def14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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Check the appropriate box: |
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o Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12 |
AVERY DENNISON CORPORATION
(Name of Registrant as Specified In Its Charter)
AVERY DENNISON CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
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Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103
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Notice of Annual Meeting of Stockholders
To be held April 22, 2010
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To the Stockholders:
The Annual Meeting of Stockholders of Avery Dennison Corporation will be held at 150 North Orange Grove Boulevard, Pasadena, California, on Thursday, April 22, 2010, at 1:30 p.m. for the following purposes:
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1. To elect three directors to the Board of Directors to
hold office for a term of three years and until their successors
are elected and have qualified;
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2. To ratify the appointment of PricewaterhouseCoopers LLP
as the Companys independent auditors for the current
fiscal year, which ends on January 1, 2011;
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3. To consider and vote upon a proposal to eliminate: (i)
the supermajority voting requirements and (ii) the interested
person stock repurchase provision in the Restated Certificate of
Incorporation of Avery Dennison Corporation;
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4. To consider and vote upon a proposal to approve an
amended and restated stock option and incentive plan; and
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5. To transact such other business as may properly come
before the meeting and any adjournments thereof.
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In accordance with the Bylaws, the Board of Directors has fixed
the close of business on Monday, February 22, 2010, as the
record date for the determination of stockholders entitled to
vote at the Annual Meeting and to receive notice thereof.
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All stockholders are cordially invited to attend the meeting.
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BY ORDER OF THE BOARD OF
DIRECTORS
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Susan C. Miller
Secretary
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Pasadena, California
Dated: March 19, 2010
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Whether or not you presently plan to attend the Annual Meeting, in order to ensure your representation, please vote by telephone or by using the Internet as instructed on the enclosed proxy card, or complete, sign and date the enclosed proxy card as promptly as possible and return it in the enclosed envelope (which does not require postage if mailed in the United States). If you attend the meeting and wish to vote in person, your proxy will not be used.
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TABLE OF CONTENTS
AVERY
DENNISON CORPORATION
150 North Orange Grove Boulevard
Pasadena, California 91103
PROXY
STATEMENT
This proxy statement is furnished to the stockholders on behalf
of the Board of Directors (Board) of Avery Dennison
Corporation, a Delaware corporation (hereinafter called
Avery Dennison or the Company), for
solicitation of proxies for use at the Annual Meeting of
Stockholders (the Annual Meeting) to be held on
Thursday, April 22, 2010, at 1:30 p.m. at 150 North
Orange Grove Boulevard, Pasadena, California and at any and all
adjournments and postponements thereof. A stockholder giving a
proxy pursuant to the present solicitation may revoke it at any
time before it is exercised by delivering a later dated proxy,
by delivering to the Secretary of the Company a written notice
of revocation prior to the voting of the proxy at the Annual
Meeting, or by voting in person at the Annual Meeting. Simply
attending the Annual Meeting will not revoke your proxy. Votes
cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspectors appointed for the meeting
and the inspectors also will determine whether or not a quorum
is present. At the Annual Meeting: (i) shares represented
by proxies that reflect abstentions or broker
non-votes (i.e., shares held by a broker or nominee that
are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular
proposal) will be counted as shares that are present and
entitled to vote at the Annual Meeting for purposes of
determining the presence of a quorum; (ii) there is no
cumulative voting and the director nominees receiving a majority
of the votes cast (in uncontested elections) will be elected
(for purposes of determining the vote required to elect
directors, a majority of the votes cast shall mean
that the number of shares voted for a
directors election exceeds the number of votes cast
against that director (with abstentions not counted as votes
cast)); (iii) the affirmative vote of at least 80% of the
total voting power of all shares of stock of Avery Dennison
entitled to vote in the election of directors shall be required
for adoption of Proxy Item 3; and (iv) for all matters
other than the election of directors and Proxy Item 3, the
affirmative vote of the majority in voting power of the shares
represented at the Annual Meeting and entitled to vote on the
matter shall be the act of the stockholders and, therefore,
abstentions as to a particular proposal will have the same
effect as a vote against that proposal and broker non-votes will
have no effect on the vote. The Company has retained D. F.
King & Co., Inc. to assist in soliciting proxies for
this meeting at a fee estimated at $11,500 plus out of pocket
expenses. Expenses incident to the preparation and mailing of
the notice of meeting, proxy statement and form of proxy are to
be paid by the Company. This proxy statement is to be mailed to
stockholders on or about March 19, 2010.
The purpose of the meeting and the matters to be acted upon are
set forth in the preceding Notice of Annual Meeting. In addition
to the election of three directors and ratification of the
appointment of PricewaterhouseCoopers LLP as independent
auditors for the Company, a proposal to eliminate the
supermajority voting requirements and the interested person
stock repurchase provision in the Restated Certificate of
Incorporation (Certificate of Incorporation) of the
Company, and a proposal on the Stock Option and Incentive Plan,
as amended and restated (Stock Plan), will be
submitted for approval by the Companys stockholders. The
Stock Plan has been previously approved by stockholders, and is
proposed to be amended to increase the total number of shares
issuable thereunder by 2.8 million shares, to provide that
equity awards may also be granted to members of the Board, and
to increase the aggregate number of shares represented by
full-value awards (such as restricted stock, restricted stock
units and performance units) that may be granted by
1.2 million out of the total of 2.8 million.
1
As of the date of this proxy statement, management knows of no
other business that will be presented for consideration at the
meeting. However, if any such other business shall properly come
before the meeting, votes will be cast pursuant to these proxies
in respect of any such other business in accordance with the
best judgment of the persons acting under these proxies. See
GENERAL Stockholder Proposals.
Important
Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to be Held on April 22,
2010.
The Proxy
Statement and the Annual Report to Stockholders
are available at www.investors.averydennison.com
ELECTION
OF DIRECTORS (Proxy Item 1)
The Bylaws of the Company presently provide for twelve
directors, divided into three classes. Three directors are to be
elected at the 2010 Annual Meeting and will hold office until
the Annual Meeting in 2013 and until their successors are
elected and have qualified. It is intended that the persons so
appointed in the enclosed proxy will, unless authority is
withheld, vote for the election of the three nominees proposed
by the Board, all of whom are presently directors of the
Company. In voting for the election of directors, each share has
one vote for each position to be filled. All of the nominees
have consented to being named herein and to serve if elected. In
the event that any of them should become unavailable prior to
the Annual Meeting, the proxy may be voted for a substitute
nominee or nominees designated by the Board, or the number of
directors may be reduced accordingly.
The following several pages provide information for each of the
nominees for election to the Board and for each director whose
term continues, as well as for those directors who are retiring,
including his or her age, positions held, current principal
occupation and business experience during the past five years,
as well as the names of other publicly-held companies of which
he or she currently serves as a director or has served as a
director during the past five years. In addition to the
information presented below regarding each directors
experience, qualifications, attributes and skills that led our
Board to the conclusion that he or she should serve as a
director, we also believe that each of our directors has a
reputation for integrity and an adherence to high ethical
standards, as well as a commitment to representing the long-term
interests of the stockholders. They each have demonstrated
business leadership skills and an ability to exercise sound
judgment, as well as a commitment to service to Avery Dennison
and our Board. In addition, we value their significant
experience on other public company boards of directors and board
committees.
2
2010
NOMINEES
The Board recommends a vote FOR the three nominees below.
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Rolf Börjesson, age 67. Since May 2008, Mr.
Börjesson has been the Retired Chairman of Rexam PLC, a
worldwide consumer packaging company based in London, United
Kingdom. From May 2004 through April 2008, Mr. Börjesson
was non-executive Chairman of Rexam. From 1996 through May 2004,
Mr. Börjesson served as Chief Executive Officer of Rexam.
He is also a director of SCA AB (Svenska Cellulosa
Aktiebolaget), a pulp and paper manufacturer based in Stockholm,
Sweden, and Huhtamäki Oyj, a manufacturer of consumer and
specialty packaging based in Espoo, Finland. He has been a
director of Avery Dennison Corporation since January 2005. Mr.
Börjessons qualifications to be a member on our Board
include his international experience as a chairman and chief
executive officer, as well as his forty years of experience in
the consumer packaging and manufacturing industries.
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Peter W. Mullin, age 69. Since November 2008, Mr. Mullin
has been Chairman Emeritus of MullinTBG, an executive
compensation, benefit planning and corporate insurance
consulting firm. From March 2006 through October 2008, Mr.
Mullin was Chairman of MullinTBG; prior to March 2006, he was
Chairman of Mullin Consulting, Inc.; and prior to July 2003, Mr.
Mullin also served as Chief Executive Officer of Mullin
Consulting. He has been a director of Avery Dennison Corporation
since January 1988. During the past five years, Mr. Mullin also
served as a director of Mrs. Fields Holding Company, Inc. Mr.
Mullins qualifications to be a member on our Board include
his experience as a chairman and chief executive officer, as
well as his forty years of experience in the benefit planning
and corporate insurance profession.
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Patrick T. Siewert, age 54. Since April 2007, Mr. Siewert
has been a Managing Director for The Carlyle Group, an
investment company. From February 2006 through March 2007,
Mr. Siewert was a Senior Advisor to The Coca-Cola Company,
a worldwide beverage company. From August 2001 through March
2007, Mr. Siewert was Group President, Asia, The Coca-Cola
Company. He is also a director of Computime Group Ltd., a
manufacturer of home and commercial control products, and
Natural Beauty Ltd., a manufacturer and distributor of personal
care products, both based in Hong Kong. He has been a director
of Avery Dennison Corporation since April 2005. Mr.
Siewerts qualifications to be a member on our Board
include his experience with an investment company as a managing
director and in the consumer goods industry as a group
president, as well as his thirty years of international and
domestic business experience.
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CONTINUING
DIRECTORS
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Peter K. Barker, age 61. Since September 2009, Mr. Barker
has been the Chairman of California for JPMorgan Chase &
Company, a global financial services firm. From November 1982
through November 1998, Mr. Barker was a partner with Goldman
Sachs & Company, an investment banking, securities and
investment management firm. He is also a director of Fluor
Corporation, an engineering, procurement, construction, and
maintenance services company. He has been a director of Avery
Dennison Corporation since January 2003. During the past five
years, Mr. Barker has been a private investor and also served as
a director of Ameron International Corporation, Catellus
Corporation, GSC Investment Company, and Stone Energy
Corporation. Mr. Barkers qualifications to be a member on
our Board include his experience as a chairman, as well as his
more than thirty-seven years of experience in the investment
banking and investment management profession. His present term
expires in 2011.
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Ken C. Hicks, age 57. Since February 2010, Mr. Hicks has
been Chairman and since August 2009, he has been President and
Chief Executive Officer of Foot Locker, Inc., a specialty
athletic retailer. From January 2005 through July 2009, Mr.
Hicks was the President and Chief Merchandising Officer of J.C.
Penney Company, Inc., a retailing company. From July 2002
through December 2004, Mr. Hicks was President and Chief
Operating Officer of J.C. Penney Company. From January 1999
through February 2002, he was President of Payless ShoeSource,
Inc. He has been a director of Avery Dennison Corporation since
July 2007. During the past five years, Mr. Hicks also served as
a director of J.C. Penney Company. Mr. Hicks
qualifications to be a member on our Board include his
experience as a president and chief merchandising officer and
his twenty-eight years of experience in the retail and apparel
industries and in the consulting profession. His present term
expires in 2011.
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Debra L. Reed, age 53. Since February 2007, Ms. Reed has
served as Chairperson, President and Chief Executive Officer of
Southern California Gas and San Diego Gas & Electric,
the regulated utilities of Sempra Energy. From April 2004
through October 2006, she served as Chief Operating Officer, and
in October 2006, she became Chief Executive Officer of Southern
California Gas and San Diego Gas & Electric. Prior to
serving as Chief Operating Officer, Ms. Reed was the Chief
Financial Officer for Southern California Gas and San Diego
Gas & Electric. Ms. Reed also serves on the board of
Halliburton Company. Ms. Reed has been a director of Avery
Dennison Corporation since October 2009, and was recommended by
Korn/Ferry, an executive search firm. During the past five
years, Ms. Reed also served as a director of Genentech, Inc. Ms.
Reeds qualifications to be a member on our Board include
her experience as a chairperson, president, chief executive
officer and chief financial officer, as well as her thirty years
of experience in the energy services industry. Her present term
expires in 2011.
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John T. Cardis, age 68. Mr. Cardis is a private investor.
In May 2004, Mr. Cardis retired as National Managing
Partner Global Strategic Clients of Deloitte &
Touche USA LLP, an audit, tax, consulting and financial advisory
service company. From 1991 through June 1999, Mr. Cardis served
as Office Managing Partner, Los Angeles, for Deloitte &
Touche. He was also a member of the executive committee and a
member of the board of directors. He also is a director of
Edwards Lifesciences Corporation, a cardiovascular disease
treatment company. He has been a director of Avery Dennison
Corporation since October 2004. During the past five years, Mr.
Cardis also served as a director of Energy East Corporation. Mr.
Cardis qualifications to be a member on our Board include
his forty years of experience dealing with public company
financial accounting matters for complex global organizations.
His present term expires in 2012.
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David E.I. Pyott, age 56. Since February 2006, Mr. Pyott
has been Chairman and Chief Executive Officer of Allergan, Inc.,
a global healthcare company. From April 2001 through January
2006, Mr. Pyott was Chairman, President and Chief Executive
Officer and from January 1998 through March 2001, he was
President and Chief Executive Officer of Allergan. He is also a
director of Edwards Lifesciences Corporation, a cardiovascular
disease treatment company. He has been a director of Avery
Dennison Corporation since November 1999. During the past five
years, Mr. Pyott also served as a director of Pacific Mutual
Holding Company. Mr. Pyotts qualifications to be a member
on our Board include his experience as a chairman, president and
chief executive officer, as well as his thirty years of
international and domestic experience in the health care
industry. His present term expires in 2012.
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Dean A. Scarborough, age 54. Since May 2005, Mr.
Scarborough has been President and Chief Executive Officer of
Avery Dennison Corporation, a global leader in
pressure-sensitive technology. From May 2000 through April 2005,
Mr. Scarborough served the Company as President and Chief
Operating Officer. From November 1999 through April 2000,
Mr. Scarborough served the Company as Group Vice President,
Fasson Roll Worldwide. Prior to November 1999, Mr. Scarborough
held other executive positions with the Company. He is also a
director of Mattel Corporation, a manufacturer and marketer of
toys and family products. He has been a director of Avery
Dennison Corporation since May 2000. Mr. Scarboroughs
qualifications to be a member on our Board include his
twenty-five years of international and domestic experience in
the pressure-sensitive materials industry, the last five years
as our Chief Executive Officer and the last ten years as our
President. His present term expires in 2012.
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Julia A. Stewart, age 54. Since June 2008, Ms. Stewart
has been Chairman and Chief Executive Officer of DineEquity,
Inc. (formerly IHOP Corporation), which owns, operates and
franchises the IHOP and Applebees restaurant chains. From
May 2006 through May 2008, Ms. Stewart was Chairman and Chief
Executive Officer, and from May 2002 through April 2006,
Ms. Stewart was President, Chief Executive Officer and
Chief Operating Officer of IHOP. She has been a director of
Avery Dennison Corporation since January 2003. Ms.
Stewarts qualifications to be a member on our Board
include her experience as a chairman, president and chief
executive officer, as well as her nearly forty years of
experience in the restaurant industry. Her present term expires
in 2012.
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RETIRING
DIRECTORS
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Richard M. Ferry, age 72. Mr. Ferry is a private
investor. Since July 2001, Mr. Ferry has been Founder Chairman
of Korn/Ferry International, an international executive search
firm. In June 2001, Mr. Ferry retired as Chairman of Korn/Ferry,
a position he had held since May 1997; and in June 2002, he left
the Korn/Ferry board. From May 1991 through May 1997, Mr. Ferry
was Chairman and Chief Executive Officer of Korn/Ferry. He has
been a director of Avery Dennison Corporation since December
1985. During the past five years, Mr. Ferry also served as a
director of Dole Food Company, Inc., Pacific Mutual Holding
Company and Mrs. Fields Famous Brands, LLC. Mr. Ferrys
qualifications to be a member on our Board include his
experience as a chairman and chief executive officer and his
thirty-five years of experience in the international executive
search profession. Mr. Ferry will retire at the Annual Meeting
in April.
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Kent Kresa, age 71. Since December 2005, Mr. Kresa has
served as non-executive Chairman of Avery Dennison Corporation.
During the period from March 30 until July 10, 2009, Mr. Kresa
also served as Interim Chairman of General Motors Corporation.
Since October 2003, he has been Chairman Emeritus of Northrop
Grumman Corporation, a defense systems manufacturer. In October
2003, Mr. Kresa retired as Chairman of Northrop Grumman, a
position he had held since September 1990. From September 1990
through March 2003, he served as Chairman and Chief Executive
Officer of Northrop Grumman. He is also a director of Fluor
Corporation, an engineering, procurement, construction, and
maintenance services company; General Motors Corporation, an
automotive manufacturer; and MannKind Corporation, a
pharmaceutical manufacturer. He has been a director of Avery
Dennison Corporation since February 1999. Mr. Kresas
qualifications to be a member on our Board include his
experience as a chairman and chief executive officer, as well as
his forty years of experience in the defense systems industry.
Mr. Kresa will retire at the Annual Meeting in April.
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5
SECURITY
OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of the
Companys common stock beneficially owned by each director
of the Company and each of the executive officers named on
page 13, and the aggregate number of such shares
beneficially owned by all directors and executive officers as of
December 31, 2009.
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Amount and
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Nature of
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Beneficial
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Percent
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Name of Beneficial Owner
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Ownership(1)
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of Class
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Dean A. Scarborough
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831,132
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(3)
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(2
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Richard M. Ferry
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68,647
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(4)
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(2
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Peter W. Mullin
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108,020
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(5)
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(2
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Kent Kresa
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55,165
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(6)
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(2
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David E.I. Pyott
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40,589
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(7)
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(2
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Julia A. Stewart
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32,142
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(8)
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(2
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Peter K. Barker
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32,716
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(9)
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(2
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John T. Cardis
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24,817
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(10)
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(2
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Rolf Börjesson
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18,051
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(11)
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(2
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Patrick T. Siewert
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22,850
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(12)
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(2
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Ken C. Hicks
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19,274
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(13)
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(2
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Debra L. Reed
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490
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(14)
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(2
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Daniel R. OBryant
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360,976
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(15)
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(2
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Donald A. Nolan
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59,768
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(16)
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(2
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Timothy S. Clyde
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304,433
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(17)
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(2
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Robert M. Malchione
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327,849
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(18)
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(2
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All Directors and Executive Officers as a Group
(24 persons, including those named)
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2,915,937
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(19)
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2.5
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%
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(1) |
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Except as otherwise indicated and
subject to applicable community property and similar statutes,
the persons listed as beneficial owners of the shares have
voting and/or investment power with respect to such shares.
Exercise prices for stock options for the persons referred to
above on shares range from $20.64 to $67.80.
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(2) |
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Less than 1%.
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(3) |
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Includes 740,000 shares with
respect to which Mr. Scarborough holds options exercisable
within 60 days from December 31, 2009. Also includes
145 shares held by Mrs. Scarborough, as to which
Mr. Scarborough disclaims beneficial ownership, and
2,702 shares issuable under stock units designated for
Mr. Scarborough under the Companys Capital
Accumulation Plan (CAP) trust.
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(4) |
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Includes 17,000 shares with
respect to which Mr. Ferry holds options exercisable within
60 days from December 31, 2009. Also includes 6,062
stock units designated for Mr. Ferry under the Director
Deferred Equity Compensation Program (DDECP), and
1,569 shares issuable under stock units designated for
Mr. Ferry under the CAP trust.
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(5) |
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Includes 17,000 shares with
respect to which Mr. Mullin holds options exercisable
within 60 days from December 31, 2009. Also includes
785 shares issuable under stock units designated for
Mr. Mullin under the CAP trust, and 3,000 shares held
by Mrs. Mullin (405 shares of which are held in a
trust), as to which Mr. Mullin disclaims beneficial
ownership.
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(6) |
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Includes 17,000 shares with
respect to which Mr. Kresa holds options exercisable within
60 days from December 31, 2009. Also includes 33,465
stock units designated for Mr. Kresa under the DDECP.
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(7) |
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Includes 17,000 shares with
respect to which Mr. Pyott holds options exercisable within
60 days from December 31, 2009. Also includes 19,089
stock units designated for Mr. Pyott under the DDECP.
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(8) |
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Includes 16,000 shares with
respect to which Ms. Stewart holds options exercisable
within 60 days from December 31, 2009. Also includes
12,242 stock units designated for Ms. Stewart under the
DDECP.
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(9) |
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Includes 16,000 shares with
respect to which Mr. Barker holds options exercisable
within 60 days from December 31, 2009. Also includes
5,816 stock units designated for Mr. Barker under the DDECP.
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(10) |
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Includes 14,000 shares with
respect to which Mr. Cardis holds options exercisable
within 60 days from December 31, 2009. Also includes
317 stock units designated for Mr. Cardis under the DDECP.
|
|
(11) |
|
Includes 12,000 shares with
respect to which Mr. Börjesson holds options
exercisable within 60 days from December 31, 2009.
|
|
(12) |
|
Includes 12,000 shares with
respect to which Mr. Siewert holds options exercisable
within 60 days from December 31, 2009.
|
|
(13) |
|
Includes 8,000 shares with
respect to which Mr. Hicks holds options exercisable within
60 days from December 31, 2009. Also includes 2,774
stock units designated for Mr. Hicks under the DDECP.
|
|
(14) |
|
Ms. Reed joined the Board in
October 2009. Includes 490 stock units designated for
Ms. Reed under the DDECP.
|
|
(15) |
|
Includes 317,974 shares with
respect to which Mr. OBryant holds options
exercisable within 60 days from December 31, 2009.
Also includes 17,579 shares of restricted stock that are
scheduled to vest on August 14, 2012.
|
|
(16) |
|
Includes 59,443 shares with
respect to which Mr. Nolan holds options exercisable within
60 days from December 31, 2009.
|
|
(17) |
|
Includes 292,829 shares with
respect to which Mr. Clyde holds options exercisable within
60 days from December 31, 2009.
|
|
(18) |
|
Includes 312,743 shares with
respect to which Mr. Malchione holds options exercisable
within 60 days from December 31, 2009.
|
|
(19) |
|
Includes 2,459,449 shares with
respect to which all executive officers and directors as a group
hold options exercisable within 60 days from
December 31, 2009.
|
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended (1934 Act) requires the Companys
executive officers and directors, and persons who own more than
10% of a registered class of the Companys equity
securities (collectively, Insiders), to file initial
reports of ownership and reports of changes in ownership with
the Securities and Exchange Commission (SEC) and the
New York Stock Exchange (NYSE). Insiders are
required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To the Companys
knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations
from certain Insiders that no other reports were required for
such Insiders, the Company believes that, during the 2009 fiscal
year, Insiders complied with the Section 16(a) filing
requirements applicable to Insiders, except Mr. Butier
filed a Form 4 one day after its due date.
BOARD OF
DIRECTORS AND COMMITTEE MEETINGS
During 2009, there were six meetings of the Board and
twenty-nine meetings of committees of the Board. All of the
Avery Dennison directors attended at least 75% of the aggregate
number of meetings of the Board and meetings of Board committees
(of which they were members) held during 2009, or if shorter,
the period of time they served on the Board and committees. The
Company has a policy of encouraging directors to attend the
Annual Meeting of Stockholders, and ten of the directors
attended the 2009 Annual Meeting.
After review and discussion of the relevant facts and
circumstances for each director, including any relationships
with Avery Dennison, the Board has determined that the following
directors, who (i) have no material relationships with
Avery Dennison, and (ii) meet the Boards categorical
independence standards for directors (which are attached as
Exhibit A), are independent based on the NYSE listing
standards: Peter K. Barker, Rolf Börjesson, John T. Cardis,
Richard M. Ferry, Ken C. Hicks, Kent Kresa, David E.I. Pyott,
Debra L. Reed, Patrick T. Siewert and Julia A. Stewart. These
ten directors constitute a majority of the Board. As part of its
independence determinations, the Board considered sales and
purchases of products and services, in the ordinary course of
business, between the Company and its subsidiaries and the
companies at which some of the Companys directors were
officers during 2009. However, the amounts paid to or received
from these companies during the last three years were less than
the 2.0% threshold in the Boards independence standards
for these ten directors. The Board also determined that none of
these relationships impaired the independence of these ten
directors.
Corporate
Governance
The Board and Avery Dennison management have taken a number of
steps to enhance the Companys corporate governance
policies and procedures, and to comply with the Sarbanes-Oxley
Act, as well as the NYSE
7
listing standards. This year the Company is proposing to
eliminate supermajority voting requirements in the Certificate
of Incorporation and in the Bylaws. In 2011, the Company will
propose declassification of the Board, which will result in
annual elections of directors, and the Company will provide a
say-on-pay
proposal. There is a corporate governance section on the
Companys web site, which includes key information about
the Companys corporate governance. You can access this
information by going to www.averydennison.com, selecting the
Investors / Corporate Governance section
to find the Companys Corporate Governance Guidelines;
Charters for the Audit, the Compensation and Executive
Personnel, and the Nominating and Governance Committees; Code of
Ethics and Business Conduct for Directors, Officers and
Employees; Code of Ethics for the Chief Executive Officer
(CEO) and Senior Financial Officers; and the Audit
Committee Complaint Procedures. The Companys web site
address provided above is not intended to function as a
hyperlink, and the information on the Companys web site is
not and should not be considered part of this proxy statement
and is not incorporated by reference herein.
On December 1, 2005, the Board elected Kent Kresa as
non-executive Chairman. Mr. Kresa presides at executive
sessions of the Board. During 2009, the Board held five
executive sessions with non-management directors only during
regularly scheduled Board meetings, including one executive
session with independent directors only.
Board
Leadership Structure
The Board believes that it should have the flexibility to decide
whether the offices of Chairman of the Board
(Chairman) and CEO should be combined or separate.
The Board also believes that determining the responsibilities of
these roles can be a useful part of the succession planning
process, and should be reevaluated periodically by the Board.
Since December 2005, the roles of Chairman and CEO have been
separate, with Mr. Kresa serving as Chairman and
Mr. Scarborough serving as CEO, following the retirement of
our then Chairman and CEO, Philip M. Neal. At the time of
Mr. Kresas election as Chairman, the Board determined
that his prior service as a member of the Board since 1999
provided him the familiarity with the Company, its businesses,
operations and stockholders to carry out the Chairmans
responsibilities effectively and to provide leadership to the
Board. Mr. Scarborough was elected by the Board as CEO in
May 2005, and has been a member of the Board since 2000. As CEO,
Mr. Scarborough is responsible for the general supervision,
direction and control of the business and affairs of the
Company, for which he has served in various significant
positions since 1983.
With Mr. Kresas pending retirement from the Board,
the Board believes that it is in the best interests of the
Company to again combine the roles of Chairman and CEO, and on
February 26, 2010 elected Mr. Scarborough to serve in
the dual roles, effective as of Mr. Kresas retirement
following the 2010 Annual Meeting. The Board believes that this
is in the best interests of the Company and the stockholders
because it allows the Company to leverage
Mr. Scarboroughs experience and knowledge as CEO and
as a director. The Board believes that Mr. Scarborough at
this time is best positioned to identify matters of operating
and strategic importance for the Board, and can serve as a
bridge between management and the Board. This combined
leadership structure enhances the Chairman/CEOs ability to
provide insight and direction on important strategic initiatives
to both the Board and management and, at the same time, ensures
that the appropriate level of independent oversight is applied
to Board decisions.
With the combined roles of Chairman and CEO, the Board believes
that it is appropriate to have a Lead Independent Director who
will, among other things, preside over executive sessions of the
Board, serve as liaison between the Chairman and the
non-management Directors, have the authority to call meetings of
the non-management directors, and have the authority to review
materials prepared for the Board. Having served on the Board
since 1999, Mr. Pyott is familiar with the Company and the
operations of the Board and is well qualified to fill this role.
Stockholders and other interested parties may write to
Mr. Kresa (prior to April 23, 2010) and to
Mr. Pyott (from April 23, 2010) concerning
matters other than accounting and auditing matters
c/o Secretary,
Avery Dennison
8
Corporation, 150 North Orange Grove Boulevard, Pasadena,
California 91103. Stockholders and other interested parties may
also write to John T. Cardis, Chairman of the Audit Committee,
regarding accounting and auditing matters
c/o Secretary
at the same address.
Risk
Oversight
Although the Companys management is responsible for the
day-to-day
management of risks to the Company, the Board has broad
oversight responsibility for the Companys risk management
programs. In this oversight role, the Board is responsible for
satisfying itself that the risk management processes designed
and implemented by the Companys management are
functioning, and that necessary steps are taken to foster a
culture of risk-adjusted decision-making within the
organization. In carrying out its oversight responsibility, the
Board has delegated to individual Board Committees certain
elements of its oversight function. In this context, the Audit
Committee regularly discusses the Companys risk assessment
and risk management processes to determine that our risk
management programs are effective. Employees who supervise
various
day-to-day
risks provide reports and information to Board Committees and
when appropriate to the Board. The Board receives updates from
its Committees on individual areas of risk, such as: updates on
accounting, credit, operational, financial reporting, and
environmental, health and safety risks from the Audit Committee;
updates on financing related matters and risks, including
liquidity risk, from the Finance Committee; updates on
compensation program issues and related risks from the
Compensation and Executive Personnel Committee; updates on
business ethics and conflict of interest matters and related
risks from the Ethics and Conflict of Interest Committee; and
updates on corporate governance matters and risks from the
Nominating and Governance Committee. Significant potential risks
to the Company are identified and discussed in the
Companys public filings with the SEC.
