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UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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______________________________
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FORM
8-K
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CURRENT
REPORT
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Pursuant
to Section 13 or 15(d) of the
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Securities
Exchange Act of 1934
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December
27,
2006
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Date
of Report (Date of earliest event
reported)
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The
Hershey
Company
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(Exact
name of registrant as specified in its
charter)
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Delaware
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(State
or other jurisdiction of
incorporation)
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1-183
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23-0691590
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(Commission
File Number)
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(IRS
Employer Identification No.)
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100
Crystal A Drive, Hershey, Pennsylvania
17033
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(Address
of Principal Executive Offices) (Zip
Code)
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Registrant's
telephone number, including area code: (717)
534-4200
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any
of the following provisions:
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[
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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[
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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INFORMATION
TO BE INCLUDED IN REPORT
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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain
Officers
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On
December 27, 2006, the Board of Directors of The Hershey Company (the "Company")
approved amendments to the Company's Executive Benefits Protection Plan (Group
3A), effective December 29, 2006. The amendments were contained in an amended
and restated plan, called “The Hershey Company Executive Benefits Protection
Plan (Group 3A) Amended and Restated as of December 29, 2006” (the "Plan"). The
Plan, which is intended to provide certain benefits upon a Change in Control
and
severance benefits upon a termination of employment to specified Executives,
was
amended to:
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·
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change
the definition of Annual Bonus upon which certain benefits are
determined
to the greater of (i) the highest bonus amount paid or deferred
in any of
the three (3) years preceding a Change in Control or (ii) the current
target bonus amount payable in the year of termination from
employment;
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·
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eliminate
performance stock unit ("PSU") awards from the formula for determining
the
amount of severance benefits;
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·
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provide
that eligibility for coverage under the Plan shall be determined
by the
Compensation and Executive Organization Committee of the Board
of
Directors in its sole discretion;
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·
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eliminate
as a factor for determining whether termination from employment
was by the
Executive for Good Reason in connection with a Potential Change
in Control
or Change in Control an event which requires the Executive to relocate
to
a different office;
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eliminate
the Plan's provision of severance benefits to the Chief Executive
Officer,
the Senior Vice President and Chief Financial Officer, the Senior
Vice
President, General Counsel and Secretary of the Company, the Vice
President, Strategy and Innovation, or the Senior Vice President,
Human
Resources and Corporate Affairs in the case of a voluntary termination
following a Change in Control;
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·
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provide
a minimum of twelve (12) months of severance benefits where the
normal
three (3) years of benefits are limited because of the Executive's
proximity to his or her Mandatory Retirement
Age;
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·
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fully
vest outstanding PSU awards that are in the first and second year
of their
performance cycle at the time in which a Change in Control occurs
and
prorate outstanding PSUs that are in the first year of the performance
cycle at the time of a Change in
Control;
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·
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provide
immediate vesting under The Hershey Company Amended and Restated
(2007)
Supplemental Executive Retirement Plan, The Hershey Company Deferred
Compensation Plan, The Hershey Company Retirement Plan, and The
Hershey
Company 401(k) Plan upon a Change in
Control;
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·
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modify
the Plan's pension benefits provisions to reflect recent changes
made to
the Company's retirement plans under the WorkLife Invest Program
(announced October 10, 2006);
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·
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provide
for the payment of the Plan's pension benefits only to Executives
who
terminate from employment within two (2) years following a Change
in
Control, provided such termination is not on account of death or
Disability, by the Company for Cause, or by the Executive without
Good
Reason;
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·
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provide
for the payment of Financial Counseling and Tax Preparation Services
for a
two (2) year period to Executives who terminate from employment
within two
(2) years following a Change in Control, provided such termination
is not
on account of death or Disability, by the Company for Cause, or
by the
Executive without Good Reason;
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·
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eliminate
the Relocation Allowance payable under the
Plan;
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·
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change
Plan provisions to comply with the requirements under Internal
Revenue
Code section 409A, including the requirement that the distribution
of
benefits to a Key Employee be delayed for at least six (6) months
after
the Key Employee's separation from
service.
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These
changes impact the benefits of all of the Company’s executive officers,
including Richard H. Lenny, the Company’s Chairman of the Board, President
and Chief Executive Officer. Mr. Lenny has consented to these changes pursuant
to a provision in his Executive Employment Agreement (“Agreement”) that would
have provided him the right, absent his consent, to terminate the Agreement
for
Good Reason (as that term is defined in the Agreement).
Compensation
and benefit plans for all employees, including executives, are continually
reviewed for legal compliance and benchmarked with peer companies. In
connection
with a review of the Plan for compliance with the requirements of Internal
Revenue Code section 409A, the Company's Board of Directors made other
changes
to bring executive severance in the event of a Change in Control of the
Company
more in line with benchmarks and with stockholder expectations.
The
foregoing description of the Executive Benefits Protection Plan (Group 3A)
Amended and Restated as of December 29, 2006 is qualified by reference to
the
plan document, a copy of which is attached hereto as Exhibit 10.1, and
incorporated by reference herein. The description of Mr. Lenny’s Executive
Employment Agreement is qualified by reference to the Agreement, filed as
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended April 1, 2001, and the Amendment to Executive Employment Agreement
filed
as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed October 10,
2006.
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Item
9.01
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Financial
Statements and Exhibits
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(d)
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Exhibits
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10.1
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Executive
Benefits Protection Plan (Group 3A) Amended and Restated as of
December
29, 2006
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date:
January 3, 2007
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THE
HERSHEY COMPANY
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By:
/s/
Burton H. Snyder
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Burton
H. Snyder
Senior
Vice President, General Counsel and
Secretary
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EXHIBIT
INDEX
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Exhibit
No.
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Description
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10.1
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Executive
Benefits Protection Plan (Group 3A) Amended and Restated as of
December
29, 2006
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Exhibit
10.1
THE
HERSHEY COMPANY
EXECUTIVE
BENEFITS PROTECTION PLAN
(GROUP
3A)
Amended
and Restated as of December 29, 2006
The
Hershey Company Executive Benefits Protection Plan (Group 3A), as set forth
herein, is intended to help attract and retain qualified management employees
and maintain a stable work environment by making provision for the protection
of
covered employees in connection with a Change in Control or termination of
employment under certain circumstances as set forth herein. The Plan is an
amendment to and restatement (as amended) of the Hershey Foods Corporation
Executive Benefits Protection Plan (Group 3A), which was last amended and
restated effective June 4, 2003.
ARTICLE
1
DEFINITIONS
As
hereinafter used, the following words shall have the meanings set forth
below.
1.1 AIP
means
the Annual Incentive Program under the KEIP and annual incentives awarded under
the Company’s Sales Incentive Plan and any successor or replacement plan
thereof.
1.2 Annual
Base Salary
means
with respect to an Executive the higher of:
1.2.1 his
or
her highest annual base salary in effect during the one (1) year period
preceding a Change in Control; or
1.2.2 his
or
her highest annual base salary in effect during the one (1) year period
preceding his or her 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.
1.3 Annual
Bonus
means
with respect to an Executive the higher of:
1.3.1 the
highest bonus paid or payable, including any bonus or portion thereof which
has
been earned but deferred, to him or her by the Company with respect to any
of
the three fiscal years (or such shorter period during which he or she has been
employed by the Company or eligible to receive any bonus payment) 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 he or she has been employed by the Company or eligible
to
receive a bonus for less than twelve full months); or
1.3.2 his
or
her 100% target bonus award amount for the year including his or her Date of
Termination.
