<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 [_]
<TABLE>
<CAPTION>
<S> <C>
Check the appropriate box:
[_]Preliminary Proxy Statement [_]Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
[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]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(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>
- ----------------- -----------------------------------------------------------
[AVERY DENNISON Avery Dennison Corporation
LOGO] 150 North Orange Grove Boulevard
Pasadena, California 91103
- -----------------
-----------------------------------------------------------
Notice of To the Stockholders:
Annual Meeting
of Stockholders The Annual Meeting of Stockholders of Avery Dennison
Corporation will be held at 150 North Orange Grove
To be held Boulevard, Pasadena, California, on Thursday, April 27,
April 27, 2000 2000, 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; and
2. 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 Monday, February 28, 2000,
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 10, 2000
-----------------------------------------------------------
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 (which
does not require postage 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 27, 2000 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 10, 2000.
The purpose of the meeting and the matters to be acted upon are set forth in
the foregoing attached Notice of Annual Meeting. As of the date of this
statement, other than the election of directors, management knows of no other
business that will be presented for consideration at the meeting. However, if
any such other 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. Three directors are to be elected at the 2000 Annual
Meeting and will hold office until the Annual Meeting in 2003 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 may be voted for a substitute nominee or nominees designated by the
Board of Directors, or the number of directors may be reduced accordingly.
1
<PAGE>
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.
2000 NOMINEES
[PHOTO OF SIDNEY R. PETERSEN]
Sidney R. Petersen, age 69. During the past five years, Mr. Petersen
has been a private investor. In 1984, he retired as Chairman and
Chief Executive Officer of Getty Oil Company, a position that he had
held since 1980. He is also a director of NICOR, Inc., Sypris
Solutions, Inc., and UnionBanCal Corp. He has been a director of
Avery Dennison Corporation since December 1981.
[PHOTO OF JOHN C. ARGUE]
John C. Argue, age 68. Mr. Argue has been Chairman of The Rose Hills
Foundation since December 1996. From January 1990 to December 1999,
he was Of Counsel to the law firm of Argue Pearson Harbison & Myers.
Mr. Argue is also a director of Apex Mortgage Capital, Inc.,
Nationwide Health Properties, Inc., and TCW/Convertible Securities
Fund, Inc., a registered investment company. He is a trustee of the
TCW Galileo family of mutual funds. Mr. Argue is Chairman of the
advisory directors of LAACO Ltd. He has been a director of Avery
Dennison Corporation since January 1988.
[PHOTO OF DAVID E. I. PYOTT]
David E. I. Pyott, age 46. Since January 1, 1998, Mr. Pyott has been
President and Chief Executive Officer of Allergan, Inc., a global
health care company. Prior to 1998, Mr. Pyott was with Switzerland-
based Novartis AG, serving as head of the Novartis Nutrition
Division and was a member of the executive committee. He has been a
director of Avery Dennison Corporation since November 1999.
The Board of Directors recommends a vote FOR the above nominees.
2
<PAGE>
CONTINUING DIRECTORS
[PHOTO OF JOHN B. SLAUGHTER]
John B. Slaughter, age 66. Since July 1999, Dr. Slaughter has been
President Emeritus of Occidental College, and since August 1999 he
has served as Melbo Professor of Leadership in Education at the
University of Southern California. Prior to July 1999, Dr. Slaughter
served as President of Occidental College. Dr. Slaughter is also a
director of Atlantic Richfield Company, International Business
Machines Corporation, Northrop Grumman Corporation, and Solutia,
Inc. He has been a director of Avery Dennison Corporation since
December 1988. His present term expires in 2000.
[PHOTO OF FRANK V. CAHOUET]
Frank V. Cahouet, age 67. In December 1998, Mr. Cahouet retired as
Chairman, President and Chief Executive Officer of Mellon Financial
Corporation, a position that he had held since June 1987. From
September 1986 through June 1987, Mr. Cahouet served as President of
the Federal National Mortgage Association. He is also a director of
Allegheny Technologies, Inc., Korn/Ferry International, Mellon
Financial Corporation, Teledyne Technologies, Inc., and Saint-Gobain
Corporation. Mr. Cahouet has been a director of Avery Dennison
Corporation since February 1983. His present term expires in 2001.
[PHOTO OF PETER W. MULLIN]
Peter W. Mullin, age 59. During the past five years, Mr. Mullin has
been Chairman and Chief Executive Officer of Mullin Consulting,
Inc., an executive compensation, benefit planning and corporate
insurance consulting firm, and related entities. He is also a
director of Golden State Vintners, Inc., and Mrs. Fields Original
Cookies, Inc. He has been a director of Avery Dennison Corporation
since January 1988. His present term expires in 2001.
[PHOTO OF JOAN T. BOK]
Joan T. Bok, age 70. Since April 1998, Mrs. Bok has been Chairman
Emeritus of the Board of NEES Companies, a public utility holding
company and supplier of electricity. From February 1984 through
April 1998, Mrs. Bok was Chairman of the Board of NEES Companies,
and from July 1988 to February 1989, she served as Chairman,
President and Chief Executive Officer. She is also a director of
John Hancock Mutual Life Insurance Company, New England Electric
System, and Solutia, Inc. Mrs. Bok has been a director of Avery
Dennison Corporation since October 1990. She served as a director of
Dennison Manufacturing Company from 1984 to October 1990. Her
present term expires in 2001.
