EXHIBIT 10.3
HERSHEY FOODS CORPORATION
DEFERRED COMPENSATION PLAN
This Deferred Compensation Plan (the "Plan") allows
participants in the Annual Incentive Program (the "AIP") of Hershey Foods
Corporation's Key Employee Incentive Plan to defer receipt of all or part of
their awards under the AIP. Participants in the Long Term Incentive Program
("LTIP") of the Key Employee Incentive Plan may also defer under this plan the
cash equivalent of their PSU awards provided certain minimum stockholding
requirements have been satisfied. The Plan is intended to benefit those key
executives of Hershey Foods Corporation (and subsidiaries as specified in the
AIP and LTIP) who participate in the AIP or LTIP, to secure their goodwill,
loyalty and achievement, and to help attract and retain high quality executives.
AIP awards for 1995 and beyond may be deferred under this
Plan. Also, Participants who have previously deferred AIP awards under the
deferral arrangement in effect for awards prior to 1995 may elect to credit
their deferral accounts under the prior deferral arrangement to their Accounts
under this Plan as hereinafter described.
PSU awards under LTIP may also be deferred under the Plan, but
only if the Participant has satisfied the employee minimum stockholding
requirements established by the Compensation and Executive Organization
Committee of the Board of Directors. Dividends previously earned, as well as
future dividends earned on deferred PSU awards are eligible for deferral under
the Plan.
ARTICLE I
DEFINITIONS
The following definitions apply to this Plan:
1.1 ACCOUNT. "Account" means the Account maintained by the Company
pursuant to Article II with respect to each Participant.
1.2 AIP. "AIP" means the Annual Incentive Program of Hershey Foods
Corporation's Key Employee Incentive Plan.
1.3 BOARD. "Board" or "Board of Directors" means the Board of Directors
of Hershey Foods Corporation.
1.4 COMMITTEE OR COMPENSATION COMMITTEE. "Committee" or "Compensation
Committee" means the Compensation and Executive Organization Committee of the
Board.
1.5 COMPANY. "Company" means Hershey Foods Corporation, a Delaware
corporation.
1.6 DEFERRAL ELECTION. "Deferral Election" means a Participant's
election to defer all or part of the Participant's AIP or PSU award as described
in Article II.
1.7 DETERMINATION DATE. "Determination Date" means the last day of each
calendar quarter.
1.8 DISABILITY. "Disability" means a condition or circumstance
entitling a Participant to be classified as "disabled" pursuant to the Company's
Long Term Disability Plan.
1.9 INVESTMENT OPTIONS. "Investment Options" means the following
investment options which are to be used as earnings indices as described in
Section 2.3:
1. Hershey Fixed Income Fund
2. IDS Cash Management Fund
3. American Express Trust Equity Index Fund I
The Investment Options are chosen by the Plan Administrator and are subject to
change from time to time as the Plan Administrator, in its discretion, deems
necessary or appropriate. No provision of this Plan shall be construed as giving
any Participant an interest in any of these Investment Options nor shall any
provision require that the Company make any investment in any such funds.
1.10 LTIP. "LTIP" means the Long Term Incentive Program of Hershey Foods
Corporation's Key Employee Incentive Plan.
1.11 PARTICIPANT. "Participant" means an employee of the Company who is
eligible to participate in the AIP or LTIP and who elects to participate in this
Plan by filing a Deferral Election as provided in Article II.
1.12 PLAN. "Plan" means this Hershey Foods Corporation Deferred
Compensation Plan as set forth herein and as amended from time to time.
1.13 PLAN ADMINISTRATOR. "Plan Administrator" means the Director,
Executive Compensation and Employee Benefits, for Hershey Foods Corporation.
1.14 PLAN YEAR. "Plan Year" means the calendar year.
1.15 PSU. "PSU" means performance share units granted under the LTIP
portion of the KEIP.
1.16 RETIREMENT. "Retirement" means termination of employment with a
Company after becoming eligible for retirement under the Hershey Foods
Corporation Retirement Plan.
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ARTICLE II
DEFERRAL ELECTIONS: ACCOUNTS
2.1. ELECTION TO DEFER.
a. AIP AWARDS. A Participant may elect to defer receipt of all or
a portion of his or her anticipated bonus under the AIP. A Participant's
election must be made no later than November 1st of the year in which the
Participant renders the services which result in the bonus award. The election
must be made on a form supplied by the Plan Administrator. The election to defer
a bonus is irrevocable except as specifically provided otherwise in this Plan.
b. PSU AWARDS. A Participant may elect under this Plan to defer
receipt of all or a portion of the amount earned as a PSU award under LTIP. An
election to defer a PSU award under this Plan can only be made if the
Participant has satisfied the minimum stockholding requirements established by
the Board of Directors. A Participant's election must be made at least sixty
(60) days prior to the date the PSU award will be paid. The election must be
made on a form supplied by the Plan Administrator. The election to defer receipt
of a PSU award is irrevocable except as specifically provided otherwise in this
Plan.