For
purposes herein, only payments under the AIP, as well as payments under any
successor or replacement substitute plan, shall be treated as bonus payments.
1.4 Base
Amount
shall
have the meaning ascribed to such term in Section 280G(b)(3) of the
Code.
1.5 Board
means
the Board of Directors of the Company.
1.6 Cause
means
with respect to an Executive:
1.6.1 his
or
her willful and continued failure to substantially perform his or her 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 him or her 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
his or her duties; or
1.6.2 his
or
her willfully engaging in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company.
For
purposes of this Section 1.6, no act or failure to act, on the part of an
Executive, shall be considered willful unless it is done, or omitted to be
done,
by him or her in bad faith and without reasonable belief that his or her 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 instruction or
with the approval of the Chief Executive Officer or an 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 an Executive
shall
not be deemed to be for Cause unless and until there shall have been delivered
to him or her 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 him or her and he or she is given an opportunity, together with counsel,
to
be heard before the Board), finding that, in the good faith opinion of the
Board, he or she is guilty of the conduct described in Subsection 1.6.1 or
1.6.2
above, and specifying the particulars thereof in detail.
1.7 CLRP
means
The Hershey Company Compensation Limit Replacement Plan and any successor or
replacement plan thereof.
2
1.8 Change
in Control
means:
1.8.1 individuals
who, on April 18, 2006, 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 April 18, 2006, 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 Company 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 Company as a
result of an actual or threatened election contest (as described in Rule
14a-12(c) under the Securities Exchange Act of 1934 (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 Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Power”) shall be deemed to be an
Incumbent Director;
1.8.2 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
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 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 by any Subsidiary for the benefit of the Company and/or its
employees or those of a Subsidiary; (iii) any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary; (iv)
the Company or any Subsidiary or (v) any underwriter temporarily holding
securities pursuant to an offering of such securities;
1.8.3 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 eligible to elect directors 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
3
1.8.4 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 (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.
1.09 Code
means
the Internal Revenue Code of 1986, as amended from time to time.
1.10 Committee
means
the Compensation and Executive Organization Committee of the Board or any
successor committee having similar authority.
1.11 Company
means
The Hershey Company, a Delaware corporation.
1.12 Coverage
Period
means
the period commencing on the date on which a Change in Control occurs and ending
on the date which is the second anniversary thereof.
1.13 Date
of Termination
has the
meaning assigned to such term in Section 4.2 hereof.
1.14 Deferred
Compensation Plan
means
The Hershey Company Deferred Compensation Plan and any successor or replacement
plan thereof.
1.15 DC
SERP
means
the Defined
Contribution Supplemental Executive Retirement Plan benefit of The Hershey
Company Deferred Compensation Plan.
1.16 Disability
means
the long-term disability of the Executive determined in accordance with the
terms of the Company's long-term disability plan (regardless of whether the
Executive is covered by such long-term disability plan).
1.17 Effective
Date
means
December 29, 2006.
1.18 Executive
means an
individual designated by the Committee, in its sole discretion, as eligible
for
coverage under the Plan.
1.19 Excise
Tax
means
any excise tax imposed under Section 4999 of the Code.
4
1.20 Good
Reason
means
with respect to an Executive:
1.20.1 the
assignment to him or her of any duties inconsistent in any respect with his
or
her 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;
1.20.2 a
reduction by the Company in his or her annual base salary as in effect, as
applicable, on the Effective Date or as the same may be increased from time
to
time, or on the date he or she first becomes an Executive if he or she was
not
an Executive on the Effective Date or as the same may be increased from time
to
time;
1.20.3 the
Company’s requiring him or her 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;
1.20.4 the
failure by the Company, without his or her consent, to pay to him or her any
portion of his or her current compensation (including, but not limited to,
any
amounts the Executive is entitled to receive under Section 2.6 hereof), or
to
pay to him or her any portion of an installment of deferred compensation under
any deferred compensation program of the Company within thirty (30) business
days of the date such compensation is due;
1.20.5 the
failure by the Company to continue in effect any compensation plan in which
he
or she participates immediately prior to either the Potential Change in Control
preceding the Change in Control or the Change in Control which is material
to
his or her total compensation, including but not limited to the KEIP (other
than
with respect to any contingent PSU grant that is outstanding as of the date
of
the Change in Control), the CLRP, and the SERP, as applicable, 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 his or her
participation relative to other participants, as existed at the time of such
Potential Change in Control or Change in Control;
1.20.6 the
failure by the Company to continue to provide him or her with benefits
substantially similar to those enjoyed by him or her under any of the Company’s
pension, life insurance, medical, health and accident, disability or other
welfare plans in which he or she 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 him or her of
any
material fringe
5
benefit
enjoyed by him or her at the time of such Potential Change in Control or Change
in Control, or the failure by the Company to provide him or her with the number
of paid vacation days to which he or she 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;
1.20.7 any
purported termination by the Company of his or her employment after a Change
in
Control otherwise than in accordance with the termination procedures of Article
4 hereof;
1.20.8 any
material failure by the Company to comply with and satisfy any of its
obligations under this Plan after a Potential Change in Control that is followed
within one (1) year by a Change in Control; or
1.20.9 any
material failure by the Company to comply with and satisfy any of its
obligations under any grantor trust established by the Company to provide itself
with a source of funds to assist itself in satisfying its liabilities under
this
Plan after (i) a Change in Control described in Subsection 1.8.1, clause (ii)
of
Subsection 1.8.4, or clause (i) of Subsection 1.8.4 other than a sale or other
disposition to a corporation; (ii) a Change in Control described in Subsection
1.8.2 if during the Coverage Period, Incumbent Directors, as described in
Subsection 1.8.1, cease for any reason to constitute at least a majority of
the
Board; (iii) a Change in Control described in Subsection 1.8.3 if, at any time
during the Coverage Period, Incumbent Directors, as described in Subsection
1.8.1, do not constitute at least a majority of the board of directors of the
Surviving Corporation; or (iv) a Change in Control described in clause (i)
of
Subsection 1.8.4 involving a sale or other disposition to a corporation if,
at
any time during the Coverage Period, Incumbent Directors, as described in
Subsection 1.8.1, do not constitute at least a majority of the board of
directors of such corporation.
For
purposes of this Plan, any good faith determination of Good Reason made by
the
Executive shall be conclusive.
1.21 Hershey
Pension Plan
means
The Hershey Company Retirement Plan and any successor or replacement plan
thereof.
1.22 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.
1.23 KEIP
means
the Hershey Foods Corporation Key Employee Incentive Plan and any successor
or
replacement plan thereof.
1.24 Mandatory
Retirement Age
means
age sixty-five (65) in the case of an Executive who has served for a minimum
of
two (2) years at a high level executive or high policy-making position and
who
is entitled to a nonforfeitable, immediate, annual employer-provided retirement
6
benefit
from any source, which is at least equal to a benefit, computed as a life
annuity, of at least $44,000 per year (or such other amount as may be provided
by future legislation). In the case of all other Executives, there shall be
no
Mandatory Retirement Age.
1.25 Notice
of Intent to Terminate
shall
have the meaning assigned to such term in Section 4.1 hereof.
1.26 Plan
means
The Hershey Company Executive Benefits Protection Plan (Group 3A), as set forth
herein, as amended from time to time.
1.27 Plan
Administrator
means
The Company's Senior Vice President, Chief People Officer (or other officer
of
the Company holding a successor position in the Company having the same or
substantially similar organizational responsibilities).