Risk
Considerations in our Compensation Programs
The Compensation and Executive Personnel Committee
(Compensation Committee) believes that the
Companys executive compensation and other employee
compensation programs have been designed to provide the
appropriate level of incentives that do not encourage our
executive officers to take unnecessary risks in managing their
businesses, or other employees to take unnecessary risks in
carrying out their responsibilities. A majority of our executive
officers compensation is performance-based, consistent
with our executive compensation philosophy. Our annual incentive
award program is designed to reward annual financial
and/or
strategic performance in areas considered important to the short
and long-term success of the Company. Our longer term equity
incentive awards are directly aligned with long-term stockholder
interests through their link to our stock price and multi-year
vesting, and our executive stock ownership guidelines, as
described on page 21 and Exhibit C, further support a
long-term focus by requiring our executives to personally
acquire and retain significant levels of the Companys
stock. The Compensation Committee has adopted a compensation
recovery (clawback) policy as described on page 17. In
combination, the Committee believes that the various elements of
our compensation programs sufficiently tie our executives
and other employees compensation opportunities to the
Companys sustained long-term performance.
Criteria
and Diversity
The Company does not have a formal policy with regard to the
consideration of diversity in identifying director nominees. In
considering whether to recommend any candidate for inclusion in
the Boards slate of recommended director nominees,
including candidates recommended by stockholders, the Nominating
and Governance Committee applies a number of criteria, including
what is set forth in the Companys Corporate Governance
Guidelines. The Guidelines provide that the Board will have a
majority of directors who meet the criteria for independence
required by the NYSE and that the Nominating and Governance
Committee is responsible for reviewing with the Board the
requisite skills and characteristics of new Board members, as
well as the composition of the Board as a whole. This assessment
includes consideration of members and nominees
qualifications as independent, as well as relevant business
experience (considering factors such as size, the particular
industry, scope,
9
complexity and international operations); attendance; time
commitments; conflicts of interest; ability to contribute to the
oversight and governance of the Company; as well as an ability
to represent the balanced interests of stockholders as a whole,
rather than those of any special interest group in the context
of the needs of the Board.
Nominees for Directorship are selected by the Nominating and
Governance Committee. The Committee seeks nominees to recommend
to the Board with a broad diversity of experience, professions,
skills, geographic representation and backgrounds. The Committee
does not assign specific weights to particular criteria and no
particular criterion is necessarily applicable to all
prospective nominees. The Board believes that the backgrounds
and qualifications of the directors, considered as a group,
should provide a significant composite mix of complimentary
experience, knowledge and abilities that will allow the Board to
fulfill its responsibilities.
Standing
Committees of the Board of Directors
The Audit Committee, which is composed of the following
independent directors: John T. Cardis (Chairman), Peter K.
Barker, Richard M. Ferry, Ken C. Hicks and Kent Kresa, met eight
times during 2009, including meetings prior to the
Companys issuing its quarterly and annual news releases
concerning financial results. Debra L. Reed was appointed to the
Audit Committee by the Board on February 26, 2010. The
Audit Committee is appointed by the Board to assist the Board
with its oversight responsibilities in monitoring (i) the
integrity of the financial statements of the Company;
(ii) the independent auditors qualifications and
independence; (iii) the performance of the Companys
internal audit function and independent auditors; and
(iv) the compliance by the Company with legal and
regulatory requirements. A copy of the Audit Committee Charter
is available on the Companys web site. The Board has
designated Mr. Cardis and Mr. Barker as audit
committee financial experts (as defined by applicable SEC
regulations). The Board has determined that each of the members
of the Audit Committee is independent (as defined by
applicable SEC regulations).
The Compensation Committee, which is composed of the following
independent directors: David E.I. Pyott (Chairman), Peter K.
Barker (who was a member during a majority of 2009), Richard M.
Ferry, Debra L. Reed and Julia A. Stewart, met seven times
during 2009. The Compensation Committee is appointed by the
Board to discharge the Boards responsibilities relating to
compensation of the Companys directors, Chairman, and CEO
and other executive officers. The Compensation Committee has
overall responsibility for approving and evaluating compensation
plans, policies and programs of the Company, as they affect the
directors, CEO and executive officers. In addition, the
Compensation Committee reviews plans and candidates for
succession to CEO and other executive officers. The Compensation
Committee is also responsible for providing a report concerning
its review of the Compensation Discussion and Analysis section
of this annual proxy statement. A copy of the Compensation
Committees Charter is available on the Companys web
site.
The Ethics and Conflict of Interest Committee, which is composed
of the following directors: Julia A. Stewart (Chairman), Rolf
Börjesson, John T. Cardis, Kent Kresa and Patrick T.
Siewert, met twice during 2009. The functions of the Ethics and
Conflict of Interest Committee are to: survey, monitor and
provide counsel as to the business relationships, affiliations
and financial transactions of directors, officers and key
employees, as they may relate to possible conflicts of interest
or to the Companys Legal and Ethical Conduct Policy;
monitor the Companys compliance program; and report and
make recommendations to the Board in instances where it is
believed that possible violations of Company policy could exist.
The Finance Committee, which is composed of the following
directors: Peter K. Barker (Chairman), Rolf Börjesson,
John T. Cardis, Peter W. Mullin and Patrick T. Siewert, met
three times during 2009. The functions of the Finance Committee
are to: assist the Board in consideration of matters relating to
the financial affairs and capital requirements of the Company;
provide an overview of the financial planning and policies of
the Company; and review significant borrowings and changes in
the financial structure of the Company.
The Nominating and Governance Committee (Nominating
Committee), which is composed of the following independent
directors: Richard M. Ferry (Chairman), Rolf Börjesson, Ken
C. Hicks, David E.I. Pyott and Julia A. Stewart, met six times
during 2009. The Nominating Committee is appointed by the Board
to: (i) assist the Board by
10
identifying individuals qualified to become Board members
consistent with criteria approved by the Board, and to recommend
to the Board the director nominees for the next annual meeting
of stockholders, as well as between annual meetings when
appropriate; (ii) review and recommend to the Board, the
Companys Corporate Governance Guidelines;
(iii) oversee the evaluations of the Board and management
(related to corporate governance); and (iv) recommend to
the Board director nominees for each committee. A copy of the
Nominating Committees Charter is available on the
Companys web site. The Nominating Committee has a process
under which all director candidates are evaluated. The
Nominating Committee uses certain criteria in evaluating any
candidates capabilities to serve as a member of the Board
including: attendance, independence, number of other board
directorships, time commitments, education, relevant
geographical experience, conflict of interest, senior management
experience with a multinational business or other organization
with the size, scope, and complexity of the Company, as well as
an ability and desire to contribute to the oversight and
governance of the Company and to represent the balanced
interests of stockholders as a whole, rather than those of
special interest groups. Further, the Nominating Committee
reviews the qualifications of any candidate with those of
current directors to determine coverage and gaps in experience
in related industries and in diverse functional areas, such as
finance, manufacturing, technology, and investing. Sources for
identifying potential nominees include members of the Nominating
Committee, other Board members, executive officers of the
Company, third-party search firms, and stockholders.
Stockholders desiring to make recommendations concerning new
directors should submit the candidates name, together with
biographical information and professional experience, and the
candidates written consent to nomination
c/o Secretary,
Nominating and Governance Committee of the Board of Directors,
Avery Dennison Corporation, 150 North Orange Grove Boulevard,
Pasadena, California 91103. Stockholders wishing to nominate new
directors for election at an annual meeting must comply with the
requirements described under the heading
GENERAL Stockholder Proposals on
page 57.
In addition to the standing committees noted above, the Board
has an Ad Hoc Committee, which is composed of the following
directors: Kent Kresa (Chairman) and David E.I. Pyott, met three
times during 2009. The Ad Hoc Committee is appointed by the
Board and has been assigned the oversight responsibility for,
and is empowered to take action (or if deemed appropriate to
make recommendations to the Board) with respect to, the
Companys response to pending competitive practices related
litigation.
11
DIRECTOR
COMPENSATION FOR 2009
The following table provides information regarding compensation
earned or awarded by the Companys non-employee directors
during 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
or Paid
|
|
Stock
|
|
Option
|
|
NQDC
|
|
All Other
|
|
|
Name
|
|
in
Cash(2)
|
|
Awards(3)
|
|
Awards(4)
|
|
Earnings(5)
|
|
Compensation(6)
|
|
Total
|
|
Peter K. Barker
|
|
$
|
97,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
|
|
|
|
$
|
10,000
|
|
|
$
|
139,590
|
|
Rolf Börjesson
|
|
$
|
80,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
|
|
|
|
|
|
|
|
$
|
112,590
|
|
John T. Cardis
|
|
$
|
95,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
|
|
|
|
$
|
10,000
|
|
|
$
|
137,590
|
|
Richard M. Ferry
|
|
$
|
103,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
$
|
190,895
|
|
|
$
|
10,000
|
|
|
$
|
336,485
|
|
Ken C. Hicks
|
|
$
|
83,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
|
|
|
|
$
|
10,000
|
|
|
$
|
125,590
|
|
Kent
Kresa(1)
|
|
$
|
248,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
$
|
2,865
|
|
|
$
|
10,000
|
|
|
$
|
293,455
|
|
Peter W. Mullin
|
|
$
|
68,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
$
|
22,359
|
|
|
$
|
10,000
|
|
|
$
|
132,949
|
|
David E.I. Pyott
|
|
$
|
101,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
$
|
16,341
|
|
|
$
|
10,000
|
|
|
$
|
159,931
|
|
Debra L. Reed
|
|
$
|
18,250
|
|
|
|
|
|
|
$
|
44,124
|
|
|
|
|
|
|
$
|
10,000
|
|
|
$
|
72,374
|
|
Patrick T. Siewert
|
|
$
|
71,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
|
|
|
|
|
|
|
|
$
|
103,590
|
|
Julia A. Stewart
|
|
$
|
92,500
|
|
|
$
|
19,260
|
|
|
$
|
12,830
|
|
|
|
|
|
|
$
|
7,954
|
|
|
$
|
132,544
|
|
|
|
|
(1) |
|
Mr. Kresa serves as Chairman.
His annual retainer is $220,000.
|
|
(2) |
|
Amounts represented retainers and
meeting fees earned by the directors in 2009. The annual
retainer for all non-employee directors (except for
Mr. Kresa) for 2009 was $55,000. Directors were able to
elect to defer all or a portion of their fees into the Director
Variable Deferred Compensation Plan (DVDCP) or the
DDECP. Ms. Reed joined the Board in October 2009.
|
|
(3) |
|
Amounts represented the value of
the stock awards made on June 30, 2009 (750 shares at
$25.68).
|
|
(4) |
|
Amounts shown do not reflect
compensation actually received by the directors. Rather, the
amounts shown are the aggregate grant date fair value of option
awards granted during 2009, without adjustment for forfeitures.
The fair value of option awards was estimated as of the date of
grant using the Black-Scholes option-pricing model. This model
requires input assumptions for expected dividend yield, expected
volatility, risk-free interest rate and the expected life of the
option awards. Refer to footnote 5 of the Summary
Compensation Table for more information on these
assumptions. Options vest in equal installments on the first two
anniversaries of the grant date and expire after ten years. As
of December 31, 2009, the directors held stock options as
follows: Mr. Barker 17,000;
Mr. Börjesson 13,000;
Mr. Cardis 15,000; Mr. Ferry
18,000; Mr. Hicks 9,000;
Mr. Kresa 18,000; Mr. Mullin
18,000; Mr. Pyott 18,000;
Ms. Reed 5,000; Mr. Siewert
13,000; and Ms. Stewart 17,000.
|
|
(5) |
|
NQDC means nonqualified deferred
compensation. For Mr. Ferry and Mr. Mullin, the
amounts include above-market earnings during fiscal year 2009 on
fees that were deferred prior to fiscal year 2009 under two
legacy plans (the fixed-rate alternatives that were frozen prior
to 2009 and are no longer open for additional Company or
director contributions): the Director Deferred Compensation Plan
and/or the DVDCP. For Mr. Ferry, Mr. Kresa,
Mr. Mullin and Mr. Pyott, the amounts include the
change in present value of their director retirement plan
benefit; this plan was frozen effective December 31, 2002.
|
|
(6) |
|
Reflects amounts of Company
matching gifts for directors contributions to charitable
and/or educational institutions; the maximum Company match is
$10,000 per year.
|
As President and CEO of the Company, Mr. Scarborough
receives no fees for services rendered in his capacity as a
director. For 2009, each non-employee director was paid an
annual retainer fee of $55,000; the non-executive Chairman was
paid an annual retainer of $220,000. Directors were paid
attendance fees of $1,500 per Board meeting attended, and $2,000
per committee meeting attended as Chairman of a committee or
$1,500 per committee meeting attended as a member of the
committee (whether it was a standing or an ad hoc committee).
The Chairmen of the Audit and the Compensation Committees were
each also paid an annual retainer fee of $10,000; the Chairmen
of the Finance, the Nominating and Governance, and the Ethics
and Conflict of Interest Committees were each paid an annual
retainer fee of $5,000. See Exhibit B for a summary of
non-employee director compensation for 2009. Under the DVDCP,
fees that are deferred accrue earnings at the rate of return of
certain bond and equity investment funds managed by an insurance
company. Under the DDECP, directors may defer fees into stock
units, which will
12
be paid out in shares of Company stock at retirement. As of
December 31, 2009, the following directors held stock units
in the DDECP: Mr. Barker 5,816;
Mr. Cardis 317; Mr. Ferry
6,062; Mr. Hicks 2,774;
Mr. Kresa 33,465; Mr. Pyott
19,089; Ms. Reed 490; and Ms.
Stewart 12,242. The Company has a matching gift
program under which the Company will match an amount of up to
$10,000 that a director contributes to charitable
and/or
educational institutions.
Each non-employee director who was a member of the Board on
June 30, 2009, received a stock award of 750 shares of
the Companys common stock, as a portion of their director
compensation for 2009. Non-employee directors also participated
in the Director Equity Plan, which provided for each
non-employee director to receive a 5,000 stock option grant upon
joining the Board, and an annual grant of 2,000 stock options
thereafter. In February 2009, options to purchase a total of
20,000 shares (2,000 options for each non-employee
director) of Company stock were granted to the non-employee
directors under this plan. When the stock options were granted,
the option price was 100% of the fair market value of the
Companys common stock on the date of grant. These options
granted have a term of ten years, and become exercisable in two
equal installments on the first and second anniversaries of the
grant date, except that all options held by a director, which
are otherwise unexercisable on the date the director retires
from the Board at or after age 72, will become fully vested
and exercisable on the date of such retirement.
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis (CD&A)
provides an overview and analysis of the Companys
executive compensation program. Refer to Additional
Information Regarding Executive Compensation below for a
series of tables containing information about the compensation
for the following individuals, whom the Company refers to as
named executive officers, or NEOs, of the Company:
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Dean A. Scarborough, President and Chief Executive Officer
(CEO)
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Daniel R. OBryant, Executive Vice President, Finance and
Chief Financial Officer (CFO)
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Donald A. Nolan, Group Vice President, Roll Materials
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Timothy S. Clyde, Group Vice President, Specialty Materials and
Converting
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Robert M. Malchione, Senior Vice President, Corporate Strategy
and Technology
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The discussion below is intended to provide an understanding of
the detailed information contained in the tables following the
CD&A and provide further information about the
Companys overall compensation program.
EXECUTIVE
SUMMARY
The Compensation Committee designs and sets the Companys
executive compensation program and levels consistent with the
Companys compensation strategy to provide a compensation
package that attracts, motivates and retains executive talent
and to reward performance and provide downside risk for
underperformance. When the Compensation Committee met at the
beginning of 2009 to establish the incentive program, there were
a number of economic and business related factors to consider.
Of particular concern was the recessionary environment
throughout North America and Europe and expected slower growth
in Asia. As a result, the Compensation Committee ratified
managements recommendation that there be no salary
increases for our U.S. based employees, including
the NEOs due to the challenging economic environment. The
Compensation Committee also made annual equity awards with
values lower than the NEOs targeted long-term incentive
award values. For the 2009 annual bonus, the Compensation
Committee left the target bonus levels for the NEOs unchanged,
but did establish funding hurdles (gates), based on free cash
flow and earnings per share, before any annual bonus award could
be paid. Despite a decline in revenues in 2009, the Company
improved or maintained its market share in key businesses and
exceeded target goals for both free cash flow and earnings per
share.
13
For 2010, executive incentives will be focused on rewarding
profitable growth, with a greater emphasis on revenue growth in
order to create shareholder value as markets recover.
ROLE OF
COMPENSATION COMMITTEE & EXECUTIVE OFFICERS
The Compensation Committee is appointed by the Board to manage
the Boards responsibilities relating to the compensation
of the Companys directors, CEO, other NEOs and other
executive officers.
The Compensation Committees major responsibilities are to:
1. Review and approve Company objectives and goals related
to CEO compensation annually, evaluate the CEOs
performance in light of those goals and objectives, and
determine and approve the CEOs overall compensation level
based on this evaluation. In determining the incentive
components of the CEOs compensation, the Compensation
Committee considers the Companys performance and strategic
direction and the value of incentive awards to CEOs at companies
of similar size.
2. Review and approve the annual base salary increases and
annual bonus awards of the other executive officers, as well as
long-term cash and equity-based incentive awards. In addition,
the Compensation Committee provides periodic reports and makes
recommendations to the Board on the Companys compensation
program for the other executive officers. The Compensation
Committee also reviews and approves employment agreements and
special or supplemental compensation and benefits for the CEO
and other executive officers, including supplemental retirement
benefits and perquisites. The Compensation Committee also
submits the CEOs compensation package, which has been
reviewed and approved by the Compensation Committee, to the
Board for ratification.
3. Select, retain and terminate any compensation consultant
used to assist the Compensation Committee in the evaluation of
compensation for directors, the CEO and other executive
officers. The Compensation Committee has sole authority to
approve the consultants fees and other terms and
conditions.
4. Conduct evaluations of, and make reports to, the Board
on succession planning for the CEO and the CEOs direct
reports. To that end, the Compensation Committee meets
throughout the year to review and discuss succession planning
for the CEO and his direct reports. As part of this process, the
Compensation Committee reviews the executives skill sets,
experience and readiness for their next roles. In addition,
development plans are reviewed. The Board also reviews
succession planning and potential successors to the CEO annually.
5. Review the Compensation Committee Charter annually and
recommend any proposed changes to the Board for approval.
The Chairman of the Board reviews and evaluates the CEOs
annual performance and makes compensation recommendations to the
Compensation Committee concerning salary and incentive awards
for the CEO. The CEO makes compensation recommendations,
including salary adjustments and incentive awards, to the
Compensation Committee, for the other NEOs and other executive
officers based on the CEOs annual review of each
officers performance. These recommendations are presented
to the Compensation Committee for review and approval. The
Compensation Committee exercises its discretion when modifying
recommended salary adjustments or incentive awards.
The CEO and the Senior Vice President and Chief Human Resources
Officer, and in some cases the CFO, participate during portions
of Compensation Committee meetings to:
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review and recommend performance objectives and goals for the
annual bonus and long-term incentive plans
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review performance against goals for the annual bonus and
long-term incentive plans
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review changes to the executive compensation program
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14
The Compensation Committee has retained the services of Towers
Watson (formerly Watson Wyatt), an independent executive
compensation consultant, to assist the Compensation Committee in
determining the overall compensation program. The Compensation
Committee has the sole authority to engage, as well as to
terminate, the services of the compensation consultant. During
2009, Towers Watson provided the Compensation Committee with
support in its review of the executive severance program (which
provides certain benefits when an executive is terminated
without cause), and the Companys stock ownership
guidelines for executives, which are designed to achieve greater
alignment with the interests of the Companys stockholders.
In addition, Towers Watson conducted a risk assessment of the
Companys executive compensation program. Utilizing
qualitative and quantitative factors developed for its
assessment, Towers Watson concluded that the Companys
executive compensation program strikes an appropriate balance
between corporate risk mitigation and executive pay for
performance. The Compensation Committee conducted its annual
assessment of the consultants performance during the
Compensation Committees December meeting, which also
included a review of fees paid to Towers Watson. In 2009, Towers
Watson provided no services for Company management (outside of
its work for the Compensation Committee), but the Company may
request services from Towers Watson in the future.
COMPENSATION
PHILOSOPHY AND OBJECTIVES
The Board believes that hiring and retaining effective leaders
and providing appropriate incentives for executives are
essential to the Companys success in the marketplace and
to creating an attractive investment for stockholders. The
Compensation Committee of the Board has responsibility for
establishing and implementing the Companys executive
compensation program.
The Compensation Committee has established a compensation
strategy and supporting plans that tie a significant portion of
executive compensation to the Companys success in meeting
specified performance goals and positively influencing the
appreciation of the Companys stock price. The objectives
of this strategy are to attract and retain the best possible
executive talent, to motivate these executives to achieve the
Companys near- and long-term goals, to link the interests
of executives and stockholders through equity-based plans and to
provide a compensation program that recognizes individual
contributions, as well as overall business results.
The Compensation Committee believes that the Companys
compensation program should be balanced, providing a mix of
incentive plans that balance short- and long-term objectives,
provide potential upside for exceeding performance targets and
downside risk for missing performance targets. In addition, the
program should balance retention with reward for stockholder
value creation, while also ensuring that the elements of the
program, individually and in the aggregate, do not encourage
excessive risk-taking. Consistent with this approach, the
Compensation Committee has also adopted a compensation recovery
(clawback) policy, which is described on Page 17.
SETTING
EXECUTIVE COMPENSATION AND NEO PAY POSITIONING IN RELATION TO
THE MARKET
The Compensation Committee has established a total direct
compensation positioning strategy for executive officers in the
third quartile of companies similar in size, global scope and
complexity with which the Company may compete for executive
talent. Using the third quartile for its positioning strategy
allows the Compensation Committee to use a range to reflect
executive experience, skills and performance. In 2009, average
target total direct compensation for the NEOs was positioned at
the 60th percentile. Total direct compensation is
base salary plus annual bonus (based on market reference data)
and annual long-term incentive opportunities (which may include
cash, stock options, performance units and restricted stock
units). In general, base salary is positioned around the market
median with target incentive opportunities driving the overall
total direct compensation positioning. The Compensation
Committee believes this positioning is appropriate given the
Companys business portfolio mix, product diversity and the
global nature of the Companys operations, which require
its executives to have a wide range of business leadership
experiences and skills. In addition, this positioning strategy
is
15
intended to drive performance, because a significant portion of
executive compensation is tied to incentive compensation.
COMPENSATION
SURVEYS AND PEER COMPANIES
The Company performs competitive benchmarking of executive pay
levels and Company performance based on competitive peer groups
and survey data, as follows:
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Executive officer compensation: broad cross section of
U.S.-based
companies to reflect similarly broad talent market, as provided
in executive compensation surveys, adjusted and regressed for
revenue size. Each year, the Company reviews surveys prepared by
independent third parties to understand the compensation
practices of publicly-traded companies and to assess the
Companys competitiveness. In 2009, primary sources were
Hewitt Associates and Towers Perrin executive compensation
surveys.
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Performance Unit (PU) vesting determination: For
2009, the financial metric is based solely on the Companys
relative total shareholder return (TSR) compared to
other companies in the S&P 500 Industrials and Materials
subsets. The Company is in the S&P 500 Industrials subset.
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Restricted Stock Unit (RSU) performance vesting
determination: Companys relative annual return on total
capital (ROTC) compared to a market basket of peer
companies (set forth below) consisting of 50 publicly-traded
U.S. companies selected on the basis of market diversity,
international focus and investment, market volatility, and
product line mix.
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The Companys market basket of peer group companies is
comprised of Air Products & Chemicals Inc.,
ArvinMeritor Inc., Baker-Hughes, Inc., Ball Corporation, Bemis
Company, Inc., Black & Decker Corporation, Cabot
Corporation, Cooper Tire & Rubber Company, Crane
Company, Crown Holdings, Inc., Cummins Inc., Dana Holding
Corporation, Danaher Corporation, Dover Corporation, Eaton
Corporation, Ecolab Inc., Ferro Corporation, FMC Corporation, H.
B. Fuller Company, Goodrich Corporation, W. R. Grace &
Company,
Harley-Davidson,
Inc., Harris Corporation, Harsco Corporation, Illinois Tool
Works Inc., Ingersoll-Rand Company, MASCO Corporation,
MeadWestvaco Corporation, NACCO Industries, Newell Rubbermaid
Inc., Olin Corporation, Owens-Illinois, Inc., PACCAR Inc.,
Parker-Hannifin Corporation, Pentair Inc., Pitney Bowes Inc.,
PolyOne Corporation, Potlatch Corporation, P.P.G. Industries
Inc., The Sherwin-Williams Company, Smurfit-Stone Container
Corporation, Snap-On Inc., Sonoco Products Company, The Stanley
Works, Tecumseh Products Company, Temple-Inland Inc., Thermo
Fisher Scientific, Inc., Thomas & Betts Corporation,
Timken Company and Trinity Industries.
KEY
COMPONENTS OF COMPENSATION PROGRAM
The key components of the Companys executive compensation
program are:
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base salary
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performance-based compensation
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benefits
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perquisites
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For the Companys executive officers, the largest component
of total direct compensation opportunity is performance-based.
To motivate the Companys executives, the Compensation
Committee allocates compensation between cash and equity
compensation based on its assessment of the Companys
objectives and the competitive practices of other public
companies. Further, the Compensation Committee considers the
Companys business portfolio to provide appropriate linkage
of incentives to the Companys objectives. Accordingly, the
Companys compensation program includes annual and
long-term incentive awards.
16
For fiscal year 2009, approximately 80% of
Mr. Scarboroughs and approximately 70% of the other
NEOs total direct compensation consisted of
performance-based compensation from the annual bonus plan and
long-term incentive plans. In February 2010, the Compensation
Committee approved the 2009 annual bonus payments and the annual
equity awards for 2010. In 2009, the CEO and other NEOs were
eligible to receive stock options and PUs under the Employee
Stock Option and Incentive Plan, which are targeted to represent
approximately 60% and 40%, respectively, of their long-term
incentive opportunity.
Base
Salary
Base salary provides executives with a base level of monthly
income and compensates them for services rendered during the
fiscal year reflecting:
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the responsibilities of the position
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the experience and performance of the individual
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the Companys or business groups financial results
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other objectives, including leadership development,
environmental health and safety, Company values and operating
principles, and employee relations
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internal equity
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the competition for executive talent
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the projected annual base salary increases for executives based
on salary surveys
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In both 2008 and 2009, the CEO and the other NEOs did not
receive an annual salary increase in response to global economic
conditions and the Companys outlook for performance.
Performance-Based
Compensation
The Company structures its performance-based compensation
program to reward the NEOs based on the Companys
performance, as well as the individual executives
contributions. The NEOs are awarded incentive compensation in
the event certain Company and individual performance objectives
are achieved. The CEOs targeted long-term incentive
opportunity represents approximately 80% of his
performance-based compensation. For the other NEOs, their
targeted long-term incentive opportunity represents
approximately 75% of their performance-based compensation.
Performance-based compensation consists of the following:
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Annual Bonus Plan
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Long-Term Incentives
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Compensation
Recovery (Clawback) Policy
In February 2009, the Compensation Committee adopted a
compensation recovery (clawback) policy. Under this policy, in
the event of fraud or other intentional misconduct on the part
of an employee that necessitates a restatement of our financial
results, the employee will be required to reimburse the Company
for any bonus awards or other incentive compensation paid or
issued to the employee in excess of the amount that would have
been paid or issued based on the restated financial results. The
Compensation Committee approved this policy after consideration
of market practices and to further align the interests of our
employees with our stockholders.
17
Annual
Bonus Plan
The annual bonus plan compensates the NEOs based on the
achievement of annual performance objectives and enhances the
NEOs motivation to achieve above target results.
In 2009, the CEO and other executive officers were eligible for
an annual cash bonus under the Companys Senior Executive
Annual Incentive Plan (SEAIP). On March 6,
2009, the SEAIP was approved by the Compensation Committee and
subsequently approved by the stockholders at the 2009 Annual
Meeting in April. Under the SEAIP, if a performance goal, based
upon the Companys annual gross profit less marketing,
general and administrative expense (Performance
Measure) determined from the Companys annual
Consolidated Statement of Income, is achieved, participants
(including the NEOs) will be eligible for an annual bonus
payment based on a percentage of the Performance Measure,
subject to Compensation Committee review and to the exercise of
downward discretion on the part of the Compensation Committee.
If the goal is achieved, the CEO will be eligible for a bonus
award of up to 1.5% ($4.77 million in 2009), and the other
NEOs and participants for an individual bonus award of up to
0.75% ($2.38 million in 2009), respectively, of the
Performance Measure.
The Compensation Committee has the discretion to decrease, but
not to increase, awards calculated under the SEAIP. As part of
this process, the Compensation Committee uses a market reference
bonus opportunity consistent with the Companys total
direct compensation positioning strategy (110% of base salary
for Mr. Scarborough, and 60% for the other NEOs, based on
their salary at the end of the fiscal year). In addition,
participants are eligible for an individual modifier based on
their respective performance against objectives; however, no
bonus payment can exceed the calculated maximum SEAIP award.
