Exhibit 10
AGREEMENT
THIS AGREEMENT dated as of August 2, 1994, is
made by and between Hershey Foods Corporation, a
Delaware corporation (the "Company"), and
_____________________ (the "Executive").
WHEREAS the Company considers it essential to
the best interests of its stockholders to foster the
continuous employment of key management personnel; and
WHEREAS the Board of Directors of the Company
(the "Board") recognizes that the possibility of a
Change in Control (as defined in the last Section
hereof) exists, as in the case of any publicly-held
corporation, and that such possibility, and the
uncertainty and questions which it may raise among
management, may result in the departure or distraction
of management personnel to the detriment of the Company
and its stockholders; and
WHEREAS the Board has determined that
appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of
members of the Company's management, including the
Executive, to their assigned duties without distraction
in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
NOW THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the Company
and the Executive hereby agree as follows:
1 Defined Terms. The definitions of
capitalized terms used in this Agreement are provided
in the last Section and elsewhere in this Agreement.
2 Term of Agreement. This Agreement shall
commence on the date hereof and shall remain in effect
thereafter; provided, however, that (a) either the
Company or the Executive may terminate this Agreement
by giving the other advance written notice of
termination of the Agreement as of such date as
specified in the notice (except that no such notice may
be given by the Company after a Potential Change in
Control occurs and for a one-year period following the
cessation of a Potential Change in Control), and (b) if
a Change in Control shall have occurred during the term
of this Agreement, this Agreement shall continue in
effect until all obligations of either party hereto
have been performed in full. Notwithstanding the
foregoing: (a) this Agreement shall terminate upon the
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Executive's attaining age sixty-five (65), except as to
obligations of the Company hereunder arising from a
Change in Control and/or a termination of the
Executive's employment prior to his having reached such
age; and (b) no termination of this Agreement by the
Company shall be effective if such termination occurs
(i) at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control, or
(ii) in connection with or in anticipation of a Change
in Control. In the event that the termination of this
Agreement by the Company occurs within two (2) months
prior to a Potential Change in Control or a Change in
Control, there shall be a presumption that the
conditions of subclauses (i) and (ii) of clause (b) of
the immediately preceding sentence shall have been met.
3 Company's Covenants Summarized. In order to
induce the Executive to remain in the employ of the
Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company
agrees, under the terms and conditions set forth
herein, that, upon a Change in Control during the term
of this Agreement, certain benefits shall thereupon
become vested as set forth in Section 5 hereof, and
paid in accordance with the provisions thereof, and, in
the event that the Executive's employment with the
Company is terminated thereafter during the Coverage
Period, the Company shall pay the Executive the amounts
provided for in Section 6 hereof.
4 The Executive's Covenant. The Executive
agrees that, subject to the terms and conditions of
this Agreement, in the event of a Potential Change in
Control, the Executive will remain in the employ of the
Company until the earliest of (a) a date which is nine
(9) months after the date of such Potential Change of
Control, (b) the date of a Change in Control, (c) the
date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the
Potential Change in Control for this purpose as a
Change in Control in applying the definition of Good
Reason) or by reason of death or Disability, (d) the
termination by the Company of the Executive's
employment for any reason, or (e) the Executive's
attaining age sixty-five (65).
5 Vesting or Payment of Certain Benefits in the
Event of a Change in Control
5.1 Vesting of AIP Benefits; Payment of
Benefits. Upon the occurrence of a Change in Control,
the Executive shall have a vested and nonforfeitable
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right hereunder to receive in cash an amount equal to
the sum of (a) the greater of (A) the 100% target award
amount of all then outstanding contingent target AIP
grants made to the Executive under the KEIP, and
(B) the amount that would have been payable to the
Executive under such contingent target AIP grants as of
the end of the applicable award period, calculated
utilizing as the applicable performance factors the
actual performance of the Executive and the Company on
an annualized basis as of the date of the Change in
Control, and (b) the value of all AIP Awards, as
defined in the KEIP ("AIP Awards"), previously earned
by the Executive for which payment has been deferred
(the sum of (a) and (b) is herein referred to as the
"Vested Bonus Amount"). Unless the Change in Control
is a Section 9.21 Change in Control, the Company shall,
within five (5) business days following the Change in
Control, pay to the Executive a lump sum cash payment
equal to the Executive's Vested Bonus Amount. If the
Change in Control is a Section 9.21 Change in Control,
the Executive's Vested Bonus Amount shall be promptly
paid to the Executive at the end of the applicable
award period or deferral period, except as otherwise
provided in Section 6.1(C) hereof.
5.2 Vesting of PSU Benefits; Payment of
Benefits. Upon the occurrence of a Change in Control,
the Executive shall have a vested and nonforfeitable
right hereunder to receive in cash an amount equal to
the sum of: (a) the 100% target award amount of all
then outstanding contingent target Performance Stock
Unit ("PSU") grants made to the Executive under the
KEIP valued at the higher of (i) the highest closing
price of the Company's Common Stock on the New York
Stock Exchange during the sixty (60) day period
preceding and including the date of the Change in
Control, and (ii) if the Change in Control involves a
transaction in which an offer is made to purchase
shares of Common Stock from the Company's stockholders,
the price at which such offer is made; and (b) the
value of all PSU Awards, as defined in the KEIP ("PSU
Awards"), previously earned by the Executive for which
payment has been deferred, including the value of cash
dividends thereon (the sum of (a) and (b) is herein
referred to as the "Vested PSU Amount"). Unless the
Change in Control is a Section 9.21 Change in Control,
the Company shall, within five (5) business days
following the Change in Control, pay to the Executive a
lump sum cash payment equal to the Executive's Vested
PSU Amount. If the Change in Control is a Section 9.21
Change in Control, the Executive's Vested PSU Amount
shall be promptly paid to the Executive at the end of
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each applicable performance cycle or deferral period,
except as otherwise provided in Section 6.1(D) hereof.
