Document:

exv10w19w5

 

Exhibit 10.19.5

AVERY DENNISON CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

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

WHEREAS, Company wishes to afford Employee the opportunity to purchase shares of its $1.00 par
value common stock under the terms of the Employee Stock Option and Incentive Plan (“Plan”); and

WHEREAS, the Compensation and Executive Personnel Committee of the Company’s Board of Directors
(hereinafter referred to as the “Committee”), appointed to administer said Plan, or the Chief
Executive Officer (“CEO”), as authorized by the Committee, has determined that it would be to the
advantage and best interest of Company and its shareholders to grant the Option provided for herein
to Employee as an inducement to remain in the service of Company or its Subsidiaries and as an
incentive for increased efforts during such service;

WHEREAS, the Committee or the CEO has advised the Company of its or his determination and
instructed the undersigned officers to issue said Option, which the Committee has determined should
be a Non-Qualified Stock Option, as authorized under the Plan;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt of which is hereby acknowledged, Company and Employee do hereby
agree as follows:

ARTICLE I

DEFINITIONS

Terms not defined herein shall have the meaning given in the Plan. Whenever the following terms are
used in this Agreement they shall have the meaning specified below unless the context clearly
indicates to the contrary.

	1.1	 	Beneficiary
	 
	 	 	“Beneficiary” shall mean a person properly designated by the Employee, including his/her spouse or heirs at law, to
exercise such Employee’s rights under the Plan. Designation, revocation and redesignation of Beneficiaries must be made in
writing in accordance with procedures established by the Committee or the Company and shall be effective upon delivery to
the Committee or the Company.
	 
	1.2	 	Change of Control
	 
	 	 	“Change of Control” shall have the same meaning given in Article 9.2 of the Plan.
	 
	1.3	 	Option
	 
	 	 	“Option” shall mean the option to purchase common stock of the Company granted under the Stock Option Agreement.

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	1.4	 	Plan
	 
	 	 	The “Plan” shall mean the Employee Stock Option and Incentive Plan.
	 
	1.5	 	Pronouns
	 
	 	 	The masculine pronoun shall include the feminine and neuter, and the singular and plural, where the context so indicates.

	1.6	 	Secretary
	 
	 	 	“Secretary” shall mean the Secretary of the Company.
	 
	1.7	 	Subsidiary
	 
	 	 	“Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with
the Company if each of the corporations other than the last corporation in the unbroken
chain then owns stock possessing 33 percent or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
	 
	1.8	 	Termination of Employment
	 
	 	 	“Termination of Employment” shall mean the time when the
employee-employer relationship between the Employee and the Company or
a Subsidiary is terminated for any reason, including, but not limited
to, a termination by resignation, discharge, death or retirement, but
excluding terminations where there is a simultaneous reemployment or
continuing employment by the Company or a Subsidiary, and, at the
discretion of the Committee or the Company, terminations which result
in the severance of the employee-employer relationship that do not
exceed one year. The Committee or the Company, in its absolute
discretion, shall determine the effect of all other matters and
questions relating to Termination of Employment.

ARTICLE II

GRANT OF OPTION

	2.1	 	Grant of Option
	 
	 	 	In consideration of Employee’s agreement to remain in the employ of
Company or its subsidiaries and for other good and valuable
consideration, on the date hereof the Company irrevocably grants to
Employee the option to purchase any part or all of an aggregate of *
shares of its $1.00 par value common stock upon the terms and
conditions set forth in this Agreement. Such Option is granted
pursuant to the Plan and shall also be subject to the terms and
conditions set forth in the Plan.
	 
	2.2	 	Purchase Price
	 
	 	 	The purchase price of the shares of stock covered by the Option shall
be
                    
and 00000/10000 dollars ($   ) per share without
commission or other charge, which was the equivalent of £            .
(For informational purposes only, on February 28, 2008 the exchange
rate of US$ to £ as calculated by Bloomberg L.P. was £1.00 equals US$            .)

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	2.3	 	Consideration to Company
	 
	 	 	In consideration of the granting of this Option by the Company, the
Employee agrees to render faithful and efficient service to the
Company or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least
one (1) year from the date this Option is granted. Nothing in this
Agreement or in the Plan shall confer upon the Employee any right to
continue in the employ of the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and
its Subsidiaries, which are hereby expressly reserved, to discharge
the Employee at any time for any reason whatsoever, with or without
good cause. Nor shall it interfere with or restrict in any way, other
than the forfeiture of all rights under this Agreement, the right of
the Employee voluntarily to terminate his employment with the Company
or a Subsidiary.
	 
	2.4	 	Adjustments in Option
	 
	 	 	In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend, or combination of shares, the Committee or
the Company shall make an appropriate and equitable adjustment in the
number and kind of shares as to which the Option, or portions thereof
then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares, the
Employee’s proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option may include a
necessary corresponding adjustment in the option price per share, but
shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the
aggregate price resulting from rounding-off of share quantities or
prices).

ARTICLE III

PERIOD OF EXERCISABILITY

	3.1	 	Commencement of Exercisability

	 	(a)	 	The Option shall become exercisable in four cumulative installments as follows:

	 	(i)	 	The first installment shall consist of twenty-five percent
(25%) of the shares covered by the Option and shall become exercisable on the
first anniversary of the date the Option was granted.
	 
	 	(ii)	 	The second installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the second anniversary of the date the Option was granted.
	 
	 	(iii)	 	The third installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the third anniversary of the date the Option was granted.

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	 	(iv)	 	The fourth installment shall consist of twenty five percent
(25%) of the shares covered by the Option and shall become exercisable on the
fourth anniversary of the date the Option was granted.

	 	 	 	The installments provided for in this Subsection (a) are cumulative. Each
installment which becomes exercisable shall remain exercisable during the term of
the Option, except as otherwise provided in this Agreement.
	 
	 	(b)	 	No portion of the Option, which is an unexercisable installment under
Subsection (a) above at Termination of Employment, shall thereafter become exercisable,
unless otherwise determined by the Committee.
	 
	 	(c)	 	Notwithstanding Subsections 3.1(a) and 3.1(b) above, upon a Change of Control,
all Option installments not yet exercisable shall become immediately exercisable.

	3.2	 	Term of Option
	 
	 	 	The Option will expire and will not, under any condition, be
exercisable after the tenth (10th) anniversary of the date the Option
was granted. Such date shall be the Option’s Expiration Date.
	 
	3.3	 	Exercise of Option after Termination of Employment
	 
	 	 	This Option is exercisable by the Employee only while he is employed
by the Company or a Subsidiary, subject to the following exceptions:

	 	(a)	 	If the Employee dies while the Option is exercisable under the terms of this
Agreement, the Employee’s Beneficiary may exercise such rights, subject to the
limitation in Subsection 3.1(b). The Option must be exercised within twelve (12)
months after the Employee’s death, and the Committee or the Company may in its
discretion extend the Expiration Date of the Option to accommodate such exercise.
	 
	 	(b)	 	If the Employee’s employment is terminated due to his permanent and total
disability, as defined in Section 22(c)(3) of the Code, the Employee may exercise the
Option, subject to the limitation in Subsection 3.1(b), within thirty six (36) months
after Termination of Employment, but not later than the Option’s Expiration Date.
	 
	 	(c)	 	If the Employee’s employment is terminated due to his Retirement, the Employee
may exercise the Option, subject to the limitations of Subsection 3.1(b), within
thirty-six (36) months after Termination of Employment, but not later than the Option’s
Expiration Date.
	 
	 	(d)	 	If the Employee’s employment is terminated other than for good cause or the
reasons set forth in Subsections (a) through (c) above, the Employee may exercise the
Option, subject to the limitations of Subsection 3.1(b), within six (6) months after
Termination of Employment, but not later than the Option’s Expiration Date.

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ARTICLE IV

EXERCISE OF OPTIONS

	4.1	 	Partial Exercise
	 
	 	 	Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.2. Each partial exercise shall be for
not less than twenty-five (25) shares (or a smaller number, if it is
the maximum number which may be exercised under Section 3.1), and
shall be for whole shares only.
	 
	4.2	 	Manner of Exercise
	 
	 	 	The Option, or any exercisable portion thereof, may be exercised by
delivery (hard copy, fax or e-mail, as appropriate) to the Secretary
or to the Company’s Securities Administrator of all of the following:

	 	(a)	 	A written notice, complying with the applicable procedures established by the
Committee or the Company, stating that the Option or portion is thereby exercised. The
notice shall be signed by the Employee or the other person then entitled to exercise
the Option, and
	 
	 	(b)	 	Full payment for the shares with respect to which the option or portion thereof
is exercised. Payment may be made (i) in cash (or by certified or bank cashier’s
check), or (ii) by actual or constructive delivery to the Company, in accordance with
the procedures established by the Company, of Company Common Stock then owned by the
Employee with a fair market value on the date the option is exercised equal to the
aggregate exercise purchase price of the shares with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the option price; or (v) by instructing the Company
to withhold a number of such shares having a Fair Market Value on the date of the
exercise equal to the aggregate exercise price of such Option; and
	 
	 	(c)	 	Full payment to the Company of any federal, state, local or foreign taxes
required to be withheld in connection with the exercise. Payment may be made (i) in
cash (or by certified or bank cashier’s check), or (ii) by actual or constructive
delivery to the Company, in accordance with the procedures established by the Company,
of Company Common Stock then owned by the Employee with a fair market value on the date
the option is exercised equal to the tax liability with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the tax liability; or (v) by instructing the Company
to withhold a number of such shares having a Fair Market Value on the date of the
exercise equal to the tax liability (and provided that in any event Employee is
responsible for the payment of any and all applicable taxes related to this stock
option grant and any exercise of stock
options hereunder); and

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	 	(d)	 	In the event the Option or portion thereof shall be exercised by any person or
persons other than the Employee, appropriate proof of the right of such person or
persons to exercise the Option.

	4.3	 	Conditions to Issuance of Stock Certificates
	 
	 	 	The shares of stock deliverable upon the exercise of the Option, or
any part thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the
Company. Such shares shall be fully paid and non-assessable. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of the
Option or part thereof prior to fulfillment of all of the following
conditions:

	 	(a)	 	The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed;
	 
	 	(b)	 	The completion of any registration or other qualification of such shares under
any state or federal law, or under rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the Committee or
the Company shall, in its absolute discretion, deem necessary or advisable;
	 
	 	(c)	 	The obtaining of any approval or other clearance from any state or federal
governmental agency which the Committee or the Company shall, in its absolute
discretion, determine to be necessary or advisable;
	 
	 	(d)	 	The lapse of such reasonable period of time following the exercise of the
Option as the Committee or the Company may from time to time establish for reasons of
administrative convenience; and
	 
	 	(e)	 	The receipt by the Company of full payment for such shares.

	4.4	 	Rights as Shareholders
	 
	 	 	The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option
unless and until certificates or book entries representing such shares shall have been
issued or made by the Company, or the Company’s transfer agent, to or for such holder.

ARTICLE V

MISCELLANEOUS

	5.1	 	Option Subject to Plan
	 
	 	 	The Option 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.
	 
	5.2	 	Administration
	 
	 	 	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 or revoke any such procedures.

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	5.3	 	Option Not Transferable
	 
	 	 	Neither the Option nor any interest or right therein or part thereof
may be sold, pledged, assigned or transferred in any manner other than
by will or by the applicable laws of descent and distribution. The
Option shall be exercised during the Employee’s lifetime only by the
Employee, or his guardian or legal representative.
	 
	5.4	 	Notices
	 
	 	 	Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary and
any notice to be given to the Employee shall be addressed to him at
the address given beneath his signature hereto. By a notice given
pursuant to this Section, either party may hereafter designate a
different address for notices to be given to him. Any notice that is
required to be given to Employee shall, if Employee is then deceased,
be given to Employee’s personal representative if such representative
has previously informed the Company of his status and address by
written notice under this Section.
	 
	5.5	 	Titles
	 
	 	 	Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
	 
	5.6	 	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.

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

	 	 	 	 	 
	 	AVERY DENNISON CORPORATION

 	 
	 	By:  	*
 	 
	 	 	Chairman & Chief Executive Officer 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Secretary 	 
	 	 	 	 
	 

	 	 	 	 	 
	By:

	 	*
	 	 
	 

	 	 	 	 
	 

	 	Optionee	 	 
	 
	 	 	 	 
	 

	 	*	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	*	 	 
	 

	 	 	 	 
	 

	 	Address	 	 

 

			
	*	 	Refer to attached Notice.

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AVERY DENNISON CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

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

WHEREAS, Company wishes to afford Employee the opportunity to purchase shares of its $1.00 par
value common stock under the terms of the Employee Stock Option and Incentive Plan (“Plan”); and

WHEREAS, the Compensation and Executive Personnel Committee of the Company’s Board of Directors
(hereinafter referred to as the “Committee”), appointed to administer said Plan, or the Chief
Executive Officer (“CEO”), as authorized by the Committee, has determined that it would be to the
advantage and best interest of Company and its shareholders to grant the Option provided for herein
to Employee as an inducement to remain in the service of Company or its Subsidiaries and as an
incentive for increased efforts during such service;

WHEREAS, the Committee or the CEO has advised the Company of its or his determination and
instructed the undersigned officers to issue said Option, which the Committee has determined should
be a Non-Qualified Stock Option, as authorized under the Plan;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt of which is hereby acknowledged, Company and Employee do hereby
agree as follows:

ARTICLE I  —  DEFINITIONS

Terms not defined herein shall have the meaning given in the Plan. Whenever the following terms are
used in this Agreement they shall have the meaning specified below unless the context clearly
indicates to the contrary.

