f8k_02152008.htm
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UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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______________________________
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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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February
12,
2008
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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
February 12, 2008, the Compensation and Executive Organization Committee
(“Committee”) of our Board of Directors approved 2008 incentive compensation
awards for certain of the executive officers who were named in the Summary
Compensation Table of our 2007 Proxy Statement (“named executive
officers”). Three of these officers retired or terminated their
employment with the Company in 2007. Richard H. Lenny retired as
Chairman of the Board of Directors, and Marcella K. Arline retired as Chief
People Officer, effective December 31, 2007. Thomas K. Hernquist
resigned as an executive officer on December 4, 2007 and discontinued
active employment with the Company on December 31, 2007. Of the two
remaining named executive officers, David J. West was elected President of the
Company on October 2, 2007 and Chief Executive Officer effective
December 1, 2007, and J. P. Bilbrey was elected Senior Vice President,
President Hershey North America on December 4, 2007.
The
independent members of our Board of Directors also approved certain compensation
for Mr. West, as well as the adoption or amendment of certain plans and
agreements, on February 13, 2008, all as more fully described
below.
Special Performance Stock Unit
(PSU) Retention Award. The Committee approved a special contingent target
award of PSUs (“special award”) under our Equity and Incentive Compensation Plan
(“Incentive Plan”) for executive officers, including Mr. Bilbrey, who
received contingent target PSUs for the 2007-2009 performance cycle, and
recommended to the independent directors as a group that Mr. West receive a
special award as he also was a recipient of PSUs for the 2007-2009 performance
cycle. PSU awards are based upon a percentage of the named executive officer’s
base salary and are earned, if at all, upon the Company’s achievement of certain
performance objectives over the performance cycle. The special award
was made to aid in retention of these executive officers as the potential
retention value of the 2007-2009 PSUs is diminished in light of the Company’s
2007 financial performance.
The
special award creates a two-year, 2008-2009 performance cycle under which
eligible executives received contingent target awards equal to two-thirds of the
target value of the PSU award for the 2007-2009 performance
cycle. The performance objective for the 2008-2009 performance cycle
is the Company’s two-year compound annual growth in absolute diluted earnings
per share from operations measured against an internal target. The total
performance score can range from a minimum of 0% to a maximum of
150%. Upon completion of the performance cycle, an award will be paid
on the basis of the number of PSUs originally awarded to the executive, the
Company’s performance against the performance objectives for the cycle and the
value per unit, which is determined at the conclusion of the cycle based upon
the average of the daily closing prices of our Common Stock on the New York
Stock Exchange in December of the final year of the cycle. To prevent
the possible payment of a duplicate award to any executive under the 2007-2009
and 2008-2009 performance cycles, the amount of any PSUs earned by an executive
under the 2007-2009 performance cycle will reduce the total PSUs earned by that
executive under the
2008-2009
special award (but not below zero). Awards will be paid only in
shares of our Common Stock. The independent directors as a group
approved the Committee’s recommended contingent target PSU award for Mr. West on
February 13, 2008.
As a
condition to receiving the special award, Mr. Bilbrey and other executive
officers (excluding Mr. West) will be required to sign an Executive
Confidentiality and Restrictive Covenant Agreement (“ECRCA”), approved by the
Board on February 13, 2008, prohibiting the executive from: (i) disclosing the
Company’s confidential information at any time during or following the
executive’s employment with the Company; (ii) competing with the Company in any
geographic area in which the Company does business in the domestic and worldwide
confectionery, snack, better-for-you, balanced nutrition and chocolate-related
grocery products businesses at any time during the executive’s employment with
the Company and for a period of 12 months following termination of the
executive’s employment; and (iii) recruiting or soliciting the Company’s
employees, or disparaging the Company’s reputation in any way, at any time
during the executive’s employment with the Company and for a period of 12 months
following termination of the executive’s employment. The ECRCA
contains certain exceptions to these restrictions that are customary in
agreements of this type. The ECRCA will be filed as an exhibit to our
Quarterly Report on Form 10-Q for the first quarter of 2008.
Mr. West
was not required to sign the ECRCA because he continues to be bound by the
non-disclosure, non-competition, non-solicitation and non-disparagement
provisions of the Amended and Restated Executive Employment Agreement
(“Executive Employment Agreement”) between him and the Company, dated as of
October 2, 2007. Mr. West’s Executive Employment Agreement will be
filed as an exhibit to the Company’s 2007 Annual Report on Form
10-K. Each of the executive officers (including Messrs. West and
Bilbrey) also will continue to be bound by the terms of the Long-Term Incentive
Program Participation Agreement, filed as Exhibit 10.2 to the Company’s Current
Report on Form 8-K on February 18, 2005.
