Document:

exv10w18w2

Exhibit 10.18.2

AVERY DENNISON CORPORATION

2005 DIRECTORS VARIABLE DEFERRED COMPENSATION PLAN

AMENDED AND RESTATED

ARTICLE 1

PURPOSE

     The 2005 Directors Variable Deferred Compensation Plan (“Plan”) adopted by Avery Dennison
Corporation, a Delaware corporation (the “Company”), originally effective as of December 1, 2004,
is hereby amended and restated effective as of January 1, 2008, to comply with Internal Revenue
Code Section 409A and applicable authorities promulgated thereunder. The Plan is a deferred
compensation plan for non-employee directors of the Company. All vested deferred compensation
balances as of November 30, 2004, grandfathered under the Code Section 409A transition rules, shall
be governed by prior deferred compensation Plan documents and no subsequent amendment shall apply
to such grandfathered amounts. All amounts deferred, contributed or which became vested on or after
December 1, 2004 shall be subject to the provisions of this amended and restated Plan. The Plan is
intended, and shall be interpreted in all respects, to comply with the provisions of Code Section
409A.

ARTICLE 2

DEFINITIONS AND CERTAIN PROVISIONS

     2.1 Administrator. “Administrator” means the administrator appointed by the Committee
to handle the day-to-day administration of the Plan pursuant to Article 9.

     2.2 Allocation Election. “Allocation Election” means the form or electronic
communication by which a Participant elects the Declared Rate(s) to be credited as earnings or
losses to such Participant’s Deferral Account.

     2.3 Annual Deferral. “Annual Deferral” means the amount of Director’s Fees that the
Participant elects to defer for a Calendar Year.

     2.4 Beneficiary. “Beneficiary” means the person or persons or entity designated as
such by a Participant pursuant to Article 8.

     2.5 Benefit. “Benefit” means any benefit provided under the terms of the Plan.

     2.6 Change of Control. “Change of Control” means “a change in the ownership or
effective control,” or in “the ownership of a substantial portion of the assets of” the Company
(but not a Participating Subsidiary, except as provided under Article 10), within the meaning of
Code Section 409A and shall include any of the following events as such concepts are interpreted
under Code Section 409A:

          (a) the date on which a majority of members of the Company’s Board of Directors is replaced
during any twelve-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Company’s Board of Directors before the date of the appointment or
election; or

          (b) the acquisition, by any one person, 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:

               (i) 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;

               (ii) 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

 

 

               (iii) 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
immediately before such acquisition, 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
Code Section 409A shall not constitute a Change of Control.

     2.7 Code. “Code” means the Internal Revenue Code of 1986, as amended, as interpreted
by Treasury regulations and applicable authorities.

     2.8 Committee. “Committee” means the deferred compensation plans administrative
committee appointed to administer the Plan pursuant to Article 9.

     2.9 Declared Rate. “Declared Rate” means the notional rates of return (which may be
positive or negative) of the individual investment options selected by a Participant for such
Participant’s Deferral Account, as referred to in Article 6.

     2.10 Deferral Account. “Deferral Account” means the notional account established for
record keeping purposes for a Participant pursuant to Section 4.4.

     2.11 Director. “Director” means a member of the Board of Directors of the Company who
is not employed by the Company or any of its subsidiaries.

     2.12 Director’s Fees. “Director’s Fees” means the retainers and meeting fees payable
to a Director for service as a Director, which may be deferred hereunder.

     2.13 Disability Benefit. “Disability Benefit” means the Benefit payable to a
Participant in accordance with Section 7.4 after the Participant has become Disabled.

     2.14 Disability or Disabled. “Disability or Disabled” shall be interpreted in accord
with the requirements of Code Section 409A and shall mean, in the case of a Participant, that the
Participant (i) is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment, which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason
of any medically determinable physical or mental impairment, which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve (12) months,
receiving income replacement benefits for a period of not less than three (3) months under an
accident and health plan covering employees of the Participant’s employer.

     2.15 Distribution. “Distribution” means any payment to a Participant or Beneficiary
according to the terms of this Plan.

     2.16 Early Termination Benefit. “Early Termination Benefit” means the lump sum amount
payable to a Participant pursuant to Section 7.3.

     2.17 Enrollment Period. “Enrollment Period” means the period(s) designated from year
to year by the Administrator for enrollments.

     2.18 Normal Retirement. “Normal Retirement” means the Termination of Service for
reasons other than death on or after the Participant attains age sixty (60).

     2.19 Participant. Participant” means a Director who has filed a completed and executed
Participation Election Form with the Administrator, and who is participating in the Plan in
accordance with the provisions of Articles 3 and 4.

     2.20 Participation Election. “Participation Election” means the commitment to make a
deferral under the Plan submitted by the Participant to the Administrator pursuant to Article 4 of
the Plan. The Participant Election may take the form of an electronic communication followed by
appropriate confirmation according to procedures established by the Administrator.

     2.21 Plan. “Plan” means this 2005 Directors Variable Deferred Compensation Plan, a
non-qualified elective deferred compensation plan, as the same may be amended from time to time.

     2.22 Plan Year. “Plan Year” means the calendar year.

 

 

     2.23 Rabbi Trust. “Rabbi Trust” means the trust described in Section 12.7.

     2.24 Settlement Date. “Settlement Date” means the date by which a lump-sum payment
shall be made or the date by which installment payments shall commence under the Plan. Unless
otherwise specified, the Settlement Date shall be as soon as practicable after, but in all events
no later than ninety (90) days following, the Valuation Date. In the case of a Participant’s death,
the Administrator shall be provided with the documentation reasonably necessary to establish the
fact of the Participant’s death. Notwithstanding the forgoing or any other provision of the Plan,
no distribution shall be made prior to the date such distribution is permissible under Coder
Section 409A and any distribution delayed by reason of the application of this prohibition shall be
paid as soon as such distribution is permissible under Code Section 409A.

     2.25 Survivor Benefit. “Survivor Benefit” means those Plan Benefits that become
payable upon the death of a Participant pursuant to Section 7.5.

     2.26 Termination of Service. “Termination of Service” means the cessation of service
as a Director for any reason, whether voluntary or involuntary, including by reason of retirement,
Disability or death. For purpose of the preceding sentence, Termination of Service shall be
interpreted consistent with the requirements of Code Section 409A for “separation from service”.

     2.27 Valuation Date. “Valuation Date” means the date on which the Deferral Account is
valued for Distribution purposes. This date shall be the last day of the month in which an event
occurs that triggers a Benefit payment.

ARTICLE 3

PARTICIPATION

     3.1 Participation. The Administrator shall notify Participants generally not less than
thirty (30) days (or such lesser period as may be practicable under the circumstances) prior to any
deadline for filing a Participation Election Form. A Director must submit a Participation Election
Form during the Enrollment Period established by the Administrator to become a Participant.

     3.2 Participation Election. A Director shall become a Participant in the Plan no later
than the first day of the Plan Year coincident with or next following the date the Director has
filed a Participant Election with the Administrator. To be effective, the Director must submit the
Participant Election during an Enrollment Period or any other such time as determined by the
Administrator. A Director who joins the Company after the first day of the Plan Year may become a
Participant provided such Director files a Participant Election with the Administrator within
thirty (30) days of commencement of service as a Director, to allow deferrals by such new Director
of Director’s Fees earned during the balance of such Plan Year.

     3.3 Continuation of Participation. A Participant who has elected to participate in the
Plan by submitting a Participant Election shall continue as a Participant in the Plan until the
entire balance of the Participant’s Deferral Account has been distributed.

ARTICLE 4

PARTICIPANT DEFERRALS

     4.1 Annual Deferral. On the Participation Election Form, and subject to the
restrictions set forth herein, a Director shall designate the amount of Director’s Fees to be
deferred thereby for the next following calendar year, provided that any deferral election shall be
made not later than the last day of the calendar year preceding the calendar year in which such
Director’s Fees are earned (or, in the case of a new Participant, the thirtieth (30 th )
day following initial eligibility for the remaining portion of the Plan Year).

     4.2 Minimum Deferral. The minimum amount of Annual Deferral that may be deferred shall
be ten percent (10%) of the Participant’s Director’s Fees.

     4.3 Maximum Deferral. The standard maximum amount of Annual Deferral that may be
deferred shall be one hundred percent (100%) of the Participant’s Director’s Fees. Notwithstanding
the foregoing, the Committee may further limit the maximum or the minimum amount of deferrals by
any Participant or group of Participants in its sole discretion.

 

 

ARTICLE 5

DISCRETIONARY COMPANY CREDITS

     The Company, in its sole discretion, may credit to selected Participants’ Deferral Accounts a
discretionary amount or match in an amount determined by the Company. These amounts and subsequent
earnings are subject to vesting schedules established by the Administrator.

ARTICLE 6

ACCOUNTS AND INVESTMENT OPTIONS

     6.1 Accounts. Solely for record keeping purposes, the Company shall maintain a
Deferral Account under the Plan for each Participant. Annual Deferrals shall be credited by the
Employer to the Participant’s Deferral Account at the time such amounts would otherwise have been
paid to the Participant. Such Account shall be credited (and compounded daily) with a notional rate
of return (positive or negative) based on the Declared Rate(s) elected by the Participant under
Section 6.2. All Distributions shall be debited from the applicable Account on the Valuation Date.