[PHOTO OF PHILIP M. NEAL]
Philip M. Neal, age 59. Since May 1998, Mr. Neal has served as
President and Chief Executive Officer of Avery Dennison Corporation.
From December 1990 through April 1998, Mr. Neal was President and
Chief Operating Officer of Avery Dennison Corporation. Prior to
December 1990, he served as Executive Vice President, Group Vice
President, and Senior Vice President, Finance, respectively. He has
been a director of Avery Dennison Corporation since December 1990.
His present term expires in 2001.
3
<PAGE>
[PHOTO OF CHARLES D. MILLER]
Charles D. Miller, age 72. Since May 1998, Mr. Miller has served as
Chairman of Avery Dennison Corporation. From November 1983 through
April 1998, Mr. Miller was Chairman and Chief Executive Officer of
Avery Dennison Corporation. Prior to 1983, he served as President
and Chief Executive Officer. He is Chairman and a director of
Nationwide Health Properties, Inc., and also is a director of Edison
International, Korn/Ferry International and Pacific Life Insurance
Company. He has been a director of Avery Dennison Corporation since
January 1975. His present term expires in 2002.
[PHOTO OF RICHARD M. FERRY]
Richard M. Ferry, age 62. Since May 1997, he has been Chairman of
Korn/Ferry International, an international executive search firm.
From May 1991 through May 1997, Mr. Ferry was Chairman and Chief
Executive Officer of Korn/Ferry International. Prior to 1991, he
served as President of Korn/Ferry International. He is also a
director of Dole Food Company, Korn/Ferry International, Mrs. Fields
Original Cookies, Inc., and Pacific Life Insurance Company. He has
been a director of Avery Dennison Corporation since December 1985.
His present term expires in 2002.
[PHOTO OF DWIGHT L. ALLISON, JR.]
Dwight L. Allison, Jr., age 70. Since October 1986, Mr. Allison has
been a private investor. From January 1977 to September 1986, Mr.
Allison served in various senior executive positions (including
Chairman and Chief Executive Officer, Vice Chairman and President)
with The Boston Company, a trust, banking and financial management
firm. He is also a director of Mellon Financial Corporation. He 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. His present term expires in 2002.
[PHOTO OF KENT KRESA]
Kent Kresa, age 61. Since October 1990, Mr. Kresa has been Chairman,
President and Chief Executive Officer of Northrop Grumman
Corporation, an aeronautical and defense systems manufacturer. From
1987 to September 1990, Mr. Kresa served as President and Chief
Operations Officer of Northrop Corporation. He is also a director of
Atlantic Richfield Corporation. He has been a director of Avery
Dennison Corporation since February 1999. His present term expires
in 2002.
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,
1999.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name Ownership(1) of Class
---- ------------ --------
<S> <C> <C>
Charles D. Miller............................... 805,709 (3) (2)
Sidney R. Petersen.............................. 44,508 (4)(5) (2)
Frank V. Cahouet................................ 66,360 (4)(6) (2)
Richard M. Ferry................................ 45,489 (4)(7) (2)
John C. Argue................................... 46,278 (4)(8) (2)
Peter W. Mullin................................. 48,673 (4)(9) (2)
John B. Slaughter............................... 26,783 (10) (2)
Philip M. Neal.................................. 458,402 (11) (2)
Dwight L. Allison, Jr........................... 67,144 (12) (2)
Joan T. Bok..................................... 36,033 (13) (2)
Kent Kresa...................................... 2,700 (14) (2)
David E.I. Pyott................................ -- --
Kim A. Caldwell................................. 170,472 (15) (2)
Robert M. Calderoni............................. 21,088 (16) (2)
Robert G. van Schoonenberg...................... 70,471 (17) (2)
Dean A. Scarborough............................. 76,307 (18) (2)
All Directors and Executive Officers as a Group
(21 persons, including those named)............ 2,144,911 (19) 1.9%
</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) Less than 1%.
(3) Includes 581,000 shares with respect to which Mr. Miller holds options
exercisable within 60 days from December 31, 1999. Also includes 192,198
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 3,862
shares held in The Candyman Trust and 3,862 shares held in the Mandycan
Trust, as to which Mr. Miller, as co-trustee, shares the authority to
vote and to dispose of the shares. Also includes 5,079 shares held by
Mrs. Miller, as to which Mr. Miller disclaims beneficial ownership. Also
includes 500 shares held by each of Mr. Miller's two dependent daughters,
as to which Mr. Miller disclaims beneficial ownership.
(4) Includes 31,000 shares with respect to which each of Messrs. Petersen,
Cahouet, Ferry, Argue, and Mullin holds options exercisable within 60
days from December 31, 1999.
(5) Includes 13,508 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.
(6) Includes 17,676 shares held in trust with respect to which Mr. Cahouet
has sole voting and disposition power. Also includes 16,474 shares held
in trust by Mrs. Cahouet, as to which Mr. Cahouet disclaims any
beneficial ownership. Also includes 1,105 shares issuable under phantom
stock units designated for Mr. Cahouet under the Company's Capital
Accumulation Plan ("CAP") trust.
(7) Includes 1,148 shares issuable under phantom stock units designated for
Mr. Ferry under the CAP trust.
5
<PAGE>
(8) Includes 3,300 shares held in trust with respect to which Mr. Argue has
sole voting power but no disposition power. Also includes 1,650 shares
held in trust with respect to which Mr. Argue has the authority to vote
and dispose of the shares. Also includes 1,148 shares issuable under
phantom stock units designated for Mr. Argue under the CAP trust.