2.2. ACCOUNTS.
a. ESTABLISHMENT OF ACCOUNTS. Any amounts deferred by a
Participant will not be funded or set aside for future payment by the Company.
Instead, an Account will be noted for the Participant on the Company's books.
A Participant's Account will be credited with amounts deferred and with
investment credits as provided in subparagraph c. below. A separate Account
will be established for each Deferral Election.
b. PARTICIPANTS AS UNSECURED CREDITORS. A Participant's
entitlement to receive the amount reflected by his or her Account will be based
solely on an unconditional promise to pay by the Company and is not assignable;
however, except as provided in Section 7.5 below, the Participant at all times
will be fully vested in the Account.
c. INVESTMENT CREDITS TO ACCOUNTS. Subject to such limitations as
may from time to time be required by law or imposed by the Plan Administrator,
and subject to such operating rules and procedures as may be imposed from time
to time by the Plan Administrator, each Participant may express to the Plan
Administrator a preference as to how the Participant's Account should be
constructively invested among the Investment Options. Such preference shall
designate the percentage of the Participant's Accounts which is requested to be
constructively invested in each Investment Option.
(1) Any initial or subsequent expression of
investment preference shall be in writing, on a form supplied by and filed with
the Plan Administrator, and shall be subject to such rules and procedures as the
Plan Administrator may promulgate from time to time. Participants may change
their investment preferences effective as of the beginning of each Plan Year.
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(2) All investment preferences shall be advisory only
and shall not bind the Company or the Plan Administrator. The Company shall not
be obligated to invest any funds in connection with this Plan. If, however, the
Company chooses to invest funds to provide for its liabilities under this Plan,
the Plan Administrator shall have complete discretion as to investments.
(3) Whether or not a Participant's investment
preferences are followed, the Participant's Account will be credited with
earnings or losses as follows. As of each Determination Date, the net earnings
or losses (as defined below) of each Investment Option since the preceding
Determination Date shall be allocated among all Accounts in accordance with the
preferences indicated by each Participant as though the Accounts had been
invested in the Investment Option in accordance with each Participant's
indicated preference.
(4) If the Plan Administrator receives an initial or
revised investment preference which it deems to be incomplete, unclear or
improper, the Participant's investment preference then in effect shall remain in
effect (or, in the case of a deficiency in an initial investment preference, the
Participant shall be deemed to have filed no investment preference) until the
beginning of the next Plan Year, unless the Plan Administrator provides for, and
permits the application of, corrective action prior thereto. If a Participant
fails to file an effective investment preference, the Participant's Account will
be constructively invested in the IDS Federal Income Fund.
(5) If the Plan Administrator determines that the
constructive value of an Account as of any date on which distributions are to be
made differs materially from the constructive value of the Account on the prior
Determination Date upon which the distribution is to be based, the Plan
Administrator, in its discretion, shall have the right to designate any date in
the interim as a Determination Date for the purpose of constructively revaluing
the Account so that the account from which the distribution is being made will,
prior to the distribution, reflect its share of such material difference in
value. Similarly, the Plan Administrator may adopt a policy of providing for
regular interim valuations without regard to the materiality of changes in the
value of the Accounts.
d. STATEMENT OF ACCOUNTS. Within a reasonable time after the
end of each calendar year, the Plan Administrator shall submit to each
Participant a statement of the balance in his Accounts.
2.3 CREDIT OF PREVIOUS AIP DEFERRALS TO ACCOUNTS. Participants who have
previously deferred AIP awards under the deferral arrangements in effect for
awards prior to 1995 may elect as of any beginning of any Plan Year to credit
any portion of their deferral accounts under the prior arrangement to their
Accounts under this Plan. Credits shall be made to this Plan pursuant to this
Section on January 1 of the year subsequent to any such election being made.
Amounts so credited shall become part of a Participant's Account and shall be
subject to the terms and conditions of this Plan, except that prior elections as
to payment of deferred amounts shall remain in effect. Once amounts are credited
to a Participant's Account pursuant to this Section 2.3, they may not thereafter
be returned to the Participant's deferral accounts under the prior deferral
arrangement.
