Avery Dennison (AVY)

ARTICLE 4 – PARTICIPANT DEFERRALS

4.1        Annual Deferral.

On the Participation Election Form, and subject to the restrictions set forth herein, the Director shall designate the amount of Director’s Fees to be deferred for the 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.

4.2        Minimum Deferral.

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

4.3        Maximum Deferral.

The standard maximum amount of Annual Deferral that may be deferred shall be 100% of the Director’s Fees. The maximum deferral amount is established at the discretion of the Administrator.

4.4        Deferral Accounts.

Solely for record keeping purposes, the Company shall maintain a Deferral Account for each Participant. The amount of a Participant’s Annual Deferral pursuant to this Article 4 shall be credited by the Company to the Participant’s Deferral Account as of the last day of the calendar quarter during which Director’s Fees otherwise would have been paid. All Distributions will be debited to the Deferral Account on the Valuation Date.

4.5        Interest on Deferral Accounts.

The Participant’s Deferral Account shall be credited with a rate of return (positive or negative) based on the Declared Rate(s) that he elects. The rate of return (positive or negative) will be credited and compounded daily.

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4.6        Statement of Accounts.

The Administrator shall provide to each Participant periodic statements (not less than annually) setting forth the Participant’s deferrals, Declared Rate(s) (credits or debits), distributions and Deferral Account balance.

4.7        Errors in Benefit Statement or Distributions.

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 event of an error in a Distribution, the 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 shall be adjusted upward or downward to correct such prior error. If the remaining balance of a Participant’s Deferral Account is insufficient to cover an erroneous overpayment, the Company may, at its discretion, offset other amounts payable to the Participant from the Company (including but not limited to Director’s Fees) to recoup the amount of such overpayment(s).

4.8        Valuation of Accounts.

The value of a Deferral Account as of any date shall equal the amounts theretofore credited or debited to such account, plus the interest deemed to be earned on such account in accordance with this Article 4 through the day preceding such date.

4.9        Vesting.

The Participant shall be 100% vested at all times in the Participant’s Deferral Account.

ARTICLE 4 - PARTICIPANT DEFERRALS

4.1 Annual Deferral.

On the Participation Election Form, and subject to the restrictions set forth herein, the Eligible Employee shall designate the amount of Annual Base Salary and Bonus to be deferred for the following calendar year or such other period as the Committee may determine, 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 Annual Base Salary or Bonus are earned; and provided further that any deferral with respect to a performance-based long-term incentive plan or other performance-based benefit may be made up to 6 months before the end of the performance period. For this purpose, the Administrator shall determine whether a plan or benefit is performance based.

4.2 Minimum Deferral.

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

4.3 Maximum Deferral.

The standard maximum amount of Annual Deferral that may be deferred shall be 50% of an Eligible Employee’s Annual Base Salary and 50% of an Eligible Employee’s Bonus; provided that, with the approval of the Administrator, officers of the Company may defer up to 100% of their Annual Base Salary and/or Bonus. The maximum deferral amount is established at the discretion of the Administrator.

4.4 Deferral Accounts.

Solely for record keeping purposes, the Company shall maintain a Deferral Account for each Participant. The amount of a Participant’s Annual Deferral pursuant to this Article 4 shall be credited by the Employer to the Participant’s Deferral Account on the date(s) that such Annual Deferral would otherwise have been paid. The Deferral Account may be credited with Company contributions pursuant to Article 5. All Distributions will be debited to the Deferral Account on the Valuation Date.

4.5 Interest on Deferral Accounts.

The Participant’s Deferral Account shall be credited with a rate of return (positive or negative) based on the Declared Rate(s) that he elects. The rate of return (positive or negative) will be credited and compounded daily.

4.6 Statement of Accounts.

The Administrator shall provide to each Participant periodic statements (not less than annually) setting forth the Participant’s deferrals, Declared Rate(s) (credits or debits), distributions and Deferral Account balance.

4.7 Errors in Benefit Statement or Distributions.

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 event of an error in a Distribution, the 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 shall be adjusted upward or downward to correct such prior error. If the remaining balance of a Participant’s Deferral Account is

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insufficient to cover an erroneous overpayment, the Company may, at its discretion, offset other amounts payable to the Participant from the Company (including but not limited to salary, bonuses, expense reimbursements, severance benefits or other nonqualified employee benefit arrangements) to recoup the amount of such overpayment(s).

4.8 Valuation of Accounts.

The value of a Deferral Account as of any date shall equal the amounts theretofore credited or debited to such account, plus the interest deemed to be earned on such account in accordance with this Article 4 through the day preceding such date.

4.9 Vesting.

Except with respect to any discretionary credits made by the Company which may have a separate vesting schedule, the Participant shall be 100% vested at all times in the Participant’s Deferral Account.