<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission File Number 001-15019
WHITMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-6167838
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3501 ALGONQUIN ROAD, ROLLING MEADOWS, ILLINOIS 60008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 818-5000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES /x/ NO / /
As of July 31, 1999, the Registrant had 141,762,799 outstanding shares
(excluding treasury shares) of common stock, par value $0.01 per share, the
Registrant's only class of common stock.
===============================================================================
<PAGE> 2
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
CONTENTS
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income 2
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 20
</TABLE>
1
<PAGE> 3
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Second Quarter First Half
------------------------ ------------------------
1999 1998 1999 1998
--------- -------- --------- --------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Sales $ 510.7 $ 410.4 $ 885.5 $ 758.9
Cost of goods sold 298.1 242.3 517.8 448.6
--------- -------- --------- --------
Gross profit 212.6 168.1 367.7 310.3
Selling, general and administrative expenses 146.9 110.9 266.9 213.9
Amortization expense 5.5 4.0 9.4 7.9
Special charges (Note 6) 23.4 -- 23.4 --
--------- -------- --------- --------
Operating income 36.8 53.2 68.0 88.5
Interest expense, net (Note 10) (14.2) (8.5) (25.5) (17.8)
Other expense, net (Notes 3 and 7) (54.4) (5.2) (47.8) (10.1)
--------- -------- ---------- --------
Income (loss) before income taxes (31.8) 39.5 (5.3) 60.6
Income taxes (24.2) 17.7 (15.9) 27.2
--------- -------- ---------- --------
Income (loss) from continuing operations
before minority interest (7.6) 21.8 10.6 33.4
Minority interest 2.7 5.4 6.6 8.9
--------- -------- --------- --------
Income (loss) from continuing operations (10.3) 16.4 4.0 24.5
Loss from discontinued operations after
taxes (Note 5) (27.2) -- (27.2) (0.5)
Extraordinary loss on early extinguishment of
debt after taxes (Note 8) -- -- -- (18.3)
--------- -------- --------- --------
Net income (loss) $ (37.5) $ 16.4 $ (23.2) $ 5.7
========= ======== ========= ========
WEIGHTED AVERAGE COMMON SHARES:
Basic 114.9 101.4 105.5 101.2
Incremental effect of stock options (Note 16) -- 1.8 1.2 1.9
--------- -------- --------- --------
Diluted 114.9 103.2 106.7 103.1
========= ======== ========= ========
INCOME (LOSS) PER SHARE - BASIC:
Continuing operations $ (0.09) $ 0.16 $ 0.04 $ 0.24
Discontinued operations (0.24) -- (0.26) --
Extraordinary loss on early extinguishment of debt -- -- -- (0.18)
--------- -------- --------- --------
Net income (loss) $ (0.33) $ 0.16 $ (0.22) $ 0.06
========= ======== ========= ========
INCOME (LOSS) PER SHARE - DILUTED:
Continuing operations $ (0.09) $ 0.16 $ 0.04 $ 0.24
Discontinued operations (0.24) -- (0.26) --
Extraordinary loss on early extinguishment of debt -- -- -- (0.18)
--------- -------- --------- --------
Net income (loss) $ (0.33) $ 0.16 $ (0.22) $ 0.06
========= ======== ========= ========
CASH DIVIDENDS PER SHARE $ 0.01 $ 0.05 $ 0.06 $ 0.10
========= ======== ========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
July 3, January 2,
1999 1999
-------- ---------
(in millions)
<S> <C> <C>
ASSETS:
Current assets:
Cash and equivalents $ 123.8 $ 147.6
Receivables 270.0 170.7
Inventories 119.0 80.0
Other current assets 35.3 30.8
-------- --------
Total current assets 548.1 429.1
Investments 59.8 160.0
Property (at cost) 1,343.8 1,006.5
Accumulated depreciation and amortization (508.0) (507.2)
-------- --------
Net property 835.8 499.3
-------- --------
Intangible assets, net 1,397.5 447.0
Other assets 38.6 33.9
-------- --------
Total assets $2,879.8 $1,569.3
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Short-term debt, including current maturities of long-term debt $ 121.5 $ --
Notes payable to PepsiCo (Note 3) 241.8 --
Accounts and dividends payable 201.8 133.0
Other current liabilities 200.7 100.2
-------- --------
Total current liabilities 765.8 233.2
-------- --------
Long-term debt 802.9 603.6
Deferred income taxes 51.5 99.1
Other liabilities 84.2 73.3
Minority interest -- 233.7
Shareholders' equity:
Preferred stock ($0.01 par value, 12.5 million shares authorized;
no shares issued) -- --
Common stock ($0.01 par value, 350.0 million shares authorized;
167.3 million shares issued at July 3, 1999 and 113.3 million
shares issued at January 2, 1999) 1,633.8 499.8
Retained income 65.1 94.3
Accumulated other comprehensive loss:
Cumulative translation adjustment (17.4) (12.0)
Unrealized investment gain 3.5 3.4
-------- --------
Accumulated other comprehensive loss (13.9) (8.6)
-------- --------
Treasury stock (25.6 million shares at July 3, 1999
and 12.3 million shares at January 2, 1999) (509.6) (259.1)
-------- --------
Total shareholders' equity 1,175.4 326.4
-------- --------
Total liabilities and shareholders' equity $2,879.8 $1,569.3
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
First Half
-------------------
1999 1998
-------- --------
(in millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 4.0 $ 24.5
Adjustments to reconcile to net cash provided by continuing operations:
Depreciation and amortization 47.1 38.6
Deferred income taxes (50.1) 7.8
Gain on sale of franchises (8.0) --
Special charges (Notes 6 and 7) 79.7 --
Cash outlays related to special charges (Note 6) (6.3) (17.9)
Other 7.0 8.8
Changes in assets and liabilities, exclusive of acquisitions:
Increase in receivables (58.4) (36.9)
Increase in inventories (2.6) (9.2)
Increase in payables 37.8 46.2
Net change in other assets and liabilities (15.9) (2.9)
------ ------
Net cash provided by continuing operations 34.3 59.0
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of franchises, net of cash divested (Note 3) 113.6 --
Franchises acquired, net of cash acquired (Note 3) (105.7) --
Dividends from and settlement of intercompany indebtedness with
Hussmann and Midas prior to spin-offs -- 434.3
Capital investments, net (79.2) (57.8)
Net activity with joint ventures 1.2 1.8
Purchases of investments -- (9.5)
Proceeds from sales of investments 5.9 7.9
------ ------
Net cash (used in) provided by investing activities (64.2) 376.7
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings of short-term debt 11.5 4.0
Proceeds from issuance of long-term debt 298.0 --
Repayment of long-term debt (30.8) (311.2)
Common dividends (6.0) (10.1)
Treasury stock purchases (251.9) (23.6)
Issuance of common stock 1.4 19.6
------ ------
Net cash provided by (used in) financing activities 22.2 (321.3)
------ ------
Net cash used in discontinued operations (15.5) (7.6)
Effect of exchange rate changes on cash and equivalents (0.6) --
------ ------
Change in cash and equivalents (23.8) 106.8
Cash and equivalents at beginning of first half 147.6 52.4
------ ------
Cash and equivalents at end of first half $123.8 $159.2
====== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements included herein have been
prepared, without audit, by New Whitman (as defined below). The financial
statements include the results of operations of the former Whitman
Corporation ("Old Whitman"), which was merged with and into Heartland
Territories Holdings, Inc. ("Heartland") on May 20, 1999 (the "Merger"),
following which Heartland changed its name to Whitman Corporation ("New
Whitman"). Unless the context dictates otherwise, the use of the terms
"Whitman" or "the Company" herein shall include the results of operations
of both Old Whitman and New Whitman. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission, although the Company believes that the
disclosures made are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in Old Whitman's Annual Report on Form 10-K/A for the
fiscal year ended January 2, 1999. In the opinion of management, the
information furnished herein reflects all adjustments (consisting only of
normal, recurring adjustments) necessary for a fair statement of results
for the interim periods presented. Certain prior year amounts have been
reclassified to conform to the current year presentation.
2. Effective at the end of 1998, Old Whitman changed its fiscal year from a
calendar year to a year consisting of 52 or 53 weeks ending on the
Saturday closest to December 31. Old Whitman's first and second quarters
of 1999 commenced January 3, 1999 and April 4, 1999, respectively, and
the Company's second quarter of 1999 ended July 3, 1999. In the second
quarter of 1999, the Company eliminated the two-month reporting lag in
consolidating results of its existing international territories,
resulting in additional sales of $11.6 million and operating losses of
$0.6 million.
3. On January 25, 1999, Old Whitman announced that its Board of Directors
had approved a new business relationship with PepsiCo, Inc. ("PepsiCo").
The new relationship was approved by Old Whitman's shareholders on May
20, 1999. As part of the Contribution and Merger Agreement (the
"Agreement") with PepsiCo and New Whitman, on May 20, 1999 PepsiCo
contributed certain assets of several domestic franchise territories to
New Whitman and Old Whitman merged into New Whitman. Contributed
territories included Cleveland, Ohio, Dayton, Ohio, Indianapolis,
Indiana, St. Louis, Missouri and southern Indiana. Pepsi-Cola General
Bottlers, Inc. ("Pepsi General"), a wholly owned subsidiary of Old
Whitman prior to the Merger and a wholly owned subsidiary of the Company
following the merger, acquired PepsiCo's international operations in
Hungary, the Czech Republic, Slovakia and the balance of Poland on May
31, 1999. In exchange for the territories acquired/contributed from
PepsiCo and the elimination of PepsiCo's 20 percent minority interest in
Pepsi General, New Whitman issued 54 million shares of common stock to
PepsiCo. In addition, New Whitman paid PepsiCo cash totaling $133.7
million and assumed bank debt of $42.3 million, and assumed $241.8
million of notes payable to PepsiCo, due August 31, 1999. As part of the
Agreement, the Company agreed to repurchase up to 16 million shares, or
$400 million of its common stock, whichever is less, during the 12-month
period following the close of the transaction. The Company repurchased
approximately 13.4 million shares of its common stock in the first half
of 1999, at a total cost of $251.9 million. PepsiCo has agreed that such
repurchases may be used to reduce New Whitman's repurchase commitment.
The Agreement provided for Pepsi General to sell to PepsiCo its operations
in Marion, Virginia, Princeton, West Virginia and the St. Petersburg area
of Russia. On March 19, 1999, Pepsi General completed the sale to PepsiCo
of the franchises in Marion, Virginia and Princeton, West Virginia. The
sale of the franchise in Russia was completed on March 31, 1999. Proceeds
from these sales were $117.8 million and the Company recorded a pretax
gain of $11.4 million ($8.0 million after tax and minority interest),
which is reflected in other expense, net, on the Condensed Consolidated
Statements of Income. In accordance with the terms of the Agreement, this
gain is subject to adjustment pending a final determination of closing
date working capital of the territories sold.
5
<PAGE> 7
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
Details of domestic and Central European territories acquired from
PepsiCo in the second quarter of 1999 are as follows (in millions):
<TABLE>
<S> <C>
Fair value of assets acquired, including
intangible assets of $1,009.0 million $1,410.7
Liabilities assumed (165.6)
--------
Cost of acquisition 1,245.1
Common stock issued to PepsiCo (54.0 million shares) (1,134.0)
Notes issued to PepsiCo (241.8)
Elimination of PepsiCo's 20 percent minority
interest in Pepsi General 243.2
Cash and equivalents acquired (6.8)
--------
Net cash paid for acquired territories $ 105.7
========
</TABLE>
The acquisitions of the domestic and Central European territories have
been accounted for under the purchase method; accordingly, the results of
operations of the acquired territories have been included in the Company's
consolidated financial statements since the dates of acquisition. The
excess of the aggregate purchase price over the fair value of net assets
acquired is being amortized on a straight-line basis over 40 years. The
principal factors considered in determining the use of a 40-year
amortization period include: 1) the franchise agreements with PepsiCo are
granted in perpetuity and provide the exclusive right to manufacture and
sell PepsiCo branded products within the territories prescribed in the
agreements, and 2) the existing and projected cash flows are adequate to
support the carrying values of intangible assets. The portion of the
excess purchase cost allocated to property is based on preliminary
appraisals. The allocation is subject to refinement when the final
appraisals are completed. The Company anticipates that the final
appraisals will not differ significantly from the preliminary appraisals.
The following pro forma consolidated results of operations for the second
quarter and first half of 1999 and 1998 assume the acquisitions occurred
as of the beginning of fiscal 1998 (unaudited and in millions, except per
share data):
<TABLE>
<CAPTION>
Second Quarter First Half
-------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Sales $ 633.9 $ 589.1 $ 1,145.8 $ 1,068.2
Net income (loss) (43.8) 21.2 (34.4) 5.9
Net income (loss) per common share-basic (0.32) 0.15 (0.25) 0.04
Net income (loss) per common share-diluted (0.32) 0.15 (0.25) 0.04
</TABLE>
The above pro forma information includes the $23.4 million of special
charges ($16.2 million after taxes) recorded by Pepsi General in the
second quarter of 1999 and the first quarter 1999 $8.0 million after tax
gain on the sale of Marion, Princeton and Russia, as well as the $56.3
million charge ($35.9 million after taxes) recorded in the second quarter
of 1999 for the write-down of real estate held by the Company (see Note
7). Absent these one-time items and adjusting 1998 sales for the change in
the Company's reporting calendar, sales and income from continuing
operations and related per share amounts are as follows (unaudited and in
millions, except per share data):
<TABLE>
<CAPTION>
Second Quarter First Half
--------------------- ----------------------
1999 1998 1999 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Sales $ 633.9 $ 622.2 $ 1,145.8 $ 1,113.5
Income from continuing operations 24.6 21.2 30.8 24.7
Income from continuing operations
per share - basic 0.18 0.15 0.22 0.18
Income from continuing operations
per share - diluted 0.18 0.15 0.22 0.18
</TABLE>
4. On January 30, 1998, the Company established Hussmann International, Inc.
("Hussmann") and Midas, Inc. ("Midas") as independent publicly-held
companies through tax-free distributions (spin-offs) to Whitman
shareholders. Whitman retained Pepsi General as its principal operating
company. The financial information of Hussmann and Midas is reflected as
discontinued operations.
6
<PAGE> 8
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
5. Loss from discontinued operations in the second quarter of 1999 includes
a $12 million settlement of environmental litigation filed against Pneumo
Abex, a former subsidiary of the Company, as well as an increase of $30.8
million in accruals for other environmental matters related to Pneumo
Abex. The loss from discontinued operations in 1998 includes the net
losses of Hussmann and Midas through January 30, 1998, the date of the
spin-offs. The losses have been reduced by income taxes of $15.6 million
for the first half of 1999 and increased by $0.1 million for the first
half of 1998.
6. In the second quarter of 1999, Pepsi General recorded a special charge of
$18.6 million ($11.4 million after tax) for staff reduction costs and
non-cash asset write-downs, principally related to the acquisition of the
domestic and international territories from PepsiCo. In addition, the
Company announced it will seek the sale of the Baltics operations to a
third party and has written down its investment by $4.8 million to the
expected net realizable value.
In 1997, the Company recorded special charges totaling $49.3 million,
consisting of $14.8 million recorded by Pepsi General to consolidate a
number of its domestic divisions, including reductions in staffing
levels, and to write-down certain assets in its domestic and
international operations, and $34.5 million recorded by Whitman relating
to the severance of essentially all of the Whitman corporate management
and staff and for expenses associated with the spin-offs.
