EXHIBIT 10.1
HERSHEY FOODS CORPORATION
KEY EMPLOYEE INCENTIVE PLAN
(Amended and Restated by the Board February 13, 2002)
1. ESTABLISHMENT AND PURPOSE
Hershey Foods Corporation (the "Corporation") hereby establishes the Key
Employee Incentive Plan (the "Plan"). The purpose of the Plan is to provide
to selected key employees of the Corporation and its subsidiaries (as
defined below), upon whose efforts the Corporation is dependent for the
successful conduct of its business, further incentive to continue and
increase their efforts as employees and to remain in the employ of the
Corporation and its subsidiaries.
The Plan continues the Annual Incentive Program ("AIP"), with certain
modifications, as in effect under the Corporation's Management Incentive
Plan ("MIP") established in 1975 and as amended thereafter, pursuant to
which participants are entitled to receive cash awards based on achievement
of performance goals during annual performance cycles. The Plan also
continues the Long-Term Incentive Program ("LTIP") portion of the MIP with
certain modifications. In addition to performance stock units ("Performance
Stock Units"), the LTIP portion also includes nonqualified stock options
for the purchase of Common Stock ("Options"); stock appreciation rights
("SARs"); and restricted stock units ("Restricted Stock Units").
As used herein, (i) the term "Subsidiary Corporation" shall mean any
present or future corporation which is or would be a "subsidiary
corporation" of the Corporation as defined in Section 424 of the Internal
Revenue Code of 1986 (the "Code"), and (ii) the term "Corporation" defined
above shall refer collectively to Hershey Foods Corporation and its
Subsidiary Corporations unless the context indicates otherwise.
2. STOCK SUBJECT TO THE PLAN
The aggregate number of shares of the Corporation's common stock, $1.00 par
value per share (the "Common Stock") that may be issued under the Plan
pursuant to awards granted wholly or partly in Common Stock (including
rights or options which may be exercised for or settled in Common Stock) is
19,000,000 (inclusive of shares that are the subject of awards outstanding
as of February 13, 2002 and shares issued pursuant to awards under this
Plan prior to such date). The shares of Common Stock issued under this Plan
may be either authorized but unissued shares, treasury shares held by the
Corporation or any direct or indirect subsidiary thereof, or shares
acquired by the Corporation through open market purchases or otherwise. The
number of shares of Common Stock that are the subject of any awards
outstanding on or after February 13, 2002 that are forfeited or terminated,
surrendered, expire unexercised, are settled in cash in lieu of Common
Stock or are exercised or settled in a manner such that some or all of the
shares covered by the award are not issued or are exchanged for awards that
do not involve Common Stock, shall again
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immediately become available for issuance as awards hereunder. The
Committee may from time to time adopt and observe such procedures
concerning the counting of shares against the Plan maximum as it may deem
appropriate.
3. ADMINISTRATION
The Plan shall be administered by the Compensation and Executive
Organization Committee (the "Committee"), or any successor committee,
appointed by and consisting solely of members of the Board of Directors
(the "Board") of the Corporation, each of whom qualifies as both a
"nonemployee director" within the meaning of Rule 16b-3 or its successor
under the Securities Exchange Act of 1934 (the "Exchange Act") and an
"outside director" within the meaning of Section 162(m) of the Code.
Committee members shall not be eligible to participate in the Plan. The
Board may from time to time remove and appoint members of the Committee in
substitution for, or in addition to, members previously appointed and may
fill vacancies, however caused, in the Committee. The Committee may adopt
such rules and regulations as it deems useful in governing its affairs. To
the extent provided by resolution of the Board, the Committee may authorize
the Chief Executive Officer of the Corporation and other senior officers of
the Corporation to designate officers and employees to be recipients of
awards, to determine the terms, conditions, form and amount of any such
awards, and to take such other actions which the Committee is authorized to
take under this Plan, provided that the Committee may not delegate to any
person the authority to grant awards to, or take other action with respect
to, participants who at the time of such awards or action are subject to
Section 16 of the Exchange Act or are "covered employees" as defined in
Section 162(m) of the Code. Any action of the Committee with respect to the
administration of the Plan shall be taken by majority vote at a Committee
meeting or written consent of all Committee members.
Subject to the terms and conditions of the Plan, the Committee shall have
authority: (i) to construe and interpret Plan provisions; (ii) to define
the terms used in the Plan; (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan; (iv) to select particular employees to
participate in the Plan, (v) to determine the terms, conditions, form and
amount of grants, distributions or payments made to each participant,
including conditions upon and provisions for vesting, exercise and
acceleration of any grants, distributions or payments; (vi) upon the
request of a participant in the Plan, to approve and determine the duration
of leaves of absence which may be granted to the participant without
constituting a termination of his or her employment for purposes of the
Plan; and (vii) to make all other determinations necessary or advisable for
the administration and operation of the Plan. The Committee shall have the
right to impose varying terms and conditions with respect to each grant or
award. All determinations and interpretations made by the Committee shall
be final, binding and conclusive on all participants and on their legal
representatives and beneficiaries.
