Exhibit 10.35
AVERY DENNISON CORPORATION KEY EXECUTIVE
CHANGE OF CONTROL SEVERANCE PLAN
     Avery Dennison Corporation has issued this Avery Dennison Corporation Key
Executive Change of Control Severance Pay Plan to provide certain designated
executives of the Company and its affiliates and Subsidiaries with severance
protection under covered circumstances.
ARTICLE I.
DEFINITIONS AND INTERPRETATIONS
     Section 1.01 Definitions. Capitalized terms used in this Plan shall have
the following meanings, except as otherwise provided or as the context of the
Plan otherwise requires:
“Annual Bonus” shall have the meaning set forth in Section 3.01(a)(ii).
“Annual Salary” shall mean the highest annualized rate of base salary applicable
to the Participant during the six month period ending on the Termination Date.
For the avoidance of doubt, “base salary” shall include amounts earned in the
applicable period the payment of which is deferred to a future year but shall
not include amounts earned in prior periods the payment of which is deferred to
the applicable period, and “base salary” also shall not include any bonus,
commission, incentive or retention payments, stock options or other stock
related rights, or other forms of employee benefits such as vacation, insurance,
health or medical benefits, disability benefits, workers’ compensation,
supplemental unemployment benefits, and post-employment or retirement benefits
(including but not limited to compensation, pension, health, medical or life
insurance).
“Benefit Plan” shall mean any “employee benefit plan” (including any “employee
benefit plan” within the meaning of Section 3(3) of ERISA), program, arrangement
or practice maintained, sponsored or provided by the Company or any of its
Subsidiaries, including those relating to compensation, bonuses, profit-sharing,
stock option, or other stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
workers’ compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance or other benefits).
“Board” shall mean the Board of Directors of the Company.
“Cause” shall mean: (a) Participant’s commission of a crime or other act that
could materially damage the reputation of the Company; (b) Participant’s theft,
misappropriation, or embezzlement of Company property; (c) Participant’s
falsification of records maintained by the Company; (d) Participant’s
substantial failure to comply with the written policies and procedures of the
Company as they may be published or revised from time-to-time; (e) Participant’s
misconduct; or (f) Participant’s substantial failure to perform the material
duties of Participant’s job with the Company, which failure is not cured within
30 days after written notice from the Company specifying the act or acts of
non-performance. Determination of Cause shall be made by the Compensation
Committee or one or more individuals designated by the Compensation Committee,
in its sole and exclusive discretion.
“Change of Control” shall mean “a change in the ownership or effective control,”
or in “the ownership of a substantial portion of the assets of” the Company,
within the meaning of Section 409A, and shall include any of the following
events as such concepts are interpreted under Section 409A:

1

--------------------------------------------------------------------------------

 

(a) the date on which a majority of members of the Board is replaced during any
twelve-month period by directors whose appointment or election is not endorsed
by a majority of the members of the Board before the date of the appointment or
election; or
     (b) the acquisition, by any one Person, or by Persons acting as a group, or
by a corporation owned by a group of Persons that has entered into a merger,
acquisition, consolidation, purchase, stock acquisition, asset acquisition, or
similar business transaction with the Company, of:
          (i) ownership of stock of the Company, that, together with any stock
previously held by such Person or group, constitutes more than fifty percent
(50%) of either (i) the total fair market value or (ii) the total voting power
of the stock of the Company;
          (ii) ownership of stock of the Company possessing thirty percent (30%)
or more of the total voting power of the Company, during the twelve-month period
ending on the date of such acquisition; or
          (iii) assets from the Company that have a total gross fair market
value equal to or more than forty percent (40%) of the total gross fair market
value of all of the assets of the Company during the twelve-month period ending
on the date of such acquisition; provided, however, that any transfer of assets
to a related person as defined under Section 409A shall not constitute a Change
of Control.
“Change of Control Period” shall mean the period beginning on the date of a
Change of Control and ending on the date twenty-four (24) months following such
Change of Control.
“Change of Control Severance Payment” shall have the meaning set forth in
Article III.
“Code” shall mean the Internal Revenue Code of 1986, as amended in the past and
the future. Reference in this Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to such section and any
regulations under such section.
“Company” shall mean Avery Dennison Corporation and its Successors and assigns.
“Comparable Position” shall mean a job position with the Company or any of its
Subsidiaries, or any of their respective Successors and assigns, the principal
work location of which does not satisfy the conditions of subsection (d) of the
definition of “Good Reason” and which position provides pay and benefits that as
a whole are substantially equivalent to, or better than, the Participant’s
aggregate pay and benefits with the Company at the time of the Termination of
Employment when taking into account the Participant’s base salary, target bonus
opportunity, incentive pay and equity opportunities, health and welfare
benefits, severance protection, and other benefits.
“Compensation Committee” shall mean the “Compensation and Executive Personnel
Committee” of the Board.
“Disability” shall mean, when used with reference to any Participant, long term
disability as defined by the applicable long term disability plan maintained by
the Company or one of its Subsidiaries under which the Participant is covered.
“Effective Date” shall mean the date that the Compensation Committee adopts this
Plan.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended in the past and future, and any rules and regulations promulgated
thereunder.

