Business Context and Reporting Period
This Form 8-K Current Report was filed by Avery Dennison Corporation on December 3, 2009. The filing addresses corporate governance and executive compensation matters, specifically the adoption of new severance plans by the Compensation and Executive Personnel Committee of the Board of Directors.
Key Financial Metrics
The filing text does not provide a clear value for revenue, profit, cash flow, margins, debt, or liquidity. This report focuses exclusively on the terms of executive compensation arrangements rather than financial performance results.
Material Changes
The primary material change reported is the adoption of two new severance plans effective December 3, 2009:
- Key Executive Change of Control Severance Plan: Provides severance to executives upon termination connected with a change of control. Tier A participants receive three times the sum of annual pay, highest annual bonus (preceding three years), and health benefits cash value. Tier B participants receive two times this sum. Participants also receive a pro-rata bonus and up to one year of outplacement services.
- Executive Severance Plan: Provides severance to specified employees upon involuntary termination. Level 1 participants receive two times the sum of annual pay, highest annual bonus (preceding three years), and health benefits cash value. Levels 2, 3, and 4 receive one times this sum. Participants also receive up to one year of outplacement services.
Both plans include provisions to reduce payments to the "safe harbor amount" if excise taxes under Section 4999 of the Internal Revenue Code would otherwise apply. Payments are offset by amounts received under other severance agreements.
Guidance, Outlook, and Risks
The filing contains no financial guidance, outlook, or management commentary regarding future business performance. The primary risk disclosed relates to the potential financial liability of the company should a change of control or involuntary terminations occur, triggering the new severance obligations. The plans are designed to comply with Section 409A of the Internal Revenue Code.
Investor Verification Checklist
- Review Exhibit 10.35 (Key Executive Change of Control Severance Plan) for specific eligibility criteria and payment formulas.
- Review Exhibit 10.36 (Executive Severance Plan) for the full terms regarding involuntary termination benefits.
- Verify the specific list of executives designated as Tier A, Tier B, Level 1, Level 2, Level 3, and Level 4 participants, as this is not detailed in the summary text.
- Assess the potential impact of these plans on the company's cash flow in the event of a merger, acquisition, or significant restructuring.