1.28 Potential
Change in Control
means
the occurrence of any of the following:
1.28.1 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 (1)
an
offer made to the Hershey Trust to purchase any number of its shares in the
Company such that if the Hershey Trust accepted such offer and sold such number
of shares in the Company the Hershey Trust might no longer have more than 50%
of
the Outstanding Company Voting Power, (2) an offering by the Hershey Trust
of
any number of its shares in the Company for sale such that if such sale were
consummated the Hershey Trust might no longer have more than 50% of the
Outstanding Company Voting Power or (3) entering into any agreement or
understanding with a person or entity that would lead to a Change in Control;
or
1.28.2 the
Board
approves a transaction described in Subsection 1.8.2, 1.8.3 or 1.8.4 of the
definition of a Change in Control contained herein.
1.29 SERP
means
The Hershey Company Amended and Restated (2007) Supplemental Executive
Retirement Plan and any successor or replacement plan thereof.
1.30 Severance
Benefits
has the
meaning assigned to such term in Section 3.2 hereof.
1.31 Subsidiary
means
any corporation controlled by the Company, directly or indirectly.
1.32 The
401(k) Plan
means
The Hershey Company 401(k) Plan.
1.33 Vested
Current Bonus Amount
shall
have the meaning assigned to such term in Section 2.1 hereof.
7
1.34 Vested
Current PSU Amount
shall
have the meaning assigned to such term in Section 2.2 hereof.
1.35 Vested
SERP Benefit
shall
have the meaning assigned to such term in Section 2.3 hereof.
ARTICLE
2
VESTING
OR PAYMENT OF CERTAIN BENEFITS
IN
THE
EVENT OF A CHANGE IN CONTROL
2.1 Vesting
of AIP Benefits; Payment of Benefits.
Upon
the occurrence of a Change in Control:
2.1.1 each
Executive shall have a vested and nonforfeitable right hereunder to receive
in
cash an amount equal to the greater of (x) the 100% target award amount of
all
then outstanding contingent target AIP grants made to him or her under the
KEIP,
and (y) the amount that would have been payable to him or her under such
contingent target AIP grants as of the end of the applicable award period
calculated using as the applicable performance factors, his or her and the
Company’s actual performance on an annualized basis as of the date of the Change
in Control (the greater of (x) and (y) is herein referred to as the “Vested
Current Bonus Amount”); and
2.1.2 the
Company shall, within thirty (30) business days following the Change in Control,
pay to each Executive a lump sum cash payment equal to his or her Vested Current
Bonus Amount.
2.2 Vesting
of PSU Benefits; Payment of Benefits.
Upon
the occurrence of a Change in Control:
2.2.1 each
Executive shall have a vested and nonforfeitable right hereunder to receive
in
cash (as specified in Subsection 2.2.2) an amount equal to the contingent target
Performance Stock Unit (“PSU”) grant, if any, made to him or her under the KEIP
for the cycle ending in the year of the Change in Control, determined as the
greater of (x) the 100% target award amount and (y) the amount that would have
been payable to him or her at the end of such award cycle based on the Company’s
actual performance through the date of the Change in Control and annualized,
plus, if applicable, PSUs from any other completed cycle for which (i) payment
has not been made or (ii) an election to defer such PSUs has been made, but
such
amounts have not been credited to the Executive's PSU Award Sub-Account under
the Deferred Compensation Plan, in each case 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 (the higher of
(i) and (ii) is herein
8
referred
to as the “Transaction Value”) (the greater of (x) and (y) is herein referred to
as the “Vested Current PSU Amount”); and
2.2.2 the
Company shall, within thirty (30) business days following the Change in Control,
pay to each Executive a lump sum cash payment equal to his or her Vested Current
PSU Amount, increased for any dividends that would be otherwise payable on
the
PSUs following the Change in Control but prior to the distribution date under
this Subsection 2.2.2.
2.3 Vested
SERP Benefit.
Upon
the occurrence of a Change in Control each Executive who either is a participant
in the SERP on the date of the Change in Control or was a participant in the
SERP on the date of the Potential Change in Control preceding the Change in
Control shall be fully vested under the SERP (such vested benefit is hereinafter
referred to as "Vested SERP Benefit"). If an Executive continues to be a
participant in the SERP as of his or her Date of Termination and he or she
has
not attained age fifty-five (55), the Executive shall be treated as being
eligible for the Early Retirement Benefit under Section 4.b. of the SERP;
provided, however, the reduction factor prescribed in Section 4.b(4) of the
SERP
shall still be given effect in calculating his or her Vested SERP Benefit,
provided that (i) for an Executive (other than the Chief Executive Officer
of
the Company) who has not yet attained age fifty (50) as of the Executive's
Date
of Termination, the reduction factor in Section 4.b(4) of the SERP shall be
based on the number of complete calendar months by which the Date of Termination
precedes his or her fifty-second (52nd)
birthday, and (ii) for an Executive (other than the Chief Executive Officer
of
the Company) who has attained age fifty (50) as of the Executive's Date of
Termination, the reduction factor in Section 4.b(4) of the SERP shall be zero
percent (0%).
An
Executive's Vested SERP Benefit shall be payable in accordance with Section
6.a.
of the SERP, but the actuarial present value of such Executive's Vested SERP
Benefit, taking into account the foregoing provisions, shall be determined
using: (i) the mortality table described in Section 6.a. of the SERP; (ii)
an
interest rate equal to the "Lump Sum Interest Rate," as defined in Section
2(h)
of the SERP, as of the Executive's Date of Termination; (iii) the Executive's
Date of Termination as the date on which payment of the Executive’s Vested SERP
Benefit is to commence and as the date as of which the actuarial present value
of such Vested SERP Benefit is calculated; and (iv) the actual age of the
Executive and his or her spouse as of the Executive's Date of Termination.
2.4 Vested
Deferred Compensation Plan Benefit.
Upon
the occurrence of a Change in Control, each Executive who either is a
participant in the Deferred Compensation Plan on the date of the Change in
Control or was a participant in the Deferred Compensation Plan on the date
of
the Potential Change in Control preceding the Change in Control shall be fully
vested in all benefits payable under the Deferred Compensation
Plan.
2.5 Vested
Hershey Pension Plan Benefit.
Upon
the occurrence of a Change in Control, each Executive who either is a
participant in the Hershey Pension Plan on the date of the Change in Control
or
was a participant in the Hershey Pension Plan on the date of the Potential
Change in Control preceding the Change in Control shall be fully vested under
the Hershey Pension Plan.
9
2.6 Vested
Core Retirement and Matching Contributions.
Upon
the occurrence of a Change in Control, each Executive who either is a
participant in The 401(k) Plan on the date of the Change in Control or was
a
participant in The 401(k) Plan on the date of the Potential Change in Control
preceding the Change in Control shall have a vested nonforfeitable right to
receive Core Retirement Contributions and Matching Contributions payable under
The 401(k) Plan.
2.7 SERP,
CLRP, or Deferred Compensation Plan Amendments.
Notwithstanding any provision of the SERP, CLRP, or Deferred Compensation Plan,
none of the SERP, CLRP, or Deferred Compensation Plan may be terminated or
amended in any manner that is adverse to the interests of any Executive without
his or her consent 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, CLRP,
or Deferred Compensation Plan in a manner adverse to the interests of an
Executive within one (1) year prior to a Potential Change in Control shall
not
be given effect for purposes of determining benefits under this
Plan.