2

--------------------------------------------------------------------------------

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Excise Tax” shall have the meaning set forth in Section 3.03.
“Good Reason” shall mean “a separation from service for good reason” as set
forth in Section 409A, which shall mean that, without the express written
consent of the Participant, one or more of the following shall have occurred
without being timely remedied in the manner set forth below: (a) a material
diminution in the Participant’s base compensation; (b) a material diminution in
the Participant’s authority, duties, or responsibilities; (c) a material
diminution in the authority, duties, or responsibilities of the supervisor to
whom the Participant is required to report; (d) a material change in the
geographic location at which the Participant must perform the services; or
(e) any other action or inaction that constitutes a material breach by the
Company of the agreement under which the Participant provides services. The
Participant shall have “Good Reason” in connection with any or all of the above
solely if (i) the Participant provides notice to the Company of the existence of
the particular condition, action or inaction which the Participant considers to
give the Participant “Good Reason” within 90 days of the initial existence of
such condition, action or inaction, and (ii) the Company shall not have remedied
the condition, action or inaction within 30 days of its receipt of the
Participant’s notice. The effective date of any termination for “Good Reason”
shall be no later than 12 months after the initial existence of such condition,
action or inaction constituting “Good Reason.”
“Parachute Value” of a Payment shall mean the present value as of the date of
the Change of Control for purposes of Section 280G of the Code of the portion of
such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of
the Code, as determined by the accounting firm referred to in Section 3.03 for
purposes of determining whether and to what extent the Excise Tax (as defined in
Section 3.03) will apply to such Payment.
“Participant(s)” shall mean an employee (or employees) of the Company or any of
its Subsidiaries or affiliates who are from time-to-time designated as
Participants in accordance with Section 2.01 of the Plan.
“Payments” shall mean any payment or distribution in the nature of compensation
(within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of
the Participant, whether paid or payable pursuant to this Plan or otherwise.
“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) of the Exchange Act, except that
such term shall not include (a) the Company or any of its Subsidiaries, (b) a
trustee or other fiduciary holding securities under a Benefit Plan of the
Company or any of its affiliates, (c) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (d) a corporation
owned, directly or indirectly, by substantially all of the stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company.
“Plan” shall mean this Avery Dennison Corporation Key Executive Change of
Control Severance Plan, as may be amended, supplemented or modified from time to
time in accordance with its terms.
“Safe Harbor Amount” shall mean three times the Participant’s “base amount,”
(within the meaning of Section 280G(b)(3) of the Code, as may be amended from
time to time) less $1.
“Section 409A” shall mean Section 409A of the Code and the Department of
Treasury Regulations and other interpretive guidance issued thereunder,
including, without limitation, any such regulations or other guidance that may
be issued after the Effective Date.

