Exhibit 10.3

 

AVERY DENNISON CORPORATION

 

MARKET-LEVERAGED STOCK UNIT AGREEMENT

 

THIS AGREEMENT, dated [Grant Date] (the “Grant Date”), is made by and between
Avery Dennison Corporation, a Delaware corporation (“Company”) and [Participant
Name], an Employee (“Awardee”).

 

WHEREAS, the Committee or the Chief Executive Officer of the Company, in his
capacity as a delegate of the Administrator in accordance with Section 12.6 of
the Plan, has decided to grant an Award of Restricted Stock Units, in the form
of market-leveraged stock units (“MSUs”), provided for herein to Awardee under
the terms of the Avery Dennison Corporation 2017 Incentive Award Plan (the
“Plan”).

 

NOW, THEREFORE, the Company and Awardee agree as follows:

 

Article 1 - DEFINITIONS

 

Terms not defined herein shall have the meaning given in the Plan.

 

Article 2 - TERMS OF AWARD

 

Section 2.1       MSU Award

 

(a)        As of the Grant Date, the Company grants to Awardee an Award of
[Number of shares granted] MSUs (the “MSU Award”), representing the right to
receive Shares in the future in an amount based upon the Total Shareholder
Return (as defined below) at the end of each Performance Period described in
Section 2.2, subject to the terms and conditions set forth in this Agreement and
the Plan.  The MSU Award shall be held on the books and records of the Company
(or its designee) for Awardee’s MSU account, but shall not represent an equity
interest in the Company until such time as actual Shares, if any, are issued to
Awardee.  The MSU Award shall vest and be settled in Shares as set forth in this
Agreement. No portion of the MSU Award may be sold, pledged, assigned, or
transferred in any manner, other than (i) by will or the laws of descent and
distribution or (ii) subject to the consent of the Administrator, pursuant to a
DRO, unless and until the MSU Award vests and the Shares are issued to Awardee.

 

(b)        Whenever dividends are paid or distributions made with respect to
Common Stock, Awardee shall be entitled to Dividend Equivalents in an amount
equal in value to the amount of the dividend paid or property distributed on a
single Share multiplied by the number of MSUs in Awardee’s MSU account as of the
record date for such dividend or distribution, which Dividend Equivalents shall
be credited as additional MSUs (rounded down to the nearest whole MSU with
fractional MSUs, if any, forfeited) to Awardee’s MSU account as of the payable
date for such dividend or distribution. The Dividend Equivalents credited as
additional MSUs shall vest and be settled in Shares subject to the same terms
and conditions as the related MSUs.

 

Section 2.2       Performance Period

 

(a)        The MSUs shall be ratably divided into four tranches (each, a
“Tranche”) and each Tranche shall be associated with a specific Performance
Period which shall commence on January 1 of the year of grant and end on
December 31 of that year (First Tranche), the following year (Second Tranche),
the next following year (Third Tranche) and the next following year (Fourth
Tranche) (each such Performance Period, a “Performance Period” for the
applicable Tranche and the last day of such period, a “Performance Period End
Date” for the applicable Tranche).

 

(b)        Each Tranche of the MSUs is unvested as of the Grant Date and, unless
earlier forfeited pursuant to the terms of this Agreement, shall be eligible to
vest on the Share Vesting Date with

 

Employee MSU Agreement 5-31-17

 

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respect to such Tranche.  For purposes of this Agreement, “Share Vesting Date”
shall mean, with respect to each Tranche, the earlier of (i) the date of the
Committee’s certification of the Total Shareholder Return (which shall occur
within 60 days after the end of the January following such Tranche’s Performance
Period) (the “Certification Date”), or (ii) the date of Termination of Service
(A) due to death or Disability or (B) by the Company (or any surviving or
successor corporation or parent or subsidiary thereof) without Cause occurring
both (x) upon or within 24 months following a Change in Control and (y) at least
one year after the Grant Date; provided that, notwithstanding the foregoing, in
the event any Termination of Service occurs after the Performance Period End
Date, but before the Certification Date, with respect to any Tranche, the Share
Vesting Date for such Tranche shall be the Certification Date for such Tranche.