Annual bonus payments are included in the Non-Equity
Incentive Plan Compensation column in the Summary
Compensation Table following the CD&A.
The following formula is used for calculating the annual bonus
award (using a market reference bonus opportunity):
Salary at year end × Bonus
Opportunity % × Financial Modifier × Individual
Modifier = Bonus Award
Financial Modifier: The amount payable
under the Companys annual bonus plan is based on the
performance of the Company. The performance is converted into a
financial modifier based on the performance achieved and
weighting of the selected performance objectives. So that
executive officers receive bonus awards that are based on
Company performance, and to give management incentive to take
necessary actions to provide for long-term value creation, the
Compensation Committee may modify performance-based bonus awards
based on adjustment items that the Compensation Committee
establishes within the first 90 days of the fiscal year.
For 2009, the Company achieved a 136% financial modifier based
on the Companys financial results for sales growth
(1/3rd),
free cash flow (FCF)
(1/3rd)
and earnings per share (EPS)
(1/3rd).
These metrics and relative percentages were determined by the
Compensation Committee in consultation with its compensation
consultant. Our performance is measured by our achievement of
these metrics that were established at the beginning of the
performance period and that are based on our corporate
strategies and objectives established as part of our annual
operating plan process. See the table and narrative below for
the Companys results against these goals. Given the
uncertain economic and business outlook at the beginning of
2009, the Compensation Committee added FCF as a metric in
determining the financial modifier, with a weighting equal to
the weighting given to EPS. For 2009, the Compensation Committee
established annual bonus award funding gates to focus
participants on the importance of generating profits and
managing cash. Before any annual bonus awards could be made, the
Company needed to achieve either the EPS or the FCF target (100%
payout level). As noted below, the Company exceeded both the EPS
and the FCF targets.
18
2009
ANNUAL BONUS RESULTS
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Sales
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Growth
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FCF
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Financial
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(ex-currency)
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EPS
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(in millions)
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Modifier
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Target
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(3.9
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)%
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$
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1.35
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$
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265.0
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100
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%
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As Reported
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(11.3
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)%
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$
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(7.21
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)
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$
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465.7
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Currency
Translation(1)
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3.7
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%
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(7.6
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)%
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$
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(7.21
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)
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$
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465.7
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87
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%
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Adjustment Factors
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Goodwill and indefinite-lived intangible asset impairment
charges(2)
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$
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7.84
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Restructuring
costs(3)
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$
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1.34
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49
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%
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Adjusted Results
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(7.6
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)%
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$
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1.97
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$
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465.7
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136
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%
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(1) |
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Excludes the impact of currency for
sales growth.
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(2) |
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EPS adjustment relates to goodwill
and indefinite-lived intangible asset impairment charges (net of
taxes) of $812.6 million.
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(3) |
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EPS adjustment relates to charges
for restructuring costs, asset impairment and lease cancellation
charges, legal settlement costs and loss from debt
extinguishment (net of taxes) of $138.4 million.
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Although sales declined in 2009, our key businesses were able to
improve or maintain market share in a challenging global
economic environment. In addition, the Company successfully
managed FCF and overall profitability. The goodwill and
intangible asset impairment charges were non-cash items.
Over the last three fiscal years, including 2009, the financial
modifier for the Company has averaged 81%.
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AIP Payout %
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2007
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88
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%
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2008
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19
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%
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2009
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136
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%
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3 year average
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81
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%
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Individual Modifier: The NEOs have
individual performance objectives that are designed to improve
the Companys performance. Individual objectives may
include leadership development, employee relations,
environmental health and safety, Company values and overall
impact on the Company. Achievement of individual objectives is
evaluated and translated into an individual modifier, which can
range from 0% to 150%. For 2009, individual modifiers for the
NEOs averaged 120%, based upon the annual review of performance
objectives established at the beginning of the year. The
Compensation Committee determines the individual modifier for
the CEO, based on its assessment of the CEOs performance;
and the CEO recommends the individual modifiers for the other
NEOs based on his assessment of their individual performance.
The Compensation Committee considers the CEOs
recommendations before finalizing the other NEOs individual
modifiers.
During 2009, the Corporate Leadership Team (CLT), of which all
the NEOs are members, developed a plan to address the numerous
challenges presented by the global economy and competitive
pressures. In addition to the financial performance, the Company
created a New Growth Platform organization and a new Company
vision and growth plan to foster a culture of innovation. The
Company also continued to invest in its strategic marketing
capabilities. At the same time, the Company continued its
efficiency efforts through the utilization of enterprise lean
sigma (ELS) tools to deliver significant working capital and
customer service improvements and execute an estimated
$160 million restructuring plan. Finally, key personnel
changes were made to bring in new skills and enhanced
end-customer industry experience.
19
Long-Term
Incentives
In order to focus alignment more closely with the interests of
the stockholders, the Companys long-term incentives for
2009 consisted solely of equity awards granted under the
Employee Stock Option and Incentive Plan; in prior years, the
Company has had a cash-based long-term incentive plan. In 2009,
after discussions with its compensation consultant, the
Compensation Committee targeted the following percentages for
the NEOs long-term incentives:
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60% stock options
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40% PUs
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The Compensation Committee believes that denominating all of the
NEOs long-term incentives in the form of equity awards
strengthens the alignment with stockholders and enhances the
risk/reward relationship between equity awards and economic
opportunity for the NEOs. Company stock price appreciation
directly impacts the realized value of the equity awards, and
for the PUs, the number of shares that may be earned.
Employee Stock Option and Incentive Plan (Stock
Plan): The Companys Stock Plan
provides for equity awards, including nonqualified stock
options, stock appreciation rights, restricted stock, RSUs, PUs
and dividend equivalents. This long-term incentive program is
designed to:
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enhance the link between the creation of stockholder value and
long-term incentive compensation
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provide an opportunity for increased equity ownership
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maintain competitive levels of total direct compensation
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Under the Stock Plan, stock options are granted at fair market
value (the average of the high and the low prices on the NYSE)
on the date of the grant. Annual stock options are granted on
the date of the Board meeting immediately following the
Compensation Committee meeting at which awards are made. Annual
stock option awards vest at a rate of 25% per year over the
first four years of a ten-year option term. The 2009 annual
equity awards (stock options and PUs) to the NEOs (and all other
equity eligible employees) were approximately 25% lower than
their target Long-Term Incentive (LTI) opportunities.
Under the mid-term incentive program (MTIP),
participants receive PU awards in the first year, which are
settled in Company stock after the end of each three-year
performance cycle (a new cycle begins each year) based on
meeting certain performance objectives. During the performance
period, the PU award recipients will not accrue dividends or
dividend equivalents. The Compensation Committee believes that
by denominating the MTIP equity awards in PUs, the NEOs
compensation will be linked to a greater extent to the stock
price, thus increasing the alignment with stockholder interests
to create long-term value through stock price appreciation.
The performance objectives for PUs awarded under the MTIP are
determined by the Compensation Committee during the first
90 days of each cycle. Company goals are set at threshold
(50% payout), target (100% payout) and maximum (200% payout)
levels. For the
2009-2011
MTIP cycle, the performance objective is relative TSR compared
to other companies in the S&P 500 Industrials and Materials
subsets. Threshold performance was set at the 40th percentile,
target performance at the 50th percentile and maximum
performance at the 80th percentile of the S&P 500 Materials
and Industrials subsets.
The NEOs (except Mr. Nolan) were granted performance
vesting RSUs in 2005 and 2006. The 2005 performance vesting RSUs
were eligible to vest in 2009, however, they did not vest
because the Companys 2008 ROTC did not meet or exceed the
67th percentile of the market basket of peer group companies.
The 2005 and 2006 performance vesting RSUs will be eligible to
vest in 2010 based on the Companys 2009 ROTC.
To further align the interests of the NEOs with those of
stockholders, the Compensation Committee believes that the NEOs
should acquire and maintain an equity interest in the Company.
To achieve this objective, the Compensation Committee reviewed
the Companys stock ownership policy for the NEOs to
acquire and maintain
20
certain levels of stock ownership during their tenure with the
Company. At the recommendation of Towers Watson, the
Compensation Committee increased the targeted ownership levels.
Recognizing the impact of a changing stock price the
Compensation Committee established guidelines that will allow
executives to achieve the new ownership guideline level using
the lesser of the number of shares equal to a multiple of
salary, or a fixed number of shares. The new ownership
guidelines are effective as of January 1, 2010 and the
executives will have a five-year transition period to achieve
the new guideline levels. See Exhibit C for further
information concerning these guidelines. It is expected,
however, that the executives will make progress toward their new
ownership levels during the transition period. The Compensation
Committee will review the ownership levels annually at the
December Compensation Committee meeting, starting in 2010, to
assess progress. If an executive has not reached the guideline
ownership levels by the end of the transition period, the
executive will be required to hold all net shares acquired
(shares remaining after the payment of taxes and transaction
fees following the vesting of a stock award or an exercise of a
stock option). The CEO is a Level 1 executive and the other
NEOs are Level 2 executives.
Targeted Levels of Stock Ownership (to be achieved generally
within five years of assuming the position):
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Stock Ownership
Guidelines(1)
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Multiple of Base
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Fixed Shares
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Position/Levels
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Salary
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or Units
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CEO
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5
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X
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95,000
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Level 2
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3
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X
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27,000
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Level 3
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2
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X
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17,000
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Level 4
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1
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X
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4,000
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(1) |
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The lesser of a multiple of base
salary or a fixed number of shares or units.
|
Under the Stock Plan and the Charter of the Compensation
Committee, the Compensation Committee has the authority to make
equity awards to executive officers and other employees of the
Company. The Compensation Committee reviews and approves the
total annual pool of stock options, PUs and RSUs, as well as
annual and special equity awards to executive officers,
including the size of the awards and related terms and
conditions. The Compensation Committee has delegated the
authority to the Compensation Committee chairman to approve
special equity grants to executive officers. The Compensation
Committee has also delegated the authority to the CEO to make
equity awards for annual and special equity grants of stock
options, PUs and RSUs to employees, other than executive
officers. Following approval by the Compensation Committee or
the CEO, as appropriate, special equity awards (other than those
granted at the time of the annual grant) are granted and dated
on the first day of the next third, sixth, ninth, or twelfth
calendar month (if the NYSE is closed on that date, then on the
first day thereafter that the NYSE is open). Special equity
grants (including those for new hires, promotions, retention,
and special recognition) may have different terms and vesting
schedules depending on the purpose of the grant.
Benefits
The Company provides a benefit program for all eligible
employees in the United States, including the NEOs, to provide
them with retirement, savings, health and welfare, and
disability coverage. The Compensation Committee works with the
Committees consultant and management to provide a benefit
program that is competitive with other companies in the
industries in which it competes for executive talent to support
the recruiting and retention of employees, including the NEOs.
Defined
Benefit Retirement Plans
The Company provides retirement benefits for all eligible
employees, including the NEOs, under the Avery Dennison Pension
Plan (Pension Plan), the successor plan to the
Retirement Plan for Employees of Avery Dennison Corporation and
the Avery Associate Retirement Plan, which merged on
November 30, 2008. The Company also provides the Benefit
Restoration Plan (BRP) for eligible employees as
described below. Effective January 1, 2009, the Pension
Plan and the BRP have been closed to new employees.
21
Benefits under the Pension Plan are based on pensionable
earnings, length of service, when benefits commence and how they
are paid, and are currently calculated separately for each year
of service. Employees vest in the Pension Plan after five years
of service.
Employees who participated in the Pension Plan at any time from
December 1, 1986 through November 30, 1997, may also
have a benefit under the Stock Holding and Retirement
Enhancement Plan of Avery Dennison Corporation (SHARE
Plan). In order to receive a maximized benefit under the
Pension Plan, these employees have the option to transfer their
SHARE Plan balance to the Pension Plan, which will be converted
into an annual annuity and combined with the monthly benefit
from the Pension Plan. If they choose not to transfer their
SHARE Plan balance, they will receive a lump-sum payment from
the SHARE Plan.
Amounts payable under the Pension Plan may be reduced in
accordance with certain Code provisions, which, as applied to
plan years beginning on or after December 1, 1994,
currently limit the annual amount of compensation used to
determine annual benefit accruals under the Pension Plan to the
first $245,000 of covered compensation as of December 31,
2009. In December 1994, the Company established the BRP to
provide for the payment of supplemental retirement benefits to
eligible employees, including the NEOs, whose benefits under the
Pension Plan are limited under the foregoing Code provisions.
The BRP is a nonqualified excess benefit plan. Benefits are
payable under the BRP in amounts equal to the amount by which a
participants benefits, otherwise payable under the Pension
Plan, are reduced under applicable provisions of the Code.
All NEOs currently have a benefit in at least one of the plans
discussed above.
Supplemental
Executive Retirement Plan
The Supplemental Executive Retirement Plan (SERP) is
designed to provide participants with additional incentives to
further the Companys growth and development, and as an
inducement to remain with the Company. Participants designated
by the Compensation Committee are offered benefits under this
plan to supplement other retirement benefits. The Company
believes that it is in the stockholders best interests to
retain key executives in critical roles in order to provide
continuity of leadership and to focus them on the Companys
long-term success. The Compensation Committee has designated
Messrs. Scarborough and OBryant as participants in
this plan. Benefits will commence generally upon the later of
age 60 for Mr. Scarborough and age 55 for
Mr. OBryant and separation from service (at the same
time as the BRP) at a benefit level that, when added to the
benefits to which they will be entitled from the Pension Plan,
the BRP, the SHARE Plan at the time of retirement, certain
Company contributions (plus interest) to the 401(k) Plan, fixed
amounts representative of contributions plus interest to the
deferred compensation plans and Social Security payments, will
equal 62.5% for Mr. Scarborough, and 52.5% for
Mr. OBryant of their respective final average
compensation (annual average of their salary for the three
highest twelve month periods out of their last sixty months of
employment with the Company plus the average of their three
highest earned annual bonuses during their last sixty months of
employment with the Company). Survivor and disability benefits
are also payable under the SERP under certain circumstances. If
benefits are payable prior to age 62 for
Mr. Scarborough and age 65 for Mr. OBryant,
they are subject to a reduction for early commencement.
Defined
Contribution Retirement Plan
The Employee Savings Plan (401(k) Plan) is a
tax-qualified retirement savings plan that permits employees to
defer up to 25% of their annual salary and bonus or, if lower,
the limit prescribed by the Internal Revenue Service, to the
401(k) Plan on a before-tax basis. The employees elective
deferrals are immediately vested upon contribution to the 401(k)
Plan. The Company currently makes matching contributions to the
401(k) Plan in an amount equal to fifty cents for each dollar a
participant contributes up to a maximum of 6% of the
participants annual salary and bonus contributed, subject
to certain other Code limits. After three years of service,
participants vest in the amounts contributed by the Company.
Employees of the Company are immediately eligible to participate
in the 401(k) Plan.
22
Deferred
Compensation
All eligible employees, including the NEOs are eligible to defer
up to 75% of their base salary and 100% of cash bonuses to the
2005 Executive Variable Deferred Retirement Plan
(EVDRP), which is a nonqualified plan. Deferrals are
100% vested. This plan provides NEOs and other employees with a
long-term capital accumulation opportunity. The EVDRP provides a
number of investment opportunities, including fixed income and
mutual fund alternatives. Certain NEOs also participated in
prior deferred compensation plans that are no longer available
for new deferrals.
The Company makes an annual contribution to each NEOs
deferred compensation account equal to 3% of cash compensation
(salary and annual bonus) in excess of the 401(k) Plan limit.
This contribution is added to their deferred compensation
account at the beginning of each plan year as long as the NEO
has contributed at least the pre-tax limit into the 401(k) Plan
during the prior plan year and is employed by the Company at
year end. This benefit is designed to supplement pre-tax 401(k)
contributions that are limited for certain executives (by the
Code).
Retiree
Medical
Retirees, including the NEOs, may be eligible for medical
coverage under the Companys plan until they are eligible
for Medicare provided they meet the following criteria: elect to
retire immediately following separation from the Company;
receive a pension benefit from the Pension Plan; and are
age 55 or older with 15 or more years of service. For
employees who are at least age 60 and have 20 years of
service, the cost for this coverage is shared by the Company and
the retiree.
Medical
Insurance
All NEOs contribute to, and participate in, medical plans
available to employees. In addition, the Company provides each
NEO, the NEOs spouse and dependent children, with
supplemental medical coverage, which reimburses the NEOs for
medical costs not covered under the basic medical plan.
Mr. Scarborough has reimbursement coverage up to $30,000
per year for himself and for each covered family member, and the
other NEOs have coverage up to $20,000 per year for themselves
and for each covered family member.
Dental
Insurance
All NEOs contribute to, and participate in, dental plans
available to employees. In addition, the Company provides each
NEO, the NEOs spouse and dependent children, supplemental
dental coverage, which reimburses the NEOs for dental costs not
covered under the basic dental plan. Mr. Scarborough has
reimbursement coverage up to $2,000 per year for himself and for
each covered family member, and the other NEOs have coverage up
to $1,500 per year for themselves and for each covered family
member. This benefit includes orthodontia coverage ($4,000
lifetime maximum) for dependents up to age 19.
Life
Insurance
The Company provides $50,000 in life insurance for all
employees, including the NEOs. In addition, the Company provides
each NEO supplemental life insurance equal to three times the
NEOs base salary less $50,000 (which is covered under the
Companys basic plan) up to a maximum coverage of $700,000.
Perquisites
The Company provides the NEOs with perquisites to attract and
retain executives. The Compensation Committee periodically
reviews the perquisites provided to the NEOs.
23
Annual
Physical
The NEOs are encouraged to have an annual physical, which is
paid for by the Company. The results are confidential between
the physician and the NEO.
Car
Program
The NEOs are eligible to participate in the executive car
allowance program under which the Company provides each NEO with
a monthly allowance. The executive is responsible for leasing or
purchasing his own vehicle, as well as for paying for all
insurance and maintenance costs. The monthly allowances for the
NEOs range from $1,700 to $2,500.
Airline
Clubs
The NEOs may participate in two airline clubs to use when
traveling and the Company reimburses the NEOs for the cost.
Other
The NEOs are entitled to enroll in one health club and the
Company reimburses the NEOs for the cost. In addition, certain
NEOs are entitled to reimbursement of monthly dues for business
and social club memberships.
Financial
Counseling
The NEOs are entitled to receive an annual reimbursement amount
for financial counseling that ranges from $15,000 to $25,000.
Home
Computer
The Company provides each NEO with a home computer and related
equipment.
Severance
Plans and Termination of Employment Agreements
On December 3, 2009, the Compensation Committee adopted the
Key Executive Change of Control Severance Plan (the COC
Severance Plan) under which the NEOs and other designated
executives are eligible (or will be eligible on January 1,
2011) for severance payments upon termination of employment
in connection with a change of control of the
Company, subject to the terms and conditions in the COC
Severance Plan. In the event of a covered termination of
employment, a participant designated as a Tier A executive
will receive three times the sum of his annual pay, his highest
annual bonus received in the preceding three years and the cash
value of his qualified medical and dental benefits, and a
participant designated as a Tier B executive will receive
two times the sum of his annual pay, his highest annual bonus
received in the preceding three years and the cash value of his
qualified medical and dental benefits. Each participant in the
COC Severance Plan will also receive a pro-rata bonus for the
year of termination based on the highest annual bonus received
by such participant in the preceding three years, as well as
outplacement services for up to one year following the
termination of employment. In certain circumstances, if a
participant would otherwise incur excise taxes under
Section 4999 of the Internal Revenue Code of 1986, as
amended (the Code), such participants payments
may be reduced to the safe harbor amount (as defined
in the COC Severance Plan), such that no such excise taxes would
be due; participants are not provided with an excise tax
gross-up.
Payments under the COC Severance Plan are offset by payments
received by the participant under any other Company severance
plan or agreement and any other statutory, legislative and
regulatory requirements.
On December 3, 2009, the Compensation Committee also
adopted the Executive Severance Plan (the Severance
Plan) under which the NEOs and other designated executives
are eligible (or will be eligible on January 1,
2011) for severance payments upon termination of employment
upon certain involuntary terminations of employment initiated by
the Company or any of its affiliates or subsidiaries, subject to
the terms and conditions
24
described in the Severance Plan. In the event of a covered
termination of employment, a participant designated as a
Level 1 executive will receive two times the sum of his
annual pay, his highest annual bonus received in the preceding
three years and the cash value of his health benefits, and a
participant designated as a Level 2, Level 3 or
Level 4 executive will receive the sum of his annual pay,
his highest annual bonus received in the preceding three years
and the cash value of his health benefits. Participants in the
Severance Plan will also be eligible for outplacement services
for up to one year following termination of employment. Payments
under the Severance Plan are offset by payments received by the
participant under any statutory, legislative and regulatory
requirement or under any other Company severance plan or
agreement.
On December 15, 2009, the Company provided a notice to
Messrs. Scarborough, OBryant, Clyde and Malchione
that their individual employment agreements (described in the
following two paragraphs) will be terminated on
December 31, 2010. As of January 1, 2011,
Messrs. Scarborough, OBryant, Clyde and Malchione
will be eligible to participate in the COC Severance Plan and
the Severance Plan. Mr. Scarborough was designated a
Tier A participant in the COC Severance Plan and a
Level 1 participant in the Severance Plan, and
Messrs. OBryant, Clyde and Malchione were designated
as Tier B participants in the COC Severance Plan and
Level 2 participants in the Severance Plan. Mr. Nolan,
who did not have an individual employment agreement, was
designated a Tier B participant in the COC Severance Plan
and a Level 2 participant in the Severance Plan as of
January 1, 2010.
On August 1, 1997, the Company entered into an agreement
with Mr. Scarborough, which was amended on May 1,
2005, to reflect his promotion to President and CEO, providing
that, if his employment is terminated for any reason other than
for cause, death, disability, or voluntary resignation without
good reason (as such terms are defined in the agreement), he
(i) would receive a payment equivalent to a pro-rated
annual bonus for the year of termination; (ii) would
receive salary and bonus (based on his highest combined annual
base salary plus bonus in any of the three previous years) for
one year before a change of control and three years after a
change of control (severance period);
(iii) would receive additional retirement and supplemental
retirement benefits that would have accrued during the severance
period; (iv) would continue to participate in benefit plans
(including medical, dental, and life insurance) during the
severance period (but reduced to the extent such benefits are
provided by another employer); (v) would receive additional
age and service credit under a deferred compensation plan
following termination during the severance period (or the
minimum age and service credit required for early retirement
benefits and the retirement interest rate); and (vi) if
such termination occurs after a change of control, the Company
would pay for outplacement services not to exceed $50,000.
Benefits and amounts to which Mr. Scarborough would be
entitled under the agreement would be reduced to the extent of
any benefits and earned income from any new employment or
services performed during the severance period.
Mr. Scarborough would receive a
gross-up
payment for any excise taxes that are imposed under
Section 4999 of the Code.
On September 1, 2000, the Company entered into an agreement
with Mr. Malchione; on January 2, 2001, the Company
entered into an agreement with Mr. OBryant; and on
January 1, 2002, the Company entered into an agreement with
Mr. Clyde. These agreements are substantially the same as
Mr. Scarboroughs, including the change of control
provisions described above.
On March 31, 2005, the Company entered into a retention
agreement with Mr. OBryant under which he will remain
employed by the Company in his present position and the Company
(i) contributed $1 million on April 1, 2005 to
Mr. OBryants deferred compensation account,
which contribution (and any earnings thereon) will vest at
age 55; (ii) granted to him 30,000 shares of
restricted stock, which will vest in two equal installments on
April 1, 2009 and August 14, 2012; and
(iii) during the period
2005-2011,
agreed to grant to him incremental options each year equal to
$180,000 divided by the Black-Scholes value of the
Companys stock used at the time of the annual stock option
grant, with such options to vest under the same terms as other
annual options granted to Mr. OBryant. These benefits
vest upon death or disability, involuntary (not for cause)
termination, good reason termination, or a change of control.
25
TAX AND
ACCOUNTING IMPLICATIONS
Deductibility
of Executive Compensation
With its performance-based compensation programs, the Company
aims to compensate the NEOs in a manner that is tax effective
for the Company.
Under the 1993 Omnibus Budget Reconciliation Act
(OBRA) and Section 162(m) of the Code, income
tax deductions of publicly-traded companies may be limited to
the extent total compensation for certain executive officers
exceeds $1 million in any one year, except for compensation
payments that qualify as performance-based. To
qualify as performance-based, compensation payments
must be based solely upon the achievement of objective
performance goals and made under a plan that is administered by
the Compensation Committee. In addition, the material terms of
the plan must be disclosed to and approved by the stockholders
and the Compensation Committee must certify that the performance
goals were achieved before payments can be made. The
Compensation Committee has designed certain of the
Companys compensation programs to conform with
Section 162(m) of the Code and related regulations so that
total compensation paid to any employee covered by
Section 162(m) generally should not exceed $1 million
in any one year, except for compensation payments that qualify
as performance-based. However, the Company may pay
compensation that is not deductible in certain circumstances.
Section 409A
of the Internal Revenue Code
Section 409A of the Code requires that nonqualified
deferred compensation be deferred and paid under plans or
arrangements that satisfy the requirements of the statute with
respect to the timing of deferral elections, timing of payments
and certain other matters. Failure to satisfy these requirements
can expose employees and other service providers to accelerated
income tax liabilities, penalty taxes and interest on their
vested compensation under such plans. Accordingly, as a general
matter, it is our intention to design and administer our
compensation and benefits plans and arrangements for all of our
employees and other service providers, including our, NEOs, so
that they are either exempt from, or satisfy the requirements
of, Section 409A.
Section 280G
of the Internal Revenue Code
Section 280G of the Code disallows a tax deduction with
respect to excess parachute payments to certain executives of
companies which undergo a change in control. In addition,
Section 4999 of the Internal Revenue Code imposes a
20 percent penalty on the individual receiving the excess
payment. Parachute payments are compensation that is linked to
or triggered by a change in control and may include, but are not
limited to, bonus payments, severance payments, certain fringe
benefits, and payments and acceleration of vesting from
long-term incentive plans including stock options and other
equity-based compensation. Excess parachute payments are
parachute payments that exceed a threshold determined under
Section 280G based on the executives prior
compensation. In approving the compensation arrangements for our
NEOs in the future, the Compensation Committee will periodically
consider the elements of the cost to our Company of providing
such compensation, including the potential impact of
Section 280G. However, our Compensation Committee may, in
its judgment, authorize compensation arrangements that could
give rise to loss of deductibility under Section 280G and
the imposition of excise taxes under Section 4999, when the
Compensation Committee believes that such arrangements are
appropriate to attract and retain executive talent.
Accounting
Standards
Accounting Standards Codification (ASC) Topic 718,
Compensation Stock Compensation (referred to
as ASC Topic 718 and formerly known as Statement of Financial
Accounting Standards No. 123(R), requires us to recognize
an expense for the fair value of equity-based compensation
awards. Grants of stock options, restricted stock, restricted
stock units and performance units under our equity incentive
award plans will be accounted for under ASC Topic 718. Our
Compensation Committee will periodically consider the accounting
implications of
26
significant compensation decisions, especially in connection
with decisions that relate to our equity incentive award plans
and programs. As accounting standards change, we may revise
certain programs to appropriately align accounting expenses of
our equity awards with our overall executive compensation
philosophy and objectives.
COMPENSATION
AND EXECUTIVE PERSONNEL COMMITTEE REPORT
The Compensation and Executive Personnel Committee of the Board
of Directors has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included or
incorporated by reference in the Companys annual report on
Form 10-K
and this Proxy Statement.
February 25, 2010
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|
David E.I. Pyott, Chairman
Richard M. Ferry
Debra L. Reed
Julia A. Stewart
|
The above Report of the Compensation and Executive Personnel
Committee of the Board of Directors does not constitute
soliciting material and should not be deemed filed or
incorporated by reference into any other Company filing under
the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates
this Report by reference therein.
27
ADDITIONAL
INFORMATION REGARDING EXECUTIVE COMPENSATION
Executive
Compensation
The following table and accompanying notes show, for the
President and CEO, the CFO and the other three most highly
compensated executive officers of the Company, the compensation
earned or awarded during
2007-2009.
SUMMARY
COMPENSATION TABLE
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Change in
|
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Pension
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
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Non-Equity
|
|
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Value and
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|
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Stock
|
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Option
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Incentive Plan
|
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NQDC
|
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All Other
|
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|
Name and Principal Position
|
|
Year
|
|
|
Salary(2)
|
|
|
Bonus(3)
|
|
Awards(4)
|
|
|
Awards(5)
|
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Compensation(6)
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Earnings(7)
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Compensation(8)
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Total
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Dean A. Scarborough
|
|
|
2009
|
|
|
$
|
945,000
|
|
|
|
|
|
|
$
|
627,120
|
|
|
$
|
1,924,478
|
|
|
$
|
1,700,000
|
|
|
$
|
2,733,704
|
|
|
$
|
128,445
|
|
|
$
|
8,058,747
|
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President and Chief
|
|
|
2008
|
|
|
$
|
945,000
|
|
|
|
|
|
|
$
|
799,380
|
|
|
$
|
3,233,975
|
|
|
$
|
1,325,650
|
|
|
$
|
1,202,837
|
|
|
$
|
137,811
|
|
|
$
|
7,644,653
|
|
Executive Officer
|
|
|
2007
|
|
|
$
|
916,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
831,600
|
|
|
$
|
479,908
|
|
|
$
|
119,929
|
|
|
$
|
2,347,437
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Daniel R. OBryant
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|
|
2009
|
|
|
$
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559,800
|
|
|
|
|
|
|
$
|
164,945
|
|
|
$
|
662,245
|
|
|
$
|
639,600
|
|
|
$
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321,286
|
|
|
$
|
114,941
|
|
|
$
|
2,462,817
|
|
Executive Vice President,
|
|
|
2008
|
|
|
$
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559,800
|
|
|
|
|
|
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$
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361,409
|
|
|
$
|
954,318
|
|
|
$
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594,173
|
|
|
$
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323,001
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|
|
$
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152,150
|
|
|
$
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2,944,851
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Finance and Chief
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2007
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|
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$
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552,600
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
295,600
|
|
|
$
|
26,499
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|
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$
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132,420
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|
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$
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1,007,119
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Financial Officer
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Donald A.
