Exhibit 10.31.2
AVERY DENNISON
CORPORATION
2005 EXECUTIVE
VARIABLE DEFERRED RETIREMENT PLAN
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 li