4. FAIR MARKET VALUE
As used in the Plan (unless a different method of calculation is required
by applicable law, and except as otherwise specifically provided in any
Plan provision), "Fair Market Value" on
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or as of any date shall mean (i) the closing price of the Common Stock as
reported in the New York Stock Exchange Composite Transactions Report (or
any other consolidated transactions reporting system which subsequently may
replace such Composite Transactions Report) for the New York Stock Exchange
trading day immediately preceding such date, or if there are no sales on
such date, on the next preceding day on which there were sales, or (ii) in
the event that the Common Stock is no longer listed for trading on the New
York Stock Exchange, an amount determined in accordance with standards
adopted by the Committee.
5. ELIGIBILITY AND PARTICIPATION
Key employees of the Corporation or of any of its Subsidiary Corporations,
including officers and directors who are regular employees but not members
of the Committee, who in the opinion of the Committee are in a position to
contribute significantly to the success of the Corporation or any
Subsidiary Corporation, division or operating unit thereof, shall be
eligible for selection to participate in the Plan. In making this selection
and in determining the form and amount of grants, distributions and
payments under the Plan, the Committee shall take into account the duties
of the respective employees, their present and potential contributions to
the success of the Corporation or any Subsidiary Corporation, division or
operating unit thereof, and such other factors as the Committee may deem
relevant in connection with accomplishing the purposes of the Plan. An
employee who has been selected to participate may, if he or she is
otherwise eligible, receive more than one grant from time to time, and may
be granted any combination of contingent target grants under the AIP or
under the LTIP components of the Plan, as the Committee shall determine.
6. ANNUAL INCENTIVE PROGRAM
The Committee may from time to time, subject to the provisions of the Plan
and such other terms and conditions as the Committee may determine,
establish contingent target grants for those eligible employees it selects
to participate in the AIP. Each such contingent grant may be, but need not
be, evidenced by a written instrument, and shall be determined in relation
to the participant's level of responsibility in the Corporation and the
competitive compensation practices of other major businesses, and such
other factors as are deemed appropriate by the Committee.
(a) Awards actually earned by and paid to AIP participants ("AIP Awards")
will be based primarily upon achievement of Performance Goals (as
defined in Section 9 below) over a one-year performance cycle as
approved by the Committee.
(b) The Committee, within the limits of the Plan, shall have full authority
and discretion to determine the time or times of establishing
contingent target grants; to select from among those eligible the
employees to receive awards; to review and certify the achievement of
Performance Goals; to designate levels of awards to be earned in
relation to levels of achievement of Performance Goals; to adopt such
financial and nonfinancial performance or other criteria for the
payment of awards as it may determine from time to time; to make
awards; and to establish such other measures as may be necessary to
achieve the objectives of the Plan. The financial or non-financial
Performance Goals established by
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the Committee may be based upon one or more Performance Factors (as
defined in Section 9 below).
(c) The maximum amount any participant can receive as an AIP Award for any
calendar year shall not exceed $3,000,000.
(d) AIP Awards as earned under the terms of the Plan shall be paid in cash
and may exceed or be less than the contingent target grants, subject
nevertheless to the maximum award limit set forth in subparagraph (c)
above. Payment shall normally be made as soon as possible following the
close of the year, but payment of all or any portion may be deferred by
participants with the approval of the Committee.
7. LONG-TERM INCENTIVE PROGRAM
The LTIP consists of the following four components:
I. Performance Stock Units
The Committee may, subject to the provisions of the Plan and such other
terms and conditions as the Committee may determine, grant Performance
Stock Units to reflect the value of contingent target grants
established for each eligible employee selected for participation. Each
grant of Performance Stock Units may be, but need not be, evidenced by
a written instrument. Such contingent target grants shall be determined
in relation to the employee's level of responsibility in the
Corporation or any Subsidiary Corporation, division or operating unit
thereof, and the competitive compensation practices of other major
businesses.
(a) Awards actually earned by and paid to holders of Performance Stock
Units ("PSU Awards") will be based upon achievement of Performance
Goals over performance cycles as approved by the Committee. Such
performance cycles each shall cover such period of time, not
exceeding five years, as the Committee from time to time shall
determine.