	1.1	 	Beneficiary
	 
	 	 	“Beneficiary” shall mean a person properly designated by the Employee, including his/her spouse or heirs at law, to
exercise such Employee’s rights under the Plan. Designation, revocation and redesignation of Beneficiaries must be made in
writing in accordance with procedures established by the Committee or the Company, and shall be effective upon delivery to
the Company.
	 
	1.2	 	Change of Control
	 
	 	 	“Change of Control” shall have the same meaning given in Article 9.2 of the Plan.
	 
	1.3	 	Option
	 
	 	 	“Option” shall mean the option to purchase common stock of the Company granted under this Agreement.

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	1.4	 	Plan
	 
	 	 	The “Plan” shall mean the Employee Stock Option and Incentive Plan, as amended and restated.
	 
	1.5	 	Pronouns
	 
	 	 	The masculine pronoun shall include the feminine and neuter, and the singular and plural, where the context so indicates.
	 
	1.6	 	Secretary
	 
	 	 	“Secretary” shall mean the Secretary of the Company.
	 
	1.7	 	Subsidiary
	 
	 	 	“Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns stock possessing 33 percent or more of the
total combined voting power of all classes of stock in one of the other corporations in such chain.
	 
	1.8	 	Termination of Employment
	 
	 	 	“Termination of Employment” shall mean the time when the employee-employer relationship between the Employee and the
Company or a Subsidiary is terminated for any reason, including, but not limited to, a termination by resignation,
discharge, death or retirement, but excluding terminations where there is a simultaneous reemployment or continuing
employment by the Company or a Subsidiary, and, at the discretion of the Committee or the Company, terminations which
result in the severance of the employee-employer relationship that do not exceed one year. The Committee or the Company
shall determine the effect of all other matters and questions relating to Termination of Employment.

ARTICLE II — GRANT OF OPTION

	2.1	 	Grant of Option
	 
	 	 	In consideration of Employee’s agreement to remain in the employ of
Company or its subsidiaries and for other good and valuable
consideration, on the date hereof the Company irrevocably grants to
Employee the option to purchase any part or all of an aggregate of *
shares of its $1.00 par value common stock upon the terms and
conditions set forth in this Agreement. Such Option is granted
pursuant to the Plan and shall also be subject to the terms and
conditions set forth in the Plan.
	 
	2.2	 	Purchase Price
	 
	 	 	The purchase price of the shares of stock covered by the Option shall
be * dollars per share without commission or other charge.

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	2.3	 	Consideration to Company
	 
	 	 	In consideration of the granting of this Option by the Company, the
Employee agrees to render faithful and efficient service to the
Company or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least
one (1) year from the date this Option is granted. Nothing in this
Agreement or in the Plan shall confer upon the Employee any right to
continue in the employ of the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and
its Subsidiaries, which are hereby expressly reserved, to discharge
the Employee at any time for any reason whatsoever, with or without
good cause. Nor shall it interfere with or restrict in any way, other
than the forfeiture of all rights under this Agreement, the right of
the Employee voluntarily to terminate his employment with the Company
or a Subsidiary.
	 
	2.4	 	Adjustments in Option
	 
	 	 	In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend, or combination of shares, the Committee or
the Company shall make an appropriate and equitable adjustment in the
number and kind of shares as to which the Option, or portions thereof
then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares, the
Employee’s proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option may include a
necessary corresponding adjustment in the option price per share, but
shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the
aggregate price resulting from rounding-off of share quantities or
prices).

ARTICLE III — PERIOD OF EXERCISABILITY

	3.1	 	Commencement of Exercisability

	 	(a)	 	The Option shall become exercisable in four cumulative installments as follows:

	 	(i)	 	The first installment shall consist of twenty-five percent
(25%) of the shares covered by the Option and shall become exercisable on the
first anniversary of the date the Option was granted.
	 
	 	(ii)	 	The second installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the second anniversary of the date the Option was granted.
	 
	 	(iii)	 	The third installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the third anniversary of the date the Option was granted.
	 
	 	(iv)	 	The fourth installment shall consist of twenty five percent
(25%) of the shares covered by the Option and shall become exercisable on the
fourth anniversary of the date the Option was granted.

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	 	 	 	The installments provided for in this Subsection (a) are cumulative. Each
installment that becomes exercisable shall remain exercisable during the term of the
Option, except as otherwise provided in this Agreement.
	 
	 	(b)	 	No portion of the Option, which is an unexercisable installment under
Subsection (a) above at Termination of Employment, shall thereafter become exercisable,
unless otherwise determined by the Committee.
	 
	 	(c)	 	Notwithstanding Subsections 3.1(a) and 3.1(b) above, upon a Change of Control,
all Option installments not yet exercisable shall become immediately exercisable.

	3.2	 	Term of Option
	 
	 	 	The Option will expire and will not, under any condition, be
exercisable after the tenth (10th) anniversary of the date the Option
was granted. Such date shall be the Option’s Expiration Date.
	 
	3.3	 	Exercise of Option after Termination of Employment
	 
	 	 	This Option is exercisable by the Employee only while he is employed
by the Company or a Subsidiary, subject to the following exceptions:

	 	(a)	 	If the Employee dies while the Option is exercisable under the terms of this
Agreement, the Employee’s Beneficiary may exercise such rights, subject to the
limitation in Subsection 3.1(b). The Option must be exercised within twelve (12)
months after the Employee’s death, but not later than the Option’s Expiration Date.
	 
	 	(b)	 	If the Employee’s employment is terminated due to his permanent and total
disability, as defined in Section 22(c)(3) of the Code, the Employee may exercise the
Option, subject to the limitation in Subsection 3.1(b), within thirty six (36) months
after Termination of Employment, but not later than the Option’s Expiration Date.
	 
	 	(c)	 	If the Employee’s employment is terminated due to his Retirement, the Employee
may exercise the Option, subject to the limitations of Subsection 3.1(b), within
thirty-six (36) months after Termination of Employment, but not later than the Option’s
Expiration Date.
	 
	 	(d)	 	If the Employee’s employment is terminated other than for good cause or the
reasons set forth in Subsections (a) through (c) above, the Employee may exercise the
Option, subject to the limitations of Subsection 3.1(b), within six (6) months after
Termination of Employment, but not later than the Option’s Expiration Date.

ARTICLE IV — EXERCISE OF OPTIONS

	4.1	 	Partial Exercise
	 
	 	 	Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.2. Each partial exercise shall be for
not less than one
	 
	 	 	hundred (100) shares (or a smaller number, if it is the maximum number
which may be exercised under Section 3.1), and shall be for whole
shares only.

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	4.2	 	Manner of Exercise
	 
	 	 	The Option, or any exercisable portion thereof, may be exercised by
delivery (hard copy, fax or e-mail, as appropriate) to the Secretary
or to the Company’s Securities Administrator of all of the following:

	 	(a)	 	A written notice, complying with the applicable procedures established by the
Committee or the Company, stating that the Option or portion is thereby exercised; the
notice shall be signed by the Employee or the other person then entitled to exercise
the Option; and
	 
	 	(b)	 	Full payment for the shares with respect to which the option or portion thereof
is exercised. Payment may be made (i) in cash (or by certified or bank cashier’s
check), or (ii) by actual or constructive delivery to the Company, in accordance with
the procedures established by the Company, of Company Common Stock then owned by the
Employee with a fair market value on the date the option is exercised equal to the
aggregate exercise purchase price of the shares with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the option price; and
	 
	 	(c)	 	Full payment to the Company of any federal, state, local or foreign taxes
required to be withheld in connection with the exercise. Payment may be made (i) in
cash (or by certified or bank cashier’s check), or (ii) by actual or constructive
delivery to the Company, in accordance with the procedures established by the Company,
of Company Common Stock then owned by the Employee with a fair market value on the date
the option is exercised equal to the tax liability with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the tax liability; (and provided that in any event
Employee is responsible for the payment of any and all applicable taxes related to this
stock option grant and any exercise of stock options hereunder); and
	 
	 	(d)	 	In the event the Option or portion thereof shall be exercised by any person or
persons other than the Employee, appropriate proof of the right of such person or
persons to exercise the Option.

	4.3	 	Conditions to Issuance of Stock Certificates
	 
	 	 	The shares of stock deliverable upon the exercise of the Option, or
any part thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the
Company. Such shares shall be fully paid and nonassessable. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock
	 
	 	 	purchased upon the exercise of the Option or part thereof prior to
fulfillment of all of the following conditions:

- 5 -

 

	 	(a)	 	The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed;
	 
	 	(b)	 	The completion of any registration or other qualification of such shares under
any state or federal law, or under rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the Committee or
the Company shall, in its absolute discretion, deem necessary or advisable;
	 
	 	(c)	 	The obtaining of any approval or other clearance from any state or federal
governmental agency which the Committee or the Company shall, in its absolute
discretion, determine to be necessary or advisable;
	 
	 	(d)	 	The lapse of such reasonable period of time following the exercise of the
Option as the Committee or the Company may from time to time establish for reasons of
administrative convenience; and
	 
	 	(e)	 	The receipt by the Company of full payment of the exercise price and all taxes
related to the exercise of the Option.

	4.4	 	Rights as Shareholders
	 
	 	 	The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and
until certificates or book entries representing such shares shall have
been issued or made by the Company, or the Company’s transfer agent,
to or for such holder.

ARTICLE V — MISCELLANEOUS

	5.1	 	Option Subject to Plan
	 
	 	 	The Option 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.
	 
	5.2	 	Administration
	 
	 	 	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 or revoke any such procedures.
	 
	5.3	 	Option Not Transferable
	 
	 	 	Neither the Option nor any interest or right therein or part thereof
may be sold, pledged, assigned or transferred in any manner other than
by will or by the applicable laws of descent and distribution or as a
result of marital dissolution involving a qualified domestic relations
order (or a similar determination or settlement). The Option shall be
exercised during the Employee’s
lifetime only by the Employee, or his guardian or legal representative.

- 6 -

 

	5.4	 	Notices
	 
	 	 	Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary and
any notice to be given to the Employee shall be addressed to him at
the address given beneath his signature hereto. By a notice given
pursuant to this Section, either party may hereafter designate a
different address for notices to be given to him. Any notice that is
required to be given to Employee shall, if Employee is then deceased,
be given to Employee’s Beneficiary or personal representative if such
individual has previously informed the Company of his status and
address by written notice under this Section.
	 
	5.5	 	Titles
	 
	 	 	Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
	 
	5.6	 	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.

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

	 	 	 	 	 
	 	

AVERY DENNISON CORPORATION

 	 
	 	By:  	*
 	 
	 	 	President & Chief Executive Officer 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Secretary 	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	*
	 	 
	 

	 	 	 	 
	 

	 	Optionee	 	 
	 
	 	 	 	 
	 

	 	*	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	*	 	 
	 

	 	 	 	 
	 

	 	Address	 	 

 

			
	*	 	Refer to attached Notice.

- 7 -

 

AVERY DENNISON CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

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

WHEREAS, Company wishes to afford Employee the opportunity to purchase shares of its $1.00 par
value common stock under the terms of the Employee Stock Option and Incentive Plan (“Plan”); and

WHEREAS, the Compensation and Executive Personnel Committee of the Company’s Board of Directors
(hereinafter referred to as the “Committee”), appointed to administer said Plan, or the Chief
Executive Officer (“CEO”), as authorized by the Committee, has determined that it would be to the
advantage and best interest of Company and its shareholders to grant the Option provided for herein
to Employee as an inducement to remain in the service of Company or its Subsidiaries and as an
incentive for increased efforts during such service;

WHEREAS, the Committee or the CEO has advised the Company of its or his determination and
instructed the undersigned officers to issue said Option, which the Committee has determined should
be a Non-Qualified Stock Option, as authorized under the Plan;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt of which is hereby acknowledged, Company and Employee do hereby
agree as follows:

ARTICLE I — DEFINITIONS

Terms not defined herein shall have the meaning given in the Plan. Whenever the following terms are
used in this Agreement they shall have the meaning specified below unless the context clearly
indicates to the contrary.

	1.1	 	Beneficiary
	 
	 	 	“Beneficiary” shall mean a person properly designated by the Employee, including his/her spouse or heirs at law, to
exercise such Employee’s rights under the Plan. Designation, revocation and redesignation of Beneficiaries must be made in
writing in accordance with procedures established by the Committee or the Company, and shall be effective upon delivery to
the Company.
	 
	1.2	 	Change of Control
	 
	 	 	“Change of Control” shall have the same meaning given in Article 9.2 of the Plan.
	 
	1.3	 	Option
	 
	 	 	“Option” shall mean the option to purchase common stock of the Company granted under this Agreement.

- 1 -

 

	1.4	 	Plan
	 
	 	 	The “Plan” shall mean the Employee Stock Option and Incentive Plan, as amended and restated.
	 
	1.5	 	Pronouns
	 
	 	 	The masculine pronoun shall include the feminine and neuter, and the singular and plural, where the context so indicates.
	 
	1.6	 	Secretary
	 
	 	 	“Secretary” shall mean the Secretary of the Company.
	 
	1.7	 	Subsidiary
	 
	 	 	“Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns stock possessing 33 percent or more of the
total combined voting power of all classes of stock in one of the other corporations in such chain.
	 