(9) Includes 573 shares issuable under phantom stock units designated for Mr.
Mullin under the CAP trust.
(10) Includes 22,400 shares with respect to which Dr. Slaughter holds options
exercisable within 60 days from December 31, 1999. Also includes 222
shares held by Mrs. Slaughter, as to which Dr. Slaughter disclaims any
beneficial ownership. Also includes 481 shares issuable under phantom
stock units designated for Dr. Slaughter under the CAP trust.
(11) Includes 100,731 shares held in trust in which Mr. Neal has sole voting
and disposition power. Includes 352,900 shares with respect to which Mr.
Neal holds options exercisable within 60 days from December 31, 1999.
Also includes 100 shares held by Mrs. Neal, as to which Mr. Neal
disclaims beneficial ownership.
(12) Includes 36,464 shares held in a trust in which Mr. Allison is the
primary beneficiary, but does not hold investment or voting powers. Also
includes 1,680 shares held in a trust in which Mrs. Allison is the
primary beneficiary and Mr. Allison is a contingent beneficiary without
investment or voting powers. Also includes 29,000 shares with respect to
which Mr. Allison holds options exercisable within 60 days from December
31, 1999.
(13) Includes 26,500 shares with respect to which Mrs. Bok holds options
exercisable within 60 days from December 31, 1999. Also includes 278
shares issuable under phantom stock units designated for Mrs. Bok under
the CAP trust.
(14) Includes 2,500 shares with respect to which Mr. Kresa holds options
exercisable within 60 days from December 31, 1999.
(15) Includes 141,500 shares with respect to which Mr. Caldwell holds options
exercisable within 60 days from December 31, 1999. Also includes 50
shares each held by Mr. Caldwell's daughter and son, as to which Mr.
Caldwell disclaims beneficial ownership.
(16) Includes 20,000 shares with respect to which Mr. Calderoni holds options
exercisable within 60 days from December 31, 1999.
(17) Includes 46,000 shares with respect to which Mr. van Schoonenberg holds
options exercisable within 60 days from December 31, 1999.
(18) Includes 58,889 shares with respect to which Mr. Scarborough holds
options exercisable within 60 days from December 31, 1999. Also includes
108 shares held by Mrs. Scarborough, as to which Mr. Scarborough
disclaims beneficial ownership, and 1,964 shares issuable under phantom
stock units designated for Mr. Scarborough under the CAP trust.
(19) Includes 1,506,607 shares with respect to which all executive officers
and directors as a group hold options exercisable within 60 days from
December 31, 1999.
6
<PAGE>
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
During 1999, there were nine 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: Sidney R.
Petersen (Chairman), Dwight L. Allison, Jr., Joan T. Bok, Richard M. Ferry,
Peter W. Mullin, and Kent Kresa, met twice during 1999. 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: John C. Argue (Chairman), Sidney R. Petersen and Frank V.
Cahouet, met three times during 1999. 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 and to review and make recommendations to the Board concerning
management's proposed option grants, cash incentive awards and other direct
and indirect compensation matters.
The Ethics and Conflict of Interest Committee, which is composed of the
following directors: Joan T. Bok (Chairman), John B. Slaughter and Sidney R.
Petersen, met once during 1999. The functions of the Ethics and Conflict of
Interest Committee are to survey, monitor and provide counsel on an ongoing
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 the Company's Legal and Ethical Conduct
Policy; to monitor the Company's compliance program; and to report and make
recommendations to the full Board in instances where it is believed that
possible violations of Company policy could exist.
The Finance Committee, which is composed of the following directors: Frank
V. Cahouet (Chairman), Charles D. Miller, Peter W. Mullin, Dwight L. Allison,
Jr., Philip M. Neal, Sidney R. Petersen, Joan T. Bok, and Kent Kresa met once
during 1999. 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, bank loans and
changes in the financial structure of the Company.
The Nominating Committee, which is composed of the following directors:
Richard M. Ferry (Chairman), Charles D. Miller, John C. Argue, Peter W. Mullin
and Philip M. Neal, met twice during 1999. 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. 21.
The Strategic Planning Committee, which is composed of the following
directors: Philip M. Neal (Chairman), Charles D. Miller, John C. Argue, Peter
W. Mullin, Richard M. Ferry, John B. Slaughter and
7
<PAGE>
Dwight L. Allison, Jr., met once during 1999. 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:
Charles D. Miller (Chairman), Richard M. Ferry, Philip M. Neal, John C. Argue
and Frank V. Cahouet, did not meet during 1999. 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 $32,000 and attendance fees of $1,500 per Board meeting
attended, and $1,400 per committee meeting attended as Chairman of the
committee or $1,200 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 Finance, Nominating and the Ethics and Conflict of Interest
Committees are each paid an annual retainer fee of $3,000. 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
five investment funds managed by an insurance company. Benefits payable by the
Company under these plans are secured with assets placed in an irrevocable
trust. In addition, each non-employee director (except for Mr. Pyott, who
joined the Board in November 1999) received a gift of 200 shares of the
Company's common stock on April 29, 1999.
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 the director's 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 ("1988 Plan"), pursuant to which options to purchase a
total of 20,000 shares (2,000 shares for each non-employee director) of
Company common stock were granted in 1999 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. Under the
CAP, non-employee directors have the opportunity to defer until retirement the
receipt of gain realized on exercise of stock options. The 1988 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 of
2,000 shares thereafter to each continuing non-employee director.