5.3 SERP Benefits
(a) Upon the occurrence of a Change in
Control, the Executive shall have a vested and
nonforfeitable right hereunder to receive in cash an
amount equal to the actuarial present value (as
determined in accordance with Section 5.3(e) hereof) of
the monthly retirement benefit (including the spousal
survivor benefit) to which the Executive (and his
spouse) would be entitled under Paragraph 4 of the SERP
if the Executive retired as of the date of the Change
in Control, taking into account Sections 5.3(c) and
5.3(d) hereof (the amount of such monthly retirement
benefit being herein referred to as the Executive's
"SERP Benefit" and the actuarial present value of such
SERP Benefit being herein referred to as the
Executive's "Vested Pension Benefit").
(b) Unless the Change in Control is a
Section 9.21 Change in Control, the Company shall,
within five (5) business days following the Change in
Control, pay to the Executive in cash the Executive's
Vested Pension Benefit in a single sum. If the Change
in Control is a Section 9.21 Change in Control, then
upon the subsequent termination of the Executive's
employment by the Company and its Subsidiaries for any
reason, the Company shall pay to the Executive in
accordance with Sections 6.1 and 6.4 the Executive's
"Adjusted Vested Pension Benefit." The Executive's
"Adjusted Vested Pension Benefit" shall be equal to the
actuarial present value (as determined in accordance
with Section 5.3(e) hereof) of the monthly retirement
benefit (including the spousal survivor benefit) to
which the Executive (and his spouse) would be entitled
under Paragraph 4 of the SERP if the Executive retired
as of the Executive's Date of Termination, taking into
account Sections 5.3(c) and 5.3(d) hereof (the amount
of such monthly retirement benefit being herein
referred to as the Executive's "Adjusted SERP
Benefit").
(c) For purposes of determining the
Executive's SERP Benefit as of the date of a Change in
Control or the Executive's Adjusted SERP Benefit as of
the Executive's Date of Termination (in the case of a
Section 9.21 Change in Control), the Executive shall:
(i) be credited with additional years of Service (as
defined in the SERP) for purposes of clause (1) of
paragraphs 4.a. and 4.b. of the SERP equal to the
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lesser of three (3) or the number of years (including
fractions thereof) from the date of the Change in
Control (or the Executive's Date of Termination in the
case of a Section 9.21 Change in Control) until the
Executive would attain age sixty-five (65) and for all
other purposes under the SERP equal to the excess, if
any, of ten (10) over the actual number of years
(including fractions thereof) of Service completed by
the Executive as of the date of the Change in Control
(or the Executive's Date of Termination in the case of
a Section 9.21 Change in Control); (ii) be deemed to
have five (5) years of participation in the PSU portion
of the LTIP (as defined in the SERP) regardless of his
actual years of participation in the PSU portion of the
LTIP at the time of the Change in Control (or the
Executive's Date of Termination in the case of a
Section 9.21 Change in Control); (iii) be deemed to
have his age increased by three (3) years (or such
lesser number of years (including fractions) until the
Executive would attain age sixty-five (65)) for all
purposes under the SERP (including but not limited to
the reduction factor prescribed by clause 4 of
Paragraph 4.b. of the SERP); and (iv) be deemed to have
been paid his Annual Base Salary and Annual Bonus for
three (3) additional years (or such lesser number of
years (including fractions) until the Executive would
attain age sixty-five (65)) for purposes of calculating
"Final Average Compensation" in paragraph 2.e. of the
SERP.
(d) Other than for purposes of clauses (2),
(3) and (4) of Paragraph 4.b. of the SERP, if the
Executive has not yet attained age fifty-five (55)
(after increasing the Executive's age by three (3)
years as provided in the preceding Section 5.3(c)), the
Executive shall upon the occurrence of the Change in
Control (or the Executive's Date of Termination in the
case of a Section 9.21 Change in Control) be deemed
nevertheless to have attained age fifty-five (55).
(e) The actuarial present value of the
Executive's SERP Benefit or Adjusted SERP Benefit, as
applicable, as determined in accordance with the
foregoing provisions of this Section 5.3 shall be
determined using: (i) the 83 GAM mortality tables; and
(ii) an interest rate equal to 100% of the interest
rate that would be used (as of the date of the Change
in Control or as of the date of the Executive's Date of
Termination if payment is made upon termination of
employment after a Section 9.21 Change in Control) by
the Pension Benefit Guaranty Corporation for purposes
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of determining the present value of a lump sum
distribution on plan termination.
(f) Notwithstanding any provision of the
SERP, the SERP may not be terminated or amended in any
manner that is adverse to the interests of the
Executive without the consent of the Executive either:
(i) after a Potential Change in Control occurs and for
one (1) year following the cessation of the Potential
Change in Control, or (ii) after a Change in Control.
Any termination or amendment of the SERP in a manner
adverse to the interests of the Executive within one
year prior to a Potential Change in Control shall not
be given effect for purposes of this Section 5.3.