 

Section 2.3       Termination of Employment

 

Subject to Section 2.4:

 

(a)        If Awardee experiences a Termination of Service for any reason after
the Performance Period End Date, but before the Share Vesting Date, with respect
to any Tranche, the MSUs of such Tranche will remain outstanding and eligible to
vest on and after the date of Termination of Service.

 

(b)        If Awardee experiences a Termination of Service for any reason (other
than as set forth in Section 2.3(c), 2.3(d) or 2.3(e)), except as set forth in
Section 2.3(a), all MSUs which remain outstanding on the date of Awardee’s
Termination of Service shall be forfeited by Awardee for no consideration as of
Awardee’s Termination of Service.

 

(c)        If Awardee experiences a Termination of Service due to Awardee’s
death or Disability occurring at least one year after the Grant Date:

 

(i)         a portion of the MSUs with respect to all Performance Periods ending
on or after the date of Termination of Service will remain outstanding and
eligible to vest on the date of Termination of Service (as set forth in
Section 3.2(a)) based on a prorated time-based formula for each applicable
Tranche which, with respect to each such Tranche, shall equal (A) the total
number of full months between the first day of the Performance Period and the
end of month in which the Termination of Service occurs divided by the total
number of full months in such Tranche’s Performance Period, multiplied by
(B) the number of MSUs of such Tranche; and

 

(ii)         all MSUs that do not otherwise remain outstanding pursuant to
Section 2.3(a) or 2.3(c)(i) shall be forfeited by Awardee for no consideration
as of Awardee’s Termination of Service.

 

(d)        If Awardee experiences a Termination of Service as a result of
Retirement occurring at least one year after the Grant Date:

 

(i)         a portion of the MSUs with respect to all Performance Periods ending
on or after the date of Termination of Service will remain outstanding and
eligible to vest on and after the date of Termination of Service based on a
prorated time-based formula for each applicable Tranche which, with respect to
each such Tranche, shall equal (A) the total number of full months between the
first day of the Performance Period and the end of month in which the
Termination of Service occurs divided by the total number of full months in such
Tranche’s Performance Period, multiplied by (B) the number of MSUs of such
Tranche; and

 

(ii)         all MSUs that do not otherwise remain outstanding pursuant to
Section 2.3(a) or 2.3(d)(i) shall be forfeited by Awardee for no consideration
as of Awardee’s Termination of Service.

 

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For the avoidance of doubt, any MSUs that remain outstanding pursuant to this
Section 2.3(d) will be eligible to vest thereafter based on Total Shareholder
Return as set forth in Section 3.2(b).

 

(e)        If Awardee experiences a Termination of Service by the Company (or
any surviving or successor corporation or parent or subsidiary thereof) without
Cause occurring both (i) upon or within twenty-four (24) months following a
Change in Control and (ii) at least one year after the Grant Date, all
outstanding MSUs (other than those described in Section 2.3(a)) will remain
outstanding and vest (as set forth in Section 3.2(a)) on the date of Termination
of Service.

 

Section 2.4       Adjustments in MSU Award

 

Without limiting any other actions under Section 13.2 of the Plan, in the event
of an Equity Restructuring, the Administrator shall make appropriate and
equitable adjustments to the MSU Award granted hereunder in accordance with
Section 13.2(c) of the Plan.