The following table summarizes the remaining accrued liabilities
associated with the special charges at January 2, 1999, activity during
the first half of 1999, and the remaining accrued liabilities at July 3,
1999 (in millions):
<TABLE>
<CAPTION>
Pepsi Whitman
General Corporate Total
------- --------- --------
<S> <C> <C> <C>
Accrued liabilities at January 2, 1999
(all employee related costs) $ 1.5 $13.0 $14.5
Special charges:
Asset write-downs associated with exit of
plastic returnable bottle package in existing
international territories 7.6 -- 7.6
Other asset write-downs 5.9 -- 5.9
Employee related costs 5.1 -- 5.1
Write-down of Baltics operations 4.8 -- 4.8
----- ----- -----
Total special charges 23.4 -- 23.4
----- ----- -----
Expenditures and asset write-downs:
Asset write-downs (18.3) -- (18.3)
Expenditures for employee related costs (1.7) (4.6) (6.3)
----- ----- -----
Total expenditures and asset write-downs (20.0) (4.6) (24.6)
----- ----- -----
Accrued liabilities at July 3, 1999 $ 4.9 $ 8.4 $13.3
===== ===== =====
</TABLE>
Employee related costs recorded in 1999 special charges include severance
payments for the management and staff affected by the consolidation of
international headquarters and operations in Poland and management
changes in certain domestic markets. Employee related costs recorded in
1997 special charges include severance payments for the management and
staff affected by changes in the organizational structure, as well as
other headcount reduction programs. The total number of employees
affected by the 1999 charges is approximately 110, while the total number
of employees affected by the 1997 charges was approximately 125 at Pepsi
General and essentially all employees at Whitman Corporate. During the
first half of 1999, approximately 6 positions were eliminated and
approximately 12 positions are yet to be eliminated in relation to the
1997 charges, while approximately 4 positions were eliminated and
approximately 106 positions are yet to be eliminated in relation to the
1999 charges.
7
<PAGE> 9
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
The accrued liabilities remaining at July 3, 1999 are comprised of
deferred severance payments and certain employee benefits. The Company
expects to pay a significant portion of the $13.3 million of employee
related costs during the next twelve months; accordingly, such amounts are
classified as other current liabilities.
7. The Company entered into an agreement for the sale of property in downtown
Chicago and recorded a charge of $56.3 million ($35.9 million after tax)
in the second quarter of 1999 to reduce the book value of the property.
This charge is reflected in other expense, net on the Condensed
Consolidated Statements of Income. The close of the sale is subject to
completion of certain due diligence and certain other conditions, and is
expected to occur by the end of 1999.
8. In January, 1998, Whitman made a tender offer for any and all of its
outstanding 7.625% and 8.25% notes maturing June 15, 2015, and February
15, 2007, respectively. In connection with the tender offer, Whitman
repurchased 7.625% and 8.25% notes with principal amounts of $91.0
million and $88.5 million, respectively. The Company paid total premiums
in connection with the tender offer of $26.4 million and the remaining
unamortized discount and issue costs related to repurchased notes were
$2.1 million. The Company also repaid a term loan and notes with
principal amounts of $50.0 million scheduled to mature in 1998 and 1999,
notes due in 2002 with principal amounts of $50.0 million and industrial
revenue bonds of $5.0 million due 2013. Costs associated with these
repayments and the remaining unamortized issue costs were not
significant. The Company recorded an extraordinary charge of $18.3
million, net of income tax benefits of $10.4 million, in the first
quarter of 1998 related to these early extinguishments of debt.
9. The Company's comprehensive income (loss) was as follows:
<TABLE>
<CAPTION>
Second Quarter First Half
--------------------- ----------------------
1999 1998 1999 1998
-------- --------- --------- ---------
(in millions)
<S> <C> <C> <C> <C>
Net income (loss) $(37.5) $16.4 $(23.2) $ 5.7
Foreign currency translation adjustment (4.2) 0.9 (5.4) 2.9
Unrealized gains on securities 1.4 4.6 0.1 5.5
------ ----- ------ -----
Comprehensive income (loss) $(40.3) $21.9 $(28.5) $14.1
====== ===== ====== =====
</TABLE>
Unrealized gains on securities are presented net of tax expense of $0.8
million, $2.6 million, $0.1 million and $3.0 million, respectively.
Prior to May 20, 1999, the Company classified PepsiCo's 20 percent share
of Pepsi General's cumulative translation adjustment within minority
interest. As a result of the elimination of PepsiCo's minority interest
in Pepsi General, approximately $3.7 million of cumulative translation
adjustment has been reclassified from minority interest to cumulative
translation adjustment, and therefore has been included in comprehensive
loss for the second quarter and first half of 1999.
10. Interest expense, net, is comprised of the following:
<TABLE>
<CAPTION>
Second Quarter First Half
--------------------- ----------------------
1999 1998 1999 1998
-------- --------- --------- ---------
(in millions)
<S> <C> <C> <C> <C>
Interest expense $(15.6) $(10.9) $(27.6) $(23.5)
Interest income from Hussmann and Midas -- -- -- 1.6
Interest income 1.4 2.4 2.1 4.1
------ ------ ------ ------
Interest expense, net $(14.2) $ (8.5) $(25.5) $(17.8)
====== ====== ====== ======
</TABLE>
Interest income from Hussmann and Midas related to intercompany loans and
advances. The related interest expense recorded by Hussmann and Midas is
included in loss from discontinued operations after taxes.
8
<PAGE> 10
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
11. Net cash provided by operating activities reflected cash payments and
receipts for interest and income taxes as follows:
<TABLE>
<CAPTION>
First Half
----------------------
1999 1998
--------- ---------
(in millions)
<S> <C> <C>
Interest paid $ 26.1 $ 29.3
Interest received 2.6 3.2
Income taxes paid, net of refunds 19.8 3.4
</TABLE>
The increase in income taxes paid in the first half of 1999 versus the
comparable period in 1998 was due primarily to the impact of the tax
benefits arising from the extraordinary loss recorded during the first
quarter of 1998 (see Note 8).
12. As a result of the Central European territory acquisitions, the Company
re-evaluated certain previous tax positions related to its international
operations and eliminated $19.8 million of deferred tax liabilities
recorded in prior periods. Beginning in the second quarter of 1999, the
Company no longer defers the tax benefits on international losses.
Excluding non-recurring items, the following table reconciles the income
tax provision for continuing operations at the U.S. federal statutory
rate to the Company's actual income tax (benefit) provision on continuing
operations (dollars in millions):
<TABLE>
<CAPTION>
First Half of 1999 First Half of 1998
------------------ ------------------
Amount % Amount %
------ ------ ------ ------
<S> <C> <C> <C> <C>
Income taxes computed at the U.S. federal statutory rate $22.1 35.0 $21.2 35.0
State income taxes, net of federal income tax benefit 3.1 4.9 2.8 4.6
Non-U.S. losses 0.3 0.5 1.6 2.6
Non-deductible portion of amortization - intangibles 4.1 6.5 1.6 2.6
Other items, net 0.5 0.9 -- 0.1
------ ----- ----- -----
Income tax on continuing operations, excluding
non-recurring items 30.1 47.8 27.2 44.9
===== =====
Tax benefit of special charges and elimination of
deferred tax liabilities recorded in prior periods (46.0) --
------ -----
Income tax (benefit) expense on continuing operations $(15.9) $27.2
====== =====
</TABLE>
13. At July 3, 1999, the components of inventory were approximately: raw
materials and supplies - 45 percent; finished goods - 55 percent.
14. The Company continues to be subject to certain indemnification
obligations under agreements with previously sold subsidiaries for
potential environmental liabilities. There is significant uncertainty in
assessing the Company's share of the potential liability for such claims.
The assessment and determination for cleanup at the various sites
involved is inherently difficult to estimate, and the Company's share of
related costs is subject to various factors, including possible insurance
recoveries and the allocation of liabilities among many other potentially
responsible and financially viable parties.
At July 3, 1999, the Company had accruals of $42.8 million to cover these
potential liabilities, including $12.0 million classified as current
liabilities. Such amounts are determined using estimated undiscounted
future cash requirements, and have not been reduced by potential future
insurance recoveries. These estimated liabilities include expenses for
the remediation of identified sites, payments to third parties for claims
and expenses, and the expenses of on-going evaluation and litigation. The
estimates are based upon current technology and remediation techniques,
and do not take into consideration any inflationary trends upon such
claims or expenses, nor do they reflect the possible benefits of
continuing improvements in remediation methods. The accruals also do not
provide for any claims for environmental liabilities or other potential
issues which may be filed against the Company in the future.
9
<PAGE> 11
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
The Company also has other contingent liabilities from various pending
claims and litigation on a number of matters, including indemnification
claims under agreements with previously sold subsidiaries for product
liability and toxic torts. The ultimate liability for these claims, if
any, cannot be determined. In the opinion of management, and based upon
information currently available, the ultimate resolution of these claims
and litigation, including potential environmental exposures, and
considering amounts already accrued, will not have a material effect on
the Company's financial condition or the results of operations.
Additional claims and liabilities may develop and may result in
additional charges to income, principally through discontinued
operations. Existing environmental liabilities associated with the
Company's continuing operations are not material.
15. During the first half of 1999, the Company entered into several
derivative financial instruments to reduce the Company's exposure to
adverse fluctuations in interest rates and commodity prices. These
financial instruments were "over-the-counter" instruments and were
designated at their inception as hedges of underlying exposures. The
Company does not enter into derivative financial instruments for trading
purposes.
In March, 1999, the Company entered into forward contracts with an
aggregate notional amount of $150 million to fix the interest rate on the
April, 1999 issuance of $150 million of 6.375 percent notes due in 2009.
In April, 1999, the Company entered into further contracts with an
aggregate notional amount of $150 million to fix the interest rate on the
April, 1999 issuance of $150 million of 6.0 percent notes due in 2004.
All such contracts were settled upon issuance of the notes, resulting in
net proceeds of $0.4 million.
During the first quarter of 1999, the Company entered into several swap
contracts to hedge future fluctuations in aluminum prices. Each contract
hedges price fluctuations on a portion of the Company's aluminum can
requirements over a specified future six-month period. Because of the
high correlation between aluminum commodity prices and the Company's cost
of aluminum cans, the Company considers these hedges to be highly
effective. At July 3, 1999, the Company has hedged a portion of its
future domestic aluminum requirements extending into the year 2000.
Hedging gains and losses on these contracts at July 3, 1999 were not
significant and will be recognized in income upon sale of the inventory
containing the aluminum being hedged.
16. Basic earnings per share are based upon the weighted-average number of
common shares outstanding. Diluted earnings per share assume the exercise
of all options which are dilutive, whether exercisable or not. The
dilutive effects of stock options are measured under the treasury stock
method.
Options to purchase 2,680,700 shares and 261,000 shares at a
weighted-average price of $22.36 and $19.74 per share, respectively, that
were outstanding at the end of the first half of 1999 and the first half
of 1998, respectively, were not included in the computation of diluted
EPS because the exercise price was greater than the average market price
of the common shares during the related period. Due to the loss from
continuing operations in the second quarter of 1999, no potential common
shares were included in the computation of average diluted shares. The
effect of potential common shares, assuming they were not anti-dilutive,
would have resulted in average diluted shares of 115.8 million.
10
<PAGE> 12
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
1999 SECOND QUARTER COMPARED WITH 1998 SECOND QUARTER
Due to the 1999 transaction with PepsiCo that resulted in the divestiture
of certain of the Company's operations, as well as the acquisition of
significant domestic and Central European territories from PepsiCo, as more
fully described in Note 3 to the Condensed Consolidated Financial Statements,
the Company believes that comparable results provide a better indication of
current operating trends than reported results. Comparable operating results
are determined by adjusting, as of the beginning of each period, 1999 and 1998
results to exclude results of territories divested and include results of
territories acquired, and to adjust 1998 existing Whitman sales volumes and
sales dollars for the change in the Company's reporting calendar. In addition,
comparable operating results exclude the $23.4 million of special charges
incurred in the second quarter of 1999; the $4.5 million of charges incurred in
the first quarter of 1999 related to the settlement of insurance, severance and
legal matters; and the impact of eliminating the two-month reporting lag in
consolidating international results.
Sales for the second quarter of 1999 and 1998 are summarized below (in
millions):
<TABLE>
<CAPTION>
Reported % Comparable %
------------------------ ------------------------
1999 1998 Change 1999 1998 Change
--------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic $ 467.4 $ 390.6 19.7 $ 568.5 $ 548.2 3.7
International 43.3 19.8 118.7 65.4 74.0 -11.6
-------- --------- --------- ---------
Total Sales $ 510.7 $ 410.4 24.4 $ 633.9 $ 622.2 1.9
======== ========= ========= =========
</TABLE>
On a reported basis, domestic sales increased $76.8 million, or 19.7
percent, in the second quarter of 1999 compared to 1998, reflecting sales
contributed by the acquired territories and increased volumes and improved
pricing in existing territories. In 8-ounce equivalent cases including
foodservice, volume increased 18.0 percent over the second quarter of 1998.
Reported volume included Fourth of July holiday sales in existing Whitman
markets in the second quarter of 1999, whereas such sales were reported in the
third quarter of 1998.
On a comparable basis, domestic sales increased $20.3 million, or 3.7%,
reflecting a 2.7 percent increase in 8-ounce equivalent case volume and improved
pricing. Sales growth was driven primarily by the vending, convenience and gas
and mass merchandising channels. Volume growth was led primarily by improved
demand for the Mountain Dew and Dr Pepper brands, continued strong growth in the
water brands Aquafina and Avalon, and sales of Storm and Pepsi One, which were
introduced in the third and fourth quarters of 1998, respectively. Growth of
20-ounce non-returnable ("NR") package sales continued, aided by the increased
investment in the cold drink initiative, which includes increasing points of
access through investment in vending, coolers, and fountain equipment.
Reported international sales increased significantly due to sales
contributed by the newly acquired Central European territories and as a result
of eliminating the two-month reporting lag in consolidating international
results. However, on a comparable basis, sales decreased by $8.6 million, or
11.6 percent, primarily due to lower sales in Poland, as Easter holiday sales
occurred in the first quarter of 1999 versus the second quarter of 1998. In
addition, sales decreased in Poland due to poor weather conditions and year
over year currency depreciation.
The consolidated gross profit margin on a reported basis increased to
41.6 percent of sales in the second quarter of 1999, compared with 41.0 percent
of sales in the comparable period of 1998. This increase was due to improved
international margins in Poland and the Baltics, as well as the absence of
Russian operations in the second quarter of 1999. The reported domestic margin
decreased slightly, reflecting the lower margin channel and package mix of the
acquired territories, partially offset by reduced packaging costs.
Reported selling, general and administrative ("S,G&A") expenses
represented 28.8 percent of sales in the second quarter of 1999, compared with
27.0 percent in the comparable period of 1998. This increase is due, in part,
to higher depreciation and other costs to support the Company's cold drink
initiative, which was not fully implemented until the latter half of 1998. In
addition, incremental Year 2000 costs and expenses associated with the
integrated enterprise-wide resource planning ("ERP") system implementation in
the second quarter of 1999 amounted to approximately $0.6 million. Amortization
expense increased due to the transaction with PepsiCo.
11
<PAGE> 13
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
In the second quarter of 1999, Pepsi General recorded a special charge of
$18.6 million ($11.4 million after tax) for staff reduction costs and non-cash
asset write-downs, principally related to the acquisition of the domestic and
international territories from PepsiCo. In addition, the Company announced it
will seek the sale of the Baltics operations to a third party and has written
down its investment by $4.8 million to the expected net realizable value.
As a result of the actions taken leading to the 1999 special charges of
$18.6 million, the Company expects to realize approximately $10 million in
annual pretax savings, resulting principally from employee related costs. Such
savings will not likely be fully realized until the year 2000. In fiscal 1998
and the first half of 1999, the Baltics had sales of $5.4 million and $3.1
million, respectively, and incurred operating losses of $3.5 million and $0.8
million, respectively.
Operating income (loss) for the second quarter of 1999 and 1998 is
summarized below (in millions):
<TABLE>
<CAPTION>
Reported % Comparable %
------------------------ ------------------------
1999 1998 Change 1999 1998 Change
--------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic $ 61.5 $ 58.1 5.9 $ 69.8 $ 64.6 8.0
International (24.7) (4.9) N/M (7.5) (8.9) 15.8
-------- --------- --------- ---------
Total Operating
Income $ 36.8 $ 53.2 -30.8 $ 62.3 $ 55.7 11.8
======== ========= ========= =========
</TABLE>
In the second quarter of 1999, reported domestic operating income
increased $3.4 million, or 5.9 percent. Included in second quarter 1999
domestic operating income are $2.8 million of special charges, resulting from
management changes in certain domestic markets (see Note 6 to the Condensed
Consolidated Financial Statements). Excluding these charges, reported operating
income increased $6.2 million, or 10.7 percent, to $64.3 million in the second
quarter of 1999, reflecting higher operating income from the inclusion of 1999
Fourth of July holiday sales in existing Whitman markets and operating income
contributed by the acquired territories.