Nolan(1)
|
|
|
2009
|
|
|
$
|
500,000
|
|
|
|
|
|
|
$
|
147,325
|
|
|
$
|
455,800
|
|
|
$
|
612,000
|
|
|
$
|
48,806
|
|
|
$
|
85,318
|
|
|
$
|
1,849,249
|
|
Group Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roll Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy S.
Clyde(1)
|
|
|
2009
|
|
|
$
|
500,000
|
|
|
|
|
|
|
$
|
147,325
|
|
|
$
|
540,207
|
|
|
$
|
408,000
|
|
|
$
|
166,753
|
|
|
$
|
116,608
|
|
|
$
|
1,878,893
|
|
Group Vice President,
|
|
|
2008
|
|
|
$
|
500,000
|
|
|
|
|
|
|
$
|
832,522
|
|
|
$
|
1,370,936
|
|
|
$
|
418,540
|
|
|
$
|
83,556
|
|
|
$
|
90,837
|
|
|
$
|
3,296,391
|
|
Specialty Materials and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Malchione
|
|
|
2009
|
|
|
$
|
479,100
|
|
|
|
|
|
|
$
|
141,162
|
|
|
$
|
436,748
|
|
|
$
|
391,000
|
|
|
$
|
152,550
|
|
|
$
|
81,978
|
|
|
$
|
1,682,538
|
|
Senior Vice President,
|
|
|
2008
|
|
|
$
|
479,100
|
|
|
|
|
|
|
$
|
309,316
|
|
|
$
|
629,360
|
|
|
$
|
503,138
|
|
|
$
|
97,184
|
|
|
$
|
85,552
|
|
|
$
|
2,103,650
|
|
Corporate Strategy and
|
|
|
2007
|
|
|
$
|
474,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
231,900
|
|
|
$
|
43,677
|
|
|
$
|
76,068
|
|
|
$
|
826,078
|
|
Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Nolan became an NEO in
2009; Mr. Clyde became an NEO in 2008.
|
|
(2) |
|
Amounts shown include amounts
earned and deferred at the election of these officers under the
Employee Savings Plan, a qualified defined contribution plan
under Section 401(k) of the Code, and the nonqualified
deferred compensation plan.
|
|
(3) |
|
Amounts paid under the annual bonus
plan, which prior to 2006 were reported in the Bonus
column, are reported in the Non-Equity Incentive Plan
Compensation column.
|
|
(4) |
|
Amounts shown do not reflect
compensation actually received by the NEOs. Rather, the amounts
shown are the aggregate grant date fair value of stock awards
granted during 2009, without adjustment for forfeitures. For
values actually received by the NEOs during 2009, see the
Value Realized on Vesting column in the Option Exercises
and Stock Vested for 2009 table. These stock awards granted
during 2009 will vest at the end of a three-year cliff period
provided that certain performance objectives are achieved.
Target amounts are shown in the above table. The payout levels
range from 50% of the target amounts for threshold performance
to 200% of the target amounts for maximum performance. The fair
value of stock awards is estimated as of the date of grant using
the Monte-Carlo simulation method, which utilizes multiple input
variables, including expected volatility and other assumptions
to estimate the probability of satisfying the market condition
target stipulated in the award.
|
|
(5) |
|
Amounts shown do not reflect
compensation actually received by the NEOs. Rather, the amounts
shown are the aggregate grant date fair value of option awards
granted during 2009, without adjustment for forfeitures. For
values actually received by the NEOs during 2009, see the
Value Realized on Exercise column, in the Option
Exercises and Stock Vested for 2009 table.
|
These option awards granted during 2009 will vest ratably over a
4-year
period. The fair value of stock option awards is estimated as of
the date of grant using the Black-Scholes option-pricing model.
This model requires input assumptions for expected dividend
yield, expected volatility, risk-free interest rate and the
expected life of the options. The underlying assumptions used
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Risk-free interest rate
|
|
|
2.76
|
%
|
|
|
4.15
|
%
|
|
|
4.68
|
%
|
Expected stock price volatility
|
|
|
41.51
|
%
|
|
|
29.86
|
%
|
|
|
24.75
|
%
|
Expected dividend yield
|
|
|
3.83
|
%
|
|
|
2.76
|
%
|
|
|
2.53
|
%
|
Expected option term
|
|
|
6.1 years
|
|
|
|
6 years
|
|
|
|
5.8 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|
Amounts in the table include the
bonuses earned under the Companys annual bonus plan in
2009, but paid in 2010.
|
|
(7) |
|
Reflects the increase during 2009
in the actuarial present value of each NEOs accumulated
benefits under the Pension Plan, BRP, and SERP (as applicable),
and, with respect to Mr. Scarborough, above-market earnings
of $3,421 earned in 2009 based on his participation in a legacy
deferred compensation plans (which was frozen prior to 2009 and
is no longer open for additional Company or executive
contributions). This amount is also reported in the Aggregate
Earnings in Last Fiscal Year column of the Nonqualified
Deferred Compensation table. Above-
|
28
|
|
|
|
|
market earnings mean a crediting
interest rate in excess of 120% of the applicable federal rate
(AFR). For 2009, the AFR was 5.19%, and the
crediting rate was 5.63% for the Executive Deferred Retirement
Plan (EDRP). The increase in pension value for
Mr. Scarborough was primarily because the age at which he
can receive an unreduced SERP benefit was changed by the
Compensation Committee in 2009 from age 65 to 62, so as to
be consistent with the Companys Pension Plan. Required
changes in actuarial assumptions also contributed a significant
portion of the total increase in pension value.
|
|
(8) |
|
The following table describes the
components of items for the All Other Compensation column
in the Summary Compensation Table.
|
All Other
Compensation for 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Match
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
Match
|
|
|
Excess
|
|
|
|
|
|
Executive
|
|
|
|
|
|
Dividends on
|
|
|
|
|
|
|
Financial
|
|
|
|
|
|
Airline
|
|
|
|
|
|
Savings
|
|
|
Deferred
|
|
|
Life
|
|
|
Medical/
|
|
|
Long Term
|
|
|
Executive
|
|
|
Restricted
|
|
|
|
|
Name
|
|
Planning
|
|
|
Automobile
|
|
|
Clubs
|
|
|
Other(1)
|
|
|
Plan
|
|
|
Comp
|
|
|
Insurance
|
|
|
Dental
|
|
|
Disability
|
|
|
Physical
|
|
|
Stock(2)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean A. Scarborough
|
|
$
|
19,075
|
|
|
$
|
30,000
|
|
|
|
|
|
|
$
|
9,660
|
|
|
$
|
7,350
|
|
|
$
|
46,398
|
|
|
$
|
1,932
|
|
|
$
|
14,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
128,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. OBryant
|
|
$
|
15,000
|
|
|
$
|
24,000
|
|
|
$
|
450
|
|
|
$
|
348
|
|
|
$
|
7,350
|
|
|
$
|
18,762
|
|
|
|
|
|
|
$
|
18,402
|
|
|
$
|
2,880
|
|
|
|
|
|
|
$
|
27,749
|
|
|
$
|
114,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald A.
Nolan
|
|
$
|
16,250
|
|
|
$
|
20,400
|
|
|
$
|
300
|
|
|
$
|
745
|
|
|
$
|
7,350
|
|
|
|
|
|
|
$
|
1,260
|
|
|
$
|
35,413
|
|
|
$
|
2,880
|
|
|
$
|
720
|
|
|
|
|
|
|
$
|
85,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy S.
Clyde
|
|
$
|
15,346
|
|
|
$
|
20,400
|
|
|
$
|
350
|
|
|
|
|
|
|
$
|
7,350
|
|
|
$
|
15,360
|
|
|
|
|
|
|
$
|
57,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
116,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Malchione
|
|
$
|
15,000
|
|
|
$
|
20,400
|
|
|
$
|
350
|
|
|
|
|
|
|
$
|
7,350
|
|
|
$
|
14,430
|
|
|
$
|
1,932
|
|
|
$
|
18,396
|
|
|
$
|
2,880
|
|
|
$
|
1,240
|
|
|
|
|
|
|
$
|
81,978
|
|
|
|
|
|
(1)
|
Amounts include fitness, business and social club dues.
|
|
|
(2)
|
During 2009, as part of his retention agreement, which is
described in the CD&A, Mr. OBryant received
dividends on his unvested restricted stock in the form of
additional restricted stock. On each dividend payment date,
additional shares of restricted stock are credited to
Mr. OBryants account. The number of shares of
restricted stock to be credited is determined by dividing the
dividend that would have been paid on the shares represented by
the restricted stock in his account by the closing price of the
Companys common stock on the NYSE on each dividend payment
date. During 2009, 1,138 shares of restricted stock were
credited to his account as a result of these dividends.
|
29
GRANTS OF
PLAN-BASED AWARDS FOR 2009
The following table provides information regarding grants of
cash incentive awards made to the NEOs during 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Number
|
|
|
Exercise
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
Estimated Future Payouts
|
|
|
Number
|
|
|
of
|
|
|
or Base
|
|
|
Fair
|
|
|
Fair Value
|
|
|
|
|
|
|
Non-Equity Incentive Plan
|
|
|
Under Equity Incentive
|
|
|
of Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
Value on
|
|
|
of Stock
|
|
|
|
|
|
|
Awards(1)
|
|
|
Plan
Awards(2)
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Date of
|
|
|
and Option
|
|
Name
|
|
Grant Date
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Grant
|
|
|
Awards
|
|
|
Dean A. Scarborough
|
|
|
02/26/09
|
|
|
$
|
519,750
|
|
|
$
|
1,039,500
|
|
|
$
|
3,118,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
$
|
20.64
|
|
|
|
|
|
|
$
|
1,924,478
|
|
|
|
|
02/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000
|
|
|
|
52,000
|
|
|
|
104,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12.06
|
|
|
$
|
627,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. OBryant
|
|
|
02/26/09
|
|
|
$
|
167,940
|
|
|
$
|
335,880
|
|
|
$
|
1,007,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,235
|
|
|
$
|
20.64
|
|
|
|
|
|
|
$
|
662,245
|
|
|
|
|
02/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,839
|
|
|
|
13,677
|
|
|
|
27,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12.06
|
|
|
$
|
164,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald A. Nolan
|
|
|
02/26/09
|
|
|
$
|
150,000
|
|
|
$
|
300,000
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,053
|
|
|
$
|
20.64
|
|
|
|
|
|
|
$
|
455,800
|
|
|
|
|
02/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,108
|
|
|
|
12,216
|
|
|
|
24,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12.06
|
|
|
$
|
147,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy S. Clyde
|
|
|
02/26/09
|
|
|
$
|
150,000
|
|
|
$
|
300,000
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,211
|
|
|
$
|
20.64
|
|
|
|
|
|
|
$
|
540,208
|
|
|
|
|
02/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,108
|
|
|
|
12,216
|
|
|
|
24,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12.06
|
|
|
$
|
147,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Malchione
|
|
|
02/26/09
|
|
|
$
|
143,730
|
|
|
$
|
287,460
|
|
|
$
|
862,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,083
|
|
|
$
|
20.64
|
|
|
|
|
|
|
$
|
436,748
|
|
|
|
|
02/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,853
|
|
|
|
11,705
|
|
|
|
23,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12.06
|
|
|
$
|
141,162
|
|
|
|
(1) |
These amounts represent the annual bonus opportunities (based on
market reference data) under the annual bonus plan for 2009, as
described in the CD&A. Target bonuses (shown in the table
above) were established by multiplying base salary at time of
grant by the applicable percentage shown below. Actual amounts
earned were determined in February 2010 and paid in March 2010,
and are included in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table.
|
|
|
|
|
|
|
|
2009 Target Bonus
|
|
Name
|
|
(% of Annual Base Pay at Year End)
|
|
|
Dean A. Scarborough
|
|
|
110
|
%
|
Daniel R. OBryant
|
|
|
60
|
%
|
Donald A. Nolan
|
|
|
60
|
%
|
Timothy S. Clyde
|
|
|
60
|
%
|
Robert M. Malchione
|
|
|
60
|
%
|
|
|
|
|
|
Payout levels range from 50% of the target amounts for threshold
performance to 300% of the target amounts for maximum
performance. Actual payouts were determined by the Compensation
Committee in February 2010, and are included in the Summary
Compensation Table in the Non-Equity Incentive Plan
Compensation column.
|
|
|
(2) |
These payout opportunities represent PUs awarded under the
2009-2011
MTIP cycle. These PUs are settled in shares of Company common
stock at the end of a three-year performance period, provided
that certain performance objectives are achieved at the end of
the performance period. Payout levels range from 50% of the
target units for threshold performance to 200% of the target
units for maximum performance.
|
30
OUTSTANDING
EQUITY AWARDS FOR 2009
The following table provides summary information regarding the
outstanding equity awards for the NEOs at December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Incentive
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Plan
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
Number
|
|
Market
|
|
Number of
|
|
Market or
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
of
|
|
Value of
|
|
Unearned
|
|
Payout Value
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Shares,
|
|
of Unearned
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Units or
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Stock
|
|
Stock Held
|
|
Other
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Held That
|
|
that Have
|
|
Rights That
|
|
Rights That
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Not Yet
|
|
Have Not
|
|
Have Not
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options
|
|
Price
|
|
Date
|
|
Yet Vested
|
|
Vested
|
|
Yet Vested
|
|
Yet Vested
|
|
Dean A. Scarborough
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
$
|
64.91
|
|
|
|
04/27/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
$
|
54.03
|
|
|
|
12/07/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
$
|
50.72
|
|
|
|
12/07/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
$
|
55.71
|
|
|
|
12/06/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
$
|
62.87
|
|
|
|
12/05/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
$
|
55.55
|
|
|
|
12/04/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
$
|
59.19
|
|
|
|
12/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
$
|
52.08
|
|
|
|
05/02/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
$
|
59.47
|
|
|
|
12/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
25,000
|
(1)
|
|
|
|
|
|
$
|
67.80
|
|
|
|
12/07/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,500
|
|
|
|
172,500
|
(1)
|
|
|
|
|
|
$
|
52.12
|
|
|
|
02/28/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
(1)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
02/26/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,926
|
(2)
|
|
$
|
252,730
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,263
|
(3)
|
|
$
|
265,027
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
(6)
|
|
$
|
328,410
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000
|
(6)
|
|
$
|
948,740
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
607,500
|
|
|
|
497,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,189
|
|
|
$
|
1,794,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. OBryant
|
|
|
6,500
|
|
|
|
|
|
|
|
|
|
|
$
|
54.03
|
|
|
|
12/07/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,500
|
|
|
|
|
|
|
|
|
|
|
$
|
50.72
|
|
|
|
12/07/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
$
|
55.71
|
|
|
|
12/06/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
$
|
62.87
|
|
|
|
12/05/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,250
|
|
|
|
|
|
|
|
|
|
|
$
|
55.55
|
|
|
|
12/04/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,400
|
|
|
|
|
|
|
|
|
|
|
$
|
59.19
|
|
|
|
12/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,862
|
|
|
|
|
|
|
|
|
|
|
$
|
59.47
|
|
|
|
12/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,717
|
|
|
|
12,238
|
(1)
|
|
|
|
|
|
$
|
67.80
|
|
|
|
12/07/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,968
|
|
|
|
50,903
|
(1)
|
|
|
|
|
|
$
|
52.12
|
|
|
|
02/28/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,235
|
(1)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
02/26/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,579
|
(4)
|
|
$
|
641,458
|
(7)
|
|
|
3,526
|
(2)
|
|
$
|
128,664
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,554
|
(3)
|
|
$
|
93,195
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,069
|
(6)
|
|
$
|
148,478
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,839
|
(6)
|
|
$
|
249,555
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
275,197
|
|
|
|
166,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,579
|
|
|
$
|
641,458
|
|
|
|
16,988
|
|
|
$
|
619,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald A. Nolan
|
|
|
41,679
|
|
|
|
125,034
|
(1)
|
|
|
|
|
|
$
|
50.98
|
|
|
|
03/03/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,053
|
(1)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
02/26/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,526
|
(5)
|
|
$
|
238,134
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,634
|
(6)
|
|
$
|
132,605
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,108
|
(6)
|
|
$
|
222,881
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
41,679
|
|
|
|
196,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,268
|
|
|
$
|
593,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Incentive
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Plan
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
Number
|
|
Market
|
|
Number of
|
|
Market or
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
of
|
|
Value of
|
|
Unearned
|
|
Payout Value
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Shares,
|
|
of Unearned
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Units or
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Stock
|
|
Stock Held
|
|
Other
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Held That
|
|
that Have
|
|
Rights That
|
|
Rights That
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Not Yet
|
|
Have Not
|
|
Have Not
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options
|
|
Price
|
|
Date
|
|
Yet Vested
|
|
Vested
|
|
Yet Vested
|
|
Yet Vested
|
|
Timothy S. Clyde
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
$
|
67.31
|
|
|
|
01/20/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
$
|
54.03
|
|
|
|
12/07/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
$
|
50.72
|
|
|
|
12/07/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
$
|
55.71
|
|
|
|
12/06/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
$
|
62.87
|
|
|
|
12/05/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,250
|
|
|
|
|
|
|
|
|
|
|
$
|
55.55
|
|
|
|
12/04/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,000
|
|
|
|
|
|
|
|
|
|
|
$
|
59.19
|
|
|
|
12/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,187
|
|
|
|
|
|
|
|
|
|
|
$
|
59.47
|
|
|
|
12/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,780
|
|
|
|
6.593
|
(1)
|
|
|
|
|
|
$
|
67.80
|
|
|
|
12/07/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,842
|
|
|
|
41,521
|
(1)
|
|
|
|
|
|
$
|
52.12
|
|
|
|
02/28/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,875
|
|
|
|
32,625
|
(1)
|
|
|
|
|
|
$
|
50.98
|
|
|
|
03/03/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,211
|
(1)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
02/26/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,035
|
(2)
|
|
$
|
74,257
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,850
|
(3)
|
|
$
|
67,507
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,876
|
(5)
|
|
$
|
396,865
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,634
|
(6)
|
|
$
|
132,605
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,108
|
(6)
|
|
$
|
222,881
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
257,934
|
|
|
|
164,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,503
|
|
|
$
|
894,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Malchione
|
|
|
14,577
|
|
|
|
|
|
|
|
|
|
|
$
|
45.53
|
|
|
|
09/28/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,150
|
|
|
|
|
|
|
|
|
|
|
$
|
54.03
|
|
|
|
12/07/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,150
|
|
|
|
|
|
|
|
|
|
|
$
|
50.72
|
|
|
|
12/07/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
$
|
55.71
|
|
|
|
12/06/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
$
|
61.74
|
|
|
|
08/01/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
$
|
62.87
|
|
|
|
12/05/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,250
|
|
|
|
|
|
|
|
|
|
|
$
|
55.55
|
|
|
|
12/04/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,000
|
|
|
|
|
|
|
|
|
|
|
$
|
59.19
|
|
|
|
12/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,377
|
|
|
|
|
|
|
|
|
|
|
$
|
59.47
|
|
|
|
12/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,838
|
|
|
|
6,279
|
(1)
|
|
|
|
|
|
$
|
67.80
|
|
|
|
12/07/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,190
|
|
|
|
33,570
|
(1)
|
|
|
|
|
|
$
|
52.12
|
|
|
|
02/28/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,083
|
(1)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
02/26/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,193
|
(2)
|
|
$
|
80,023
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,762
|
(3)
|
|
$
|
64,295
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,483
|
(6)
|
|
$
|
127,095
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,853
|
(6)
|
|
$
|
213,576
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
284,532
|
|
|
|
107,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,291
|
|
|
$
|
484,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Vests in equal installments on the
first four anniversaries of the grant date.
|
|
(2) |
|
Vests after year three, four or
five following the year of the award (2005), if the Company
achieves ROTC that equals or exceeds the 67th percentile of the
ROTC for the market basket of peer group companies.
|
|
(3) |
|
Vests after year three, four or
five following the year of the award (2006), if the Company
achieves the performance objective described in footnote 2 above.
|
|
(4) |
|
Vests on August 14, 2012.
|
|
(5) |
|
Cliff-vests three years from grant
date.
|
|
(6) |
|
Cliff-vests three years from grant
date, subject to meeting certain threshold performance
objectives.
|
|
(7) |
|
The closing price of the
Companys common stock on December 31, 2009 was $36.49.
|
32
OPTION
EXERCISES AND STOCK VESTED FOR 2009
The following table provides summary information regarding stock
options that were exercised during 2009 and the value realized
on exercise, as well as the value received on vesting of stock
awards during 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Award
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Value Realized
|
|
|
Number of Shares
|
|
|
Realized
|
|
|
|
Exercise
|
|
|
on Exercise
|
|
|
Acquired on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Dean A. Scarborough
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. OBryant
|
|
|
|
|
|
|
|
|
|
|
17,114
|
|
|
$
|
380,280
|
|
Donald A. Nolan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy S. Clyde
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Malchione
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PENSION
BENEFITS FOR 2009
The table below provides summary information regarding pension
benefits for the NEOs under the listed pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Present
|
|
|
|
|
|
|
|
Years of
|
|
|
Value of
|
|
|
Payments
|
|
|
|
|
Credited
|
|
|
Accumulated
|
|
|
During Last
|
|
|
|
|
Service
|
|
|
Benefit(1)
|
|
|
Fiscal Year
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
Dean A. Scarborough
|
|
Pension Plan
|
|
|
25.83
|
|
|
$
|
610,420
|
|
|
|
|
|
|
|
Benefit Restoration Plan
|
|
|
15.08
|
|
|
$
|
1,870,845
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan
|
|
|
4.67
|
|
|
$
|
5,869,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
8,350,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. OBryant
|
|
Pension Plan
|
|
|
18.25
|
|
|
$
|
388,662
|
|
|
|
|
|
|
|
Benefit Restoration Plan
|
|
|
14.08
|
|
|
$
|
714,906
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan
|
|
|
5.00
|
|
|
$
|
1,285,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
2,389,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald A. Nolan
|
|
Pension Plan
|
|
|
1.83
|
|
|
$
|
23,186
|
|
|
|
|
|
|
|
Benefit Restoration Plan
|
|
|
1.83
|
|
|
$
|
25,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
48,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy S. Clyde
|
|
Pension Plan
|
|
|
20.58
|
|
|
$
|
315,956
|
|
|
|
|
|
|
|
Benefit Restoration Plan
|
|
|
13.08
|
|
|
$
|
380,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
696,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Malchione
|
|
Pension Plan
|
|
|
8.50
|
|
|
$
|
200,816
|
|
|
|
|
|
|
|
Benefit Restoration Plan
|
|
|
8.50
|
|
|
$
|
445,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
646,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Present Value of
Accumulated Benefit for each NEO for each plan is the
lump-sum value of the pension benefit earned as of
December 31, 2009. The annual pension benefit for the NEOs
is assumed to commence on the earliest retirement age for which
there is an
|
33
|
|
|
|
|
unreduced benefit, which is
age 62 for the Pension Plan and the BRP; age 62 for
Mr. Scarboroughs SERP and age 65 for
Mr. OBryants SERP. The assumptions used to
determine the lump-sum value are as follows:
|
|
|
|
|
|
Interest rate for present values: 6.0%
|
|
|
|
Mortality: 2010 Static Mortality Table for Annuitants per
Regulation Section 1.430(h)(3)-1(e)
|
|
|
|
Pre-retirement decrements: None
|
|
|
|
The Code pay limit was $245,000 and the maximum benefit was
$195,000 for the Pension Plan as of December 31, 2009
|
Pension
Plan
The Company provides qualified retirement benefits for employees
who are eligible participants under the Pension Plan. Benefits
under the Pension Plan are based on compensation and are
calculated separately for each year of applicable service using
the formula 1.25% times compensation up to the breakpoint
(currently $56,628, which is the average of the Social Security
wage bases for the preceding 35 years) plus 1.75% times
compensation in excess of the breakpoint. The results of the
calculation for each year of service are added together to
determine the annual single life annuity benefit under the
Pension Plan for an employee at normal retirement (age 65).
The benefit is not subject to reductions for Social Security
payments.
Eligible participants may earn benefits under the Pension Plan
during their career with the Company. The Pension Plan is a
floor offset plan that coordinates the amount of retirement
benefit payable to an eligible participant with the SHARE Plan.
The total benefit payable to an eligible participant equals the
greater of the value of the participants benefit from the
Pension Plan or the value of the participants account in
the SHARE Plan (SHARE Account). The Pension Plan
generally pays benefits in the form of a lifetime annuity
benefit, while the SHARE Plan generally pays benefits in the
form of a lump-sum distribution. The amount paid from each plan
depends on the election of each eligible participant. Upon
termination of employment, each eligible participant may either
elect to take a lump-sum distribution of his SHARE Account and
have any remaining benefit paid from the Pension Plan, or to
transfer a portion of his SHARE Account into the Pension Plan in
order to receive a larger annuity benefit. The present value
calculations shown above have been completed based on the
assumption that each eligible NEO will elect to transfer his
SHARE Account into the Pension Plan upon his retirement in order
to receive his total benefit as a lifetime annuity under the
Pension Plan.
Eligible participants, who retire after reaching age 55,
may elect to commence their benefits before reaching
age 65. Benefits are payable without reduction after
participants reach age 62. Prior to age 62, the plans
require a 15% reduction in participants benefits for
commencement at age 61, and an additional 5% reduction for
each year participants elect to receive their benefit before
reaching age 61 (but not earlier than age 55).
Eligible participants may elect to receive their benefits in one
of several different payment forms. All forms of payment
available under the plan are payable in monthly payments over
the lifetime of the participant
and/or a
designated beneficiary. The amount of monthly benefit each
eligible participant will receive from each of the forms of
payment is adjusted based on the plans definition of
actuarial equivalence.
Compensation covered by the Pension Plan includes both salary
and bonus amounts.
Amounts payable under the Pension Plan may be limited in
accordance with certain Code provisions, as applied to plan
years beginning on or after December 1, 1994. The annual
amount of compensation used to determine annual benefit accruals
under the Pension Plan is limited to the first $245,000 of
covered compensation as of December 31, 2009, and the
annual pension benefit payable as of December 31, 2009
under qualified retirement plans is limited to $195,000.
Benefit
Restoration Plan
The Company established the BRP in December 1994 to provide for
the payment of supplemental retirement benefits to eligible
participants, including each of the NEOs, whose benefits under
the Pension Plan are limited
34
under the Code provisions referenced above. The BRP is an
unfunded excess benefit plan, which is administered by the
Company. Benefits are payable under the BRP in amounts equal to
the amount by which a participants benefits otherwise
payable under the Pension Plan, with respect to periods from and
after December 1, 1994, are reduced under the applicable
provisions of the Code.
Because the BRP is designed to mirror the Pension Plan, the
information concerning the BRP benefit formula, early retirement
provisions, and optional payment forms is similar to that of the
Pension Plan above. The BRP was amended, effective
January 1, 2009, to provide for payments in the form of a
lump-sum distribution, unless a timely election was made for
monthly payments over the lifetime of the participant
and/or a
designated beneficiary. The BRP benefit is generally payable
upon the later of separation from service and age 55.
Compensation covered by the BRP also includes both salary and
annual bonus amounts (including all deferred amounts) earned in
each such year.
Supplemental
Executive Retirement Plan
The SERP, adopted in 1983, is designed to provide its
participants with additional incentives to further the
Companys growth and development and as an inducement to
remain in the Companys service. Participants designated by
the Compensation Committee are offered benefits under this plan
to supplement other retirement benefits to which they may be
entitled to at the time of their retirement. The Compensation
Committee has designated Messrs. Scarborough and
OBryant as the only participants in this plan. Benefits
will commence at the same time as the BRP at a benefit level
which, when added to the benefits to which they will be entitled
from the Pension Plan, the BRP and the SHARE Plan at the time of
retirement, certain Company contributions (plus interest) to the
401(k) Plan, fixed amounts representative of contributions to
the deferred compensation plans and estimated Social Security
benefits, will equal 62.5% for Mr. Scarborough, and 52.5%
for Mr. OBryant of their respective final average
compensation (average of the highest 36 months of the last
60 months of base salary and annual bonuses paid
immediately preceding retirement).
No benefits will be provided under this plan to a participant
who voluntarily terminates his employment before reaching his
vesting age. The vesting ages for Mr. Scarborough and
Mr. OBryant are 60 and 55, respectively, and were
determined based upon the target retention dates for each
executive.
