares of the Company's
common stock, par value $1.00 per share, as presently constituted, and
the aggregate number of such shares which may be issued upon exercise of
such options or rights or upon any such awards shall not exceed
7,950,000."
2. The following language is hereby added at the end of Section 3.3(a)(ii):
"; provided, however, that in no event shall the Committee grant Options
to any individual Employee during any calendar year covering in excess of
200,000 shares."
Approved:
____________________________________
Charles D. Miller
Chairman and Chief Executive Officer
Avery Dennison Corporation
<PAGE>
AMENDMENT NO. 2
TO THE 1990 STOCK OPTION AND INCENTIVE PLAN
FOR KEY EMPLOYEES OF AVERY DENNISON CORPORATION
WHEREAS, Section 11.2 of the 1990 Stock Option and Incentive Plan for Key
Employees of Avery Dennison Corporation (the "Plan") provides that the Plan may
be amended by the Board of Directors of Avery Dennison Corporation (the
"Company"), subject to shareholder approval in certain circumstances; and
WHEREAS, the Board of Directors of the Company has determined that it is
advisable to amend the Plan in certain respects and to submit this amendment to
the Company's shareholders for approval.
NOW, THEREFORE, the Plan is hereby amended effective as of September 28, 1995,
subject to shareholder approval at the annual meeting of stockholders on April
25, 1996, in the following respects:
Section 4.5 Exercise of Option after Termination of Employment
--------------------------------------------------
The first paragraph is hereby amended and revised to read as follows:
"An Option is exercisable by an Optionee while he is an Employee.
The preceding notwithstanding, an Option may be exercised subsequent
to an Optionee's Termination Of Employment, subject to the following
limitations:"
Section 4.5(c) is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"(c) For Options granted before November 30, 1995, if the Optionee's
employment is terminated due to his retirement, the Optionee may
exercise his Options, to the extent exercisable as of his
Termination of Employment, within twenty-four (24) months after
termination, but not later than the Option's Expiration Date. For
Options granted on or after November 30, 1995, if the Optionee's
employment is terminated due to his retirement, the Optionee may
exercise his Options, to the extent exercisable as of his
Termination of Employment, as follows: (i) in the case of any Option
granted to the Chief Executive Officer or the Chief Operating
Officer, on any date prior to or on the Option's Expiration Date;
(ii) in the case of any Option granted to a participant, other than
the Chief Executive Officer or the Chief Operating Officer, in the
Company's Long-Term Incentive Program or any successor plan, within
sixty (60) months after termination, but not later than the Option's
Expiration Date; and (iii) in the case of an Option granted to any
other Optionee, within thirty-six (36) months after termination, but
not later than the Option's Expiration Date."
Approved:
------------------------------------
Charles D. Miller
Chairman and Chief Executive Officer
Avery Dennison Corporation
<PAGE>
PROXY
SOLICITED BY BOARD OF DIRECTORS
[LOGO OF AVERY ANNUAL MEETING--APRIL 25, 1996
DENNISON] PASADENA, CALIFORNIA
Avery Dennison Corporation
150 No. Orange Grove Boulevard
Pasadena, California 91103
The undersigned hereby appoints John C. Argue, Sidney R. Petersen and Philip
M. Neal, or each or any of them with power of substitution, proxies for the
undersigned to act and vote at the 1996 annual meeting of stockholders of
Avery Dennison Corporation and at any adjournments thereof as indicated upon
the matters referred to on the reverse side and described in the proxy
statement for the meeting, and, in their discretion, upon any other matters
which may properly come before the meeting.
1. Election of Directors
NOMINEES: Charles D. Miller, Richard M. Ferry and Dwight L. Allison, Jr.
2. Approval of an amendment to the Company's 1990 Stock Option and Incentive
Plan for Key Employees
IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION OF THE
DIRECTOR NOMINEES AND FOR PROPOSAL NUMBER 2.
(OVER)
(continued and to be signed on other side)
- --------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your votes as [X]
indicated in
this example
A vote FOR ALL nominees is
recommended by the Board
of Directors.
1. Election of Directors (page 1)
WITHHELD
FOR FROM ALL
[_] [_]
FOR ALL EXCEPT the following nominee(s):
- ----------------------------------------
A vote FOR is recommended by the Board of
Directors.
2. Approval of an amendment to the Company's 1990 Stock Option and Incentive
Plan for Key Employees (page 24)
FOR AGAINST ABSTAIN
[_] [_] [_]
PLEASE DO NOT FOLD OR
PERFORATE THIS CARD
IMPORTANT--PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE. THANK YOU.
Send admission ticket for meeting [_]
Signature(s) of Stockholder(s) _________________ Date ______________ , 1996
NOTE: If acting as attorney, executor, trustee, or in other representative
capacity, please sign name and title.
- --------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
[LOGO OF AVERY
DENNISON] Avery Dennison Corporation
150 No. Orange Grove Boulevard
Pasadena, California 91103
TO: FIRST INTERSTATE BANK OF CALIFORNIA AS AGENT FOR THE TRUSTEES OF THE AVERY
DENNISON SAVINGS PLAN AND SHARE PLAN
VOTING INSTRUCTIONS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF
AVERY DENNISON CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS, APRIL 25,
1996.
The undersigned hereby appoints John C. Argue, Sidney R. Petersen and Philip
M. Neal, or each or any of them with power of substitution, proxies for the
undersigned to act and vote at the 1996 annual meeting of stockholders of
Avery Dennison Corporation and at any adjournments thereof as indicated upon
the matters referred to on the reverse side and described in the proxy
statement for the meeting, and, in their discretion, upon any other matters
which may properly come before the meeting.