(b) The Committee, within the limits of the Plan, shall have full
authority and discretion to determine the time or times of
establishing contingent target grants and the granting of
Performance Stock Units; to select from among those eligible the
employees to receive PSU Awards; to review and certify the
achievement of Performance Goals; to designate levels of awards to
be earned in relation to levels of achievement of Performance
Goals; to adopt such financial and nonfinancial performance or
other criteria for the payment of PSU Awards as it may determine
from time to time; to make awards; and to establish such other
measures as may be necessary to the objectives of the Plan. The
Performance Goals established by the Committee may be based on one
or more of the Performance Factors.
(c) Payments of PSU Awards shall be made in shares of Common Stock or
partly in cash as the Committee in its sole discretion shall
determine and shall be charged against the
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shares available under the LTIP portion of the Plan as provided
in Paragraph 2; provided, however, that no fractional shares
shall be issued and any such fraction will be eliminated by
rounding downward to the nearest whole share.
(d) PSU Awards as earned under the terms of the Plan may exceed or be
less than the contingent target grants. Payment shall normally be
made as soon as possible following the close of the year, but
payment of all or any portion may be deferred by participants with
the approval of the Committee.
(e) The maximum number of PSUs a participant can receive as a PSU
Award in any calendar year is 75,000.
II. Stock Options
The Committee may, from time to time, subject to the provisions of the
Plan and such other terms and conditions as it may determine, grant
nonqualified Options to purchase shares of Common Stock of the
Corporation to employees eligible to participate in the Plan. Each
grant of an Option shall be on such terms and conditions and be in such
form as the Committee may from time to time approve, subject to the
following:
(a) The exercise price per share with respect to each Option shall be
determined by the Committee in its sole discretion, but shall not
be less than 100% of the Fair Market Value of the Common Stock as
of the date of the grant of the Option.
(b) Options granted under the Plan shall be exercisable, in such
installments and for such periods, as shall be provided by the
Committee at the time of granting, but in no event shall any
Option granted extend for a period in excess of ten years from the
date of grant.
(c) The maximum number of shares of Common Stock covered by Options
granted to a participant for any calendar year shall not exceed
500,000.
(d) Among other conditions that may be imposed by the Committee, if
deemed appropriate, are those relating to (i) the period or
periods and the conditions of exercisability of any Option; (ii)
the minimum periods during which grantees of Options must be
employed, or must hold Options before they may be exercised; (iii)
the minimum periods during which shares acquired upon exercise
must be held before sale or transfer shall be permitted; (iv)
conditions under which such Options or shares may be subject to
forfeiture; and (v) the frequency of exercise or the minimum or
maximum number of shares that may be acquired at any one time.
(e) Exercise of an Option shall be by written notice stating the
election to exercise in the form and manner determined by the
Committee.
(f) The purchase price upon exercise of any Option shall be paid in
full by making payment (i) in cash; (ii) in whole or in part by
the delivery of a certificate or
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certificates of shares of previously-acquired Common Stock of the
Corporation, valued at its then Fair Market Value; or (iii) by a
combination of (i) and (ii).
(g) Notwithstanding subparagraph (f) above, any optionee may make
payment of the Option price through a simultaneous exercise of his
or her Option and sale of the shares thereby acquired pursuant to
a brokerage arrangement approved in advance by the Committee to
assure its conformity with the terms and conditions of the Plan.
(h) The Committee may require the surrender of outstanding Options as
a condition to the grant of new Options.
(i) Notwithstanding any other provision of the Plan or of any Option
agreement between the Corporation and an employee, upon the
occurrence of a Change in Control, each outstanding Option held by
a participant who is an employee of the Corporation or any
Subsidiary Corporation or who retired while employed by the
Corporation or any Subsidiary Corporation shall become fully
vested and exercisable notwithstanding any vesting schedule or
installment schedule relating to the exercisability of such Option
contained in the applicable Option agreement or otherwise
established at the time of grant of the Option.