If Mr. Scarborough or Mr. OBryant elects to
retire and begin receiving benefits after their respective
vesting age, but before reaching age 62, their SERP benefit
will be reduced in the same manner as described under the
Pension Plan, provided that an additional 10% reduction will
apply to Mr. OBryant for any retirement commencing
between ages 62 and 65.
The SERP was amended effective January 1, 2009, to provide
that the SERP benefit will be paid in the same form of payment
as the BRP.
NONQUALIFIED
DEFERRED
COMPENSATION(1) FOR
2009
The table below provides summary information regarding NQDC for
the NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
|
Earnings
|
|
|
Aggregate
|
|
|
|
|
|
Contribution in
|
|
Contributions in
|
|
|
in Last
|
|
|
Withdrawals /
|
|
Aggregate Balance
|
|
Name
|
|
Last Fiscal Year
|
|
Last Fiscal
Year(2)
|
|
|
Fiscal
Year(3)
|
|
|
Distributions
|
|
at 12/31/09
|
|
|
Dean A. Scarborough
|
|
|
|
|
|
$
|
46,398
|
|
|
$
|
485,055
|
|
|
|
|
|
|
$
|
2,682,745
|
|
Daniel R. OBryant
|
|
|
|
|
|
$
|
18,762
|
|
|
$
|
291,390
|
|
|
|
|
|
|
$
|
1,385,842
|
|
Donald A. Nolan
|
|
|
$50,000
|
|
|
|
|
|
|
$
|
4,853
|
|
|
|
|
|
|
$
|
54,853
|
|
Timothy S. Clyde
|
|
|
|
|
|
$
|
15,360
|
|
|
$
|
65,484
|
|
|
|
|
|
|
$
|
297,798
|
|
Robert M. Malchione
|
|
|
|
|
|
$
|
14,430
|
|
|
$
|
55,684
|
|
|
|
|
|
|
$
|
250,480
|
|
|
|
|
(1) |
|
Participants with balances in
variable deferred compensation plans may choose from a group of
funds selected by the Company ranging from money market and bond
funds to index and other equity/mutual funds. Participants may
make fund changes via an online database provided
|
35
|
|
|
|
|
by the plan administrator. The rate
of return depends on the funds selected by the participant.
Participants with balances in deferred compensation plans that
have fixed rates of return selected by the Company may not make
any changes.
|
|
(2) |
|
Company contributions to the
deferred compensation plans were included in the All Other
Compensation column of the Summary Compensation Table.
|
|
(3) |
|
Of the amounts included in this
column, $3,421 is also reported for Mr. Scarborough, in the
Change in Pension Value and NQDC Earnings column of the
Summary Compensation Table.
|
The Company makes an annual contribution to each NEOs
deferred compensation account equal to 3% of annual cash
compensation (salary and annual bonus) in excess of the 401(k)
Plan limit (these amounts are included in the Summary
Compensation Table under the All Other Compensation
column). This contribution is added to each NEOs
deferred compensation account at the beginning of each plan year
as long as the NEO has contributed at least the pre-tax limit
into the 401(k) Plan during the prior plan year and is employed
by the Company at year end. This benefit is designed to
supplement pre-tax 401(k) contributions that are limited for
certain executives (by the Code). Above-market earnings credited
to Mr. Scarboroughs account are included in the
Summary Compensation Table under the Change in Pension Value
and NQDC Earnings column.
The 2005 EVDRP is the Companys current deferred
compensation plan. Under the 2005 EVDRP participants may defer
up to 75% of their salary and 100% of their bonus. Account
earnings are based on a fixed rate
and/or the
performance of certain variable funds selected by the
participant from bond and equity funds that are managed by an
insurance company.
Potential
Payments Upon Termination or Change of Control
The following table provides information regarding potential
benefits that may be paid to the NEOs in the event of
termination of employment as a result of the termination
scenarios indicated below. The amounts shown in the table are
estimates and assume that each NEO was terminated on the last
day of the Companys 2009 fiscal year, and include
estimated amounts that would be paid to the named executive upon
the occurrence of a termination or change of control. The actual
amounts that would be paid to the NEOs can only be determined at
the time of the termination or change of control. NEOs would
also be entitled to receive all amounts accrued and vested under
the Companys pension and savings programs and any deferred
compensation plans in which they participate. These amounts
would be determined and paid in accordance with the applicable
plan, and are not included in the table because they are not
severance payments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Scenarios
|
|
|
|
|
|
as of the end of fiscal year 2009
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Involuntary
|
|
|
Termination
|
|
|
|
|
|
Death or
|
|
|
or Good
|
|
|
Termination
|
|
|
on Change
|
|
Name
|
|
Benefit
|
|
Disability
|
|
|
Reason
|
|
|
for Cause
|
|
|
of
Control(1)
|
|
|
Dean A. Scarborough
|
|
Severance Payment
|
|
|
|
|
|
$
|
1,947,000
|
|
|
|
|
|
|
$
|
5,841,000
|
|
|
|
Prorata Bonus Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Stock Option Value
|
|
$
|
4,755,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4,755,000
|
|
|
|
Unvested Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTI Plan and Performance Unit Payment
|
|
$
|
1,590,338
|
|
|
$
|
3,074,264
|
|
|
|
|
|
|
$
|
3,074,264
|
|
|
|
Incremental Retirement
Benefit(2)
|
|
$
|
4,924,888
|
|
|
$
|
5,584,103
|
|
|
|
|
|
|
$
|
7,275,816
|
|
|
|
Deferred Comp. Benefit (Acceleration of Vesting)
|
|
$
|
130,432
|
|
|
$
|
130,432
|
|
|
|
|
|
|
$
|
130,432
|
|
|
|
Welfare Benefit Values
|
|
|
|
|
|
$
|
18,146
|
|
|
|
|
|
|
$
|
54,437
|
|
|
|
Perquisites
|
|
|
|
|
|
$
|
162,500
|
|
|
|
|
|
|
$
|
487,500
|
|
|
|
Outplacement
|
|
|
|
|
|
$
|
50,000
|
|
|
|
|
|
|
$
|
50,000
|
|
|
|
Excise Tax & Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,110,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,400,658
|
|
|
$
|
10,966,445
|
|
|
|
|
|
|
$
|
30,778,607
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Scenarios
|
|
|
|
|
|
as of the end of fiscal year 2009
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Involuntary
|
|
|
Termination
|
|
|
|
|
|
Death or
|
|
|
or Good
|
|
|
Termination
|
|
|
on Change
|
|
Name
|
|
Benefit
|
|
Disability
|
|
|
Reason
|
|
|
for Cause
|
|
|
of
Control(1)
|
|
|
Daniel R. OBryant
|
|
Severance Payment
|
|
|
|
|
|
$
|
950,989
|
|
|
|
|
|
|
$
|
2,852,967
|
|
|
|
Prorata Bonus Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Stock Option
Value(3)
|
|
$
|
1,996,275
|
|
|
$
|
360,000
|
|
|
|
|
|
|
$
|
1,996,275
|
|
|
|
Unvested Restricted Stock
|
|
$
|
639,086
|
|
|
$
|
639,086
|
|
|
|
|
|
|
$
|
639,086
|
|
|
|
LTI Plan and Performance Unit Payment
|
|
$
|
587,162
|
|
|
$
|
1,018,863
|
|
|
|
|
|
|
$
|
1,018,863
|
|
|
|
Incremental Retirement
Benefit(2)
|
|
$
|
1,300,065
|
|
|
$
|
1,662,010
|
|
|
|
|
|
|
$
|
2,525,700
|
|
|
|
Deferred Comp Benefit (Acceleration of Vesting)
|
|
$
|
1,067,940
|
|
|
$
|
1,067,940
|
|
|
|
|
|
|
$
|
1,067,940
|
|
|
|
Welfare Benefit Values
|
|
|
|
|
|
$
|
22,829
|
|
|
|
|
|
|
$
|
68,488
|
|
|
|
Perquisites
|
|
|
|
|
|
$
|
147,000
|
|
|
|
|
|
|
$
|
441,000
|
|
|
|
Outplacement
|
|
|
|
|
|
$
|
50,000
|
|
|
|
|
|
|
$
|
50,000
|
|
|
|
Excise Tax & Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,459,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,590,528
|
|
|
$
|
5,918,717
|
|
|
|
|
|
|
$
|
15,119,946
|
|
|
|
|
|
|
|
|
|
|
|
Donald A. Nolan
|
|
Severance Payment
|
|
|
|
|
|
$
|
607,600
|
|
|
|
|
|
|
$
|
1,215,200
|
|
|
|
Prorata Bonus Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Stock Option Value
|
|
$
|
1,126,190
|
|
|
|
|
|
|
|
|
|
|
$
|
1,126,190
|
|
|
|
Unvested Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTI Plan and Performance Unit Payment
|
|
$
|
562,571
|
|
|
$
|
948,149
|
|
|
|
|
|
|
$
|
948,149
|
|
|
|
Incremental Retirement
Benefit(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Comp Benefit (Acceleration of Vesting)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Welfare Benefit Values
|
|
|
|
|
|
$
|
16,689
|
|
|
|
|
|
|
$
|
33,378
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement
|
|
|
|
|
|
$
|
25,000
|
|
|
|
|
|
|
$
|
25,000
|
|
|
|
Excise Tax & Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,688,761
|
|
|
$
|
1,597,438
|
|
|
|
|
|
|
$
|
3,347,917
|
|
|
|
|
|
|
|
|
|
|
|
Timothy S. Clyde
|
|
Severance Payment
|
|
|
|
|
|
$
|
742,000
|
|
|
|
|
|
|
$
|
2,226,000
|
|
|
|
Prorata Bonus Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Stock Option Value
|
|
$
|
1,334,744
|
|
|
|
|
|
|
|
|
|
|
$
|
1,334,744
|
|
|
|
Unvested Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTI Plan and Performance Unit Payment
|
|
$
|
863,075
|
|
|
$
|
1,248,653
|
|
|
|
|
|
|
$
|
1,248,653
|
|
|
|
Incremental Retirement
Benefit(2)
|
|
|
|
|
|
$
|
106,606
|
|
|
|
|
|
|
$
|
370,088
|
|
|
|
Deferred Comp Benefit (Acceleration of Vesting)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Welfare Benefit Values
|
|
|
|
|
|
$
|
22,327
|
|
|
|
|
|
|
$
|
66,982
|
|
|
|
Perquisites
|
|
|
|
|
|
$
|
136,400
|
|
|
|
|
|
|
$
|
409,200
|
|
|
|
Outplacement
|
|
|
|
|
|
$
|
50,000
|
|
|
|
|
|
|
$
|
50,000
|
|
|
|
Excise Tax & Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,275,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,197,819
|
|
|
$
|
2,305,986
|
|
|
|
|
|
|
$
|
7,981,104
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Malchione
|
|
Severance Payment
|
|
|
|
|
|
$
|
762,467
|
|
|
|
|
|
|
$
|
2,287,401
|
|
|
|
Prorata Bonus Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Stock Option Value
|
|
$
|
1,079,116
|
|
|
|
|
|
|
|
|
|
|
$
|
1,079,116
|
|
|
|
Unvested Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTI Plan and Performance Unit Payment
|
|
$
|
456,752
|
|
|
$
|
826,213
|
|
|
|
|
|
|
$
|
826,213
|
|
|
|
Incremental Retirement
Benefit(2)
|
|
|
|
|
|
$
|
149,224
|
|
|
|
|
|
|
$
|
527,018
|
|
|
|
Deferred Comp Benefit (Acceleration of Vesting)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Welfare Benefit Values
|
|
|
|
|
|
$
|
22,574
|
|
|
|
|
|
|
$
|
67,723
|
|
|
|
Perquisites
|
|
|
|
|
|
$
|
136,400
|
|
|
|
|
|
|
$
|
409,200
|
|
|
|
Outplacement
|
|
|
|
|
|
$
|
50,000
|
|
|
|
|
|
|
$
|
50,000
|
|
|
|
Excise Tax & Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,970,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,535,868
|
|
|
$
|
1,946,878
|
|
|
|
|
|
|
$
|
7,216,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As discussed in the CD&A, the
employment agreement with each NEO (except Mr. Nolan, who
does not have one), will terminate effective December 31,
2010. Commencing January 1, 2011, under the new COC
Severance Plan, the NEOs would be eligible to receive severance
benefits; however, under this new Plan, there is no excise tax
gross-up.
|
|
(2) |
|
Actuarial present value of the
annuity enhancement, determined using an effective interest rate
of 4.78% and the mortality table per Code Section 417(e)(3).
|
|
(3) |
|
Mr. OBryants
retention agreement in the event of death or
disability, involuntary termination or voluntary termination due
to good reason, or a termination upon a change of control,
Mr. OBryant (or his beneficiary) would receive
$180,000 per full year remaining on his retention agreement in
lieu of foregone option awards. There are two full years
remaining as of December 31, 2009 resulting in
a payment of $360,000 in addition to the value of unvested stock
options.
|
37
The following provides information regarding various
termination scenarios for NEOs other than a change of
control:
Severance
|
|
|
|
|
In the event of an involuntary (not for cause) termination, or a
termination for good reason (unrelated to a change of control),
the NEOs would receive a lump-sum payment equal to the
executives highest combined annual salary and annual bonus
during the last three full fiscal years prior to the date of
termination.
|
Stock
Options
|
|
|
|
|
In the event of an involuntary (not for cause) termination, or a
termination for good reason (unrelated to a change of control),
Mr. OBryant would receive (in accordance with his
retention agreement) $180,000 for each full fiscal year
remaining on the agreement at the time of termination in lieu of
foregone annual stock option awards.
|
|
|
|
In the event of an NEOs death or disability, stock options
would vest. In the event of death or disability,
Mr. OBryant would also receive (in accordance with
his retention agreement) $180,000 for each full fiscal year
remaining on the agreement at the time of termination in lieu of
foregone annual stock option awards.
|
Restricted
Stock, Restricted Stock Units and Performance Units
|
|
|
|
|
In the event of an involuntary (not for cause) termination, or a
termination for good reason (unrelated to a change of control),
Mr. OBryants restricted stock would vest in
accordance with his retention agreement.
|
|
|
|
In the event of an NEOs death or disability, restricted
stock, RSUs and PUs would vest.
|
PUs would be pro-rated based on the number of months the NEO was
employed during the cycle, and paid out assuming target
performance.
Retirement
Benefits
|
|
|
|
|
In the event of an involuntary (not for cause) termination, or a
termination for good reason (unrelated to a change of control),
the NEOs, with the exception of Mr. Nolan who is covered by
the Executive Severance Plan, would receive an additional
retirement benefit equal to the difference between:
|
|
|
|
|
(a)
|
the benefit payable to the NEO under the Companys
qualified, excess and supplemental defined benefit retirement
plans assuming the NEO remained employed for an additional
year, and
|
|
|
|
|
(b)
|
the vested benefit earned by the NEO under the Companys
qualified, excess and supplemental defined benefit retirement
plans, if any.
|
The benefit described would be considered fully vested
regardless of the NEOs actual age and service at such
time. The benefit would be paid in a single lump-sum amount
based on the applicable interest rate and mortality table used
to determine lump-sum payments under the Companys
qualified defined benefit plans.
|
|
|
|
|
In the event of Mr. Scarboroughs or
Mr. OBryants disability, benefits earned under
the SERP would commence at the later of the executives
separation from service due to disability (generally
24 months after becoming disabled) and age 55,
provided he is then living.
|
Deferred
Compensation Plan Benefits
|
|
|
|
|
In the event of an involuntary (not for cause) termination, or a
termination for good reason (unrelated to a change of control),
Mr. Scarborough would receive immediate vesting in certain
currently unvested interest credits to one of his nonqualified
deferred compensation accounts, and Mr. OBryant would
receive
|
38
|
|
|
|
|
immediate vesting in certain currently unvested benefits in his
nonqualified deferred compensation accounts.
|
Health
and Welfare Benefits
|
|
|
|
|
In the event of an involuntary (not for cause) termination, or a
termination for good reason (unrelated to a change of control),
the NEOs, with the exception of Mr. Nolan, would receive
continued equivalent health and welfare (medical, dental, life
insurance, and disability) benefits for a period of up to
12 months after termination (with the executive bearing any
portion of the cost the executive bore prior to the
termination); provided, however, that such benefits would be
discontinued to the extent the executive receives similar
benefits from a subsequent employer. Mr. Nolan would
receive a payment equal to 12 months of the Companys
and his contributions to the medical and dental plans.
|
Perquisites
|
|
|
|
|
In the event of an involuntary (not for cause) termination, or a
termination for good reason (unrelated to a change of control),
the NEOs, with the exception of Mr. Nolan, would receive
continued perquisite benefits (auto allowance, club dues, office
and support staff) for a period of up to 12 months after
termination; provided, however, that such benefits would be
discontinued to the extent the executive receives similar
benefits from a subsequent employer.
|
Retirement
|
|
|
|
|
Payments at the time of retirement are discussed in the Pension
Benefits For 2009 and the Nonqualified Deferred Compensation For
2009 sections above.
|
The following provides information regarding a change of
control scenario for NEOs:
Based on the employment agreements described in the CD&A,
the NEOs would receive change of control severance benefits if
(i) there were a change of control, and (ii) within
36 months following a change of control (24 months in
Mr. Nolans case) either the executives
employment is terminated for reasons other than cause or the
executive terminates his own employment for good reason (a
qualifying termination).
Assuming a change of control on December 31, 2009 and a
qualifying termination, severance benefits would have been as
follows:
|
|
|
|
|
A lump-sum payment equal to three times (two times in
Mr. Nolans case) (i) the executives
highest combined annual base salary and annual bonus during the
last three full fiscal years (for the purposes of this severance
calculation, 2009 is not considered a full fiscal year) prior to
the date of termination.
|
|
|
|
All stock options would vest upon a change of control, whether
or not there is a qualifying termination. The value of this
benefit is based on the excess of the closing price of the
Companys stock at year end over the exercise price of the
options, multiplied by the number of options vesting upon a
change of control.
|
|
|
|
In the event of a change of control, the benefits under
Mr. OBryants retention agreement would vest. In
accordance with Mr. OBryants retention
agreement, he would receive $180,000 for each full fiscal year
remaining on the agreement at the time of termination in lieu of
foregone annual stock option awards.
|
|
|
|
All restrictions applicable to restricted stock, RSUs, PUs and
associated dividend equivalents lapse following a change of
control, whether or not there is a qualifying termination (PUs
would be paid out at target). The value of this benefit is the
closing price of the Companys stock multiplied by the
number of shares vesting.
|
|
|
|
Continued equivalent health and welfare benefits (medical,
dental, life insurance, and disability) for a period of up to
36 months after termination (24 months in
Mr. Nolans case), with the executive bearing any
portion
|
39
|
|
|
|
|
of the cost the executive bore prior to a change of control,
provided, however, that such benefits would be discontinued to
the extent the executive receives similar benefits from a
subsequent employer.
|
|
|
|
|
|
NEOs, with the exception of Mr. Nolan, would receive
perquisite benefits (auto allowance, club dues, office and
support staff) for a period of up to 36 months after
termination, provided, however, that such benefits would be
discontinued to the extent the executive receives similar
benefits from a subsequent employer.
|
|
|
|
Outplacement assistance up to $50,000 ($25,000 in
Mr. Nolans case).
|
|
|
|
NEOs, with the exception of Mr. Nolan, would receive an
additional retirement benefit equal to the difference between:
|
|
|
|
|
(a)
|
the benefit payable to the NEOs under the Companys
qualified, excess and supplemental defined benefit retirement
plans assuming the NEOs remained employed for an additional
3 years, and
|
|
|
|
|
(b)
|
the vested benefit earned by the NEOs under the Companys
qualified, excess and supplemental defined benefit retirement
plans, if any.
|
The benefit described above would be considered fully vested
regardless of the NEOs actual age and service at such
time. The benefit would be paid in a single lump-sum amount
based on the applicable interest rate and mortality table used
to determine lump-sum payments under the Companys
qualified defined benefit plans.
|
|
|
|
|
Mr. Scarborough would receive immediate vesting in certain
currently unvested interest credits to one of his nonqualified
deferred compensation accounts, and Mr. OBryant would
receive immediate vesting in certain currently unvested benefits
in his nonqualified deferred compensation accounts.
|
|
|
|
If Mr. Nolans
change-in-control
payments triggered an excise tax under IRC Section 280G, he
would receive the better of, on an after-tax basis,
(i) full benefits under the COC Severance Plan and he would
pay the excise tax out of these proceeds, or (ii) his
payments would be reduced until the excise tax is no longer
triggered.
|
|
|
|
A gross-up
payment to hold the NEOs, with the exception of Mr. Nolan,
harmless against the impact, if any, of federal excise taxes
imposed on the NEOs as a result of the payments contingent on a
change of control.
|
|
|
|
|
|
A
gross-up
under IRC Section 280G is a contract provision under which
the Company will pay the excise tax (and associated taxes) with
respect to the payments received by the individual in the event
of a change of control, such that the individual is left with
the full, normally taxable amount of the benefit to which the
individual is entitled. The excise tax amount is based on the
Companys estimate of the individuals liability under
IRC Sections 280G and 4999, assuming that a termination
under a change of control occurred on December 31, 2009.
|
In connection with any termination of employment, the Company
will comply with Section 409A of the Code, which may
require, for example, a delay in making certain payments to the
NEOs.
40
EQUITY
COMPENSATION PLAN INFORMATION
as of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
Number of Securities
|
|
|
|
to be Issued Upon
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Exercise of
|
|
|
Weighted-Average
|
|
|
Future Issuance under
|
|
|
|
Outstanding
|
|
|
Exercise Price of
|
|
|
Equity Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Outstanding Options,
|
|
|
(Excluding Securities
|
|
|
|
and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a))
|
|
Plan Category
|
|
(a)(4)
|
|
|
(b)(4)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security
holders(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Director Equity Plan
|
|
|
175,000
|
|
|
$
|
54.03
|
|
|
|
178,000
|
|
Stock Plan
|
|
|
10,497,270
|
|
|
$
|
42.65
|
|
|
|
3,347,611
|
|
Paxar Corporation
|
|
|
457,284
|
(2)
|
|
$
|
31.10
|
|
|
|
|
|
Equity compensation plans not approved by security
holders(3)
|
|
|
1,084,740
|
|
|
$
|
58.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12,214,294
|
|
|
$
|
43.80
|
|
|
|
3,525,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
There are two plans: the
Companys Director Equity Plan and the Stock Plan. Equity
awards have included stock options, stock awards and stock units
for directors, and stock options, restricted stock, RSUs, PUs
and dividend equivalents for employees.
|
|
(2) |
|
The Company acquired Paxar
Corporation (Paxar) in June 2007. At that time,
Paxar had an equity plan and this number represents the
outstanding awards (converted into Company awards) granted to
former Paxar employees, who are now Company employees. The
Company has not issued (and will not issue) any additional
awards under the Paxar equity plan.
|
|
(3) |
|
The 1996 Stock Incentive Plan
(Stock Incentive Plan) was amended and restated in
December 2002, to provide that no future stock options or other
awards would be made after December 6, 2002, and options
that have been granted may not be repriced (note that no
previously granted options have ever been repriced).
|
|
(4) |
|
Securities in column
(a) include restricted stock units and performance units;
the weighted average exercise price in column (b) does not
include these awards.
|
In general, the material features of the Stock Incentive Plan
are similar to those in the Stock Plan, which was amended and
restated and approved by the stockholders in April 2008. The
Stock Incentive Plan was adopted by the Board in December 1996
and provided for grants of stock options, stock payments and
other awards; however, only stock options were awarded. Options
were granted at 100% of the fair market value on the grant date.
Under the Stock Incentive Plan, 1,084,740 options were
outstanding and exercisable as of December 31, 2009. The
shares available under this Plan upon exercise of stock options,
or issuance of stock payments, may be either previously unissued
shares, issued shares that have been repurchased by the Company
as treasury shares, or former treasury shares held in a grantor
trust. This Plan provides for appropriate adjustments in the
number and kind of shares subject to this Plan and to
outstanding grants thereunder in the event of a stock split,
stock dividend or certain other types of recapitalizations.
Options granted under the Stock Incentive Plan were nonqualified
stock options (NQSOs) and generally became
exercisable in equal installments over four years from the date
of grant. NQSOs were granted for a term of ten years.
Under the Director Equity Plan, stock payments are authorized in
the form of stock units as part of the DDECP, a deferred
compensation arrangement that may be elected by directors
instead of receiving fees or retainers that would otherwise be
payable to a director in cash. Dividend equivalents are credited
in the form of stock units to the accounts of directors who
participate in the DDECP, which represent the value of the
dividends per share paid by the Company, calculated with
reference to the number of stock units held by each director.
Options and other awards granted under the Stock Plan provide
that, in the event of a change of control (as
defined in the Plan or in an award agreement) of the Company,
all previously unexercisable options and other equity awards
become immediately vested. This Plan provides that the period of
exercisability, following retirement, for
41
options is (i) the full term of the option for the CEO;
(ii) the lesser of five years or the full term of the
option for options granted to participants in an executive
annual bonus plan or any successor plan; and (iii) the
lesser of three years or the full-term of the option for all
other optionees.
TRANSACTIONS
WITH RELATED PERSONS
One of the Companys directors, Peter W. Mullin is the
chairman, chief executive officer and majority stockholder in
various entities (collectively referred to as the Mullin
Companies), which previously provided executive
compensation, benefit consulting and insurance agency services.
In October 2008, the above described operations of the Mullin
Companies were sold to a subsidiary of Prudential Financial,
Inc. (Prudential). During 2009, the Company paid
premiums to insurance carriers for life insurance originally
placed by the Mullin Companies in connection with various
Company employee benefit plans (however, the interests of the
Mullin Companies in this insurance were sold to Prudential, in
October 2008). Prudential has advised the Company that in 2009,
Prudential earned commissions from such insurance carriers in an
aggregate amount of approximately $426,900 for the placement and
renewal of this insurance, in which Mr. Mullin had an
interest of approximately $91,100, in accordance with the terms
of a commission sharing agreement entered into between
Mr. Mullin and Prudential at the time of the sale.
The Mullin Companies own a minority interest in M Financial
Holdings, Inc. (MFH). Substantially all of the life
insurance policies, which the Company originally placed through
the Mullin Companies, are issued by insurance carriers that
participate in reinsurance agreements entered into between these
insurance carriers and M Life Insurance Company (M
Life), a wholly-owned subsidiary of MFH. Reinsurance
returns earned by M Life are determined annually by the
insurance carriers and can be negative or positive, depending
upon the results of M Lifes aggregate reinsurance
pool, which consists of the insured lives reinsured by M Life.
The Mullin Companies have advised that in 2009, they did not
receive any distributions of net reinsurance gains (either in
the form of gains without risk of forfeiture, or gains subject
to risk of forfeiture) ascribed by M Life to the Companys
life insurance policies referred to above.
VOTING
SHARES
Stockholders of record, at the close of business on
February 22, 2010, are entitled to notice of, and to vote
at, the Annual Meeting. There were 112,058,162 shares of
common stock of the Company outstanding on February 22,
2010.
Principal
Stockholders
Whenever in this proxy statement information is presented as to
beneficial ownership, please note that such
ownership indicates only that the person shown, directly or
indirectly, has or shares with others the power to vote (or to
direct the voting of) or the power to dispose of (or to direct
the disposition of) such shares; such person may or may not have
any economic interest in the shares. The reporting of
information herein does not constitute an admission that any
such person is, for the purpose of Section 13 or 16 of the
1934 Act, the beneficial owner of the shares
shown herein.
42
To the knowledge of the Company, the following were the only
stockholders that, as of December 31, 2009, owned
beneficially 5% or more of the outstanding common stock of the
Company.
|
|
|
|
|
|
|
|
|
Name and Address
|
|
Number of Shares
|
|
|
Percent
|
|
of Beneficial Owner
|
|
Beneficially Owned
|
|
|
of Class
|
|
|
Avery Dennison Corporation
Employee Stock Benefit Trust (ESBT)
|
|
|
6,744,845
|
(1)
|
|
|
6.0
|
%
|
Wachovia Bank, N.A., Trustee
|
|
|
|
|
|
|
|
|
Executive Benefits Group
|
|
|
|
|
|
|
|
|
One West 4th Street, NC 6251
|
|
|
|
|
|
|
|
|
Winston-Salem, NC 27101
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
|
|
|
9,416,318
|
(2)
|
|
|
8.4
|
%
|
40 East 52nd Street
|
|
|
|
|
|
|
|
|
New York, NY 10022
|
|
|
|
|
|
|
|
|
Capital Research Global Investors
|
|
|
8,063,459
|
(3)
|
|
|
7.2
|
%
|
333 South Hope Street
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90071
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The ESBT and Wachovia Bank, N.A., a
Wells Fargo Company, as Trustee, disclaim beneficial ownership
of these shares.
|
|
(2) |
|
Based on information contained in
the Schedule 13G of BlackRock for the period ending
December 31, 2009. BlackRock is a parent holding company or
control person, in accordance with
Section 240.13d-1(b)(1)(ii)(G)
of the 1934 Act.
|
|
(3) |
|
Based on information contained in
the Schedule 13G of Capital Research Global Investors for
the period ending December 31, 2009. Capital Research
Global Investors is an investment advisor, in accordance with
Section 240.13d-1(b)(1)(ii)(E)
of the 1934 Act.
|
The 401(k) Plan, SHARE Plan and qualified retirement plans
(Plans) together owned a total of
4,490,094 shares of Company common stock on
December 31, 2009, or 4.0% of the common stock then
outstanding. Although the Company is the Administrator of the
Plans, each plan was established and is administered to achieve
the different purposes for which it was created for the
exclusive benefit of its participants, and employees
participating in the Plans are entitled to vote all shares
allocated to their accounts. Accordingly, such plans do not
constitute a group within the meaning of
Section 13(d) of the 1934 Act.