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2.4 CREDIT OF PREVIOUS DIVIDENDS PAID ON PSU DEFERRALS TO ACCOUNTS.
Participants who have previously received dividends on deferred PSU awards under
the deferral arrangements in effect for awards prior to 1995 may elect as of the
beginning of any Plan Year to credit any portion of their previously deferred
dividends under the prior arrangement to their Accounts under this Plan.
Notwithstanding the above, previously deferred PSU dividends are not eligible to
be deferred pursuant to the terms of the Plan unless the Participant has
satisfied the employee minimum stockholding requirements established by the
Committee. Credits shall be made to this Plan pursuant to this Section on the
January 1 of the year subsequent to any such election being made. Amounts so
credited shall become part of a Participant's Account and shall be subject to
the terms and conditions of this Plan, except that prior elections as to payment
of deferred amounts shall remain in effect. Once amounts are credited to a
Participant's Account pursuant to this Section 2.4, they may not thereafter be
returned to the Participant's deferral accounts under the prior deferral
arrangement.
ARTICLE III
DISTRIBUTION OF DEFERRALS
3.1 INITIAL ELECTION OF DISTRIBUTION OPTIONS IN DEFERRAL ELECTION. A
Participant must specify in his or her Deferral Election when the Participant's
Account will be distributed. Distribution may be made or begin in any year or
years in the future, but distributions must begin not later than the calendar
year following the calendar year in which the Participant attains age 70. The
Participant may elect to receive amounts deferred in a lump sum or in up to ten
approximately equal annual installments. A Participant may specify different
distribution dates and forms of payment under each of his or her Deferral
Elections.
3.2 CHANGES IN DISTRIBUTION OPTIONS.
a. A Participant is entitled to one future opportunity to further
lengthen (not shorten) the deferral period provided in a Deferral Election and
to make one future change with regard to lengthening (not shortening) the
payment schedule provided in that Election up to a maximum payment schedule of
ten years.
b. Any change in the deferral period or the payment schedule must
be submitted to the Plan Administrator in writing, on a form provided by the
Plan Administrator, at least twelve months before the date payments were
originally scheduled to begin. Any change in the deferral period shall not
require payments to begin after the calendar year following the Participant's
attainment of age 70.
3.3 PAYMENT OF DEFERRED AMOUNTS.
a. Upon the date elected by the Participant, the Company shall
begin to pay an amount equal to the total amount then credited to the
Participant's Account. Such amount is to be paid either in one lump sum or in
approximately equal annual installments over a period of years as elected by the
Participant, which period shall be not more than ten years. Each annual
installment shall include investment credits on the remaining balance during the
previous year until the Account shall have been paid out in full. A Participant
may continue to express investment preferences as provided in paragraph c of
Section 2.2 during the period that the
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Account is being distributed.
b. If the Participant should die before payment in full of the
amount standing to the Participant's credit in the Account, the unpaid balance
may be paid in one lump sum or in installments to the Participant's beneficiary
in accordance with whichever election has been made by the Participant. If the
Participant should die before the beginning date of the deferral payment and did
not indicate a specific method of distribution, then the beneficiary may
petition the Plan Administrator regarding the method of distribution. In the
absence of a designated beneficiary, the balance of the Account will be paid in
a lump sum to the estate of the Participant as soon as possible.
c. If the Participant's employment is terminated for any reason
other than Retirement, death or Disability before the elected payment date, then
the Company, acting through the Plan Administrator, at its discretion and at any
time thereafter may:
(1) Immediately pay over any amounts credited to the
Participant's Account to the Participant.
(2) Deposit any amounts credited to the Participant's
Account with a third party fiduciary in trust for the Company's benefit who will
manage and pay over such amounts to the Participant in accordance with the terms
of this Plan, with administrative costs in such event being charged to the
Participant's Account.
(3) Continue to itself maintain and pay over amounts
deferred to the Participant in accordance with the terms of this Plan and the
Participant's election pursuant thereto.
d. If both the Participant and his beneficiary shall die after
payments to the Participant begin and before all payments are made from the
Participant's Account, the remaining value of the Account shall be determined as
of the date of death of the beneficiary or Participant, whichever is later, and
shall be paid as promptly as possible in one lump sum to the estate of such
beneficiary or as specified in the beneficiary's last will and testament, as the
case may be.
e. A Participant may designate or change his or her beneficiary
(without the consent of any prior beneficiary) on a form provided by the Plan
Administrator and delivered to the Plan Administrator before the Participant's
death.
f. Installment payments shall commence on or before the fifteenth
day of the year selected by the Participant (or on or before the fifteenth day
of the year after the year in which the Participant retires, if the Participant
has elected to defer until after Retirement).
