Amended and Restated Annual Incentive Plan
AVERY DENNISON CORPORATION
AMENDED AND RESTATED ANNUAL INCENTIVE PLAN
WHEREAS, Avery Dennison Corporation (the “Company”) wishes to amend and restate the Amended and Restated Annual Incentive Plan, effective as of January 1, 2015, by adopting this Amended and Restated Annual Incentive Plan (“AIP” or the “Plan”), effective as of January 1, 2020 (the “Effective Date”); and
WHEREAS, this Plan was approved by the Compensation and Executive Personnel Committee of the Company’s Board of Directors or any successor committee of the Board with similar responsibilities (the “Committee”) pursuant to Section 6(c) of the Plan.
NOW, THEREFORE, this Plan is hereby amended and restated, effective as of the Effective Date, as follows:
The purposes of the Plan are as follows:
1 As defined by applicable regulations of the Securities and Exchange Commission.
payments, stock options or other long-term incentive compensation vehicles, or other forms of employee benefits such as vacation, insurance, health or medical benefits, disability benefits, workers’ compensation, supplemental unemployment benefits, and post-employment or retirement benefits (including but not limited to compensation, pension, health, medical or life insurance). If a Participant’s standard work hours change during a Plan Year (whether increased or decreased), the Base Salary used for his or her AIP calculation will be prorated based on each of the Participant’s previous and current standard hours and the number of months associated with each status.
Participation in the Plan is limited to employees of the Company and its Subsidiaries who have been designated as Participants by the Administrator or, with respect only to non-executive officers of the Company, an authorized Delegate.
4. ANNUAL AIP OPPORTUNITY
a. AIP Award
Subject to achievement (by the Company or any Business Unit thereof) of any minimum benchmark established by the Administrator for the payment of any awards under the Plan for a given Plan Year, Participants will have the opportunity to earn an annual variable AIP award determined in accordance with this Article 4.
b. AIP Award Payout
The percentage derived from each Financial Performance Objective (prior to weighing) shall be:
1. Zero if the Company or Business Unit(s) achieved less than the threshold performance level for such Financial Performance Objective.
2. 50% if the Company or Business Unit(s) achieved the threshold performance level for such Financial Performance Objective.
3. 100% if the Company or Business Unit(s) achieved the target performance level for such Financial Performance Objective.
4. 200% if the Company or Business Unit(s) achieved at least the maximum performance level for such Financial Performance Objective.
Upon the achievement of between the threshold and the target levels or between the target and the maximum levels for a Financial Performance Objective of the Company or Business Unit(s), the Financial Modifier for such Financial Performance Objective will be determined by means of linear interpolation. The maximum Financial Modifier shall be 200%, for each Financial Performance Objective and in total.
c. AIP Award Determination in Cases of Prior or Subsequent Participation in Another Variable Incentive or Similar Plan or Change in Target Award.
Participants who are eligible to receive an award under another Variable Incentive Plan (e.g., sales incentive plan) during part of the Plan Year and are designated as Participants under the Plan during a portion of the Plan Year may receive an award under the Plan on a prorated basis as set forth in Section 4(h). Participants who have a change in their Target Award are eligible to receive an award under the Plan that is prorated based on the timing of the change to the Participant’s Target Award.
d. AIP Award Determination in Cases of Leave of Absence
If a Participant is on an approved leave of absence (including, without limitation, leaves caused by short-term disability) for more than one month during the Plan Year, then the Participant will continue to participate for that Plan Year; provided that the Administrator may, in its discretion, decrease the award that would otherwise be payable under the Plan.
e. AIP Award Determination in Cases of Disability, Death or Retirement
f. AIP Award Determination in Cases of Termination
Participants whose employment with the Company or a Subsidiary is terminated prior to end of the Plan Year for any reason other than Retirement, Disability or death shall not be eligible to receive awards under this Plan, as may be amended or supplemented for local legal differences for employees of foreign (non-U.S.) Subsidiaries.
g. AIP Award Determination in Cases of New Participants or Participants in Another Variable Incentive Plan
Participants who become eligible to participate in the Plan prior to the end of the first fiscal quarter of the Plan Year and participate in the Plan for the remainder of such Plan Year will be eligible for a full year AIP opportunity for such Plan Year and Participants who become eligible to participate in the Plan during the fourth fiscal quarter of the Plan Year will not be eligible for an award under the Plan, unless approved by the Administrator or, with respect only to non-executive officers of the Company, an authorized Delegate. Participants who become eligible to participate in the Plan during the second or third fiscal quarters of the Plan Year will be eligible for a prorated award of between 25% and 75% of the full year AIP opportunity, based on the number of months of the Plan Year in which they worked and were eligible to participate in the Plan. Participants must (i) become eligible to participate in the Plan on or prior to the 15th day of a month, and (ii) participate in the Plan through the end of such month, in order to receive credit for such month toward a prorated award.
Participants who are eligible to participate in the Plan at the beginning of the Plan Year, but who subsequently become ineligible to participate in the Plan prior to the end of the Plan Year may receive an award under the Plan on a prorated basis, in the discretion of the Administrator or, with respect only to non-executive officers of the Company, an authorized Delegate.
h. Other Incentive Programs
No Participant may participate in any other Variable Incentive Plan, except as provided for herein.