	1.8	 	Termination of Employment
	 
	 	 	“Termination of Employment” shall mean the time when the employee-employer relationship between the Employee and the
Company or a Subsidiary is terminated for any reason, including, but not limited to, a termination by resignation,
discharge, death or retirement, but excluding terminations where there is a simultaneous reemployment or continuing
employment by the Company or a Subsidiary, and, at the discretion of the Committee or the Company, terminations which
result in the severance of the employee-employer relationship that do not exceed one year. The Committee or the Company
shall determine the effect of all other matters and questions relating to Termination of Employment.

ARTICLE II — GRANT OF OPTION

	2.1	 	Grant of Option
	 
	 	 	In consideration of Employee’s agreement to remain in the employ of
Company or its subsidiaries and for other good and valuable
consideration, on the date hereof the Company irrevocably grants to
Employee the option to purchase any part or all of an aggregate of *
shares of its $1.00 par value common stock upon the terms and
conditions set forth in this Agreement. Such Option is granted
pursuant to the Plan and shall also be subject to the terms and
conditions set forth in the Plan.
	 
	2.2	 	Purchase Price
	 
	 	 	The purchase price of the shares of stock covered by the Option shall
be * dollars per share without commission or other charge.

- 2 -

 

	2.3	 	Consideration to Company
	 
	 	 	In consideration of the granting of this Option by the Company, the
Employee agrees to render faithful and efficient service to the
Company or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least
one (1) year from the date this Option is granted (unless the Employee
retires before the end of such period and the Employee satisfies the
requirements of the last paragraph of Subsection 3.1(a)). Nothing in
this Agreement or in the Plan shall confer upon the Employee any right
to continue in the employ of the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and
its Subsidiaries, which are hereby expressly reserved, to discharge
the Employee at any time for any reason whatsoever, with or without
good cause. Nor shall it interfere with or restrict in any way, other
than the forfeiture of all rights under this Agreement, the right of
the Employee voluntarily to terminate his employment with the Company
or a Subsidiary.
	 
	2.4	 	Adjustments in Option
	 
	 	 	In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend, or combination of shares, the Committee or
the Company shall make an appropriate and equitable adjustment in the
number and kind of shares as to which the Option, or portions thereof
then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares, the
Employee’s proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option may include a
necessary corresponding adjustment in the option price per share, but
shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the
aggregate price resulting from rounding-off of share quantities or
prices).

ARTICLE III — PERIOD OF EXERCISABILITY

	3.1	 	Commencement of Exercisability

	 	(a)	 	The Option shall become exercisable in four cumulative installments as follows:

	 	(i)	 	The first installment shall consist of twenty-five percent
(25%) of the shares covered by the Option and shall become exercisable on the
first anniversary of the date the Option was granted.
	 
	 	(ii)	 	The second installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the second anniversary of the date the Option was granted.
	 
	 	(iii)	 	The third installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the third anniversary of the date the Option was granted.
	 
	 	(iv)	 	The fourth installment shall consist of twenty five percent
(25%) of the shares covered by the Option and shall become exercisable on the fourth anniversary
of the date the Option was granted.

- 3 -

 

	 	 	 	The installments provided for in this Subsection (a) are cumulative. Each
installment that becomes exercisable shall remain exercisable during the term of the
Option, except as otherwise provided in this Agreement.
	 
	 	 	 	Alternatively, Options, granted under this Agreement to employees participating in
the Senior Executive or the Executive Leadership Compensation Plans (annual bonus
plans), who (i) die, (ii) become disabled (as described in Subsection 3.3(b) below)
or (iii) retire under the Company’s retirement plan, have worked for the Company for
ten (10) or more years, and have a combination of age and service with the Company
of seventy five (75) or more, will vest as of the date of death, disability or
Termination of Employment, as applicable.

	 	(b)	 	No portion of the Option which is not exercisable under Subsection (a) above at
Termination of Employment shall thereafter become exercisable, unless otherwise
determined by the Committee.
	 
	 	(c)	 	Notwithstanding Subsections 3.1(a) and 3.1(b) above, upon a Change of Control,
all Option installments not yet exercisable shall become immediately exercisable.

	3.2	 	Term of Option
	 
	 	 	The Option will expire and will not, under any condition, be
exercisable after the tenth (10th) anniversary of the date the Option
was granted. Such date shall be the Option’s Expiration Date.
	 
	3.3	 	Exercise of Option after Termination of Employment
	 
	 	 	This Option is exercisable by the Employee only while he is employed
by the Company or a Subsidiary, subject to the following exceptions:

	 	(a)	 	If the Employee dies while the Option is exercisable under the terms of this
Agreement, the Employee’s Beneficiary may exercise such rights, subject to the
limitation in Subsection 3.1(b). The Option must be exercised within twelve (12)
months after the Employee’s death, but not later than the Option’s Expiration Date.
	 
	 	(b)	 	If the Employee’s employment is terminated due to his permanent and total
disability, as defined in Section 22(c)(3) of the Code, the Employee may exercise the
Option, subject to the limitation in Subsection 3.1(b), within thirty six (36) months
after Termination of Employment, but not later than the Option’s Expiration Date.
	 
	 	(c)	 	If the Employee’s employment is terminated due to his Retirement, the Employee
may exercise the Option, subject to the limitations of Subsection 3.1(b), within sixty
(60) months after Termination of Employment, but not later than the Option’s Expiration
Date.
	 
	 	(d)	 	If the Employee’s employment is terminated other than for Cause or the reasons
set forth in Subsections (a) through (c) above, the Employee may exercise the Option,
subject to the limitations of Subsection 3.1(b), within six (6) months after Termination of
Employment, but not later than the Option’s Expiration Date.

- 4 -

 

ARTICLE IV — EXERCISE OF OPTIONS

	4.1	 	Partial Exercise
	 
	 	 	Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.2. Each partial exercise shall be for
not less than one hundred (100) shares (or a smaller number, if it is
the maximum number which may be exercised under Section 3.1), and
shall be for whole shares only.
	 
	4.2	 	Manner of Exercise
	 
	 	 	The Option, or any exercisable portion thereof, may be exercised by
delivery (hard copy, fax or e-mail, as appropriate) to the Secretary
or to the Company’s Securities Administrator of all of the following:

	 	(a)	 	A written notice, complying with the applicable procedures established by the
Committee or the Company, stating that the Option or portion is thereby exercised; the
notice shall be signed by the Employee or the other person then entitled to exercise
the Option; and
	 
	 	(b)	 	Full payment for the shares with respect to which the option or portion thereof
is exercised. Payment may be made (i) in cash (or by certified or bank cashier’s
check), or (ii) by actual or constructive delivery to the Company, in accordance with
the procedures established by the Company, of Company Common Stock then owned by the
Employee with a fair market value on the date the option is exercised equal to the
aggregate exercise purchase price of the shares with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the option price; and
	 
	 	(c)	 	Full payment to the Company of any federal, state, local or foreign taxes
required to be withheld in connection with the exercise. Payment may be made (i) in
cash (or by certified or bank cashier’s check), or (ii) by actual or constructive
delivery to the Company, in accordance with the procedures established by the Company,
of Company Common Stock then owned by the Employee with a fair market value on the date
the option is exercised equal to the tax liability with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the tax liability (and provided that in any event
Employee is responsible for the payment of any and all applicable taxes related to this
stock option grant and any exercise of stock options hereunder); and
	 
	 	(d)	 	In the event the Option or portion thereof shall be exercised by any person or
persons other than the Employee, appropriate proof of the right of such person or persons to
exercise the Option.

- 5 -

 

	4.3	 	Conditions to Issuance of Stock Certificates
	 
	 	 	The shares of stock deliverable upon the exercise of the Option, or
any part thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the
Company. Such shares shall be fully paid and nonassessable. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of the
Option or part thereof prior to fulfillment of all of the following
conditions:

	 	(a)	 	The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed;
	 
	 	(b)	 	The completion of any registration or other qualification of such shares under
any state or federal law, or under rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the Committee or
the Company shall, in its absolute discretion, deem necessary or advisable;
	 
	 	(c)	 	The obtaining of any approval or other clearance from any state or federal
governmental agency which the Committee or the Company shall, in its absolute
discretion, determine to be necessary or advisable;
	 
	 	(d)	 	The lapse of such reasonable period of time following the exercise of the
Option as the Committee or the Company may from time to time establish for reasons of
administrative convenience; and
	 
	 	(e)	 	The receipt by the Company of full payment for such shares.

	4.4	 	Rights as Shareholders
	 
	 	 	The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and
until certificates or book entries representing such shares shall have
been issued or made by the Company, or the Company’s transfer agent,
to or for such holder.

ARTICLE V — MISCELLANEOUS

	5.1	 	Option Subject to Plan
	 
	 	 	The Option 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.
	 
	5.2	 	Administration
	 
	 	 	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 or revoke any such procedures.
	 
	5.3	 	Option Not Transferable
	 
	 	 	Neither the Option nor any interest or right therein or part thereof
may be sold, pledged, assigned or transferred in any manner other than
by will or by the applicable laws of descent and

- 6 -

 

	 	 	distribution or as a
result of marital dissolution involving a qualified domestic relations
order (or a similar determination or settlement). The Option shall be
exercised during the Employee’s lifetime only by the Employee, or his
guardian or legal representative.
	 
	5.4	 	Notices
	 
	 	 	Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary and
any notice to be given to the Employee shall be addressed to him at
the address given beneath his signature hereto. By a notice given
pursuant to this Section, either party may hereafter designate a
different address for notices to be given to him. Any notice that is
required to be given to Employee shall, if Employee is then deceased,
be given to Employee’s Beneficiary or personal representative if such
individual has previously informed the Company of his status and
address by written notice under this Section.
	 
	5.5	 	Titles
	 
	 	 	Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
	 
	5.6	 	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.

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

	 	 	 	 	 
	 	AVERY DENNISON CORPORATION

 	 
	 	By:  	*
 	 
	 	 	President & Chief Executive Officer 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Secretary 	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	*
	 	 
	   	 	 
	Optionee
	 	 	 	 
	 

	 	*	 	 
	   	 	 
	 
	 	 	 	 
	 

	 	*	 	 
	   	 	 
	Address
	 	 	 	 

 

* Refer to attached Notice.

- 7 -

 

AVERY DENNISON CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

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

WHEREAS, Company wishes to afford Employee the opportunity to purchase shares of its $1.00 par
value common stock under the terms of the Employee Stock Option and Incentive Plan (“Plan”); and

WHEREAS, the Compensation and Executive Personnel Committee of the Company’s Board of Directors
(hereinafter referred to as the “Committee”), appointed to administer said Plan, or the Chief
Executive Officer (“CEO”), as authorized by the Committee, has determined that it would be to the
advantage and best interest of Company and its shareholders to grant the Option provided for herein
to Employee as an inducement to remain in the service of Company or its Subsidiaries and as an
incentive for increased efforts during such service;

WHEREAS, the Committee or the CEO has advised the Company of its or his determination and
instructed the undersigned officers to issue said Option, which the Committee has determined should
be a Non-Qualified Stock Option, as authorized under the Plan;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt of which is hereby acknowledged, Company and Employee do hereby
agree as follows:

ARTICLE I — DEFINITIONS

Terms not defined herein shall have the meaning given in the Plan. Whenever the following terms are
used in this Agreement they shall have the meaning specified below unless the context clearly
indicates to the contrary.

	1.1	 	Beneficiary
	 
	 	 	“Beneficiary” shall mean a person properly designated by the Employee, including his/her spouse or heirs at law, to
exercise such Employee’s rights under the Plan. Designation, revocation and redesignation of Beneficiaries must be made in
writing in accordance with procedures established by the Committee or the Company, and shall be effective upon delivery to
the Company.
	 
	1.2	 	Change of Control
	 
	 	 	“Change of Control” shall have the same meaning given in Article 9.2 of the Plan.
	 
	1.3	 	Option
	 
	 	 	“Option” shall mean the option to purchase common stock of the Company granted under this Agreement.

- 1 -

 

	1.4	 	Plan
	 
	 	 	The “Plan” shall mean the Employee Stock Option and Incentive Plan, as amended and restated.
	 
	1.5	 	Pronouns
	 
	 	 	The masculine pronoun shall include the feminine and neuter, and the singular and plural, where the context so indicates.
	 
	1.6	 	Secretary
	 
	 	 	“Secretary” shall mean the Secretary of the Company.
	 
	1.7	 	Subsidiary
	 
	 	 	“Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns stock possessing 33 percent or more of the
total combined voting power of all classes of stock in one of the other corporations in such chain.
	 
	1.8	 	Termination of Employment
	 
	 	 	“Termination of Employment” shall mean the time when the employee-employer relationship between the Employee and the
Company or a Subsidiary is terminated for any reason, including, but not limited to, a termination by resignation,
discharge, death or retirement, but excluding terminations where there is a simultaneous reemployment or continuing
employment by the Company or a Subsidiary, and, at the discretion of the Committee or the Company, terminations which
result in the severance of the employee-employer relationship that do not exceed one year. The Committee or the Company
shall determine the effect of all other matters and questions relating to Termination of Employment.

ARTICLE II — GRANT OF OPTION

	2.1	 	Grant of Option
	 
	 	 	In consideration of Employee’s agreement to remain in the employ of
Company or its subsidiaries and for other good and valuable
consideration, on the date hereof the Company irrevocably grants to
Employee the option to purchase any part or all of an aggregate of *
shares of its $1.00 par value common stock upon the terms and
conditions set forth in this Agreement. Such Option is granted
pursuant to the Plan and shall also be subject to the terms and
conditions set forth in the Plan.
	 