(j) For purposes of this Plan, a "Change in Control" means:
(1) Individuals who, on June 8, 1999, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person
becoming a director subsequent to June 8, 1999, whose election
or nomination for election was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board
(either by specific vote or by approval of the proxy statement
of the Corporation in which such person is named as nominee
for director, without written objection to such nomination)
shall be an Incumbent Director; PROVIDED, HOWEVER, that no
individual initially elected or nominated as a director of the
Corporation as a result of an actual or threatened election
contest (as described in Rule 14a-11 under the Exchange Act)
("Election Contest") or other actual or threatened
solicitation of proxies or consents by or on behalf of any
person (as such term is defined in Section 3(a)(9) of the
Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of
the Exchange Act) ("Person") other than the Board ("Proxy
Contest"), including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest, shall
be deemed an Incumbent Director; and PROVIDED FURTHER,
HOWEVER, that a director who has been approved by the Hershey
Trust while it beneficially owns more than 50% of the combined
voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Power") shall
be deemed to be an Incumbent Director; or
(2) The acquisition or holding by any Person of beneficial
ownership (within the meaning of Section 13(d) under the
Exchange Act and the rules and regulations
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promulgated thereunder) of shares of the Common Stock and/or
the Class B Common Stock of the Corporation representing 25%
or more of either (i) the total number of then outstanding
shares of both Common Stock and Class B Common Stock of the
Corporation (the "Outstanding Corporation Stock") or (ii)
the Outstanding Corporation Voting Power; provided that, at
the time of such acquisition or holding of beneficial
ownership of any such shares, the Hershey Trust does not
beneficially own more than 50% of the Outstanding
Corporation Voting Power; and provided, further, that any
such acquisition or holding of beneficial ownership of
shares of either Common Stock or Class B Common Stock of the
Corporation by any of the following entities shall not by
itself constitute such a Change in Control hereunder: (i)
the Hershey Trust; (ii) any trust established by the
Corporation or by any Subsidiary Corporation for the benefit
of the Corporation and/or its employees or those of a
Subsidiary Corporation or by any Subsidiary Corporation for
the benefit of the Corporation and/or its employees or those
of a Subsidiary Corporation; (iii) any employee benefit plan
(or related trust) sponsored or maintained by the
Corporation or any Subsidiary Corporation; (iv) the
Corporation or any Subsidiary Corporation or (v) any
underwriter temporarily holding securities pursuant to an
offering of such securities; or
(3) The approval by the stockholders of the Corporation of any
merger, reorganization, recapitalization, consolidation or
other form of business combination (a "Business Combination")
if, following consummation of such Business Combination, the
Hershey Trust does not beneficially own more than 50% of the
total voting power of all outstanding voting securities of (x)
the surviving entity or entities (the "Surviving Corporation")
or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of more than
50% of the combined voting power of the then outstanding
voting securities eligible to elect directors of the Surviving
Corporation; or
(4) The approval by the stockholders of the Corporation of (i) any
sale or other disposition of all or substantially all of the
assets of the Corporation, other than to a corporation (the
"Acquiring Corporation") if, following consummation of such
sale or other disposition, the Hershey Trust beneficially owns
more than 50% of the total voting power of all outstanding
voting securities eligible to elect directors (x) of the
Acquiring Corporation or (y) if applicable, the ultimate
parent corporation that directly or indirectly has beneficial
ownership of more than 50% of the combined voting power of the
then outstanding voting securities eligible to elect directors
of the Acquiring Corporation, or (ii) a liquidation or
dissolution of the Company.
For purposes of this Plan, "Hershey Trust" means either or both of
(a) the Hershey Trust Company, a Pennsylvania corporation, as
Trustee for the Milton Hershey School, or any successor to the
Hershey Trust Company as such trustee, and (b) the Milton Hershey
School, a Pennsylvania not-for-profit corporation
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(k) For purposes of this Plan, a "Potential Change in Control" means:
(1) The Hershey Trust by action of any of the Board of Directors
of Hershey Trust Company; the Board of Managers of Milton
Hershey School; the Investment Committee of the Hershey Trust;
and/or any of the officers of Hershey Trust Company or Milton
Hershey School (acting with authority) undertakes
consideration of any action the taking of which would lead to
a Change in Control as defined herein, including, but not
limited to consideration of (i) an offer made to the Hershey
Trust to purchase any number of its shares in the Corporation
such that if the Hershey Trust accepted such offer and sold
such number of shares in the Corporation the Hershey Trust
would no longer have more than 50% of the Outstanding
Corporation Voting Power, (ii) an offering by the Hershey
Trust of any number of its shares in the Corporation for sale
such that if such sale were consummated the Hershey Trust
would no longer have more than 50% of the Outstanding
Corporation Voting Power or (iii) entering into any agreement
or understanding with a person or entity that would lead to a
Change in Control; or
(2) The Board approves a transaction described in subsection (2),
(3) or (4) of the definition of a Change in Control contained
in subparagraph (j) of Paragraph 7II hereof.
(l) In the event that a transaction which would constitute a Change in
Control if approved by the stockholders of the Corporation is to
be submitted to such stockholders for their approval, each
participant who is an employee and who holds an Option granted
under the Plan at the time scheduled for the taking of such vote,
whether or not then exercisable, shall have the right to receive a
notice at least ten (10) business days prior to the date on which
such vote is to be taken. Such notice shall set forth the date on
which such vote of stockholders is to be taken, a description of
the transaction being proposed to stockholders for such approval,
a description of the provisions of subparagraph (i) of Paragraph
7II of the Plan and a description of the impact thereof on such
participant in the event that such stockholder approval is
obtained. Such notice shall also set forth the manner in which and
price at which all Options then held by each such participant
could be exercised upon the obtaining of such stockholder
approval.