On a comparable basis, domestic operating income increased $5.2 million,
or 8.0 percent, reflecting the benefit of 1999 Fourth of July holiday sales.
Excluding certain one-time credits passed back by PepsiCo to the newly acquired
territories in 1998, comparable operating income growth was 10.6 percent. The
domestic operating margin for the second quarter of 1999, at 12.3 percent, was
essentially unchanged from a year ago.
Included in the second quarter 1999 international operating losses are
$20.6 million of special charges resulting principally from the acquisition of
Central European territories from PepsiCo (see Note 6 to the Condensed
Consolidated Financial Statements). Excluding these charges, reported operating
losses decreased $0.8 million, or 16.3 percent, to $4.1 million in the second
quarter of 1999. This decrease was principally attributable to improved results
in Poland and the Baltics. On a comparable basis, international operating
losses decreased by $1.4 million from the second quarter of 1998, primarily due
to cost savings realized in the existing Poland and Baltics territories, as
well as improved results in Hungary and the Czech Republic.
Net interest expense increased $5.7 million to $14.2 million. The
increase was due principally to an increase in average quarterly outstanding
net debt due to the acquisitions of domestic and Central European territories
from PepsiCo and related share repurchases.
Other expense, net, increased to $54.4 million in the second quarter of
1999 compared with $5.2 million in the second quarter of 1998, primarily due to
the $56.3 million write-down of non-operating real estate. See Note 7 to the
Condensed Consolidated Financial Statements. Absent this charge, non-operating
income was $1.9 million in the quarter. The reduced non-operating expenses are
attributable, in part, to the termination of the management fee paid to PepsiCo
and reduced real estate taxes on non-operating land.
12
<PAGE> 14
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
RESULTS OF OPERATIONS
1999 FIRST HALF COMPARED WITH 1998 FIRST HALF
See "Results of Operations - 1999 Second Quarter Compared with 1998
Second Quarter" for discussion of the basis used below for determining
comparable results of operations.
Sales for the first half of 1999 and first half of 1998 are summarized
below (in millions):
<TABLE>
<CAPTION>
Reported % Comparable %
------------------------ ------------------------
1999 1998 Change 1999 1998 Change
--------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic $ 828.7 $ 723.3 14.6 $ 1,034.3 $ 995.5 3.9
International 56.8 35.6 59.6 111.5 118.0 -5.5
-------- --------- --------- ---------
Total Sales $ 885.5 $ 758.9 16.7 $ 1,145.8 $ 1,113.5 2.9
======== ========= ========= =========
</TABLE>
Reported domestic sales increased $105.4 million, or 14.6 percent, in the
first half of 1999 compared with the same period of 1998, reflecting sales
contributed by the acquired territories and improved pricing and increased
volumes in existing territories. Reported volume including foodservice, in
8-ounce equivalent cases, increased 12.6 percent, reflecting volume contributed
by the acquired territories and the inclusion of 1999 Fourth of July holiday
sales in existing Whitman markets which were reported in the third quarter of
1998.
On a comparable basis, domestic sales increased $38.8 million, or 3.9%,
reflecting a 3.3 percent increase in 8-ounce equivalent case volume, including
foodservice, and improved pricing.
Reported international sales increased significantly in the first half of
1999 due to sales contributed by the newly acquired Central European
territories and as a result of eliminating the two-month reporting lag in
consolidating international results. On a comparable basis, sales decreased by
$6.5 million to $111.5 million, reflecting lower sales in Poland due to poor
weather conditions and year over year currency depreciation.
The consolidated gross profit margin on a reported basis increased from
40.9 percent of sales to 41.5 percent of sales, due to decreased domestic
packaging costs, and higher international margins attributable to improvements
in Poland and the Baltics.
Reported S,G&A expenses, excluding first half charges related to the
settlement of insurance, severance and legal matters, represented 29.6 percent
of sales in the first half of 1999, compared with 28.2 percent in the
comparable period of 1998. This increase is due, in part, to higher
depreciation and other costs to support the Company's cold drink initiative,
which was not fully implemented until the latter half of 1998. In addition,
incremental Year 2000 costs and expenses associated with the ERP system
implementation in the first half of 1999 amounted to approximately $1.5
million. Amortization expense increased due to the transaction with PepsiCo.
See "Results of Operations - 1999 Second Quarter Compared with 1998 Second
Quarter" for discussion of special charges incurred in the first half of 1999.
Operating income (loss) for the first half of 1999 and first half of 1998
is summarized below (in millions):
<TABLE>
<CAPTION>
Reported % Comparable %
------------------------ ------------------------
1999 1998 Change 1999 1998 Change
--------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic $ 100.1 $ 99.3 0.8 $ 112.5 $ 105.6 6.5
International (32.1) (10.8) N/M (21.6) (27.7) 22.0
-------- --------- --------- ---------
Total Operating
Income $ 68.0 $ 88.5 -23.2 $ 90.9 $ 77.9 16.7
======== ========= ========= =========
</TABLE>
13
<PAGE> 15
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
Excluding first half charges, reported domestic operating income
increased $8.1 million, or 8.2 percent, to $107.4 million. This increase
reflects higher sales volumes resulting from the inclusion of 1999 Fourth of
July holiday sales and operating income contributed by the acquired
territories, partially offset by increased amortization expense of $1.5
million.
On a comparable basis, domestic operating income increased $6.9 million,
or 6.5 percent, in the first half of 1999, reflecting the benefit of 1999
Fourth of July holiday sales. Excluding certain one-time credits passed back by
PepsiCo to the newly acquired territories in 1998, comparable operating income
growth was 8.6 percent. The domestic operating margin for the first half of
1999, at 10.9 percent, was essentially unchanged from the first half of 1998.
Included in 1999 first half international losses are $20.6 million of
special charges recorded in the second quarter of 1999 (see "Results of
Operations - 1999 Second Quarter Compared with 1998 Second Quarter"). Excluding
these charges, reported operating losses increased $0.7 million, or 6.5
percent, to $11.5 million in the first half of 1999. This increase is due
primarily to the second quarter 1999 elimination of the two-month lag in
reporting international results and the additional operating losses from the
newly acquired territories, partially offset by improved results in the
Baltics. On a comparable basis, 1999 first half international operating losses
decreased by $6.1 million from the first half of 1998, primarily due to
improvements in the Poland, Baltics and Czech Republic territories.
Net interest expense increased $7.7 million to $25.5 million. This
increase was due principally to an increase in average outstanding net debt due
to the acquisitions of domestic and Central European territories and to the
related share repurchases, as well as the loss of interest income received from
Midas and Hussmann in the first quarter of 1998.
Other expense, net, of $47.8 million in the first half of 1999 includes
the $56.3 million write-down of non-operating real estate and the $11.4 million
pre-tax gain related to the sale of the Company's operations in Marion,
Princeton, and Russia. Absent these items, non-operating expense was $2.9
million in the first half of 1999, compared to 10.1 million in the first half of
1998. This decrease is due, in part, to the termination of the management fee
paid to PepsiCo and reduced real estate taxes on non-operating land.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by continuing operations decreased by $24.7 million to
$34.3 million in the first half of 1999. Income from continuing operations in
the first half of 1999 decreased by $20.5 million, principally due to the
non-recurring items, including special charges and the real estate investment
write-down, discussed in the Notes to the Condensed Consolidated Financial
Statements. The $50.1 million decrease in deferred taxes resulted primarily from
the reversal of $19.8 million of deferred tax liabilities related to
international operations (see Note 12 to the Condensed Consolidated Financial
Statements) and the recording of deferred tax assets attributable to
non-recurring items recorded in the second quarter of 1999 (see Notes 6 and 7 to
the Condensed Consolidated Financial Statements). Increases in primary working
capital (defined as receivables and inventories less payables), principally due
to the operations of the acquired territories, were $23.2 million in the first
half of 1999 compared with decreases of $0.1 million in the prior year. The net
change in other assets and liabilities required net cash of $15.9 million in the
first half of 1999 compared with $2.9 million in the comparable period of 1998.
This decrease in cash was primarily due to the following factors: the
extraordinary loss recorded in the first quarter of 1998 provided a current tax
benefit of $10.4 million; reductions in reserves at the Company's insurance
subsidiary due to claim payments associated with coverage for previously
discontinued operations; and various payments of operating liabilities.
Investing activities in the first half of 1999 included $113.6 million of
net proceeds received from the sale of the Marion, Princeton and Russia
franchise territories, as well as $105.7 million of net cash paid for the
domestic and Central European franchises acquired from PepsiCo. Investing
activities in the first half of 1998 included $434.3 million received in
January, 1998, from Hussmann and Midas prior to their spin-offs to settle
intercompany indebtedness and to pay special dividends. The Company made capital
investments of $79.2 million, net of proceeds from dispositions, in its
operations in the first half of 1999 compared with $57.8 million in the first
half of 1998, with increased spending principally attributable to investment in
the cold drink initiative, spending by the newly acquired territories, and
increased spending on fleet vehicles to support the Company's growth. Cash
received, net of investments made, from the Company's joint venture in Poland
was $1.2 million in the first half of 1999 compared to $1.8 million in the first
half of 1998.
Purchases and sales of investments principally relate to the Company's
insurance subsidiary, which provides certain levels of insurance for Pepsi
General and the operations of Hussmann and Midas up to the date of the
spin-offs. Funds are invested by the insurance subsidiary and proceeds from the
sale of investments are used by the insurance subsidiary to pay claims and other
expenses. A substantial portion of such investments are reinvested as they
mature.
14
<PAGE> 16
The Company's total debt increased $562.6 million to $1,166.2 million at
July 3, 1999, from $603.6 million at January 2, 1999. This increase is primarily
attributable to the April, 1999 issuance of $150 million of 6.0 percent notes
due in 2004 and $150 million of 6.375 percent notes due in 2009, as well as the
May, 1999 assumption of $241.8 million of notes payable to PepsiCo, which mature
on August 31, 1999 and bear interest at a rate of 5.05 percent. The Company
repurchased approximately 13.4 million shares and 1.3 million shares of its
common stock for $251.9 million and $23.6 million in the first half of 1999 and
the first half of 1998, respectively. The Company paid dividends of $6.0 million
in the first half of 1999, based on quarterly cash dividend rates of $0.05 and
$0.01 per common share in the first and second quarters of 1999, respectively,
compared with $10.1 million in the first half of 1998, based on a quarterly cash
dividend rate of $0.05 per common share. The issuance of common stock, including
treasury shares, for the exercise of stock options resulted in cash inflows of
$1.4 million in the first half of 1999, compared with $19.6 million in the first
half of 1998.
The Company has a five-year revolving credit agreement with maximum
borrowings of $500 million. In April 1999, the Company increased its commercial
paper program to $500 million. The revolving credit facility acts as a back-up
for the commercial paper program; accordingly, the Company has a total of $500
million available under the commercial paper program and revolving credit
facility combined. Total commercial paper borrowings were $35 million at July 3,
1999. The Company believes that with its existing operating cash flows,
available lines of credit, and the potential for additional debt and equity
offerings, the Company will have sufficient resources to fund its future growth
and expansion, including potential domestic franchise acquisitions.
YEAR 2000 READINESS
The Year 2000 ("Y2K") issue relates to computer applications being
designed using only two digits, rather than four, to represent a year. As a
result, computer applications could fail or create erroneous results by
recognizing "00" as the year 1900 rather than the year 2000. The Company
considers Y2K readiness as the ability to manage and process date-related
information without materially abnormal or incorrect outcomes beyond January 1,
2000.
Beginning in 1997, the Company initiated a company-wide effort to address
the Y2K issues that affect its operations and to minimize service interruptions.
This effort consists of five phases: (1) inventory, (2) assessment, (3)
remediation, (4) testing and (5) developing contingency plans. The contingency
plans will include addressing issues associated with any non-compliant suppliers
and key customers in order to minimize the potential material adverse effects of
any Y2K problems. During 1998, the Company designated one of its senior managers
as its Vice President - Y2K Planning and Compliance. This position is
responsible for coordinating all facets of the Company's Y2K initiative,
including coordinating efforts and responsibilities between corporate
Information Technology ("IT") and non-IT personnel and local division management
to identify, evaluate and implement changes to centralized and non-centralized
computer systems, applications and equipment necessary to achieve Y2K readiness.
Local management has identified and evaluated major areas of potential business
impact, including critical suppliers and customers, to enable proper monitoring
of Y2K conversion efforts on a centralized basis.
In the first quarter of 1998, the Company began implementation of an ERP
system. The ERP system will address the Company's financial applications during
the first phase of implementation and address manufacturing and distribution
systems during the second phase. The ERP project was begun with the goal of
expanding existing system capacity for future growth and improving processing
efficiencies, as well as addressing any Y2K compliance issues associated with
the Company's existing systems. The first phase of the ERP implementation was
implemented during January, 1999, except for the asset management and accounts
receivable modules. The asset management module was implemented during the first
quarter of 1999. The accounts receivable module will be implemented during the
fourth quarter of 1999. Phase two of the ERP project is expected to be completed
during the latter half of 1999 and first half of the Year 2000. The stages of
the second phase targeted for completion in the Year 2000 do not involve any Y2K
compliance issues. In conjunction with the implementation of the ERP system,
certain hardware and software components have been or will be upgraded to expand
existing capacity. Through the first half of 1999, costs incurred in the ERP
implementation totaled approximately $14.2 million.
15
<PAGE> 17
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
Implementation costs for the entire ERP project currently are expected to be $25
million to $30 million. These costs have been, and will be, funded through
operating cash flows. A majority of the costs, as they relate to purchased
hardware, software and the implementation thereof, will be capitalized.
The Company has conducted an inventory of its IT systems and has corrected
substantially all of those critical-path systems that were found to have
date-related deficiencies, excluding the financial systems addressed by phase
one of the ERP implementation. In the case of non-IT systems (i.e., including
embedded chip technology), the Company conducted an inventory of its
facilities, which was completed, for the most part, by the end of 1998.
Correction of date-deficient systems and equipment was virtually complete by
the end of the second quarter of 1999. The Company is also surveying selected
third parties, including its principal suppliers and customers, as well as
governmental entities, to determine the status of their Y2K compliance
programs.
The inventory, assessment, remediation and testing phases of the Y2K
project are in progress. As part of the Company's testing phase, it intends to
conduct verification testing of selected mainframe/network component upgrades
received from suppliers. In addition, selected critical components are
scheduled to undergo testing in a controlled environment that replicates the
current mainframe/network configuration to simulate the turn of the century and
leap year dates. In the event these efforts do not address all potential
systems problems, the Company is beginning the process of developing
contingency plans to ensure that it will be able to operate the critical areas
of its business. This process includes developing alternative plans to engage
in business activities with customers and suppliers should they or the Company
not be Y2K compliant, including resorting to paper records of certain
transactions presently handled electronically. Development of overall
contingency plans was deferred due to the acquisition of territories from
PepsiCo. Contingency plans are being developed for both international and
domestic operations, and will be finalized in the third quarter of 1999. The
ultimate implementation of contingency plans, if necessary, would be expected
during the fourth quarter of 1999.
The Company is continuing its effort to address Y2K readiness at its
operations which were sold to PepsiCo in the first quarter of 1999. Likewise,
PepsiCo continued its Y2K project at the territories acquired in the second
quarter of 1999. The Company has been informed that PepsiCo's project, as it
relates to their bottling operations, is similar in scope and progress to the
Company's project.