(g) The Executive may, in his sole
discretion, elect to receive hereunder in lieu of his
Vested Pension Benefit or his Adjusted Vested Pension
Benefit, as applicable, his SERP Benefit or Adjusted
SERP Benefit, as applicable, in any optional or
alternative form of payment that a participant who has
satisfied all applicable eligibility requirements under
the SERP is entitled to elect under the SERP. Any such
election by the Executive pursuant to this Section
5.3(g) must be made at least ninety (90) days prior to
the date that the Executive's Vested Pension Benefit or
Adjusted Vested Pension Benefit, as applicable, would
otherwise be payable.
6 Benefits and Rights upon Termination of
Employment
6.1 General Termination Rights and Benefits.
If the Executive's employment by the Company is
terminated after a Change in Control for any reason
(whether by the Company or the Executive), the Company
shall pay to the Executive the payments described in
Subsections (A) through (E) below.
(A) Previously Earned Salary. The Company
shall pay the Executive's full salary to the Executive
through the Date of Termination at the highest rate in
effect during the period between the Potential Change
in Control preceding the Change in Control and the date
the Notice of Intent to Terminate is given, together
with all compensation and benefits payable to the
Executive through the Date of Termination under the
terms of any compensation or benefit plan, program or
arrangement maintained by the Company during such
period.
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(B) Previously Earned Benefits. The
Company shall pay the Executive's normal
post-termination compensation and benefits to the
Executive as such payments become due. Such
post-termination compensation and benefits shall be
determined under, and paid in accordance with, the
Company's retirement, insurance, pension, welfare and
other compensation or benefit plans, programs and
arrangements.
(C) Payment of Vested Bonus Amounts.
Except to the extent that the Company has previously
paid to the Executive all or a portion of his Vested
Bonus Amount pursuant to Section 5.1 hereof, the
Company shall pay to the Executive a lump sum cash
payment equal to the Executive's Vested Bonus Amount.
(D) Payment of Vested PSU Amounts. Except
to the extent that the Company has previously paid to
the Executive all or a portion of his Vested PSU Amount
pursuant to Section 5.2 hereof, the Company shall pay
to the Executive a lump sum cash payment equal to the
Executive's Vested PSU Amount.
(E) Payment of Vested Pension Benefit.
Except to the extent the Company has previously paid to
the Executive the Executive's Vested Pension Benefit as
provided in Section 5.3(b) hereof, the Company shall
pay to the Executive a lump sum cash payment equal to
the Executive's Adjusted Vested Pension Benefit.
6.2 Severance Benefits. In addition to the
payments provided for by Section 6.1 hereof, the
Company shall pay to the Executive the payments
described in Subsections (A) through (D) below (the
"Severance Benefits") upon termination of the
Executive's employment with the Company during the
Coverage Period, unless such termination is (a) by the
Company for Cause, (b) by reason of the Executive's
death or Disability, (c) after the Executive attains
age sixty-five (65), or (d) by the Executive without
Good Reason.
(A) Lump-Sum Severance Payment. In lieu of
any further salary payments to the Executive for
periods subsequent to the Date of Termination, the
Company shall pay to the Executive a lump sum severance
payment, in cash, equal to three (3) (or, if less, the
number of years, including fractions, from the Date of
Termination until the Executive would have reached age
sixty-five (65)) times the sum of (a) the Executive's
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Annual Base Salary and (b) the Executive's Annual
Bonus.
(B) Continued Benefits. For a thirty-six
(36) month period (or, if less, the number of months
from the Date of Termination until the Executive would
have reached age sixty-five (65)) after the Date of
Termination, the Company shall provide the Executive
with life insurance, health, disability and other
welfare benefits ("Welfare Benefits") substantially
similar in all respects to those which the Executive is
receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in
such benefits subsequent to the Potential Change in
Control preceding the Change in Control or the Change
in Control which reduction constitutes or may
constitute Good Reason). Benefits otherwise receivable
by an Executive pursuant to this Section 6.2(B) shall
be reduced to the extent substantially similar benefits
are actually received by or made available to the
Executive by any other employer during the same time
period for which such benefits would be provided
pursuant to this Section 6.2(B) at a cost to the
Executive that is commensurate with the cost incurred
by the Executive immediately prior to the Executive's
Date of Termination (without giving effect to any
increase in costs paid by the Executive after the
Potential Change in Control preceding the Change in
Control or the Change in Control which constitutes or
may constitute Good Reason); provided, however, that if
the Executive becomes employed by a new employer which
maintains a medical plan that either (i) does not cover
the Executive or a family member or dependent with
respect to a preexisting condition which was covered
under the applicable Company medical plan, or (ii) does
not cover the Executive or a family member or dependent
for a designated waiting period, the Executive's
coverage under the applicable Company medical plan
shall continue (but shall be limited in the event of
noncoverage due to a preexisting condition, to such
preexisting condition) until the earlier of the end of
the applicable period of noncoverage under the new
employer's plan or the third anniversary of the
Executive's Date of Termination. The Executive agrees
to report to the Company any coverage and benefits
actually received by the Executive or made available to
the Executive from such other employer(s). The
Executive shall be entitled to elect to change his
level of coverage and/or his choice of coverage options
(such as Executive only or family medical coverage)
with respect to the Welfare Benefits to be provided by
the Company to the Executive to the same extent that
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actively employed senior executives of the Company are
permitted to make such changes; provided, however, that
in the event of any such changes the Executive shall
pay the amount of any cost increase that would actually
be paid by an actively employed executive of the
Company by reason of making the same change in his
level of coverage or coverage options.