3

--------------------------------------------------------------------------------

 

“Severance Multiplier” shall mean the multiplier, designated pursuant to
Section 2.01(c) in accordance with a Participant’s Tier, to be applied to a
Participant’s Change of Control Severance Payment under Section 3.01.
“Specified Employee” shall mean any Participant who, as of such Participant’s
Termination Date, is determined to be a “key employee” of the Company if, at
such time, the Company has any stock that is publicly traded on an established
securities market or otherwise. For purposes of this definition, a Participant
is a “key employee” if the Participant meets the requirements of Sections
416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the
Treasury Regulations thereunder and disregarding Section 416(i)(5) of the Code)
at any time during the twelve (12) month period ending on the last day of the
applicable calendar year (referred to as the “identification date” below). If a
Participant is a “key employee” as of the identification date, such Participant
shall be treated as a “key employee” for the entire twelve (12) month period
beginning on the first day of the fourth month following the identification
date. For purposes of this definition, a Participant’s compensation for the
twelve (12) month period ending on an identification date shall mean such
Participant’s compensation, as determined under Treasury Regulation Section
1.415(c)-2(d)(4), from the Company for such period.
“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 chain then owns stock possessing 33% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain, as well as partnerships and limited liability
companies, in which the Company holds a 33% or more interest.
“Successor” shall mean a successor to all or substantially all of the business,
operations or assets of the Company or such other portion of the Company’s
business as shall be determined by the Compensation Committee.
“Termination Date” shall mean, with respect to any Participant, the actual date
of the Participant’s Termination of Employment.
“Termination of Employment” shall mean the time when the employee-employer
relationship between the Participant and the Company or any subsidiary of the
Company is terminated for any reason, with or without Cause, including, but not
limited to, a termination by resignation, discharge, death, Disability or
retirement; provided that such “Termination of Employment” constitutes a
“separation from service” within the meaning of Treasury
Regulation Section 1.409A-1(h).
“Termination Notice” shall mean written notice from the Company to any
Participant stating that the Participant’s employment is terminated for Cause or
Disability in accordance with Section 5.07(c).
“Tier” shall mean the tier designated for each Participant by the Compensation
Committee in accordance with Section 2.01. Each Participant’s “Tier” shall be
listed on Exhibit A to this Plan.
Section 1.02 Interpretation. In this Plan, unless a clear contrary intention
appears, (a) the words “herein,” “hereof” and “hereunder” refer to this Plan as
a whole and not to any particular Article, Section or other subdivision,
(b) reference to any Article or Section, means such Article or Section hereof
and (c) the words “including” (and with correlative meaning “include”) means
including, without limiting the generality of any description preceding such
term. The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.

4

--------------------------------------------------------------------------------

 

ARTICLE II.
ELIGIBILITY AND BENEFITS
Section 2.01 Eligible Employees. Only employees of the Company or any of its
Subsidiaries or affiliates who are designated as Participants according to this
Section 2.01 shall be eligible for payments and benefits under this Plan.
     (a) The Participants shall be set forth on Exhibit A to this Plan. The
Compensation Committee shall be authorized on and after the Effective Date to
designate as Participants one or more employees of the Company or any of its
Subsidiaries or affiliates (including new hires), which employees shall remain
Participants unless the Compensation Committee, in its discretion, removes such
designation. The designation of an employee as a Participant (or removal of such
designation) shall be in writing, signed by the authorized representative of the
Compensation Committee confirming the designation. The Compensation Committee
also shall designate the Participant’s Tier for purposes of the Severance
Multiplier, which designated Tier may be changed by the Compensation Committee
in its discretion. Participants and their Tiers shall be listed on Exhibit A to
this Plan, which shall be amended as required when new designations or changes
to the designations are made by the Compensation Committee.
     (b) The Compensation Committee may delegate to the Chief Executive Officer
of the Company, in writing, authority to designate Participants and to designate
each Participant’s Tier for purposes of the Severance Multiplier, or to remove
or change such designations, so long as the employee to be designated is not an
“officer” within the meaning of Section 16(b) of the Exchange Act. Such
Participant and Tier designations (and any changes thereto) shall also be listed
in Exhibit A.
     (c) A designation of “Tier A” shall mean the Participant’s Severance
Multiplier is three (3x). A designation of “Tier B” shall mean the Participant’s
Severance Multiplier is two (2x).
Section 2.02 Individuals Not Eligible. An individual shall not be eligible to be
a Participant in the Plan, and shall not be designated as such, if the
individual is otherwise designated by the Company as a temporary employee, as an
individual working for the Company or any of its affiliates or subsidiaries on
referral from a temporary personnel agency or employee leasing agency, or as an
independent contractor or person working for an independent contractor.
ARTICLE III.
SEVERANCE AND RELATED TERMINATION BENEFITS
Section 3.01 Termination of Employment during Change of Control Period. In the
event that, during a Change in Control Period, a Participant incurs a
Termination of Employment initiated by the Company or any Subsidiary or
affiliate without Cause or initiated by the Participant for Good Reason (for the
avoidance of doubt, the Terminations of Employment covered by the preceding
clause do not include a Termination of Employment (w) due to Disability or
death, (x) where there is a simultaneous reemployment or continuing employment
of the Participant by the Company or any Subsidiary or affiliate of the Company
in any position; (y) resulting from the Participant declining an offer of
simultaneous reemployment or continuing employment in a Comparable Position with
the Company or with any Subsidiary or affiliate of the Company; and (z) where a
Successor or assign of the Company, or of that portion of the assets of the
Company that is transferred, sold or outsourced to the Successor or assign,