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 1999, the compensation paid by the Company to such persons for
services in all capacities during 1999 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)
------------------ ---- -------- -------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip M. Neal 1999 $750,025 $930,000 -- -- 85,000 $1,120,000 $48,716
President and Chief 1998 658,333 800,000 -- -- 150,000 428,000 54,006
Executive Officer 1997 558,333 725,000 -- -- 55,000 428,000 63,079
Kim A. Caldwell 1999 $410,672 $374,400 $70,381 -- 16,600 $527,500 $20,680
Executive Vice
President, 1998 393,333 265,000 77,792 -- 28,000 252,000 23,388
Global Technology and 1997 346,917 308,000 -- -- 43,000 252,000 124,463
New Business
Development
Robert M. Calderoni 1999 $378,340 $317,700 $67,824 -- 16,600 $292,000 $18,678
Senior Vice President, and 1998 360,000 260,000 -- -- 40,000 -- 7,463
Chief Financial Officer 1997 58,333 50,000 -- -- 61,500 -- 18,914
Robert G. van Schoonenberg 1999 $353,340 $297,000 -- -- 16,600 $544,000 $19,421
Senior Vice President, 1998 332,667 310,000 -- -- 27,000 240,000 23,137
General Counsel and 1997 310,500 250,000 -- -- 22,000 240,000 30,628
Secretary
Dean A. Scarborough 1999 $345,182 $314,300 -- -- 46,600 $450,300 $14,425
Group Vice President, 1998 316,667 162,700 -- -- 26,000 107,500 16,878
Fasson Roll Worldwide 1997 277,083 248,000 -- -- 64,000 107,500 15,598
</TABLE>
- --------
(1) Amounts shown include amounts earned but deferred at the election of
executive officers under the Company's deferred compensation plans and
Employee Savings Plan, a qualified defined contribution plan under Section
401(k) of the Code.
(2) Amounts paid to Mr. Caldwell and Mr. Calderoni include $44,009 and
$36,000, respectively, for mortgage differential payments related to
relocation expenses.
(3) Amounts for 1999, 1998 and 1997 consist of cash payments under the
Company's Executive Long-Term Incentive Plan ("LTIP") for the cycles which
were completed on December 31, 1998 and December 31, 1996, respectively.
For the cycle completed in 1996, half was paid in 1997, and the second
half in 1998.
(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 ("Savings Plan"); and (ii) interest earned on deferred
compensation accounts above 120% of the applicable federal rate ("above
market interest"). These amounts for 1999 are $46,313 and $2,403,
respectively, for Mr. Neal; $20,230 and $450, respectively, for Mr.
Caldwell; $18,678 and $0, respectively, for Mr. Calderoni; $18,350 and
$1,071, respectively, for Mr. van Schoonenberg, and $14,425 and $0,
respectively, for Mr. Scarborough.
9
<PAGE>
Option Grants
The following table shows information regarding options granted in 1999 to
each of the named executive officers under the 1990 Stock Option and Incentive
Plan (the "1990 Plan" or "1990 Stock Option Plan") and 1996 Stock Incentive
Plan (the "1996 Plan").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------
Number of
Securities % of
Underlying Total Options Exercise
Options Granted to or Base
Granted Employees in Price Expiration Grant Date
Name (#)(1)(2) Fiscal Year ($/Share) Date Present Value ($)(3)
---- ---------- ------------- --------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
Philip M. Neal 85,000 8.56% $59.1562 12/2/2009 $1,720,400
Kim A. Caldwell 16,600 1.43 59.1562 12/2/2009 355,984
Robert M. Calderoni 16,600 1.43 59.1562 12/2/2009 355,984
Robert G. van
Schoonenberg 16,600 1.43 59.1562 12/2/2009 355,984
Dean A. Scarborough 30,000 2.58 53.1250 9/23/2009 491,100
16,600 1.43 59.1562 12/2/2009 355,984
</TABLE>
- --------
(1) Non-qualified stock options were granted at fair market value for a term
of ten years under the 1990 or the 1996 Plan. With the exception of Mr.
Scarborough's first grant which vests 50% after 3 years and 50% after 6
years, 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 a return on total capital test, which
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.
(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 .2843 to .2847); (ii) dividend yield is measured as the
cumulative dividends paid the last twelve months as a percentage of the
twelve month average of the month-end closing prices (for the month in
which the dividend was declared) prior to grant of the option (ranges from
1.737% to 1.79%); (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 5.23% to 5.50%); (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 $1,028,220 for Mr. Neal; $200,805 for Mr. Caldwell;
$200,805 for Mr. Calderoni; $200,805 for Mr. van Schoonenberg, and 200,805
for the grant expiring 12/2/2009 for Mr. Scarborough. The Black-Scholes
option pricing model calculates a cash equivalent value for an option on
the date of grant. The Company's use of such model is not intended to
forecast any future appreciation in the price of the Company's stock. In
addition, no gain to the optionees is possible without appreciation in the
price of the Company's common stock, which will benefit all stockholders.
If the market price of the stock does not exceed the exercise price of the
options at some time after the options become exercisable or if they
terminate unvested or unexercised, the value of the options will
ultimately be zero.
