Exhibit 10.39

 

AVERY DENNISON CORPORATION

 

PERFORMANCE UNIT AGREEMENT

 

THIS AGREEMENT, dated *, is made by and between Avery Dennison Corporation, a
Delaware corporation (“Company”) and *, an employee of the Company or a
Subsidiary (“Employee”).

 

WHEREAS, the Compensation and Executive Personnel Committee of the Company’s
Board of Directors (“Committee”) or the Chief Executive Officer (“CEO”), as
authorized by the Committee, has decided to grant an Award of performance units
(“PUs”) provided for herein to Employee under the terms of the Employee Stock
Option and Incentive Plan, as amended and restated (“Plan”).

 

NOW, THEREFORE, Company and Employee agree as follows:

 

ARTICLE 1 – DEFINITIONS

 

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

 

ARTICLE 2 – TERMS OF AWARD

 

2.1 PU Award

As of the date of this Agreement, the Company grants to Employee a PU Award
representing a right to receive * shares of the Company’s Common Stock in the
future, assuming that the Company’s results at the end of the performance period
described in Section 2.2 produce 100% of the target performance, subject to the
terms and conditions set forth in this Agreement and the Plan. Each PU Award
represents one hypothetical share of Common Stock of the Company at 100% target
performance. The PU Award shall be held on the books and records of the Company
(or its designee) for Employee’s PU account, but shall not represent an equity
interest in the Company until such time as actual shares are issued to Employee.
The PU Award shall be earned, vested and paid as set forth in this Agreement and
shall not earn dividend equivalents.

 

2.2 Performance Period

(a) No portion of the PU Award may be sold, transferred, assigned, pledged or
otherwise encumbered by Employee until the PU Award is earned and the shares are
issued.  Employee must be employed by the Company from the date of this
Agreement until the date that the PU Award is earned and vested, except as
provided in Sections 2.3 through 2.5.  The “Performance Period” shall begin on
the first day of the fiscal year in which this PU Award is granted and end on
the last day of the fiscal year in which the second anniversary of the date of
such grant occurs (resulting in a three-year Performance Period). Except as
provided in Sections 2.3 and 2.4, after the end of the Performance Period, the
specific number of shares of Common Stock to be issued to Employee under the PU
Award shall be determined based on the Company’s results during the Performance
Period compared against the performance goals (“Goals”) approved by the
Committee (as modified by any adjustment items approved by the Committee).  The
Goals will be communicated, directly or indirectly, to Employee as soon as
reasonably practical following their approval by the Committee.

 

(b) Except as provided in Sections 2.3 and 2.4, the PU Award will be earned and
vested on the last day of the Performance Period, subject to the Committee’s
certification of results of the Goals after the end of the Performance Period.

 

(c) Subject to Sections 2.3 through 2.5 of this Agreement, if the PU Award has
not been earned by the time of Employee’s Termination of Service, it shall be
forfeited by Employee.

 

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2.3 Change of Control

In the event of a Change in Control, if the surviving or successor corporation
or parent or subsidiary thereof terminates Employee’s employment or service
without Cause upon or within 24 months following the Change in Control prior to
the determinations referred to in Section 2.2(a) having been made by the
Committee, the PU Award granted to Employee pursuant to this Agreement will be
earned and vested as of the date of such termination at 100% target performance
regardless of the Company’s actual performance.

 

2.4 Death; Disability

If Employee’s employment with the Company or its Subsidiaries terminates by
reason of Employee’s death or Disability, the PU Award will be earned and vested
as of the date of Termination of Service based on a prorated time-based formula
starting with the beginning of the Performance Period through the end of month
in which there is a Termination of Service divided by the total months in the
original Performance Period multiplied by the number of shares in the PU Award
assuming 100% target performance.