2.8 Other
PSU Grants Outstanding as of the Date of a Change in Control.
An
Executive shall have
a
vested and non-forfeitable right hereunder to receive a lump sum cash payment
with respect to each contingent target PSU grant that is outstanding
as
of the
date of a Change in Control (and that is not otherwise paid out in whole or
in
part in accordance with the terms of Section 2.2) in an amount equal to the
product of (x) and (y), where (x) is an amount equal to the 100% target award
amount of each such contingent target PSU grant valued at the higher of (i)
the
Transaction Value and (ii) the highest closing price of the Company’s Common
Stock on the New York Stock Exchange from the date of the Change in Control
until the end of the cycle, and (y) is 100%, unless the Change in Control occurs
within the first year of the award period, in which case, (y) is a fraction
the
numerator of which is the number of days from and including the first day of
the
award period applicable to such outstanding contingent target PSU grant until
(and including) the date of the Change in Control and the denominator of which
is the number of days in the award period applicable to such outstanding
contingent target PSU grant, increased for any dividends that would be otherwise
payable on the PSUs following the Change in Control but prior to the
distribution date under this Section 2.8. The payment provided for in this
Section 2.8 with respect to each such contingent target PSU grant shall be
made
to an Executive by the thirtieth (30th)
business day following the first to occur of (a) the end of the cycle of such
grant and (b) the Executive’s Date of Termination.
10
ARTICLE
3
EXECUTIVE
BENEFITS AND RIGHTS
UPON
TERMINATION OF EMPLOYMENT
3.1 General
Termination Rights and Benefits.
If an
Executive’s employment by the Company is terminated at any time after a Change
in Control for any reason (whether by him or her or the Company), the Company
shall pay to him or her the payments described in Subsections 3.1.1 through
3.1.5 below.
3.1.1 Previously
Earned Salary.
The
Company shall pay his or her full salary to him or her through his or her 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 him or her through the Date of Termination under the terms
of any compensation or benefit plan, program or arrangement maintained by the
Company during such period.
3.1.2 Previously
Earned Benefits.
The
Company shall pay his or her normal post-termination compensation and benefits
to him or her 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.
3.1.3 Payment
of Vested Current Bonus Amount.
Except
to the extent that the Company has previously paid or concurrently pays to
him
or her all or a portion of his or her Vested Current Bonus Amount pursuant
to
Section 2.1, Subsection 3.1.1 or Subsection 3.1.2 hereof, the Company shall
pay
to him or her a lump sum cash payment equal to his or her Vested Current Bonus
Amount.
3.1.4 Payment
of Vested Current PSU Amount.
Except
to the extent that the Company has previously paid or concurrently pays to
him
or her all or a portion of his or her Vested Current PSU Amount pursuant to
Section 2.2, Subsection 3.1.1 or Subsection 3.1.2 hereof, the Company shall
pay
to him or her a lump sum cash payment equal to his or her Vested Current PSU
Amount.
3.1.5 Hershey
Pension Plan and 401(k) Plan.
In
the
event that any amount under the Hershey Pension Plan and The 401(k) Plan that
vests pursuant to Sections 2.5 and 2.6 cannot be paid to the Executive under
the
terms of the applicable plan, the Company shall pay such amount to the Executive
under the terms of this Plan.
3.2 Severance
Benefits.
In
addition to the payments provided for by Section 3.1 hereof, the Company shall
pay or provide to an Executive the payments, benefits, and services described
in
Subsections 3.2.1 through 3.2.5 below (the “Severance Benefits”) in accordance
with such Subsections upon termination of his or her employment with the Company
during the
11
Coverage
Period, unless such termination is (a) by the Company for Cause, (b) by
reason of his or her death or Disability or after his or her Mandatory
Retirement Age, if applicable, or (c) by him or her without Good
Reason.
3.2.1 Lump-Sum
Severance Payment.
In lieu
of any further salary payments to him or her for periods subsequent to the
Date
of Termination, the Company shall pay to him or her 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 he or she would have
reached Mandatory Retirement Age, if applicable, but not less than one (1)
year)
times the sum of (a) and (b), where (a) equals his or her Annual Base
Salary, and (b) equals his or her Annual Bonus.
3.2.2 Continued
Welfare Benefits.
For a
thirty-six (36) month period (or, if less, the number of months from the Date
of
Termination until he or she would have reached Mandatory Retirement Age, if
applicable, but not less than 12 months) after the Date of Termination, the
Company shall provide him or her with life insurance (subject to Section
10.1.4), health and other welfare benefits, excluding long-term and short-term
disability benefits (“Welfare Benefits”) substantially similar in all respects
to those which he or she was receiving immediately prior to the Notice of
Termination on substantially the same terms and conditions, including
contributions required from him or her for such benefits (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); provided that if he or she cannot
continue to participate in the Company plans providing Welfare Benefits, the
Company shall otherwise provide such benefits on the same after-tax basis as
if
continued participation had been permitted. The Executive shall be entitled
to
elect to change his or her level of coverage and/or his or her 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 him or her
to
the same extent that actively employed executives of the Company are permitted
to make such changes; provided, however, that in the event of any such changes
he or she shall pay the amount of any cost increase that would actually be
paid
by an actively employed executive of the Company by reason of such actively
employed executive making the same change in level of coverage or coverage
options. Notwithstanding the foregoing, in the event that the Executive
becomes reemployed with another employer and becomes eligible to receive welfare
benefits from such employer, the Welfare Benefits described herein shall be
secondary to such benefits, but only to the extent that the Company reimburses
him or her for any increased cost and provides any additional benefits necessary
to give him or her the Welfare Benefits provided hereunder.
3.2.3 Outstanding
Awards.
Except
to the extent the Company has previously paid or concurrently pays to him or
her
all or a portion of his or her Vested Current Bonus Amount as provided for
herein, if an Executive’s Date of Termination occurs within the Coverage Period,
he or she shall be entitled to a lump sum cash payment with respect to each
outstanding contingent target AIP grant under the KEIP or any similar types
of
grants under any replacement plans or programs equal to the product of
(x) and (y) for each then outstanding contingent target AIP grant made to
him or her under the KEIP (or similar types of grants under any replacement
plans or programs) for the applicable award period that includes his or her
Date
12
of
Termination, where (x) is an amount equal to the greater of (A) the 100%
target award amount of such outstanding contingent target AIP grant, and
(B) the amount that would have been payable to him or her under such
contingent target AIP grant as of the end of the applicable award period,
calculated utilizing as the applicable performance factors his or her and the
Company’s actual performance on an annualized basis as of his or her 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 award period applicable to such
outstanding contingent AIP grant that includes his or her Date of Termination
until (and including) his or her Date of Termination and the denominator of
which is the number of days in such applicable award period.
3.2.4 Outplacement
Services.
If an
Executive becomes eligible to receive Severance Benefits, such Executive shall
be entitled to receive outplacement services in accordance with the Company’s
outplacement services policy (as in effect immediately prior to the Change
in
Control) for up to one (1)
year
following the Date of Termination and in an amount not to exceed
$35,000.