III.Stock Appreciation Rights
The Committee may, from time to time, subject to the provisions of the
Plan and such other terms and conditions as the Committee may
determine, grant SARs to employees eligible to participate in the Plan.
SARs may, but need not be evidenced by an agreement executed by the
Corporation and the holder, and shall be subject to such terms and
conditions consistent with the Plan as the Committee shall impose from
time to time, including the following:
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(a) SARs may, but need not, relate to Options granted under the Plan,
as the Committee shall determine from time to time. In no event
shall any SARs granted extend for a period in excess of ten years
from the date of grant.
(b) A holder shall exercise his or her SARs by giving written notice
of such exercise in the form and manner determined by the
Committee, and the date upon which such written notice is received
by the Corporation shall be the exercise date for the SARs.
(c) A holder of SARs shall be entitled to receive upon exercise the
excess of the Fair Market Value of a share of Common Stock at the
time of exercise over the Fair Market Value of a share at the time
the SARs were granted, multiplied by the number of shares with
respect to which the SARs relate.
(d) In the sole discretion of the Committee, the amount payable to the
holder upon exercise of SARs may be paid either in Common Stock or
in cash or in a combination thereof. To the extent paid in Common
Stock, the value of the Common Stock that shall be distributed
shall be the Fair Market Value of a share of Common Stock upon
exercise of the SARs as provided in Paragraph 2; provided,
however, that no fractional shares shall be issued and any such
fraction will be eliminated by rounding downward to the nearest
whole share.
(e) In the sole discretion of the Committee, SARs related to specific
Options may be exercisable only upon surrender of all or a portion
of the related Option, or may be exercisable, in whole or in part,
only at such times and to the extent that the related Option is
exercisable, and the number of shares purchasable pursuant to the
related Option may be reduced to the extent of the number of
shares with respect to which the SARs are exercised.
(f) In lieu of receiving payment at the time of exercise of SARs,
payment of all or any portion may be deferred by the participant
with the approval of the Committee.
(g) The maximum number of SARs granted to a participant during any
calendar year shall not exceed 500,000.
IV. Restricted Stock Units
The Committee may, from time to time, subject to the provisions of the
Plan and such other terms and conditions as it may determine, grant
Restricted Stock Units to employees eligible to participate in the
Plan. Each grant of Restricted Stock Units may be, but need not be
evidenced by a written instrument. The grant of Restricted Stock Units
shall state the number of Restricted Stock Units covered by the grant,
and shall contain such terms and conditions and be in such form as the
Committee may from time to time approve, subject to the following:
(a) Each Restricted Stock Unit shall be equivalent in value to a share
of Common Stock.
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(b) Vesting of each grant of Restricted Stock Units shall require the
holder to remain in the employment of the Corporation or a
Subsidiary Corporation for a prescribed period (a "Restriction
Period"). The Committee shall determine the Restriction Period or
Periods which shall apply to the shares of Common Stock covered by
each grant of Restricted Stock Units. Except as otherwise
determined by the Committee and provided in the written instrument
granting the Restricted Stock Units, and except as otherwise
provided in Paragraph 8, all Restricted Stock Units granted to a
participant under the Plan shall terminate upon termination of the
participant's employment with the Corporation or any Subsidiary
Corporation before the end of the Restriction Period or Periods
applicable to such Restricted Stock Units, and in such event the
holder shall not be entitled to receive any payment with respect
to those Restricted Stock Units. The Committee may also, in its
sole discretion, establish other terms and conditions for the
vesting of Restricted Stock Units, including conditioning vesting
on the achievement of one or more of the Performance Factors.
Notwithstanding any other provisions of the Plan or of any written
instrument granting Restricted Stock Units, upon the occurrence of
a Change in Control as defined in subparagraph (j) of Paragraph
7II hereof, all restrictions on Restricted Stock Units held by a
participant who is an employee of the Corporation or any
Subsidiary Corporation shall lapse.
(c) Upon expiration of the Restriction Period or Periods applicable to
each grant of Restricted Stock Units, the holder shall, without
payment on his part, be entitled to receive payment in an amount
equal to the aggregate Fair Market Value of the shares of Common
Stock covered by such grant upon such expiration. Such payment may
be made in cash, in shares of Common Stock equal to the number of
Restricted Stock Units with respect to which such payment is made,
or in any combination thereof, as the Committee in its sole
discretion shall determine. Further upon such expiration, the
holder shall be entitled to receive a cash payment in an amount
equal to each cash dividend the Corporation would have paid to
such holder during the term of those Restricted Stock Units as if
the holder had been the owner of record of the shares of Common
Stock covered by such Restricted Stock Units on the record date
for the payment of such dividend.