	2.2	 	Purchase Price
	 
	 	 	The purchase price of the shares of stock covered by the Option shall
be * dollars per share without commission or other charge.

- 2 -

 

	2.3	 	Consideration to Company
	 
	 	 	In consideration of the granting of this Option by the Company, the
Employee agrees to render faithful and efficient service to the
Company or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least
one (1) year from the date this Option is granted (unless the Employee
retires before the end of such period and the Employee satisfies the
requirements of the last paragraph of Subsection 3.1(a)). Nothing in
this Agreement or in the Plan shall confer upon the Employee any right
to continue in the employ of the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and
its Subsidiaries, which are hereby expressly reserved, to discharge
the Employee at any time for any reason whatsoever, with or without
good cause. Nor shall it interfere with or restrict in any way, other
than the forfeiture of all rights under this Agreement, the right of
the Employee voluntarily to terminate his employment with the Company
or a Subsidiary.
	 
	2.4	 	Adjustments in Option
	 
	 	 	In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend, or combination of shares, the Committee or
the Company shall make an appropriate and equitable adjustment in the
number and kind of shares as to which the Option, or portions thereof
then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares, the
Employee’s proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option may include a
necessary corresponding adjustment in the option price per share, but
shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the
aggregate price resulting from rounding-off of share quantities or
prices).

ARTICLE III — PERIOD OF EXERCISABILITY

	3.1	 	Commencement of Exercisability

	 	(a)	 	The Option shall become exercisable in four cumulative installments as follows:

	 	(i)	 	The first installment shall consist of twenty-five percent
(25%) of the shares covered by the Option and shall become exercisable on the
first anniversary of the date the Option was granted.
	 
	 	(ii)	 	The second installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the second anniversary of the date the Option was granted.
	 
	 	(iii)	 	The third installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the third anniversary of the date the Option was granted.
	 
	 	(iv)	 	The fourth installment shall consist of twenty five percent
(25%) of the shares covered by the Option and shall become exercisable on the
fourth anniversary of the date the Option was granted.

- 3 -

 

	 	 	 	The installments provided for in this Subsection (a) are cumulative. Each
installment that becomes exercisable shall remain exercisable during the term of the
Option, except as otherwise provided in this Agreement.
	 
	 	 	 	Alternatively, Options, granted under this Agreement to employees participating in
the Senior Executive Leadership Compensation Plan (annual bonus plan), who (i) die,
(ii) become disabled (as described in Subsection 3.3(b) below) or (iii) retire under
the Company’s retirement plan, have worked for the Company for ten (10) or more
years, and have a combination of age and service with the Company of seventy five
(75) or more, will vest as of the date of death, disability or Termination of
Employment, as applicable.
	 
	 	(b)	 	No portion of the Option which is not exercisable under Subsection (a) above at
Termination of Employment shall thereafter become exercisable, unless otherwise
determined by the Committee.
	 
	 	(c)	 	Notwithstanding Subsections 3.1(a) and 3.1(b) above, upon a Change of Control,
all Option installments not yet exercisable shall become immediately exercisable.

	3.2	 	Term of Option
	 
	 	 	The Option will expire and will not, under any condition, be
exercisable after the tenth (10th) anniversary of the date the Option
was granted. Such date shall be the Option’s Expiration Date.
	 
	3.3	 	Exercise of Option after Termination of Employment
	 
	 	 	This Option is exercisable by the Employee only while he is employed
by the Company or a Subsidiary, subject to the following exceptions:

	 	(a)	 	If the Employee dies while the Option is exercisable under the terms of this
Agreement, the Employee’s Beneficiary may exercise such rights, subject to the
limitation in Subsection 3.1(b). The Option must be exercised within twelve (12)
months after the Employee’s death, but not later than the Option’s Expiration Date.
	 
	 	(b)	 	If the Employee’s employment is terminated due to his permanent and total
disability, as defined in Section 22(c)(3) of the Code, the Employee may exercise the
Option, subject to the limitation in Subsection 3.1(b), within thirty six (36) months
after Termination of Employment, but not later than the Option’s Expiration Date.
	 
	 	(c)	 	If the Employee’s employment is terminated due to his Retirement, the Employee
may exercise the Option, subject to the limitations of Subsection 3.1(b), to the full
term of the option, but not later than the Option’s Expiration Date.
	 
	 	(d)	 	If the Employee’s employment is terminated other than for Cause or the reasons
set forth in Subsections (a) through (c) above, the Employee may exercise the Option,
subject to the limitations of Subsection 3.1(b), within six (6) months after
Termination of Employment, but not later than the Option’s Expiration Date.

- 4 -

 

ARTICLE IV — EXERCISE OF OPTIONS

	4.1	 	Partial Exercise
	 
	 	 	Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.2. Each partial exercise shall be for
not less than one hundred (100) shares (or a smaller number, if it is
the maximum number which may be exercised under Section 3.1), and
shall be for whole shares only.
	 
	4.2	 	Manner of Exercise
	 
	 	 	The Option, or any exercisable portion thereof, may be exercised by
delivery (hard copy, fax or e-mail, as appropriate) to the Secretary
or to the Company’s Securities Administrator of all of the following:

	 	(a)	 	A written notice, complying with the applicable procedures established by the
Committee or the Company, stating that the Option or portion is thereby exercised; the
notice shall be signed by the Employee or the other person then entitled to exercise
the Option; and
	 
	 	(b)	 	Full payment for the shares with respect to which the option or portion thereof
is exercised. Payment may be made (i) in cash (or by certified or bank cashier’s
check), or (ii) by actual or constructive delivery to the Company, in accordance with
the procedures established by the Company, of Company Common Stock then owned by the
Employee with a fair market value on the date the option is exercised equal to the
aggregate exercise purchase price of the shares with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the option price; and
	 
	 	(c)	 	Full payment to the Company of any federal, state, local or foreign taxes
required to be withheld in connection with the exercise. Payment may be made (i) in
cash (or by certified or bank cashier’s check), or (ii) by actual or constructive
delivery to the Company, in accordance with the procedures established by the Company,
of Company Common Stock then owned by the Employee with a fair market value on the date
the option is exercised equal to the tax liability with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the tax liability (and provided that in any event
Employee is responsible for the payment of any and all applicable taxes related to this
stock option grant and any exercise of stock options hereunder); and
	 
	 	(d)	 	In the event the Option or portion thereof shall be exercised by any person or
persons other than the Employee, appropriate proof of the right of such person or
persons to exercise the Option.

- 5 -

 

	4.3	 	Conditions to Issuance of Stock Certificates
	 
	 	 	The shares of stock deliverable upon the exercise of the Option, or
any part thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the
Company. Such shares shall be fully paid and nonassessable. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of the
Option or part thereof prior to fulfillment of all of the following
conditions:

	 	(a)	 	The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed;
	 
	 	(b)	 	The completion of any registration or other qualification of such shares under
any state or federal law, or under rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the Committee or
the Company shall, in its absolute discretion, deem necessary or advisable;
	 
	 	(c)	 	The obtaining of any approval or other clearance from any state or federal
governmental agency which the Committee or the Company shall, in its absolute
discretion, determine to be necessary or advisable;
	 
	 	(d)	 	The lapse of such reasonable period of time following the exercise of the
Option as the Committee or the Company may from time to time establish for reasons of
administrative convenience; and
	 
	 	(e)	 	The receipt by the Company of full payment for such shares.

	4.4	 	Rights as Shareholders
	 
	 	 	The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and
until certificates or book entries representing such shares shall have
been issued or made by the Company, or the Company’s transfer agent,
to or for such holder.

ARTICLE V — MISCELLANEOUS

	5.1	 	Option Subject to Plan
	 
	 	 	The Option 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.
	 
	5.2	 	Administration
	 
	 	 	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 or revoke any such procedures.

- 6 -

 

	5.3	 	Option Not Transferable
	 
	 	 	Neither the Option nor any interest or right therein or part thereof
may be sold, pledged, assigned or transferred in any manner other than
by will or by the applicable laws of descent and distribution or as a
result of marital dissolution involving a qualified domestic relations
order (or a similar determination or settlement). The Option shall be
exercised during the Employee’s lifetime only by the Employee, or his
guardian or legal representative.
	 
	5.4	 	Notices
	 
	 	 	Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary and
any notice to be given to the Employee shall be addressed to him at
the address given beneath his signature hereto. By a notice given
pursuant to this Section, either party may hereafter designate a
different address for notices to be given to him. Any notice that is
required to be given to Employee shall, if Employee is then deceased,
be given to Employee’s Beneficiary or personal representative if such
individual has previously informed the Company of his status and
address by written notice under this Section.
	 
	5.5	 	Titles
	 
	 	 	Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
	 
	5.6	 	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.

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

	 	 	 	 	 	 	 	 	 
	 	 	AVERY DENNISON CORPORATION	 	 
	 

	 	By:
	 	 	 	*	 	 
	 	 	 	 	 	 	 
	 	 	 	 	President & Chief Executive Officer	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 	 	 	 	Secretary	 	 	 	 

	 	 	 	 	 
	 

	 	*	 	 
	 	 	 
	Optionee	 	 
	 
	 	 	 	 
	 

	 	*	 	 
	 	 	 
	 
	 	 	 	 
	 

	 	*	 	 
	 	 	 
	Address
	 	 	 	 
	 
	 	 	 	 

 

* Refer to attached Notice.

- 7 -

 

AVERY DENNISON CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

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

WHEREAS, Company wishes to afford Employee the opportunity to purchase shares of its $1.00 par
value common stock under the terms of the Employee Stock Option and Incentive Plan (“Plan”); and

WHEREAS, the Compensation and Executive Personnel Committee of the Company’s Board of Directors
(hereinafter referred to as the “Committee”), appointed to administer said Plan, or the Chief
Executive Officer (“CEO”), as authorized by the Committee, has determined that it would be to the
advantage and best interest of Company and its shareholders to grant the Option provided for herein
to Employee as an inducement to remain in the service of Company or its Subsidiaries and as an
incentive for increased efforts during such service;

WHEREAS, the Committee or the CEO has advised the Company of its or his determination and
instructed the undersigned officers to issue said Option, which the Committee has determined should
be a Non-Qualified Stock Option, as authorized under the Plan;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt of which is hereby acknowledged, Company and Employee do hereby
agree as follows:

ARTICLE I

DEFINITIONS

Whenever the following terms are used in this Agreement they shall have the meaning specified below
unless the context clearly indicates to the contrary.

	1.1	 	Beneficiary
	 
	 	 	“Beneficiary” shall mean a person properly designated by the Employee, including his/her spouse or heirs at law, to
exercise such Employee’s rights under the Plan. Designation, revocation and redesignation of Beneficiaries must be made in
writing in accordance with procedures established by the Committee or the Company and shall be effective upon delivery to
the Committee or the Company.
	 
	1.2	 	Change of Control
	 
	 	 	“Change of Control” shall have the same meaning given in Article 9.2 of the Plan.
	 
	1.3	 	Option
	 
	 	 	“Option” shall mean the option to purchase common stock of the Company granted under the Stock Option Agreement.

- 1 -

 

	1.4	 	Plan
	 
	 	 	The “Plan” shall mean the Employee Stock Option and Incentive Plan.
	 
	1.5	 	Pronouns
	 
	 	 	The masculine pronoun shall include the feminine and neuter, and the singular and plural, where the context so indicates.
	 
	1.6	 	Secretary
	 
	 	 	“Secretary” shall mean the Secretary of the Company.
	 
	1.7	 	Subsidiary
	 
	 	 	“Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with
the Company if each of the corporations other than the last corporation in the unbroken
chain then owns stock possessing 33 percent or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
	 
	1.8	 	Termination of Employment
	 
	 	 	“Termination of Employment” shall mean the time when the
employee-employer relationship between the Employee and the Company or
a Subsidiary is terminated for any reason, including, but not limited
to, a termination by resignation, discharge, death or retirement, but
excluding terminations where there is a simultaneous reemployment or
continuing employment by the Company or a Subsidiary, and, at the
discretion of the Committee or the Company, terminations which result
in the severance of the employee-employer relationship that do not
exceed one year. The Committee or the Company, in its absolute
discretion, shall determine the effect of all other matters and
questions relating to Termination of Employment.

ARTICLE II

GRANT OF OPTION

	2.1	 	Grant of Option
	 
	 	 	In consideration of Employee’s agreement to remain in the employ of
Company or its subsidiaries and for other good and valuable
consideration, on the date hereof the Company irrevocably grants to
Employee the option to purchase any part or all of an aggregate of *
shares of its $1.00
par value common stock upon the terms and conditions set forth in this
Agreement. Such Option
is granted pursuant to the Plan and shall also be subject to the terms
and conditions set forth in the Plan.
	 
	2.2	 	Purchase Price
	 
	 	 	The purchase price of the shares of stock covered by the Option shall
be                      and 00000/10000 dollars ($           ) per share without
commission or other charge, which was the equivalent of £           .
(For informational purposes only, on February 28, 2008 the exchange
rate of US$ to £ as calculated by Bloomberg L.P. was £1.00 equals US$            .)