 

Article 3 - ISSUANCE OF SHARES

 

Section 3.1       Issuance of Shares

 

Subject to Section 3.3 below, the Company shall issue the number of Shares set
forth in Section 3.2 via electronic transfer to Awardee’s brokerage account
(less any Shares traded to cover, or associated with net settlement of,
withholding taxes) as soon as practical following the Share Vesting Date, but in
no event later than sixty (60) days after the applicable Share Vesting Date;
provided, however, that, if Awardee is determined at the time of his or her
separation from service to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code, to the extent delayed settlement of the
MSUs is required in order to avoid a prohibited distribution under Section 409A,
such payment shall be made on the earlier of (a) the expiration of the six-month
period measured from the date of Awardee’s “separation from service” (as defined
in Section 409A) or (b) the date of Awardee’s death.  The determination of
whether Awardee is a “specified employee” shall be made by the Company in
accordance with the terms of Section 409A.  Issuance of these Shares with
respect to any Tranche shall satisfy the Company’s obligations under this
Agreement with respect to such Tranche in full and, after such issuance, Awardee
shall forfeit and have no rights with respect to the MSUs of such Tranche or any
Shares due thereunder. The Shares deliverable for the MSU Award, or any part
thereof, may be either previously authorized but unissued shares, treasury
shares or shares purchased on the open market. Such Shares shall be fully paid
and nonassessable.  Awardee shall not have the rights of a shareholder with
respect to this MSU Award until the Shares, if any, are issued to Awardee.

 

Section 3.2       Vesting/Number of Shares

 

(a)        In the event of a Share Vesting Date other than the Certification
Date, (i) the outstanding MSUs associated with such Share Vesting Date (after
taking into account the effects of Sections 2.3(c) and 2.3(e)) shall, unless
previously forfeited, vest on such Share Vesting Date and (ii) subject to
Section 3.3, the number of Shares that shall be issued following such Share
Vesting Date will equal the number of such vested MSUs.

 

(b)        In the event of any Share Vesting Date that is the Certification Date
(including, without limitation, any Share Vesting Date with respect to MSUs
described in Section 2.3(a)):

 

(i)         if the Total Shareholder Return for the applicable Tranche’s
Performance Period is equal to or greater than 1.10, then (A) the MSUs of such
Tranche, unless previously forfeited, shall vest and (B) subject to Section 3.3,
the number of Shares that shall be issued following such Share Vesting Date will
equal the product of (x) the number of vested MSUs of the applicable Tranche and
(y) the sum of (I) 1.00 and (II) a fraction, the numerator of which is the
excess of such Total Shareholder Return over 1.10, and the denominator of which
is 0.65; provided that such fraction shall not exceed 1.00.

 

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(ii)         if the Total Shareholder Return for the applicable Tranche’s
Performance Period is equal to or greater than 0.85 and less than 1.10, then
(A) the MSUs of such Tranche, unless previously forfeited, shall vest and
(B) subject to Section 3.3, the number of Shares that shall be issued following
such Share Vesting Date will equal the product of (x) the number of vested MSUs
of the applicable Tranche and (y) the sum of (I) 0.85 and (II) the product of
(X) 0.15 and (Y) a fraction the numerator of which is the excess of such Total
Shareholder Return over 0.85, and the denominator of which is 0.25.

 

(iii)        if the Total Shareholder Return for the applicable Tranche’s
Performance Period is less than 0.85, then no MSUs of such Tranche shall vest
and such MSUs shall be forfeited by Awardee for no consideration as of such
Share Vesting Date.

 

(c)        For purposes of this Agreement, “Total Shareholder Return” shall
equal, with respect to a Performance Period, (i) the sum of (A) the average
closing share price of Common Stock for all trading days of the
January following the respective Performance Period End Date (or, if Common
Stock is not traded on an established securities exchange, the Fair Market Value
of a Share as of the Share Vesting Date), and (B) the aggregate amount of all
dividends paid (on a per Share basis) during such Performance Period, divided by
(ii) the average closing share price of Common Stock for all trading days in
January of the year of grant.

 

Section 3.3       Conditions to Issuance of Shares

 

(a)        Without limiting any conditions set forth in Section 11.4 of the
Plan, the issuance of Shares is subject to the following conditions:

 

(i)         The receipt by the Company of full payment or withholding for all
related taxes in accordance with the Plan.  Awardee shall be liable for any and
all taxes, including withholding taxes, arising out of this MSU Award or the
vesting or settlement of the MSU Award.  Subject to the terms and conditions of
Section 11.2 of the Plan, the Company may withhold Shares deliverable under the
MSU Award to satisfy such tax obligation or take any other actions permitted
pursuant to Section 11.2 of the Plan; and

 

(ii)         Awardee establishing an equity account with a broker designated by
the Company so that the Shares from vested MSUs (after withholding for
applicable taxes) may be electronically transferred to Awardee’s account.