(C) Outstanding Awards. If the Executive's
Date of Termination occurs within the Coverage Period
and during any calendar year following the calendar
year during which a Change in Control occurs, the
Executive shall be entitled to a lump sum cash payment
with respect to each outstanding contingent target PSU
and AIP grant under the KEIP (or any similar types of
grants under any replacement plan or program) equal to
the sum of: (i) the product of (x) and (y), where (x)
is an amount equal to the 100% target award amount of
all then outstanding contingent target PSU grants under
the KEIP (or similar types of grants under any
replacement plan or program) for the applicable award
period that includes the Executive's Date of
Termination, and (y) is a fraction the numerator of
which is the number of days from and including the
first day of the applicable award period that includes
the Executive's Date of Termination until (and
including) the Executive's Date of Termination and the
denominator of which is the number of days in the
applicable award period; and (ii) the product of (x)
and (y), where (x) is an amount equal to the greater of
(A) the 100% target award amount of all then
outstanding contingent target AIP grants made to the
Executive under the KEIP (or similar types of grants
under any replacement plan or program), and (B) the
amount that would have been payable to the Executive
under such contingent target AIP grants as of the end
of the applicable award period, calculated utilizing as
the applicable performance factors the actual
performance of the Executive and the Company on an
annualized basis as of the Executive's Date of
Termination, and (y) is a fraction the numerator of
which is the number of days from and including the
first day of the applicable award period that includes
the Executive's Date of Termination until (and
including) the Executive's Date of Termination and the
denominator of which is the number of days in the
applicable award period. Contingent PSU grants under
the KEIP or a similar type of grant under a replacement
plan or program shall be valued at the highest closing
price of the Company's Common Stock on the New York
Stock Exchange during the sixty (60) day period
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preceding and including the Executive's Date of
Termination.
(D) Relocation Allowance. The Company
shall pay to the Executive a relocation allowance of
$75,000; provided, however, that any such payment shall
be reduced by any payments received by the Executive
from any successor employer for the purpose of
reimbursing the Executive for costs of relocation. The
Executive agrees to report to the Company any such
payments from any successor employer and agrees to
reimburse to the Company any amounts received from the
Company pursuant to this Section 6.2(D) that should
have been so reduced.
6.3 Gross-Up Payment. In the event that the
Executive becomes entitled to the Severance Benefits or
any other benefits or payments under this Agreement
(other than pursuant to this Section 6.3.) or the KEIP
by reason of the accelerated vesting of stock options
thereunder (together, the "Total Benefits"), and in the
event that any of the Total Benefits will be subject to
the Excise Tax, the Company shall pay to the Executive
an additional amount (the "Gross-Up Payment") such that
the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Benefits and
any federal, state and local income tax, Excise Tax and
FICA and Medicare withholding taxes upon the payment
provided for by this Section 6.3, shall be equal to the
Total Benefits.
For purposes of determining whether any of the
Total Benefits will be subject to the Excise Tax and
the amount of such Excise Tax, (i) any other payments
or benefits received or to be received by the Executive
in connection with a Change in Control or the
Executive's termination of employment (whether pursuant
to the terms of this Agreement or any other agreement,
plan or arrangement with the Company, any Person whose
actions result in a Change in Control or any Person
affiliated with the Company or such Person) shall be
treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel ("Tax
Counsel") selected by the Company's independent
auditors and acceptable to the Executive, such other
payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable
compensation for services actually rendered within the
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meaning of Section 280G(b)(4) of the Code in excess of
the Base Amount, or are otherwise not subject to the
Excise Tax, (ii) the amount of the Total Benefits which
shall be treated as subject to the Excise Tax shall be
equal to the lesser of (A) the total amount of the
Total Benefits reduced by the amount of such Total
Benefits that in the opinion of Tax Counsel are not
parachute payments, or (B) the amount of excess
parachute payments within the meaning of Section
280G(b)(1) (after applying clause (i), above), and
(iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence
on the Date of Termination, net of the reduction in
federal income taxes which could be obtained from
deduction of such state and local taxes (calculated by
assuming that any reduction under Section 68 of the
Code in the amount of itemized deductions allowable to
the Executive applies first to reduce the amount of
such state and local income taxes that would otherwise
be deductible by the Executive).
In the event that the Excise Tax is subsequently
determined to be less than the amount taken into
account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to
the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax, federal, state and
local income taxes and FICA and Medicare withholding
taxes imposed on the portion of the Gross-Up Payment
being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax, FICA
and Medicare withholding taxes and/or federal, state or
local income taxes) plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account
hereunder at the time of the termination of the
Executive's employment (including by reason of any
payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
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Company shall make an additional Gross-Up Payment,
determined as previously described, to the Executive in
respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is
finally determined.
6.4 Timing of Payments. The payments provided
for in Sections 6.1 through 6.3 (other than
Section 6.2(B) hereof) shall be made not later than the
fifth (5th) day following the Date of Termination;
provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Company,
of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest
at the rate provided in Section 1274(b)(2)(B) of the
Code from the fifth (5th) day following the Date of
Termination to the payment of such remainder) as soon
as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently
determined to have been due, such excess shall
constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by
the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code from the
fifth (5th) day following the Date of Termination to
the repayment of such excess).