1. Election of Directors
NOMINEES: Charles D. Miller, Richard M. Ferry and Dwight L. Allison, Jr.
2. Approval of an amendment to the Company's 1990 Stock Option and Incentive
Plan for Key Employees
IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION OF THE
DIRECTOR NOMINEES AND FOR PROPOSAL NUMBER 2.
(OVER)
(continued and to be signed on other side)
- --------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your votes as [X]
indicated in
this example
A vote FOR ALL nominees is WITHHELD
recommended by the Board FOR FROM ALL
of Directors. [_] [_]
1.Election of Directors (page 1)
FOR ALL EXCEPT the following nominee(s):
- ---------------------------------------
A vote FOR is recommended by the Board of
Directors.
2. Approval of an amendment to the Company's 1990 Stock Option and Incentive
Plan for Key Employees (page 24)
FOR AGAINST ABSTAIN
[_] [_] [_]
PLEASE DO NOT FOLD OR
PERFORATE THIS CARD
IMPORTANT--PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE. THANK YOU.
Send admission ticket for meeting [_]
Signature(s) of Stockholder(s) _________________Date ______________ , 1996
NOTE: If acting as attorney, executor, trustee, or in other representative
capacity, please sign name and title.
- --------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
[LOGO OF AVERY
DENNISON] Avery Dennison Corporation
150 No. Orange Grove Boulevard
Pasadena, California 91103
TO: FIRST INTERSTATE BANK OF CALIFORNIA AS AGENT FOR THE TRUSTEES OF THE
DENNISON MANUFACTURING COMPANY BARGAINING UNIT EMPLOYEE STOCK OWNERSHIP
PLAN
VOTING INSTRUCTIONS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF
AVERY DENNISON CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS, APRIL 25,
1996.
The undersigned hereby appoints John C. Argue, Sidney R. Petersen and Philip
M. Neal, or each or any of them with power of substitution, proxies for the
undersigned to act and vote at the 1996 annual meeting of stockholders of
Avery Dennison Corporation and at any adjournments thereof as indicated upon
the matters referred to on the reverse side and described in the proxy
statement for the meeting, and, in their discretion, upon any other matters
which may properly come before the meeting.
1. Election of Directors
NOMINEES: Charles D. Miller, Richard M. Ferry and Dwight L. Allison, Jr.
2. Approval of an amendment to the Company's 1990 Stock Option and Incentive
Plan for Key Employees
IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION OF THE
DIRECTOR NOMINEES AND FOR PROPOSAL NUMBER 2.
(OVER)
(continued and to be signed on other side)
- --------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your votes as [X]
indicated in
this example
A vote FOR ALL nominees is WITHHELD
recommended by the Board FOR FROM ALL
of Directors. [_] [_]
1.Election of Directors (page 1)
FOR ALL EXCEPT the following nominee(s):
- ----------------------------------------
A vote FOR is recommended by the Board of Directors.
2. Approval of an amendment to the Company's 1990 Stock Option and Incentive
Plan for Key Employees (page 24)
FOR AGAINST ABSTAIN
[_] [_] [_]
PLEASE DO NOT FOLD OR
PERFORATE THIS CARD
IMPORTANT--PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE. THANK YOU.
Send admission ticket for meeting [_]
Signature(s) of Stockholder(s) _________________ Date _____________ , 1996
NOTE: If acting as attorney, executor, trustee, or in other representative
capacity, please sign name and title.
- --------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE
<PAGE>
PROXY
SOLICITED BY BOARD OF DIRECTORS
[LOGO OF AVERY ANNUAL MEETING--APRIL 25, 1996
DENNISON] PASADENA, CALIFORNIA
Avery Dennison Corporation
150 No. Orange Grove Boulevard
Pasadena, California 91103
The undersigned hereby appoints John C. Argue, Sidney R. Petersen and Philip
M. Neal, or each or any of them with power of substitution, proxies for the
undersigned to act and vote at the 1996 annual meeting of stockholders of Avery
Dennison Corporation and at any adjournments thereof as indicated upon the
matters referred to on the reverse side and described in the proxy statement
for the meeting, and, in their discretion, upon any other matters which may
properly come become the meeting.
1.Election of Directors
NOMINEES: Charles D. Miller, Richard M. Ferry and Dwight L. Allison, Jr.
2. Approval of an amendment to the Company's 1990 Stock Option and Incentive
Plan for Key Employees
IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION OF
THE DIRECTOR NOMINEES AND FOR PROPOSAL NUMBER 2.
(OVER)
(continued and to be signed on other side)
<PAGE>
[X] PLEASE MARK VOTES.
- --------------------------------------------------------------------------------
A vote FOR ALL nominees is A vote FOR is recommended by the Board of
recommended by the Board of Directors:
Directors:
- --------------------------------------------------------------------------------
1. Election of Directors (page 1) 2. Approval of an amendment to the
Company's 1990 Stock Option and
FOR WITHHELD Incentive Plan for Key Employees
ALL FROM (page 24)
NOMINEES ALL
[_] NOMINEES FOR AGAINST ABSTAIN
[_] [_] [_] [_]
FOR ALL EXCEPT the following nominee(s):
------------------------------------
Date ___________ , 1996
-----------------------
-----------------------
Signature(s) of
Stockholder(s)
-----------------------
Note: If acting as
attorney, executor,
trustee, or in other
representative
capacity, please sign
name and title.
-------------------------
Send admission ticket
for meeting [_]
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. THANK YOU.