The Company's critical IT systems, except as specifically noted elsewhere,
were Y2K compliant at the end of the first quarter of 1999. Over 90 percent of
the Company's non-IT systems and equipment were compliant by June, 1999. It is
expected the balance of non-IT systems and equipment will be compliant by the
end of the third quarter of 1999. Incremental costs, over and above the
aforementioned ERP system project spending, related to the Y2K project are
being expensed as incurred and funded through operating cash flows. Through the
second quarter of 1999, the Company had expensed approximately $1.3 million of
such incremental costs. Total incremental costs to ensure Y2K compliance are
estimated to be $2 million to $5 million, with the majority of the costs being
incurred in 1999. This expectation assumes that the Company will not be
obligated to incur significant Y2K-related costs on behalf of its customers or
suppliers. The projection of Y2K-related costs is based on numerous assumptions
and estimates; consequently, actual costs could be materially greater than
anticipated. Plans will continue to be monitored for completion. Incomplete or
untimely resolution of the Y2K issue by the Company, by critically important
suppliers and customers of the Company, or by governmental entities, could have
a materially adverse impact on the Company's business operations or financial
condition in the future.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain forward-looking
information that reflects management's expectations, estimates and assumptions,
based on information available at the time this Form 10-Q was prepared. When
used in this document, the words "anticipate," "believe," "estimate," "expect,"
"plan", "intend" and similar expressions are intended to identify
forward-looking statements. Such forward-looking statements involve risks,
uncertainties and other factors which may cause the actual performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements, including, but not limited to, the following: competition, including
product and pricing pressures; changing trends in consumer tastes; changes in
the Company's relationship and/or support programs with PepsiCo and other brand
owners; market acceptance of new product offerings; weather conditions; cost and
availability of raw materials; availability of capital; labor and employee
benefit costs; unfavorable interest rate and currency fluctuations; unexpected
costs associated with Year 2000 conversions or the business risks associated
with potential Year 2000 non-compliance by the Company, customers and/or
suppliers; costs of legal proceedings; and general economic, business and
political conditions in the countries and territories where the Company
operates.
16
<PAGE> 18
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
These events and uncertainties are difficult or impossible to predict
accurately and many are beyond the Company's control. The Company assumes no
obligation to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to various market risks, including risks from
changes in commodity prices, interest rates and current exchange rates.
COMMODITY PRICES
The risk from commodity price changes correlates to Pepsi General's
ability to recover higher product costs through price increases to customers,
which may be limited due to the competitive pricing environment that exists in
the soft drink business. In 1999, the Company began to use swap contracts to
hedge against price fluctuations for a portion of its aluminum requirements.
See Note 15 to the Condensed Consolidated Financial Statements. Costs for other
raw material requirements are managed by entering into firm commitments for
materials used.
INTEREST RATES
In the first half of 1999, the risk from changes in interest rates was
not material to the Company's operations because a significant portion of the
Company's debt issues were fixed rate obligations. Substantially all of the
Company's floating rate exposure related to changes in the six month LIBOR
rate. A 50 basis point (0.5 percent) change in the six month LIBOR rate would
have had an insignificant impact on the Company's first half 1999 interest
expense related to its floating rate obligations. In possible future issuances
of debt, the Company may be subject to additional floating rate interest
exposure and may manage those exposures using interest rate swaps. Thus far in
1999, the Company has entered into contracts to fix interest rates on $300
million of notes issued by the Company on April 30, 1999. See Note 15 to the
Condensed Consolidated Financial Statements. In the first half of 1999, the
Company had short-term investments throughout the first half of the year,
principally invested in money market funds and commercial paper, which were
most closely tied to three-month Treasury-bill rates. Assuming a change of 50
basis points in the rate of interest associated with the Company's short-term
investments, interest income would have changed by approximately $0.2 million.
CURRENCY EXCHANGE RATES
Because the Company operates international franchise territories, it is
subject to exposure resulting from changes in currency exchange rates. Currency
exchange rates are established based on a variety of economic factors including
local inflation, growth, interest rates and governmental actions, as well as
other factors. The Company currently does not hedge the translation risks of
investments in its international operations. Any positive cash flows generated
have been reinvested in the operations, excluding loan repayments from the
manufacturing joint venture in Poland.
Non-U.S. operations do not represent a significant portion of the
Company's total operations. Changes in currency exchange rates impact the
translation of the results of the international operations from their local
currencies into U.S. dollars. If the currency exchange rates had changed by 5
percent in the first half of 1999, the impact on reported operating income would
have been less than $0.5 million. This estimate does not take into account the
possibility that rates can move in opposite directions and that gains in one
category may or may not be offset by losses from another category. The economy
in Russia was considered highly inflationary for accounting purposes with all
transactions being recorded at historical costs in U.S. dollars. All gains and
losses due to foreign exchange transactions from the Russia operations, which
were sold in the first quarter of 1999, are included in the consolidated results
of operations.
17
<PAGE> 19
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) MAY 20, 1999 SPECIAL MEETING OF SHAREHOLDERS.
(c) MATTERS VOTED UPON
To consider and vote upon the proposed Contribution and Merger
Agreement (the "Agreement") between the Company and PepsiCo as
outlined in the Definitive Proxy Statement dated April 19, 1999 (see
Note 3 to the Condensed Consolidated Financial Statements).
The following votes were recorded with respect thereto:
<TABLE>
<S> <C>
Votes for 61,561,944
Votes against 5,484,946
Votes withheld 204,328
Total votes received 67,251,218
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
<TABLE>
<S> <C>
3a. Certificate of Incorporation, as Amended and Filed Herewith
Restated on May 20, 1999
3b. By-Laws, as Amended and Restated on May 20, 1999 Filed Herewith
4a. First Supplemental Indenture dated as of May 20, 1999 Filed Herewith
between Whitman Corporation and The First National
Bank of Chicago, Trustee, to the Indenture dated as of
January 15, 1993
10a. Revised Stock Incentive Plan, as Adopted May 20, 1999 Filed Herewith
10b. Form of Nonqualified Stock Option Agreement as Filed Herewith
Amended May 20, 1999
10c. Form of Change in Control Agreement dated May 21, 1999 Filed Herewith
10d. Deferred Compensation Plan for Directors, as Adopted Filed Herewith
May 20, 1999
</TABLE>
18
<PAGE> 20
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
<TABLE>
<S> <C>
10e. 1982 Stock Option, Restricted Stock Award and Performance Filed Herewith
Award Plan (as amended through June 16, 1989)
10f. Amendment No. 2 to 1982 Stock Option, Restricted Stock Filed Herewith
Award and Performance Award Plan made as of
September 1, 1992
10g. Form of Nonqualified Stock Option Agreement Filed Herewith
10h. Amendment to 1982 Stock Option, Restricted Stock Award Filed Herewith
and Performance Award Plan made as of February 19, 1993
10i. Management Incentive Compensation Plan Filed Herewith
10j. Long Term Performance Compensation Program Filed Herewith
10k. Whitman Corporation Executive Retirement Plan, as Filed Herewith
Amended and Restated Effective January 1, 1998
10l. Pepsi-Cola General Bottlers, Inc. Executive Retirement Filed Herewith
Plan, as Amended and Restated Effective January 1, 1998
12. Statement of Calculation of Ratio of Earnings to Filed Herewith
Fixed Charge
27. Financial Data Schedules for the first half of 1999 and 1998 Filed Herewith
</TABLE>
(b) REPORTS ON FORM 8-K.
Old Whitman (as defined below) filed a current report on April 22,
1999, during the second quarter of 1999. The current report included
as an exhibit, under Item 7, the Form of Supplemental Indenture
between the former Whitman Corporation ("Old Whitman") and the First
National Bank of Chicago, as trustee. Also included under Item 7
were PepsiCo Bottling Operations Combined Financial Statements, as
well as New Whitman's (as defined below) Unaudited Pro Forma Combined
Financial Information.
New Whitman also filed a current report on May 20, 1999, which,
under Item 2, described the merging of Old Whitman into Heartland
Territories Holdings, Inc. ("New Whitman" or the "Company"), with New
Whitman as the surviving corporation and with New Whitman acquiring
all assets of Old Whitman. Simultaneously with the merger, the name
of Heartland Territories Holdings, Inc. was changed to "Whitman
Corporation". Such report also described, under Item 5, the adoption
of a new rights plan, under which each shareholder acquired one
preferred share purchase right for each share of common stock held
on June 11, 1999. Included as an exhibit to such report under Item 7
was the text of the press release dated May 20, 1999 relating to the
closing of the merger and the authorization of the rights.
On July 28, 1999, the Company filed an amendment to the current
report filed on May 20, 1999 to indicate that New Whitman is the
successor to Old Whitman under Rule 12g(3)(a) of the Securities Act
of 1934, as amended.
19
<PAGE> 21
WHITMAN CORPORATION
FORM 10-Q
SECOND QUARTER 1999
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.
WHITMAN CORPORATION
Date: August 17, 1999 By: /s/ MARTIN M. ELLEN
-------------------------
Martin M. Ellen
Senior Vice President and Chief Financial
Officer
(As Chief Accounting Officer and Duly
Authorized Officer of Whitman Corporation)
20
<PAGE> 1
EXHIBIT 3a
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
HEARTLAND TERRITORIES HOLDINGS, INC.
1. The name of the corporation (the "Corporation") is "Heartland
Territories Holdings, Inc."
2. The original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on May 20, 1963 under the name Pepsi-Cola
(Pakistan), Inc.
3. This Restated Certificate of Incorporation has been duly proposed by
resolutions adopted and declared advisable by the Board of Directors of the
Corporation, duly adopted by written consent of the sole stockholder of the
Corporation in lieu of a meeting and vote and duly executed and acknowledged by
the officers of the Corporation in accordance with the provisions of Sections
103, 228, 242 and 245 of the General Corporation Law of the State of Delaware
and, upon filing with the Secretary of State in accordance with Section 103,
shall supersede the original Certificate of Incorporation and shall, as it may
thereafter be amended in accordance with its terms and applicable law, be the
Certificate of Incorporation of the Corporation.
4. The text of the Certificate of Incorporation of the Corporation is
hereby restated to read in its entirety as follows:
FIRST: The name of the corporation (the "Corporation") is
WHITMAN CORPORATION
SECOND: The registered office of the Corporation within the State of
Delaware is The Corporation Trust Center, 1209 Orange Street in the City
of Wilmington, County of New Castle, State of Delaware. The registered
agent of the Corporation within the State of Delaware is The Corporation
Trust Company, the business office of which is identical with the
registered office of the Corporation.
THIRD: The purpose of the Corporation shall be to engage in any lawful
act or activity for which corporations may be organized and incorporated
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 362,500,000, of which
350,000,000 shares, par value $0.01 per share, shall be "Common Stock" and
12,500,000 shares, par value $0.01 per share, shall be "Preferred Stock".
A. PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized to fix by resolution or
resolutions adopted in accordance with the by-laws of the Corporation the
voting rights, if any, designations, powers, preferences and the relative,
participation, optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, of any unissued series of Preferred Stock;
and to fix by such resolution or resolutions the number of shares constituting
such series, and to increase or decrease the number of shares of any such
series (but not below the number of shares thereof then outstanding).
B. COMMON STOCK
(1) Except as otherwise provided by law or by the resolution or
resolutions adopted by the Board in accordance with the by-laws of the
Corporation designating the rights, powers and preferences of any series of
Preferred Stock and subject to the provisions of the by-laws of the Corporation
as from time to time amended, with respect to the fixing of a record date for
the determination of stockholders entitled to vote, the
<PAGE> 2
holders of outstanding shares of Common Stock shall exclusively possess voting
power for the election of directors and for all other purposes, each holder of
record of shares of Common Stock being entitled to one vote for each share of
Common Stock standing in his name on the books of the Corporation.
(2) Subject to any rights or preferences of holders of Preferred Stock,
the holders of Common Stock shall be entitled to receive such dividends as from
time to time may be declared on the Common Stock by the Board of Directors.
(3) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, subject to any rights or
preferences of holders of Preferred Stock, the holders of Common Stock shall be
entitled to share, ratably according to the number of shares of Common Stock
held by them, in all assets of the Corporation available for distribution to
its stockholders.
C. PROVISIONS RELATING TO ALL CLASSES OF STOCK
(1) No holder of shares of Common Stock or Preferred Stock of the
Corporation shall be entitled as of right to pre-emptive or prior right to
subscribe for, purchase, or receive any part of any new or additional issue of
stock of any class, whether now or hereafter authorized, or of any bonds,
debentures, or other securities, convertible or exchangeable into stock of any
class, and all such new or additional shares of stock, bonds, debentures or
other securities, convertible or exchangeable into stock, or stock that has
been purchased by the Corporation or its nominee or nominees, may be issued and
disposed of by the Board of Directors to such persons, firms or corporations
and on such terms and for such consideration permitted by law as the Board of
Directors, in their absolute discretion, may deem advisable.
(2) Neither the merger or consolidation of the Corporation into or with
another corporation nor the merger or consolidation of any other corporation
into or with the Corporation, nor the sale, transfer or lease of all or
substantially all the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation.
(3) All stockholder action shall be taken at an annual or special meeting,
and no stockholder action may be taken without a meeting.
FIFTH: The minimum amount of capital with which the Corporation will
commence business is One Thousand Dollars ($1,000.00).
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall not be subject
to the payment of corporate debts to any extent whatever.
EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon the
real and personal property of the Corporation.
To set apart out of any of the funds of the Corporation available
for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created.
By resolution passed by the Board of Directors in accordance with
the by-laws of the Corporation, to designate one or more committees,
each committee to consist of two or more of the directors of the
Corporation, which, to the extent provided in the resolution or in the
by-laws of the Corporation, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of
the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it. Such committee or
committees shall have such name or
<PAGE> 3
names as may be stated in the by-laws of the Corporation or as may be
determined from time to time by resolution adopted by the Board of
Directors.
When and as authorized by the affirmative vote of the holders of a
majority of the stock issued and outstanding having voting power given
at a stockholders' meeting duly called for that purpose, or when
authorized by the written consent of the holders of a majority of the
voting stock issued and outstanding, to sell, lease or exchange all of
the property and assets of the Corporation, including its good will and
its corporate franchise, upon such terms and conditions and for such
consideration, which may be in whole or in part shares of stock in,
and/or other securities of, any other corporation or corporations, as
its Board of Directors shall deem expedient and for the best interests
of the Corporation.
NINTH: No director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty by such
director as a director, except for any matter in respect of which such
director shall be liable under Section 174 of the Delaware General
Corporation Law or shall be liable by reason that, in addition to any and
all other requirements for such liability, he (i) shall have breached his
duty of loyalty to the Corporation or its stockholders, (ii) in acting or
in failing to act, shall not have acted in good faith or shall have acted
in a manner involving intentional misconduct or a knowing violation of law
or (iii) shall have derived an improper personal benefit from the
transaction in respect of which such breach of fiduciary duty occurred.
Neither the amendment nor repeal of this Article NINTH shall eliminate or
reduce the effect of this Article NINTH in respect of any matter
occurring, or any cause of action, suit or claim that, but for this
Article NINTH would accrue or arise, prior to such amendment or repeal. If
the Delaware General Corporation Law is amended after approval by the
stockholders of this Article NINTH to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the Delaware General Corporation Law,
as so amended from time to time.
TENTH: (1) In anticipation that PepsiCo, Inc. is currently, and will
remain, a substantial stockholder of the Corporation, and in anticipation
that the Corporation and PepsiCo, Inc. may engage in the same or similar
activities or lines of business and have an interest in the same areas of
business opportunities, and in recognition of the benefits to be derived
by the Corporation through its continued contractual, corporate and
business relations with PepsiCo, Inc. (including service of employees,
officers and directors of PepsiCo, Inc. as officers and directors of the
Corporation), the provisions of this Article TENTH are set forth to
regulate and define the conduct of certain affairs of the Corporation as
they may involve PepsiCo, Inc. and its employees, officers and directors,
and the powers, rights, duties and liabilities of the Corporation and its
officers, directors and stockholders in connection therewith.