- 2 -

 

	2.3	 	Consideration to Company
	 
	 	 	In consideration of the granting of this Option by the Company, the
Employee agrees to render faithful and efficient service to the
Company or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least
one (1) year from the date this Option is granted. Nothing in this
Agreement or in the Plan shall confer upon the Employee any right to
continue in the employ of the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and
its Subsidiaries, which are hereby expressly reserved, to discharge
the Employee at any time for any reason whatsoever, with or without
good cause. Nor shall it interfere with or restrict in any way, other
than the forfeiture of all rights under this Agreement, the right of
the Employee voluntarily to terminate his employment with the Company
or a Subsidiary.
	 
	2.4	 	Adjustments in Option
	 
	 	 	In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend, or combination of shares, the Committee or
the Company shall make an appropriate and equitable adjustment in the
number and kind of shares as to which the Option, or portions thereof
then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares, the
Employee’s proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option may include a
necessary corresponding adjustment in the option price per share, but
shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the
aggregate price resulting from rounding-off of share quantities or
prices).

ARTICLE III

PERIOD OF EXERCISABILITY

	3.1	 	Commencement of Exercisability

	 	(a)	 	The Option shall become exercisable in four cumulative installments as follows:

	 	(i)	 	The first installment shall consist of twenty-five percent
(25%) of the shares covered by the Option and shall become exercisable on the
first anniversary of the date the Option was granted.
	 
	 	(ii)	 	The second installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the second anniversary of the date the Option was granted.
	 
	 	(iii)	 	The third installment shall consist of an additional twenty
five percent (25%) of the shares covered by the Option and shall become
exercisable on the third anniversary of the date the Option was granted.

- 3 -

 

	 	(iv)	 	The fourth installment shall consist of twenty five percent
(25%) of the shares covered by the Option and shall become exercisable on the
fourth anniversary of the date the Option was granted.

The installments provided for in this Subsection (a) are cumulative. Each
installment which becomes exercisable shall remain exercisable during the term of
the Option, except as otherwise provided in this Agreement.

	 	(b)	 	No portion of the Option, which is an unexercisable installment under
Subsection (a) above at Termination of Employment, shall thereafter become exercisable,
unless otherwise determined by the Committee.
	 
	 	(c)	 	Notwithstanding Subsections 3.1(a) and 3.1(b) above, upon a Change of Control,
all Option installments not yet exercisable shall become immediately exercisable.

	3.2	 	Term of Option
	 
	 	 	The Option will expire and will not, under any condition, be
exercisable after the tenth (10th) anniversary of the date the Option
was granted. Such date shall be the Option’s Expiration Date.
	 
	3.3	 	Exercise of Option after Termination of Employment
	 
	 	 	This Option is exercisable by the Employee only while he is employed
by the Company or a Subsidiary, subject to the following exceptions:

	 	(a)	 	If the Employee dies while the Option is exercisable under the terms of this
Agreement, the Employee’s Beneficiary may exercise such rights, subject to the
limitation in Subsection 3.1(b). The Option must be exercised within twelve (12)
months after the Employee’s death, and the Committee or the Company may in its
discretion extend the Expiration Date of the Option to accommodate such exercise.
	 
	 	(b)	 	If the Employee’s employment is terminated due to his permanent and total
disability, as defined in Section 22(c)(3) of the Code, the Employee may exercise the
Option, subject to the limitation in Subsection 3.1(b), within thirty six (36) months
after Termination of Employment, but not later than the Option’s Expiration Date.
	 
	 	(c)	 	If the Employee’s employment is terminated due to his retirement, the Employee
may exercise the Option, subject to the limitations of Subsection 3.1(b), within sixty
(60) months after Termination of Employment, but not later than the Option’s Expiration
Date.
	 
	 	(d)	 	If the Employee’s employment is terminated other than for good cause or the
reasons set forth in Subsections (a) through (c) above, the Employee may exercise the
Option, subject to the limitations of Subsection 3.1(b), within six (6) months after
Termination of Employment, but not later than the Option’s Expiration Date.

- 4 -

 

ARTICLE IV

EXERCISE OF OPTIONS

	4.1	 	Partial Exercise
	 
	 	 	Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.2. Each partial exercise shall be for
not less than twenty-five (25) shares (or a smaller number, if it is
the maximum number which may be exercised under Section 3.1), and
shall be for whole shares only.
	 
	4.2	 	Manner of Exercise
	 
	 	 	The Option, or any exercisable portion thereof, may be exercised by
delivery (hard copy, fax or e-mail, as appropriate) to the Secretary
or to the Company’s Securities Administrator of all of the following:

	 	(a)	 	A written notice, complying with the applicable procedures established by the
Committee or the Company, stating that the Option or portion is thereby exercised. The
notice shall be signed by the Employee or the other person then entitled to exercise
the Option; and
	 
	 	(b)	 	Full payment for the shares with respect to which the option or portion thereof
is exercised. Payment may be made (i) in cash (or by certified or bank cashier’s
check), or (ii) by actual or constructive delivery to the Company, in accordance with
the procedures established by the Company, of Company Common Stock then owned by the
Employee with a fair market value on the date the option is exercised equal to the
aggregate exercise purchase price of the shares with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the option price; or (v) by instructing the Company
to withhold a number of such shares having a Fair Market Value on the date of the
exercise equal to the aggregate exercise price of such Option; and
	 
	 	(c)	 	Full payment to the Company of any federal, state, local or foreign taxes
required to be withheld in connection with the exercise. Payment may be made (i) in
cash (or by certified or bank cashier’s check), or (ii) by actual or constructive
delivery to the Company, in accordance with the procedures established by the Company,
of Company Common Stock then owned by the Employee with a fair market value on the date
the option is exercised equal to the tax liability with respect to which the option or
portion thereof is exercised, or (iii) by a combination of cash and surrender of stock
in the manner herein specified, or (iv) irrevocable instructions to a broker,
acceptable to the Company, to deliver promptly to the Company the amount of the sale or
the loan proceeds necessary to pay the tax liability; or (v) by instructing the Company
to withhold a number of such shares having a Fair Market Value on the date of the
exercise equal to the tax liability (and provided that in any event Employee is
responsible for the payment of any and all applicable taxes related to this stock
option grant and any exercise of stock
options hereunder); and

- 5 -

 

	 	(d)	 	In the event the Option or portion thereof shall be exercised by any person or
persons other than the Employee, appropriate proof of the right of such person or
persons to exercise the Option.

	4.3	 	Conditions to Issuance of Stock Certificates
	 
	 	 	The shares of stock deliverable upon the exercise of the Option, or
any part thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the
Company. Such shares shall be fully paid and non-assessable. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of the
Option or part thereof prior to fulfillment of all of the following
conditions:

	 	(a)	 	The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed;
	 
	 	(b)	 	The completion of any registration or other qualification of such shares under
any state or federal law, or under rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the Committee or
the Company shall, in its absolute discretion, deem necessary or advisable;
	 
	 	(c)	 	The obtaining of any approval or other clearance from any state or federal
governmental agency which the Committee or the Company shall, in its absolute
discretion, determine to be necessary or advisable;
	 
	 	(d)	 	The lapse of such reasonable period of time following the exercise of the
Option as the Committee or the Company may from time to time establish for reasons of
administrative convenience; and
	 
	 	(e)	 	The receipt by the Company of full payment for such shares.

	4.4	 	Rights as Shareholders
	 
	 	 	The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option
	 
	 	 	unless and until certificates or book entries representing such shares shall have been
issued or made by the Company, or the Company’s transfer agent, to or for such holder.

ARTICLE V

MISCELLANEOUS

	5.1	 	Option Subject to Plan
	 
	 	 	The Option 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.
	 
	5.2	 	Administration
	 
	 	 	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 or revoke any such procedures.

- 6 -

 

	5.3	 	Option Not Transferable
	 
	 	 	Neither the Option nor any interest or right therein or part thereof
may be sold, pledged, assigned or transferred in any manner other than
by will or by the applicable laws of descent and distribution. The
Option shall be exercised during the Employee’s lifetime only by the
Employee, or his guardian or legal representative.
	 
	5.4	 	Notices
	 
	 	 	Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary and
any notice to be given to the Employee shall be addressed to him at
the address given beneath his signature hereto. By a notice given
pursuant to this Section, either party may hereafter designate a
different address for notices to be given to him. Any notice that is
required to be given to Employee shall, if Employee is then deceased,
be given to Employee’s personal representative if such representative
has previously informed the Company of his status and address by
written notice under this Section.
	 
	5.5	 	Titles
	 
	 	 	Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
	 
	5.6	 	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.

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

	 	 	 	 	 	 	 	 	 
	 	 	AVERY DENNISON CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	*	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	President & Chief Executive Officer	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Secretary	 	 	 	 

	 	 	 	 	 	 	 
	By:

	 	 	 	*	 	 
	 	 	 	 	 
	 	 	Optionee	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	*	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	*	 	 
	 	 	 	 	 
	 	 	Address	 	 
	 
	 	 	 	 	 	 

 

* Refer to attached Notice.

- 7 -exv10w1

 

EXHIBIT
10.1

AGREEMENT AND AMENDMENT NO. 1 TO

AMENDED AND RESTATED CREDIT AGREEMENT

     This AGREEMENT AND AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT (this
“Agreement”) dated as of February 25, 2008 (the “Effective Date”) is among Holly
Energy Partners — Operating, L.P. (the “Borrower”), the Guarantors (as defined below), the
parties that are “Banks” under and as defined in the Credit Agreement referred to below (the
“Existing Banks”), the parties that are New Banks (as defined below; and together with the
Existing Banks, the “Banks” and individually, a “Bank”), Union Bank of California,
N.A., as administrative agent for such Banks (in such capacity, the “Administrative Agent”)
and as Sole Lead Arranger, Bank of America, N.A. as Syndication Agent, and Guaranty Bank as
Documentation Agent.

RECITALS

     A. The Borrower, the Existing Banks, and the Administrative Agent are parties to the Amended
and Restated Credit Agreement dated as of August 27, 2007 (the “Credit Agreement”).

     B. In connection with such Credit Agreement, the undersigned Subsidiaries of the Borrower (the
“Guarantors”) executed and delivered that certain Amended and Restated Guaranty Agreement
dated as of August 27, 2007 (as the same may be further amended, modified or supplemented from time
to time, the “Guaranty”) in favor of the Administrative Agent for the benefit of the
Beneficiaries (as defined therein).

     C. The Borrower, Holly Energy Partners, L.P., a Delaware limited partnership (the “Limited
Partner”), HEP Pipeline, L.L.C., a Delaware limited liability company (“HEP”), and HEP
Woods Cross, L.L.C., a Delaware limited liability company (“HEP Woods Cross”), as buyer
parties (collectively, the “Purchasers”) will enter into a Purchase and Sale Agreement
dated on or about February 29, 2008 (the “Navajo/Woods Cross PSA”) with Holly Corporation,
a Delaware corporation (“Parent”), Navajo Pipeline Co., L.P., a Delaware limited
partnership (“Navajo Pipeline”), Navajo Refining Company, L.P., a Delaware limited
partnership (“Navajo Refining”) and Woods Cross Refining Company, L.L.C., a Delaware
limited liability company (“Woods Cross Refining”) as seller parties (collectively, the
“Sellers”), pursuant to which the Limited Partner and/or certain of its Subsidiaries will
acquire (the “Navajo/Woods Cross Acquisition”) certain pipelines and related assets (the
“Navajo/Woods Cross Assets”).

     D. Pursuant to a Contribution Agreement dated on or about February 29, 2008 (the
“Navajo/Woods Cross Contribution Agreement”) among the Borrower, the Limited Partner, HEP
and HEP Woods Cross, as transferee parties, and Parent, Navajo Pipeline, Navajo Refining, and Woods
Cross Refining as transferor parties, a portion of the Navajo/Woods Cross Assets will be
contributed to and owned by HEP after the Navajo/Woods Cross Acquisition and the remaining portion
of the Navajo/Woods Cross Assets will be contributed to and owned by HEP Woods Cross after the
Navajo/Woods Cross Acquisition.

     E. To fund the Navajo/Woods Cross Acquisition, the Borrower has requested an increase in the
aggregate Commitments under, and as defined in, the Credit Agreement.

 

 

     F. To effect the increase to the Commitments and subject to the terms set forth herein,
certain Existing Banks have agreed to increase their respective Commitments and certain other
financial institutions have agreed to enter into the Credit Agreement as Banks (such new banks
being referred to herein as “New Banks”).

     G. The Borrower has also requested that the Existing Banks and the New Banks amend the Credit
Agreement to make certain other changes to the Credit Agreement.

     THEREFORE, the parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS

     Section 1.01 Terms Defined Above. As used in this Agreement, each of the terms
defined in the opening paragraph and the Recitals above shall have the meanings assigned to such
terms therein.

     Section 1.02 Terms Defined in the Credit Agreement. Each term defined in the Credit
Agreement and used herein without definition shall have the meaning assigned to such term in the
Credit Agreement, unless expressly provided to the contrary.

     Section 1.03 Other Definitional Provisions. The words “hereby”, “herein”,
“hereinafter”, “hereof”, “hereto” and “hereunder” when used in this Agreement shall refer to this
Agreement as a whole and not to any particular Article, Section, subsection or provision of this
Agreement. Section, subsection and Exhibit references herein are to such Sections, subsections and
Exhibits to this Agreement unless otherwise specified. All titles or headings to Articles,
Sections, subsections or other divisions of this Agreement or the exhibits hereto, if any, are only
for the convenience of the parties and shall not be construed to have any effect or meaning with
respect to the other content of such Articles, Sections, subsections, other divisions or exhibits,
such other content being controlling as the agreement among the parties hereto. Whenever the
context requires, reference herein made to the single number shall be understood to include the
plural; and likewise, the plural shall be understood to include the singular. Words denoting sex
shall be construed to include the masculine, feminine and neuter, when such construction is
appropriate; and specific enumeration shall not exclude the general but shall be construed as
cumulative. Definitions of terms defined in the singular or plural shall be equally applicable to
the plural or singular, as the case may be, unless otherwise indicated.