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS (Proxy
Item 2)
The Audit Committee of the Board has selected
PricewaterhouseCoopers LLP (PwC) as Avery
Dennisons independent auditors for fiscal year 2010, and
the Board urges stockholders to vote to ratify PwCs
appointment. Ratification of the selection of PwC by
stockholders is not required by the Companys Bylaws.
However, as a matter of good corporate practice, the Board is
submitting the selection of PwC for stockholder ratification.
PwC has audited the Companys financial statements since
1998. PwC has confirmed to Avery Dennison that PwC is in
compliance with all rules, standards and policies of the Public
Company Accounting Oversight Board (PCAOB) and the
SEC governing auditor independence. See Audit Committee
Report on page 46.
Representatives of PwC will be present at the Annual Meeting and
will have the opportunity to make a statement if they desire and
will be available to respond to appropriate questions.
Relationship
with Independent Auditors
PwC has served as Avery Dennisons independent auditors
since 1998, and was the Companys independent auditor for
the fiscal year ended January 2, 2010. Prior to 1998,
Coopers & Lybrand, LLP, a predecessor firm of PwC,
served as the Companys independent auditor. As stated in
Proxy Item 2, the Audit Committee of the Board has selected
PwC to serve as the Companys independent auditors for the
fiscal year ending January 1, 2011.
Audit services performed by PwC for fiscal 2009 consisted of the
examination of the Companys financial statements and
services related to filings with the SEC and certain other
non-audit services.
43
Fiscal
2009 Audit Firm Fee Summary
During fiscal year 2009, the Company retained PwC to provide
services in the following categories and amounts, all of which
were approved by the Audit Committee.
Under the SECs final rule issued on January 28, 2003,
Strengthening the Commissions Requirements Regarding
Auditor Independence, in accordance with
Section 208(a) of the Sarbanes-Oxley Act of 2002, the
categorization of PwC services for fiscal years 2008 and 2009 is
as follows:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Audit Fees
|
|
$
|
7.7
|
|
|
$
|
8.8
|
|
Audit Related Fees
|
|
|
.3
|
|
|
|
.3
|
|
Tax Fees:
|
|
|
|
|
|
|
|
|
Compliance
|
|
|
2.6
|
|
|
|
3.2
|
|
Planning
|
|
|
1.1
|
|
|
|
2.8
|
|
Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
11.7
|
|
|
$
|
15.1
|
|
|
|
|
|
|
|
|
|
|
Audit services fees include fees for services performed to
comply with the standards established by the PCAOB, including
the recurring audit of the Companys consolidated financial
statements and managements assessment of the effectiveness
of the Companys internal control over financial reporting
and the effectiveness of internal control over financial
reporting. This category also includes fees for audits provided
in connection with statutory filings or services that generally
only the principal auditor reasonably can provide to a client,
such as procedures related to audit of income tax provisions and
related reserves, consents and assistance with and review of
documents filed with the SEC.
Audit-related fees include fees associated with assurance and
related services traditionally performed by the independent
auditors and are reasonably related to the performance of the
audit or review of the Companys financial statements. This
category includes fees related to assistance in financial due
diligence related to mergers and acquisitions, accounting
consultations, consultations concerning financial accounting and
reporting standards, general advice with implementation of SEC
and Sarbanes-Oxley Act of 2002 requirements and audit services
not required by statute or regulation. Audit-related fees also
include audits of pension and other employee benefit plans, as
well as the review of information systems and general internal
controls unrelated to the audit of the financial statements.
Tax fees relate to fees associated with tax compliance
(preparation of original/amended tax returns, tax audits and
transfer pricing) and tax planning (domestic and international
tax planning, tax planning on restructurings, mergers and
acquisitions).
The Audit Committee has adopted procedures for pre-approving all
audit and non-audit services provided by the independent
auditors, and the fees paid to PwC in 2009 were pre-approved.
These procedures include reviewing and approving a budget for
audit and permitted non-audit services. The budget includes a
description of, and an estimated amount for, audit services and
for particular categories of non-audit services that are
recurring in nature and therefore are anticipated at the time
the budget is reviewed. Audit Committee pre-approval is required
(i) if the estimated amount for a particular category of
non-audit services will be substantially exceeded, and
(ii) to engage the independent auditors for any non-audit
services not included in the budget. The Audit Committee has
delegated pre-approval authority to the chairman of the Audit
Committee for services that were not included in the budget;
these services are then reviewed at the next Audit Committee
meeting. The Audit Committee considers whether the independent
auditor is best positioned to provide the most effective and
efficient service, for reasons such as its familiarity with the
Companys business, accounting systems, risk profile, and
whether the services enhance the Companys ability to
manage or control risks and improve audit quality. The Audit
Committee periodically
44
monitors the services rendered and fees paid to the independent
auditors to ensure that such services are within the parameters
approved by the Audit Committee.
The Audit Committee considers at least annually whether the
provision of non-audit services by PwC is compatible with
maintaining auditor independence.
Required
Vote for Approval and Recommendation of the Board of
Directors
The affirmative vote of a majority of the shares present or
represented and entitled to vote at the Annual Meeting is
required to ratify the appointment of PwC as the Companys
independent auditors for the current fiscal year, which ends on
January 1, 2011.
Your
Board of Directors recommends that you vote FOR approval of this
proposal.
45
AUDIT
COMMITTEE REPORT
The following Report of the Audit Committee of the Board of
Directors does not constitute soliciting material and should not
be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent the
Company specifically incorporates this Report by reference
therein.
The Audit Committee of the Companys Board of Directors
(Audit Committee) is composed of independent
directors set forth below, each of whom meets the independence
standards of the NYSE. The Audit Committee has a written charter
adopted by the Board of Directors, which is available at the
Companys web site.
Management is responsible for the Companys internal
controls and the financial reporting process. The independent
auditors are responsible for performing an independent audit of
the Companys consolidated financial statements in
accordance with auditing standards generally accepted in the
United States and to issue an opinion thereon. The Audit
Committees responsibility is to monitor and oversee these
processes. The members of the Audit Committee are not
professionally engaged in the practice of auditing or
accounting. Members of the Audit Committee rely without
independent verification on the information provided to them and
the representations made by management and the independent
auditors.
Management has represented to the Audit Committee that the
Companys consolidated financial statements were prepared
in accordance with accounting principles generally accepted in
the United States of America. The Audit Committee has reviewed
and discussed the consolidated financial statements for the year
ended January 2, 2010, with management and the independent
auditors, PricewaterhouseCoopers LLP (PwC). The
Audit Committee has also discussed with the independent auditors
the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit
Committees, as amended, and
Rule 2-07
of
Regulation S-X,
Communication with Audit Committees. The
Companys independent auditors have also provided to the
Audit Committee the written disclosures and the letter from the
independent auditors pursuant to Rule 3526,
Communications with Audit Committees Concerning
Independence, of the Public Company Accounting Oversight
Board. The Audit Committee has discussed independence matters
with the independent auditors and management, and, based on its
discussion and review, the Audit Committee is satisfied that the
provision of non-audit services, described above, is compatible
with maintaining PwCs independence.
Based on the Audit Committees discussions with management
and the independent auditors and on the Audit Committees
review of the representations of management and the report of
the independent auditors, the Audit Committee has recommended
that the Board of Directors include the audited consolidated
financial statements in the Companys Annual Report on
Form 10-K
for the year ended January 2, 2010, filed with the SEC.
February 25, 2010
|
|
|
|
|
John T. Cardis, Chairman
|
|
|
Peter K. Barker
|
|
|
Richard M. Ferry
|
|
|
Ken C. Hicks
|
|
|
Kent Kresa
|
46
PROPOSAL TO
ELIMINATE
SUPERMAJORITY VOTING REQUIREMENTS AND THE
INTERESTED PERSON STOCK REPURCHASE PROVISION
(Proxy Item 3)
Background
Article VI of the Companys Restated Certificate of
Incorporation and Article VIII, Section 1 of the
Companys Amended and Restated Bylaws currently require the
vote of the holders of not less than eighty percent (80%) of the
total voting power of all shares of stock of the Company
entitled to vote in the election of directors, voting together
as a single class, in order for the stockholders to make,
repeal, alter, amend or rescind the Amended and Restated Bylaws.
Additionally, Article XIV of the Restated Certificate of
Incorporation currently requires the vote of the holders of not
less than eighty percent (80%) of the total voting power of all
shares of stock of the Company entitled to vote in the election
of directors, voting together as a single class, for the
approval or authorization of certain business
combinations with an entity which beneficially owns,
directly or indirectly, more than 10% of the outstanding common
stock of the Company. Articles XV and XVI of the Restated
Certificate of Incorporation currently require the vote of the
holders of not less than eighty percent (80%) of the total
voting power of all shares of stock of the Company entitled to
vote in the election of directors, voting together as a single
class, to repeal or amend in any respect Articles VI
[dealing with the alteration of Bylaws of stockholders], VII
[dealing with the number of directors], VIII [dealing with the
classified board], XI [dealing with the prohibition against
stockholder action without meetings] and XIV [dealing with the
80% vote of stockholders required for certain mergers and
similar transactions] of the Restated Certificate of
Incorporation, or to add an article providing for cumulative
voting in the election of directors. These provisions of the
Restated Certificate of Incorporation are referred to as the
Supermajority Voting Provisions.
In addition to the Supermajority Voting Provisions,
Article XVIII of the Restated Certificate of Incorporation
contains an Interested Person Stock Repurchase
Provision. This Interested Person Stock Repurchase
Provision generally provides that, subject to certain
exceptions, a vote of not less than a majority of the total
voting power, excluding the voting power of the stock owned by
an interested stockholder, shall be required for any direct or
indirect purchase by the Company of shares of stock from an
interested stockholder for more than the market price of such
shares. For purposes of the Interested Person Stock Repurchase
Provision, an interested stockholder includes a
beneficial owner of more than 5% of the voting power of the
outstanding voting stock.
On the recommendation of the Nominating and Governance
Committee, the Board has approved, and recommends to the
stockholders for approval, amendments to the Restated
Certificate of Incorporation to eliminate or amend the
Supermajority Voting Provisions and the Interested Person Stock
Repurchase Provision. In addition, the Board approved, and
recommends to the stockholders for approval, an amendment to
Article VII to eliminate a cross reference to
Article VI.
Text of
the Proposed Amendments to the Restated Certificate of
Incorporation
The amendments to the Restated Certificate of Incorporation
approved by the Board, and recommended for stockholder approval,
are substantially in the form as follows:
ARTICLE VI: [repealed].
ARTICLE VII: The number of directors shall be fixed
from time to time by a bylaw or amendment thereof duly adopted
by the Board of Directors or by the stockholders.
ARTICLE XIV: [repealed].
ARTICLE XV: [repealed].
47
ARTICLE XVI: The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
ARTICLE XVIII: [repealed].
Board
Amendment to Bylaws to Eliminate Supermajority Voting
Provision
In connection with the proposed amendments to the Restated
Certificate of Incorporation, the Board has also adopted an
amendment to Article VIII, Section 1 of the Amended
and Restated Bylaws to eliminate the supermajority voting
provision for stockholders to amend or repeal the Amended and
Restated Bylaws of the Company. As amended, Article VIII,
Section 1 reads substantially in the form as follows:
New Bylaws may be adopted or these Bylaws may be amended
or repealed by the majority of the votes cast by stockholders,
considered for purposes of this Section 1 as one class,
provided that a quorum exists as defined by Article II,
Section 6 of these Bylaws.
The effectiveness of this amendment to the Amended and Restated
Bylaws is subject to the approval by the stockholders of the
amendment to Article VI of the Restated Certificate of
Incorporation as provided above and subject to the filing and
effectiveness of a certificate of amendment with the Secretary
of State of the State of Delaware effecting such amendment to
Article VI of the Restated Certificate of Incorporation.
The stockholders are not being asked to vote on this amendment
to the Amended and Restated Bylaws.
General
Effect of Amendments
If the amendments to the Restated Certificate of Incorporation
to remove the Supermajority Voting Provisions are approved by
the stockholders and become effective, (i) the amendment to
the Amended and Restated Bylaws as described above will become
effective and new bylaws may be added or repealed or the Amended
and Restated Bylaws may otherwise be amended by the
stockholders, if a quorum is present, by the majority of the
votes cast by stockholders, and (ii) the Restated
Certificate of Incorporation may be amended, altered, changed or
repealed in the manner prescribed by statute, which, under
Delaware General Corporation Law, generally would require a vote
of the majority of the outstanding stock entitled to vote
thereon, and a majority of the outstanding stock of each class
entitled to vote thereon as a class. As a corollary, the voting
requirement prescribed by statute will replace the supermajority
voting requirement with respect to any repeal or amendment of
Articles VI, VII, VIII, XIV, and XV each as described
above, and with respect to the addition of an article providing
for cumulative voting in the election of directors.
If approved by the stockholders, the proposed amendments to
delete the Supermajority Voting Provisions would eliminate
Article XIV of the Restated Certificate of Incorporation
requiring the vote of the holders of not less than eighty
percent (80%) of the total voting power of all shares of stock
of the Company entitled to vote in the election of directors,
voting together as a single class for the approval or
authorization of certain business combinations with
an entity which beneficially owns, directly or indirectly, more
than 10% of the outstanding common stock of the Company.
However, the Company would still be subject to Section 203
of the Delaware General Corporation Law which, under certain
circumstances, would require a vote of
662/3%
of the outstanding voting stock (excluding stock owned by an
interested stockholder) for approval of a business
combination with an interested stockholder. For purposes
of Section 203 of the Delaware General Corporation Law, an
interested stockholder is a person beneficially owning 15% or
more of the outstanding voting stock of the corporation.
If approved by the stockholders, the proposed amendment to
delete the Interested Person Stock Repurchase Provision would
eliminate the need to obtain a stockholder vote in connection
with certain repurchases of stock by the Company from certain
persons, including persons beneficially owning more than 5% of
the voting power of the voting stock.
48
Reasons
for Amendments
The proposal to amend the Restated Certificate of Incorporation
to eliminate the Supermajority Voting Provisions and the
Interested Person Stock Repurchase Provision is a result of
ongoing review of corporate governance matters by the Board. The
Board, assisted by the Nominating and Governance Committee,
considered the advantages and disadvantages of maintaining the
Supermajority Voting Provisions and the Interested Person Stock
Repurchase Provision. The Board considered the view of some of
the stockholders that the Supermajority Voting Provisions may
make it more difficult for one or a few large stockholders to
replace important corporate governance rules of the company to
further a special interest, or to take control of the Company,
and help ensure that important corporate governance rules are
not changed without the clear consensus of a substantial
majority of the stockholders that such change is prudent and in
the best interests of the Company. While the Board recognizes
those potential benefits, the Board also recognizes that
supermajority voting provisions are disfavored by many of the
stockholders and stockholder groups for the same
reasons that is, that they make it more difficult
for the stockholders to change important rules relating to the
election of directors or other governance matters. In view of
the Boards commitment to include in the 2011 proxy
statement to the stockholders a proposal at the 2011 annual
meeting of the stockholders for declassification of the Board
and replacement of triennial elections with annual elections,
the Board believes that maintaining the Supermajority Voting
Provisions could provide only marginal benefit, if any.
Accordingly, on the recommendation of the Nominating and
Governance Committee, the Board approved the amendments to the
Restated Certificate of Incorporation as described above, and
now recommends that the stockholders approve them.
Required
Vote for Approval and Recommendation of the Board of
Directors
With respect to the amendments to Articles VI, VII, XIV, XV
and XVI, the affirmative vote of not less than eighty percent
(80%) of the total voting power of all shares of stock of the
Company entitled to vote in the election of directors, voting
together as a single class, shall be required for approval by
the stockholders.
With respect to the amendment to Article XVIII, the
affirmative vote of a majority of the outstanding shares
entitled to vote thereon is required to approve the elimination
of the Interested Person Stock Repurchase Provision.
Your Board of Directors recommends that you vote FOR approval
to amend the Companys Restated Certificate of
Incorporation to eliminate the Supermajority Voting Provisions
and the Interested Person Stock Repurchase Provision.
49
EMPLOYEE
STOCK OPTION AND INCENTIVE PLAN, amended and restated
(Stock Plan)
(Proxy Item 4)
Upon the recommendation of the Compensation and Executive
Personnel Committee (Committee), on
February 26, 2010, the Board of Directors
(Board) ratified and the Company has adopted,
subject to stockholder approval on April 22, 2010, the
Stock Plan, as amended and restated, which includes the
following key amendments:
1. an increase of 2.8 million in the total number of
shares of common stock authorized for issuance under equity
awards to participants under the Stock Plan;
2. as a portion of this total of 2.8 million, an
increase of 1.2 million in the number of shares represented
by full-value awards (such as restricted stock, restricted stock
units, stock payments, performance units and dividend
equivalents) that may be granted under the Stock Plan; and
3. the addition of the members of the Companys Board
as eligible participants in the Stock Plan.
In January 1990, the Companys Board adopted the Stock Plan
and in March 1990 the stockholders approved it. In February
1991, January 1994, September 1995, February 2003, February 2005
and February 2008, the Board adopted certain amendments to the
Stock Plan, which were approved by the stockholders in March
1991, April 1994, April 1996, April 2003, April 2005 and
April 2008, respectively.
The principal purpose of the Stock Plan is to provide incentives
for employees and directors of the Company and its subsidiaries
through granting of stock options and other equity awards,
thereby stimulating their personal and active interest in the
Companys development and financial success, and inducing
them to remain in the Companys service.
As of December 31, 2009, there were approximately 1,452,000
full-value awards that are outstanding under the Stock Plan. As
of December 31, 2009, a total of approximately
10,130,000 shares were subject to outstanding stock
options, of which approximately 6,436,000 were exercisable, and
equity awards were held by more than 800 employees. As of
December 31, 2009, assuming that all outstanding options
are exercised, approximately 3,348,000 shares remained
available for the grant of new stock options, including
approximately 1,180,000 full value awards, under the Stock Plan.
Subject to stockholder approval, as of April 22, 2010, the
number of shares deliverable pursuant to awards shall be
increased by 2,800,000 under the Stock Plan.
Shares issued under the Stock Plan upon the exercise of stock
options and the vesting of other equity awards, may be
previously unissued shares, issued shares which have been
repurchased by the Company as treasury shares, or former
treasury shares that are held in a grantor trust. The Stock Plan
provides for appropriate adjustments in the number and kind of
shares subject to the Stock Plan and to outstanding grants
thereunder in the event of a stock split, stock dividend or
certain other types of recapitalizations or reorganizations.
If any portion of a stock option or other equity award
terminates or lapses unexercised, or unvested, or is canceled,
the shares, which were subject to such option or other equity
award, will continue to be available for issuance under the
Stock Plan. The Company has not repriced and will not reprice
any stock option under the Stock Plan. This Stock Plan has been
designed to meet the requirements of Section 162(m) of the
Internal Revenue Code, as amended (the Code)
regarding deductibility of executive compensation. The principal
features of the Stock Plan, as amended and restated, are
summarized herein below, but the summary is qualified in its
entirety by reference to the Stock Plan itself. Copies of the
Stock Plan will be available at the Annual Meeting of
Stockholders and can also be obtained by making written request
to the Companys Secretary. A copy of the amended and
restated Stock Plan is attached as Exhibit D to this Proxy
Statement.
50
Administration
The Committee, which consists of four independent members of the
Board, oversees the Stock Plan. The Committee is authorized to
select from among the eligible participants the individuals to
whom options and other equity awards are to be granted and to
determine the number of shares to be subject thereto and the
terms and conditions thereof, consistent with the Stock Plan.
The Committee is also authorized to adopt, amend and rescind
rules relating to the administration of the Stock Plan.
The Stock Plan also authorizes the Committee to delegate all or
specified authority and administrative duties to the CEO or the
Secretary of the Company, or both, except the authority to make
grants or awards to directors or to executive officers. The
Committee has granted to the CEO the authority to make grants or
awards under the Stock Plan to participants, other than
directors and executive officers, subject to such limitations as
the Committee may impose.
Payment
for Shares
The exercise or purchase price for all options, and other rights
to acquire Company common stock, together with any applicable
tax required to be withheld, must be paid in full in cash at the
time of exercise or purchase. Payment may be made in whole or in
part in common stock of the Company owned or surrendered (as
part of the transaction) by the awardee and having a fair market
value on the date of exercise or receipt of shares equal to the
applicable tax and the aggregate exercise price of the shares so
to be purchased or the applicable tax on the receipt of shares
resulting from other equity awards. The Committee may also
authorize other lawful consideration to be applied to the
exercise or purchase price of an award. This may also include
services rendered, or the difference between the exercise price
of presently exercisable options and the fair market value of
the common stock covered by such options on the date of exercise.
Amendment
and Termination
Amendments to the Stock Plan to (i) increase the number of
shares as to which options, and other equity awards may be
granted (except for adjustments resulting from stock splits,
stock dividends, etc.), (ii) change the class of persons
eligible to participate, (iii) grant options at an exercise
price below the fair market value of a share of common stock of
the Company on the date of grant, or (iv) reprice options
require the approval of the Companys stockholders. In
other respects, the Stock Plan can be amended, modified,
suspended or terminated by the Board, unless such action would
otherwise require stockholder approval as a matter of applicable
law, regulation, or rule. Amendments to the Stock Plan will not,
without the consent of the participant, affect such
persons rights under an award previously granted, unless
the award itself otherwise expressly so provides. No termination
date is specified for the Stock Plan.
Eligibility
As determined by the Committee, options and other equity awards
under the Stock Plan may be granted to individuals who are
employees or directors of the Company or any of its present or
future subsidiaries as determined by the Committee.
Approximately 2,500 employees and directors will be
eligible for consideration to participate in the Stock Plan. Any
options granted to directors under the Stock Plan will be
nonqualified stock options. More than one option, or other award
may be granted to an employee or director, but the aggregate
fair market value (determined at the time of grant) of shares
with respect to which an Incentive Stock Option is first
exercisable by an optionee during any calendar year cannot
exceed $100,000, and the Committee may not grant options to any
optionee during any calendar year covering more than
600,000 shares. During 2009, approximately 2,188,000 stock
options, approximately 543,000 RSUs and approximately 475,000
PUs were awarded under the Stock Plan.
The Stock Plan provides that the Committee may award stock
options, stock appreciation rights (SARs),
restricted stock, restricted stock units, performance stock,
performance units, dividend equivalents, deferred stock, stock
payments and other stock related benefits, or any combination
thereof. Each award or issuance will be set forth
51
in a separate agreement with the person receiving the award and
will indicate the type, terms and conditions of the award.
Nonqualified stock options (NQSOs) will provide for
the right to purchase common stock at an exercise price equal to
at least 100% of fair market value of common stock on the grant
date. NQSOs have been granted with a term of ten years.
Incentive stock options (ISOs), if granted,
will be designed to comply with the provisions of the Code and
will be subject to restrictions contained in the Code, including
exercise prices equal to at least 100% of fair market value of
common stock on the grant date and a ten year restriction on
their term, but may be subsequently modified to disqualify them
from treatment as an incentive stock option.
Stock appreciation rights may be granted in connection with
stock options or other awards, or separately. SARs granted by
the Committee in connection with stock options or other awards
typically will provide for payments to the holder based upon
increases in the price of the Companys common stock over
the exercise price of the related option or other awards,
subject to such restrictions and requirements as may be
determined by the Committee. The Committee may elect to pay SARs
in cash or in common stock, or in a combination of cash and
common stock.
Restricted stock and restricted stock units may be sold or
granted to participants at various prices and made subject to
such restrictions and requirements as may be determined by the
Committee. Performance units may be granted to participants
subject to such restrictions and requirements as may be
determined by the Committee. The increase in the total number of
shares represented by full-value awards (restricted stock,
restricted stock units, stock payments, deferred stock,
performance units and dividend equivalents) that may be awarded
under the Stock Plan is 1.2 million. Restricted stock,
typically, may be repurchased by the Company at the original
purchase price if the conditions or restrictions are not met. In
general, restricted stock may not be sold, or otherwise
transferred or pledged, until restrictions are removed or
expire. Purchasers of restricted stock, unlike recipients of
options and other equity awards, will have voting rights and
will be credited with dividends prior to the time when the
restrictions lapse. Restricted stock units represent the right
to receive, at a specified time or times, a specified number of
shares of common stock, as the Committee shall determine.
Performance units represent the right to receive, at a specific
time or times based on performance criteria established by the
Committee, either a specified number of shares of common stock,
or a cash payment equal to the fair market value of a specified
number of shares of common stock, as the Committee shall
determine.
Dividend equivalents may be credited to a participant in the
Stock Plan. They represent the value of the dividends per share
paid by the Company, calculated with reference to the number of
shares covered by options, SARs, restricted stock, RSUs or other
awards held by the participant.
Stock payments may be granted pursuant to the Stock Plan. A
stock payment is a payment in the form of shares of the
Companys common stock or an option or other right to
purchase shares, as part of a bonus, deferred compensation or
other arrangement. Stock payments may, but are not required to,
be made in lieu of base salary, bonus, fees or other cash
compensation otherwise payable to any individual who is eligible
to receive awards. The number of shares will be determined by
the Committee and may be based upon specific performance
criteria determined appropriate by the Committee. Recipients of
stock payments will have voting rights.
Deferred stock may be granted pursuant to the Stock Plan.
Deferred stock is a right to receive shares of the
Companys common stock. Deferred stock may be awarded to
participants and may be linked to any performance criteria
determined to be appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined
by the Committee. Deferred stock may constitute, or provide for
a deferral of compensation, subject to Section 409A of the
Code and there may be certain tax consequences if the
requirements of Section 409A of the Code are not met.
Please see Federal Income Tax Consequences for more
information.
52
Miscellaneous
Provisions
Equity agreements may provide for termination of an award in the
event the awardee terminates service in violation of an
employment or other service agreement or is discharged for
cause. Options and other equity awards under the Stock Plan
currently provide that, in the event of a change of
control (as defined in the Stock Plan) of the
Company, all previously unexercisable options and unvested
awards will vest immediately. Any options held by a director
that are not yet exercisable on the date of such directors
retirement at or after age 72 years will become fully
exercisable on that date.
The Stock Plan provides that the period of exercisability,
following retirement, for options is (i) the full term of
the option for a Level 1 executive; (ii) the lesser of
five years or the full term of the option for options granted to
a Level 2 through Level 4 executive or director; and
(iii) the lesser of three years or the full term of the
option for all other optionees.
No option, SAR or other award granted under the Stock Plan may
be assigned or transferred by the awardee, except by will or the
laws of intestate succession, or to a properly designated
beneficiary or transferee. During the lifetime of the holder of
any option or right, the option or right may be exercised only
by the holder, his guardian or legal representative, or properly
designated transferee.
The Company requires participants to discharge withholding tax
obligations in connection with the exercise of any option or
other award granted under the Stock Plan or the lapse of
restrictions on restricted stock, as a condition to the issuance
or delivery of stock or payment of other compensation pursuant
thereto. Shares held by or to be issued to a participant as a
result of an award may also be used to discharge tax withholding
obligations related to exercise of options or receipt of other
awards, subject to the discretion of the Committee to disapprove
such use.
Federal
Income Tax Consequences
The tax consequences of the Stock Plan under current federal law
are summarized in the following discussion, which deals with the
general tax principles applicable to the Stock Plan, and is
intended for general information only. In addition, the tax
consequences described below are subject to the limitation of
OBRA. Under OBRA, which became law in August 1993, income tax
deductions of publicly-traded companies may be limited to the
extent total compensation (including base salary, annual bonus,
stock option exercises and nonqualified benefits paid in 1994
and thereafter) for certain executive officers exceeds
$1 million (less the amount of any excess parachute
payments as defined in section 280G of the Code) in
any one year. However, under OBRA, the deduction limit does not
apply to qualified performance-based compensation
established by an independent compensation committee, which is
adequately disclosed to, and approved by, stockholders. In
particular, stock options and stock appreciation rights will
satisfy the performance-based exception if the awards are made
by a qualifying compensation committee, the Stock Plan sets the
maximum number of shares that can be granted to any particular
participant within a specified period, and the compensation is
based solely on an increase in the stock price after the grant
date (i.e., the option exercise price is equal to or greater
than the fair market value of the stock subject to the award on
the grant date). The Company believes that it has complied with
the requirements of the performance-based compensation exclusion
under Section 162(m) of the Code for the Stock Plan,
including option pricing requirements and requirements governing
the administration of the Stock Plan so that deductibility of
compensation paid to senior executives thereunder is not
expected to be disallowed. Alternative minimum tax and state and
local income taxes are not discussed below, and may vary
depending on individual circumstances and from locality to
locality.
Nonqualified Stock Option. For federal income
tax purposes, the recipient of NQSOs granted under the Stock
Plan will not have taxable income upon the grant of the option,
nor will the Company then be entitled to any deduction.
Generally, upon exercise of NQSOs, the optionee will realize
ordinary income, and the Company will be entitled to a
deduction, in an amount equal to the difference between the
option exercise price and the fair market value of the stock on
the date of exercise. An optionees basis for the stock for
the purpose of determining his gain or loss on his subsequent
disposition of the shares generally will be the fair market
value of the stock on the date of exercise of the NQSO.