10
<PAGE>
Option Exercises and Fiscal Year-End Values
The following table shows for each of the named executive officers the
shares acquired on exercise of options during 1999, the difference between the
option exercise price and the market value of the underlying shares on the
date of such exercise, and (as to outstanding options at December 31, 1999)
the number of unexercised options and the aggregate unrealized appreciation on
"in-the-money," unexercised options held at such date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year-End (#) Fiscal Year-End ($)(2)
------------------- ----------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($)(1) Unexercisable Unexercisable
- ---- --------------- --------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Philip M. Neal 104,000 $5,556,120 352,900/367,500 $19,126,761/9,741,635
Kim A. Caldwell 71,400 3,939,995 141,500/118,100 7,516,103/3,491,621
Robert M. Calderoni -- -- 20,000/ 98,100 653,124/2,622,604
Robert G. van
Schoonenberg 28,800 1,226,156 46,000/109,800 2,153,000/3,376,755
Dean A. Scarborough 36,711 2,019,416 58,889/160,600 3,247,419/4,591,730
</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, 1999 minus the exercise
price of "in-the-money" options.
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 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 performance cycle, which
cycles generally begin every other year. The current three-year cycle
commenced in 1998 (1998-2000), and future cycles will commence every other
year (e.g., 2000 and 2002). Cash payments made in 1999 under the LTIP for the
performance cycle ended in 1998 are set forth in the table on page 9. No
deferred cash incentive awards were made under the LTIP in 1999.
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 $31,128, 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.
11
<PAGE>
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 $160,000 of covered
compensation and which limited the annual pension benefit payable under the
Retirement Plan to $130,000. 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 $335,981 for
Mr. Neal, $259,903 for Mr. Caldwell, $288,094 for Mr. Calderoni, $212,727 for
Mr. van Schoonenberg, and $225,648 for Mr. Scarborough, respectively. These
estimated benefits do not include any assumption for annual increases in
compensation.
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 Mr.
Neal as a participant in this plan. Mr. Neal's benefits will commence upon his
retirement 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 average compensation (average
of his annual salary plus annual bonus for last three years of employment).
Assuming benefits commence in 2005, Mr. Neal's estimated annual retirement
benefit under the SERP would be $733,025. Survivor and disability 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 April 15, 1997, the Company entered into an agreement with Mr. Neal,
which agreement was amended on May 1, 1998, providing that, if his employment
is terminated for any reason other than for death, disability, cause or
voluntary resignation without good reason (as such terms are defined in the
agreement), he (i) will receive a payment equivalent to a pro-rated annual
bonus for the year of termination; salary and bonus (based on his highest
combined annual base salary plus bonus in any of the three previous years) for
three years or until he reaches age 65 (the "severance period"); and
additional retirement and supplemental retirement benefits which would have
accrued during the severance period; (ii) will continue to participate in
welfare benefit plans (such as medical, dental, and life insurance) for three
years (but reduced to the extent such benefits are provided by another
employer); (iii) will receive three additional years of age and service credit
under the Company's deferred compensation plans; (iv) will receive payments
under the LTIP for performance cycles which commence during his employment as
if he had remained employed with the Company during the severance period; and
(v) his unvested stock options will be accelerated. Upon any such termination,
Mr. Neal will be entitled to purchase the Company automobile, if any, then
being provided for his use at its depreciated book value, and to have assigned
12
<PAGE>
to him at no cost (although Mr. Neal 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 specifically
relating to him. If such termination occurs after a change of control, the
Company will pay for outplacement services not to exceed $50,000. Amounts to
which Mr. Neal would be entitled under the agreement are reduced to the extent
of any compensation which he earns from any new employment or services
performed during the severance period. Mr. Neal will be reimbursed for any
excise taxes that are imposed under Section 4999 of the Code.
On April 15, 1997, the Company entered into an agreement with Mr. Caldwell,
on October 29, 1997 with Mr. Calderoni and on August 1, 1997 with Mr.
Scarborough which are substantially the same as that of Mr. Neal described
above, except (i) the severance period following termination is one year
before a change of control and three years after a change of control; (ii)
coverage under welfare benefit plans and additional age and service credit
under the Company's deferred compensation plans following termination is one
year before a change of control and three years (or the minimum age and
service credit required for early retirement benefits and the retirement
interest rate) after a change of control; and (iii) there are no comparable
provisions relating to payments under the LTIP or assumption of insurance
policies. On March 16, 1996, the Company entered into an agreement with Mr.
van Schoonenberg providing that, if his employment with the Company is
terminated for any reason other than for death, disability, cause, or
voluntary resignation without good reason (as such terms are defined in the
agreement), he will receive a payment equivalent to two years salary and
bonus, continue to participate in benefit and incentive plans for a two-year
period, his unvested options will be accelerated, and he will receive the
minimum age and service credit required for early retirement eligibility and
other purposes; in the event of such termination within two years of a change
of control, he will receive a payment equal to three times salary and bonus,
payment for LTIP and reimbursement for excise taxes.
Section 16(a) Beneficial Ownership Reporting Compliance
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 1999 fiscal year, Insiders complied with all Section
16(a) filing requirements applicable to Insiders.
13
<PAGE>
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 10 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 60 highly compensated executives. This is designed to
ensure consistency throughout the executive compensation program. In reviewing
the individual performance of the 9 executive officers (other than Mr. Neal),
the Committee takes into account the detailed performance reviews and
recommendations of Mr. Neal.
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 LTIP. The Committee's policies with respect to each of
these elements, including the basis for the compensation paid and awarded to
Mr. Neal, President 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 executive.