     6.2 Participant Election of Declared Rates. The crediting rate on amounts in a
Participant’s Deferral Account shall be based on the Participant’s choice among the investment
alternatives made available from time to time by the Committee. The Administrator shall establish a
procedure by which a Participant may make an Allocation Election among any combination of Declared
Rates in one percent (1%) increments up to one hundred percent (100%) and may change the Declared
Rate(s) at least once per week with such change(s) effective as of the first day of the next
following week. Such investment elections may apply to future deferrals and/or to the existing
Deferral Account balances, as indicated by the Participant. Notwithstanding the foregoing, the
Company shall have no obligation to set aside or invest funds as directed by the Participant and,
if the Company elects to invest funds as directed by the Participant, the Participant shall have no
more right to such investments than any other unsecured general creditor of the Company.

     6.3 Declared Rates. A Participant may select from Declared Rates which may from time
to time be established under the Plan and the number of which may be expanded by the Committee; it
being the intention that at all times Participants will have at least nine (9) core investment fund
choices comparable in focus, type and quality to those listed on Exhibit A. The Declared Rates
provide a rate of return (positive or negative) that are based on the actual net performance of the
Declared Rate(s) selected by the Participant. The Declared Rates credited to Participant Deferral
Accounts shall be the actual net performance of the Declared Rates, to which will be added a basis
point credit, which credit (when added to the actual net performance of the Declared Rates) will
together be approximately equivalent on average to crediting the actual gross performance of the
Declared Rates less twenty (20) basis points.

     6.4 Valuation of Deferral Accounts. The value of a Deferral Account as of any date
shall equal the amounts theretofore credited or debited to such Deferral Account, plus the deemed
earnings or losses of such Deferral Account in accordance with this Article 6 through the day
immediately preceding such date.

     6.5 Vesting. A Participant shall be one hundred percent (100%) vested at all times in
amounts credited to the Participant’s Deferral Accounts.

     6.6 Statement of Deferral Accounts. The Administrator (or an agent thereof) shall
provide to each Participant periodic statements or on-line access to information setting forth the
Participant’s deferrals, Declared Rate(s) (credits or debits), Distributions and Deferral Account
balance.

     6.7 Errors in Benefit Statements, Deferrals, Distributions or Administration. In the
event an error is made in a benefit statement, such error shall be corrected on the next benefit
statement following the date such error is discovered. In the event of an error in the amount of a
Participant’s deferral, immediately upon the discovery of such error, if possible, the next
deferral of such Participant shall be adjusted upward or downward to correct such prior error
subject to compliance with permissible corrections procedures established under Code Section 409A.
In the event of an error in a Distribution, the applicable Participant’s Deferral Account shall,
immediately upon the discovery of such error, be adjusted to reflect such under or over payment
and, if possible, the next Distribution to such Participant shall be adjusted upward or downward to
correct such prior error subject to compliance with permissible corrections procedures established
under Code Section 409A. If the remaining balance of a Participant’s Deferral Account is
insufficient to cover an erroneous overpayment to such Participant, the Company may, at its
discretion, offset other amounts payable to the Participant from the Company to the extent
permitted under all applicable laws, to recoup the amount of such overpayment(s). It is the

 

 

intent of the Company that the Plan be interpreted and administered to comply in all respects
with Code Section 409A. However, Participants and/or their Beneficiaries shall be responsible for
any and all taxes resulting from participation in the Plan, and the Company shall have no liability
to the Participant or any Beneficiary in the event any taxes or excise taxes may ultimately be
determined to be applicable to any deferral, contribution, vesting event or Distribution under the
Plan.

ARTICLE 7

BENEFITS

     7.1 Normal Retirement Benefit Distribution Election.

          (a) Initial Election. At the time of entering the Plan or, if later, on or before
December 31, 2008, Participants shall designate the form of distributions of amounts credited to
their Deferral Account upon Normal Retirement, from among the distribution alternatives specified
herein. A Participant may only change a distribution election for the Deferral Account in
accordance with the change in elections provisions specified in Section 7.1(b).

          (b) Modification of Election. A distribution election with respect to an existing
Deferral Account under the Plan may only be changed under the terms and conditions specified by the
Committee in compliance with Code Section 409A. After December 31, 2008, except as expressly
provided in this Article 7, no acceleration of a distribution is permitted and a subsequent
election that delays payment or changes the form of payment shall be permitted if and only if all
of the following requirements are met:

               (i) the new election does not take effect until at least twelve (12) months after the date on
which the new election is made; and

               (ii) in the case of payments made on account of Termination of Service (other than by reason
of death or Disability) or Change in Control, the new election delays payment for at least five (5)
years from the date that payment would otherwise have been made, absent the new election.

     For purposes of application of the above change limitations, installment payments from a
Deferral Account shall be treated as a single payment. Changes complying with the requirements of
this Section 7.1(b) may be made any number of times with respect to the same Deferral Account but
in no event may any change delay the distribution of benefits payable from any Deferral Account
beyond the date the Participant attains (or a deceased Participant would have attained) age
ninety-two (92). Election changes made pursuant to this Section 7.1(b) shall be made in accordance
with rules established by the Committee, and shall comply with all applicable requirements of Code
Section 409A and applicable authorities.

     7.2 Normal Retirement Benefit Distribution Alternatives. The Participant shall be
entitled to select the form of payment of Distributions from a Deferral Account from among the
following alternatives set forth below. Benefits shall be paid according to the Participant’s
distribution elections unless such distribution election is superseded by an alternative
distribution event such as death, Disability, or Change in Control, as specified in this Article 7.

          (a) Form of Distribution. The available forms of payment from the
Participant’s Deferral Account upon Normal Retirement shall be as follows:

          (i) Lump-Sum. One lump-sum payment.

          (ii) Installment Payments. Monthly installments of principal and interest payable over
a period of any number of years up to twenty (20), but in no event ending later than the date on
which the Participant shall attain age ninety-two (92). Installment payments shall be calculated on
an annual basis but paid during the Plan Year at approximately monthly intervals as may be
determined by the Committee, provided that such intervals shall not be less frequent than
quarterly, except in the final year of payments when only one installment shall be made in January
in such final Plan Year. Installment payments shall be based on the Participant’s Deferral Account
balance at the beginning of the payment period and shall be recalculated annually by dividing the
Participant’s Deferral Account balance as of the last day of the Plan Year by the number of
remaining years in the payment period based on the Participant’s retirement payment election.
Deferral Accounts shall continue to be credited during the payment period based on the
Participant’s choice among Declared Rates as provided in Article 6. Notwithstanding the foregoing,
an installment payout election shall not be available prior to the date that the Participant shall
have qualified for Normal Retirement.

 

 

          (iii) Small Benefit Exception. Notwithstanding the foregoing, in the event that the
total balance payable from all of a Participant’s Accounts under this Plan (and any other plans
aggregated with this Plan for purposes of Code Section 409A) is less than the applicable dollar
amount under Code Section 402(g)(1)(B) for the calendar year of payment, the Administrator shall
have the discretion to pay all of the Participant’s benefits under the Plan (and such other
aggregated plans) in the form of a single lump-sum, at any time, subject to compliance with
Treasury Regulation Section 1.409A-3(j)(4)(v), as may be further revised or amended.

If no election is made regarding the form of benefits from a particular Account, benefits from that
Account shall be paid in a single lump-sum.

          (b) Commencement of Payment of Benefits. The commencement date for payment of benefits
from a Participant’s Deferral Account on Normal Retirement shall be upon the Settlement Date next
following the Participant’s Normal Retirement.

     7.3 Early Termination Benefit. In the event of a Participant’s Termination of Service
for any reason other than death, Disability, or Normal Retirement, the Participant shall receive an
Early Termination Benefit equal to the outstanding balance of the Participant’s Deferral Account,
credited with notional earnings as provided in Article 6, payable in the form of a single lump-sum
distribution on the Settlement Date next following such early Termination of Service. The
Participant shall be entitled to no further Benefits under this Plan.

     7.4 Survivor Benefits. In the event of a Participant’s death prior to complete
distribution of all of the Participant’s Deferral Account, the Participant’s Beneficiary shall
receive a Survivor Benefit equal to the outstanding balance of the Participant’s Deferral Account,
credited with notional earnings as provided in Article 6, payable in the form of a single lump-sum
Distribution on the last day of the fifteenth (15 th ) month commencing after the month
in which the Participant’s death occurs, unless the Beneficiary makes a timely election during the
first three (3) months following the Participant’s death, which is in compliance with Code Section
409A, to delay commencement of the Deferral Account by a minimum of five (5) years and to receive
the benefits in January of a later Plan Year, in the form of a single lump-sum or over a period of
up to twenty (20) years.

     7.5 Change of Control or other Benefit. In the event a Change in Control occurs before
a Participant’s Deferral Account has been fully distributed, the Participant shall receive an
amount equal to the balance of the Deferral Account, credited with notional earnings as provided in
Article 6, payable in the form of a single lump-sum distribution on the last day of the fifteenth
(15 th ) month commencing after the month in which such Change in Control occurs, unless
the Participant makes a timely election under Section 7.1(b), during the first three (3) months
following such Change in Control, to delay commencement of the Deferral Account by a minimum of
five (5) years and to receive the benefits in January of a later Plan Year, in the form of a single
lump-sum or over a period of up to twenty (20) years.