3.2.5 Financial
Counseling and Tax Preparation. If
an
Executive becomes eligible to receive Severance Benefits, such Executive shall
be entitled to receive reimbursements for expenses incurred for financial
counseling and tax preparation services under The Hershey Company Financial
Counseling and Tax Preparation Services Program (hereinafter referred to as
"Qualifying Expenses") for twenty-four (24) months following the Date of
Termination (hereinafter referred to as "Severance Period"). The Company shall
reimburse the Executive directly or indirectly on a date that is six months
following the Executive's Separation from Service and on the first day of each
subsequent calendar quarter until the end of the Severance Period. Such
reimbursements shall be in an amount equal to the Qualifying Expenses that
are
submitted to the Company during each such period. For the purposes of this
Section 3.2.5, the Committee in its sole discretion shall determine whether
the
expenses incurred by the Executive for financial counseling and tax preparation
services constitute Qualifying Expenses.
3.3 Enhanced
Pension Benefits.
In
addition to payments provided for by Sections 3.1 and 3.2 hereof, the Company
shall pay or provide to an Executive the benefits described in Subsections
3.3.1
through 3.3.4 below in accordance with such Subsections upon termination of
his
or her employment with the Company during the Coverage Period, unless such
termination is (a) by the Company for Cause, (b) by reason of his or her death
or Disability or after his or her Mandatory Retirement Age, if applicable,
or
(c) by him or her without Good Reason.
3.3.1 Enhanced
SERP Benefit.
For an
Executive who continues to be a participant in the SERP as of his or her Date
of
Termination, such Executive shall receive in cash an amount equal to his or
her
Vested SERP Benefit increased in the following manner (the amount an Executive
is entitled to receive under this Subsection 3.3.1 is hereinafter referred
to as
"Enhanced SERP Benefit"):
for
purposes of determining such Executive's Enhanced SERP Benefit as of the date
of
his or her Date of Termination: (i) he or she shall be credited for all purposes
under the SERP with additional Years of Service (as defined in the SERP) equal
to three (3) or, if less,
13
the
number of years (including fractions thereof) from his or her Date of
Termination until he or she would attain Mandatory Retirement Age, if
applicable, but not less than one (1) year; (ii) the provisions of Section
2.3
regarding vesting and early retirement eligibility and reduction factors shall
apply (iii) he or she shall be deemed to have been paid his or her Annual Base
Salary for three (3) additional years (or, if less, the number of years
(including fractions thereof) from his or her Date of Termination until he
or
she would attain Mandatory Retirement Age, if applicable, but not less than
one
(1) year) which shall be considered to have been earned over such period of
time
during his or her last five (5) years of employment with the Company for
purposes of calculating "Final Average Compensation" in Section 2.f of the
SERP;
(iv) he or she shall be deemed to have been paid his or her Annual Bonus for
three (3) additional years (or, if less, the number of years (including
fractions thereof) from his or her Date of Termination until he or she would
attain Mandatory Retirement Age, if applicable, but not less than one (1) year)
which, together with his or her Vested Current Bonus Amount as determined
pursuant to Section 2.1.1 shall be considered his or her AIP awards paid or
accrued with respect to the last three (3) consecutive calendar years (or such
lesser number of calendar years (including fractions) as appropriate if limited
by his or her Mandatory Retirement Age) during his or her last five (5) years
of
employment with the Company for purposes of calculating “Final Average
Compensation” in Section 2.f of the SERP; and (v) for the purposes of Section
2.f of the SERP (and not for the purposes of any other provision of the SERP),
in the event he or she has not participated in the AIP portion of the KEIP
(after taking into account the year during which the Change in Control occurs
as
to which he or she is entitled to his or her Vested Current Bonus Amount plus
the number of years with respect to which he or she is deemed to have been
paid
his or her Annual Bonus as provided in Subsection 3.3.1(v)) for three (3)
consecutive years in his or her last five (5) years of employment with the
Company, he or she shall have his or her highest annual average AIP award be
based on the average of his or her AIP awards paid or accrued over the sum
of
the number of years preceding the year during which the Date of Termination
occurs during which he or she has participated in the AIP portion of the KEIP
plus the number of years with respect to which he or she is deemed to have
been
paid his or her Annual Bonus as provided in Subsection 3.3.1(v) plus the year
during which the Change in Control occurs with respect to which he or she is
entitled to his or her Vested Current Bonus Amount regardless of his or her
actual years of participation in the AIP portion of the KEIP at the time of
his
or her Date of Termination and regardless of the number of years such Executive
has been employed by the Company as of the Date of Termination.
3.3.2 Enhanced
DC SERP Benefit.
Each
Executive who is a participant in the DC SERP as of his or her Date of
Termination shall receive in cash an amount equal to the applicable percentage
rate under Section 6.2 of the Deferred Compensation Plan multiplied by his
or
her Annual Base Salary and Annual Bonus determined as if such amounts were
paid
to the Executive for three (3) additional years (or, if less, the number of
years (including fractions thereof) from his or her Date of Termination until
he
or she would attain Mandatory Retirement Age, if applicable, but not less than
one (1) year).
14
3.3.3 Additional
Enhanced Benefits.
Each
Executive who is not a participant in the SERP as of his or her Date of
Termination shall have a vested and nonforfeitable right hereunder to receive
in
cash an amount equal to the amount determined under either Subsections 3.3.3.1
or 3.3.3.2, as applicable.
3.3.3.1 for
an
Executive who is a participant in the Hershey Pension Plan, a lump sum cash
amount equal to the Basic Credit rate applicable to the Executive under the
Hershey Pension Plan multiplied by his or her Annual Base Salary and Annual
Bonus determined as if such amounts were paid to the Executive for three (3)
additional years (or, if less, the number of years (including fractions thereof)
from his or her Date of Termination until he or she would attain Mandatory
Retirement Age, if applicable, but not less than one (1) year). For this
purpose, the IRS limitations imposed under the Hershey Pension Plan shall not
apply. Notwithstanding the foregoing, for purposes of determining the lump
sum
cash amount payable under this Subsection 3.3.3.1 to an Executive who is a
participant under the DC SERP, the Basic Credit rate applicable to amounts
paid
to the Executive in excess of the limitation under Code section 401(a)(17)
shall
equal three (3) percent; and
3.3.3.2 for
an
Executive who is not a participant in the Hershey Pension Plan, a lump sum
cash
amount equal to the Core Retirement Contribution rate in effect under The 401(k)
Plan multiplied by his or her Annual Base Salary and Annual Bonus determined
as
if such amounts were paid to the Executive for three (3) additional years (or,
if less, the number of years (including fractions thereof) from his or her
Date
of Termination until he or she would attain Mandatory Retirement Age, if
applicable, but not less than one (1) year). For this purpose, the IRS
limitations imposed under The 401(k) Plan shall not apply.
3.3.4 Enhanced
Matching Contributions.
Each
Executive who is eligible to receive amounts under Subsections 3.3.1, 3.3.2,
or
3.3.3 shall also receive in cash an amount equal to the Matching Contribution
rate in effect under The 401(k) Plan multiplied by his or her Annual Base Salary
and Annual Bonus determined as if such amounts were paid to the Executive for
three (3) additional years (or, if less, the number of years (including
fractions thereof) from his or her Date of Termination until he or she would
attain Mandatory Retirement Age, if applicable, but not less than one (1) year).
For this purpose, the IRS limitations imposed under The 401(k) Plan shall not
apply.
3.4 Gross-Up
Payment.
In the
event that an Executive becomes entitled to the Severance Benefits or any other
benefits or payments under this Plan (other than pursuant to this Section 3.4),
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 him or
her
an additional amount (the “Gross-Up Payment”) such that the net amount retained
by him or her, 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 3.4, shall
be
equal to the Total Benefits.