3.4 HARDSHIP DISTRIBUTIONS. The Compensation Committee may, in its
discretion, accelerate payments to a Participant in an amount up to the bonus
previously deferred, together with investment credits to date, in the event of
demonstrated severe financial hardship. Any such payments made will be limited
to the amount needed to meet the demonstrated financial need. A Participant
seeking a financial hardship withdrawal from his or her Account must request a
hearing with the Plan Administrator, who will gather facts and render a report
to the
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Compensation Committee for a decision.
3.5 OTHER WITHDRAWALS: FORFEITURE PENALTY. A Participant may, by
written request on a form provided by the Plan Administrator, withdraw all or
any portion of his Account as of any Determination Date, provided that the
Participant shall forfeit 15% of the amount withdrawn as a penalty.
3.6. WITHHOLDING. Any payments made pursuant to this Article III
shall be subject to appropriate federal, state or local income tax withholdings.
ARTICLE IV
CLAIMS PROCEDURE
4.1 The following provisions are incorporated in the Plan in accordance
with the requirements of the Employment Retirement Income Security Act of 1974:
a. The following claims procedure is hereby established:
(1) A Participant or beneficiary shall make a claim for
the benefits provided by delivering a written request to the Plan Administrator.
Upon receipt of a claim, the Plan Administrator shall determine whether to grant
the claim, deny it, or grant it in part.
(2) If a claim is wholly or partially denied, notice of
the decision, meeting the requirements of paragraph (3) following shall be
furnished to the claimant within a reasonable period of time after receipt of a
claim by the Plan Administrator.
(3) The Plan Administrator shall provide to every
claimant who is denied a claim for benefits, written notice setting forth in a
manner calculated to be understood by the claimant, the specific reason or
reasons for the denial; specific reference to pertinent Plan provisions on which
denial is based; a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and an explanation of the Plan's claim
review procedure as set forth herein.
(4) The purpose of the review procedures set forth
herein is to provide a procedure by which a claimant under the Plan may have a
reasonable opportunity to appeal a denial of a claim to the named fiduciary for
a full and fair review. To accomplish that purpose, the claimant or his duly
authorized representative may request a review upon written application to the
Committee may review pertinent Plan documents; and may submit issues and
comments in writing. A claimant (or his duly authorized representative) shall
request a review by filing a written application for review with the Committee
at any time within sixty (60) days after receipt by the claimant of written
notice of denial of this claim.
(5) The decision on review of a denied claim shall be
made as follows. The decision on review shall be made by the Committee, which
may in its discretion hold a hearing on the denied claim. The Committee shall
make a decision promptly, and not later than sixty (60) days after receipt of
the request for review, unless special circumstances (such as the
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need to hold a hearing) require an extension of time of reprocessing, in which
case a decision shall be rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the request for review. The decision
on review shall be in writing and shall include specific reasons for the
decisions, written in the manner calculated to be understood by the claimant,
and specific references to the pertinent Plan revisions on which the decision is
based. The Committee shall have full discretion to decide the claim and its
decision on review shall be final and binding on all parties.
b. For purposes of implementing the claims procedure (but not
for any other purposes), the Committee is hereby designated as a named
fiduciary of this Plan.
ARTICLE V
PLAN ADMINISTRATOR
5.1 PLAN ADMINISTRATOR DUTIES. The Plan Administrator shall administer
this Plan and shall be a named fiduciary of the Plan for that purpose. The Plan
Administrator may be a Participant. A Plan Administrator who is a Participant
may not vote on matters affecting his or her personal benefit under this Plan,
but any such individual shall otherwise be fully entitled to act in matters
arising out of or affecting this Plan notwithstanding his or her participation
herein. The Plan Administrator shall have the authority to make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of this Plan and decide or resolve any and all questions,
including interpretations of this Plan, as may arise in connection with the
Plan.
5.2 AGENTS. In the administration of this Plan, the Plan Administrator
may, from time to time, employ agents and delegate to them or to others
(including employees of the Company) such administrative duties as it sees fit.
The Plan Administrator may from time to time consult with counsel, who may be
counsel to the Company.
5.3 BINDING EFFECT OF DECISIONS. In carrying out its duties herein, the
Plan Administrator (or its designee) shall have full discretion to exercise all
powers and to make all determinations, consistent with the terms of the Plan, in
all matters entrusted to it, and its determinations shall be final and binding
on all parties.