Under the 1993 Omnibus Budget Reconciliation Act ("OBRA") and Section 162(m)
of the Code, 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." To qualify as "performance-based,"
compensation payments must be based solely upon the achievement of objective
performance goals and made under a plan that is administered by a committee of
outside directors. In addition, the material terms of the plan must be
disclosed to and approved by stockholders, and the Committee must certify that
the performance goals were achieved before payments can be made. The Committee
has designed certain of the Company's compensation programs to conform with
the Section 162(m) of the Code and related regulations so that total
compensation paid to any employee covered by the Section 162(m) should 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 certain circumstances, when sound management of the
Company so requires.
14
<PAGE>
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. Neal'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 executive's entire compensation package.
For 1999, his salary level was within or below this range, based on
competitive salary data compiled in 1998 and updated for use in 1999.
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. Neal,
comparing the total compensation packages of the executive, 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, 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. Neal in 1999, 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 exceeding several financial goals in 1999, including
return on total capital ("ROTC") and earnings per share ("EPS"); the
performance of the Company's common stock against the Peer Group; and the
assessment by the Committee of Mr. Neal's performance, including his
individual leadership with respect to the development of long-term business
strategies for the Company to improve its economic value, leadership
development, succession planning and management continuity. The Committee also
took into account Mr. Neal's considerable experience in both operating and
corporate positions, which has enable him to make significant contributions to
the Company. Mr. Neal was granted a base salary of $775,000 for 1999
(effective May 1999), an increase of 10.7% over his $700,000 base salary for
1998.
Annual Bonus
The Company's executive officers, other than Mr. Neal, are eligible for an
annual cash bonus under the Company's Executive Leadership 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 1999, 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,
economic value added and sales. The Committee weighs these financial goals
very heavily. Each of the specified financial performance measures is given
approximately equal weight. In 1999, 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.
15
<PAGE>
Mr. Neal is eligible for an annual cash bonus under the Company's Senior
Executive Leadership Compensation Plan (the "Senior Executive Bonus Plan")
which, along with the Executive Bonus Plan was approved by stockholders in
1999 as part of the Company's policy to design certain of the Company's
compensation programs to conform with Section 162(m) of the Code 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 ("ROS"), economic value added
("EVA"), return on equity ("ROE"), 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 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 1999, the Company substantially exceeded each of its targeted
performance goals (ROTC and EPS) under the Senior Executive Bonus Plan. Based
on this performance, Mr. Neal was awarded a cash bonus of $930,000, which is
16.25% more than the bonus paid for 1998.
Stock Options
Under the 1990 Plan and 1996 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 may elect not to award options or to
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.
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. Except for
special grants, which vest 25% per year, and for Mr. Scarborough's grant of
30,000 options in 1999, which vest 50% after 3 years and 50% after 6 years,
options for the executive officers (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 a return on total capital,
which measures Company's return on total capital against that of a specified
group of other companies approved by the Compensation and Executive Personnel
Committee. Options for executives who do not participate in the LTIP 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 package cannot be realized unless stock price appreciation occurs
over a number of years.
In 1999, Mr. Neal received options to purchase 85,000 shares with an
exercise price of $59.1562 per share. As of December 31, 1999, Mr. Neal held
in trust 100,731 shares of the Company's common stock and, with the 1999
grant, holds options to purchase an additional 720,400 shares, of which
options to purchase 352,900 shares were exercisable at December 31, 1999.
LTIP
Under the LTIP, key executives recommended by the Company's Chief Executive
Officer and designated by the Committee are eligible 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
16
<PAGE>
incentive award after the end of each multi-year performance cycle, which
cycles generally begin every other year. Cash payments made in 1999, under the
LTIP for the performance cycle ended in 1998, are set forth in the table on
page 9. No deferred cash incentive awards were made under the LTIP in 1999.
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 1999, approximately 50% of the
Company's executive compensation (over 65% for the individuals listed in the
table on page 9) consisted of these performance-based variable elements. For
Mr. Neal, approximately 71% of his 1999 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 24, 2000
John C. Argue, Chairman
Frank V. Cahouet
Sidney R. Petersen
17
<PAGE>
STOCKHOLDER RETURN PERFORMANCE
The graph on the next page 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.
The Peer Group is comprised of Air Products & Chemicals Inc., Armstrong
World Industries Inc., Arvin Industries Incorporated, Baker-Hughes,
Incorporated, Bemis Company, Incorporated, Black & Decker Corporation, Boise
Cascade Corporation, Cabot Corporation, Crane Company, Dana Corporation,
Danaher Corporation, Eaton Corporation, Ecolab Incorporated, Engelhard
Corporation, Ethyl Corporation, Federal-Mogul Corporation, Ferro Corporation,
H. B. Fuller Company, The B. F. Goodrich Company, W. R. Grace & Company, Great
Lakes Chemical Corporation, M.A. Hanna Company, Harris Corporation, Harsco
Corporation, Hercules Incorporated, Illinois Tool Works Incorporated,
Ingersoll-Rand Company, Mark IV Industries Incorporated, MASCO Corporation,
The Mead Corporation, Moore Corporation Limited, NACCO Industries, Nalco
Chemical Company, National Service Industries, Incorporated, Newell Rubbermaid
Incorporated, Olin Corporation, P.P.G. Industries Incorporated, Parker-
Hannifin Corporation, Pentair Incorporated, Pitney Bowes Incorporated, Sequa
Corporation, The Sherwin-Williams Company, Snap-On Tools Corporation, Sonoco
Products Company, Stanley Works, Tecumseh Products Company, Thomas & Betts
Corporation, Timken Company, Union Carbide Corporation, and Westvaco
Corporation.