     7.6 Unforeseeable Emergency. Upon a finding by the Committee that the Participant has
suffered a Unforeseeable Emergency, subject to compliance with Code Section 409A, the Administrator
may at the request of the Participant, approve cessation of current deferrals or accelerate
distribution of benefits under the Plan in the amount reasonably necessary to alleviate such
financial hardship. The amount distributed pursuant to this Section 7.7 with respect to an
Unforeseeable Emergency shall not exceed the amount necessary to satisfy such emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking
into account the extent to which such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent
the liquidation of such assets would not itself cause severe financial hardship).

ARTICLE 8

BENEFICIARY DESIGNATION

     Each Participant and Beneficiary shall have the right, at any time, to designate any person or
persons as Beneficiary or Beneficiaries to whom payment under this Plan shall be made in the event
of death of the Participant or Beneficiary, as the case may be, prior to complete distribution of
the Participant’s Benefits due under the Plan. Each Beneficiary designation shall become effective
only when filed in writing with the Administrator during the Participant’s or Beneficiary’s
lifetime, as the case may be, on a form prescribed by the Administrator.

     The filing of a new Beneficiary designation form by a Participant will cancel and revoke all
Beneficiary designations previously filed by such Participant.

 

 

     If a Participant or Beneficiary, as the case may be, fails to designate a Beneficiary as
provided above, or if all designated Beneficiaries predecease the Participant or Beneficiary, as
the case may be, or die prior to complete distribution of the Participant’s Benefits, then the
Administrator shall direct the distribution of such Benefits to the estate of the Participant or
Beneficiary, as the case may be.

ARTICLE 9

ADMINISTRATION OF THE PLAN

     A Committee consisting of three (3) or more members shall be appointed by the Company’s Chief
Executive Officer to administer the Plan, which shall have the exclusive right and full discretion
(i) to appoint agents and service providers to act on its behalf, (ii) to interpret the Plan, (iii)
to decide any and all matters arising hereunder (including the right to remedy possible
ambiguities, inconsistencies, or admissions), (iv) to make, amend and rescind such rules and
procedures as it deems necessary for the proper administration of the Plan and (v) to make all
other determinations and resolve all questions of fact necessary or advisable for the
administration of the Plan, including determinations regarding eligibility for benefits payable
under the Plan. All interpretations of the Committee with respect to any matter hereunder shall be
final, conclusive and binding on all persons affected thereby, subject to the provisions of this
Article 9. All decisions of the Committee shall be by vote of at least a majority of its members.
Members of the Committee shall be eligible to participate in the Plan while serving as members of
the Committee, but a member of the Committee shall not vote or act upon any matter that relates
solely to such member’s interest in the Plan as a Participant. The current members of the Committee
are the Chief Executive Officer; the Chief Financial Officer; the Senior Vice President, Human
Resources; the Senior Vice President and General Counsel; the Vice President and Treasurer; the
Vice President, Compensation and Benefits; the Vice President, Associate General Counsel and
Assistant Secretary; the Vice President, Global Finance; the Manager, Corporate Finance and
Investments, and the Director, Financial Reporting at the Company’s Miller Corporate Center. The
Committee has designated the Vice President, Compensation and Benefits as the Administrator to
carry out the day-to-day administration of the Plan. No member of the Committee or any other agent
thereof including the Administrator shall be liable for any determination, decision, or action made
in good faith with respect to the Plan. The Company shall indemnify and hold harmless the members
of the Committee and the Administrator from and against any and all liabilities, costs, and
expenses incurred by such persons as a result of any act, or omission, in connection with the
performance of such persons’ duties, responsibilities, and obligations under the Plan, other than
such liabilities, costs, and expenses as may result from the bad faith, willful misconduct, or
criminal acts of such persons.

ARTICLE 10

AMENDMENT OR TERMINATION OF PLAN

     The Chief Executive Officer, the Board of Directors of the Company, or the Committee (at the
direction of the Chief Executive Officer or the Board of Directors) may amend the Plan; provided,
however, that (i) no such amendment shall be effective to decrease the Benefits accrued by any
Participant or Beneficiary of a deceased Participant (including, but not limited to, the rate of
earnings credited on Deferral Accounts); (ii) no such amendment shall revise the substantive
provisions of the Plan related to the calculation of Benefits (including, without limitation, the
provisions of Article 6), the minimum number of Declared Rates or the manner or timing of payments
to be made under the Plan so as to prejudice the rights of any Participant or Beneficiary, except
to the extent required by law, and (iii) no amendment shall change the timing or form of
Distributions or otherwise violate the provisions of Code Section 409A so as to result in the
imposition of excise taxes. Notwithstanding the foregoing, the Plan shall be interpreted in all
respects to comply with the provisions of Code Section 409A and the Committee may amend the Plan at
anytime as may be necessary to assure such compliance.

     The Company shall not terminate the Plan but may, in its complete and sole discretion, freeze
the Plan and allow no further deferrals into this Plan on a prospective basis. Notwithstanding the
foregoing, the Company or any Participating Subsidiary may accelerate distribution upon termination
of the Plan in the event of a Change in Control subject to compliance with all requirements of Code
Section 409A.

ARTICLE 11

MAINTENANCE OF ACCOUNTS

     The Company shall keep, or cause to be kept, all such books of account, records and other data
as may be necessary or advisable for the administration of this Plan, and to reflect properly the
affairs thereof, and to determine the nature and amount of the interests of the respective
Participants in each Deferral Account. Separate accounts or records for the

 

 

respective Participants’ Deferral Accounts shall be maintained for operational and accounting
purposes, but no such account or record shall be considered as creating a lien of any nature
whatsoever on or as segregating any of the assets with respect to the Deferral Accounts under this
Plan from any other funds or property of the Company.

ARTICLE 12

MISCELLANEOUS

     12.1 Applicable Law. Except to the extent preempted by ERISA and applicable
substantive provisions of federal law, this Plan shall be governed and construed in accordance with
the laws of the State of California applicable to agreements made and to be performed entirely
therein.

     12.2 Captions. The captions of the articles, sections, and paragraphs of this Plan are
for convenience only and shall not control or affect the meaning or construction of any of its
provisions.

     12.3 Limitation. A Participant and the Participant’s Beneficiary shall assume all
risks in connection with the performance of any Declared Rate and any decrease in value of the
Deferral Accounts, and none of the Company, any of its officers, employees, or directors, the
Committee or the Administrator shall be liable or responsible therefor.

     12.4 Notice. Any notice or filing required or permitted to be given to the
Administrator under the Plan shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the principal office of the Company, directed to the attention of
the Administrator with a copy to the Senior Vice President and General Counsel of the Company. Such
notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the
date shown on the postmark on the receipt for registration or certification.

     12.5 Limits on Transfer. Other than by will, the laws of descent and distribution, or
legal or judicial process related to dissolution of marriage, no right, title or interest of any
kind in the Plan shall be transferable or assignable by a Participant or the Participant’s
Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, levy,
execution or other legal or equitable process, nor subject to the debts, contracts, alimony,
liabilities or engagements, or torts of any Participant or Participant’s Beneficiary. Any attempt
to alienate, sell, transfer, assign, pledge, garnish, attach or take any other action subject to
legal or equitable process or encumber or dispose of any interest in the Plan shall be void.

     12.6 Satisfaction of Claims. Payments to any Participant or Beneficiary in accordance
with the provisions of the Plan shall, to the extent thereof, be in full or partial satisfaction of
claims against the Company for the compensation or other amounts deferred and relating to the
Deferral Account to which the payments relate.

     12.7 Participant Cooperation. Each Participant shall cooperate with the Company by
furnishing any and all information requested by the Company in order to facilitate the payment of
Benefits hereunder, taking such physical examinations as the Company may deem necessary and taking
such other relevant action as may be requested by the Company. If a Participant refuses to so
cooperate, the Company shall have no further obligation to the Participant under the Plan, other
than payment to such Participant of the cumulative deferrals theretofore made pursuant to this
Plan. If a Participant commits suicide during the two (2) year period beginning on the first day on
which he participates in the Plan or if the Participant makes any material misstatement of
information or nondisclosure of medical history, then no Benefits will be payable hereunder to such
Participant of the deferrals theretofore made pursuant to this Plan, provided, that in the
Company’s sole discretion, Benefits may be payable in an amount reduced to compensate the Company
for any loss, cost, damage or expense suffered or incurred by the Company as a result in any way of
any such action, misstatement or nondisclosure.

     12.8 Unfunded Status of Plan; Creation of Rabbi Trust. The Plan is intended to
constitute an “unfunded” plan of deferred compensation and Participants shall rely solely on the
unsecured promise of the Company for payment hereunder. With respect to any payment not yet made to
a Participant under the Plan, nothing contained in the Plan shall give a Participant any rights
that are greater than those of a general unsecured creditor of the Company. The Company has
established the Avery Dennison Corporation Directors Compensation Trust (“Rabbi Trust”). The assets
of the Rabbi Trust shall be subject to the claims of the Company’s creditors. To the extent any
Benefits provided under the Plan are actually paid to a Participant or Beneficiary from the Rabbi
Trust, the Company shall have no further obligation with respect thereto, but to the extent not so
paid, such Benefits shall remain the obligation of, and shall be paid by, the Company. Participants
and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights,
interest, or claims in or to any specific property or assets of the Company, nor shall they be
beneficiaries of, or have any rights,

 

 

claims, or interests in any life insurance policies, annuity contracts, or the proceeds
therefrom owned or which may be acquired by the Company (“Policies”). Apart from the Rabbi Trust,
such Policies or other assets of the Company shall not be held under any trust for the benefit of
Participants, their Beneficiaries, heirs, successors, or assigns, or held in any way as collateral
security for the fulfilling of the obligations of the Company under this Plan. Any and all of the
Company’s assets and Policies shall be, and shall remain, the general, un-pledged, unrestricted
assets of the Company. The Company’s obligations under the Plan shall be merely an unfunded and
unsecured promise of the Company to pay money in the future.