6.5 Reimbursement of Legal Costs. The Company
shall pay to the Executive all legal fees and expenses
incurred by the Executive as a result of a termination
which entitles the Executive to any payments under this
Agreement including all such fees and expenses, if any,
incurred in contesting or disputing any Notice of
Intent to Terminate under Section 7.3 hereof or in
seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any
tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code to any
payment or benefit provided hereunder. Such payments
shall be made within five (5) business days after
delivery of the Executive's respective written requests
for payment accompanied by such evidence of fees and
expenses incurred as the Company reasonably may
require.
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7 Termination Procedures and Compensation
During Dispute
7.1 Notice of Intent To Terminate. After a
Change in Control, any purported termination of the
Executive's employment (other than by reason of death)
must be preceded by a written Notice of Intent to
Terminate from one party hereto to the other party
hereto in accordance with Section 8.6 hereof. For
purposes of this Agreement, a "Notice of Intent to
Terminate" shall mean a notice which shall indicate the
notifying party's opinion regarding the specific
provisions of this Agreement that will apply upon such
termination and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis
for the application of the provisions indicated.
Further, a Notice of Intent to Terminate for Cause is
required to include a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the
purpose of considering such termination (after
reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in
the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (a) or (b) of the
definition of Cause herein, and specifying the
particulars thereof in detail.
7.2 Date of Termination. "Date of
Termination", with respect to any purported termination
of the Executive's employment after a Change in
Control, shall mean (except as provided in Section 7.3
hereof) (a) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Intent
to Terminate is given (provided that the Executive
shall not have returned to the full-time performance of
the Executive's duties during such thirty (30) day
period), and (b) if the Executive's employment is
terminated for any other reason, the date specified in
the Notice of Intent to Terminate (which (i) in the
case of a termination by the Company, shall not be less
than thirty (30) days, except in the case of a
termination for Cause in which case it shall not be
less than ten (10) days, provided that the Company may
require the Executive not to report to work during such
ten (10) day period and (ii) in the case of a
termination by the Executive, shall not be less than
fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Intent to
Terminate is given).
14
7.3 Dispute Concerning Termination. If within
fifteen (15) days after any Notice of Intent to
Terminate is given, or, if later, prior to the Date of
Termination (as determined without regard to this
Section 7.3), the party receiving such Notice of Intent
to Terminate notifies the other party that a dispute
exists concerning the termination or the provisions of
this Agreement that apply to such termination, the Date
of Termination shall be the date on which the dispute
is finally resolved, either by mutual written agreement
of the parties or by a final judgment, order or decree
of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal
therefrom has expired and no appeal has been
perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the
party giving such notice pursues the resolution of such
dispute with reasonable diligence.
7.4 Compensation During Dispute. If a
purported termination occurs following a Change in
Control and such termination or the provisions of this
Agreement that apply upon such termination is disputed
in accordance with Section 7.3 hereof (including a
dispute as to the existence of good faith and/or
reasonable diligence thereunder), the Company shall
continue to pay the Executive the full compensation
(including, but not limited to, salary) at the
Executive's Annual Base Salary and continue his
participation in all compensation plans required to be
maintained hereunder and continue to provide to the
Executive the Welfare Benefits provided for in Section
6.2(B) hereof until the dispute is finally resolved in
accordance with Section 7.3 hereof. Amounts paid under
this Section 7.4 are in addition to all other amounts
due under this Agreement (other than those due under
Section 6.1(A) hereof) and shall not be offset against
or reduce any other amounts due under this Agreement.
8 Miscellaneous
8.1 No Mitigation. The Company agrees that, if
the Executive's employment by the Company is terminated
during the Coverage Period, the Executive is not
required to seek other employment or to attempt in any
way to reduce any amounts payable to the Executive by
the Company pursuant to this Agreement. Further, the
amount of any payment or benefit provided for under
this Agreement (other than to the extent provided in
Section 6.2(B) and Section 6.2(D)) shall not be reduced
by any compensation earned by the Executive as the
15
result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
8.2 Successors. In addition to any obligations
imposed by law upon any successor to the Company, the
Company shall be obligated to require any successor
(whether direct or indirect, by purchase, merger,
consolidation, operation of law, or otherwise) to all
or substantially all of the business and/or assets of
the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same
extent that the Company would be required to perform it
if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the
Executive to compensation and benefits from the Company
in the same amount and on the same terms as the
Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment
for Good Reason during the Coverage Period.
8.3 Terminations in Anticipation of Change in
Control. The Executive's employment shall be deemed to
have been terminated by the Company without Cause
during the Coverage Period if the Executive's
employment is terminated by the Company without Cause
prior to a Change in Control and such termination of
employment (a) was at the request of a third party who
has taken steps reasonably calculated to effect a
Change in Control, or (b) otherwise arose in connection
with or in anticipation of a Change in Control. The
Executive's employment shall be deemed to have been
terminated by the Executive for Good Reason during the
Coverage Period if the Executive terminates his
employment with Good Reason prior to a Change in
Control if the circumstance or event which constitutes
Good Reason (a) occurs at the request of a third party
who has taken steps reasonably calculated to effect a
Change in Control or (b) otherwise arose in connection
with or in anticipation of a Change in Control. In the
event of a termination of employment described in this
Section 8.3, the Executive shall be entitled to all
payments and other benefits to which the Executive
would have been entitled had such termination occurred
during the Coverage Period (other than salary pursuant
to Section 6.1(A) hereof for any period after the
actual date of termination) and the Executive shall be
entitled to an additional payment in an amount which
shall compensate the Executive to the extent that the
Executive was deprived by such termination of the
16
opportunity prior to termination of employment to
exercise stock options granted to him under the KEIP at
the highest market price of the Company's Common Stock
reached in connection with the Change in Control or
Potential Change in Control if a Potential Change in
Control shall occur and not be followed by a Change in
Control within twelve (12) months of the Potential
Change in Control. In the event that the termination
of employment of the Executive as described in this
Section 8.3 occurs following a Potential Change in
Control or within two (2) months prior to a Change in
Control, there shall be a presumption that clauses (a)
and (b) of the first two sentences of this Section 8.3
shall have been met.