 

Article 4- MISCELLANEOUS

 

Section 4.1       Agreement Subject to the Plan

 

The Agreement is subject to the terms of the Plan, and in the event of any
conflict between this Agreement and the Plan, the Plan shall control.

 

Section 4.2       Administration / Compensation Recovery

 

The Administrator shall have the power to interpret the Plan and this Agreement
and to adopt such rules and procedures for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret, amend
or revoke any such rules and procedures. Nothing in the Plan or in this
Agreement confers upon Awardee any right to continue as an employee for the
Company or any of its Subsidiaries interferes with or restricts in any way the
rights of the Company or any of its Subsidiaries under Section 4.4 of the Plan.

 

Without limiting Section 11.5 of the Plan, in the case of fraud or other
intentional misconduct on the part of Awardee (or any other event or
circumstance set forth in any clawback policy implemented by the Company or any
Subsidiary, including, without limitation, any clawback policy adopted to comply
with

 

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the requirements of Applicable Law, including, without limitation, the
Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or
regulations promulgated thereunder (including, without limitation, any listing
rules or standards resulting therefrom)) that necessitates a restatement of the
Company’s or any Subsidiary’s financial results (including, without limitation,
any accounting restatement due to the material noncompliance with any financial
reporting requirement), Awardee will be required to reimburse the Company or a
Subsidiary for any incentive compensation issued to Awardee under the Plan
(including, without limitation, the MSU Award and Shares issued to Awardee under
the MSU Award) in excess of the amount that would have been issued to Awardee
based on the restated financial results, as determined by the Company or any
Subsidiary pursuant to any applicable clawback policy or otherwise.

 

Section 4.3       Section 409A

 

The MSU Award granted hereunder is intended to be exempt from or comply in all
respects with Section 409A, and this Agreement shall be interpreted
accordingly.  However, in the event that following the Grant Date the
Administrator determines that the MSU Award may be subject to Section 409A, the
Administrator may (but is not obligated to), without Awardee’s consent, adopt
such amendments to the Plan and this Agreement or adopt other policies and
procedures (including amendments, policies and procedures with retroactive
effect), or take any other actions, that the Administrator determines are
necessary or appropriate to (a) exempt the MSU Award from Section 409A and/or
preserve the intended tax treatment of the benefits provided with respect to the
MSU Award, or (b) comply with the requirements of Section 409A and thereby avoid
the application of any penalty taxes under Section 409A. The Company makes no
representations or warranties as to the tax treatment of the MSU Award under
Section 409A or otherwise. The Company shall have no obligation to take any
action (whether or not described herein) to avoid the imposition of taxes,
penalties or interest under Section 409A with respect to the MSU Award and shall
have no liability to Awardee or any other person if the MSU Award is determined
to constitute non-compliant, “nonqualified deferred compensation” subject to the
imposition of taxes, penalties and/or interest under Section 409A. No provision
of this Agreement or the Plan shall be interpreted or construed to transfer any
liability for failure to comply with the requirements of Section 409A from
Awardee or any other individual to the Company or any of its affiliates,
employees or agents.

 

Section 4.4       Construction

 

This Agreement and the Plan and all actions taken thereunder shall be governed
by and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws.  Titles are provided in this
Agreement for convenience only and shall not serve as a basis for interpretation
or construction of this Agreement.

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties.

 

Awardee

Avery Dennison Corporation

 

 

 

[Signed Electronically]

By:

/s/ Mitchell R. Butier

 

President & Chief Executive Officer

 

 

Acceptance Date: [Acceptance Date]

 

 

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