     12.9 Waiver of Stay, Extension and Usury Laws. The Company covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any portion of the Benefits
due hereunder, wherever such laws may be enacted, now or at any time hereafter in force, or which
may affect the administration or performance of this Plan; and (to the extent that it may lawfully
do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the realization of any Benefits to which the Participants
hereunder are entitled, but will suffer and permit the realization of all such Benefits as though
no such law had been enacted. The provisions of this Section 12.9 are not intended, however, to
prevent compliance of the Plan with the provisions of Code Section 409A.

     12.10 Status. The establishment and maintenance of, or allocations and credits to, the
Deferral Account of any Participant shall not vest in any Participant any right, title or interest
in and to any Plan assets or Benefits except at the time or times and upon the terms and conditions
and to the extent expressly set forth in the Plan and in accordance with the terms of the Rabbi
Trust.

     12.11 Validity. In the event any provision of this Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other
provision of this Plan.

     12.12 Waiver of Breach. The waiver by any party of any breach of any provision of the
Plan by any other party shall not operate or be construed as a waiver of any subsequent breach.

     12.13 Gender, Singular and Plural. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may
require. As the context may require, the singular may be read as the plural and the plural as the
singular.exv10w31w2

Exhibit 10.31.2

AVERY DENNISON CORPORATION

2005 EXECUTIVE VARIABLE DEFERRED RETIREMENT PLAN

AMENDED AND RESTATED

ARTICLE 1

PURPOSE

     The 2005 Executive Variable Deferred Retirement Plan (“Plan”) adopted by Avery Dennison
Corporation, a Delaware corporation (the “Company”) on behalf of itself and its
participating Subsidiaries, originally effective as of December 1, 2004, is hereby amended
and restated effective as of January 1, 2008, to comply with Internal Revenue Code Section
409A and applicable authorities promulgated thereunder. The Plan is a deferred compensation
plan for Eligible Executives employed by the Company and its Participating Subsidiaries. All
vested deferred compensation account balances as of November 30, 2004, grandfathered under
the Code Section 409A transition rules, shall be governed by prior deferred compensation
plan documents and no subsequent amendment shall apply to such grandfathered amounts. All
amounts deferred, contributed or which became vested on or after December 1, 2004 shall be
subject to the provisions of this amended and restated Plan. The Plan is intended, and shall
be interpreted in all respects, to comply with the provisions of Code Section 409A and those
provisions of the Employee Retirement Income Security Act of 1974, as amended, applicable to
an unfunded plan maintained primarily to provide deferred compensation benefits for a select
group of “management or highly compensated employees.”

ARTICLE 2

DEFINITIONS AND CERTAIN PROVISIONS

     2.1 Account(s). “Account” or “Accounts” means the bookkeeping account(s)
established for record keeping purposes for a Participant pursuant to Section 6.1, which
shall include one or more Deferral Accounts, a Company Contributions Account, any Special
Unit Accounts and/or Stock Unit Account which may be established for the Participant by the
Company.

     2.2 Administrator. “Administrator” means the administrator appointed by the
Committee to handle the day-to-day administration of the Plan pursuant to Article 9.

     2.3 Allocation Election. “Allocation Election” means the form or electronic
communication by which a Participant elects the Declared Rate(s) to be credited as notional
earnings or losses to such Participant’s Account.

     2.4 Annual Base Salary. “Annual Base Salary” means an Eligible Employee’s
annual salary at the time of deferral, or any other subsequent date as determined by the
Administrator in its discretion, before reductions for contributions to or deferrals under
any pension, deferred compensation or benefit plans sponsored by the Company. For Eligible
Employees who are sales representatives for the Company, Annual Base Salary (solely for the
purpose of computing the maximum deferral amount under Section 4.3) shall include any
commissions earned by such Eligible Employee.

     2.5 Annual Deferral. “Annual Deferral” means the amount of Annual Base Salary
and/or Bonus that the Participant elects to defer under the Plan for a Plan Year.

     2.6 Beneficiary. “Beneficiary” means the person or persons or entity designated
as such by a Participant pursuant to Article 8.

     2.7 Benefit. “Benefit” means any benefit provided under the terms of the Plan.

     2.8 Bonus. “Bonus” means the bonus to which the Participant is entitled from
the Company under any bonus plan or incentive program specified by the Administrator,
including any annual bonus plan or long-term incentive plan, before reductions for
contributions to or deferrals under any pension, deferred compensation or benefit plans

 

 

sponsored by the Company.

     2.9 Change of Control. “Change of Control” means “a change in the ownership or
effective control,” or in “the ownership of a substantial portion of the assets of” the
Company (but not a Participating Subsidiary, except as provided under Article 10), within
the meaning of Code Section 409A and shall include any of the following events as such
concepts are interpreted under Code Section 409A:

          (a) the date on which a majority of members of the Company’s Board of Directors is
replaced during any twelve-month period by directors whose appointment or election is not
endorsed by a majority of the members of the Company’s Board of Directors 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:

               (i) 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;

               (ii) 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

               (iii) 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 immediately before such acquisition, 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 Code Section 409A shall not constitute a Change of Control.

     2.10 Code. “Code” means the Internal Revenue Code of 1986, as amended, as
interpreted by Treasury regulations and applicable authorities.

     2.11 Committee. “Committee” means the deferred compensation plans
administrative committee appointed to administer the Plan pursuant to Article 9.

     2.12 Company. “Company” means Avery Dennison Corporation, a Delaware
corporation, acting on behalf of itself and its Participating Subsidiaries, as the context
may require.

     2.13 Company Contributions. “Company Contributions” means discretionary
Matching Contributions or Special Unit Contributions made by the Employer on behalf of the
Participant pursuant to Article 5.

     2.14 Company Contributions Account. “Company Contributions Account” means an
Account established to hold discretionary Matching Contributions pursuant to Sections 5.1
and 6.1.

     2.15 Declared Rate. “Declared Rate” means the notional rates of return (which
may be positive or negative) of the individual investment options selected by a Participant
for such Participant’s Account, as referred to in Article 6.

     2.16 Deferral Account. “Deferral Account” means an Account established to hold
Annual Deferrals pursuant to Sections 4.1 and 6.1.

     2.17 Disability Benefit. “Disability Benefit” means the Benefit payable to a
Participant in accordance with Section 7.4 after the Participant has become Disabled.

     2.18 Disability or Disabled. “Disability or Disabled” shall be interpreted in
accord with the requirements of Code Section 409A and shall mean, in the case of a
Participant, that the Participant (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment, which can be
expected to result in death or can be expected to last for a continuous period of not less
than twelve (12) months, or (ii) is, by reason of any medically determinable physical or
mental impairment, which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income replacement benefits
for a period of not less than three (3) months under an accident and health plan covering

 

 

Employees.

     2.19 Distribution. “Distribution” means any payment to a Participant or
Beneficiary according to the terms of this Plan.

     2.20 Early Termination Benefit. “Early Termination Benefit” means the lump-sum
amount payable to a Participant who ceases to be an Employee pursuant to the provisions of
Section 7.2 or 7.3.

     2.21 Eligible Employee. “Eligible Employee” means an Employee who is (i) a
member of a select group of management, or a highly compensated employee, and (ii) who meets
the annually indexed salary requirement and/or such other eligibility requirements as may be
established by the Committee.

     2.22 Employee. “Employee” means any person employed by the Company or a
Participating Subsidiary.

     2.23 Employer. “Employer” means the Company or the Participating Subsidiary
that is the legal employer of the relevant Participant.

     2.24 Enrollment Period. “Enrollment Period” means the period(s) designated for
a particular Plan Year by the Administrator for enrollments.

     2.25 ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974,
as amended, as interpreted by applicable authorities.

     2.26 Matching Contributions. “Matching Contributions” means contributions made
by the Employer on behalf of a Participant pursuant to Section 5.1.

     2.27 Participant. “Participant” means an Eligible Employee who has filed a
completed and executed Participation Election Form with the Administrator, and who is
participating in the Plan in accordance with the provisions of Articles 3 and 4.

     2.28 Participating Subsidiary. “Participating Subsidiary” means a subsidiary
corporation the majority of the outstanding stock of which is owned, directly or indirectly
by the Company.

     2.29 Participation Election. “Participation Election” means the commitment to
make a deferral under the Plan, submitted by the Participant to the Administrator pursuant
to Articles 3 and 4 of the Plan. The Participant Election may take the form of an electronic
communication followed by appropriate confirmation according to procedures established by
the Administrator.

     2.30 Plan. “Plan” means this 2005 Executive Variable Deferred Retirement Plan,
a non-qualified elective deferred compensation plan, as the same may be amended from time to
time.