During 1999, five companies were removed from the Peer Group for all periods
due to merger/acquisition activity. These companies include Witco Corporation,
which merged into Crompton & Knowles, Morton International Incorporated, which
was acquired by Rohm and Haas, Premark International Incorporated, which was
acquired by Illinois Tool Works, Union Camp Corporation, which merged into
International Paper Company, and Rubbermaid Incorporated, which was acquired
by Newell Companies to form Newell Rubbermaid Incorporated. MASCO Corporation,
Thomas & Betts Corporation, Timken Company, The M.A. Hanna Company, and
National Services Industries, Incorporated have been included for all periods.
18
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
OF AVERY DENNISON, S&P 500 INDEX AND PEER GROUP,
WEIGHTED AVERAGE(2) AND MEDIAN
as of December 31, 1999
[Chart of Avery Dennison, S&P 500 Index & Peer Group, Weighted Average(2) and
Meridian]
<TABLE>
<CAPTION>
12/94 12/95 12/96 12/97 12/98 12/99
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Avery Dennison $100 $145 $209 $269 $276 $453
-------------------------------------------------------------------
S&P 500 Index $100 $138 $169 $226 $290 $351
-------------------------------------------------------------------
Peer Group (Wt. Average) (2) $100 $130 $154 $203 $211 $215
-------------------------------------------------------------------
Peer Group (Median) $100 $127 $148 $200 $173 $154
</TABLE>
- --------
(1) Assumes $100 invested on December 31, 1994, and the reinvestment of
dividends; chart reflects performance on a calendar year basis.
(2) Weighted average is weighted by market capitalization.
Stock price performance of the Company reflected in the above graph is not
necessarily indicative of future price performance.
19
<PAGE>
CERTAIN TRANSACTIONS
Peter W. Mullin 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 1999, the Company paid insurance companies premiums
for life insurance placed by MINC and PWM in 1999 and prior years in
connection with various Company employee benefit plans. In 1999, MINC and PWM
earned commissions from such insurance companies in an aggregate amount of
approximately $1,016,000 for the placement and renewal of this insurance, in
which Mr. Mullin had direct and indirect interests of approximately $712,000.
VOTING SHARES
Stockholders of record, at the close of business on February 28, 2000, are
entitled to notice of, and to vote at, the Annual Meeting. There were
112,421,211 shares of common stock of the Company outstanding on February 28,
2000.
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; such person 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 were the only persons who, as
of December 31, 1999, 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>
Avery Dennison Corporation
Employee Stock Benefit Trust ("ESBT") 13,914,515(1) 12.3%
Wachovia Bank, N.A., Trustee
101 North Main Street
Winston-Salem, NC 27150-3099
</TABLE>
- --------
(1)The ESBT and Wachovia Bank, N.A., as Trustee, disclaim beneficial ownership
of these shares.
The Company's Employee Savings Plan, SHARE Plan and Retirement Plan (the
"Plans") together owned a total of 9,225,733 shares of Company common stock on
December 31, 1999, or 8.2% of the 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.
20
<PAGE>
GENERAL
Independent Accountants
The Board of Directors has selected PricewaterhouseCoopers L.L.P. to serve
as the Company's independent accountants for the 2000 fiscal year. One or more
representatives of PricewaterhouseCoopers 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 26, 2001, must be received at the Company's principal
executive offices on or before November 9, 2000. 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 of Directors 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.
Annual Report
The Company's 1999 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 SOLICITATION/VOTING INSTRUCTION CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
Robert G. van Schoonenberg
Secretary
Dated: March 10, 2000
21
<PAGE>
[LOGO OF AVERY PROXY SOLICITATION/
DENNISON] VOTING INSTRUCTION CARD
ANNUAL MEETING - APRIL 27, 2000
PASADENA, CALIFORNIA
The undersigned hereby appoints Frank V. Cahouet, Philip M. Neal and Peter
W. Mullin, or each or any of them with power of substitution, proxies for the
undersigned to act and vote at the 2000 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. This card provides voting instructions, as applicable,
to (i) the appointed proxies for shares held of record by the undersigned
including those held under the Company's DirectSERVICE(TM) Investment and Stock
Purchase Program, and (ii) the Trustee for shares held on behalf of the
undersigned in the Company's Savings Plan and SHARE Plan.
1. Election of Directors
Nominees: (01) Sidney R. Petersen, (02) John C. Argue, and (03) David
E.I. Pyott
IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION
OF THE DIRECTOR NOMINEES
(OVER)
(continued and to be signed on other side)
-PLEASE FOLD AND DETACH HERE-
NOTICE
If you plan to attend the Annual Meeting of Stockholders, please so indicate by
marking the appropriate box on this card. Space limitations make it necessary
to limit attendance to stockholders. Registration for the Annual Meeting will
begin at 12:30 p.m. on April 27, 2000.
1
<PAGE>
[x] Please mark your
votes as indicated in
this example.
A vote FOR ALL nominees is recommended by the Board of Directors.
FOR ALL WITHHELD FROM ALL
1. Election of
Directors [_] [_]
(page 1)
FOR ALL EXCEPT the following nominee(s):
- ------------------------------------------------------------
PLEASE DO NOT FOLD OR
PERFORATE THIS CARD
IMPORTANT--PLEASE MARK, SIGN, DATE AND
RETURN THIS CARD PROMPTLY IN THE ENCLOSED
ENVELOPE. THANK YOU.