(d) In lieu of receiving payment at the time of expiration of the
Restriction Period or Periods, payment of all or any portion may
be deferred by the participant with the approval of the Committee.
(e) The maximum number of shares of Common Stock as to which
Restricted Stock Units may be granted to a participant for any
calendar year shall not exceed 75,000.
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8. TERMINATION OF EMPLOYMENT
Upon termination of employment with the Corporation of any participant,
such participant's rights with respect to any contingent target grants
under the AIP, or any Performance Stock Units, Options, SARs or Restricted
Stock Units granted under the LTIP, shall be as follows:
(a) In the event that the participant is terminated or discharged by the
Corporation for any reason, except as and to the extent provided
otherwise by the Committee in writing, the participant's rights and
interests under the Plan shall immediately terminate upon notice of
termination of employment. Upon the occurrence of a Potential Change in
Control (as defined in subparagraph (k) of Paragraph 7II hereof) and
for a period of one year thereafter, and upon the occurrence of a
Change in Control (as defined in subparagraph (j) of Paragraph 7II
hereof), the following special provisions and notice requirements shall
be applicable in the event of the termination of the employment of any
participant holding an Option under the Plan: (i) in no event may a
notice of termination of employment be issued to such a participant
unless at least ten (10) business days prior to the effective date of
such termination the participant is provided with a written notice of
intent to terminate the participant's employment which sets forth in
reasonable detail the reason for such intent to terminate, the date on
which such termination is to be effective, and a description of the
participant's rights under this Plan and under the agreements granting
such Option or Options, including the fact that no such Option may be
exercised after such termination has become effective and the manner,
extent and price at which all Options then held by such participant may
be exercised; and (ii) such notice of intent to terminate a
participant's employment shall not be considered a "notice of
termination of employment" for purposes of the first sentence of this
Paragraph 8 (a). This Paragraph 8 (a) is intended only to provide for a
requirement of notice to terminate upon the occurrence of the events
set forth herein and shall not be construed to create an obligation of
continued employment or a contract of employment in any manner or to
otherwise affect or limit the Corporation's ability to terminate the
employment of any participant holding an Option under the Plan.
(b) If a participant terminates employment with the Corporation as the
result, in the sole judgment of the Committee, of his or her becoming
totally disabled (in which event termination will be deemed to occur on
the date the Committee makes such determination), or if a participant
should die or (except as to Restricted Stock Units) retire while
employed by the Corporation or any of its Subsidiary Corporations, then
the participant or, as the case may be, the person or persons to whom
the participant's interest under the Plan shall pass by will or by the
laws of descent and distribution (the "Estate"), shall have the
following rights:
(i) the grantee of a contingent AIP grant or the Estate shall be
entitled to receive payment of an AIP award as, and to the extent,
determined by the Committee;
(ii) if the holder of Performance Stock Units shall have been employed
for at least two-thirds of the related performance cycle prior to
the date of termination or death, then, except as otherwise
provided in the written instrument (if any) evidencing the
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Performance Stock Units, and subject to any further adjustments
the Committee may make in its absolute discretion, the participant
or the Estate shall be entitled to receive payment of a PSU Award
upon the expiration of the related performance cycle, provided
that such award shall be adjusted by multiplying the amount
thereof by a fraction, the numerator of which shall be the number
of full and partial calendar months between the date of the
beginning of each such performance cycle and the date of
termination or death, and the denominator of which shall be the
number of full and partial calendar months from the date of the
beginning of the performance cycle to the end of the said
performance cycle;
(iii)except as otherwise provided in the terms and conditions of the
stock option or SAR grant, the holder or the Estate shall be
entitled to exercise (provided any vesting requirement has been
satisfied as of the date of exercise) any Option or SAR for a
period of five years (three years in the case of options or SARs
granted prior to 1997) from such date of death, total disability
or retirement, or for such longer period as the Committee may
determine in the case of financial hardship or other unusual
circumstances (subject to the maximum exercise period for Options
and SARs specified in Paragraph 7II(b) and 7III(a) hereof,
respectively);
(iv) except as otherwise provided in the written instrument evidencing
the Restricted Stock Units, upon death or termination due to total
disability the holder or the Estate shall be entitled to receive
payment in respect of the Restricted Stock Units, provided that
such Units shall be adjusted by multiplying the amount thereof by
a fraction, the numerator of which shall be the number of full and
partial calendar months between the date of grant of such Units
and the date of death or termination, and the denominator of which
shall be the number of full and partial calendar months from the
date of the grant to the end of the Restriction Period. Upon
retirement, the participant's rights with respect to Restricted
Stock Units shall immediately terminate.