15
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 an Executive in connection with a Change in
Control or his or her termination of employment (whether pursuant to the terms
of this Plan or any other plan, arrangement or agreement 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, 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 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, an Executive shall be deemed
to
pay federal income taxes at the applicable rate for federal income tax
withholding on supplemental wage payments in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the
applicable rate for withholding taxes on supplemental wage payments in the
state
and locality of his or her 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 him or her
applies first to reduce the amount of such state and local income taxes that
would otherwise be deductible by him or her).
In
the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of an 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 Company shall make an additional
Gross-Up Payment, determined as previously described, to him or her in respect
of such excess (plus any interest, penalties or additions payable by him or
her
with respect to such excess) at the time that the amount of such excess is
finally determined.
3.5 Timing
of Payments.
Subject
to Section 10.1.3, the amounts payable under Subsections 3.1.1, 3.1.3, 3.1.4,
3.1.5, 3.2.1, 3.2.3, 3.2.4, or Sections 3.3 and 3.4 hereof shall be made to
an
Executive not later than the thirtieth (30th)
business day following his or her Date of Termination.
16
3.6 Reimbursement
of Legal Costs.
The
Company shall pay to an Executive all legal fees and expenses incurred by him
or
her as a result of a termination of his or her employment which entitles him
or
her to any payments under this Plan (including all such fees and expenses,
if
any, incurred in contesting or disputing any Notice of Intent to Terminate
under
Section 4.3 hereof or in seeking to obtain or enforce any right or benefit
provided by this Plan 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
thirty (30) business days after delivery of his or her respective written
requests for payment accompanied by such evidence of fees and expenses incurred
as the Company reasonably may require.
3.7 Executives’
Covenant.
The
Company may condition the payment of the amounts and provision of the benefits
described in Article 3 of the Plan to an Executive upon his or her providing
to
the Company a written agreement that, subject to the terms and conditions of
this Plan, in the event of a Potential Change in Control, he or she will remain
in the employ of the Company until the earliest of (a) a date which is nine
months after the date of such Potential Change in Control, (b) the date of
a
Change in Control, (c) the date of his or her termination of his or her
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 his or her employment for any reason or (e) his or her attaining
age
sixty-five (65).
ARTICLE
4
TERMINATION
PROCEDURES AND
COMPENSATION
DURING DISPUTE
4.1 Notice
of Intent to Terminate.
After a
Change in Control, any purported termination of an Executive’s employment (other
than by reason of death) must be preceded by a written Notice of Intent to
Terminate from him or her to the Company or the Company to him or her, as
applicable, in accordance with Section 8.17 hereof. For purposes of this Plan,
a
Notice of Intent to Terminate shall mean a notice which shall indicate the
notifying party’s opinion regarding the specific provisions of this Plan 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 so 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 him or her, together with his or her counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, he or she was guilty
of
conduct set forth in Subsection 1.6.1 or 1.6.2 herein, and specifying the
particulars thereof in detail.
4.2 Date
of Termination.
Date of
Termination, (a) with respect to any purported termination of an Executive’s
employment after a Change in Control, shall mean (except as provided in Section
4.3 hereof) (i) if his or her employment is terminated by reason of his or
her
17
death,
his or her date of death, (ii) if his or her employment is terminated for
Disability, thirty (30) days after Notice of Intent to Terminate is given
(provided that he or she shall not have returned to the full-time performance
of
his or her duties during such thirty (30) day period), or (iii) if his or her
employment is terminated for any other reason, the date specified in the Notice
of Intent to Terminate (which (x) 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 him or her to not report to work during such ten (10) day
period and (y) in the case of a termination by an 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), and (b) for purposes of
Section 2.3 of this Plan and the definitions of the defined terms Annual Base
Salary and Annual Bonus as used in such Section 2.3, shall mean the date a
Change in Control occurs.
4.3 Dispute
Concerning Termination.
If
within fifteen (15) days after any Notice of Intent to Terminate is given
(within eight (8) days in the case of a termination for Cause by the Company),
or, if later, prior to the Date of Termination (as determined without regard
to
this Section 4.3), the person receiving such Notice of Intent to Terminate
notifies the person giving such notice that a dispute exists concerning the
termination or the provisions of this Plan 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 to such dispute 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 person giving such notice pursues the resolution
of
such dispute with reasonable diligence.
4.4 Compensation
During Dispute.
If a
purported termination of an Executive’s employment occurs following a Change in
Control and such termination or the provisions of this Plan that apply upon
such
termination is disputed in accordance with Section 4.3 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 his or her Annual Base
Salary and continue his or her participation in all compensation plans required
to be maintained hereunder and continue to provide to him or her the Welfare
Benefits provided for in Subsection 3.2.2 hereof until the dispute is finally
resolved in accordance with Section 4.3 hereof. Amounts paid under this Section
4.4 are in addition to all other amounts due under this Plan (other than those
due under Subsection 3.1.1 hereof) and shall not be offset against or reduce
any
other amounts due under this Plan.
ARTICLE
5
PLAN
ADMINISTRATION
5.1 Authority
to Plan Administrator.
The
Plan shall be interpreted, administered and operated by the Plan Administrator,
subject to the express provisions of the Plan.
18
5.2 Delegation
of Duties.
The
Plan Administrator may delegate any of his or her duties hereunder to such
person or persons from time to time as he or she may designate.
5.3 Engagement
of Third Parties.
The
Plan Administrator is empowered, on behalf of the Plan, to engage accountants,
legal counsel and such other personnel as he or she deems necessary or advisable
to assist him or her in the performance of his or her duties under the Plan.
The
functions of any such persons engaged by the Plan Administrator shall be limited
to the specified services and duties for which they are engaged, and such
persons shall have no other duties, obligations or responsibilities under the
Plan. Such persons shall exercise no discretionary authority or discretionary
control respecting the management of the Plan. All reasonable expenses thereof
shall be borne by the Company.
ARTICLE
6
CLAIMS
6.1 Claims
Procedure.
Claims
for benefits under the Plan shall be filed with the Plan Administrator. If
any
Executive or other payee claims to be entitled to a benefit under the Plan
and
the Plan Administrator determines that such claim shall be denied in whole
or in
part, the Plan Administrator shall notify such person of its decision in
writing. Such notification will be written in a manner calculated to be
understood by such person and will contain (a) specific reasons for the denial,
(b) specific reference to pertinent Plan provisions, (c) a description of any
additional material or information necessary for such person to perfect such
claim and an explanation of why such material or information is necessary,
and
(d) information as to the steps to be taken if the person wishes to submit
a
request for review. Such notification will be given within 90 days after the
claim is received by the Plan Administrator. If such notification is not given
within such period, the claim will be considered denied as of the last day
of
such period and such person may request a review of his or her
claim.
6.2 Review
Procedure.
Within
60 days after the date on which a person receives a written notice of a denied
claim (or, if applicable, within 60 days after the date on which such denial
is
considered to have occurred) such person (or his or her duly authorized
representative) may (a) file a written request with the Plan Administrator
for a
review of his or her denied claim and of pertinent documents and (b) submit
written issues and comments to the Plan Administrator. The Plan Administrator
will notify such person of its decision in writing. Such notification will
be
written in a manner calculated to be understood by such person and will contain
specific reasons for the decision as well as specific references to pertinent
Plan provisions. The decision on review will be made within 60 days after the
request for review is received by the Plan Administrator. If the decision on
review is not made within such period, the claim will be considered
denied.
6.3 Claims
and Review Procedures Not Mandatory.