53
Incentive Stock Option. There is no taxable
income to an employee when an ISO is granted or when that option
is exercised; however, the amount by which the fair market value
of the shares at the time of exercise exceeds the option price
will be an item of tax preference for the
optionee. Gain realized by an optionee upon sale of stock issued
on exercise of an ISO is taxable at capital gains rates, and no
tax deduction is available to the Company, unless the optionee
disposes of the shares within two years after the date of grant
of the option or within one year of the date the shares were
transferred to the optionee. In such event, the difference
between the option exercise price and the fair market value of
the shares on the date of the options exercise will be
taxed at ordinary income rates, and the Company will be entitled
to a deduction to the extent the employee must recognize
ordinary income. An ISO that is exercised more than three months
after an optionees retirement from employment, other than
by reason of death or disability, will be taxed as an NQSO, with
the optionee deemed to have received income upon such exercise
taxable at ordinary income rates. The Company will be entitled
to a tax deduction equal to the ordinary income, if any,
realized by the optionee.
Stock Appreciation Right. No taxable income is
realized upon the receipt of a SAR, but upon exercise of the SAR
the fair market value of the shares (or cash in lieu of shares)
received must be treated as compensation taxable as ordinary
income to the recipient in the year of such exercise. The
Company will be entitled to a deduction for compensation paid in
the same amount that the recipient realized as ordinary income.
Restricted Stock. Unless an election is made
under Section 83(b) of the Code, a recipient to whom
restricted stock is issued will not have taxable income upon
issuance and the Company will not then be entitled to a
deduction. However, when restrictions on shares of restricted
stock lapse, such that the shares are no longer subject to
repurchase by the Company, the recipient will realize ordinary
income and the Company will be entitled to a deduction in an
amount equal to the fair market value of the shares at the date
such restrictions lapse, less the purchase price thereof. If an
election is made under Section 83(b), the recipient will
realize ordinary income at the date of issuance equal to the
difference between the fair market value of the shares at that
date less the purchase price thereof and the Company will be
entitled to a deduction in the same amount.
Restricted Stock Unit. A recipient, who has
been granted a restricted stock unit award, will not realize
taxable income until the recipient receives stock or cash
pursuant to the award, at which time such recipient will realize
ordinary income equal to the full fair market value of the
shares delivered or the amount of cash paid. At that time, the
Company generally will be allowed a corresponding tax deduction
equal to the compensation taxable to the recipient, subject to
any other Code restrictions.
Performance Stock or Performance Unit. A
recipient, who has been granted a performance stock or
performance unit award, will not realize taxable income until
the recipient receives stock (or cash) pursuant to the award, at
which time such recipient will realize ordinary income equal to
the full fair market value of the shares delivered. In the event
the receipt of performance units is deferred under a Company
deferred compensation Stock Plan, the recipient will realize
ordinary income equal to the full fair market value of the
performance units when they are converted into shares and are
delivered to the recipient. At such time, the Company generally
will be allowed a corresponding tax deduction equal to the
compensation taxable to the recipient, subject to any other Code
restrictions.
Dividend Equivalent. A recipient of a dividend
equivalent award will not realize taxable income at the time of
grant, and the Company will not be entitled to a deduction at
that time. When a dividend equivalent is paid, the participant
will recognize ordinary income, and the Company will be entitled
to a corresponding deduction.
Stock Payment. A recipient of a stock payment
in lieu of a cash payment that would otherwise have been made
generally will be taxed as if the cash payment has been
received, and the Company will have a deduction in the same
amount.
Deferred Stock. A recipient of deferred stock
generally will not have taxable income upon the issuance of the
deferred stock nor will the Company be entitled to a deduction.
However, when deferred stock vests and is issued to the
recipient, the recipient will realize ordinary income and the
Company will be entitled to a deduction in an
54
amount equal to the difference between the fair market value of
the shares at the date of issuance over the purchase price, if
any, for the deferred stock. Deferred stock may be subject to
Section 409A of the Code, and the failure of any award of
deferred stock that is subject to Section 409A of the Code
to comply with Section 409A of the Code may result taxable
income to the recipient upon the grant or vesting of the award.
Furthermore, an additional 20% penalty tax may be imposed
pursuant to Section 409A of the Code, and, potentially,
certain interest penalties may apply. Please see
Section 409A of the Code in this section for
more information.
Deferred Compensation. Awardees who defer
compensation generally will recognize no income, gain or loss
for federal income tax purposes when nonqualified stock options
or other awards are granted in lieu of amounts otherwise
payable, and the Company will not be entitled to a deduction at
that time. When and to the extent options are exercised or
awards are received, the ordinary rules regarding awards
outlined above will apply. When and to the extent stock or cash
is received, the ordinary rules outlined above will apply. Such
deferred compensation may be subject to the requirements of
Section 409A of the Code, as discussed below.
Section 409A of the Code. Certain awards
under the Stock Plan may be considered nonqualified
deferred compensation subject to Section 409A of the
Code, which imposes additional requirements on the payment of
deferred compensation. Generally, if at any time during a
taxable year a nonqualified deferred compensation plan fails to
meet the requirements of Section 409A of the Code, or is
not operated in accordance with those requirements, all amounts
deferred under the nonqualified deferred compensation plan for
the current taxable year and all preceding taxable years, by or
for any participant with respect to whom the failure relates,
are includible in the gross income of the participant for the
taxable year to the extent not subject to a substantial risk of
forfeiture and not previously included in gross income. If a
deferred amount is required to be included in income under
Section 409A of the Code, the amount will be subject to
income tax at regular income tax rates plus an additional
20 percent tax, as well as potential premium interest tax.
Reasons
for the Amended and Restated Stock Plan
The Committee and the Board have determined that it is advisable
to continue to provide stock-based incentive compensation to the
Companys directors and employees, thereby continuing to
align the interests of such participants with those of the
stockholders, and that awards under the Stock Plan are an
effective means of providing such compensation. On
February 26, 2010, the Board approved and the Company
adopted (subject to stockholder approval) the Stock Plan, as
amended and restated, including an increase in the number of
shares authorized for issuance and an increase in the number of
shares for full-value awards that may be issued. In order to
continue to grant stock-based incentive compensation in the
future, it is requested to increase the number of shares
available for issuance under the Stock Plan. Therefore, the
Board recommends that 2.8 million additional shares of
common stock be reserved under the Stock Plan for issuance on
exercise of options and other awards, and that the Stock Plan be
approved as amended and restated.
Section 162(m) of the Code. Under
Section 162(m) of the Code, which became law in August
1993, income tax deductions of publicly-traded companies may be
limited to the extent total compensation (including base salary,
annual bonus, stock option exercises and nonqualified benefits
paid in 1994 and thereafter) for certain executive officers
exceeds $1 million (less the amount of any excess
parachute payments as defined in Section 280G of the
Code) in any one year. However, under Section 162(m) of the
Code, the deduction limit does not apply to qualified
performance-based compensation established by an
independent compensation committee which is adequately disclosed
to, and approved by, stockholders. In particular, stock options
and stock appreciation rights will satisfy the performance-based
exception if the awards are made by a qualifying compensation
committee, the Stock Plan sets the maximum number of shares that
can be granted to any particular participant within a specified
period, and the compensation is based solely on an increase in
the stock price after the grant date (i.e., the option exercise
price is equal to or greater than the fair market value of the
stock subject to the award on the grant date).
It is the Companys policy generally to design the
Companys compensation programs to conform with
Section 162(m) of the Code so that total compensation paid
to any employee will not exceed $1 million in any one
55
year, except as otherwise approved by the Committee or for
compensation payments in excess of $1 million that qualify
as performance-based. However, the Company may pay
compensation that is not deductible in certain circumstances.
The Company intends to comply with other requirements of the
performance-based compensation exclusion under
Section 162(m) of the Code, including option pricing
requirements and requirements governing the administration of
the Stock Plan, so that, upon stockholder approval of the
amended and restated Stock Plan, deductibility of compensation
paid to senior executives thereunder is not expected to be
disallowed. Accordingly, the Board is asking stockholders to
approve the Stock Plan, as amended and restated.
The proposed amendments will not affect the Federal income tax
consequences associated with the Stock Plan, except as noted
above.
THE FOREGOING SUMMARY DESCRIPTION OF THE PROPOSED AMENDED AND
RESTATED STOCK PLAN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE ACTUAL TERMS OF THE STOCK PLAN, WHICH IS ATTACHED TO THIS
PROXY STATEMENT AS EXHIBIT D.
Required
Vote for Approval and Recommendation of the Board of
Directors
The affirmative vote of a majority of the shares present or
represented and entitled to vote at the Annual Meeting is
required to approve the Stock Plan, as amended and restated.
Your
Board of Directors recommends that you vote FOR approval of this
proposal.
56
GENERAL
Stockholder
Proposals
Stockholder proposals for presentation at the annual meeting
scheduled to be held on April 28, 2011, must be received at
the Companys principal executive offices on or before
November 19, 2010. The Companys Bylaws provide that
stockholders desiring to nominate persons for election to the
Board of Directors or to bring any other business before the
stockholders at an annual meeting must notify the Secretary of
the Company thereof in writing 90 to 120 days prior to the
first anniversary of the preceding years annual meeting
(or, if the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, 90
to 120 days prior to such annual meeting or within
10 days after the public announcement of the date of such
meeting is first made by the Company; or, if the first public
announcement of the date of such annual meeting is less than
100 days prior to such annual meeting, the 10th day
following the day on which public announcement of such meeting
is first made by the Company, or if the number of directors to
be elected to the Board of Directors is increased, effective at
the annual meeting, and the Company does not make a public
announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors at least
100 days prior to the first anniversary of the preceding
years annual meeting, within 10 days after such
public announcement is first made by the Company (with respect
to nominees for any newly created positions only)). Such notice
must include, among other things, (a) as to each person
whom the stockholder proposes to nominate for election or
reelection as a director, all information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14
under the 1934 Act, such persons written consent to
be named in the proxy statement as a nominee and to serving as a
director if elected, and a description of certain material
relationships between such stockholder and beneficial owner (and
their associates and affiliates) and each nominee (and their
associates and affiliates) as more particularly set forth in the
Companys Bylaws; (b) as to any other business that
the stockholder proposes to bring before the meeting, a brief
description of such business, the text of the proposal or
business, the reasons for conducting such business at the
meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (c) the name and record address,
and class and number of shares owned beneficially and of record,
of such stockholder and any such beneficial owner, as well as
information relating to security ownership in the Company by
such stockholder and such beneficial owner as more particularly
set forth in the Companys Bylaws.
Annual
Report
The Companys 2009 Annual Report to Stockholders is being
mailed to all stockholders of record.
ALL STOCKHOLDERS ARE URGED TO VOTE BY TELEPHONE OR
ELECTRONICALLY THROUGH THE INTERNET BY FOLLOWING THE
INSTRUCTIONS ON THE PROXY CARD, OR TO COMPLETE, SIGN, AND
RETURN THE ACCOMPANYING PROXY SOLICITATION/VOTING
INSTRUCTION CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
Susan C. Miller
Secretary
Dated: March 19, 2010
57
EXHIBIT A
AVERY
DENNISON CORPORATION
BOARD OF
DIRECTORS
INDEPENDENCE
STANDARDS
An independent Director is one who the Board of Directors
affirmatively determines has no material relationship with Avery
Dennison (directly or as a partner, shareholder or officer of an
organization that has a relationship with Avery Dennison). The
Board has adopted the following categorical standards to assist
it in determining each Directors independence. In the
event that a Director has a business or other relationship that
does not fit within the described standards and the Director is
determined to be independent, the Board will disclose the basis
for its determination in the Companys annual proxy
statements or otherwise at least annually.
A Director will be presumed to be independent if the Director:
1) has not been an employee of Avery Dennison for at least
five years, other than in the capacity as a former interim
Chairman or interim CEO;
2) has not, during the last three years, been affiliated
with or employed by a present or former independent auditor of
Avery Dennison or of any affiliate of Avery Dennison;
3) has not, during the last three years, been employed as
an executive officer by a company for which an executive officer
of Avery Dennison concurrently served as a member of such
companys compensation committee;
4) has no immediate family members (i.e., spouse, parents,
children, siblings, mothers and
fathers-in-law,
sons and
daughters-in-law,
brothers and
sisters-in-law
and anyone (other than domestic employees) who shares the
Directors home) who did not satisfy the foregoing criteria
during the last three years; provided, however, that with
respect to the employment criteria, such Directors
immediate family member may have (i) been affiliated with
or employed by a present or former auditor of Avery Dennison or
of any affiliate of Avery Dennison other than, in a professional
capacity and (ii) served as an employee but not as an
executive officer of Avery Dennison during such period;
5) has not received, and has no immediate family member who
has received, during the last three years, more than $100,000 in
any year in direct compensation from Avery Dennison (other than
in his or her capacity as a member of the Board of Directors, or
any committee of the Board or pension or other deferred
compensation for prior services, provided that such compensation
is not contingent in any way on continued service); provided,
however, that compensation to such Directors immediate
family member as a non-executive employee shall not be
considered in determining independence;
6) has not been during the last three years an executive
officer or an employee, and has no immediate family member who,
during the last three years, has been an executive officer of a
company that made payments to, or received payments from, Avery
Dennison for property or services in any of the last three years
in an amount which, in any single fiscal year, exceeds the
greater of $1 million, or 2% of such other companys
consolidated gross revenues;
7) has not been, and has no immediate family member who has
been, an executive officer of a foundation, university,
non-profit trust or other charitable organization, for which
Avery Dennison and its respective trusts or foundations, account
or accounted for more than 2% or $1 million, whichever is
greater, of such charitable organizations consolidated
gross revenues, in any of the last three years;
8) does not serve, and has no immediate family member who
has served, as an executive officer or general partner of an
entity that has received an investment from Avery Dennison or
any of its subsidiaries, unless such investment is less than
$1 million or 2% of such entitys total invested
capital, whichever is greater, in any of the last three
years; and
9) is not otherwise disqualified by applicable SEC or NYSE
rules, regulations or listing standards.
58
In addition to the foregoing, a Director will be considered
independent for purposes of serving on Avery Dennisons
Audit and Finance Committee only if the Director:
A) has not accepted, directly or indirectly, any
consulting, advisory or other compensatory fee from Avery
Dennison or any subsidiary of Avery Dennison, other than in the
Directors capacity as a director or committee member or
any pension or other deferred compensation for prior service,
provided that such compensation is not contingent in any way on
continued service; and
B) is not an affiliated person of Avery
Dennison or any subsidiary of Avery Dennison as defined in
Rule 10A-3
of the Securities Exchange Act of 1934.
59
EXHIBIT B
AVERY
DENNISON CORPORATION
NON-EMPLOYEE
DIRECTOR COMPENSATION SUMMARY FOR 2009
|
|
|
|
|
Board members
|
|
|
|
|
Annual retainer for non-executive Chairman
|
|
$
|
220,000
|
|
Annual retainer for other directors
|
|
$
|
55,000
|
|
Meeting fees (per meeting)
|
|
$
|
1,500
|
|
Annual stock payment (shares of Company stock)
|
|
|
750
|
|
Annual stock option grant (stock options)
|
|
|
2,000
|
|
(new directors are granted 5,000 options when they join the
Board)
|
|
|
|
|
Committee Chairman retainer
|
|
|
|
|
Audit Committee
|
|
$
|
10,000
|
|
Compensation and Executive Personnel Committee
|
|
$
|
10,000
|
|
Other Committees
|
|
$
|
5,000
|
|
Committee meeting fees (per meeting)
|
|
|
|
|
Chairman
|
|
$
|
2,000
|
|
Members
|
|
$
|
1,500
|
|
60
EXHIBIT C
AVERY
DENNISON CORPORATION
STATEMENT
OF STOCK OWNERSHIP POLICY
FOR
OFFICERS AND DIRECTORS
Avery Dennison believes that the ownership of Company stock is
both a privilege and a responsibility that executive management
should be encouraged to exercise. By holding a significant stake
in the future of the Company, management demonstrates its
commitment to the long-term profitability of the Corporation and
better serves the interests of the Company and all of its
shareholders.
It is the policy of the Company that each executive and director
shall own and continuously hold a number of Avery Dennison
shares or units equal to the lesser of either (a) a fixed
number of shares or units, or (b) a number of shares or
units with a total value equal to a designated multiple of base
salary. Stock ownership guidelines are presented below.
|
|
|
|
|
|
|
|
|
Stock Ownership Guidelines
|
|
|
|
Multiple of Base
|
|
Fixed Shares
|
|
Position/Levels
|
|
Salary
|
|
or Units
|
|
|
Chief Executive Officer
|
|
5X
|
|
|
95,000
|
|
Level 2 [including the other NEOs]
|
|
3X
|
|
|
27,000
|
|
Level 3 executives
|
|
2X
|
|
|
17,000
|
|
Level 4 executives
|
|
1X
|
|
|
4,000
|
|
Non-Employee Directors: number of shares equal
to 5 times the annual Board retainer fee divided by the market
value of the Companys stock at year end equals the number
of target shares for directors.
In order to meet the Stock Ownership Guidelines, the following
shares or units and related value (three month average stock
price) shall be counted towards achieving and maintaining
compliance with the guideline:
|
|
|
|
|
Shares owned outright or in a trust for your benefit (including
shares acquired from equity awards or from stock market
purchases);
|
|
|
|
Shares or units held in qualified and nonqualified Avery
Dennison employee benefit plans; and
|
|
|
|
Unvested restricted stock or restricted stock units that are
subject to time-based vesting.
|
For purposes of Stock Ownership Guidelines, the following will
not be counted as shares owned: unexercised options (whether
vested or unvested); and unvested restricted stock, restricted
stock units and performance stock units subject to
performance-based vesting conditions that have not yet been
satisfied.
Avery Dennison encourages executives to achieve compliance with
their applicable guideline as soon as practical given their
individual circumstances, but all executives are expected to be
in compliance within five years from either implementation of
this Policy in January 2010 or from the date of hire or
promotion. During the five year period, it is expected that the
executives will plan and make reasonable/satisfactory progress
toward accumulating the required number of shares within the
specified time period. The CEO will review the progress of the
executives and their status in October of each year in
preparation for presenting a report to the Committee each
December.
61
EXHIBIT D
AVERY
DENNISON CORPORATION
STOCK
OPTION AND INCENTIVE PLAN
Amended
and Restated
The purposes of this Stock Option and Incentive Plan
(Plan) are as follows:
(1) To provide additional incentive for Employees and
Directors to further the growth, development and financial
success of the Company by personally benefiting through the
ownership of Company stock
and/or
rights, which recognize such growth, development and financial
success.
(2) To enable the Company to recruit and retain Employees
and Directors considered essential to the long range success of
the Company by offering them an opportunity to own stock in the
Company
and/or
rights, which will reflect the growth, development and financial
success of the Company.
ARTICLE 1 DEFINITIONS
Wherever the following terms are used in this Plan they shall
have the meaning specified below, unless the context clearly
indicates otherwise.
1.1 Award
Award shall mean Deferred Stock, Deferred Stock
Unit, Dividend Equivalent, Option, Performance Stock,
Performance Unit, Restricted Stock, Restricted Stock Unit, Stock
Appreciation Right or Stock Payment granted under this Plan.
1.2 Award
Agreement
Award Agreement shall mean an agreement setting
forth the terms and conditions of an Award.
1.3 Awardee
Awardee shall mean any Employee or Director who has
received an Award under the Plan.
1.4 Beneficiary
Beneficiary shall have the meaning given in
Article 11.8.
1.5 Board
Board shall mean the Board of Directors of the
Company.
1.6 Cause
Cause shall mean, with respect to any Awardees
Termination of Service, unless otherwise provided by the
Committee or the Company, (i) Cause as defined
in any Individual Agreement or Award Agreement to which the
applicable Awardee is a party, or (ii) if there is no such
Individual Agreement or Award Agreement or if it does not define
Cause: (A) conviction of the Awardee for committing a
felony under federal law or the law of the state in which such
action occurred, (B) willful and deliberate failure on the
part of the Awardee to perform his employment duties in any
material respect, or (C) prior to a Change in Control, such
other serious events as shall be determined by the Committee or
the Company. Prior to a Change of Control, the Committee or the
Company shall, unless otherwise provided in an Individual
Agreement with a particular Awardee, have the discretion to
determine on a reasonable basis whether Cause
exists, and its determination shall be final.
62
1.7 Change
in Control
Change in Control has the meanings set forth in
Article 9.2.
1.8 CEO
CEO shall mean the Chief Executive Officer of the
Company.
1.9 Code
Code shall mean the Internal Revenue Code of 1986,
as amended.
1.10 Committee
Committee shall mean committee of the Board
designated to administer the Plan as contemplated by
Article 10.1.
1.11 Commission
Commission shall mean the Securities and Exchange
Commission or any successor agency.
1.12 Common
Stock
Common Stock shall mean the common stock of the
Company.
1.13 Company
Company shall mean Avery Dennison Corporation or any
successor company.
1.14 COO
COO shall mean the Chief Operating Officer of the
Company.
1.15 Covered
Employee
Covered Employee shall mean an Awardee designated by
the Committee in connection with any Award as an individual who
is or may be a covered employee within the meaning
of Section 162(m)(3) of the Code in the year in which an
Award is expected to be taxable to such Awardee.
1.16 Deferred
Stock
Deferred Stock shall mean shares of Common Stock
awarded under Article 7.
1.17 Deferred
Stock Unit
Deferred Stock Unit shall mean a right to receive
shares of Common Stock awarded under Article 7.
1.18 Director
Director shall mean a member of the Board who is not
an Employee.
1.19 Disability
Disability shall mean, with respect to any Awardee,
unless otherwise provided by the Committee,
(i) Disability as defined in any Individual
Agreement or Award Agreement to which the Awardee is a party, or
(ii) if there is no such Individual Agreement or it does
not define Disability, permanent and total
disability as defined in Section 22(c)3 of the Code.
63
1.20 Disaffiliation
Disaffiliation shall mean, with respect to any
Subsidiary, the Subsidiarys ceasing to be a Subsidiary for
any reason (including, without limitation, as a result of a
public offering, or a spin-off or sale by the Company, of the
majority of the stock of the Subsidiary).
1.21 Dividend
Equivalent
Dividend Equivalent shall mean a right to receive a
number of shares of Common Stock or an amount of cash,
determined as provided in Article 8.1 hereof.
1.22 Employee
Employee shall mean any officer or other employee of
the Company, or of any corporation, which is then a Subsidiary.
1.23 Expiration
Date
Expiration Date shall have the meaning given in
Article 4.3.
1.24 Exchange
Act
Exchange Act shall mean the Securities Exchange Act
of 1934, as amended.
1.25 Fair
Market Value
Fair Market Value of a share of Common Stock as of a
given date shall be (i) the mean between the highest and
lowest selling price of a share of Common Stock during normal
business hours on the principal exchange on which shares of
Common Stock are then trading, if any, on such date, or if
shares were not traded on such date, then the mean between the
highest and lowest sales on the nearest date before and the
nearest date after such valuation date; or (ii) if Common
Stock is not traded on an exchange, the mean between the closing
representative bid and asked prices for the Common Stock during
normal business hours on such date as reported by NYSE or, if
NYSE is not then in existence, by its successor quotation
system; or (iii) if Common Stock is not publicly traded,
the Fair Market Value of a share of Common Stock as established
by the Committee acting in good faith.
1.26 Greater
Than 10% Stockholder
Greater Than 10% Stockholder shall mean an
individual then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company,
any Subsidiary or any affiliate corporation (as defined in
Section 424(f) of the Code) or parent corporation thereof
(as defined in Section 424(e) of the Code).
1.27 Incentive
Stock Option
Incentive Stock Option shall mean an Option that
both meets the requirements to be an incentive stock
option under Section 422A of the Code and is
designated as an Incentive Stock Option by the Committee.
1.28 including
or includes
including or includes shall mean
including without limitation, or includes, without limitation.
1.29 Individual
Agreement
Individual Agreement shall mean an employment,
severance or similar agreement between an Awardee and the
Company or one of its Subsidiaries.
64
1.30 Involuntary
Termination
Involuntary Termination shall mean Termination of
Service other than for Cause, death, Disability, Retirement or
voluntary termination by the Awardee.
1.31 Nonqualified
Stock Option
Nonqualified Stock Option shall mean an Option that
either is not an Incentive Stock Option or is designated as a
Nonqualified Stock Option by the Committee or the Company.
1.32 Option
Option shall mean a stock option granted pursuant to
this Plan. An Option shall be either a Nonqualified Stock Option
or an Incentive Stock Option; provided, however, that Options
granted to Directors shall only be Non qualified Stock Options.
1.33 Optionee
Optionee shall mean an Employee or Director granted
an Option under this Plan.
1.34 Performance
Goals
Performance Goals shall mean the performance goals
established by the Committee or the Company in connection with
the grant of Performance Stock, Performance Units, Restricted
Stock, Restricted Stock Units, Stock Payments, Deferred Stock or
Deferred Stock Units. In the case of Qualified Performance-Based
Awards, (i) such goals shall be based on the attainment of
specified levels of one or more of the following measures: net
earnings (either before or after one or more of the following:
(a) interest, (b) taxes, (c) depreciation and
(d) amortization), EPS, adjusted EPS, price per share of
Common Stock, gross sales, net sales, return on sales, net
income, net income after tax, adjusted net income, gross income,
operating income, gross or net profit or operating margin,
return on sales, cash flow from operations, expenses, economic
value added, unit volume, market share, return on equity, return
on assets or return on net assets, working capital, change in
working capital, return on total capital, total stockholder
return, productivity, operating efficiency, implementation or
completion of critical projects, or regulatory body approval for
commercialization of product and (ii) such Performance
Goals shall be set by the Committee within the time period
prescribed by Section 162(m) of the Code and related
regulations.
1.35 Plan
Plan shall mean the Avery Dennison Corporation Stock
Option and Incentive Plan, as amended and restated.
1.36 Qualified
Performance-Based Award
Qualified Performance-Based Award shall mean an
Award of Performance Stock, Performance Unit, Restricted Stock,
Restricted Stock Units, Stock Payments, Deferred Stock or
Deferred Stock Units designated as such by the Committee at the
time of grant, based upon a determination that (i) the
Awardee is or may be a covered employee within the
meaning of Section 162(m)(3) of the Code in the year in
which the Company would expect to be able to claim a tax
deduction with respect to such Restricted Stock and
(ii) the Committee wishes such Award to qualify for the
Section 162(m) Exemption. Notwithstanding any other
provision of the Plan, no Award shall be considered a Qualified
Performance-Based Award unless it is granted subject to or after
obtaining stockholder approval satisfying the requirements of
Section 162(m)(4)(C)(ii) of the Code and the Department of
Treasury Regulations thereunder.
1.37 Performance
Stock
Performance Stock shall mean a right to receive
Common Stock pursuant to Article 7.
65
1.38 Performance
Unit
Performance Unit shall mean a right to receive
Common Stock pursuant to Article 7.
1.39 Restricted
Stock
Restricted Stock shall mean Common Stock issued
pursuant to Article 7.
1.40 Restricted
Stock Unit
Restricted Stock Unit shall mean a right to receive
Common Stock pursuant to Article 7.
1.41 Retirement
Retirement shall mean (a) with respect to an
Employee, termination from active employment with the Company,
or a Subsidiary, on or after age 55 with 10 or more years
of service, or as otherwise determined by the Committee and
(b) with respect to a Director, termination from service by
reason of retirement at or after age 72 years.
1.42 Rule 16b-3
Rule 16b-3
shall mean
Rule 16b-3,
as promulgated by the Commission under Section 16(b) of the
Exchange Act, as amended from time to time.
1.43 Secretary
Secretary shall mean the Secretary of the Company.
1.44 Section 162(m)
Exemption
Section 162(m) Exemption shall mean the
exemption from the limitation on deductibility imposed by
Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C) of the Code.
1.45 Section 409A
Section 409A shall mean Section 409A of
the Code along with the Department of Treasury Regulations and
other interpretive guidance issued thereunder, including,
without limitation, any related regulations or other guidance
that may be issued.
1.46 Stock
Appreciation Right
Stock Appreciation Right shall mean a stock
appreciation right granted under Article 6.
1.47 Stock
Payment
Stock Payment shall mean (a) a payment in the
form of shares of Common Stock, or (b) an option or other
right to purchase shares of Common Stock, either (a) or
(b) as part of a bonus, deferred compensation or other
arrangement, awarded under Article 7.
1.48 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% or more of the total
combined voting power of all classes of stock in one of the
other corporations in such chain, as well as partnerships and
limited liability companies, in which the Company holds a 33% or
more interest.
66
1.49 Termination
of Service
Termination of Service of (a) an Employee shall
mean the termination of the employee-employer relationship
between the Employee and the Company or a Subsidiary for any
reason, including a termination by resignation, discharge,
death, Disability or Retirement; but excluding
(i) terminations where there is a simultaneous reemployment
or continuing employment by the Company or a Subsidiary and
(ii) temporary absences from employment because of illness,
vacation or leave of absence and transfers among the Company and
Subsidiaries, and (b) a Director shall mean the termination
of service between the Director and the Company for any reason,
including a termination by resignation, failure to be elected,
discharge, death, Disability or Retirement; but excluding
(i) terminations where there is a simultaneous commencement
of or continuing service by the Company and (ii) temporary
absences from service because of illness, vacation or leave of
absence. In addition, an Employee employed by a Subsidiary shall
be deemed to incur a Termination of Service upon a
Disaffiliation of that Subsidiary, unless the Employee
immediately thereafter becomes or remains an Employee of the
Company or one of its continuing Subsidiaries. The Committee or
the Company shall determine the effect of all other matters and
questions relating to Termination of Service; provided, however,
that, with respect to Incentive Stock Options, unless the
Committee otherwise provides in the terms of the Award Agreement
or otherwise, a leave of absence, change in status from an
Employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of
Service of an Employee only if, and to the extent that, such
leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the
Code and the then applicable regulations and revenue rulings
under said Section.