ARTICLE II.

NEW BANKS

     Section 2.01 New Banks Agreements. Each New Bank:

          (a) represents and warrants that it has full power and authority, and has taken all action
necessary, to execute and deliver this Agreement and to become a Bank under the Credit Agreement;

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          (b) agrees that, from and after the Effective Date, it shall be bound by the provisions of the
Credit Agreement as a Bank thereunder and, subject to its Commitment, shall have the obligations of
a Bank thereunder;

          (c) represents and warrants that it is sophisticated with respect to decisions to enter into
the Credit Agreement as a Bank and either it, or the person exercising discretion in making its
decision to enter into the Credit Agreement, is experienced in making credit decisions as a lender
in the type of transaction evidenced by the Credit Agreement;

          (d) represents and warrants that it has received a copy of the Credit Agreement and such other
Credit Documents it has requested, and has received or has been accorded the opportunity to receive
copies of the most recent financial statements delivered pursuant to Section 5.06 thereof, as
applicable, and such other documents and information as it deems appropriate to make its own credit
analysis and decision to enter into this Agreement and the Credit Agreement;

          (e) represents and warrants that it has, independently and without reliance upon the
Administrative Agent or any other Existing Bank or New Bank and based on such documents and
information as it has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and to become a Bank under the Credit Agreement,

          (f) if it is not incorporated under the laws of the United States of America or a state
thereof, has delivered or shall deliver simultaneously with the execution of this Agreement, any
documentation required to be delivered by it as a Bank pursuant to the terms of the Credit
Agreement, duly completed and executed by such New Bank;

          (g) agrees that (i) it will, independently and without reliance on the Administrative Agent or
any other Existing Bank or New Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or not taking action
under the Credit Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Documents are required to be performed by it as a
Bank; and

          (h) appoints and authorizes Administrative Agent to take such action as Administrative Agent
on its behalf and to exercise such powers and discretion under the Credit Documents as are
delegated to the Administrative Agent thereby, together with such powers and discretion as are
reasonably incidental thereto.

ARTICLE III.

AMENDMENTS

     Section 3.01 Amendments to Credit Agreement. Effective as of the Effective Date, the
Credit Agreement shall hereby be amended as follows:

          (a) The reference to “$100,000,000” on the cover page to the Credit Agreement is hereby
replaced with a reference to “$300,000,000.”

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          (b) The following definitions found in Section 1.01 (Certain Defined Terms) of the
Credit Agreement are hereby amended to read in their entirety as follows:

“Bank” means a party to this Agreement that (a) became a party hereto as a
lender on the date hereof, (b) is identified as new lender entering into this
Agreement under and as provided in Amendment No. 1, or (c) is an Eligible Assignee
that became a party hereto pursuant to Sections 2.14, 2.15 or 9.06.

          (c) The following new definitions are added to Section 1.01 (Certain Defined Terms) of
the Credit Agreement to appear therein in alphabetical order:

“Amendment No. 1” means the Agreement and Amendment No. 1 to Amended and
Restated Credit Agreement dated as of February 25, 2008 among the Borrower, the
Banks and the other parties thereto which amends this Agreement.

“Navajo/Woods Cross Acquisition” means the “Navajo/Woods Cross Acquisition”
as defined in Amendment No. 1

“Navajo/Woods Cross Assets” means the “Navajo/Woods Cross Assets” as defined
in Amendment No. 1.

“Navajo/Woods Cross Contribution Agreement” means the “Navajo/Woods Cross
Contribution Agreement” as defined in Amendment No. 1.

“Navajo/Woods Cross Effective Date” means the date notified by the
Administrative Agent to the Banks which shall be the date on or prior to which all
of the conditions precedent that are listed on Schedule 3.03 to this Agreement have
been satisfied (or will be satisfied contemporaneously with the consummation of the
Navajo/Woods Cross Acquisition) or waived.

“Navajo/Woods Cross PSA” means the “Navajo/Woods Cross PSA” as defined in
Amendment No. 1.

          (d) Section 2.01 (Making the Advances) of the Credit Agreement is hereby amended by replacing
clause (a) thereof in its entirety with the following:

(a) Advances. Each Bank having a Commitment severally agrees, on the terms and
conditions set forth in this Agreement, to make Advances to the Borrower from time to time
on any Business Day during the period from the date of this Agreement until the Revolver
Termination Date in an aggregate outstanding amount up to but not to exceed at any time
outstanding its Commitment, as such amount may be reduced pursuant to Section 2.03, 7.02,
and 7.03 or increased pursuant to Section 2.14 or pursuant to Amendment No. 1;
provided, however that (i) the aggregate outstanding principal amount of all
Advances plus the aggregate Letter of Credit Exposure shall not at any time exceed
the aggregate Commitments, and (ii) prior to the Navajo/Woods Cross Effective Date, the
aggregate outstanding principal amount of all Advances plus the aggregate Letter of
Credit Exposure shall not exceed $150,000,000.

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          (e) Section 2.02(c) (Certain Limitations) of the Credit Agreement is hereby amended by
replacing sub-clause (i) thereof in its entirety with the following:

(i) at no time shall there be more than twelve (12) Interest Periods applicable to
outstanding Eurodollar Rate Advances and the Borrower may not select Eurodollar Rate
Advances for any Borrowing at any time that an Event of Default has occurred and is
continuing;

          (f) Section 2.06 (Fees) of the Credit Agreement is hereby amended by replacing clauses (a) and
(b) thereof in their entirety with the following:

(a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent
for the account of each Bank:

(i) prior to the Navajo/Woods Cross Effective Date, a commitment fee on the daily
amount by which such Bank’s Pro Rata Share of $150,000,000 exceeds such Bank’s
outstanding Advances plus its Pro Rata Share of the aggregate Letter of Credit
Exposure, at a rate equal to the Applicable Margin for commitment fees from the date
of this Agreement until the Revolver Termination Date; and

(ii) on and after the Navajo/Woods Cross Effective Date, a commitment fee on the
daily amount by which such Bank’s Commitment exceeds such Bank’s outstanding
Advances plus its Pro Rata Share of the aggregate Letter of Credit Exposure, at a
rate equal to the Applicable Margin for commitment fees from the date of this
Agreement until the Revolver Termination Date.

All commitment fees required hereunder shall be due and payable quarterly in arrears
on the last day of each March, June, September and December commencing on September
30, 2007 and continuing thereafter through the Revolver Termination Date and on the
Revolver Termination Date.

(b) Administrative Agent Fees. The Borrower agrees to pay to the
Administrative Agent for the benefit of the Administrative Agent the fees described
in (i) the letter dated August 27, 2007 from the Administrative Agent to the
Borrower, and (ii) the letter dated February 25, 2008 from the Administrative Agent
to the Borrower (such letters being collectively, the “Administrative Agent’s
Fee Letter”).

          (g) Section 2.14 (Commitment Increase) of the Credit Agreement is hereby amended by replacing
the reference to “$200,000,000” found in clause (a) therein with a reference to “$370,000,000.”

          (h) Article III (Conditions of Lending) of the Credit Agreement is hereby amended by adding a
new Section to the end thereof as follows:

     Section 3.03 Conditions Precedent to Borrowings Above $150,000,000.
Notwithstanding anything herein to the contrary, the obligation of each Bank to make an
Advance on the occasion of any Borrowing (and of an Issuing Bank to issue, increase, or

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extend any Letter of Credit) that would result in the sum of the aggregate outstanding
Advances hereunder plus the aggregate Letter of Credit Exposure exceeding $150,000,000,
shall be subject to the further conditions precedent that on or prior to the date of such
Borrowing (or the date of such issuance, increase, or extension of such Letter of Credit)
each of the conditions precedent set forth on Schedule 3.03 shall have been satisfied or
waived in writing by all of the Banks.

          (i) Schedule 1.01 (a) — Commitments and Schedule 1.01(b) — Notice Addresses and Applicable
Lending Offices which are attached to the Credit Agreement are hereby replaced in their entirety
with the corresponding Schedule 1.01(a) and Schedule 1.01(b) that are attached hereto.

          (j) The Credit Agreement is further amended by adding the Schedule 3.03 attached to this
Agreement as a new Schedule 3.03 to the end thereof.

ARTICLE IV.

AGREEMENTS

     Section 4.01 Commitments. Each Existing Bank and each New Bank hereby acknowledges
and confirms that, as of the date hereof and after giving effect to this Agreement its respective
Commitment is as set forth next to its name on Schedule 1.01(a) attached hereto.

     Section 4.02 Breakage Costs. If, as a result of increase in the aggregate Commitments
effected hereby, including the introduction of the New Banks under the Credit Agreement, any
Existing Bank incurs any losses, out-of-pocket costs or expenses as a result of any payment of
Eurodollar Rate Advances prior to the last day of the Interest Period applicable thereto (whether
by the Borrower or as a result of the reallocation of the outstandings of the Eurodollar Rate
Advances under the Credit Agreement due to the changes in the Existing Banks’ Pro Rata Share
resulting from the non-pro rata increases in the Commitments and the introduction of New Banks into
the Credit Agreement) and such Existing Bank makes a request for compensation, the Borrower shall,
within 10 days of any written demand sent by such Existing Bank to the Borrower through the
Administrative Agent, pay to the Administrative Agent for the account of such Existing Bank any
amounts required to compensate such Existing Bank for such losses, out-of-pocket costs or expenses
which it may reasonably incur as a result of such payment or reallocation, including, without
limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by any Existing Bank to fund or
maintain such Advances.

     Section 4.03 Upfront Fees. On the Effective Date, the Borrower shall pay to the
Administrative Agent (a) for each Existing Bank, an upfront fee equal to .20% of the increase in
its Commitment which is effected hereby, and (b) for each New Bank, an upfront fee equal to .20% of
its Commitment after giving effect to this Agreement. Such fee shall be non-refundable and deemed
to be fully earned when paid.

     Section 4.04 Pro Forma EBITDA Adjustments. The Existing Banks and the New Banks
hereby acknowledge that the pro forma adjustments to EBITDA under the Credit Agreement that would
result from the Navajo/Woods Cross Acquisition may exceed 30%.

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Based on the pro forma calculations of EBITDA previously delivered to the Administrative
Agent, such pro forma calculations resulting from the Navajo/Woods Cross Acquisition are acceptable
to the Administrative Agent and otherwise comply with the terms of the Credit Agreement (it being
agreed that to the extent such calculations differ in any material respect (as determined solely by
the Administrative Agent in its reasonable discretion) with the pro forma adjustments to EBITDA
which the Borrower includes in its Compliance Certificate delivered under the Credit Agreement,
such differing calculations must be reasonably acceptable to the Administrative Agent in accordance
with the definition of “EBITDA” set forth in the Credit Agreement.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

     Section 5.01 Borrower Representations and Warranties. The Borrower represents and
warrants that: (a) the representations and warranties contained in the Credit Agreement and the
representations and warranties contained in the other Credit Documents are true and correct in all
material respects on and as of the Effective Date as if made on as and as of such date, except to
the extent that such representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct in all material respects as of such earlier date; (b) no
Default has occurred which is continuing; (c) the execution, delivery and performance of this
Agreement are within the partnership power and authority of the Borrower and have been duly
authorized by appropriate partnership action and proceedings; (d) this Agreement constitutes the
legal, valid, and binding obligation of the Borrower enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the rights of creditors generally and general principles of equity; (e) there are no
governmental or other third party consents, licenses and approvals required to be obtained by the
Borrower in connection with the execution, delivery, performance of this Agreement by the Borrower
or the validity and enforceability of this Agreement against the Borrower; and (f) the Liens under
the Security Documents are valid and subsisting and secure Borrower’s obligations under the Credit
Documents.

     Section 5.02 Guarantors’ Representations and Warranties. Each Guarantor represents
and warrants that: (a) the representations and warranties of such Guarantor contained in the
Guaranty and the representations and warranties contained in the other Credit Documents to which
such Guarantor is a party are true and correct in all material respects on and as of the Effective
Date as if made on as and as of such date, except to the extent that such representations and
warranties specifically refer to an earlier date, in which case they shall be true and correct as
of such earlier date; (b) no Default has occurred which is continuing; (c) the execution, delivery
and performance of this Agreement are within the corporate or other organizational power and
authority of such Guarantor and have been duly authorized by appropriate action and proceedings;
(d) this Agreement constitutes the legal, valid, and binding obligation of such Guarantor
enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the rights of creditors generally and general
principles of equity; (e) there are no governmental or other third party consents, licenses and
approvals required to be obtained by such Guarantor in connection with the execution, delivery or
performance of this Agreement by such Guarantor or the validity and enforceability of this
Agreement against such Guarantor; (f) it has no defenses to the

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enforcement of its Guaranty (other than the indefeasible payment in full of the Obligations);
and (g) the Liens under the Security Documents to which such Guarantor is a party are valid and
subsisting and secure such Guarantor’s obligations under the Credit Documents.

ARTICLE VI.