The
claims procedure and review procedure provided for in this Article 6 are
provided for the use and benefit of Executives who may choose to use such
procedures, but compliance with the provisions of this Article 6 is not
mandatory for any Executive claiming benefits under the Plan. It shall not
be
necessary for any
19
Executive
to file a claim with the Plan Administrator or to exhaust the procedures and
remedies provided for by this Article 6 prior to bringing any legal claim or
action, or asserting any other demand, for payments or other benefits to which
he or she claims entitlement hereunder.
ARTICLE
7
PLAN
MODIFICATION OR TERMINATION
The
Plan
may be amended or terminated by resolution of the Board at any time; provided,
however, that (a) the Plan may not be terminated or amended in a manner adverse
to the interests of any Executive, without his or her consent (i) after a
Potential Change in Control occurs and for one (1) year following the cessation
of a Potential Change in Control, or (ii) for the two-year period following
consummation of the transaction(s) resulting from or in the Change in Control;
and (b) no termination of this Plan or amendment hereof in a manner adverse
to
the interests of any Executive, without his or her consent, shall be effective
if such termination or amendment 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 or
Potential Change in Control. For this purpose, the cessation of a Potential
Change in Control occurs if a Change in Control has not occurred within one
(1)
year following the Potential Change in Control. In the event that the
termination of this Plan by the Company or an amendment hereof in a manner
adverse to the interests of any Executive (without his or her consent) occurs
within six (6) 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 next preceding sentence shall have been met. Upon
the
expiration of the Coverage Period, the Plan may not be amended in any manner
which would adversely affect the rights which any Executive has at that time
to
receive any and all payments or benefits pursuant to Articles 2, 3, and 4 by
reason of a Change in Control which has theretofore occurred or by reason of
a
termination of his or her employment during the Coverage Period, and the
Company’s obligations to make such payments and provide such benefits shall
survive any termination of the Plan.
ARTICLE
8
MISCELLANEOUS
8.1 Terminations
in Anticipation of Change in Control.
An
Executive’s employment shall be deemed to have been terminated by the Company
without Cause during the Coverage Period if his or her employment is terminated
by the Company without Cause prior to a Change in Control or Potential Change
in
Control and such termination of employment (a) was at the request of a third
party who had indicated an intention to take or had 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 and (c) in either case, a Change
in Control does occur which may involve such third party (or a party competing
with such third party to effectuate a Change in Control). An Executive shall
be
deemed to have terminated his or her employment for Good Reason during the
Coverage Period if he or she terminates his or her employment with Good Reason
prior to a Change in Control or Potential Change in Control if the circumstance
or event
20
which
constitutes Good Reason (a) occurred at the request of a third party who had
indicated an intention to take or had 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, and (c) in either case, a Change in Control
does occur which may involve such third party (or a party competing with such
third party to effectuate a Change in Control). In the event of a termination
of
employment described in this Section 8.1, the Executive shall be entitled to
all
payments and other benefits to which he or she would have been entitled had
such
termination occurred during the Coverage Period (other than salary pursuant
to
Subsection 3.1.1 hereof for any period after the actual date of termination)
and
he or she shall be entitled to an additional payment in an amount which shall
compensate him or her to the extent that he was deprived by such termination
of
the opportunity prior to termination of employment to exercise any stock options
granted to him or her under the KEIP (including any such stock options that
were
not exercisable at the time of his or her termination of employment) 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 an Executive as described in this Section 8.1
occurs following a Potential Change in Control or within six (6) 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 8.1 shall have been met.
8.2 Burden.
In any
proceeding (regardless of who initiates such proceeding) in which the payment
of
Severance Benefits or other compensation or benefits under this Plan is at
issue, (i) the burden of proof as to whether Cause exists for purposes of this
Plan shall be upon the Company and (ii) in the event that the last sentence
of
Section 8.1 applies, the Company shall have the burden to prove, by clear and
convincing evidence, that a termination of employment has not been made in
anticipation of a Change in Control as contemplated by Section 8.1.
8.3 No
Right to Continued Employment.
Nothing
in the Plan shall be deemed to give any Executive the right to be retained
in
the employ of the Company, or to interfere with the right of the Company to
discharge him or her at any time and for any lawful reason, with or without
notice, subject in all cases to the terms of this Plan.
8.4 No
Assignment of Benefits.
Except
as otherwise provided herein or by law, no right or interest of any Executive
under the Plan 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
any Executive under the Plan shall be liable for, or subject to, any obligation
or liability of such Executive.
8.5 Death.
This
Plan shall inure to the benefit of and be enforceable by an Executive’s personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If an Executive shall die while any amount
would still be payable to him or her hereunder (other than amounts which, by
their terms, terminate upon his or her death) if he or she had continued to
live, all such amounts, unless otherwise provided herein,
21
shall
be
paid in accordance with the terms of this Plan to the executors, personal
representatives or administrators of his or her estate.
8.6 Incompetency.
Any
benefit payable to or for the benefit of an Executive, if legally incompetent
or
incapable of giving a receipt therefor, shall be deemed paid when paid to his
or
her guardian or to the party providing or reasonably appearing to provide for
his or her care, and such payment shall fully discharge the Company, the Plan
Administrator and all other parties with respect thereto.
8.7 Reduction
of Benefits By Legally Required Benefits.
Notwithstanding any other provision of this Plan to the contrary, if the Company
is obligated by law or by contract (other than under this Plan) to pay severance
pay, a termination indemnity, notice pay, or the like, to an Executive or if
the
Company is obligated by law or by contract to provide advance notice of
separation (“Notice Period”) to an Executive, then any Severance Benefits
payable to him or her 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.
8.8 Enforceability.
If any
provision of the Plan shall be held invalid or unenforceable, such invalidity
or
unenforceability shall not affect any other provisions hereof, and the Plan
shall be construed and enforced as if such provisions had not been included.
8.9 Effective
Date.
The
Plan shall be effective as of the Effective Date and shall remain in effect
unless and until terminated by the Board, subject to the requirements of Article
7 hereof.
8.10 No
Mitigation.
The
Company agrees that, if an 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 him or
her
by the Company pursuant to this Plan. Further, the amount of any payment or
benefit provided for under this Plan (other than to the extent provided in
Subsection 3.2.2) shall not be reduced by any compensation earned by him or
her
as a result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by him or her to the Company, or
otherwise.
8.11 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 the Company’s obligations under this Plan
in the same manner and to the same extent that the Company would be required
to
perform them 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 entitle each Executive to compensation and benefits from the
Company in the
22
same
amount and on the same terms as he would be entitled to hereunder if he were
to
terminate his or her employment for Good Reason during the Coverage
Period.
8.13 Employment
by Subsidiary.
For
purposes of this Plan, an Executive who is employed by a Subsidiary shall be
treated as if employed by the Company and his or her entitlement to benefits
hereunder shall be determined as if he or she were employed by the Company.
For
such purpose, the Subsidiary shall be treated as if it were an unincorporated
division of the Company.
8.14 Waiver.
No
waiver by an Executive at any time of any breach of the terms of this Plan,
or
compliance with, any condition or provision of this Plan to be performed by
the
Company shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
8.15 Withholding
Taxes.
Any
payments to an Executive provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which he or she has agreed.
8.16 Construction.
The
headings and captions herein are provided for reference and convenience only,
shall not be considered part of the Plan, and shall not be employed in the
construction of the Plan. Neither the gender nor the number (singular or plural)
of any word shall be construed to exclude another gender or number when a
different gender or number would be appropriate.