5

--------------------------------------------------------------------------------

 

offers to the Participant a Comparable Position), the Participant shall receive
the following Change of Control Severance Payment and benefits, subject to
Section 3.02 and any other conditions set forth in this Plan:
     (a) Subject to the limitations set forth in Section 3.05, the Change of
Control Severance Payment shall be a lump sum cash payment equal to the sum of
(x) the sum of the amounts described in Sections 3.01(a)(i), (ii), and
(iii) multiplied by the Participant’s Severance Multiplier and (y) the amount
described in Section 3.01(a)(iv):
     (i) The Participant’s Annual Salary.
     (ii) The highest of the bonus payments received by the Participant under
the applicable Company annual bonus plan for the last three annual periods
completed prior to the Termination Date (the “Annual Bonus”). For the avoidance
of doubt, the Annual Bonus shall not include any long term incentive
compensation, commissions, or any other incentive or retention compensation,
bonuses, or awards of any kind other than the annual bonus plan applicable to
the Participant.
     (iii) The cash value of twelve months of employee and employer premiums (as
previously established by the Company in its sole and exclusive discretion) for
qualified medical and dental plans in which the Participant participates, as of
the Termination Date, but excluding any supplemental health and welfare
benefits.
     (iv) The product of (A) the Participant’s Annual Bonus and (B) a fraction,
the numerator of which is the number of days which have elapsed in the Company’s
current fiscal year through the Termination Date, and the denominator of which
is 365.
     (b) The Participant shall be eligible for outplacement services appropriate
for a senior executive of the Company, to be provided by a nationally recognized
outplacement firm capable of providing such services, selected by the
Participant with the Company’s approval, in an amount not to exceed twenty-five
thousand dollars and 00/100 cents ($25,000.00) to the extent such services are
used by the Participant within one (1) year of his or her Termination Date. The
Company will reimburse the outplacement firm directly.
     (c) Subject to Section 3.04, any Change of Control Severance Payment shall
be paid to the Participant on or before the 90th day after the Termination Date.
     (d) The Company shall deduct any required tax withholding from any Change
of Control Severance Payments. There shall be no deferrals, contributions or
additional accruals to any qualified savings or retirement plan of the Company
or to any deferred compensation plan of the Company from, or based on, any
Change of Control Severance Payment.
Section 3.02 Condition to Receipt of Severance Benefits. In order to receive any
Change of Control Severance Payment or benefit under this Plan, the Participant
must timely execute, deliver and not revoke a Separation and Release Agreement
with the Company on or prior to the 60th day following the Participant’s
Termination Date in a form and with content determined solely and exclusively by
the Compensation Committee (or its designee) and containing generally the
following provisions, unless prohibited by law: No-Hire, Non-Competition,
Confidentiality, Non-Disclosure, Claw-Back, Cooperation, Return of Company
Property, and Comprehensive Waiver, Release and Covenant Not-To-Sue. Such
Separation and Release Agreement shall be provided by the Company to the
Participant on or about the Participant’s Termination Date.