(2) PepsiCo, Inc. shall have the right to engage (and shall have no
duty to refrain from engaging) in the same or similar activities or lines
of business as the Corporation, and the Corporation shall not be deemed
to have an interest or expectancy in any business opportunity,
transaction, or other matter (each a "Business Opportunity") in which
PepsiCo, Inc. engages or seeks to engage merely because the Corporation
engages in the same or similar activities or lines of business as that
involved in or implicated by such Business Opportunity. Neither PepsiCo,
Inc. nor any employee, officer or director thereof (except as provided in
paragraph 3 below) shall be liable to the Corporation or its stockholders
for breach of any fiduciary duty by reason of any such activities of
PepsiCo, Inc. or of such person's participation therein. In the event that
PepsiCo, Inc. acquires knowledge of a potential Business Opportunity which
may be deemed to constitute a corporate opportunity for both PepsiCo, Inc.
and the Corporation, PepsiCo, Inc. shall have no duty to communicate or
offer such Business Opportunity to the Corporation and shall not be liable
to the Corporation or its stockholders for breach of any fiduciary duty as
a stockholder of the Corporation by reason of the fact that PepsiCo, Inc.
pursues or acquires such Business Opportunity for itself, directs such
Business Opportunity to another person, or does not communicate
information regarding such Business Opportunity to the Corporation.
<PAGE> 4
(3) In the event that a director or officer of the Corporation who is
also a director, officer or employee of PepsiCo, Inc. acquires knowledge
of a potential Business Opportunity which may be deemed to be a corporate
opportunity for both the Corporation and PepsiCo, Inc., such director or
officer of the Corporation shall have fully satisfied and fulfilled the
fiduciary duty of such director or officer to the Corporation and its
stockholders with respect to such Business Opportunity and, to the extent
permitted by applicable law, shall not be liable to the Corporation or its
stockholders for breach of any fiduciary duty by reason of the fact that
PepsiCo, Inc. pursues or acquires such Business Opportunity for itself or
directs such Business Opportunity to another person or does not
communicate information regarding such Business Opportunity to the
Corporation, if such director or officer acts in a manner consistent with
the following policy:
A Business Opportunity offered to any person who is an officer of
the Corporation, and who is also a director or an officer or an
employee of PepsiCo, Inc., shall belong to the Corporation; and a
Business Opportunity offered to any person who is a director but not an
officer of the Corporation, and who is also a director or officer of
PepsiCo, Inc., shall belong to the Corporation if such Business
Opportunity is expressly offered to such person solely in his or her
capacity as a director of Corporation, and otherwise shall belong to
PepsiCo, Inc.
(4) Any person purchasing or otherwise acquiring any interest in share
of the capital stock of the Corporation shall be deemed to have consented
to the provisions of this Article TENTH.
(5) For purposes of this Article TENTH:
(a) A director of the Corporation who is Chairman of the Board of
Directors of the Corporation or of a committee thereof shall not be
deemed to be an officer of the Corporation by reason of holding such
position (without regard to whether such position is deemed an office
of the Corporation under the by-laws of the Corporation), unless such
person is a full-time employee of the Corporation; and
(b) PepsiCo, Inc. shall include all subsidiary corporations and
other entities in which PepsiCo, Inc. owns (directly or indirectly)
more that 50% of the outstanding voting capital stock or voting power.
(6) Any proposed amendment to this Article TENTH shall require the
approval of two-thirds of the whole Board of Directors.
ELEVENTH: Meetings of stockholders may be held outside the State of
Delaware, if the by-laws of the Corporation so provide. The books of the
Corporation may be kept (subject to any provision contained in the
statutes) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the by-laws
of the Corporation. Elections of directors need not be by ballot unless
the by-laws of the Corporation shall so provide.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
THIRTEENTH: The Corporation hereby expressly elects not to be governed
by Section 203(a) of the Delaware General Corporation Law relating to
business combinations with interested shareholders.
<PAGE> 1
EXHIBIT 3b
FORM OF
WHITMAN CORPORATION
(FORMERLY NAMED HEARTLAND TERRITORIES HOLDINGS, INC.)
AMENDED AND RESTATED
BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. Beginning with the 2000 annual meeting, annual meetings of
stockholders for the election of directors and for the transaction of such
other business as may come before the meeting shall be held on the first
Thursday of May at 10:30 A.M., at Chicago, Illinois, or on such other date or
at such other time or place, whether within or without the State of Delaware,
as shall be designated by the Board of Directors.
SECTION 2. At any annual or special meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (a)
by or at the direction of the Board of Directors or (b) by any stockholder of
the Corporation who complies with the notice procedures set forth in this
Section 2. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, in the case of an annual
meeting, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to the stockholders, notice by the stockholder to be
timely must be received not later than the close of business on the 10th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. In the case of a special meeting
requested by a stockholder, such stockholder must provide notice in accordance
with the following sentence at the time of such request. A stockholder's notice
to the Secretary shall be set forth as to each matter the stockholder proposes
to bring before the annual or special meeting, as the case may be, (a) a brief
description of the business desired to be brought before such meeting and the
reasons for conducting such business at such meeting, (b) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Notwithstanding anything in these By-Laws to the
contrary, no business shall be conducted at an annual or special meeting except
in accordance with the procedures set forth in this Section 2. The chairman of
any annual or special meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this Section 2, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
SECTION 3. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by law or by the Certificate of
Incorporation, may be called by the Chairman and Chief Executive Officer and
shall be called by him or by the Secretary at the request of (i) a majority of
the Board of Directors or (ii) any stockholder which, individually or together
with any other entity in which such stockholder has a 20% or greater equity or
other ownership interest, owns 20% or more of the issued and outstanding
securities of the Corporation entitled to vote generally in the election of
directors of the Corporation, provided that such request shall state the
purpose or purposes of the proposed meeting and in the case of a request by a
stockholder, shall also comply with the provisions of Section 2 of this Article
I. Special meetings may be held at such time and place and for such purposes as
shall be stated in the notice issued by the Chairman and Chief Executive
Officer or the Secretary calling the meeting, provided that in the case of a
special meeting requested by a stockholder, such special meeting shall take
place not later than 70 days from
<PAGE> 2
the date of receipt of proper notice from such stockholder requesting the
meeting. In the case of a special meeting requested by a stockholder, the Board
of Directors shall fix a record date for stockholders entitled to vote at the
special meeting, which record date shall be not later than 10 days from receipt
of proper notice from such stockholder requesting the meeting, subject to
compliance with the applicable regulations of any exchange on which the
Corporation's securities are listed.
SECTION 4. Nominations of persons for election to the Board of Directors
of the Corporation may be made at a meeting of stockholders (a) by or at the
direction of the Board of Directors or (b) by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 4. Nominations by
stockholders shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for the election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected), and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in these By-Laws. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination
was not made in accordance with the procedures prescribed in this Section 4,
and if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
SECTION 5. Unless waived, written notice of the date, place, and time of
the holding of each annual and special meeting of the stockholders and, in the
case of a special meeting, the purpose or purposes thereof, shall be given
personally or by mail in a postage prepaid envelope to each stockholder
entitled to vote at such meeting, not less than ten nor more than sixty days
before the date of such meeting, and, if mailed, it shall be directed to such
stockholder at his address as it appears on the records of the Corporation.
SECTION 6. The officer who has charge of the stock ledger of the
Corporation shall prepare and make before every meeting of stockholders a
complete list of the stockholders as of the record date entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 7. The Board may, in advance of any meeting of stockholders,
appoint one or more inspectors to act at such meeting, or any adjournment
thereof. If the inspectors shall not be so appointed or if any of them shall
fail to appear or act, the chairman of the meeting may, and on the request of
any stockholder entitled to vote thereat shall, appoint inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and
<PAGE> 3
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the chairman of the meeting or any stockholder
entitled to vote thereat, the inspectors shall make a report in writing of any
challenge, request or matter determined by them and shall execute a certificate
of any fact found by them. No director or candidate for the office of director
shall act as inspector of an election of directors. Inspectors need not be
stockholders.
SECTION 8. At each meeting of the stockholders the Chairman and Chief
Executive Officer or, in his absence or inability to act, the President shall
act as chairman of the meeting. The Secretary or, in his absence or inability
to act, the Assistant Secretary or any person appointed by the chairman of the
meeting shall act as secretary of the meeting and keep the minutes thereof. The
order of business at all meetings of the stockholders shall be as determined by
the chairman of the meeting.
SECTION 9. Except as otherwise provided by law or the Certificate of
Incorporation, at all meetings of the stockholders fifty-one per cent of the
votes of the shares of stock of the Corporation issued and outstanding and
entitled to vote shall be present in person or by proxy to constitute a quorum
for the transaction of any business, provided that (except as aforesaid) when
stockholders are required to vote by class or series, fifty-one per cent of the
votes represented by the issued and outstanding shares of the appropriate class
or series shall be present in person or by proxy. In the absence of a quorum,
the holders of a majority of the votes of the shares of stock present in person
or by proxy and entitled to vote may adjourn the meeting from time to time.
Unless the Board shall fix after the adjournment a new record date for an
adjourned meeting, notice of such adjourned meeting need not be given, except
as hereinafter provided, if the time and place to which the meeting shall be
adjourned were announced at the meeting at which the adjournment is taken. If
the adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At the adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting.
SECTION 10. Except as otherwise provided by law, the Certificate of
Incorporation, or any certificate filed by the Corporation in the State of
Delaware pursuant to Section 151 (or any successor provisions) of the General
Corporation Law of the State of Delaware, each holder of record of shares of
stock of the Corporation having voting power shall be entitled at each meeting
of the stockholders to one vote for every share of such stock standing in his
name on the record of stockholders of the Corporation on the date fixed by the
Board as the record date for the determination of the stockholders who shall be
entitled to notice of and to vote at such meeting. Each stockholder entitled to
vote at any meeting of stockholders may authorize another person or persons to
act for him by proxy signed by such stockholder or his attorney-in-fact. Any
such proxy shall be delivered to the secretary of such meeting at or prior to
the time designated in the order of business for so delivering in such proxies.
No proxy shall be valid after the expiration of three years from the date
thereof, unless otherwise provided in the proxy. A proxy shall be revocable at
the pleasure of the stockholder executing it, except in those cases where an
irrevocable proxy is permitted by law. Except as otherwise provided by law, the
Certificate of Incorporation, or these By-Laws, any corporate action to be
taken by vote of the stockholders shall be authorized by a majority of the
total votes cast, or when stockholders are required to vote by class or series
by a majority of the votes cast of the appropriate class or series. Unless
required by law or determined by the chairman of the meeting to be advisable,
the vote on any question need not be by written ballot. On a vote by written
ballot, each ballot shall be signed by the stockholder voting, or by his proxy,
and shall state the number of shares voted.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. The business and affairs of the Corporation shall be managed by
the Board of Directors. The Board may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by law or the
Certificate of Incorporation directed or required to be exercised or done by
the stockholders.
<PAGE> 4
SECTION 2. The number of directors of the Corporation shall be such number
of persons, not less than three (3), as shall from time to time be fixed by
resolution of two-thirds of the whole Board. Directors need not be
stockholders. Except as otherwise provided by law, the Certificate of
Incorporation, or these By-Laws, the directors shall be elected at the annual
meeting of the stockholders, and the persons receiving a plurality of the votes
cast at such election shall be elected. Directors shall hold office until their
respective successors shall have been duly elected and qualified, or until
death, resignation, or removal, as hereinafter provided in these By-Laws, or as
otherwise provided by law of the Certificate of Incorporation. The Board shall
elect one of its members as Chairman and Chief Executive Officer.
SECTION 3. The Chairman and Chief Executive Officer, if present, shall
preside at all meetings of the Board. He shall serve as Chairman of the
Executive Committee of the Board and be a member of such other committees of
the Board as shall be determined by the Board at the time of the creation or
the election of the members of any such committees.
SECTION 4. Meetings of the Board may be held at such place, either within
or without the State of Delaware, as the Board may from time to time determine
or as shall be specified in the notice or waiver of notice of such meeting.
SECTION 5. Regular meetings of the Board may be held without notice at
such time and place as the Board may from time to time determine.
SECTION 6. Special meetings of the Board may be called by two or more
directors of the Corporation or by the Chairman and Chief Executive Officer or
the Secretary.
SECTION 7. Notice of each special meeting of the Board shall be given by
the Secretary as hereinafter provided in this Section, in which notice shall be
stated the time and place of the meeting. Notice of each such meeting shall be
delivered to each director either personally or by telephone, telegraph, cable,
or similar means, at least twenty-four hours before the time at which such
meeting is to be held or mailed by first-class mail, postage prepaid, addressed
to the director at his residence or usual place of business, at least three
days before the day on which such meeting is to be held. Notice of any such
meeting need not be given to any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to such
director. Except as otherwise specifically required by these By-Laws, a notice
or waiver of notice of any regular or special meeting need not state the
purpose of such meeting.
SECTION 8. Subject to Section 14 of this Article, one-third of the entire
Board shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at such meeting, and,
except as otherwise expressly required by law, the Certificate of Incorporation
or these By-Laws, the act of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the Board. In the absence of a
quorum at any meeting of the Board, a majority of the directors present thereat
may adjourn such meeting to another time and place, or such meeting need not be
held. At any adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as originally
called. Except as otherwise provided in this Article II, the directors shall
act only as a Board and the individual directors shall have no power as such.
SECTION 9. Any director of the Corporation may resign at any time by
giving a written notice of resignation to the Board, the Chairman and Chief
Executive Officer, or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 10. Vacancies or newly created directorships resulting from an
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until their successors are duly elected and shall
qualify. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a
majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
holder or holders of at least ten percent of the votes of the shares
<PAGE> 5
at the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office. Except as otherwise provided in these By-Laws, when one or more
directors shall resign from the Board, effective at a future date, a majority
of the directors then in office, including those who have so resigned, shall
have power to fill such vacancy or vacancies, to vote thereon to take effect
when such resignation or resignations shall become effective, and each director
so chosen shall hold office as provided in this Section 10 in the filling of
other vacancies.
SECTION 11. Except as otherwise provided in the Certificate of
Incorporation or these By-Laws, any director may be removed, either with or
without cause, at any time, by the affirmative vote of a majority of the votes
of the issued and outstanding stock entitled to vote for the election of
directors of the Corporation given at a special meeting of the stockholders
called and held for such purpose; and the vacancy in the Board caused by any
such removal may be filled by such stockholders at such meeting, or, if the
stockholders shall fail to fill such vacancy, as in these By-Laws provided.
SECTION 12. The Board shall have authority to fix the compensation,
including fees and reimbursement of expenses, of directors for services to the
Corporation in any capacity, provided that no such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 13. Any action required or permitted to be taken at any meeting of
the Board or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee. Members of the Board or of any committee designated
by the Board may participate in a meeting of such Board or committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and participation
in a meeting pursuant to this procedure shall constitute presence in person at
such meeting.
SECTION 14. The issuance of preferred stock by the Corporation shall
require the approval of two-thirds of the whole Board.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 1. The Board of Directors may, by resolution adopted by two-thirds
of the whole Board, designate an Executive Committee to exercise, subject to
applicable provisions of law, all the powers of the Board in the management of
the business and affairs of the Corporation when the Board is not in session,
including without limitation the power to declare dividends and to authorize
the issuance of the Corporation's capital stock, and may, by resolution
similarly adopted, designate one or more other committees. The Executive
Committee and each such other committee shall consist of two or more directors
of the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, other than the Executive
Committee whose powers are expressly provided for herein, may to the extent
permitted by law exercise such powers and shall have such responsibilities as
shall be specified in the designating resolution. In the absence or
disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member. Each committee shall keep written minutes of its proceedings and shall
report such proceedings to the Board when required.
SECTION 2. (a) The Board of Directors shall designate an Affiliated
Transaction Committee. The Affiliated Transaction Committee shall review,
consider and pass upon any Affiliated Transaction, and no such transaction
shall be effected without the concurrence of the Affiliated Transaction
Committee. The Affiliated Transaction Committee shall have the powers to (i)
negotiate with the representatives of any party to an Affiliated Transaction;
(ii) require approval of an Affiliated Transaction by a vote of the
stockholders of
<PAGE> 6
the Corporation which may be greater than or in addition to any vote required
by law; and (iii) engage Independent Advisers at the reasonable expense of the
Corporation, and without prior approval of the Corporation, to assist in its
review and decision regarding any Affiliated Transaction.
(b) The Affiliated Transaction Committee shall consist of at least three
Independent Directors, with each other Independent Director being an alternate
member if any committee member is unable or unwilling to serve.