Amendment to Executive Benefits
Protection Plan (Group 3A). On February 13, 2008, our Board
approved an amendment to the Company’s Executive Benefits Protection Plan (Group
3A) (“Group 3A Plan”) that would reduce the Lump-Sum Severance Payment payable
to an eligible participant whose employment with the Company is terminated as
the result of a Change in Control from three-times the sum of Annual Base Salary
and Annual Incentive Pay to two-times the sum of Annual Base Salary and Annual
Incentive Pay. Capitalized terms used herein shall have the meanings
ascribed to them in the Group 3A Plan. The Group 3A Plan, Amended and
Restated as of October 2, 2007, will be filed as an exhibit to the Company’s
2007 Annual Report on Form 10-K. The Group 3A Plan containing the
amendment described above will be filed as an exhibit to our Quarterly Report on
Form 10-Q for the first quarter of 2008.
Amendment to Mr. West’s Executive
Employment Agreement. The Board and Mr. West agreed on
February 13, 2008 to amend Mr. West’s Executive Employment Agreement to conform
the agreement to the changes to the Group 3A Plan described
above. The amendment will be filed as an exhibit to our Quarterly
Report on Form 10-Q for the first quarter of 2008.
At its
meeting on February 12, 2008, the Committee also approved or recommended the
following incentive compensation awards for executive officers:
2008 Annual Incentive Program (AIP)
Target Awards. The Committee approved 2008 contingent target
awards for our executive officers including Mr. Bilbrey, and recommended to the
independent directors as a group a 2008 contingent target award for
Mr. West, under the annual incentive program (“AIP”) of the Incentive
Plan. The final award, if any, will be calculated as the product of
the executive officer’s base salary, applicable target percentage and a
corporate performance score reflecting the Company’s achievement of certain
growth objectives in 2008. These corporate growth objectives are
based upon the Company’s diluted earnings per share from operations (weighted
40%), consolidated net sales (weighted 40%) and free cash flow (weighted
20%). The target percentage of base salary used in the 2008 AIP
contingent target award for Mr. Bilbrey is 65% and the target for Mr. West
is 100%. The independent directors as a group approved the
Committee’s recommended 2008 AIP contingent target award for Mr. West on
February 13, 2008.
Performance Stock Units
(PSUs) for the
2008-2010 Cycle. The Committee also approved contingent target awards of
PSUs under the Incentive Plan for our executive officers including Mr. Bilbrey,
and recommended to the independent directors as a group a contingent target
award of PSUs for Mr. West, for the 2008-2010 PSU performance
cycle. The performance objectives for the 2008-2010 performance cycle
are the Company’s three-year compound annual growth in absolute diluted earnings
per share from operations measured against an internal target and the Company’s
relative total stockholder return (“TSR”) over the three-year cycle versus the
three-year compound annual growth in TSR of a peer group of companies we
identified in our 2007 proxy statement as the “financial peer
group.” The total performance score can range from a minimum of 0% to
a maximum of 250% based upon each of the performance measurements having a 50%
weighted value in the formula. Upon completion of the performance cycle, an
award will be paid on the basis of the number of PSUs originally awarded to the
executive, the Company’s performance against the performance objectives for the
cycle and the value per unit, which is determined at the conclusion of the cycle
based upon the average of the daily closing prices of our Common Stock on the
New York Stock Exchange in December of the final year of the
cycle. Awards will be paid only in shares of our Common
Stock. The independent directors as a group approved the Committee’s
recommended contingent target PSU award for Mr. West on February 13,
2008.
Stock Option
Awards. The Committee approved stock option awards under the
Incentive Plan for our executive officers other than Mr. West, and recommended
to the independent directors as a group a stock option award to Mr. West, all
such awards to be effective February 13, 2008. The independent
directors as a group approved the grant of stock options to Mr. West on February
13, 2008. All such awards were made subject to the Incentive Plan and
the Terms and Conditions of Nonqualified Stock Option Awards, which will be
filed as an exhibit to the Company’s 2007 Annual Report on Form
10-K.
Additional
information regarding the compensation of the Company’s executive officers will
be provided in the Company’s Proxy Statement for the 2008 Annual Meeting of
Stockholders, which will be filed in March 2008.
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: February
15, 2008
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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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