5. TIMING OF PAYMENT OF AWARDS
AIP awards for each Participant will be paid in the form (cash or Company shares) as determined by the Committee, subject to such vesting as is determined by the Committee, and subject to the terms and conditions of the 2017 Incentive Award Plan, or any successor long-term incentive plan, as soon as conveniently possible after the calculation of the Company’s (or the Business Unit’s) achievement of the Performance Objectives and the award thereof by the Administrator following the Plan Year to which such awards relate, but in no event later than three months from the last day of the Plan Year to which such award relates; provided that Participants, if applicable under the law governing their employment contract with the Company or Subsidiary as the case may be, may have elected to defer the receipt of all or part of such award, to the extent permitted under Section 409A, in accordance with established deferred compensation plans offered by the Company.
6. PLAN ADMINISTRATION
a. General Administration
This Plan will be administered by the Administrator, which may delegate its administrative responsibilities in connection with the Plan to a Delegate with respect to non-executive officers of the Company. The Administrator (or the authorized Delegate with respect to non-executive officers) or its delegate will have full power and authority to interpret the Plan, to establish, amend and rescind any rules, forms or procedures as it deems necessary for the proper administration of the Plan, to determine the manner and time of payment of the annual incentive compensation payable under the Plan, and to take any other action as it deems necessary or advisable in connection with the Plan. Any decision made, action taken or interpretation made by the Administrator (or its authorized Delegate) that is not inconsistent with the provisions of this Plan will be final, conclusive, and binding on all persons interested in the Plan.
b. Adjustments for Extraordinary Events
If an event occurs during a Plan Year that materially influences the Financial Performance Objectives of the Company or Business Unit and is deemed by the Committee to be extraordinary and out of the control of management, the Committee may, in its discretion, increase or decrease the Financial Performance Objectives used to determine the annual AIP payout. Events warranting such action may include, but are not limited to, changes in accounting, tax or regulatory rulings, acquisitions, divestitures, mergers, consolidations, spin-offs, reorganizations, significant changes in economic conditions resulting in windfalls or hardships and other such events as the Committee, in its sole discretion, may determine.
c. Amendment, Suspension, or Termination
The Committee may amend, suspend or terminate the Plan, in whole or in part, at any time, if, in the sole judgment of the Committee, such action is in the best interests of the Company. Notwithstanding the above, any such amendment, suspension or termination must be prospective in that it may not deprive then-current Participants of that which they otherwise would have received under the Plan for the current Plan Year had the Plan not been amended, suspended or terminated.
7. MISCELLANEOUS PROVISIONS
Section and Article titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.
b. Employment Not Guaranteed
Nothing contained in the Plan nor any action taken in the administration of the Plan will be construed as a contract of employment or as giving a Participant any right to be retained in the service of the Company or any of its Subsidiaries.
In the event that any provision of the Plan is held to be invalid, void or unenforceable, the same will not affect, in any respect whatsoever, the validity of any other provision of the Plan.
d. Withholding Tax
All payments made pursuant to this Plan will be subject to withholding for all applicable taxes and contributions required by law to be withheld therefrom.
e. Clawback Provision
In the case of fraud or other intentional misconduct on the part of a Participant (or any other event or circumstance set forth in any clawback policy implemented by the Company or any Subsidiary, including, without limitation, any clawback policy adopted to comply with the requirements of applicable law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder (including, without limitation, any listing rules or standards resulting therefrom)) that necessitates a restatement of the Company’s or Business Unit’s financial results (including, without limitation, any accounting restatement due to the material noncompliance with any financial reporting requirement), such Participant will reimburse the Company for any awards or other incentive compensation paid or issued to such Participant in excess of the amount that would have been paid or issued based on the restated financial results, as determined by the Administrator pursuant to any applicable clawback policy or otherwise.
f. Applicable Law
The Plan will be governed in accordance with the laws of the State of Delaware, without giving effect to any principles of conflicts of law, whether of the State of Delaware or any other jurisdiction, and where applicable, the laws of the United States, that would result in the application of the laws of any other jurisdiction.
g. Section 409A
The annual variable awards granted under the Plan are intended to be exempt from or comply in all respects with Section 409A and, to the extent applicable, the Plan will be interpreted in accordance with Section 409A. Notwithstanding any provision of the Plan to the contrary, in the event that the Committee determines that any payment under the Plan may be subject to penalty for noncompliance with Section
409A, the Committee shall have the right (without any obligation to do so or to indemnify any Participant for failure to do so) to adopt such amendments to the Plan or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions that the Committee determines are necessary or appropriate to (i) exempt the payment from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to the payment, or (ii) satisfy the requirements of Section 409A and thereby avoid the application of penalty taxes under Section 409A. No provision of this Plan shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from a Participant or any other person to the Company or any of its Subsidiaries, employees or agents.
In the case of a Participant who is a “specified employee” and where delayed commencement of any payments under this Plan is required to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, any payment under this Plan that constitutes “non-qualified deferred compensation” subject to Section 409A may not be made before the date which is six months after the Participant’s separation from service (or, if earlier, the date of the Participant’s death). For purposes of this Section 7(g), a Participant shall be a “specified employee” if such Participant is a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of a corporation, any stock of which is publicly traded on an established securities market or otherwise, as determined under Section 409A(a)(2)(B)(i) of the Code and the Department of Treasury regulations thereunder.