CONDITIONS

     The consent provided herein shall become effective and enforceable against the parties hereto,
and the Credit Agreement shall be amended as provided herein, upon the date all of the following
conditions precedent have been met (the “Effective Date”):

     Section 6.01 Documents. The Administrative Agent shall have received each of the
following:

          (a) this Agreement duly and validly executed and delivered by duly authorized officers of the
Borrower, the Guarantors, the Administrative Agent, the Existing Banks and the New Banks;

          (b) a fee letter from the Administrative Agent to the Borrower and dated the date hereof;

          (c) new Notes for the Existing Banks which increase their Commitments under this Agreement and
the New Banks, in each case, in the amount of their respective Commitments after giving effect to
this Agreement;

          (d) favorable opinions of the Borrower’s and the Guarantors’ counsel dated as of the date of
this Agreement in form and substance satisfactory to the Administrative Agent and covering such
matters as the Administrative Agent may reasonably request;

          (e) a secretary’s or a Responsible Officer’s certificate for the Borrower dated the date
hereof and certifying (i) copies of the resolutions of the board of directors of the General
Partner authorizing this Amendment and the increase in the aggregate Commitments effected hereby,
(ii) the Borrower Partnership Agreement and the other organizational documents of the Borrower,
(iii) the General Partner’s Certificate of Organization and Regulations, (iv) all other documents
evidencing other necessary corporate action and governmental approvals, if any, with respect to
this Agreement, the new Notes delivered in connection herewith, and the other Credit Documents
delivered in connection herewith, and (v) the names and true signatures of the officers of the
General Partner authorized to sign this Agreement, the new Notes, and the other Credit Documents to
which the Borrower is a party;

          (f) a secretary’s or a Responsible Officer’s certificate for each Guarantor dated the date
hereof and covering the matters set forth in clause (h) above as to such Guarantor; and

          (g) certificates of good standing and existence for the Borrower and each Guarantor in each
state in which each such Person is organized, which certificate shall be dated a date not sooner
than 30 days prior to Effective Date.

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     Section 6.02 No Default. No Default shall have occurred which is continuing as of the
Effective Date.

     Section 6.03 Representations. The representations and warranties in this Agreement
shall be true and correct in all material respects as of the Effective Date.

     Section 6.04 Fees. The Borrower shall have paid or reimbursed the Administrative
Agent for (a) all of its reasonable out-of-pocket costs and expenses incurred in connection with
this Agreement and the increases in the aggregate Commitments effected hereby, any other documents
prepared in connection herewith and the transactions contemplated hereby, including, without
limitation, the fees and disbursements of the Administrative Agent’s outside legal counsel, in each
case, pursuant to all invoices of the Administrative Agent and/or such counsel presented to the
Borrower for payment not less than one Business Day prior to the Effective Date, (b) all fees
required to be paid under the fee letter referenced in Section 6.01(b) above, and (c) all upfront
fees required to be paid under Section 4.03 above.

ARTICLE VII.

MISCELLANEOUS

     Section 7.01 Effect on Credit Documents; Acknowledgments.

          (a) The Borrower acknowledges that on the date hereof all Obligations are payable without
defense, offset, counterclaim or recoupment.

          (b) The Administrative Agent, the Issuing Banks, the Existing Banks and the New Banks hereby
expressly reserve all of their rights, remedies, and claims under the Credit Documents. Nothing in
this Agreement shall constitute a waiver or relinquishment of (i) any Default or Event of Default
under any of the Credit Documents, (ii) any of the agreements, terms or conditions contained in any
of the Credit Documents, (iii) any rights or remedies of the Administrative Agent, the Issuing
Bank, any Existing Bank or any New Bank with respect to the Credit Documents, or (iv) the rights of
the Administrative Agent, any Issuing Bank, any Existing Bank or any New Bank to collect the full
amounts owing to them under the Credit Documents.

          (c) Each of the Borrower, the Guarantors, Administrative Agent, Issuing Banks, the Existing
Banks and the New Banks does hereby adopt, ratify, and confirm the Credit Agreement and each other
Credit Document, as amended hereby, and acknowledges and agrees that the Credit Agreement and each
other Credit Document, as amended hereby, is and remains in full force and effect, and the Borrower
and the Guarantors acknowledge and agree that their respective liabilities under the Credit
Agreement and the other Credit Documents are not impaired in any respect by this Agreement.

          (d) From and after the Effective Date, all references to the Credit Agreement and the Credit
Documents shall mean such Credit Agreement and such Credit Documents as amended by this Agreement.

          (e) This Agreement is a Credit Document for the purposes of the provisions of the other Credit
Documents. Without limiting the foregoing, any breach of representations,

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warranties, and covenants under this Agreement shall be a Default or Event of Default, as
applicable, under the Credit Agreement.

     Section 7.02 Reaffirmation of the Guaranty. Each Guarantor hereby ratifies, confirms,
acknowledges and agrees that its obligations under the Guaranty are in full force and effect and
that such Guarantor continues to unconditionally and irrevocably guarantee the full and punctual
payment, when due, whether at stated maturity or earlier by acceleration or otherwise, all of the
Guaranteed Obligations (as defined in the Guaranty), as such Guaranteed Obligations may have been
amended by this Agreement, and its execution and delivery of this Agreement does not indicate or
establish an approval or consent requirement by such Guarantor under the Guaranty in connection
with the execution and delivery of amendments to the Credit Agreement, the Notes or any of the
other Credit Documents (other than the Guaranty or any other Credit Document to which such
Guarantor is a party).

     Section 7.03 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original and all of which, taken together, constitute a
single instrument. This Agreement may be executed by facsimile signature and all such signatures
shall be effective as originals.

     Section 7.04 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns permitted pursuant
to the Credit Agreement.

     Section 7.05 Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any other provision of
this Agreement.

     Section 7.06 Governing Law. This Agreement shall be deemed to be a contract made
under and shall be governed by and construed in accordance with the laws of the State of Texas.

     Section 7.07 Additional Agents. Neither the Syndication Agent nor the Documentation
Agent referred herein shall have any duties, obligations or liabilities in their respective
capacities as agents. The Sole Lead Arranger shall have no duties, obligations or liabilities in
its capacity as such under this Agreement or under any other Credit Document but shall be entitled
to the indemnities provided for it in the Credit Documents.

     Section 7.08 Patriot Act. Each Existing Bank, New Bank and the Administrative Agent
(for itself and not on behalf of any other Person) hereby notifies the Borrower and the Guarantors
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that
identifies the Borrower and the Guarantors, which information includes the names and addressed of
the Borrower and the Guarantors and other information that will allow such Existing Bank, New Bank
or the Administrative Agent, as applicable, to identify the Borrower and the Guarantors in
accordance with the Act.

     Section 7.09 Entire Agreement. THIS AGREEMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS
AGREEMENT, THE NOTES, AND THE

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OTHER CREDIT DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH
RESPECT THERETO.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[SIGNATURES BEGIN ON NEXT PAGE]

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     EXECUTED effective as of the date first above written.

	 	 	 	 	 
	 	BORROWER:

HOLLY ENERGY PARTNERS — OPERATING, L.P.,

a Delaware limited partnership

By: HEP Logistics GP, L.L.C., a Delaware limited liability company,
its General Partner

By: Holly Energy Partners, L.P., a Delaware limited partnership,
its Sole Member

By: HEP Logistics Holdings, L.P., a Delaware limited partnership, its General Partner

By: Holly Logistic Services, L.L.C., a Delaware limited
liability company, its General Partner

 	 
	 	By:  	 /s/ Bruce R. Shaw	 
	 	 	Bruce R. Shaw 	 
	 	 	Senior Vice President and

Chief Financial Officer 	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	GUARANTORS:

HEP PIPELINE GP, L.L.C., a Delaware

     limited liability company

HEP REFINING GP, L.L.C., a Delaware

     limited liability company

HEP MOUNTAIN HOME, L.L.C., a Delaware

     limited liability company

HEP PIPELINE, L.L.C., a Delaware

     limited liability company

HEP REFINING, L.L.C., a Delaware

     limited liability company

HEP WOODS CROSS, L.L.C., a Delaware

     limited liability company

Each by: Holly Energy Partners — Operating, L.P., a Delaware limited partnership and its Sole Member

By: HEP Logistics GP, L.L.C., a Delaware limited

liability company, its General Partner

By: Holly Energy Partners, L.P., a Delaware

limited partnership, its Managing Member

By: HEP Logistics Holdings, L.P., a Delaware

limited partnership, its General Partner

By: Holly Logistic Services, L.L.C., a

Delaware limited liability company, its

General Partner

 	 
	 	By:  	/s/ Bruce R. Shaw	 
	 	 	Bruce R. Shaw 	 
	 	 	Senior Vice President and

Chief Financial Officer 	 
	 
	 	HOLLY ENERGY FINANCE CORP., a Delaware corporation

 	 
	 	By:  	/s/ Bruce R. Shaw	 
	 	 	Bruce R. Shaw 	 
	 	 	Vice President and

Chief Financial Officer 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	HEP NAVAJO SOUTHERN, L.P., a Delaware limited
partnership

HEP PIPELINE ASSETS, LIMITED PARTNERSHIP,
a Delaware limited partnership

HEP FIN-TEX/TRUST-RIVER, L.P., a Texas limited
partnership

Each by: HEP Pipeline GP, L.L.C., a Delaware limited

liability company and its General Partner

By: Holly Energy Partners — Operating, L.P., a Delaware
limited partnership and its Sole Member

By: HEP Logistics GP, L.L.C., a Delaware limited

liability company, its General Partner

By: Holly Energy Partners, L.P., a Delaware

limited partnership, its Managing Member

By: HEP Logistics Holdings, L.P., a Delaware

limited partnership, its General Partner

By: Holly Logistic Services, L.L.C., a

Delaware limited liability company, its

General Partner

 	 
	 	By:  	/s/ Bruce R. Shaw	 
	 	 	Bruce R. Shaw 	 
	 	 	Senior Vice President and

Chief Financial Officer 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	HOLLY ENERGY PARTNERS, L.P., a Delaware
limited partnership

By: HEP Logistics Holdings, L.P., a Delaware limited
partnership, its General Partner

By: Holly Logistic Services, L.L.C., a Delaware

limited liability company, its General Partner

 	 
	 	By:  	/s/ Bruce R. Shaw	 
	 	 	Bruce R. Shaw 	 
	 	 	Senior Vice President and

Chief Financial Officer 	 
	 
	 	HEP REFINING ASSETS, L.P., a Delaware limited
partnership

By: HEP Refining GP, L.L.C., a Delaware limited liability
company and its General Partner

By: Holly Energy Partners — Operating, L.P., a Delaware
limited partnership and its Sole Member

By: HEP Logistics GP, L.L.C., a Delaware limited
liability company, its General Partner

By: Holly Energy Partners, L.P., a Delaware
limited partnership, its Managing Member

By: HEP Logistics Holdings, L.P., a Delaware
limited partnership, its General Partner

By: Holly Logistic Services, L.L.C., a
Delaware limited liability company, its
General Partner

 	 
	 	By:  	/s/ Bruce R. Shaw	 
	 	 	Bruce R. Shaw 	 
	 	 	Senior Vice President and

Chief Financial Officer 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	HEP LOGISTICS GP,
L.L.C., a Delaware limited liability company

By: Holly Energy Partners, L.P., a Delaware limited
partnership, its Managing Member

By: HEP Logistics Holdings, L.P., a Delaware limited
partnership, its General Partner

By: Holly Logistic Services, L.L.C., a Delaware
limited liability company, its General Partner

 	 
	 	By:  	/s/ Bruce R. Shaw	 
	 	 	Bruce R. Shaw 	 
	 	 	Senior Vice President and

Chief Financial Officer 	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ADMINISTRATIVE AGENT:

UNION BANK OF CALIFORNIA, N.A., as
Administrative Agent and Sole Lead Arranger

 	 
	 	By:  	/s/ Sean Murphy	 
	 	 	Sean Murphy, Senior Vice President 	 
	 	 	 	 
	 	EXISTING BANKS:

UNION BANK OF CALIFORNIA, N.A., as an Existing Bank

 	 
	 	By:  	/s/ Sean Murphy	 
	 	 	Sean Murphy, Senior Vice President 	 
	 	 	 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A., as an Existing Bank and as

Syndication Agent

 	 
	 	By:  	/s/ Ronald E. McKaig	 
	 	 	Name:  	Ronald E. McKaig	 
	 	 	Title:  	Senior Vice President	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	GUARANTY BANK, as an Existing Bank and as

Documentation Agent

 	 
	 	By:  	/s/ Jim R. Hamilton	 
	 	 	Name:  	Jim R. Hamilton	 
	 	 	Title:  	Senior Vice President	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	FORTIS CAPITAL CORP., as an Existing Bank

 	 
	 	By:  	/s/ Darrel Holey	 
	 	 	Name:  	Darrel Holey	 
	 	 	Title:  	Managing Director	 
	 
	 	 	 
	 	By:  	/s/ Farhan Iqbal	 
	 	 	Name:  	Farhan Iqbal	 
	 	 	Title:  	Vice President	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, as an
Existing Bank

 	 
	 	By:  	/s/ Dustin Hansen	 
	 	 	Name:  	Dustin Hansen	 
	 	 	Title:  	Vice President	 
	 
	 	By:  	/s/ Matt Coleman	 
	 	 	Name:  	Matt Coleman	 
	 	 	Title:  	Portfolio Manager	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as an Existing Bank