     2.31 Plan Year. “Plan Year” means the calendar year.

     2.32 Settlement Date. “Settlement Date” means the date by which a lump-sum
payment shall be made or the date by which installment payments shall commence under the
Plan. Unless otherwise specified, the Settlement Date shall be as soon as practicable after,
but in all events no later than ninety (90) days following, the Valuation Date. In the case
of a Participant’s death, the Administrator shall be provided with the documentation
reasonably necessary to establish the fact of the Participant’s death. Notwithstanding the
foregoing or any other provision of the Plan, in the event that a Participant is a “key
employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof) of a
corporation, any stock of which is publicly traded on an established securities market, the
Settlement Date with respect to payments triggered by Termination of Employment (other than
be reason of death or Disability) or Change in Control shall be paid only after the earlier
of (i) the last day of the sixth (6th) complete calendar month following the Participant’s
Termination of Employment, or (ii) the Participant’s death, consistent with the provisions
of Code Section 409A. Any payments delayed by reason of the preceding sentence shall be
caught up and paid in a single lump-sum on the first day such payments are permissible
consistent with the application of Code Section 409A.

     2.33 Special Unit Contribution. “Special Unit Contribution” means a
contribution made by the Employer on behalf of a Participant pursuant to Section 5.2.

 

 

     2.34 Special Unit Account. “Special Unit Account” means an Account created to
hold a Special Unit Contribution pursuant to Sections 5.2 and 6.1.

     2.35 Special Unit Award Agreement. “Special Unit Award Agreement” means the
agreement between the Participant and the Company specifying the terms of a Special Unit
Contribution including the vesting schedule and payout elections applicable to such Special
Unit Contribution. The Special Unit Award Agreement may take the form of an electronic
communication followed by appropriate confirmation according to procedures established by
the Administrator.

     2.36 Stock Unit Contribution. “Stock Unit Contribution” means a contribution
made by the Company on behalf of a Participant pursuant to Section 5.3.

     2.37 Stock Unit Account. “Stock Unit Account” means an Account created to hold
all Stock Unit Contribution on behalf of a single Participant pursuant to Sections 5.3 and
6.1.

     2.38 Stock Unit Award Agreement. “Stock Unit Award Agreement” means a
Performance Unit Agreement or such other agreement between a Participant and the Company
specifying the terms of a Stock Unit Contribution. The Stock Unit Award Agreement may take
the form of an electronic communication followed by appropriate confirmation according to
procedures established by the Administrator.

     2.39 Survivor Benefit. “Survivor Benefit” means those Plan Benefits that become
payable upon the death of a Participant pursuant to Section 7.5.

     2.40 Termination of Employment. “Termination of Employment” means the cessation
of a Participant’s employment with the Employer for any reason, whether voluntary or
involuntary, including by reason of retirement, Disability or death. For purpose of the
preceding sentence, Termination of Employment shall be interpreted consistent with the
requirements of Code Section 409A for “separation from service”.

     2.41 Valuation Date. “Valuation Date” means the date on which the Account is
valued for Distribution purposes. This date shall be the last day of the month in which an
event occurs that triggers a Benefit payment.

     2.42 Years of Participation. “Years of Participation” means the cumulative
consecutive years of participation in this Plan or in any other nonqualified deferred
compensation plan sponsored by the Company, as determined in the complete and sole
discretion of the Administrator.

ARTICLE 3

PARTICIPATION

     3.1 Participation. The Administrator shall notify Eligible Employees generally
not less than thirty (30) days (or such lesser period as may be practicable under the
circumstances) prior to any deadline for filing a Participation Election Form. An Eligible
Employee must submit a Participant Election during the Enrollment Period established by the
Administrator to become a Participant.

     3.2 Participation Election. An Eligible Employee shall become a Participant in
the Plan no later than the first day of the Plan Year coincident with or beginning after the
date the Employee is designated as an Eligible Employee, provided such Employee has filed a
Participant Election with the Administrator. To be effective, the Eligible Employee must
submit the Participant Election during an Enrollment Period or any other such time as
determined by the Administrator. The Administrator may establish a special Enrollment Period
during a Plan Year within thirty (30) days after an Eligible Executive first becomes
eligible to participate in the Plan (if the Eligible Employee is not already a participant
in any plan that is aggregated with this Plan for purposes of Code Section 409A), to allow
deferrals by such newly Eligible Employee of amounts earned during the balance of such Plan
Year.

     3.3 Continuation of Participation. A Participant who has elected to participate
in the Plan by submitting a Participant Election shall continue as a Participant until all
Benefits payable to or on behalf of the Participant under the Plan have been distributed. In
the event a Participant becomes ineligible to continue participation in the Plan, but has
not experienced a Termination of Employment, no further Annual Deferrals or Company

 

 

Contributions shall be made by or on behalf of the Participant but the Participant’s
Accounts shall be held and administered in accordance with the Plan until such time as the
Participant’s Accounts have been completely distributed.

ARTICLE 4

PARTICIPANT DEFERRALS

     4.1 Annual Deferral. On the Participation Election Form, and subject to the
restrictions set forth herein, an Eligible Employee shall designate the amount of Annual
Base Salary and Bonus to be deferred for the following Plan Year or Bonus performance
period, or such other period as the Committee may determine, provided that any deferral
election shall be made no later than the last day of the calendar year preceding the
calendar year (or, in the case of a new Participant, the thirtieth (30 th ) day
following initial eligibility for the remaining portion of the Plan Year) in which the
services are performed for which such Annual Base Salary or Bonus are earned; except and
provided further that, to the extent allowed by Code Section 409A, the Committee may allow
deferral elections to be made or revised no later than six (6) months before the end of the
performance period solely with respect to any “performance-based compensation” as defined in
Code Section 409A that is based on services performed over a period of at least twelve (12)
months. For this purpose, the Committee shall determine, in its complete and sole
discretion, whether any Bonus qualifies as “performance-based compensation” as defined under
Code Section 409A.

     4.2 Minimum Deferral. The minimum amount of Annual Deferral that may be
deferred shall be two percent (2%) of a Participant’s Annual Base Salary.

     4.3 Maximum Deferral. The standard maximum amount of Annual Deferral that may
be deferred shall be seventy-five percent (75%) of a Participant’s Annual Base Salary and
one hundred percent (100%) of a Participant’s Bonus; provided that, with the approval of the
Administrator, Participants may defer up to one hundred percent (100%) of their Annual Base
Salary, less applicable withholdings. Notwithstanding the foregoing, the Committee may
further limit the maximum or the minimum amount of deferrals by any Participant or group of
Participants in its sole discretion.

ARTICLE 5

DISCRETIONARY COMPANY CONTRIBUTIONS

     5.1 Discretionary Matching Contributions. The Employer, in its sole discretion,
may credit to selected Participants’ Accounts a discretionary amount or match of an Annual
Deferral in any amount determined by the Company. Matching Contributions shall be made in
the complete and sole discretion of the Company and no Participant or Eligible Employee
shall have the right to receive any Matching Contribution regardless of whether Matching
Contributions are made on behalf of other Participants. Matching Contributions shall vest at
the time specified by the Company.

     5.2 Special Unit Contributions. The Employer, in its complete and sole
discretion, may credit an amount to the Plan on behalf of an existing Participant or a newly
Eligible Employee as a special bonus award or a deferred signing bonus (a “Special Unit
Contribution”). Such amounts shall be granted pursuant to a Special Unit Award Agreement
which shall specify the period over which such Special Unit Contribution shall vest. The
Participant may be granted an election with respect to the time and form of payment of a
Special Unit Contribution during the thirty (30) day period following the grant of a Special
Unit Contribution if such Contribution is subject to a substantial risk of forfeiture for a
minimum of twelve (12) months after the end of such election period (i.e., 13 months after
the grant date), or as otherwise permitted under Code Section 409A.

     5.3 Stock Unit Contributions. A Participant may be credited an amount under the
Plan as a hypothetical stock contribution (a “Stock Unit Contribution”), for example,
pursuant to a Performance Unit Award under the Company-sponsored Employee Stock Option and
Incentive Plan or any successor plan or similar plan, as determined by the Company in its
complete and sole discretion, and as evidenced by a Stock Unit Award Agreement. The Stock
Unit Award Agreement may specify that such award is to be contributed to this Plan or the
Participant may be granted an election with respect to such an award to defer such phantom
stock unit award into this Plan within the thirty (30) day period following grant of the
award but only if such stock unit award is subject to a substantial risk of forfeiture for a
minimum of twelve (12) months after the end of such election period (i.e.,

 

 

13 months after the grant date), or as otherwise permitted under Code Section 409A.

ARTICLE 6

ACCOUNTS AND INVESTMENT OPTIONS

     6.1 Accounts. Solely for record keeping purposes, the Company shall maintain up
to five (5) Deferral Accounts under the Plan for each Participant. Annual Deferrals shall be
credited by the Employer to the Participant’s Deferral Account at the time such amounts
would otherwise have been paid to the Participant. The Company shall also maintain a Company
Contributions Account for each Participant which shall be credited with any Matching
Contributions made on behalf of such Participant pursuant to Section 5.1, as directed by the
Company. In addition to Deferral Accounts and Company Contribution Accounts, separate
Special Unit Accounts shall be maintained for each Special Unit Contribution and a separate
Stock Unit Account shall be maintained for all Stock Unit Contributions made to the Plan on
behalf of a Participant, if any, as directed by the Company. All of a Participant’s
Accounts, except the Stock Unit Account, shall be credited (and compounded daily) with a
notional rate of return (positive or negative) based on the Declared Rate(s) elected by the
Participant under Section 6.2. Stock Unit Accounts shall be credited as provided in Section
6.4.