(c) The Affiliated Transaction Committee shall cease to exist on the later
of (i) January , 2009 or (ii) the date on which any Affiliated Transaction
being reviewed, considered and passed upon by the Affiliated Transaction
Committee prior to January , 2009 shall have been either consummated or
abandoned.
(d) For the purposes of the foregoing Article III, Section 2, the
following definitions shall apply:
(i) "Corporation" means the Corporation or any company in which the
Corporation has more than 50% of the voting power in the election of
directors or in which it has the power to elect a majority of the Board of
Directors.
(ii) "PepsiCo, Inc." means PepsiCo, Inc. or any company in which
PepsiCo, Inc. has more than 50% of the voting power in the election of
directors or in which it has the power to elect a majority of the Board of
Directors.
(iii) "Affiliate" means any entity (other than the Corporation) in
which PepsiCo, Inc. has a 20% or greater equity or other ownership
interest, or any entity controlled directly or indirectly by such
Affiliate. Notwithstanding the above, no entity shall be an Affiliate
solely by virtue of the rights granted to PepsiCo, Inc. pursuant to a
bottling contract.
(iv) "Affiliated Transaction" means any proposed merger or
consolidation with, purchase of an equity interest in, or purchase of
assets other than in the ordinary course of business from an Affiliate,
and which transaction has an aggregate value exceeding $10 million;
provided, however, that any such merger, consolidation, or purchase which
constitutes a "Permitted Acquisition" under the Shareholder Agreement
between the Corporation and PepsiCo, Inc., dated as of [ ], 1999 (as it
may be amended from time to time, the "Shareholders Agreement"), shall not
constitute an Affiliated Transaction for purposes of this Article III,
Section 2.
(v) "Independent Directors" means any member of the Corporation's Board
of Directors who (i) is not, and for the past two years has not been, an
officer, director or employee of PepsiCo, Inc. or (other than serving as a
director of the Corporation) an Affiliate; (ii) does not own in excess of
1% of the shares of PepsiCo, Inc.; and (iii) own any equity or other
ownership interest in an entity (except as permitted by the preceding (ii)
and other than in the Corporation) which is a party to the Affiliated
Transaction.
(vi) "Independent Adviser" means any legal or financial adviser or
other expert (i) that has not represented or provided services to PepsiCo,
Inc. during the past calendar year, or (ii) notwithstanding (i) above,
that the Affiliated Transaction Committee (as defined below) determines,
after due inquiry, is able to represent it in an independent manner not
adverse to the interests of the Corporation and its stockholders.
SECTION 3. A majority of any committee may determine its action and fix
the time and place of its meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the committee in the
manner provided for in Article II, Section 7. The Board shall have power at any
time to fill vacancies in, to change the membership of, or to dissolve any such
committee. Nothing herein shall be deemed to prevent the Board from appointing
one or more committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such committee shall
have or may exercise any authority of the Board.
<PAGE> 7
ARTICLE IV
OFFICERS
SECTION 1. The officers of the Corporation shall consist of the Chairman
and Chief Executive Officer, the President, one or more Vice Presidents, the
Treasurer, the Controller and the Secretary. Any two or more offices may be
held by the same person. Each such officer shall be elected from time to time
by the Board of Directors to hold office until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
have resigned, or have been removed, as hereinafter provided in these By-Laws.
The Board may from time to time elect, or the Chairman and Chief Executive
Officer may appoint, such other officers (including one or more Assistant Vice
Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant
Controllers) and such agents, as may be necessary or desirable for the conduct
of the business of the Corporation. Such other officers and agents shall have
such duties and shall hold their offices for such terms as shall be provided in
these By-Laws or as may be prescribed by the Board or by the Chairman and Chief
Executive Officer.
SECTION 2. Any officer or agent of the Corporation may resign at any time
by giving written notice of his resignation to the Board, the Chairman and
Chief Executive Officer, or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
SECTION 3. Any officer or agent of the Corporation may be removed, either
with or without cause, at any time, by the vote of a majority of the whole
Board at any meeting of the Board, or, except in the case of an officer or
agent elected by the Board, by the Chairman and Chief Executive Officer. Such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 4. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant in the manner
prescribed in these By-Laws for the regular election or appointment of such
office.
SECTION 5. The Chairman and Chief Executive Officer shall have the primary
responsibility for and the general control and management of all of the
business and affairs of the Corporation, under the direction of the Board. He
shall have power to select and appoint all necessary officers and employees of
the Corporation except such officers as under these By-Laws are to be elected
by the Board, to remove all appointed officers or employees whenever he shall
deem it necessary, and to make new appointments to fill the vacancies. He shall
have the power of suspension from office for cause of any elected officer,
which shall be forthwith declared in writing to the Board. Whenever in his
opinion it may be necessary, he shall define the duties of any officer or
employee of the Corporation which are not prescribed in the By-Laws or by
resolution of the Board. He shall have such other authority and shall perform
such other duties as may be assigned to him by the Board.
SECTION 6. The President shall be the chief operating officer of the
Corporation and shall have such authority and perform such duties relative to
the business and affairs of the Corporation as may be delegated to him by the
Board or the Chairman and Chief Executive Officer. In the absence of the
Chairman and Chief Executive Officer, the President shall preside at meetings
of the stockholders and of the directors.
SECTION 7. Each Vice President and each Assistant Vice President shall
have such powers and perform all such duties as from time to time may be
assigned to him by the Board, the Chairman and Chief Executive Officer, the
President or the senior officer to whom he reports.
SECTION 8. The Treasurer shall exercise general supervision over the
receipt, custody and disbursement of corporate funds. He shall have such
further powers and duties and shall be subject to such directions as may be
granted or imposed upon him from time to time by the Board or the Chairman and
Chief Executive Officer.
SECTION 9. The Controller shall be the chief accounting officer of the
Corporation and shall maintain adequate records of all assets, liabilities and
transactions of the Corporation; he shall establish and maintain
<PAGE> 8
internal accounting controls and, in cooperation with the independent public
accountants selected by the Board, shall supervise internal auditing. He shall
have such further powers and duties as may be conferred upon him from time to
time by the Board or the Chairman and Chief Executive Officer.
SECTION 10. The Secretary shall keep or cause to be kept in one or more
books provided for that purpose, the minutes of all meetings of the Board, the
committees of the Board and the stockholders; he shall see that all notices are
duly given in accordance with the provisions of these By-Laws and as required
by law; he shall be custodian of the records and the seal of the Corporation
and affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be a facsimile,
as hereinafter provided) and affix and attest the seal to all other documents
to be executed on behalf of the Corporation under its seal; he shall see that
the books, reports, statements, certificates and other documents and records
required by law to be kept and filed are properly kept and filed; and in
general, he shall perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board
or the Chairman and Chief Executive Officer.
SECTION 11. Any Assistant Secretary, Assistant Treasurer, or Assistant
Controller elected or appointed as heretofore provided, shall perform the
duties and exercise the powers of the Secretary, Treasurer and Controller,
respectively, in their absence or inability to act, and shall perform such
other duties and have such other powers as the Board, the Chairman and Chief
Executive Officer, the Secretary, Treasurer, or Controller (as the case may
be), may from time to time prescribe.
SECTION 12. If required by the Board, any officer of the Corporation shall
give a bond or other security for the faithful performance of his duties in
such amount and with such surety or sureties as the Board may specify.
SECTION 13. The compensation of the officers of the Corporation for their
services as such officers shall be fixed from time to time by the Board;
provided, however, that the Board may by resolution delegate to the Chairman
and Chief Executive Officer the power to fix compensation of non-elected
officers and agents appointed by him. An officer of the Corporation shall not
be prevented from receiving compensation by reason of the fact that he is also
a director of the Corporation, but any such officer who shall also be a
director shall not have any vote in the determination of the amount of
compensation paid to him.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans maintained or sponsored by the Corporation, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said Law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, excise taxes
pursuant to the Employee Retirement Income Security Act of 1974 or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith and such indemnification shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in Section 2 of this Article, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of
<PAGE> 9
Directors of the Corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance
of its final disposition; provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The Corporation may, by action of
its Board of Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
SECTION 2. If a claim under Section 1 of this Article is not paid in full
by the Corporation within thirty days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standard of conduct which makes it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
SECTION 3. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise. No repeal or modification of this Article
shall in any way diminish or adversely affect the rights of any director,
officer, employee or agent of the Corporation hereunder in respect of any
occurrence or matter arising prior to any such repeal or modification.
SECTION 4. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law.
ARTICLE VI
CONTRACTS, PROXIES, ETC.
SECTION 1. Except as otherwise required by law, the Certificate of
Incorporation or these By-laws, any contracts or other instruments may be
executed and delivered in the name and on behalf of the Corporation by such
officer or officers (including any assistant officer) of the Corporation as the
Board of Directors may from time to time direct. Such authority may be general
or confined to specific instances as the Board may determine. The Chairman and
Chief Executive Officer, the President or any Vice President may execute bonds,
contracts, deeds, leases and other instruments to be made or executed for or on
behalf of the Corporation. Subject to any restrictions imposed by the Board or
the Chairman and Chief Executive Officer, the President or any Vice President
of the Corporation may delegate contractual power to others under his
<PAGE> 10
jurisdiction, it being understood, however, that any such delegation of power
shall not relieve such officer of responsibility with respect to the exercise
of such delegated power.
SECTION 2. Unless otherwise provided by resolution adopted by the Board,
the Chairman and Chief Executive Officer, the President or any Vice President
may from time to time appoint an attorney or attorneys or agent or agents of
the Corporation, in the name and on behalf of the Corporation, to cast the
votes which the Corporation may be entitled to cast as the holder of stock or
other securities in any other corporation, any of whose stock or other
securities may be held by the Corporation, at meetings of the holders of the
stock or other securities of such other corporation, or to consent in writing,
in the name of the Corporation as such holder, to any action by such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause
to be executed in the name and on behalf of the Corporation and under its
corporate seal or otherwise, all such written proxies or other instruments as
he may deem necessary or proper in the premises.
ARTICLE VII
SHARES, BOOKS, ETC.
SECTION 1. Every holder of stock in the Corporation shall be entitled to
have a certificate signed by or in the name of the Corporation by the Chairman
and Chief Executive Officer, the President or a Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
certifying the number of shares owned by such holder in the Corporation. Any of
or all the signatures on the certificate may be facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent, or registrar at the date of issue.
SECTION 2. The books and records of the Corporation may be kept at such
places within or without the State of Delaware, as the Board of Directors may
from time to time determine.
SECTION 3. Transfers of shares of stock of the Corporation shall be made
on the stock records of the Corporation only upon authorization by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent,
and or surrender of the certificate or certificates for such shares properly
endorsed or accompanied by a duly executed stock transfer power and the payment
of all taxes thereon. Except as otherwise provided by law, the Corporation
shall be entitled to recognize the exclusive right of a person in whose name
any share or shares stand on the record of stockholders as the owner of such
share or shares for all purposes, including, without limitation, the right to
receive dividends or other distributions, and to vote as such owner, and the
Corporation may hold any such stockholder of record liable for calls and
assessments and shall not be bound to recognize any equitable or legal claim to
or interest in any such share or shares on the part of any other person whether
or not it shall have express or other notice thereof.
SECTION 4. The Board may make such additional rules and regulations, not
inconsistent with these By-Laws, as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of the
Corporation. It may appoint or authorize any officer or officers to appoint,
one or more transfer agents or one or more registrars and may require all
certificates for shares of stock to bear the signature or signatures of any of
them.
SECTION 5. Upon notice to the Corporation by the holder of any certificate
representing shares of stock of the Corporation of any loss, theft, destruction
or mutilation of such certificate, the Corporation may issue a new certificate
of stock in the place of any certificate theretofore issued by it which the
holder thereof shall allege to have been lost, stolen, or destroyed or which
shall have been mutilated, and the Board may, in its discretion, require such
holder or his legal representatives to give to the Corporation a bond in such
sum, limited or unlimited, and in such form and with such surety or sureties as
the Board in its absolute discretion shall determine, and to indemnify the
Corporation against any claim which may be made against it on account of the
alleged loss, theft, or destruction of any such certificate, or of the issuance
of a new certificate.
<PAGE> 11
Anything herein to the contrary notwithstanding, the Board, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Delaware.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the Board of
Directors.
ARTICLE IX
SEAL
The Corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it, or a facsimile thereof, to be
impressed or affixed or reproduced or otherwise.
ARTICLE X
AMENDMENTS
These By-Laws may be amended or repealed, or new By-Laws may be adopted,
by two-thirds of the whole Board of Directors at any meeting thereof; provided
that By-Laws adopted by the Board may be amended or repealed by the
stockholders.
<PAGE> 1
EXHIBIT 4a
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
-------------------------
FIRST SUPPLEMENTAL INDENTURE
DATED AS OF MAY 20, 1999
TO
INDENTURE
DATED AS OF JANUARY 15, 1993
-------------------------
WHITMAN CORPORATION
<PAGE> 2
THIS FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") is
made and dated as of May 20, 1999 by and between Whitman Corporation, a
Delaware corporation formerly known as Heartland Territories Holdings, Inc.
("New Whitman"), and The First National Bank of Chicago, a national banking
association organized and existing under the laws of the United States (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Indenture (as defined below).
WHEREAS, Whitman Corporation, a corporation organized and existing
under the laws of the State of Delaware, ("Old Whitman") and Trustee entered
into an Indenture dated as of January 15, 1993, pursuant to which Old Whitman
issued debt securities in the form of unsecured notes (the "Securities");
WHEREAS, pursuant to an Amended and Restated Contribution and Merger
Agreement dated as of March 18, 1999 among Old Whitman, PepsiCo, Inc., a North
Carolina corporation ("PepsiCo"), and Heartland Territories Holdings, Inc., a
Delaware corporation and wholly owned subsidiary of PepsiCo ("Heartland"), Old
Whitman has been merged (the "Merger") with and into Heartland, with Heartland
surviving as New Whitman, and New Whitman has assumed various liabilities and
obligations of Old Whitman, including those under the Indenture and with
respect to the Securities;
WHEREAS, in connection with the Merger and in accordance with Section
10.01(a) of the Indenture, the parties desire to enter into this Supplemental
Indenture, without the consent of the holders of the outstanding Securities, in
order to evidence the succession under the Indenture of New Whitman to Old
Whitman and the assumption by New Whitman of the covenants, agreements and
obligations of Old Whitman contained in the Indenture;
WHEREAS, Old Whitman has delivered to the Trustee the Certified Board
Resolution and Opinion of Counsel required by Sections 10.01 and 11.03 of the
Indenture.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, New Whitman and the Trustee agree as follows:
1. Assumption of Obligations. In accordance with Section 11.01 of the
Indenture, New Whitman hereby expressly assumes the due and punctual payment of
the principal of (and premium, if any) and any interest on all the Securities,
according to their tenor, and the due and punctual performance and observance
of all of the covenants and conditions of the Indenture to be performed by Old
Whitman.
2. Succession. In accordance with Section 11.02 of the Indenture, New
Whitman hereby succeeds to and is substituted for Old Whitman, with the same
effect as if New Whitman were a party to the Indenture.
<PAGE> 3
3. Effect of Supplemental Indenture. In accordance with Section 10.03
of the Indenture, the Indenture is hereby deemed to be modified and amended by
this Supplemental Indenture with respect to the Securities and the respective
rights, limitations of rights, obligations, duties and immunities under the
Indenture of the Trustee, Old Whitman and the Holders of Securities shall be
determined, exercised and enforced under the Indenture, as supplemented by this
Supplemental Indenture, and all the terms and conditions of this Supplemental
Indenture shall be and are hereby deemed to be part of the terms and conditions
of the Indenture for any and all purposes. As supplemented by this Supplemental
Indenture, the Indenture is in all respects ratified and confirmed and the
Indenture and this Supplemental Indenture shall be read, taken and construed as
one and the same instrument. From and after the date of this Supplemental
Indenture, all references in the Indenture to this "Indenture" shall refer to
the Indenture as supplemented hereby.