(c) In the event of resignation by the participant, the participant's
rights and interests under the Plan shall immediately terminate upon
such resignation; provided, however, that the Committee shall have the
absolute discretion to review the reasons and circumstances of the
resignation and to determine whether, alternatively, and to what
extent, if any, the participant may continue to hold any rights or
interests under the Plan.
(d) A transfer of a participant's employment without an intervening period
from the Corporation to a Subsidiary Corporation or vice versa, or from
one Subsidiary Corporation to another, shall not be deemed a
termination of employment.
(e) The Committee shall be authorized to make all determinations and
calculations required by this Paragraph 8, including any determinations
necessary to establish the reason for terminations of employment for
purposes of the Plan, which determinations and calculations shall be
conclusive and binding on any affected participants and Estates.
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9. PERFORMANCE FACTORS; ADDITIONAL REQUIREMENTS
Without limiting the type or number of awards that may be made under this
Plan, an award may be in the form of a performance-based award intended to
comply as "performance-based" compensation under Section 162(m) of the Code
(such award a "Performance Award"). A Performance Award shall be paid,
vested or otherwise deliverable solely on account of the attainment of one
or more pre-established, objective performance goals ("Performance Goals")
established by the Committee prior to the earlier to occur of (x) 90 days
after the commencement of the period of service to which the Performance
Goal relates and (y) the elapse of 25% of the period of service (as
established in good faith at the time the Performance Goal is established),
and in any event while the outcome is substantially uncertain. A
Performance Goal is objective if a third party having knowledge of the
relevant facts could determine whether the goal is met. A Performance Goal
may be based on one or more of the following business criteria: earnings
per share, return on net assets, market share, control of costs, net sales,
cash flow, return on invested capital, economic value-added measures, sales
growth, earnings growth, stock price, return on equity, financial ratings,
regulatory compliance, achievement of balance sheet or income statement
objectives, or other financial, accounting or quantitative objectives
established by the Committee (collectively, the "Performance Factors").
Performance Factors may be particular to a participant or the division,
line of business or other unit in which the participant works, or the
Corporation generally, or may be absolute in their terms or measured
against or in relationship to the performance of a peer group or other
external or internal measure. A Performance Goal may, but need not be,
based upon a change or an increase or positive result under a particular
Performance Factor and could include, for example, maintaining the status
quo, limiting economic losses, or a relative comparison of performance to
the performance of a peer group or other external or internal measure
(measured, in each case, by reference to specific Performance Factors). A
Performance Goal may include or exclude items to measure specific
objectives, including, without limitation, extraordinary or other
non-recurring items, acquisitions and divestitures, internal restructuring
and reorganizations, accounting charges and effects of accounting changes.
In interpreting Plan provisions applicable to Performance Goals and
Performance Awards applicable to awards to employees who are "covered
employees" under Section 162(m) of the Code, it is the intent of the Plan
to conform with the standards of Section 162(m) of the Code and Treasury
Regulations Section 1.162-27(e)(2)(i), and the Committee in establishing
such goals and interpreting the Plan shall be guided by such provisions.
Prior to the payment of any compensation based on the achievement of
Performance Goals to any such "covered employee", the Committee must
certify in writing that applicable Performance Goals and any of the
material terms thereof were, in fact, satisfied. Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any
Performance Awards made pursuant to this Plan shall be determined by the
Committee.
No Performance Stock Units, Options, SARs or Restricted Stock Units
(hereinafter collectively an "Interest") granted pursuant to the Plan shall
be exercisable or realized in whole or in part, and the Corporation shall
not be obligated to sell, distribute or issue any shares subject to any
such Interest, if such exercise and sale would, in the opinion of counsel
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for the Corporation, violate the Securities Act of 1933, as amended (or
other Federal or state statutes having similar requirements). Each Interest
shall be subject to the further requirement that, if at any time the Board
of Directors shall determine in its discretion that the listing or
qualification of the shares relating or subject to such Interest under any
securities exchange requirements or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such
Interest or the distribution or issue of shares thereunder, such Interest
may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained
free of any condition not acceptable to the Board of Directors.
Interests may be subject to restrictions as to resale or other disposition
and to such other provisions as may be appropriate to comply with Federal
and state securities laws and stock exchange requirements, and the exercise
of any Interest or entitlement to payment thereunder may be contingent upon
receipt from the holder (or any other person permitted by this Plan to
exercise any Interest or receive any distribution hereunder) of a
representation that at the time of such exercise it is his or her then
present intention to acquire the shares being distributed for investment
and not for resale.
10. NONTRANSFERABILITY
Unless otherwise approved by the Committee, contingent AIP grants,
Performance Stock Units, Options, SARs and Restricted Stock Units granted
under the Plan to an employee shall be nonassignable and shall not be
transferable by him or her otherwise than by will or the laws of descent
and distribution, and shall be exercisable, during the employee's lifetime,
only by the employee or the employee's guardian or legal representative.