     6.2 Participant Election of Declared Rates. The crediting rate on amounts in a
Participant’s Account shall be based on the Participant’s choice among the investment
alternatives made available from time to time by the Committee. The Administrator shall
establish a procedure by which a Participant may make an Allocation Election among any
combination of Declared Rates in one percent (1%) increments up to one hundred percent
(100%) and may change the Declared Rate(s) at least once per week with such change(s)
effective as of the first day of the next following week. Such investment elections may
apply to future deferrals and/or to the existing Account balances, as indicated by the
Participant. Notwithstanding the foregoing, the Company shall have no obligation to set
aside or invest funds as directed by the Participant and, if the Company elects to invest
funds as directed by the Participant, the Participant shall have no more right to such
investments than any other unsecured general creditor of the Company.

     6.3 Declared Rates. A Participant may select from Declared Rates which may from
time to time be established under the Plan and the number of which may be expanded by the
Committee; it being the intention that at all times Participants will have at least nine (9)
core investment fund choices comparable in focus, type and quality to those listed on
Exhibit A. The Declared Rates provide a rate of return (positive or negative) that are based
on the actual net performance of the Declared Rate(s) selected by the Participant. The
Declared Rates credited to Participant Accounts shall be the actual net performance of the
Declared Rates, to which will be added a basis point credit, which credit (when added to the
actual net performance of the Declared Rates) will together be approximately equivalent on
average to crediting the actual gross performance of the Declared Rates less twenty (20)
basis points.

     6.4 Stock Unit Accounts. A Participant’s Stock Unit Account shall be credited
with the number of phantom shares of common stock of the Company specified in the Stock Unit
Award Agreement. Amounts credited to a Stock Unit Account shall be distributed in kind,
subject to compliance with all legal requirements. The Committee shall administer any Stock
Unit Account consistent with the intent of the Plan to reflect a hypothetical investment in
common stock of the Company and shall have the complete and sole discretion to establish a
minimum or maximum share level and/or require the adjustment in number or conversion of
notional shares held in a Stock Unit Account to an alternative form of security as
appropriate to accomplish the intent of the Plan to treat such notional stock units
similarly to actual shares of Company common stock. Prior to distribution, Participants
shall have no rights as shareholders with respect to amounts credited to a Stock Unit
Account except that Participants shall be entitled to be credited with dividend equivalents
on vested awards or otherwise as provided under the terms of the Stock Unit Award Agreement.
Such dividend equivalents shall be considered current earnings on the Stock Unit Account and
shall be credited in the form of additional share units to the Stock Account based on the
value of Company stock as of the date dividends are paid to shareholders of the Company.

     6.5 Valuation of Accounts. The value of an Account as of any date shall equal
the amounts theretofore credited or debited to such Account, plus the deemed earnings or
losses of such Account in accordance with this Article 6 through the day immediately
preceding such date.

     6.6 Vesting. A Participant shall be one hundred percent (100%) vested at all
times in amounts credited to the Participant’s Deferral Accounts. Amounts credited to a
Participant’s Company Contributions Account or Special

 

 

Unit Account shall vest as specified by the Company or in the Special Award Agreement.
Amounts credited to a Participant’s Stock Unit Account shall vest as provided under the
applicable Stock Unit Award Agreement for such Stock Unit Contribution.

     6.7 Statement of Accounts. The Administrator (or an agent thereof) shall
provide to each Participant periodic statements or on-line access to information setting
forth the Participant’s deferrals, Declared Rate(s) (credits or debits), Distributions and
Account balance.

     6.8 Errors in Benefit Statements, Deferrals, Distributions or Administration.
In the event an error is made in a benefit statement, such error shall be corrected on the
next benefit statement following the date such error is discovered. In the event of an error
in the amount of a Participant’s deferral, immediately upon the discovery of such error, if
possible, the next deferral of such Participant shall be adjusted upward or downward to
correct such prior error subject to compliance with permissible corrections procedures
established under Code Section 409A. In the event of an error in a Distribution, the
applicable Participant’s Account shall, immediately upon the discovery of such error, be
adjusted to reflect such under or over payment and, if possible, the next Distribution to
such Participant shall be adjusted upward or downward to correct such prior error subject to
compliance with permissible corrections procedures established under Code Section 409A. If
the remaining balance of a Participant’s Account is insufficient to cover an erroneous
overpayment to such Participant, the Company may, at its discretion, offset other amounts
payable to the Participant from the Company to the extent permitted under all applicable
laws, to recoup the amount of such overpayment(s). It is the intent of the Company that the
Plan be interpreted and administered to comply in all respects with Code Section 409A.
However, Participants and/or their Beneficiaries shall be responsible for any and all taxes
resulting from participation in the Plan, and the Company shall have no liability to the
Participant or any Beneficiary in the event any taxes or excise taxes may ultimately be
determined to be applicable to any deferral, contribution, vesting event or Distribution
under the Plan.

ARTICLE 7

BENEFITS

     7.1 Normal Benefit Distribution Election.

          (a) Initial Election. At the time of entering the Plan or, if later, on or
before December 31, 2008, Participants shall designate the time and form of distributions of
amounts credited to their Accounts, from among the distribution alternatives specified
herein. A Participant may establish up to five (5) Deferral Accounts with different payout
elections. Thereafter, at the time of making an Annual Deferral election under the Plan, the
Participant shall designate the time and form of Distribution of deferrals made pursuant to
such election by directing such deferrals to one or more existing Accounts or by
establishing one or more new Accounts with new payout elections. A Participant shall have no
more than five (5) Deferral Accounts in existence at any one time under the Plan. A
Participant may elect to make additional deferrals into an existing Account in a subsequent
Plan Year but may only make a new distribution election for such Account in accordance with
the change in elections provisions specified in Section 7.1(b). If deferrals are directed to
an Account which is in payout status, such deferrals shall be paid out over the remaining
installment period commencing with the calendar year following the year in which the
deferral is credited to the Account. At the time of entering the Plan or, if later, on or
before December 31, 2008, Participants shall designate the time and form of distributions of
amounts credited to their Company Contributions Accounts. The time and form of payment of a
Special Unit Account shall be specified in the Special Unit Award Agreement or elected
within the first thirty (30) days following the award of such Special Unit Contribution as
provided in Section 5.2. All of a Participant’s Stock Unit Accounts shall be paid in a
single lump-sum on the Settlement Date next following the Participant’s Termination of
Employment for any reason unless preceded by a Change in Control as specified in Section
7.6, subject to compliance with all applicable laws.

          (b) Modification of Election. A distribution election with respect to an
existing Account under the Plan may only be changed under the terms and conditions specified
by the Committee in compliance with Code Section 409A. After December 31, 2008, except as
expressly provided in this Article 7, no acceleration of a distribution is permitted and a
subsequent election that delays payment or changes the form of payment shall be permitted if
and only if all of the following requirements are met:

               (i) the new election does not take effect until at least twelve (12) months after the
date on which

 

 

the new election is made;

               (ii) in the case of payments made on account of Termination of Employment (other than
by reason of death or Disability), Change in Control, or a scheduled date, the new election
delays payment for at least five (5) years from the date that payment would otherwise have
been made, absent the new election; and

               (iii) in the case of payments made according to a scheduled date, the new election is
made not less than twelve (12) months before the date on which payment would have been made
(or, in the case of installment payments, the first installment payment would have been
made) absent the new election.

     For purposes of application of the above change limitations, distribution elections
shall be made on an Account by Account basis and installment payments from a single Account
shall be treated as a single payment. Changes complying with the requirements of this
Section 7.1(b) may be made any number of times with respect to the same Account but in no
event may any change delay the distribution of benefits payable from any Account beyond the
date the Participant attains (or a deceased Participant would have attained) age eighty-five
(85). No changes shall be made to the timing or form of distribution of a Stock Unit Account
unless specifically approved by the Committee. Election changes made pursuant to this
Section 7.1(b) shall be made in accordance with rules established by the Committee, and
shall comply with all applicable requirements of Code Section 409A and applicable
authorities.

     7.2 Benefit Distribution Alternatives. The Participant shall be entitled to
select the time and form of payment of Distributions from a particular Account from among
the following alternatives set forth below. Benefits shall be paid according to the
Participant’s distribution elections unless such distribution election is superseded by an
alternative distribution event such as death, Disability, Unforeseeable Emergency, early
Termination of Employment, or Change in Control, as specified in this Article 7. No
distribution alternatives shall apply to a Stock Unit Account, which shall be payable only
in the form of a single lump-sum on the Settlement Date next following Termination of
Employment for any reason unless preceded by Change in Control as specified in Section 7.6.

          (a) Form of Distribution. The available forms of payment from each of the
Participant‘s Accounts (other than a Stock Unit Account) shall be as follows:

          (i) Lump-Sum. One lump-sum payment.

          (ii) Installment Payments. Monthly installments of principal and interest
payable over a period of any number of years up to twenty (20), but in no event ending later
than the date on which the Participant shall attain age eighty-five (85). Installment
payments shall be calculated on an annual basis but paid during the Plan Year at
approximately monthly intervals as may be determined by the Committee, provided that such
intervals shall not be less frequent than quarterly, except in the final year of payments
when only one installment shall be made in January of such final Plan Year. Installment
payments shall be based on the Participant’s vested Account balance at the beginning of the
payment period and shall be recalculated annually by dividing the Participant’s vested
Account balance as of the last day of the Plan Year by the number of remaining years in the
payment period based on the Participant’s retirement payment election. Accounts shall
continue to be credited during the payment period based on the Participant’s choice among
Declared Rates as provided in Article 6. In the event that any amounts credited to a
Participant’s Account vest after the end of the installment period, such amounts shall be
paid in a single lump-sum on the Settlement Date next following the Participant’s
Termination of Employment. Notwithstanding the foregoing, an installment payout election
shall not be available prior to the date that the Participant shall have completed five (5)
Years of Participation.