8.4 Incompetency. Any benefit payable to or
for the benefit of the Executive, if legally
incompetent, or incapable of giving a receipt therefor,
shall be deemed paid when paid to the Executive's
guardian or to the party providing or reasonably
appearing to provide for the care of such person, and
such payment shall fully discharge the Company.
8.5 Death. This Agreement shall inure to the
benefit of and be enforceable by the Executive's
personal or legal representatives, executors,
administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die
while any amount would still be payable to the
Executive hereunder (other than amounts which, by their
terms, terminate upon the death of the Executive) if
the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the
executors, personal representatives or administrators
of the Executive's estate.
8.6 Notices. For the purpose of this
Agreement, notices and all other communications
provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other
address as either party may have furnished to the other
in writing in accordance herewith, except that notice
of change of address shall be effective only upon
actual receipt:
17
To the Company:
Hershey Foods Corporation
100 Crystal A Drive
Hershey, PA 17033-0810
Attention:
Chairman of the Board
To the Executive:
At the address listed on the first page
hereof.
8.7 Modification, Waiver. No provision of this
Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as
may be specifically designated by the Board. No waiver
by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any
condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
8.8 Entire Agreement. No agreements or
representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been
made by either party which are not expressly set forth
in this Agreement.
8.9 Governing Law. The validity,
interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of
Delaware.
8.10 Statutory Changes. All references to
sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to
such sections.
8.11 Withholding. Any payments provided for
hereunder shall be paid net of any applicable
withholding required under federal, state or local law
and any additional withholding to which the Executive
has agreed.
8.12 Validity. The invalidity or
unenforceability or any provision of this Agreement
18
shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain
in full force and effect.
8.13 No Right to Continued Employment. Nothing
in this Agreement shall be deemed to give the Executive
the right to be retained in the employ of the Company,
or to interfere with the right of the Company to
discharge the Executive at any time and for any lawful
reason, subject in all cases to the terms of this
Agreement.
8.14 No Assignment of Benefits. Except as
otherwise provided herein or by law, no right or
interest of the Executive under the Agreement shall be
assignable or transferable, in whole or in part, either
directly or by operation of law or otherwise, including
without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted
assignment or transfer thereof shall be effective; and
no right or interest of the Executive under this
Agreement shall be liable for, or subject to, any
obligation or liability of the Executive.
8.15 Burden. In any proceeding (regardless of
who initiates such proceeding) in which the payment of
Severance Benefits or other compensation or benefits
under this Agreement is at issue, the burden of proof
as to whether Cause exists for purposes of this
Agreement shall be upon the Company.
8.16 Reduction of Benefits By Legally Required
Benefits. Notwithstanding any other provision of this
Agreement to the contrary, if the Company is obligated
by law or by contract (other than under this Agreement)
to pay severance pay, a termination indemnity, notice
pay, or the like, or if the Company is obligated by law
or by contract to provide advance notice of separation
("Notice Period"), then any Severance Benefits
hereunder shall be reduced by the amount of any such
severance pay, termination indemnity, notice pay or the
like, as applicable, and by the amount of any pay
received during any Notice Period; provided, however,
that the period following a Notice of Intent to
Terminate shall not be considered a Notice Period.
8.17 Consent to Cancellation of Awards. The
Company may condition the payment to the Executive of
his Vested Bonus Amount and/or his Vested PSU Amount
under this Agreement upon the Executive's providing a
written consent to the cancellation of the contingent
target AIP and PSU grants and/or the AIP and PSU Awards
19
for which payment has been deferred on which the
Executive's Vested Bonus Amount and/or Vested PSU
Amount is based and in lieu of which such amounts are
paid.
8.18 Consent to Reduction of SERP Benefit. The
Company may condition the payment to the Executive of
his Vested Pension Benefit or his Adjusted Vested
Pension Benefit under this Agreement or the providing
of any benefit or payment under Section 5.3(g) hereof
upon the Executive's providing a written consent to the
reduction of his monthly benefit to be paid under the
SERP, such reduction to be in the amount of the SERP
Benefit or Adjusted SERP Benefit, as applicable, which
was used in the calculation of the Executive's Vested
Pension Benefit or Adjusted Vested Pension Benefit or
the amount of any payments or benefits provided under
Section 5.3(g) hereof.
8.19 Employment by or Transfer to Subsidiary.
In the event that the Executive is employed by or
transferred to a Subsidiary, the Company agrees that
this Agreement shall be amended in such manner as may
be necessary or appropriate to ensure that this
Agreement provides or continues to provide the
Executive with the benefits and protections intended to
be provided hereby.