 

2.5 Retirement

PU Awards granted to employees whose employment with the Company is terminated
as a result of Retirement may be earned and vested after the end of the
Performance Period based on the Company’s actual performance as determined in
Section 2.2(a) on a prorated time-based formula starting with the beginning of
the Performance Period through the end of the month in which there is
Termination of Service, divided by the total number of months in the Performance
Period.

 

2.6 Adjustments in PU Award

In the event of an Equity Restructuring, the Committee or the Company shall make
appropriate and equitable adjustments to the PU Award granted hereunder.

 

ARTICLE 3 – ISSUANCE OF COMMON STOCK

 

3.1 Conditions to Issuance of Common Stock

The shares of Common Stock deliverable for the PU Award, or any part thereof,
may be either previously authorized but unissued shares or issued shares that
have then been reacquired by the Company.  Such shares shall be fully paid and
nonassessable. Employee shall not have the rights of a shareholder with respect
to this PU Award until shares are issued to Employee. Issuance of shares of
Common Stock is subject to the following conditions:

 

(a) The receipt by the Company of full payment or withholding for all related
taxes in accordance with the Plan.  Employee shall be liable for any and all
taxes, including withholding taxes, arising out of this PU Award or the vesting
of the PU Award hereunder. The Company or Employee may elect to have the Company
trade part of the shares of Common Stock deliverable for the PU Award to satisfy
such withholding tax obligation;

 

(b)   Subject to Section 4.3 below, the Company shall issue via electronic
transfer to Employee’s brokerage account the number of shares of Common Stock
represented by the number of vested PUs (less shares traded to cover withholding
taxes) as soon as practical following the vesting of same, but in no event later
than two and one-half (2.5) months after the calendar year in which the PUs
vest; provided, however, that, if Employee is determined at the time of his
separation from service to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended
(“Code”), to the extent delayed payment of the PUs is required in order to avoid
a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such
payment shall be made on the earlier of (i) the expiration of the six-month
period measured from the date of Employee’s “separation from service” with the
Company (as such term is defined in the Department of Treasury Regulations
issued under Section 409A of the Code) or (ii) the date of Employee’s death, but
in no event earlier than the date on which the PUs are paid to active employees
pursuant to this Section 3.1(b). The determination of whether Employee is a
“specified employee” shall be made by the Company in accordance with the terms
of Section 409A of the Code and applicable guidance

 

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thereunder.  Delivery of these shares of Common Stock shall satisfy the
Company’s obligations under this Agreement; and

 

(c) Employee shall establish an equity account with a broker designated by the
Company (currently Charles Schwab) so that the net shares from vested PUs (after
withholding for applicable taxes) may be electronically transferred to
Employee’s account.

 

ARTICLE 4 – MISCELLANEOUS

 

4.1 Agreement Subject to 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.

 

4.2 Administration / Compensation Recovery

The Committee or the Company shall have the power to interpret the Plan and this
Agreement and to adopt such procedures for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret, modify
or revoke any such procedures.  Nothing in this Agreement or the Plan shall be
construed to create or imply any contract or right of continued employment
between Employee and the Company (or any of its Subsidiaries).

 

In the case of fraud or other intentional misconduct on the part of Employee (or
any other event or circumstance set forth in any clawback policy implemented by
the Company or any Subsidiary) that necessitates a restatement of the Company’s
financial results, Employee will be required to reimburse the Company for any
Common Stock issued to Employee under this Award in excess of the amount that
would have been issued to Employee based on the restated financial results.

 

4.3 Code Section 409A

The PU 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, if at any time the Committee or the Company determines that the PUs may
be subject to penalty taxes for noncompliance with Section 409A, the Committee
or the Company shall have the right, in its sole discretion, to amend this
Agreement as it may determine is necessary or desirable for the PUs to satisfy
the requirements of 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 Employee or any other
individual to the Company or any of its affiliates, employees or agents.

 

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.

 

Employee

 

Avery Dennison Corporation

*

 

 

 

 

Address

 

 

By: /s/ Dean A. Scarborough

*

 

 

 

Chairman, President & Chief Executive Officer

 

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