6

--------------------------------------------------------------------------------

 

Section 3.03 Parachute Payments. In the event that it shall be determined that
any payment or distribution to or for the benefit of any Participant under this
Plan or under any other Company plan, contract or agreement would, but for the
effect of this Section, be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties with respect to such excise tax
(collectively, such excise tax, together with any such interest or penalties,
the “Excise Tax”), then, in the event that the after-tax value of all Payments
to a Participant (such after-tax value to reflect the deduction of the Excise
Tax and all income or other taxes on such Payments) would, in the aggregate, be
less than the after-tax value (so calculated) to the Participant of the Safe
Harbor Amount, (i) the cash portions of the Payments payable to the Participant
under this Plan shall be reduced, in the order in which they are due to be paid,
until the Parachute Value of all Payments paid to the Participant, in the
aggregate, equals the Safe Harbor Amount, and (ii) if the reduction of the cash
portions of the Payments, payable under this Plan, to zero would not be
sufficient to reduce the Parachute Payments to the Safe Harbor Amount, then any
cash portions of the Payments payable to the Participant under any other plans
shall be reduced, in the order in which they are due to be paid, until the
Parachute Value of all Payments paid to the Participant, in the aggregate,
equals the Safe Harbor Amount, and (iii) if the reduction of all cash portions
of the Payments, payable pursuant to this Plan and otherwise, to zero would not
be sufficient to reduce the Parachute Payments to the Safe Harbor Amount, then
non-cash portions of the Payments shall be reduced, in the order in which they
are due to be paid, until the Parachute Value of all Payments paid to the
Participant, in the aggregate, equals the Safe Harbor Amount.
Section 3.04 Section 409A Compliance. No payments under this Article III shall
be paid to a Participant prior to or during the 6-month period following the
Participant’s Termination Date if the Company determines in its sole discretion
that paying such amounts at the time or times indicated in this Article III
would be a prohibited payment of deferred compensation to a Specified Employee
under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts
is not made as a result of the previous sentence, then within 15 business days
following the end of such 6-month period (or such earlier date upon which such
amount can be paid under Section 409A without resulting in a prohibited
distribution, including as a result of the Participant’s death), the Company
shall pay the Participant a lump-sum amount equal to the cumulative amount that
would have otherwise been payable to the Participant during such period, and any
remaining amounts due to such Participant shall be paid as otherwise provided in
the Plan. For any payment that is delayed under this Article III, the Company
shall also pay to the Participant interest on the delayed payment at a rate
equal to the rate provided under Section 1274(b)(2)(B) of the Code as of the
Termination Date.
Section 3.05 Limitation of Benefits. Notwithstanding anything to the contrary in
this Plan, a Participant’s Change of Control Severance Payment shall be reduced
by the aggregate amount of any termination, redundancy, severance or similar
separation payments or benefits (other than state unemployment benefits) which
such Participant is eligible for and receives, due to the Participant’s
Termination of Employment, under any other agreement or plan (including, without
limitation, any severance plans of the Company or any Subsidiary or affiliate or
any government-mandated plans) or pursuant to any statutory, legislative, or
regulatory requirement.
Section 3.06 Plan Unfunded; Participant’s Rights Unsecured. The Company shall
not be required to establish any special or separate fund or make any other
segregation of funds or assets to assure the payment of any Change of Control
Severance Payment or benefit under this Plan. The right of any Participant to
receive the benefits provided for herein shall be an unsecured claim against the
general assets of the Company. No payment or benefit under this Plan shall be
deemed earned, vested or accrued compensation or benefits except according to
the express terms of this Plan.

7

--------------------------------------------------------------------------------

 