4. Notation of Changes. In accordance with Section 10.04 of the
Indenture, Securities authenticated and delivered after the execution of this
Supplemental Indenture in exchange for or in lieu of any Securities outstanding
shall, if required by the Trustee, bear a legend as follows:
"Pursuant to a First Supplemental Indenture dated as of May 20,
1999 (the "Supplemental Indenture") between Whitman Corporation, a
Delaware corporation formerly known as Heartland Territories
Holdings, Inc. ("New Whitman"), and the Trustee, New Whitman has
expressly assumed all the obligations under this Security and of
the Indenture expressed therein to be performed by Whitman
Corporation, a Delaware corporation which corporation merged into
New Whitman on May 20, 1999. Copies of the Supplemental Indenture
are on file with the Trustee."
5. Acceptance by Trustee. The Trustee accepts the amendment of the
Indenture effected by this Supplemental Indenture and agrees to perform the
Indenture as supplemented hereby, but only upon the terms and conditions set
forth in the Indenture.
6. Governing Law. This Supplemental Indenture shall be deemed to be a
contract under the laws of the State of Illinois, and for all purposes shall be
governed by and construed in accordance with the laws of such State.
7. Counterparts. This Supplemental Indenture may be executed in any
number of counterparts, each of which shall be deemed to be an original but all
of which shall constitute one and the same instrument.
8. Notices. Any required notices or demands under the Indenture shall
be delivered or sent to New Whitman at the address set forth in Section 14.03
of the Indenture.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and year first
above written.
WHITMAN CORPORATION
By: /s/ William B. Moore
------------------------------------
Name: William B. Moore
Title: Senior Vice President
Attest:
/s/ Olga Iszczuk
- -----------------------------
Asst. Secretary
[CORPORATE SEAL]
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
By: /s/ Janice Ott Rotunno
------------------------------------
Name: Janice Ott Rotunno
Title: Vice President
Attest:
/s/ Sandy Caruba
- -----------------------------
Secretary
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 10a
WHITMAN CORPORATION
REVISED STOCK INCENTIVE PLAN
(As Adopted May 20, 1999)
1. DEFINITIONS
The following definitions shall be applicable throughout this Plan:
(a) "Code" shall mean the Internal Revenue Code of 1986, as the same
may be amended from time to time. Reference in the Plan to any section of the
Code shall be deemed to include any amendments or successor provision to such
section and any regulations under such section.
(b) "Committee" shall mean the Committee selected by the Board of
Directors as provided in Paragraph 4, consisting of two or more members of the
Board of Directors, each of whom shall be (i) a "Non-Employee Director" within
the meaning of Rule 16b-3 under the Exchange Act, and (ii) an "outside
director" within the meaning of Section 162(m) of the Code.
(c) "Common Stock" shall mean common stock of the Corporation with par
value of $0.01 per share.
(d) "Corporation" shall mean Whitman Corporation, a Delaware
corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Holder" shall mean an individual who has been granted an Option,
Restricted Stock Award or Performance Award.
(g )"Option" shall mean any option granted under the Plan for the
purchase of Common Stock.
(h) "Performance Award" shall mean an award granted under the
Performance Award provisions of the Plan.
(i) "Plan" shall mean the Corporation's Revised Stock Incentive Plan,
as amended from time to time.
(j) "Restricted Stock Award" shall mean an award of Common Stock
granted under the Restricted Stock Award provisions of the Plan.
(k) "Retirement" shall mean cessation of active employment or service
with the Corporation or a subsidiary pursuant to the Corporation's retirement
policies and programs.
<PAGE> 2
(1) "SAR" shall mean a stock appreciation right which is issued in
tandem with, or by reference to, an Option, which entitles the Holder thereof
to receive, upon exercise of such SAR and surrender for cancellation of all or
a portion of such Option, shares of Common Stock, cash or a combination thereof
with an aggregate value equal to the excess of the fair market value of one
share of Common Stock on the date of exercise over the purchase price specified
in such Option, multiplied by the number of shares of Common Stock subject to
such Option, or portion thereof, which is surrendered.
2. PURPOSE
It is the purpose of the Plan to provide a means through which the
Corporation may attract able persons to enter its employ and the employ of its
subsidiaries, to serve as directors and to provide a means whereby those
persons upon whom the responsibilities of the successful administration and
management of the Corporation or its subsidiaries rest, and whose present and
potential contributions to the welfare of the Corporation or its subsidiaries
are of importance, can acquire and maintain stock ownership. Such persons
should thus have a greater than ordinary concern for the welfare of the
Corporation and/or its subsidiaries and would be expected to strengthen and
maintain a desire to remain in the employ or service of the Corporation or its
subsidiaries. It is a further purpose of the Plan to provide such persons with
additional incentive and reward opportunities designed to enhance the
profitable growth of the Corporation. So that the maximum incentive can be
provided each participant in the Plan by granting such participant an Option or
award best suited to such participant's circumstances, the Plan provides for
granting "incentive stock options" (as defined in Section 422 of the Code) and
nonqualified stock options (with or without SARS), Restricted Stock Awards and
Performance Awards, or any combination of the foregoing.
3. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective upon adoption by the Board of Directors
of the Corporation. The Plan shall remain in effect until all Options granted
under the Plan have been exercised, all restrictions imposed upon Restricted
Stock Awards have been eliminated and all Performance Awards have been
satisfied.
4. ADMINISTRATION
The members of the Committee shall be selected by the Board of
Directors to administer the Plan. A majority of the Committee shall constitute
a quorum. Subject to the express provisions of the Plan, the Committee shall
have authority, in its discretion, to determine the individuals or classes of
individuals to receive Options (with or without SARS), Restricted Stock Awards
and Performance Awards, the time or times when they shall receive them, whether
an "incentive stock option" under Section 422 of the Code or nonqualified
option shall be granted, the number of shares to be subject to each Option and
Restricted Stock Award and the value of each Performance Award. In making such
determinations the Committee shall take into account
2
<PAGE> 3
the nature of the services rendered by such individuals, their present and
potential contribution to the Corporation's success, and such other factors as
the Committee shall deem relevant.
The Committee shall have such additional powers as are delegated to it
by the other provisions of the Plan and, subject to the express provisions of
the Plan, to construe the respective Option, Restricted Stock Award and
Performance Award agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan and to determine the terms,
restrictions and provisions of the Option, Restricted Stock Award and
Performance Award agreements (which need not be identical) including such
terms, restrictions and provisions as shall be requisite in the judgment of the
Committee to cause certain Options to qualify as "incentive stock options"
under Section 422 of the Code, and to make all other determinations necessary
or advisable for administering the Plan. The Committee may, in its sole
discretion and for any reason at any time, subject to the requirements imposed
under Section 162(m) of the Code and regulations promulgated thereunder in the
case of an award intended to be qualified performance-based compensation, take
action such that (i) any or all outstanding Options shall become exercisable in
part or in full, (ii) all or some of the restrictions applicable to any
outstanding Restricted Stock Award shall lapse and (iii) all or a portion of
any outstanding Performance Award shall be satisfied. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any Option, Restricted Stock Award or Performance Award agreement in the
manner and to the extent it shall deem expedient to carry it into effect, and
it shall be the sole and final judge of such expediency. The determinations of
the Committee on matters referred to in this Paragraph 4 shall be conclusive.
The Committee shall act by majority action at a meeting, except that
action permitted to be taken at a meeting may be taken without a meeting if
written consent thereto is given by all members of the Committee.
5. GRANTS OF OPTIONS, RESTRICTED STOCK AWARDS AND PERFORMANCE AWARDS;
SHARES SUBJECT TO THE PLAN
The Committee may from time to time grant both "incentive stock
options" under Section 422 of the Code and nonqualified options to purchase
shares of Common Stock (with or without SARS), Restricted Stock Awards and
Performance Awards to one or more officers, key employees or directors
determined by it to be eligible for participation in accordance with the
provisions of Paragraph 6 and providing for the issuance of such number of
shares and, in the case of Performance Awards, having such value as in the
discretion of the Committee may be fitting and proper. Subject to Paragraph 10,
not more than 2,174,433 shares of Common Stock may be issued upon exercise of
Options or SARs or pursuant to Restricted Stock Awards or Performance Awards
granted under the Plan. Performance Awards which may be exercised or paid only
in cash shall not affect the number of shares of Common Stock available for
issuance under the Plan.
The Common Stock to be offered under the Plan pursuant to Options,
SARS, Restricted Stock Awards and Performance Awards may be authorized but
unissued Common Stock or Common Stock previously issued and outstanding and
reacquired by the Corporation.
3
<PAGE> 4
The number of shares of Common Stock available for issuance under the
Plan shall be reduced by the sum of the aggregate number of shares of Common
Stock then subject to outstanding Options, Restricted Stock Awards and
outstanding Performance Awards which may be paid solely in shares of Common
Stock or in either shares of Common Stock or cash. To the extent (i) that an
outstanding Option expires or terminates unexercised or is canceled or
forfeited (other than in connection with the exercise of an SAR for Common
Stock as set forth in the immediately following sentence) or (ii) that an
outstanding Restricted Stock Award or outstanding Performance Award which may
be paid solely in shares of Common Stock or in either shares of Common Stock or
cash expires or terminates without vesting or is canceled or forfeited or (iii)
shares of Common Stock are withheld or delivered pursuant to the provisions on
Share Withholding set forth in Paragraph 11(A), then the shares of Common Stock
subject to such expired, terminated, unexercised, canceled or forfeited portion
of such Option, Restricted Stock Award or Performance Award, or the shares of
Common Stock so withheld or delivered, shall again be available for issuance
under the Plan. In the event all or a portion of an SAR is exercised, the
number of shares of Common Stock subject to the related Option (or portion
thereof) shall again be available for issuance under the Plan, except to the
extent that shares of Common Stock were actually issued upon exercise of the
SAR. The provisions of this paragraph (except the first sentence hereof) shall
also be applicable with respect to outstanding Options granted under the Stock
Incentive Plan or the Revised Stock Incentive Plan of the Corporation's
predecessor, the former Whitman Corporation.
To the extent necessary for an award hereunder to be qualified
performance-based compensation under Section 162(m) of the Code and the rules
and regulations thereunder, the maximum number of shares of Common Stock with
respect to which Options, SARs or Restricted Stock Awards or a combination
thereof may be granted during any calendar year to any person shall be 500,000,
subject to adjustment as provided in Paragraph 10. Grants of Options,
Restricted Stock Awards or Performance Awards that are canceled shall count
toward the maximum stated in the preceding sentence.
6. ELIGIBILITY
Options, Restricted Stock Awards and Performance Awards may be granted
only to persons who, at the time of the grant or award, are officers, other key
employees or directors of the Corporation or any of its present and future
subsidiaries within the meaning of Section 424(f) of the Code (herein called
subsidiaries). Options, Restricted Stock Awards or Performance Awards, or any
combination thereof, may be granted on more than one occasion to the same
person. A person who has received or is eligible to receive options to purchase
stock of any subsidiary of the Corporation or incentive awards from any
subsidiary of the Corporation will not, by reason thereof, be ineligible to
receive Options, Restricted Stock Awards or Performance Awards under the Plan
unless prohibited by the plan of such subsidiary.
Nothing in the Plan or any Option, Restricted Stock Award or
Performance Award agreement shall be construed to constitute or be evidence of
an agreement or understanding,
4
<PAGE> 5
expressed or implied, on the part of the Corporation or its subsidiaries to
employ any person for any specific period of time.
7. OPTIONS AND SARS
(A) Number of Shares. The Committee may, in its discretion, grant
Options to such eligible persons as may be selected by the Committee. With
respect to each Option, the Committee shall determine the number of shares
subject to the Option and the manner and the time of exercise of such Option.
The Committee shall make such other determinations which in its discretion
appear to be fitting and proper.
(B) Stock Option Agreement. Each Option shall be evidenced by a stock
option agreement in such form containing such provisions not inconsistent with
the provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify certain Options as
"incentive stock options" under Section 422 of the Code. An incentive stock
option may not be granted to any person who is not an employee of the
Corporation or any parent or subsidiary (as defined in Section 424 of the
Code). Each incentive stock option shall be granted within ten years of the
earlier of the date the Plan is adopted by the Corporation's Board of Directors
and the date the Plan is approved by Whitman as the sole shareholder of the
Corporation. To the extent that the aggregate fair market value (determined as
of the date of grant) of shares of Common Stock with respect to which Options
designated as incentive stock options are exercisable for the first time by a
person during any calendar year exceeds the amount (currently $100,000)
established by the Code, such Options shall be deemed to be non-qualified stock
options.
(C) Option Price and Term of Option. The purchase price per share of
the Common Stock under each Option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock
purchasable upon exercise of an incentive stock option shall not be less than
100% of the fair market value of the Common Stock at the date such Option is
granted; provided, further, that if an incentive stock option shall be granted
to any person who, at the time such Option is granted, owns capital stock of
the Corporation possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Corporation (or of any parent or
subsidiary of the Corporation) (a "Ten Percent Holder"), such purchase price
shall be the price (currently 110% of fair market value) required by the Code
in order to constitute an incentive stock option.
The period during which an Option may be exercised shall be determined
by the Committee; provided, however, that no incentive stock option shall be
exercised later than ten years after its date of grant; provided further, that
if an incentive stock option shall be granted to a Ten Percent Holder, such
option shall not be exercised later than five years after its date of grant.
The Committee shall determine whether an Option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time.
An exercisable Option, or portion thereof, may be exercised only with respect
to whole shares of Common Stock.
5
<PAGE> 6
(D) Payment. An Option may be exercised by giving written notice to the
Corporation specifying the number of shares of Common Stock to be purchased and
accompanied by payment of the purchase price in full (or arrangement made for
such payment to the Corporation's satisfaction). As determined by the Committee
at the time of grant of an Option and set forth in the agreement evidencing the
Option, the purchase price may be paid (a) in cash or (b) by delivery (either
actual delivery or by attestation procedures established by the Corporation) of
previously-owned whole shares of Common Stock (for which the holder has good
title, free and clear of all liens and encumbrances and which such holder
either (i) has held for at least six months or (ii) has purchased on the open
market) valued at their fair market value on the date of exercise. If
applicable, a person exercising an Option shall surrender to the Corporation
any SARs which are canceled by reason of the exercise of such Option.
(E) Termination of Employment or Service or Death of Holder. In the
event of any termination of the employment or service of a Holder with the
Corporation or one of its subsidiaries, other than by reason of death or, in
the case of a Holder of a nonqualified option, Retirement, the Holder may
(unless otherwise provided in the Option agreement) exercise each Option held
by such Holder at any time within three months (or one year if the Holder is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code) after such termination of employment or service, but only if and to the
extent such Option is exercisable at the date of such termination of employment
or service, and in no event after the date on which such Option would otherwise
terminate; provided, however, that if such termination of employment or service
is for cause or voluntary on the part of the Holder without the written consent
of the Corporation, any Option held by such Holder under the Plan shall
terminate unless otherwise provided in the Option agreement.
In the event of the termination of employment or service of a Holder of
a nonqualified option by reason of Retirement, then each nonqualified option
held by the Holder shall be fully exercisable, and, subject to the following
paragraph, such nonqualified option shall be exercisable by the Holder at any
time up to and including (but not after) the date on which the nonqualified
option would otherwise terminate (unless otherwise provided in the Option
Agreement).
Unless otherwise provided in the Option Agreement, in the event of the
death of a Holder (i) while employed by or providing service to the Corporation
or one of its subsidiaries or after Retirement, (ii) within three months after
termination of the Holder's employment or service, other than a termination by
reason of permanent and total disability within the meaning of Section 22(e)(3)
of the Code, or (iii) within one year after termination of the Holder's
employment or service by reason of such disability, then each Option held by
such Holder shall be fully exercisable and may be exercised by the legatees of
the Holder under his last will, or by his personal representatives or
distributees, at any time within a period of one year after the Holder's death,
but in no event after the date on which such Option would otherwise terminate.
(F) Privileges of the Holder as Shareholder. The Holder shall be
entitled to all the privileges and rights of a shareholder with respect only to
such shares of Common Stock as have been actually purchased under the Option
and registered in the Holder's name.