          (iii) Small Benefit Exception. Notwithstanding the foregoing, in the event that
the total balance payable from all of a Participant’s Accounts under this Plan (and any
other plans aggregated with this Plan for purposes of Code Section 409A) is less than the
applicable dollar amount under Code Section 402(g)(1)(B) for the calendar year of payment,
the Administrator shall have the discretion to pay all of the Participant’s benefits under
the Plan (and such other aggregated plans) in the form of a single lump-sum, at any time,
subject to compliance with Treasury Regulation Section 1.409A-3(j)(4)(v), as may be further
revised or amended.

If no election is made regarding the form of benefits from a particular Account,
benefits from that Account shall be paid in a single lump-sum.

 

 

          (b) Commencement of Payment of Benefits. The available commencement dates
for payment from a Participant’s Accounts (other than a Stock Unit Account) are as follows:

          (i) Upon the Settlement Date next following Termination of Employment;

          (ii) In January of any specified Plan Year (without regard to Termination of
Employment, except as provided in Section 7.3); or

          (iii) Upon the earlier of January of a specified Plan Year or the Settlement Date next
following Termination of Employment.

If a Participant does not elect a commencement date for benefits from a particular Account,
benefits from such Account shall commence on the Settlement Date next following the
Participant’s Termination of Employment.

     7.3 Early Termination Benefit. In the event of a Participant’s Termination of
Employment for any reason other than death, Disability, or prior to completion of five (5)
Years of Participation, the Participant shall receive an Early Termination Benefit equal to
the outstanding vested balance of each of the Participant’s Accounts, credited with notional
earnings as provided in Article 6, payable in the form of a single lump-sum distribution on
the Settlement Date next following such early Termination of Employment. The Participant
shall be entitled to no further Benefits under this Plan.

     7.4 Disability Benefit. In the event of a Participant’s Disability prior to
complete distribution of all of the Participant’s Accounts, the Participant shall receive a
Disability Benefit equal to the outstanding vested balance of each of the Participant’s
Accounts, credited with notional earnings as provided in Article 6, payable in the form of a
single lump-sum Distribution on the last day of the fifteenth (15 th ) month
commencing after the month in which such Disability occurs, unless the Participant makes a
timely election under Section 7.1(b), during the first three (3) months following
Disability, to delay commencement of a particular Account by a minimum of five (5) years and
to receive the benefits in January of a later Plan Year, in the form of a single lump-sum or
over a period of up to twenty (20) years. Notwithstanding the foregoing, no delay in
distribution shall be available for a Stock Account which shall be paid on the Settlement
Date next following Termination of Employment by reason of Disability.

     7.5 Survivor Benefits. In the event of a Participant’s death prior to complete
distribution of all of the Participant’s Accounts, the Participant’s Beneficiary shall
receive a Survivor Benefit equal to the outstanding vested balance of each of the
Participant’s Accounts, credited with notional earnings as provided in Article 6, payable in
the form of a single lump-sum Distribution on the last day of the fifteenth (15
th ) month commencing after the month in which the Participant’s death occurs, unless
the Beneficiary makes a timely election during the first three (3) months following the
Participant’s death, which is in compliance with Code Section 409A, to delay commencement of
a particular Account by a minimum of five (5) years and to receive the benefits in January
of a later Plan Year, in the form of a single lump-sum or over a period of up to twenty (20)
years. Notwithstanding the foregoing, no delay in distribution shall be available for a
Stock Account which shall be paid on the Settlement Date following death.

     7.6 Change of Control or other Benefit. In the event a Change in Control occurs
before a Participant’s Account has been fully distributed, the Participant shall receive an
amount equal to the balance of the Account, credited with notional earnings as provided in
Article 6, payable in the form of a single lump-sum distribution on the last day of the
fifteenth (15 th ) month commencing after the month in which such Change in
Control occurs, unless the Participant makes a timely election under Section 7.1(b), during
the first three (3) months following such Change in Control, to delay commencement of a
particular Account by a minimum of five (5) years and to receive the benefits in January of
a later Plan Year, in the form of a single lump-sum or over a period of up to twenty (20)
years, except that with respect to a Stock Account, any delayed distribution must be paid in
the form of a single lump-sum.

     7.7 Unforeseeable Emergency. Upon a finding by the Committee that the
Participant has suffered a Unforeseeable Emergency, subject to compliance with Code Section
409A, the Administrator may at the request of the Participant, approve cessation of current
deferrals or accelerate distribution of benefits under the Plan in the amount reasonably
necessary to alleviate such financial hardship. The amount distributed pursuant to this
Section 7.7 with respect to an Unforeseeable Emergency shall not exceed the amount necessary
to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a
result of the distribution, after taking

 

 

into account
the extent to which such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the
extent the liquidation of such assets would not itself cause severe financial hardship).

ARTICLE 8

BENEFICIARY DESIGNATION

     Each Participant and Beneficiary shall have the right, at any time, to designate any
person or persons as Beneficiary or Beneficiaries to whom payment under this Plan shall be
made in the event of death of the Participant or Beneficiary, as the case may be, prior to
complete distribution of the Participant’s Benefits due under the Plan. Each Beneficiary
designation shall become effective only when filed in writing with the Administrator during
the Participant’s or Beneficiary’s lifetime, as the case may be, on a form prescribed by the
Administrator.

     The filing of a new Beneficiary designation form by a Participant will cancel and
revoke all Beneficiary designations previously filed by such Participant.

     If a Participant or Beneficiary, as the case may be, fails to designate a Beneficiary
as provided above, or if all designated Beneficiaries predecease the Participant or
Beneficiary, as the case may be, or die prior to complete distribution of the Participant’s
Benefits, then the Administrator shall direct the distribution of such Benefits to the
estate of the Participant or Beneficiary, as the case may be.

ARTICLE 9

ADMINISTRATION OF THE PLAN

     9.1 Committee. A Committee consisting of three (3) or more members shall be
appointed by the Company’s Chief Executive Officer to administer the Plan, which shall have
the exclusive right and full discretion (i) to appoint agents and service providers to act
on its behalf, (ii) to interpret the Plan, (iii) to decide any and all matters arising
hereunder (including the right to remedy possible ambiguities, inconsistencies, or
admissions), (iv) to make, amend and rescind such rules and procedures as it deems necessary
for the proper administration of the Plan and (v) to make all other determinations and
resolve all questions of fact necessary or advisable for the administration of the Plan,
including determinations regarding eligibility for benefits payable under the Plan. All
interpretations of the Committee with respect to any matter hereunder shall be final,
conclusive and binding on all persons affected thereby, subject to the provisions of this
Article 9. All decisions of the Committee shall be by vote of at least a majority of its
members. Members of the Committee shall be eligible to participate in the Plan while serving
as members of the Committee, but a member of the Committee shall not vote or act upon any
matter that relates solely to such member’s interest in the Plan as a Participant. The
current members of the Committee are the Chief Executive Officer; the Chief Financial
Officer; the Senior Vice President, Human Resources; the Senior Vice President and General
Counsel; the Vice President and Treasurer; the Vice President, Compensation and Benefits;
the Vice President, Associate General Counsel and Assistant Secretary; the Vice President,
Global Finance; the Manager, Corporate Finance and Investments, and the Director, Financial
Reporting at the Company’s Miller Corporate Center. The Committee has designated the Vice
President, Compensation and Benefits as the Administrator to carry out the day-to-day
administration of the Plan. No member of the Committee or any other agent thereof including
the Administrator shall be liable for any determination, decision, or action made in good
faith with respect to the Plan. The Company shall indemnify and hold harmless the members of
the Committee and the Administrator from and against any and all liabilities, costs, and
expenses incurred by such persons as a result of any act, or omission, in connection with
the performance of such persons’ duties, responsibilities, and obligations under the Plan,
other than such liabilities, costs, and expenses as may result from the bad faith, willful
misconduct, or criminal acts of such persons.

     9.2 Claims Procedure. Any Participant, former Participant or Beneficiary may
file a written claim with the Administrator setting forth the nature of the Benefit claimed,
the amount thereof, and the basis for claiming entitlement to such Benefit. The
Administrator shall determine the validity of the claim and communicate a decision to the
claimant promptly and, in any event, not later than ninety (90) days after the date of the
claim. The claim may be deemed by the claimant to have been denied for purposes of further
review described below in the event a decision is not furnished to the claimant within such
ninety (90) day period. If additional information is necessary to make a determination on a
claim, the claimant shall be advised of the need for such additional

 

 

information within forty-five (45) days after the date of the claim. The claimant shall
have up to one hundred and eighty (180) days to supplement the claim information, and the
claimant shall be advised of the decision on the claim within forty-five (45) days after the
earlier of the date the supplemental information is supplied or the end of the one hundred
and eighty (180) day period. Every claim for Benefits that is denied shall be denied by
written notice setting forth in a manner calculated to be understood by the claimant (i) the
specific reason or reasons for the denial, (ii) specific reference to any provisions of the
Plan (including any internal rules, guidelines, protocols, criteria, etc.) on which the
denial is based, (iii) description of any additional material or information that is
necessary to process the claim, and (iv) an explanation of the procedure for further
reviewing the denial of the claim and shall include an explanation of the claimant’s right
to pursue legal action upon an adverse determination on review.