Send admission ticket for meeting [_]
Signature of Stockholder(s)/Plan Participant(s) Date , 2000
--------------- ----
NOTE: If acting as attorney, executor, trustee, or in other representative
capacity, please sign name and title.
-PLEASE FOLD AND DETACH HERE-
Dear Stockholder/Plan Participant:
Please complete the card and return it promptly in the envelope provided so that
your vote can be tabulated prior to the Annual Meeting of Stockholders, which
will be held on April 27, 2000.
Alternatively, you may vote your shares by telephone. Voting by telephone
eliminates the need to return the card. To vote by telephone, please follow the
steps below:
1) Have this card and your social security number available.
2) Using a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683)
24 hours a day, 7 days a week.
Your telephone vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the card.
U.S. Trust Company, N.A., as Trustee of the Avery Dennison Corporation Savings
Plan and SHARE Plan, will vote shares of Company Stock that have not been
allocated to the account of any participant in proportion to the manner in which
allocated shares of Company Stock are voted by participants who timely furnish
voting instructions. The card should be returned no later than April 20, 2000.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
2
<PAGE>
[LOGO OF AVERY CONFIDENTIAL VOTING INSTRUCTIONS
DENNISON]
TO: FIRST CHICAGO TRUST COMPANY OF NEW YORK AS TABULATING AGENT FOR THE TRUSTEE
OF THE AVERY DENNISON CORPORATION EMPLOYEE STOCK BENEFIT TRUST
VOTING INSTRUCTIONS SOLICITED BY THE TRUSTEE ON BEHALF OF THE BOARD OF
DIRECTORS OF AVERY DENNISON CORPORATION FOR THE ANNUAL MEETING OF
STOCKHOLDERS, APRIL 27, 2000.
The undersigned hereby authorizes Wachovia Bank, N.A., as Trustee, to act
and vote at the 2000 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 its discretion, upon any other matters which may properly come
before the meeting.
1. Election of Directors
Nominees: (01) Sidney R. Petersen, (02) John C. Argue, and (03) David
E.I. Pyott
IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION
OF THE DIRECTOR NOMINEES
(OVER)
-(continued and to be signed on other side)-
PLEASE FOLD AND DETACH HERE
3
<PAGE>
[_] Please mark your
votes as indicated in
this example.
A vote FOR ALL nominees is recommended by the Board of Directors.
FOR ALL WITHHELD FROM ALL
1. Election of [_] [_]
Directors
(page 1)
FOR ALL EXCEPT the following nominee(s):
- ----------------------------------------------------
PLEASE DO NOT FOLD OR
PERFORATE THIS CARD
IMPORTANT--PLEASE MARK, SIGN, DATE AND
RETURN THIS CARD PROMPTLY IN THE ENCLOSED
ENVELOPE. THANK YOU.
Signature of Optionee Date , 2000
--------------------------- ----
NOTE: If acting as attorney, executor, trustee, or in other representative
capacity, please sign name and title.
-PLEASE FOLD AND DETACH HERE-
Dear Avery Dennison Optionee:
Under the terms of the Avery Dennison Corporation Employee Stock Benefit Trust,
you are entitled, as an employee and a holder of vested stock options from Avery
Dennison, to instruct the Trustee how to vote shares held by the Trust.
Please complete the card and return it promptly in the envelope provided so that
your instructions can be tabulated prior to the Annual Meeting of Stockholders,
which will be held on April 27, 2000.
Alternatively, you may vote your shares by telephone. Voting by telephone
eliminates the need to return the card. To vote by telephone, please follow the
steps below:
1) Have this card and your social security number available.
2) Using a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683)
24 hours a day, 7 days a week.
Your telephone vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
4
<PAGE>
[LOGO OF AVERY PROXY
DENNISON] SOLICITED BY BOARD OF DIRECTORS
ANNUAL MEETING - APRIL 27, 2000
PASADENA, CALIFORNIA
The undersigned hereby appoints Frank V. Cahouet, Philip M. Neal and Peter
W. Mullin, or each or any of them with power of substitution, proxies for the
undersigned to act and vote at the 2000 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: (01) Sidney R. Petersen, (02) John C. Argue, and (03) David
E.I. Pyott
IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION
OF THE DIRECTOR NOMINEES
(OVER)
(continued and to be signed on other side)
-PLEASE FOLD AND DETACH HERE-
5
<PAGE>
[X] Please mark your
votes as indicated in
this example
A vote FOR ALL nominees is recommended by the Board of Directors.
FOR ALL WITHHELD FROM ALL
1. Election of [_] [_]
Directors
(page 1)
FOR ALL EXCEPT the following nominee(s):
- ----------------------------------------------------
PLEASE DO NOT FOLD OR
PERFORATE THIS CARD
IMPORTANT--PLEASE MARK, SIGN, DATE AND
RETURN THIS CARD PROMPTLY IN THE ENCLOSED
ENVELOPE. THANK YOU.
Space limitations for the Annual
Meeting make it necessary to limit
attendance to stockholders. "Street
name" holders wishing to attend need to
bring to the Annual Meeting a copy of a
brokerage statement reflecting stock
ownership as of February 28, 2000.
Signature of Stockholder Date , 2000
--------------------- ---
NOTE: If acting as attorney, executor, trustee, or in other representative
capacity, please sign name and title.
-PLEASE FOLD AND DETACH HERE-
6