11. DISCLAIMER OF RIGHTS
No provision in the Plan or any contingent target AIP grants, Performance
Stock Units, Options, SARs or Restricted Stock Units granted pursuant to
the Plan shall be construed to confer upon the participant any right to be
employed by the Corporation or by any Subsidiary Corporation, or to
interfere in any way with the right and authority of the Corporation or any
Subsidiary Corporation either to increase or decrease the compensation of
the participant at any time, or to terminate any relationship of employment
between the participant and the Corporation or any of its Subsidiary
Corporations.
Participants under the Plan shall have none of the rights of a stockholder
of the Corporation with respect to shares subject to Performance Stock
Units, Options, SARs or Restricted Stock Units unless and until such shares
have been issued to him or her.
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12. STOCK ADJUSTMENTS
In the event that the shares of Common Stock, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares
of stock or other securities of the Corporation or of another corporation
(whether by reason of merger, consolidation, recapitalization,
reclassification, stock split, combination of shares or otherwise), or if
the number of such shares of Common Stock shall be increased through the
payment of a stock dividend, or a dividend on the shares of Common Stock of
rights or warrants to purchase securities of the Corporation shall be made,
then there shall be substituted for or added to each share available under
and subject to the Plan as provided in Paragraph 2 hereof, and to the
limitations set forth in Paragraphs 7II (c); 7III (g) and 7IV (e), and each
share theretofore appropriated or thereafter subject or which may become
subject to Performance Stock Units, Options, SARs or Restricted Stock Units
under the Plan, the number and kind of shares of stock or other securities
into which each outstanding share of Common Stock shall be so changed or
for which each such share shall be exchanged or to which each such share
shall be entitled, as the case may be. Outstanding Options and SARs also
shall be appropriately amended as to price and other terms as may be
necessary to reflect the foregoing events. In the event there shall be any
other change in the number or kind of the outstanding shares of Common
Stock, or of any stock or other securities into which the Common Stock
shall have been changed or for which it shall have been exchanged, then if
the Board of Directors shall, in its sole discretion, determine that such
change equitably requires an adjustment in the shares available under and
subject to the Plan, or in any Performance Stock Units, Options, SARs or
Restricted Stock Units theretofore granted or which may be granted under
the Plan, such adjustments shall be made in accordance with such
determination.
No fractional shares of Common Stock or units of other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from
any such adjustment shall be eliminated in each case by rounding downward
to the nearest whole share or unit.
13. TAXES
The Corporation shall be entitled to withhold the amount of any tax
attributable to any amounts payable or shares of Common Stock deliverable
under the Plan. The person entitled to any such delivery, whether due to
the settlement of PSUs, the exercise of an Option or SAR, or the vesting of
Restricted Stock Units, or any other taxable event may, by notice to the
Corporation, elect to have any such required withholding satisfied by a
reduction of the number of shares otherwise so deliverable (a "Stock
Withholding Election"), or by delivery of shares of Stock already owned by
the Participant, with the amount of shares subject to such reduction or
delivery to be calculated based on the Fair Market Value on the date of
such taxable event.
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14. EFFECTIVE DATE AND TERMINATION OF PLAN
The Plan as amended and restated herein shall become effective upon
adoption by the Board of Directors of the Corporation.
The Board of Directors at any time may terminate the Plan, but such
termination shall not alter or impair any of the rights or obligations
under any contingent target AIP grants, Performance Stock Units, Options,
SARs or Restricted Stock Units theretofore granted under the Plan unless
the affected participant shall so consent.
15. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of capital stock
pursuant to Options will be used for general corporate purposes.
16. AMENDMENT
The Board of Directors by majority vote, at any time and from time to time,
may amend the Plan in such respects as it shall deem advisable, to conform
to any change in any applicable law or in any other respect; provided that
any such amendment shall not adversely alter or impair any of the rights or
obligations under any contingent target AIP grants, Performance Stock
Units, Options, SARs or Restricted Stock Units theretofore granted under
the Plan unless the affected participant shall so consent. Notwithstanding
the foregoing, the Plan may not be terminated or amended in a manner
adverse to the interests of any participant (without the consent of the
participant) either: (a) after a Potential Change in Control occurs and for
one (1) year following the cessation of a Potential Change in Control, or
(b) for a two-year period beginning as of the date of a Change in Control
(the "Coverage Period"). Upon the expiration of the Coverage Period,
subparagraph (l) of Paragraph 7II of the Plan and Paragraph 8 (a) of the
Plan may not be amended in any manner that would adversely affect any
participant without the consent of the participant.
/s/ Marcella K. Arline
--------------------------------------
Marcella K. Arline
Vice President, Human Resources
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