8.20 Headings. The headings and captions
herein are provided for reference and convenience only,
shall not be considered part of the Agreement, and
shall not be employed in the construction of the
Agreement.
9 Definitions
9.1 "AIP" means the Annual Incentive Program
under the KEIP.
9.2 "Annual Base Salary" means the higher of
(a) the Executive's highest annual base salary in
effect during the one (1) year period preceding a
Change in Control, or (b) the Executive's highest
annual base salary in effect during the one year period
preceding the Executive's Date of Termination. For
purposes of the foregoing, salary reduction elections
pursuant to Sections 125 and 401(k) of the Code shall
not be taken into account.
9.3 "Annual Bonus" means the highest of (a) the
average of the three highest bonuses paid or payable,
including any bonus or portion thereof which has been
20
earned but deferred, to the Executive by the Company in
respect of the five fiscal years (or such shorter
period during which the Executive has been employed by
the Company) immediately preceding the fiscal year in
which a Change in Control occurs (annualized for any
fiscal year during such period consisting of less than
twelve full months or with respect to which the
Executive has been employed by the Company for less
than twelve full months), (b) the bonus paid or payable
(annualized as described above), including any bonus or
portion thereof which has been earned but deferred, to
the Executive by the Company in respect of the most
recently completed fiscal year prior to the Change in
Control, (c) the bonus paid or payable (annualized as
described above), including any bonus or portion
thereof which has been earned or deferred, for the most
recently completed fiscal year preceding the
Executive's Date of Termination, and (d) 100% of the
Executive's target bonus award amount for the year
including the Executive's Date of Termination. For
purposes herein, only payments under the AIP (as well
as payments under any substitute plan or program) shall
be treated as bonus payments.
9.4 "Base Amount" shall have the meaning
ascribed to such term in Section 280G(b)(3) of the
Code.
9.5 "Board" means the Board of Directors of the
Company.
9.6 "Cause" means:
(a) the willful and continued failure of
the Executive to substantially perform the Executive's
duties with the Company (other than any such failure
resulting from incapacity due to physical or mental
illness), after a written demand for substantial
performance is delivered to the Executive by the Board
or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board
or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties;
or
(b) the willful engaging by the Executive
in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company.
For purposes of the preceding clauses (a) and (b), no
act or failure to act, on the part of the Executive,
shall be considered "willful" unless it is done, or
21
omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's action
or omission was in the best interests of the Company.
Any act, or failure to act, based upon prior approval
given by the Board or upon the instructions or with the
approval of the Chief Executive Officer or the
Executive's superior or based upon the advice of
counsel for the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of
the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to
the Executive and the Executive is given an
opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of
the Board, the Executive is guilty of the conduct
described in clause (a) or (b) above, and specifying
the particulars thereof in detail.
9.7 A "Change in Control" means:
(a) 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 promulgated thereunder) of shares of the
Common Stock and/or the Class B Common Stock of the
Company 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 Company (the
"Outstanding Company Stock") or (ii) the combined
voting power of the then outstanding voting securities
of the Company entitled to vote generally in the
election of directors (the "Outstanding Company 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 Company 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 Company 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 Company or any
Subsidiary for the benefit of the Company and/or its
employees or those of any Subsidiary; or (iii) any
employee benefit plan (or related trust) sponsored or
maintained by the Company or by any Subsidiary; or
22
(b) The approval by the stockholders of the
Company 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 the surviving entity or entities; or
(c) The approval by the stockholders of the
Company of (i) any sale or other disposition of all or
substantially all of the assets of the Company, other
than to a corporation as to which the Hershey Trust
beneficially owns more than 50% of the total voting
power of all outstanding voting securities, or (ii) a
liquidation or dissolution of the Company.
9.8 "Code" means the Internal Revenue Code of
1986, as amended from time to time.
9.9 "Company" means Hershey Foods Corporation,
a Delaware corporation.
9.10 "Coverage Period" means the period,
commencing on the date on which a Change in Control
occurs and ending on the second anniversary date
thereof.
9.11 "Date of Termination" has the meaning
assigned to such term in Section 7.2 hereof.
9.12 "Disability" means the absence of the
Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive days as a
result of incapacity due to mental or physical illness
which is determined to be total and permanent by a
physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not
to be withheld unreasonably), provided that such
absence shall constitute "Disability" only if the
Executive is entitled to long-term disability benefits
for the period of his disability after such 180 day
period at least equal to 70% of the greater of the
Executive's base salary as of the first day of such 180
day period or his Annual Base Salary. Such requirement
of entitlement to long-term disability benefits shall
not apply in making determinations under Section 4 of
this Agreement.
9.13 "Exchange Act" means the Securities
Exchange Act of 1934, as amended from time to time.
23
9.14 "Excise Tax" means any excise tax imposed
under Section 4999 of the Code.