ARTICLE IV.
DISPUTE RESOLUTION
Section 4.01 Any disputes, controversies or claims which arise between any
Participant (or any person claiming by, through or under any Participant) and
the Company or any of its Subsidiaries and affiliates (including the
Compensation Committee) relating to or arising out of this Plan, which are not
settled by agreement between the parties, shall be settled by arbitration in
accordance with the then-current Rules of Practice and Procedure for Employment
Arbitration (“Rules”) of the Judicial Arbitration and Mediation Services, Inc.
(“JAMS”). The arbitration shall be before a single arbitrator selected in
accordance with the JAMS Rules or otherwise by mutual agreement of the parties.
The arbitration shall take place in Los Angeles County, California, unless the
parties agree to hold the arbitration at another location. Depositions and other
discovery shall be allowed in accordance with the JAMS Rules. The arbitrator
shall apply the substantive law (and the law of remedies, if applicable) of the
State of California or federal law, or both, as applicable to the claim(s)
asserted.
Section 4.02 In consideration of the benefits provided herein, the anticipated
expedition and the minimizing of expense of this arbitration remedy, and other
good and valuable consideration, the arbitration provisions of this Plan shall
provide the exclusive remedy for disputes arising hereunder, and each party
expressly waives any right such party may have to seek redress in any other
forum. The arbitrator, and not any federal, state, or local court or agency,
shall have exclusive authority to resolve any dispute relating to the
interpretation, applicability and enforceability of this Plan, including but not
limited to any claim that all or any part of this Plan is void or voidable. The
arbitration and any decision and award or order of the arbitrator shall be final
and binding upon the parties and judgment thereon may be entered in the Superior
Court of the State of California or any other court having jurisdiction.
Either party may bring an action in any court of competent jurisdiction to
compel arbitration under this Plan and to enforce an arbitration award. Except
as otherwise provided in this Plan, both the Company and the Participant agree
that neither of them shall initiate or prosecute any lawsuit or administrative
action in any way related to any claim covered by this Plan.
Section 4.03 Any claim which either party has against the other party, that
could be submitted for resolution pursuant to this Article IV must be presented
in writing by the claiming party to the other party within one year of the date
the claiming party knew or should have known of the facts giving rise to the
claim. Unless the party against whom any claim is asserted waives the time
limits set forth above, any claim not brought within the time periods specified
shall be waived and forever barred, even if there is a federal or state statute
of limitations which would have given more time to pursue the claim.
Section 4.04 The Company shall advance the costs and expenses of the arbitrator.
In any arbitration to enforce any of the provisions or rights under this Plan,
the unsuccessful party in such arbitration, as determined by the arbitrator,
shall pay to the successful party or parties all costs, expenses and reasonable
attorneys’ fees incurred therein by such party or parties (including without
limitation such costs, expenses and fees on any appeals), and if such successful
party or parties shall recover an award in any such arbitration proceeding, such
costs, expenses and attorneys’ fees shall be included as part of such award.
Notwithstanding the foregoing provision, in no event shall the successful party
or parties be entitled to recover an amount from the unsuccessful party for
costs, expenses and attorneys’ fees that exceeds the unsuccessful party’s costs,
expenses and attorneys’ fees in connection with the action or proceeding. Any
reimbursement of attorneys’ fees pursuant to this Section 4.04 shall be provided
no later than the last day of the Participant’s taxable year following the later
of (i) the year in which such attorneys’ fees were incurred and (ii) the year in
which the arbitrator determined that the Participant was the successful party.

8

--------------------------------------------------------------------------------

 

Section 4.05 Each of the above terms and conditions shall have separate
validity, and the invalidity of any part thereof shall not affect the remaining
parts.
ARTICLE V.
MISCELLANEOUS PROVISIONS
Section 5.01 Cumulative Benefits. Except as provided in Section 3.05 or as
otherwise agreed to in a writing signed between the Company and the Participant,
the rights and benefits provided to any Participant under this Plan are
cumulative of, and are in addition to, all of the other rights and benefits
provided to such Participant under any Benefit Plan or any agreement between
such Participant and the Company or any of its Subsidiaries; provided, that, in
no event shall a Participant be entitled to participate in the Severance Pay
Plan of Avery Dennison Corporation, as amended and re-stated effective
January 1, 2009, and any amendments or successors to that plan.
Section 5.02 No Mitigation. No Participant shall be required to mitigate the
amount of any payment provided for in this Plan by seeking or accepting other
employment following a Termination of Employment with the Company. The amount of
any payment or benefit provided for in this Plan shall not be reduced by any
compensation or benefit earned by a Participant as the result of employment by
another employer or by retirement or other benefits, except as described in
Section 3.05.
Section 5.03 Amendment, Modification or Termination.
     (a) The Compensation Committee may amend, modify, or terminate the Plan at
any time in its sole discretion; provided, however, that: (i) no such amendment,
modification or termination may materially and adversely affect any rights of
any Participant who has incurred a Termination of Employment on or prior to the
date of such amendment, modification or termination; (ii) any termination of the
Plan or modification that is a material diminishment of the severance benefit
shall not be effective until twelve (12) months after written notice of such
action has been provided to the Participants, except that any modification or
amendment shall be immediately applicable to any employee designated as a
Participant after the date that the Compensation Committee adopts the
modification or amendment; and (iii) the Plan shall not be terminated or
materially amended during any Change of Control Period. Notwithstanding the
foregoing, the Plan shall terminate when all of the obligations to Participants
hereunder have been satisfied in full.
     (b) Notwithstanding Section 5.03(a) or any other provision of this Plan,
and to the fullest extent applicable, this Plan shall be interpreted and the
terms shall be applied in accordance with Section 409A. In the event that the
Compensation Committee in its sole and exclusive discretion determines that any
payments, disbursements, or benefits provided, or to be provided, under this
Plan may be subject to, and not in compliance with, Section 409A, the
Compensation Committee may adopt at any time (without any obligation to do so or
to indemnify any Participant for failure to do so) such limited amendments to
this Plan, including amendments with retroactive effect, that it reasonably
determines are necessary or appropriate to (i) exempt the compensation and
benefits payable under this Plan from Section 409A and/or preserve the intended
tax treatment of the compensation and benefits provided with respect to this
Agreement or (ii) comply with the requirements of Section 409A; and all such
amendments shall be immediately effective as to all Participants.