     9.3 Review Procedures. Within sixty (60) days after the receipt of a denial on
a claim, a claimant or his/her authorized representative may file a written request for
review of such denial. Such review shall be undertaken by the Committee and shall be a full
and fair review. The claimant shall have the right to review all pertinent documents,
information and data. The Committee shall issue a decision not later than sixty (60) days
after receipt of a request for review from a claimant unless special circumstances, such as
the need to hold a hearing, require a longer period of time, in which case a decision shall
be rendered as soon as possible but not later than one hundred and twenty (120) days after
receipt of the claimant’s request for review. The decision on review shall be in writing and
shall include specific reasons for the decision written in a manner calculated to be
understood by the claimant with specific reference to any provisions of the Plan on which
the decision is based and shall include an explanation of the claimant’s right to pursue
legal action upon an adverse determination on review.

ARTICLE 10

AMENDMENT OR TERMINATION OF PLAN

     The Chief Executive Officer, the Board of Directors of the Company, or the Committee
(at the direction of the Chief Executive Officer or the Board of Directors) may amend the
Plan; provided, however, that (i) no such amendment shall be effective to decrease the
Benefits accrued by any Participant or Beneficiary of a deceased Participant (including, but
not limited to, the rate of earnings credited on Accounts); (ii) no such amendment shall
revise the substantive provisions of the Plan related to the calculation of Benefits
(including, without limitation, the provisions of Article 6), the minimum number of Declared
Rates or the manner or timing of payments to be made under the Plan so as to prejudice the
rights of any Participant or Beneficiary, except to the extent required by law, and (iii) no
amendment shall change the timing or form of Distributions or otherwise violate the
provisions of Code Section 409A so as to result in the imposition of excise taxes.
Notwithstanding the foregoing, the Company shall not terminate the Plan but may, in its
complete and sole discretion, freeze the Plan and allow no further deferrals into this Plan
on a prospective basis. Notwithstanding the foregoing, the Company or any Participating
Subsidiary may accelerate distribution upon termination of the Plan in the event of a Change
in Control subject to compliance with all requirements of Code Section 409A.

ARTICLE 11

MAINTENANCE OF ACCOUNTS

     The Company shall keep, or cause to be kept, all such books of account, records and
other data as may be necessary or advisable for the administration of this Plan, and to
reflect properly the affairs thereof, and to determine the nature and amount of the
interests of the respective Participants in each Account. Separate Accounts or records for
the respective Participants’ Accounts shall be maintained for operational and accounting
purposes, but no such Account or record shall be considered as creating a lien of any nature
whatsoever on or as segregating any of the assets with respect to the Accounts under this
Plan from any other funds or property of the Company.

ARTICLE 12

MISCELLANEOUS

     12.1 Applicable Law. Except to the extent preempted by ERISA and applicable
substantive provisions of federal law, this Plan shall be governed and construed in
accordance with the laws of the State of California applicable to agreements made and to be
performed entirely therein.

 

 

     12.2 Exempt ERISA Plan. The Plan is intended to be an unfunded plan maintained
primarily to provide deferred compensation benefits for a select group of management or
highly compensated employees within the meaning of Section 401 of ERISA, and therefore to be
exempt from Parts 2, 3, and 4 of Title I of ERISA.

     12.3 Captions. The captions of the articles, sections, and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning or construction of
any of its provisions.

     12.4 Employment Not Guaranteed. Nothing contained in this Plan nor any action
taken hereunder, shall be construed as a contract of employment or as giving any Employee
any right to be retained in the employ of the Company.

     12.5 Limitation. A Participant and the Participant’s Beneficiary shall assume
all risks in connection with the performance of any Declared Rate and any decrease in value
of the Accounts, and none of the Company, any of its officers, employees, or directors, the
Committee or the Administrator shall be liable or responsible therefor.

     12.6 Notice. Any notice or filing required or permitted to be given to the
Administrator under the Plan shall be sufficient if in writing and hand delivered, or sent
by registered or certified mail, to the principal office of the Employer, directed to the
attention of the Administrator with a copy to the Senior Vice President and General Counsel
of the Company. Such notice shall be deemed given as of the date of delivery or, if delivery
is made by mail, as of the date shown on the postmark on the receipt for registration or
certification.

     12.7 Limits on Transfer. Other than by will, the laws of descent and
distribution, or legal or judicial process related to dissolution of marriage, no right,
title or interest of any kind in the Plan shall be transferable or assignable by a
Participant or the Participant’s Beneficiary or be subject to alienation, anticipation,
encumbrance, garnishment, attachment, levy, execution or other legal or equitable process,
nor subject to the debts, contracts, alimony, liabilities or engagements, or torts of any
Participant or Participant’s Beneficiary. Any attempt to alienate, sell, transfer, assign,
pledge, garnish, attach or take any other action subject to legal or equitable process or
encumber or dispose of any interest in the Plan shall be void.

     12.8 Satisfaction of Claims. Payments to any Participant or Beneficiary in
accordance with the provisions of the Plan shall, to the extent thereof, be in full or
partial satisfaction of the Participant’s and/or Beneficiary’s claims against the Company
for the compensation or other amounts deferred and relating to the Account and/or Benefits
to which the payments relate.

     12.9 Tax Withholding. The Participant or Beneficiary shall make appropriate
arrangements with the Company for satisfaction of any federal, state or local income tax
withholding requirements and Social Security or other employee tax requirements applicable
to the crediting and payment of Benefits under the Plan. If no other arrangements are made,
the Company shall have the right to deduct from amounts otherwise credited or payable in
settlement of an Account any sums that federal, state, local or foreign tax law requires to
be withheld with respect to such credit or payment.

     12.10 Participant Cooperation. Each Participant shall cooperate with the
Employer by furnishing any and all information requested by the Administrator in order to
facilitate the payment of Benefits hereunder, taking such physical examinations as the
Administrator may deem necessary and taking such other relevant action as may be requested
by the Employer. If a Participant refuses to so cooperate, the Employer shall have no
further obligation to the Participant under the Plan, other than payment to such Participant
of the cumulative deferrals theretofore made pursuant to this Plan. If a Participant commits
suicide during the two (2) year period beginning on the first day on which he participates
in the Plan or if the Participant makes any material misstatement of information or
nondisclosure of medical history, then no Benefits will be payable hereunder to such
Participant of the deferrals theretofore made pursuant to this Plan, provided, that in the
Committee’s sole discretion, Benefits may be payable in an amount reduced to compensate the
Employer for any loss, cost, damage or expense suffered or incurred by the Employer as a
result in any way of any such action, misstatement or nondisclosure.

     12.11 Unfunded Status of Plan; Creation of Rabbi Trust. The Plan is intended to
constitute an “unfunded” plan of deferred compensation and Participants shall rely solely on
the unsecured promise of the Company for payment hereunder. With respect to any payment not
yet made to a Participant under the Plan, nothing contained in the Plan shall give a
Participant any rights that are greater than those of a general unsecured creditor of the
Company. The Company has established the Avery Dennison Corporation Executive Compensation
Trust (“Rabbi

 

 

Trust”). The assets of the Rabbi Trust shall be subject to the claims of the Company’s
creditors. To the extent any Benefits provided under the Plan are actually paid to a
Participant or Beneficiary from the Rabbi Trust, the Employer shall have no further
obligation with respect thereto, but to the extent not so paid, such Benefits shall remain
the obligation of, and shall be paid by, the Employer. Participants and their Beneficiaries,
heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims
in or to any specific property or assets of the Employer, nor shall they be beneficiaries
of, or have any rights, claims, or interests in any life insurance policies, annuity
contracts, or the proceeds therefrom owned or which may be acquired by the Employer
(“Policies”). Apart from the Rabbi Trust, such Policies or other assets of the Employer
shall not be held under any trust for the benefit of Participants, their Beneficiaries,
heirs, successors, or assigns, or held in any way as collateral security for the fulfilling
of the obligations of the Employer under this Plan. Any and all of the Employer’s assets and
Policies shall be, and shall remain, the general, un-pledged, unrestricted assets of the
Employer. The Employer’s obligations under the Plan shall be merely an unfunded and
unsecured promise of The Employer to pay money in the future.

     12.12 Waiver of Stay, Extension and Usury Laws. The Company covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive the Company from paying all or
any portion of the Benefits due hereunder, wherever such laws may be enacted, now or at any
time hereafter in force, or which may affect the administration or performance of this Plan;
and (to the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder, delay or impede
the realization of any Benefits to which the Participants hereunder are entitled, but will
suffer and permit the realization of all such Benefits as though no such law had been
enacted. The provisions of this Section 12.12 are not intended, however, to prevent
compliance of the Plan with the provisions of Code Section 409A.

     12.13 Validity. In the event any provision of this Plan is held invalid, void,
or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any
other provision of this Plan.

     12.14 Waiver of Breach. The waiver by any party of any breach of any provision
of the Plan by any other party shall not operate or be construed as a waiver of any
subsequent breach.

     12.15 Gender, Singular and Plural. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the
person or persons may require. As the context may require, the singular may be read as the
plural and the plural as the singular.

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