1.50 Gender
and Number
Gender and Number wherever the masculine gender is
used it shall include the feminine and neuter, and wherever a
singular pronoun is used it shall include the plural, unless the
context clearly indicates otherwise.
ARTICLE 2 SHARES SUBJECT
TO PLAN
2.1 Shares Subject
to Plan
As of December 31, 2009, there were approximately
3,348,000 shares available for future Awards under the
Plan. As of the Effective Date, as defined in Article 11.13
below and subject to stockholder approval, the aggregate number
of shares deliverable pursuant to Awards shall be increased by
2,800,000 for a total of approximately 6,148,000 shares.
Shares of Common Stock issued under the Plan may be authorized
and unissued shares, previously outstanding shares held as
treasury shares, or treasury shares that have been transferred
to and held in a grantor trust of the Company.
2.2 Unexercised
Options and Other Rights
If any Option, or other right to acquire shares of Common Stock
under any other Award expires or is cancelled or forfeited
without having been fully exercised or issued, the number of
shares subject to such Option or other Award, but as to which
such Option or other Award was not exercised or issued prior to
its expiration, cancellation, or forfeiture may again be
optioned, granted or awarded hereunder, subject to the
limitations of Article 2.1.
ARTICLE 3 GRANTING
OF OPTIONS
3.1 Eligibility
Options may be granted to Employees and Directors of the Company
or of a Subsidiary.
67
3.2 Granting
of Options
The Committee shall from time to time, in its discretion:
(i) Select the Employees and Directors who will be granted
Options;
(ii) Determine the number of shares to be subject to such
Options or Stock Appreciation Rights granted to the selected
Employees; provided, however, that no Employee shall be granted
Options or Stock Appreciation Rights covering in excess of an
aggregate of 600,000 shares and rights during any calendar
year; and
(iii) Determine the terms and conditions of such Options,
consistent with this Plan (including whether they are Incentive
Stock Options or Nonqualified Stock Options).
ARTICLE 4 TERMS
OF OPTIONS
4.1 Option
Agreement
Each Option and the terms and conditions thereof shall be
evidenced by an Award Agreement, which shall be executed by the
Optionee and an authorized officer of the Company. Upon grant of
an Option, the Committee or the Company shall instruct the
Secretary to issue an Award Agreement evidencing such Option,
and to deliver such Award Agreement to the Optionee. Award
Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to meet the applicable
provisions of Section 422 of the Code.
4.2 Option
Price
The exercise price per share of the shares of Common Stock
subject to each Option shall be not less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option
is granted (or, as to Incentive Stock Options, on the date the
Option is modified, extended or renewed for purposes of
Section 424(h) of the Code). Once Options are granted, they
may not be repriced, and this Article 4.2 may not be
amended without the consent of the stockholders. In addition, in
the case of Incentive Stock Options granted to a Greater Than
10% Stockholder, such price shall not be less than 110% of the
Fair Market Value of a share of Common Stock on the date the
Option is granted (or the date the Option is modified, extended
or renewed for purposes of Section 424(h) of the Code).
4.3 Option
Term
The term of an Option shall be set by the Committee in its
discretion; provided that the term shall not exceed ten years or
five years from the date an Incentive Stock Option is granted to
a Greater Than 10% Stockholder. The last day of the term of the
Option shall be the Options Expiration Date.
4.4 Option
Vesting
(a) The period during which the right to exercise an Option
in whole or in part vests in the Optionee shall be set by the
Committee (and Option vesting shall be set forth in Award
Agreements), and the Committee may determine that an Option may
not be exercised in whole or in part for a specified period
after it is granted. At any time after the grant of an Option,
the Committee may, in its sole discretion and subject to
whatever terms and conditions it selects, accelerate the period
during which an Option vests or extend the period during which
it may be exercised (but not beyond the Expiration Date thereof).
(b) No portion of an Option which is unexercisable at
Termination of Service shall thereafter become exercisable;
provided, however that all Options held by a Director that are
not yet exercisable on the date of such Directors
Retirement shall become fully exercisable on that date.
68
4.5 Exercise
of Options after Termination of Service
(a) Termination by Death. Unless
otherwise determined by the Committee, if an Optionee has a
Termination of Service by reason of the Optionees death,
any Option held by such Optionee may thereafter be exercised by
the Optionees Beneficiaries, to the extent then
exercisable, or on such accelerated basis as the Committee may
determine, for a period of 12 months (or such other period
as the Committee may specify in the applicable Award Agreement)
from the date of such death or until the Expiration Date
thereof, whichever period is the shorter.
(b) Termination by Reason of
Disability. Unless otherwise determined by the
Committee, if an Optionee has a Termination of Service by reason
of the Optionees Disability, any Option held by such
Optionee may thereafter be exercised by the Optionee, to the
extent it was exercisable immediately before the Termination of
Service, or on such accelerated basis as the Committee may
determine, for a period of three years (or such shorter period
as the Committee may specify in the applicable Award Agreement)
from the date of such Termination of Service or until the
Expiration Date thereof, whichever period is the shorter;
provided, however, that if the Optionee dies within such
period, any unexercised Stock Option held by such Optionee
shall, notwithstanding the expiration of such period, continue
to be exercisable to the extent to which it was exercisable at
the time of death for a period of 12 months from the date
of such death or until the Expiration Date thereof, whichever
period is the shorter.
(c) Termination by Reason of
Retirement. Unless otherwise determined by the
Committee in an Award Agreement and subject to
Section 4.4(b), if an Optionee has a Termination of Service
by reason of the Optionees Retirement, any Option held by
such Optionee may thereafter be exercised by the Optionee, to
the extent it was exercisable at the time of such Retirement, or
on such accelerated basis as the Committee may determine, as
follows: (i) if the Optionee has been before such
Retirement, a Level 1 executive, for the period ending on
the Expiration Date of such Option; (ii) if the Optionee
has been before such Retirement, a Director or a Level 2
through Level 4 executive, for the period ending on the
earlier of the fifth anniversary of such Retirement or the
Expiration Date of such Option; and (iii) in all other
cases, for a period ending on the earlier of the third
anniversary of such Retirement or the Expiration Date of such
Option.
(d) Other Termination. Unless otherwise
determined by the Committee: (i) if an Optionee incurs a
Termination of Service for Cause, all Options held by such
Optionee shall thereupon terminate; and (ii) if an Optionee
incurs a Termination of Service for any reason, other than
death, Disability, Retirement or for Cause, any Stock Option
held by such Optionee, to the extent then exercisable, or on
such accelerated basis as the Committee may determine, may be
exercised for the lesser of 6 months from the date of such
Termination of Service or until the Expiration Date of such
Stock Option; provided, however, that if the Optionee
dies within such period, any unexercised Stock Option held by
such Optionee shall, notwithstanding the expiration of such
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months
from the date of such death or until the Expiration Date of such
Stock Option, whichever period is the shorter.
(e) Transferability of Stock Options. No
Option shall be transferable by the Optionee other than
(i) by designation of a Beneficiary, by will or by the laws
of descent and distribution, or (ii) as otherwise expressly
permitted under the applicable Award Agreement including, if so
permitted, pursuant to a gift to such Optionees family,
whether directly or indirectly or by means of a trust or
partnership or otherwise. All Options shall be exercisable,
subject to the terms of this Plan, only by the Optionee, by the
guardian or legal representative of the Optionee if the Optionee
is incapacitated, by the Optionees Beneficiaries, legal
representative or heirs after the Optionees death, or any
person to whom such option is transferred pursuant to
clause (ii) of the preceding sentence.
(f) Cashing Out of Stock Option. On
receipt of written notice of exercise, the Committee or the
Company may elect to cash out all or part of the portion of the
shares of Common Stock for which an Option is being exercised by
paying the Optionee an amount, in cash or Common Stock, equal to
the excess of the Fair Market Value of the Common Stock over the
option price times the number of shares of Common Stock for
which the Option is being exercised on the effective date of
such cash-out.
69
(g) Qualification of Incentive Stock
Options. No Incentive Stock Option shall be
granted to any person who is not an Employee of the Company or
any subsidiary corporation of the Company (as
defined in Section 424(f) of the Code). No person who
qualifies as a Greater Than 10% Stockholder may be granted an
Incentive Stock Option unless such Incentive Stock Option
conforms to the applicable provisions of Section 422 of the
Code. Any Incentive Stock Option granted under the Plan may be
modified by the Committee, with the consent of the Optionee, to
disqualify such Option from treatment as an incentive
stock option under Section 422 of the Code. To the
extent that the aggregate fair market value of stock with
respect to which incentive stock options (within the
meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code) are exercisable for the first
time by an Optionee during any calendar year under the Plan, and
all other plans of the Company and any affiliate or parent
corporation thereof (each as defined in Section 424(f) and
(e) of the Code, respectively), exceeds $100,000, the
Options shall be treated as Nonqualified Stock Options to the
extent required by Section 422 of the Code. The rule set
forth in the preceding sentence shall be applied by taking
Options and other incentive stock options into
account in the order in which they were granted and the Fair
Market Value of stock shall be determined as of the time the
respective options were granted.
ARTICLE 5 EXERCISE
OF OPTIONS
5.1 Partial
Exercise
An Option may be exercised in whole or in part at any time after
it has become vested and exercisable and before its Expiration
Date, subject to Article 4. However, an Option shall not be
exercisable with respect to fractional shares and the Committee
or the Company may impose a minimum number of shares for which a
partial exercise will be permitted.
5.2 Manner
of Exercise
All or a portion of an exercisable Option may be exercised upon
delivery to the Secretary or the Secretarys designee of
all of the following:
(a) A written notice complying with the applicable rules
established by the Committee or the Company, stating that the
Option, or a portion thereof, is being exercised, and signed by
the Optionee or other person then entitled to exercise the
Option or such portion or an appropriate notice from the
Optionees stock broker, (provided that, in the event of a
disposition of shares of Common Stock acquired by exercise of an
Incentive Stock Option which occurs within (i) two years
from the date of granting (including the date the Option is
modified, extended or renewed for purposes of
Section 424(h) of the Code) such Option to such Optionee,
or (ii) one year after the transfer of such shares to such
Optionee, the Optionee shall also give the Company prompt
written or electronic notice of such disposition);
(b) Such representations and documents as the Committee, in
its sole discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act
of 1933, as amended, and any other federal, state or foreign
securities laws or regulations, the rules of any securities
exchange or automated quotation system on which the Shares are
listed, quoted or traded or any other applicable law. The
Committee may, in its sole discretion, also take whatever
additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents
and registrars;
(c) Full payment for the shares and taxes described in
Article 11.7 with respect to which the Option, or portion
thereof, is exercised in whole or in part by (i) cash;
(ii) certified or bank check or such other instrument as
the Company may accept; (iii) delivery (either by surrender
of the shares or by attestation) of shares unrestricted Common
Stock already owned by the Optionee of the same class as the
Common Stock subject to the Stock Option (based on the Fair
Market Value of the Common Stock on the date the Stock Option is
exercised); provided, however, that such already-owned
shares either were acquired by the Optionee in an open-market
transaction or have been held by the Optionee for at least six
months at the time of exercise; (iv) if permitted by the
Committee or the Company, the surrender of shares of Common
Stock then issuable upon exercise of the Option; or (v) if
70
permitted by the Committee, by delivering a properly executed
exercise notice to the Company, together with a copy of
irrevocable instructions to a stock broker acceptable to the
Company to deliver promptly to the Company the amount of sale or
loan proceeds necessary to pay the option price, and, if
requested, by the amount of any federal, state, local or foreign
withholding taxes; and
(d) In the event that the Option shall be exercised by any
person or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option.
ARTICLE 6 STOCK
APPRECIATION RIGHTS
6.1 Grant
and Exercise
(a) Stock Appreciation Rights may be granted in conjunction
with all or part of any Option granted under the Plan, either at
or after the time of grant of such Option. A Stock Appreciation
Right shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
(b) A Stock Appreciation Right may be exercised by an
Optionee in accordance with Article 6.2(b) by surrendering
the applicable portion of the related Option in accordance with
procedures established by the Committee or the Company. Upon
such exercise and surrender, the Optionee shall be entitled to
receive an amount determined in the manner prescribed in
Article 6.2(b). Options that have been so surrendered shall
no longer be exercisable to the extent the related Stock
Appreciation Rights have been exercised.
6.2 Terms
and Conditions
Stock Appreciation Rights shall be subject to such terms and
conditions as shall be determined by the Committee, including
the following:
(a) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Options to which
they relate are exercisable in accordance with the provisions of
the Plan.
(b) Upon the exercise of a Stock Appreciation Right, an
Optionee shall be entitled to receive an amount in cash, shares
of Common Stock or both, in value equal to the excess of the
Fair Market Value of one share of Common Stock over the option
price per share specified in the related Option multiplied by
the number of shares in respect of which the Stock Appreciation
Right shall have been exercised, with the Committee or the
Company having the right to determine the form of payment. To
the extent that a Stock Appreciation Right is exercised and
settled in Common Stock, the number of shares available for
future Awards under the Plan shall be reduced by the number of
Stock Appreciation Rights that are exercised (and not the number
of shares actually issued upon settlement of the Award).
(c) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Option in accordance
with the provisions of the Plan.
ARTICLE 7 RESTRICTED
STOCK, RESTRICTED STOCK UNITS, PERFORMANCE STOCK, PERFORMANCE
UNITS, STOCK PAYMENTS, DEFERRED STOCK AND DEFERRED STOCK
UNITS
7.1 Administration
Shares of Restricted Stock, Stock Payments and Deferred Stock
and Awards of Restricted Stock Units, Performance Stock,
Performance Units or Deferred Stock Units may be awarded either
alone or in addition to other Awards granted under the Plan. The
Committee or the Company shall determine the Awardees to whom
and the time or times at which grants of Restricted Stock,
Restricted Stock Units, Performance Stock, Performance Units,
Stock Payments, Deferred Stock
and/or
Deferred Stock Units will be awarded, the number of shares to be
awarded to any Awardee, the conditions for vesting, the time or
times within which such Awards may be subject to forfeiture and
any other terms and conditions of the Awards, in addition to
those contained in Article 7.3. The total number of shares
of (i) Restricted Stock, any Stock Payments and Deferred
Stock and (ii) the total number of shares
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represented by Restricted Stock Units, Performance Stock,
Performance Units, Deferred Stock Units and Dividend Equivalents
granted under the Plan shall not exceed 4 million.
7.2 Awards
and Certificates
(a) Shares of Restricted Stock, Stock Payments and Deferred
Stock shall be evidenced in such manner, as the Committee or the
Company may deem appropriate, for example book-entry
registration or issuance of one or more stock certificates. Any
certificate issued in respect of shares of Restricted Stock,
shares underlying any Stock Payments and shares of Deferred
Stock shall be registered in the name of such Awardee and shall
bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Award, substantially in the
following form:
The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and conditions
(including forfeiture) of the Avery Dennison Corporation Stock
Option and Incentive Plan, as amended and restated, and an Award
Agreement. Copies of such Plan and Agreement are on file at the
offices of Avery Dennison Corporation, 150 North Orange Grove
Boulevard, Pasadena, California 91103.
The Committee or the Company may require that the certificates
evidencing such shares be held in custody by the Company until
the restrictions thereon shall have lapsed and that, as a
condition of any Award of Restricted Stock, Stock Payments and
Deferred Stock, the Awardee shall have delivered a stock power,
endorsed in blank, relating to the Common Stock covered by such
Award.
(b) Restricted Stock Units, Performance Stock, Performance
Units and Deferred Stock Units shall represent the right,
subject to the terms and conditions of the Award, to receive, at
a specified time or times, either a specified number of shares
of Common Stock, or a cash payment equal to the Fair Market
Value of a specified number of shares of Common Stock, as the
Committee or the Company shall determine.
7.3 Terms
and Conditions
The terms and conditions of an Award of Restricted Stock or
Restricted Stock Units, Performance Stock or Performance Units,
Stock Payments, Deferred Stock or Deferred Stock Units as
established by the Committee or the Company shall be set forth
in an Award Agreement (or other documentation), including the
following:
(a) The Committee may, in connection with the grant,
designate an Award of Restricted Stock, Restricted Stock Units,
Performance Stock, Performance Units, Stock Payments, Deferred
Stock or Deferred Stock Units as a Qualified Performance-Based
Award, in which event it shall condition the grant or vesting,
as applicable, of such Award upon the attainment of Performance
Goals. If the Committee does not designate an Award of
Restricted Stock, Restricted Stock Units, Performance Stock,
Performance Units, Stock Payments, Deferred Stock or Deferred
Stock Units as a Qualified Performance-Based Award, it may also
condition the grant or vesting thereof upon the attainment of
Performance Goals. Regardless of whether an Award of Restricted
Stock, Restricted Stock Units, Performance Stock, Performance
Units, Stock Payments, Deferred Stock or Deferred Stock Units is
a Qualified Performance-Based Award, the Committee may also
condition the grant or vesting thereof upon the continued
service of the Awardee. The conditions for grant or vesting and
the other provisions of Awards of Restricted Stock, Restricted
Stock Units, Performance Stock, Performance Units, Stock
Payments, Deferred Stock or Deferred Stock Units (including any
applicable Performance Goals) need not be the same with respect
to each Awardee. The Committee may at any time, in its sole
discretion, accelerate or waive, in whole or in part, any of the
foregoing restrictions; provided, however, that in the case of
an Award that is a Qualified Performance-Based Award, the
applicable Performance Goals have been satisfied. The total
number of shares represented by Qualified Performance Based
Award granted under the Plan shall not exceed 4 million.
(b) Subject to the provisions of the Plan and the
applicable Award Agreement, during the period, if any, set by
the Committee, commencing with the date of such Award for which
such Awardees continued service is required (the
Restriction Period), and until the later of
(i) the expiration of the Restriction Period and
(ii) the date the applicable Performance Goals (if any) are
satisfied, the Awardee shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber shares of Restricted
Stock, shares underlying any Stock Payment or shares of Deferred
Stock or
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an Award of Restricted Stock Units, Performance Stock,
Performance Units or Deferred Stock Units; provided, however,
that, if so permitted under the applicable Award Agreement, the
rights to receive shares of Common Stock pursuant to an Award of
Restricted Stock Units, Performance Units or Deferred Stock
Units may be transferred pursuant to a gift to such
Awardees family, whether directly or indirectly or by
means of a trust or partnership or otherwise.
(c) Except as provided in this paragraph (c) and
Articles 7.3(a) and 7.3(b) and the applicable Award
Agreement, the Awardee shall have, with respect to shares of
Restricted Stock or shares underlying any Stock Payment (but not
Restricted Stock Units), all of the rights of a stockholder of
the Company holding the class or series of Common Stock that is
the subject of the Restricted Stock or any Stock Payment,
including, if applicable, the right to vote the shares and the
right to receive any cash dividends. Unless otherwise determined
by the Committee and subject to the terms of individual Award
Agreements, Section 11.3(e) and the next sentence,
(A) cash dividends on the class or series of Common Stock
that are the subject of the Award of Restricted Stock or
Restricted Stock Units, the subject of any Stock Payment or the
subject of any Deferred Stock or Deferred Stock Units, shall be
automatically deferred and reinvested in additional Restricted
Stock, Restricted Stock Units, Stock Payments or Deferred Stock
or Deferred Stock Units, as applicable, held subject to the
vesting of the underlying Award, and (B) dividends payable
in Common Stock shall be paid in the form of additional
Restricted Stock, Restricted Stock Units, Stock Payments,
Deferred Stock or Deferred Stock Units, as applicable, held
subject to the vesting of the underlying Award. Notwithstanding
the foregoing or any provision of an Award Agreement,
reinvestment of dividends in additional Restricted Stock,
Restricted Stock Units, Stock Payments, Deferred Stock or
Deferred Stock Units shall only be permissible if sufficient
shares of Common Stock are available under the Plan for such
reinvestment (taking into account then outstanding Awards).
(d) Except to the extent otherwise provided in the
applicable Award Agreement and Articles 7.3(a), 7.3(b),
7.3(e) and 9.1(b), upon an Awardees Termination of Service
for any reason during the Restriction Period or before the
applicable Performance Goals are satisfied, all shares of
Restricted Stock, shares underlying any Stock Payments and
shares of Deferred Stock and all Restricted Stock Units,
Performance Stock, Performance Units and Deferred Stock Units
still subject to restriction shall be forfeited by the Awardee.
(e) Except to the extent otherwise provided in
Article 9.1(b), in the event of an Awardees
Retirement or Termination of Service other than for Cause, the
Committee shall have the discretion to waive, in whole or in
part, any or all remaining restrictions (other than, in the case
of Restricted Stock with respect to which an Awardee is a
Covered Employee, satisfaction of the applicable Performance
Goals unless the Termination of Service was by reason of the
Awardees death, Disability or Involuntary Termination)
with respect to any or all of such Awardees shares of
Restricted Stock, Restricted Stock Units, Performance Stock,
Performance Units, shares underlying any Stock Payments shares
of Deferred Stock and Deferred Stock Units.
(f) If and when any applicable Performance Goals are
satisfied and the Restriction Period expires without a prior
forfeiture of the Restricted Stock, unlegended certificates for
such shares shall be delivered to the Awardee upon surrender of
the legended certificates.
ARTICLE 8 DIVIDEND
EQUIVALENTS
8.1 Dividend
Equivalents
Dividend Equivalents may be granted under this Plan in
conjunction with other Awards, except Options and Stock
Appreciation Rights. Dividend Equivalents shall represent the
right to receive cash payments, shares of Common Stock, or a
combination thereof, having a value equal to the dividends
declared on Common Stock during a specified period, and subject
to such other terms and conditions as the Committee shall
determine.
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ARTICLE 9 CHANGE
IN CONTROL PROVISIONS
9.1 Impact
of Event
Notwithstanding any other provision of the Plan to the contrary,
in the event of a Change in Control:
(a) Any Options and Stock Appreciation Rights outstanding
as of the date such Change in Control is determined to have
occurred, and which are not then exercisable and vested, shall
become fully exercisable and vested, and shall remain
exercisable until their Expiration Date notwithstanding any
Termination of Service of the relevant Optionee other than a
Termination of Service for Cause.
(b) The restrictions and deferral limitations applicable to
any Restricted Stock, Restricted Stock Units, Performance Stock,
Performance Units, Dividend Equivalents, Stock Payments,
Deferred Stock or Deferred Stock Units shall lapse, and such
Restricted Stock, Restricted Stock Units, Performance Stock,
Performance Units, Dividend Equivalents, Stock Payments,
Deferred Stock or Deferred Stock Units shall become free of all
restrictions and become fully vested and transferable at the
target amount.
(c) Any restrictions or deferral or forfeiture limitations
applicable to any Dividend Equivalents shall lapse.
9.2 Definition
of Change in Control
For purposes of the Plan,
Change of Control shall mean a change in the
ownership or effective control, or in the ownership
of a substantial portion of the assets of the Company,
within the meaning of Section 409A, and shall include any
of the following events as such concepts are interpreted under
Section 409A:
(a) the date on which a majority of members of the Board is
replaced during any twelve-month period by Directors whose
appointment or election is not endorsed by a majority of the
members of the Board before the date of the appointment or
election; or
(b) the acquisition, by any one Person, or by Persons
acting as a group, or by a corporation owned by a group of
Persons that has entered into a merger, acquisition,
consolidation, purchase, stock acquisition, asset acquisition,
or similar business transaction with the Company, of:
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(i)
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ownership of stock of the Company, that, together with any stock
previously held by such Person or group, constitutes more than
fifty percent (50%) of either (i) the total fair market
value or (ii) the total voting power of the stock of the
Company;
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(ii)
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ownership of stock of the Company possessing thirty percent
(30%) or more of the total voting power of the Company, during
the twelve-month period ending on the date of such
acquisition; or
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(iii)
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assets from the Company that have a total gross fair market
value equal to or more than forty percent (40%) of the total
gross fair market value of all of the assets of the Company
during the twelve-month period ending on the date of such
acquisition; provided, however, that any transfer of assets to a
related person as defined under Section 409A shall not
constitute a Change of Control.
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ARTICLE 10 ADMINISTRATION
10.1 Committee
The Plan shall be administered by the Compensation and Executive
Personnel Committee of the Board or such other committee of the
Board, as may from time to time be selected by the Board.
74
10.2 Powers
of Committee
(a) The Committee shall have the authority to conduct the
general administration of this Plan in accordance with its
provisions. The Committee shall have the power to make Awards
and set the terms and conditions for such Awards (including the
option price, any vesting condition, restriction or limitation
(which may be related to the performance of the Awardee, the
Company or any Subsidiary) and any vesting acceleration or
forfeiture waiver regarding any Award and the shares of Common
Stock relating thereto), based on such factors as the Committee
shall determine; to modify, amend or adjust the terms and
conditions of any Award, at any time or from time to time,
including Performance Goals; provided, however, that the
Committee may not adjust upwards the amount payable with respect
to a Qualified Performance-Based Award or waive or alter the
Performance Goals associated therewith except as specifically
permitted by the Plan; to determine to what extent and under
what circumstances Common Stock and other amounts payable with
respect to an Award shall be deferred; and to determine under
what circumstances an Award may be settled in cash or Common
Stock under Articles 4, 6, 7, 8 and 9, as applicable. The
Committee shall have the power to interpret this Plan and the
Awards made hereunder, to adopt such rules and procedures for
the administration, interpretation, and application of this Plan
as are consistent therewith, and to interpret, amend or revoke
any such rules and procedures. Any Award under this Plan need
not be the same with respect to each Awardee.
(b) Any determination made by the Committee or pursuant to
delegated authority pursuant to the provisions of the Plan with
respect to any Award shall be made in the sole discretion of the
Committee or such delegate at the time of the grant of the Award
or, unless in contravention of any express term of the Plan, at
any time thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of
the Plan shall be final and binding on all persons, including
the Company, Awardees and Beneficiaries.
10.3 Action
by Committee
(a) The Committee shall act by a majority of its members in
office. The Committee may act either by vote at a meeting, or by
a memorandum, minutes or other written instrument signed by the
Chairman of the Committee or by a majority of the Committee. The
Committee may delegate to (i) the CEO the authority to make
decisions pursuant to, and interpretations of, the Plan
(provided that no such delegation may be made that would cause
Awards or other transactions under the Plan to cease to be
exempt from Section 16(b) of the Exchange Act or cause
Qualified Performance-Based Awards to fail to qualify for the
Section 162(m) exemption), and the authority to grant
Awards and establish terms and conditions related to such Awards
to any Awardee, who is not an officer of the Company
(within the meaning of
Rule 16a-1(f)
promulgated under the Exchange Act, as amended), subject to any
limitations the Committee may impose, and (ii) the CEO or
Secretary, or both, any or all of the administrative and
interpretive duties and authority of the Committee under the
Plan. Based on such delegation of authority from the Committee,
the CEO may request Company representatives to take actions
related to the granting of Awards and to other Plan matters.
(b) Any authority granted to the Committee under this Plan
may also be exercised by the full Board, except to the extent
that the grant or exercise of such authority would cause any
Award designated as a Qualified Performance-Based Award not to
qualify for, or to cease to qualify for, the Section 162(m)
Exemption. To the extent that any permitted action taken by the
Board conflicts with action taken by the Committee, the Board
action shall control.
10.4 Compensation;
Professional Assistance; Good Faith Actions
Expenses and liabilities that members of the Committee incur in
connection with the administration of this Plan shall be borne
by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers, or other persons. The
Committee, the Company, and its officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any
such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be
final and binding upon all Awardees and Beneficiaries, the
Company, and all other interested persons. No members of the
Committee shall be personally liable for any action,
determination, or interpretation made in good faith with respect
to this Plan or any Award, and all members of the Committee
shall be fully protected by the Company in respect of any such
action, determination or interpretation.
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ARTICLE 11 MISCELLANEOUS
PROVISIONS
11.1 Not
Transferable
Except as specifically provided in the Plan with respect to
Options, Stock Appreciation Rights, Restricted Stock Units,
Performance Units and Deferred Stock Units, as provided in
Article 11.8 regarding designation of Beneficiaries, and as
may be otherwise provided in the applicable Award Agreement:
(i) Awards may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of
descent and distribution; (ii) no Award or interest or
right therein shall be subject to the debts, contracts or
engagements of the Awardee or his Beneficiaries and successors
in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary
or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings
(including bankruptcy); and (iii) any attempted disposition
of an Award shall be null and void and of no effect.
11.2 Unfunded
Status of Plan
It is presently intended that the Plan constitutes an
unfunded plan for incentive and deferred
compensation. The Committee may authorize the creation of trusts
or other arrangements to meet the obligations created under the
Plan to deliver Common Stock or make payments; provided that,
unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the
unfunded status of the Plan.
11.3 General
Provisions
(a) The Committe