9

--------------------------------------------------------------------------------

 

Section 5.04 Administration.
     (a) Subject to the limitations of the Plan, the Compensation Committee
shall have full and final authority, in its sole and exclusive discretion, to
administer the Plan, to construe and interpret its provisions, to decide matters
arising under the Plan, and to take all other actions deemed necessary or
advisable for the proper administration of this Plan. No discretionary action by
the Compensation Committee, or any person who is delegated authority under this
Plan, shall amend or supersede the express provisions of this Plan.
     (b) For any matter under this Plan for which the Compensation Committee or
Company has discretion or authority affecting whether or not an employee is
designated as a Participant and the Participant’s eligibility to receive a
payment or benefit or the amount of the payment or benefit (such as
determinations of Cause, Disability, or eligibility), such discretion or
authority shall be retained by the Compensation Committee exclusively relative
to any such employee who is an officer of the Company under Section 16(b) of the
Exchange Act (“16(b) Officers”).
     (c) For any matter under this Plan not covered by Section 5.04(b) and for
which the Compensation Committee or Company has discretion or authority (such as
determinations of Cause, Disability, or eligibility), the Compensation Committee
may delegate such discretion or authority to one or more appropriate executives,
except for the authority to terminate the Plan which shall remain exclusively
with the Compensation Committee.
Section 5.05 Consolidations, Mergers, Etc. In the event of a merger,
consolidation or other transaction, nothing herein shall relieve the Company
from any of the obligations set forth in the Plan; provided, however, that
nothing in this Section 5.05 shall prevent an acquirer of or Successor to the
Company from assuming the obligations, or any portion thereof, of the Company
hereunder pursuant to the terms of the Plan provided that such acquirer or
Successor provides adequate assurances of its ability to meet this obligation.
In the event that an acquirer of or Successor to the Company agrees to perform
the Company’s obligations, or any portion thereof, hereunder, the Company shall
require any person, firm or entity which becomes its Successor to expressly
assume and agree to perform such obligations in writing, in the same manner and
to the same extent that the Company would be required to perform hereunder if no
such succession had taken place.
Section 5.06 Successors and Assigns. This Plan shall be binding upon and inure
to the benefit of the Company and its Successors and assigns. This Plan and all
rights of each Participant shall inure to the benefit of and be enforceable by
such Participant and his or her personal or legal representatives, executors,
administrators, heirs and permitted assigns. If any Participant should die while
any amounts are due and payable to such Participant hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Plan to such Participant’s devisees, legatees or other designees or, if
there be no such devisees, legatees or other designees, to such Participant’s
estate. No payments, benefits or rights arising under this Plan may be assigned
or pledged by any Participant, except under the laws of descent and
distribution.
Section 5.07 Notices.
     (a) All notices and other communications provided for in this Plan shall be
in writing and shall be delivered as follows: (i) if to the Company, at the
Company’s principal office address or such other address as the Company may have
designated by written notice to all Participants for purposes hereof, directed
to the attention of the General Counsel, and (ii) if to any Participant, at his
or her residence address on the records of the Company or to such other address
as he or she may have designated to the Company in writing for purposes hereof.
Each such notice or other communication according to this Plan shall be deemed
to have been duly delivered upon being deposited in the United States Mail via
certified or registered mail, return receipt requested, postage prepaid, or by
overnight