8.17 Notices.
Any
notice or other communication required or permitted pursuant to the terms hereof
shall be deemed to have been duly given when delivered or mailed by United
States Mail, first class, postage prepaid, addressed to the intended recipient
at his or her last known address (which in the case of an Executive shall be
the
address specified by him or her in any written notice provided to the Company
in
accordance with this Section 8.17).
8.18 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.
8.19 Governing
Law.
This
Plan shall be construed and enforced according to the laws of the State of
Delaware to the extent not preempted by Federal law, which shall otherwise
control.
23
ARTICLE
9
TERMINATION
UNRELATED TO A POTENTIAL CHANGE IN
CONTROL
OR CHANGE IN CONTROL
9.1 Subject
to the terms and conditions noted below, in the event Executive’s employment
with the Company is, or is deemed to be, terminated by the Company without
cause
(as defined below), or is, or is deemed to be, terminated by the Executive
for
good reason (as defined below) regardless of whether a Potential Change in
Control or Change in Control has occurred or is pending (such termination
hereinafter is referred to as “Change in Status Event”); provided, however, any
termination of an Executive’s employment which results in such Executive being
entitled to Severance Benefits pursuant to Section 3.2 shall not constitute
a
Change in Status Event and no Executive entitled to Severance Benefits pursuant
to Section 3.2 shall in addition be entitled to the benefits provided for in
this Section 9.1:
From
and
after the date of the Change in Status Event for a period of two years
thereafter, the Company will continue Executive as an employee on a paid leave
of absence with the benefit coverage of an active employee, excluding disability
coverage and, in the case of an Executive that terminates on or after January
1,
2007, excluding coverage under all tax-qualified retirement plans. Executive’s
base compensation during the paid leave of absence will equal his or her Annual
Base Salary as defined in Section 1.2 (substituting “Change in Status
Event” for “Change in Control”) of Article 1 of this Group 3A Plan.
Executive shall also remain a participant in the AIP during the paid leave
of
absence period and Executive’s target percentage for AIP payment purposes will
be that in effect just prior to the Change in Status Event, and Executive will
be scored on the basis of the actual achievement of the Company’s performance
targets for AIP, but up to a maximum of 100%. Executive will additionally be
entitled to payments for AIP and PSU grants for any previously deferred awards
or any awards covering periods ending prior to the date of the Change in Status
Event that have been earned but not yet paid prior to the date of the Change
in
Status Event.
9.1.1 During
the above leave of absence: (a) Executive’s stock options granted prior to the
Change in Status Event will continue to vest in accordance with the vesting
schedule(s) applicable under the terms of the grant(s), but (b) Executive will
not be eligible to participate in or receive new grants or benefits under the
LTIP and will not be eligible for participation in or the payment of benefits
under the Executive Benefits Protection Plan (except for under this
Article 9), the Employee Benefits Protection Plan, or the Severance
Benefits Plan. If Executive meets the eligibility requirements of paragraph
3 of
the SERP and elects to retire from employment with the Company during the leave
of absence, Executive’s paid leave of absence will cease and the Executive will
be treated for all purposes as a retiree in accordance with the terms of the
SERP and the Company’s other benefit plans.
9.2 Executive’s
voluntary resignation from the Company other than for good reason (as defined
below) shall not constitute a Change in Status Event, and therefore will not
entitle Executive to the benefits provided for in Section 9.1 above. In such
event, Executive would be entitled to the benefits provided under the benefit
plans of the Company to which Executive is entitled in accordance with the
terms
of those plans.
24
9.3 Termination
of Executive’s employment “without cause” for purposes of this Article 9
shall mean termination of active employment by the Company not based on “cause”
as defined in paragraph 2(a) of the SERP. Termination of Executive’s employment
“for good reason” for purposes of this Article 9 shall mean termination of
active employment by the Executive during the first two years of the tenure
of
the Company’s then current Chief Executive Officer if, and only if, the
Executive has not given the Company written notice of his or her intention
to
retire and during such two year period and prior to the Executive’s termination
of active employment either (i) the Company has assigned duties to the Executive
or taken other actions which are inconsistent with his or her position
(including status, offices, titles and reporting relationships), authority,
duties or responsibilities immediately prior to the then current Chief Executive
Officer becoming the Chief Executive Officer of the Company and such assignment
of duties or other action results in more than an insignificant diminution
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; or (ii) the Company has reduced the Executive’s annual base
salary as in effect, as applicable, on the date the then current Chief Executive
Officer became the Chief Executive Officer of the Company or as the same may
be
increased from time to time.
9.4 The
severance arrangements of this Article 9 shall not be considered to constitute
an employment contract. The terms and conditions of the Long-Term Incentive
Program Participation Agreement and Mutual Agreement to Arbitrate Claims by
and
between Executive and the Company (“Participation and Arbitration Agreement”),
are incorporated herein by reference and made a part hereof as if fully set
forth herein. Notwithstanding any provisions to the contrary in the
Participation and Arbitration Agreement, the terms and conditions thereof shall
remain in effect for three years after Executive’s Change in Status Event
regardless of whether Executive is eligible or not to receive benefits under
the
SERP.
ARTICLE
10
APPLICATION
OF CODE SECTION 409A
10.1 To
the
extent Code section 409A applies to any compensation or other benefit payable
under this Plan, this Article 10 applies, and to the extent that it conflicts
with any other provision of this Plan, it supersedes such conflicting
provisions. If Code section 409A does not apply to any compensation or other
benefits payable under this Plan, this Article 10 shall have no
effect.
10.1.1 In
General.
This
Article 10 is intended to comply with the provisions of Code section 409A and
the Treasury regulations relating thereto. In furtherance of this intent, to
the
extent this Plan is subject to Code section 409A, it shall be interpreted,
operated, and administered in a manner consistent with these
intentions.
25
|
10.1.2
|
Definitions.
For purposes of, and as used in, this Plan,
|
10.1.2.1 Key
Employee shall mean an employee who is treated as a "specified employee" under
Section 409A(a)(2)(B)(i) of the Code, i.e., a key employee (as defined in
Section 416(i) of the Code, without regard to paragraph (5) thereof, and
determined as of each December 31 in accordance with Section 409A of the Code)
of the Company.
10.1.2.2 Separation
from Service or Separate from Service shall mean a "separation from service"
within the meaning of Code section 409A.
10.1.3 Timing
of Benefit Payments.
If the
Executive is a Key Employee, all amounts payable under Article 3 and Article
9
as a result of the Executive's Separation from Service that are subject to
Code
section 409A shall not be paid prior to the date that is six months following
the Executive's Separation from Service (or on the date of the Executive's
death, if earlier). With respect to PSUs payable to a Key Employee under Section
3.2.3, such PSUs will be credited with any dividends that would otherwise be
payable on the PSUs during the six-month period.
10.1.4 Continuation
of Group Term Life Insurance.
If the
Company continues to provide life insurance coverage under Section 3.2.2 to
an
Executive who is a Key Employee, to the extent payment of such coverage by
the
Company would violate Code section 409A, the Executive shall be solely
responsible for paying for the coverage during the six month period following
the Executive's Separation from Service (or until the date of the Executive's
death, if earlier).
IN
WITNESS WHEREOF, the Company has caused the Plan to be amended and restated
as
of December 29, 2006.
|
THE
HERSHEY COMPANY
|
|
|
BY: /s/
Marcella K. Arline
|
|
|
Marcella
K. Arline
Senior
Vice President,
Chief People Officer
|
26