9.15 "Good Reason" means:
(a) the assignment to the Executive of any
duties inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting relationships), authority, duties or
responsibilities immediately prior to either the
Potential Change in Control which precedes the Change
in Control or the Change in Control or any other action
by the Company which results in a diminution in any
respect in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(b) a reduction by the Company in the
Executive's annual base salary as in effect on the date
hereof or as the same may be increased from time to
time;
(c) the failure by the Company to increase
the Executive's base salary each year after a Change in
Control by an amount which at least equals, on a
percentage basis, the mean average percentage increase
in base salary for all officers of the Company during
the two full calendar years immediately preceding the
Change in Control;
(d) the Company's requiring the Executive
to be based at any office or location that is more than
35 miles from the Executive's office or location
immediately prior to either the Potential Change in
Control which precedes the Change in Control or the
Change in Control but only if such change involves a
material increase in the Executive's cost of living and
is not accompanied by a commensurate increase in
compensation and benefits;
(e) the Company's requiring the Executive
to travel on Company business to a substantially
greater extent than required immediately prior to
either the Potential Change in Control which precedes
the Change in Control or the Change in Control;
(f) the failure by the Company, without the
Executive's consent, to pay to the Executive any
portion of the Executive's current compensation, or to
24
pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation
program of the Company within seven (7) days of the
date such compensation is due;
(g) the failure by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to either the Potential
Change in Control preceding the Change in Control or
the Change in Control which is material to the
Executive's total compensation, including but not
limited to the KEIP and the SERP or any substitute or
alternative plans adopted prior to either such
Potential Change in Control or Change in Control,
unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to
continue the Executive's participation therein (or in
such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount
of benefits provided and the level of the Executive's
participation relative to other participants, as
existed at the time of such Potential Change in Control
or Change in Control;
(h) the failure by the Company to continue
to provide the Executive with benefits substantially
similar to those enjoyed by the Executive under any of
the Company's pension, life insurance, medical, health
and accident, disability or other welfare plans in
which the Executive was participating at the time of
either the Potential Change in Control preceding the
Change in Control or the Change in Control, the taking
of any action by the Company which would directly or
indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of such Potential
Change in Control or Change in Control, or the failure
by the Company to provide the Executive with the number
of paid vacation days to which the Executive is
entitled on the basis of years of service with the
Company in accordance with the Company's normal
vacation policy in effect at the time of such Potential
Change in Control or Change in Control;
(i) any purported termination by the
Company of the Executive's employment after a Change in
Control otherwise than in accordance with the
termination procedures of Sections 7.1 through 7.4
hereof;
25
(j) any material failure by the Company to
comply with and satisfy any of its obligations under
this Agreement after a Potential Change in Control that
is followed within one (1) year by a Change in Control;
or
(k) The Company's or its controlling
Person's or any affiliate's, engaging in any act,
practice, or line of business which (x) is illegal, (y)
is unethical or (z) is otherwise inconsistent with the
unique character, culture and/or reputation of the
Company, deriving from its origins and traditions, as
they existed prior to the Change in Control, provided
that any termination by the Executive by reason of the
invocation of clause (z) of this Subsection (k) must be
the subject of a Notice of Intent to Terminate which is
delivered to the Company within 60 days following any
Change in Control described in Subsections 9.7(b) or
(c) and within six months following any Change in
Control described in Subsection 9.7(a).
For purposes of this Agreement, any determination of
Good Reason made by the Executive in good faith shall
be conclusive and binding upon the Company.
9.16 "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.
9.17 "KEIP" means the Hershey Foods Corporation
1987 Key Employee Incentive Plan and any successor or
replacement plan thereof.
9.18 "Notice of Intent to Terminate" shall have
the meaning assigned to such term in Section 7.1
hereof.
9.19 "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and
used in Section 13(d)(3) thereof.
9.20 "Potential Change in Control" means the
occurrence of any of the following:
(a) The Hershey Trust, or any Person acting
or purporting to act on its (or their) behalf, makes a
public announcement that it (or they), or its (or
their) Board of Directors or Board of Managers or any
other responsible official, (i) intends to take, (ii)
26
is taking or (iii) has taken actions which would lead
to a Change in Control (a "public announcement" being
defined for this purpose as any statement quoted or
otherwise reported in any print, broadcast, wire
service or other means of publication available to the
public in any locality in which any employee of the
Company is regularly located);
(b) The Hershey Trust enters into any
contract, agreement or other arrangement with any
Person which would lead to a Change in Control; or
(c) The Board approves a transaction
described in subsection (b) or (c) of the definition of
Change in Control contained in Section 9.7 hereof.
9.21 A "Section 9.21 Change in Control" means a
Change in Control described in subsection (b) of
Section 9.7 hereof which meets the following
conditions: (a) the transaction constituting the
Change in Control was initially proposed by the Board
and was approved in advance by the Board (consisting of
directors two-thirds (2/3) of whom shall have been
serving as directors at the time of the Potential
Change in Control preceding the Change in Control); and
(b) following consummation of such Change in Control,
persons who served as members of the Board prior to
such Change in Control constitute at least 50% of the
board of directors of the surviving entity or entities
following such Change in Control.
9.22 "SERP" means the Hershey Foods Corporation
Supplemental Executive Retirement Plan.
9.23 "Severance Benefits" has the meaning
assigned to such term in Section 6.2 hereof.
9.24 "Subsidiary" means any corporation
controlled by the Company, directly or indirectly.
9.25 "Vested Bonus Amount" shall have the
meaning assigned to such term in Section 5.1 hereof.
9.26 "Vested PSU Amount" shall have the meaning
assigned to such term in Section 5.2 hereof.
27
9.27 "Welfare Benefits" shall have the meaning
ascribed to such term in Section 6.2(B) hereof.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officer, thereunto duly
authorized, and Executive has executed this Agreement,
all as of the day and year first above written.
HERSHEY FOODS CORPORATION
By__________________________
____________________________
Executive