10

--------------------------------------------------------------------------------

 

delivery using a service capable of tracking and confirmation of receipt (with
postage fees prepaid) such as FedEx or UPS, except that any change of notice
address shall be effective only upon receipt.
     (b) The Company’s Vice President of Compensation and Benefits (or the
person serving in the equivalent role for the Company), or such other executive
as may be designated by the Compensation Committee from time to time, shall
deliver to each Participant, within thirty (30) days of such Participant’s
designation on Exhibit A hereto as eligible for this Plan, a letter notifying
such Participant that he or she has been designated as a Participant in the Plan
and his or her Severance Multiplier and Tier, and a copy of the Plan (but not
Exhibit A). Within thirty (30) days following any material amendment to the Plan
or any change to the Participant’s Severance Multiplier, the Vice President of
Compensation and Benefits of the Company (or such other executive as may be
designated by the Compensation Committee from time to time) shall deliver such
amendment, amended Plan, or other confirming document to each affected
Participant.
     (c) For purposes of this Plan, in order for the Company to terminate any
Participant’s employment for Cause, the Company must deliver a Termination
Notice to such Participant, which notice shall be dated the date it is
transmitted for delivery to such Participant, shall specify the Termination Date
and shall state that the termination is for Cause and shall set forth in
reasonable detail the particulars thereof. For purposes of this Plan, in order
for the Company to terminate any Participant’s employment for Disability, the
Company must give a Termination Notice to such Participant, which notice shall
be dated the date it is transmitted for delivery to such Participant, shall
specify the Termination Date and shall state that the termination is for
Disability and shall set forth in reasonable detail the particulars thereof. Any
Termination Notice delivered by the Company that does not comply, in all
material respects, with the foregoing requirements shall be invalid and
ineffective for purposes of this Plan.
Section 5.08 No Employment Rights Conferred. This Plan shall not be deemed to
create a right, promise, contract or guarantee of employment, continued
employment, or of any particular job position, between any Participant and the
Company and/or any of its affiliates or Subsidiaries.
Section 5.09 Severability. If any provision of the Plan is, becomes or is deemed
to be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions of this Plan shall not be
affected thereby.
Section 5.10 Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its conflict of laws rules, and applicable federal law.

11

--------------------------------------------------------------------------------

 

Exhibit A
Key Executive Change of Control Severance Plan Participants

                  Bus Unit   Name   Business Title   Tier   Effective Date
CRP
  Scarborough, Dean   Chairman, President & Chief Executive Officer   A  
1-Dec-10
OPW
  Bond, Timothy   Group VP, Office Products   B   1-Jan-10
CRP
  Butier, Mitchell   Senior VP and Chief Financial Officer   B   1-Jan-10
CRP
  Hill, Anne   Senior VP and Chief Human Resources Officer   B   1-Jan-10
CRP
  Hoffman, Richard   Senior VP & Chief Information Officer   B   1-Jan-10
RIS
  Neville, R. Shawn   Group VP, Retail Information Services   B   1-Jan-10
RMW
  Nolan, Don   Group VP, Roll Materials   B   1-Jan-10
CRP
  Sallay, John   Senior VP, New Growth Platforms   B   1-Jan-10
SMC
  Clyde, Timothy   Group VP, Specialty Materials & Converting   B   1-Dec-10
CRP
  Malchione, Robert.   Senior VP, Corp Strategy & Technology   B   1-Dec-10
CRP
  O’Bryant, Daniel   VP, Business Development   B   1-Dec-10
CRP
  Dixon, Diane   VP, Communications   B   1-Jan-11
CRP
  Edwards, David   VP, Technology   B   1-Jan-11
CRP
  Miller, Susan   Senior VP, General Counsel & Secretary   B   1-Jan-11

12