 	 
	 	By:  	/s/ Tyler Fauerbach	 
	 	 	Name:  	Tyler Fauerbach	 
	 	 	Title:  	Vice President	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	NEW BANKS:

PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY,
as a New Bank

 	 
	 	By:  	Prudential Investment Management, Inc., as investment manager 	 
	 
	 	 	 
	 	By:  	
/s/ Timothy M. Laczkowski	 
	 	 	Timothy M. Laczkowski 	 
	 	 	Vice President 	 
	 
	 	PRUCO LIFE INSURANCE COMPANY, as a New Bank

 	 
	 	By:  	/s/ Timothy M. Laczkowski	 
	 	 	Timothy M. Laczkowski 	 
	 	 	Vice President 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	COMPASS BANK, as a New Bank

 	 
	 	By:  	/s/ Murray E. Brasseux	 
	 	 	Name:  	Murray E. Brasseux 	 
	 	 	Title:  	Executive Vice President 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	BANK OF SCOTLAND plc, as a New Bank

 	 
	 	By:  	/s/ Karen Weich	 
	 	 	Name:  	Karen Weich 	 
	 	 	Title:  	Vice President 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	CAPITAL ONE, N.A., as a New Bank

 	 
	 	By:  	/s/ Stan G. Weiser Jr.	 
	 	 	Name:  	Stan G. Weiser Jr. 	 
	 	 	Title:  	Vice President 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	COMERICA BANK, as a New Bank

 	 
	 	By:  	/s/ Gerald R. Finney, Jr.	 
	 	 	Name:  	Gerald R. Finney, Jr. 	 
	 	 	Title:  	Vice President 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	NATIXIS, as a New Bank

 	 
	 	By:  	/s/ Daniel Payer	 
	 	 	Name:  	Daniel Payer 	 
	 	 	Title:  	Director 	 
	 
	 	 	 
	 	By:  	
/s/ Louis P. Laville, III	 
	 	 	Name:  	Louis P. Laville, III 	 
	 	 	Title:  	Managing Director 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

	 	 	 	 	 
	 	PNC BANK, NATIONAL ASSOCIATION, as a New Bank

 	 
	 	By:  	/s/ Robert Rease	 
	 	 	Name:  	Robert Rease 	 
	 	 	Title:  	Vice President 	 
	 

Signature page to Agreement and Amendment No. 1 to Amended and Restated Credit Agreement

 

 

SCHEDULE 1.01(a)

COMMITMENTS

	 	 	 	 	 
	Bank	 	Commitment
	 
	Union Bank of California, N.A.
	 	$	40,000,000	 
	Bank of America, N.A.
	 	$	25,000,000	 
	Guaranty Bank
	 	$	20,000,000	 
	Fortis Capital Corp.
	 	$	30,000,000	 
	Wells Fargo Bank, National Association
	 	$	30,000,000	 
	U.S. Bank National Association
	 	$	30,000,000	 
	Compass Bank
	 	$	22,500,000	 
	Prudential Retirement Insurance and Annuity Company
	 	$	17,450,000	 
	Pruco Life Insurance Company
	 	$	5,050,000	 
	Bank of Scotland plc
	 	$	20,000,000	 
	Capital One, N.A.
	 	$	15,000,000	 
	Comerica Bank
	 	$	15,000,000	 
	Natixis
	 	$	15,000,000	 
	PNC Bank, National Association
	 	$	15,000,000	 
	Total:
	 	$	300,000,000	 

Schedule 1.01(a)

Page 1 of 1

 

 

SCHEDULE 1.01(b)

NOTICE ADDRESSES AND APPLICABLE LENDING OFFICES

	 	 	 
	Borrower: 
	 	 Office:
	Holly Energy Partners — Operating, L.P.
	 	Address for Notices:
	 
	 	100 Crescent Court, Suite 1600
	 
	 	Dallas, TX 75201-6927
	 
	 	 
	 
	 	Telecopier Number: (214) 237-3051
	 
	 	Attention: Stephen D. Wise
	 
	 	 
	Administrative Agent:
	 	Applicable Lending Offices:
	Union Bank of California, N.A.
	 	Address for Notices:
	 
	 	445 South Figueroa Street, 15th Floor
	 
	 	Los Angeles, California 90071
	 
	 	 
	 
	 	Telecopier Number: 213-236-6823
	 
	 	Attention:  Don Smith
	 
	 	 
	Banks:
	 	Applicable Lending Offices:
	Union Bank of California, N.A.
	 	U.S. Domestic Lending Office:
	 
	 	445 South Figueroa Street, 15th Floor
	 
	 	Los Angeles, California 90071
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: 213-236-6823
	 
	 	Attention:  Don Smith
	 
	 	 
	Bank of America, N.A.
	 	U.S. Domestic Lending Office:
	 
	 	901 Main St.
	 
	 	Dallas, TX 75202-3714
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: (214) 290-9644
	 
	 	Attention: Taelitha Harris

 Schedule 1.01(b)

Page 1 of 3

 

 

	 	 	 
	Guaranty Bank
	 	U.S. Domestic Lending Office:
	 
	 	1100 NE Loop 410, Suite 700
	 
	 	San Antonio, TX 78209
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: (210) 930-1783
	 
	 	Attention: Jim Hamilton
	 
	 	 
	Fortis Capital Corp.
	 	U.S. Domestic Lending Office:
	 
	 	15455 North Dallas Parkway, Suite 1400
	 
	 	Addison, TX 75001
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 
	 	Telecopier Number: (214) 754-5982
	 
	 	Attention: Casey Lowary
	 
	 	 
	Wells Fargo Bank, National Association
	 	U.S. Domestic Lending Office:
	 
	 	1445 Ross Avenue #2360
	 
	 	MAC: T5303-233
	 
	 	Dallas, TX 75202
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: (303) 863-2729
	 
	 	Attention: Tanya Ivie
	 
	 	 
	U.S. Bank National Association
	 	U.S. Domestic Lending Office:
	 
	 	950 17th Street DN-CO-T8E
	 
	 	Denver, CO 80202
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	555 SW Oak, PDORP7LS
	 
	 	Portland, OR 97208
	 
	 	 
	 
	 	Telecopier Number: (503) 973-6900
	 
	 	Attention: Tony Wong

Schedule 1.01(b)

Page 2 of 3

 

 

	 	 	 
	Prudential Retirement Insurance and Annuity Company
	 	U.S. Domestic Lending Office:
	 
	 	c/o Prudential Capital Group
	 
	 	2200 Ross Avenue, Suite 4200E
	 
	 	Dallas, TX 75201
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: (800) 224-2278
	 
	 	Attention: Tracey Schwarmann and Syeda Kaptan
	 
	 	 
	Pruco Life Insurance Company
	 	U.S. Domestic Lending Office:
	 
	 	c/o Prudential Capital Group
	 
	 	2200 Ross Avenue, Suite 4200E
	 
	 	Dallas, TX 75201
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: (800) 224-2278
	 
	 	Attention: Tracey Schwarmann and Syeda Kaptan
	 
	 	 
	Compass Bank
	 	U.S. Domestic Lending Office:
	 
	 	24 Greenway Plaza, Suite 1400A
	 
	 	Houston, Texas  77046
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: 713-968-8292
	 
	 	Attention:  Greg Determann
	 
	 	 
	Bank of Scotland plc
	 	U.S. Domestic Lending Office:
	 
	 	565 Fifth Avenue
	 
	 	New York, New York  10017
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	1021 Main Street, Suite 1370
	 
	 	Houston, Texas  77002
	 
	 	 
	 
	 	Telecopier Number: 713-651-9714
	 
	 	Attention:  Val Gibbs / Jarrod Stallings

 Schedule 1.01(b)

Page 3 of 3

 

 

	 	 	 
	Capital One, N.A.
	 	U.S. Domestic Lending Office:
	 
	 	313 Carondelet St., 10th Floor
	 
	 	New Orleans, Louisiana  70112
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: 504-533-5594
	 
	 	Attention:  Nancy Moragas / Hope Ignelzi
	 
	 	 
	Comerica Bank
	 	U.S. Domestic Lending Office:
	 
	 	4100 Spring Valley Rd. Suite 400
	 
	 	Dallas, Texas  75244
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: 972-361-2550
	 
	 	Attention:  Gerald R. Finney, Jr.
	 
	 	 
	Natixis
	 	U.S. Domestic Lending Office:
	 
	 	333 Clay Street, Suite 4340
	 
	 	Houston, Texas  77002
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: 713-571-6167
	 
	 	Attention:  Daniel Payer
	 
	 	 
	PNC Bank, National Association
	 	U.S. Domestic Lending Office:
	 
	 	Two Tower Center Blvd. 8th Floor
	 
	 	East Brunswick, New Jersey 08816
	 
	 	 
	 
	 	Eurodollar Lending Office:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Address for Notices:
	 
	 	Same as U.S. Domestic Lending Office
	 
	 	 
	 
	 	Telecopier Number: 732-220-3268
	 
	 	Attention:  Gurdatt Jagnanan

 Schedule 1.01(b)

Page 4 of 3

 

 

Schedule 3.03

Navajo/Woods Cross Conditions Precedent

     (I) Documents. The Administrative Agent shall have received each of the following (or
evidence that, contemporaneously with the consummation of the Navajo/Woods Cross Acquisition, the
Administrative Agent shall receive the following):

          (a) a fully executed copy, certified by the Limited Partner, of the Navajo/Woods Cross
Contribution Agreement and the Navajo/Woods Cross PSA, together with all of their respective
exhibits, schedules, and amendments thereto and any material bills of sale, material assignments,
and other material documents or agreements executed in connection with the Navajo/Woods Cross
Acquisition;

          (b) new Mortgages or supplements to existing Mortgages by HEP Pipeline, L.L.C., a Delaware
limited liability company (“HEP”), and HEP Woods Cross, L.L.C., a Delaware limited
liability company (“Woods Cross”) in form and substance substantially similar to the
Mortgages previously approved by the Administrative Agent (with such revisions thereto necessary to
address issues particular to the jurisdictions in which such new Mortgages will be filed) and in
favor of the Administrative Agent for the benefit of the Secured Parties covering all real property
assets included in the applicable Navajo/Woods Cross Assets to the extent required under Section
5.11 of the Credit Agreement;

          (c) copies of the subordinated mortgages executed in favor of the Parent by any of the
purchasers under the Navajo/Woods Cross PSA and encumbering the Navajo/Woods Cross Assets in form
and substance substantially similar to the subordinated mortgages previously approved by the
Administrative Agent and subordination, non-disturbance and attornment agreements executed by the
Parent and such applicable purchasers covering such mortgages and in form and substance
substantially similar to the Subordination, Non-Disturbance and Attornment Agreement dated as of
July 8, 2005 executed by the Administrative Agent and the Parent;

          (d) legal opinions of Parr Waddoups Brown Gee & Loveless as Utah local counsel, of Scheuer,
Yost & Patterson as New Mexico local counsel and of Vinson & Elkins LLP as Texas counsel (or such
other Utah and/or New Mexico local counsel reasonably acceptable to the Administrative Agent) in
each case, with respect to the Mortgages described in the preceding clause (b) in form and
substance reasonably satisfactory to the Administrative Agent, and including, without limitation,
opinions regarding the enforceability of such Mortgages and the validity and perfection of the
Liens created thereby; and

          (e) a certificate dated as of the Navajo/Woods Cross Effective Date from a Responsible Officer
and containing therein a representation and warranty that (i) Navajo/Woods Cross Acquisition
complies with Section 6.04 of this Agreement, (ii) the conditions in this Schedule 3.03 have been
satisfied or waived by all of the Banks, (iii) the Borrower has provided to the Administrative
Agent, true, correct, and complete copies of all Material Contracts which affect the Navajo/Woods
Cross Assets and which are in effect as of the Navajo/Woods Cross Effective Date, (iv) the assets
which are being acquired under the Navajo/Woods Cross PSA are substantially the same assets as
those listed in Schedule 8.03 of the draft of the Navajo/Woods Cross PSA provided by the Borrower
to the Administrative Agent for its due diligence review

 Schedule 3.03

Page 1 of 2

 

 

performed on or prior to February 25, 2008, and (iv) since February 25, 2008, no event,
circumstance, action, or other condition has occurred or exists which could reasonably be expected
to (A) result in a Material Adverse Effect or (B) result in a material adverse affect on the
Navajo/Woods Cross Assets.

     II. Fees. The Borrower shall have paid or reimbursed the Administrative Agent for all
of its reasonable out-of-pocket costs and expenses for which the Borrower has received an invoice
not less than one Business Day prior to the Navajo/Woods Cross Effective Date and which are payable
pursuant to Section 9.04(a) of this Agreement.

     III. Acquisition. The Administrative Agent shall have received evidence reasonably
satisfactory to it that all actions and consents necessary to consummate the Navajo/Woods Cross
Acquisition (other than the payment of the purchase price) shall have been received or taken in
accordance with all Legal Requirements, all applicable material third party agreements, and in
accordance with the terms of the Navajo/Woods Cross PSA, without amendment or waiver of any
material provision thereof from the form of the Navajo/Woods Cross PSA provided to and reviewed by
the Administrative Agent on or prior to February 25, 2008 other than any amendment or waiver that
could not reasonably be expected to result in an adverse consequence or otherwise have an adverse
affect on the Borrower, any Guarantor, the Administrative Agent, the Issuing Bank, or any Bank.

  Schedule 3.03

Page 2 of 2

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