5.4 INDEMNITY. The Company shall indemnify and hold harmless the Plan
Administrator and any employees to whom administrative duties under this Plan
are delegated, against any and all claims, loss, damage, expense, or liability
arising from any action or failure to act with respect to this Plan, except in
the case of willful misconduct.
ARTICLE VI
AMENDMENT AND TERMINATION
6.1 AMENDMENT. The Committee may at any time amend the Plan in whole or
in part. However, no amendment shall be effective to decrease or restrict any
then existing Account or to change the Company's obligations under any then
existing Deferral Election.
6.2 BOARD'S RIGHT TO TERMINATE. The Board may at any time terminate
the Plan in its
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entirety, in which event no new Deferral Elections shall be made, but the
obligations of the Company under existing Deferral Elections shall continue.
ARTICLE VII
MISCELLANEOUS
7.1 UNFUNDED PLAN. This Plan is intended to be an "unfunded" plan
maintained primarily to provide deferred compensation for a "select group of
management or highly compensated employees" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended, and shall be so construed.
7.2 UNSECURED GENERAL CREDITOR. This Plan is unfunded. Benefits shall be
paid from the Company's general assets. Participants and their beneficiaries,
heirs, successors, and assigns shall have no legal or equitable rights, interest
or claims in any property or assets owned or which may be acquired by the
Company. Such assets of the Company shall not be held under any trust for the
benefit of Participants, their beneficiaries, heirs, successors or assigns, or
held in any way as collateral security against the obligations of the Company
under this Plan. The Company's obligation under the Plan shall be that of an
unfunded and unsecured promise of the Company to pay money in the future. The
Company in its sole discretion, may, however, elect to provide for its
liabilities under this Plan through a trust or funding vehicle, provided,
however, that the terms of any such trust or funding vehicle shall not alter the
status of Participants and beneficiaries as mere general unsecured creditors of
the Company or otherwise cause the Plan to be funded or benefits taxable to
Participants except upon actual receipt.
7.3 NONASSIGNABILITY. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage,
or otherwise encumber, transfer, hypothecate, or convey in advance of actual
receipt the amounts, if any, payable hereunder, or any part thereof. The rights
to all such amounts are expressly declared to be unassignable and
non-transferable. No part of the amounts payable shall, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts, judgments,
alimony, or separate maintenance owned by Participants or any other person, nor
be transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency, except as required by law.
7.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between the Company
and a Participant, and a Participant shall have no rights against the Company
except as may otherwise be specifically provided herein. Moreover, nothing in
the Plan shall be deemed to give a Participant the right to be retained in the
service of the Company or to interfere with the right of the Company to
discipline or discharge an employee at any time.
7.5 FORFEITURE OF BENEFITS. If a Participant's employment is terminated
because of willful misfeasance or gross negligence in the performance of his or
her duties, his or her right to benefits under this Plan shall, in the
discretion of the Committee, be forfeited, and the Company shall have no further
obligation hereunder to such Participant or his or her beneficiary(ies).
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7.6 TERMS. Use of the masculine pronoun in this Plan will include the
feminine and use of the singular will include the plural, unless the context
clearly indicates otherwise.
7.7 CAPTIONS. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
7.8 GOVERNING LAW. This Plan shall be governed by the laws of the United
States and, to the extent not preempted thereby, the laws of Pennsylvania.
7.9 VALIDITY. The illegality or invalidity of any provision of this Plan
shall not affect its remaining parts, but this Plan shall be construed and
enforced without such illegal or invalid provisions.
7.10 NOTICE. Any notice or filing required or permitted to be given to
the Plan Administrator under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to:
Director, Executive Compensation
and Employee Benefits
Hershey Foods Corporation
100 Crystal A Drive
Hershey, Pennsylvania 17033
Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
7.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Company and its successors and assigns. The term successors as
used herein shall include any corporation or other business entity which shall,
whether by merger, consolidation, purchase of assets, or otherwise, acquire all
or substantially all of the business or assets of the Company, and successors of
any such corporation or other business entity.
7.12 INCAPACITY. If the Plan Administrator finds that any Participant or
beneficiary to whom a benefit is payable under this Plan is unable to care for
his affairs, any payment due (unless prior claim therefore shall have been made
by a duly authorized guardian or other legal representative) may be paid, upon
appropriate indemnification of the Plan Administrator, to any person who is
charged with the support of the Participant or beneficiary. Any such payment
shall be payment for the account of the Participant and shall be a complete
discharge of any liability of the Company to the Participant or beneficiary.
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