Business Context and Reporting Period
This Form 8-K Current Report was filed by Avery Dennison Corporation on October 29, 2010. The report addresses Item 5.02 regarding the departure of directors or certain officers and compensatory arrangements. The primary event reported is the approval by the Compensation and Executive Personnel Committee to terminate existing employment agreements with specific Named Executive Officers (NEOs) effective December 1, 2010.
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 executive compensation and employment contract modifications rather than financial performance metrics.
Material Changes
The material change reported is the termination of employment agreements for the following NEOs, effective December 1, 2010:
- Dean A. Scarborough (Chairman, President & CEO)
- Daniel O’Bryant (Executive Vice President, Business Development)
- Timothy S. Clyde (Group Vice President, Specialty Materials and Converting)
- Robert M. Malchione (Senior Vice President, Corporate Strategy and Technology)
Additionally, the filing notes that employment agreements for Mitchell R. Butier and Donald A. Nolan had previously terminated effective December 31, 2009.
Guidance, Outlook, and Management Commentary
Following the termination of employment agreements, the Company outlined specific eligibility for severance plans in the event of a change of control:
- Severance Caps: Generally, NEOs are eligible for payments not exceeding two times the sum of their annual pay, highest annual bonus (preceding three years), and cash value of medical/dental benefits. Mr. Scarborough is an exception, eligible for three times such sum.
- Excise Tax Gross-Ups: No NEOs are eligible for excise tax gross-ups, with the exception of Mr. O’Bryant, whose retention agreement provides for such a gross-up. Mr. O’Bryant’s retention agreement expires on December 31, 2012.
- Plan Participation: Affected NEOs are eligible to participate in the Key Executive Change of Control Severance Plan and the Executive Severance Plan. Mr. Scarborough is designated as a Tier A/Level 1 participant, while Messrs. O’Bryant, Clyde, and Malchione are Tier B/Level 2 participants.
Important Facts for Investor Verification
- Verify the specific financial impact of the potential severance payments under the Change of Control scenarios described.
- Confirm the status of Mr. O’Bryant’s retention agreement and its expiration date of December 31, 2012.
- Review the Company's broader executive compensation philosophy to understand the rationale behind terminating fixed-term employment agreements.
- Check subsequent filings for any actual payouts triggered by a change of control or termination events.