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<PAGE> 7
(G) SARS. The Committee may, in its sole discretion, grant an SAR
(concurrently with the grant of the Option or, in the case of a nonqualified
option which is not intended to be qualified performance-based compensation
under Section 162(m) of the Code and the rules and regulations thereunder,
subsequent to such grant) to any Holder of any Option granted under the Plan
(or such Holder's legatees, personal representatives or distributees then
entitled to exercise such Option). An SAR may be exercised (i) by giving
written notice to the Corporation specifying the number of SARs which are being
exercised and (ii) by surrendering to the Corporation any Options which are
canceled by reason of the exercise of the SAR. An SAR shall be exercisable upon
such additional terms and conditions as may from time to time be prescribed by
the Committee. No fractional share shall be issued upon the exercise of any
SAR.
(H) Non-Transferability. Unless otherwise specified in the agreement
evidencing an Option or SAR, no Option or SAR hereunder shall be transferable
other than by will or the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Corporation. Except to the
extent permitted by the foregoing sentence, each Option or SAR may be exercised
during the Holder's lifetime only by the Holder or the Holder's legal
representative or similar person. Except as permitted by the second preceding
sentence, no Option or SAR hereunder shall be sold, transferred, assigned,
pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or
similar process. Upon any attempt to so sell, transfer, assign, pledge,
hypothecate, encumber or otherwise dispose of any Option or SAR hereunder, such
Option or SAR and all rights thereunder shall immediately become null and void.
8. RESTRICTED STOCK AWARDS
(A) Restriction Period to Be Established by the Committee. At the time
of the making of a Restricted Stock Award, the Committee shall establish a
period of time (the "Restriction Period") applicable to such award. The
Committee may establish different Restriction Periods from time to time and
each Restricted Stock Award may have a different Restriction Period, in the
discretion of the Committee.
(B) Other Terms and Conditions. Common Stock, when awarded pursuant to
a Restricted Stock Award, shall be represented by a stock certificate or
book-entry credits registered in the name of the Holder who receives the
Restricted Stock Award or a nominee for the benefit of the Holder. The Holder
shall have the right to receive dividends (or the cash equivalent thereof)
during the Restriction Period and shall also have the right to vote such Common
Stock and all other shareholder's rights (in each case unless otherwise
provided in the agreement evidencing the Restricted Stock Award), with the
exception that (i) the Holder shall not be entitled to delivery of the stock
certificate (or the removal of restrictions in the Corporation's books and
records) until the Restriction Period established by the Committee pursuant to
Paragraph 8(A) shall have expired, (ii) the Corporation shall retain custody of
the stock certificate during the Restriction Period, (iii) the Holder may not
sell, transfer, pledge, exchange, hypothecate or dispose of such Common Stock
during the Restriction Period, and (iv) a breach of restriction or breach of
terms and conditions established by the Committee
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<PAGE> 8
pursuant to the Restricted Stock Award shall cause a forfeiture of the
Restricted Stock Award. If requested by the Corporation, a Holder of a
Restricted Stock Award shall deposit with the Corporation stock powers or other
instruments of assignment (including a power of attorney), each endorsed in
blank with a guarantee of signature if deemed necessary or appropriate by the
Corporation, which would permit transfer to the Corporation of all or a portion
of the shares of Common Stock subject to the Restricted Stock Award in the
event such award is forfeited in whole or in part. A distribution with respect
to shares of Common Stock, other than a distribution in cash, shall be subject
to the same restrictions as the shares of Common Stock with respect to which
such distribution was made, unless otherwise determined by the Committee. The
Committee may, in addition, prescribe additional restrictions, terms or
conditions upon or to the Restricted Stock Award in the manner prescribed by
Paragraph 4. The Committee may, in its sole discretion, also establish rules
pertaining to the Restricted Stock Award in the event of termination of
employment or service (by Retirement, disability, death or otherwise) of a
Holder of such award prior to the expiration of the Restriction Period.
(C) Restricted Stock Award Agreement. Each Restricted Stock Award shall
be evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve.
(D) Payment for Restricted Stock. Restricted Stock Awards may be made
by the Committee whereby the Holder receives Common Stock subject to those
terms, conditions and restrictions established by the Committee but is not
required to make any payment for said Common Stock. The Committee may also
establish terms as to each Holder whereby such Holder, as a condition to the
Restricted Stock Award, is required to pay, in cash or other consideration, all
(or any lesser amount than all) of the fair market value of the Common Stock,
determined as of the date the Restricted Stock Award is made.
(E) Termination of Employment or Service or Death of Holder. A
Restricted Stock Award shall terminate for all purposes if the Holder does not
remain continuously in the employ or service of the Corporation or a subsidiary
at all times during the applicable Restriction Period, except as may otherwise
be determined by the Committee.
9. PERFORMANCE AWARDS
(A) Performance Period. The Committee shall establish with respect to
each Performance Award a performance period over which performance shall be
measured. The performance period shall be established at the time of such
award.
(B) Performance Awards. Each Performance Award shall have a maximum
value established by the Committee at the time of such award.
(C) Performance Measures. Performance Awards shall be awarded to an
eligible person contingent upon future performance of the Corporation and/or a
designated subsidiary, division or department of the Corporation over the
performance period. The Committee shall establish the performance measures
applicable to such performance. The performance measures
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<PAGE> 9
determined by the Committee shall be established prior to the beginning of each
performance period but, except as necessary to qualify a Performance Award as
"performance-based compensation" under Section 162(m) of the Code and the rules
and regulations thereunder, may be subject to such later revisions to reflect
significant, unforeseen events or changes, as the Committee shall deem
appropriate.
(D) Award Criteria. In determining the value of Performance Awards, the
Committee shall take into account an eligible person's responsibility level,
performance, potential, cash compensation level, unexercised stock options,
other incentive awards and such other considerations as it deems appropriate.
Notwithstanding the preceding sentence, to the extent necessary for a
Performance Award to be qualified performance-based compensation under Section
162(m) of the Code and the rules and regulations thereunder, the performance
period shall be not less than three years and, if a Performance Award is
payable in shares of Common Stock, the maximum number of shares that may be
paid under the Performance Award during such performance period shall be
500,000 and, if a Performance Award is payable in cash, the maximum amount that
may be paid under the Performance Award during such performance period shall be
$10,000,000.
(E) Payment. Following the end of each performance period, the Holder
of each Performance Award shall be entitled to receive payment of an amount,
not exceeding the maximum value of the Performance Award, based on the
achievement of the performance measures for such performance period, as
deter-mined by the Committee. Payment of Performance Awards may be made wholly
in cash, wholly in shares of Common Stock or a combination thereof, all at the
discretion of the Committee. Payment shall be made in a lump sum or in
installments, and shall be subject to such vesting and other terms and
conditions as may be prescribed by the Committee for such purpose.
Notwithstanding anything contained herein to the contrary, in the case of a
Performance Award intended to be qualified performance-based compensation under
Section 162(m) and the rules and regulations thereunder, no payment shall be
made under any such Performance Award until the Committee certifies in writing
that the performance measures for the performance period have in fact been
achieved.
(F) Termination of Employment or Service or Death of Holder. A
Performance Award shall terminate for all purposes if the Holder does not
remain continuously in the employ or service of the Corporation or a subsidiary
at all times during the applicable performance period, except as may otherwise
be determined by the Committee.
In the event that a Holder of a Performance Award ceases to be an
employee or director of the Corporation or a subsidiary following the end of
the applicable performance period but prior to full payment according to the
terms of the Performance Award, payment shall be made in accordance with terms
established by the Committee for the payment of such Performance Award.
(G) Other Terms and Conditions. When a Performance Award is payable in
installments in Common Stock, if determined by the Committee, one or more stock
certificates or book-entry credits registered in the name of the Holder
representing shares of Common Stock which would
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<PAGE> 10
have been issuable to the Holder of the Performance Award if such payment had
been made in full on the day following the end of the applicable performance
period may be registered in the name of such Holder, and during the period
until such installment becomes due such Holder shall have the right to receive
dividends (or the cash equivalent thereof) and shall also have the right to
vote such Common Stock and all other shareholder's rights (in each case unless
otherwise provided in the agreement evidencing the Performance Award), with the
exception that (i) the Holder shall not be entitled to delivery of any stock
certificate until the installment payable in shares becomes due, (ii) the
Corporation shall retain custody of any stock certificates until such time and
(iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or
dispose of such Common Stock until such time. A distribution with respect to
shares of Common Stock payable in installments which has not become due, other
than a distribution in cash, shall be subject to the same restrictions as the
shares of Common Stock with respect to which such distribution was made, unless
otherwise determined by the Committee.
(H) Performance Award Agreements. Each Performance Award shall be
evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve.
10. ADJUSTMENTS UPON CHANGES in CAPITALIZATION; CHANGE IN CONTROL
(A) Notwithstanding any other provision of the Plan, each Option,
Restricted Stock Award or Performance Award agreement may contain such
provisions as the Committee shall determine to be appropriate for the
adjustment of (i) the number and class of shares or other consideration subject
to any Option or to be delivered pursuant to any Restricted Stock Award or
Performance Award and (ii) the Option or Restricted Stock Award price, in the
event of a stock dividend, spin-off, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, or the like. In such event,
the maximum number and class of shares available under the Plan, and the number
and class of shares subject to Options, SARS, Restricted Stock Awards or
Performance Awards, shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
(B)(i) In the event of a "change in control" (as hereinafter defined)
pursuant to subparagraph (C)(i) or (ii) below, or in the event of a change in
control pursuant to subparagraph (C)(iii) or (iv) below in connection with
which the holders of Common Stock receive consideration other than shares of
common stock that are registered under Section 12 of the Exchange Act:
(1)(x) each Option granted under the Plan shall be exercisable
in full, (y) each Holder of an Option shall receive from the
Corporation within 60 days after the change in control, in exchange for
the surrender of the Option or any portion thereof to the extent the
Option is then exercisable in accordance with clause (x), an amount in
cash equal to the difference between the fair market value (as
determined by the Committee) on the date of the change in control of
the Common Stock covered by the Option or portion thereof which is so
surrendered and the purchase price of such Common Stock under the
Option
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<PAGE> 11
and (z) each SAR shall be surrendered by the Holder thereof and shall
be canceled simultaneously with the cancellation of the related Option;
(2) each Holder of a Restricted Stock Award shall receive from
the Corporation within 60 days after the change in control, in exchange
for the surrender of the Restricted Stock Award, an amount in cash
equal to the fair market value (as determined by the Committee) on the
date of the change in control of the Common Stock subject to the
Restricted Stock Award;
(3) each Holder of a Performance Award for which the performance
period has not expired shall receive from the Corporation within 60
days after the change in control, in exchange for the surrender of the
Performance Award, an amount in cash equal to the product of the value
of the Performance Award and a fraction the numerator of which is the
number of whole months which have elapsed from the beginning of the
performance period to the date of the change in control and the
denominator of which is the number of whole months in the performance
period; and
(4) each Holder of a Performance Award that has been earned but
not yet paid shall receive an amount in cash equal to the value of the
Performance Award.
(ii) Notwithstanding any other provision of the Plan or any
agreement relating to an Option, Restricted Stock Award or Performance Award,
in the event of a change in control pursuant to subparagraph (C)(iii) or (iv)
below in connection with which the holders of Common Stock receive shares of
common stock that are registered under Section 12 of the Exchange Act:
(1) each Option and SAR granted under the Plan shall be
exercisable in full;
(2) the Restriction Period applicable to any outstanding
Restricted Stock Award shall lapse and, if applicable, any other
restrictions, terms or conditions shall lapse and/or be deemed to be
satisfied at the maximum value or level;
(3) the performance measures applicable to any outstanding
Performance Award shall be deemed to be satisfied at the maximum value;
and
(4) there shall be substituted for each share of Common Stock
remaining available for issuance under the Plan, whether or not then
subject to an outstanding Option (and SAR), Restricted Stock Award or
Performance Award, the number and class of shares into which each
outstanding share of Common Stock shall be converted pursuant to such
Change in Control. In the event of any such substitution, the purchase
price per share in the case of any award shall be appropriately
adjusted by the Committee (whose determination shall be conclusive),
such adjustments to be made without any increase in the aggregate
purchase price.
(C) For purposes of this paragraph, the term "change in control"
shall mean:
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<PAGE> 12
(i) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act, of
25% or more of either (x) the then outstanding shares of common stock
of the Corporation (the "Outstanding Common Stock") or (y) the combined
voting power of the then outstanding securities of the Corporation
entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); excluding, however, the following:
(1) any acquisition directly from the Corporation (excluding any
acquisition resulting from the exercise of an exercise, conversion or
exchange privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Corporation), (2) any
acquisition by the Corporation, (3) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation or (4) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (1), (2) and (3) of clause (iii) in this definition of
change in control;
(ii) individuals who, as of the effective date of the Plan,
constitute the Board of Directors of the Corporation (the "Incumbent
Board") cease for any reason to constitute at least a majority of such
Board; provided, however, that any individual who becomes a director of
the Corporation subsequent to such effective date whose election, or
nomination for election by the Corporation's shareholders, was approved
by the vote of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent Board; and
provided further, that any individual who was initially elected as a
director of the Corporation as a result of an actual or threatened
election contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any
Person other than the Board of Directors shall not be deemed a member
of the Incumbent Board;
(iii) the consummation of a reorganization, merger or
consolidation of the Corporation or sale or other disposition of all or
substantially all of the assets of the Corporation (a "Corporate
Transaction"); excluding, however, a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals or entities who
are the beneficial owners, respectively, of the Outstanding Common
Stock and the Outstanding Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly,
more than 66 2/3% of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of
such corporation entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation
which as a result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly or
indirectly) in substantially the same proportions relative to each
other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Common Stock and the Outstanding Voting
Securities, as the case may be, (2) no Person (other than: the
Corporation; any employee
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<PAGE> 13
benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation; the
corporation resulting from such Corporate Transaction; and any Person
which beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, 25% or more of the Outstanding
Common Stock or the Outstanding Voting Securities, as the case may be)
will beneficially own, directly or indirectly, 25% or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power
of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (3) individuals who were
members of the Incumbent Board will constitute at least a majority of
the members of the board of directors of the corporation resulting from
such Corporate Transaction; or
(iv) the consummation of a plan of complete liquidation or
dissolution of the Corporation.
(D) With respect to any Holder of an Option or SAR who is
subject to Section 16 of the Exchange Act, (i) notwithstanding the
exercise periods set forth in Paragraph 7(E) or as set forth pursuant
to Paragraph 7(E) in any agreement evidencing such Option or SAR and
(ii) notwithstanding the expiration date of the term of such Option or
SAR, in the event the Corporation is involved in a business combination
which is intended to be treated as a pooling of interests for financial
accounting purposes (a "Pooling Transaction") or pursuant to which such
Holder receives a substitute option to purchase securities of any
entity, including an entity directly or indirectly acquiring the
Corporation, then each Option or SAR (or option or stock appreciation
right in substitution thereof) held by such Holder shall be exercisable
to the extent set forth in the Plan or the agreement evidencing such
Option or SAR until and including the latest of (x) the expiration date
of the term of the Option or SAR or, in the event of such Holder's
termination of employment or service, the date determined pursuant to
Paragraph 7(E), (y) the date which is six months and ten business days
after the consummation of such business combination and (z) the date
which is ten business days after the date of expiration of any period
during which such Holder may not dispose of a security issued in the
Pooling Transaction in order for the Pooling Transaction to be
accounted for as a pooling of interests.
11. WITHHOLDING TAXES
(A) If provided in the agreement evidencing an Option, SAR, Restricted
Stock Award or Performance Award, the Holder thereof may elect, by written
notice to the Corporation at the office of the Corporation designated for that
purpose, to pay through withholding by the Corporation all or a portion of the
estimated federal, state, local and other taxes arising from (1) the exercise
of an Option or SAR and (2) the vesting or distribution of shares of Common
Stock pursuant to a Restricted Stock Award or Performance Award (a) by having
the Corporation withhold shares of Common Stock or (b) by delivering
previously-owned shares (collectively, "Share Withholding"), in each case being
such number of shares of Common
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<PAGE> 14
Stock as shall have a fair market value equal to the amount of taxes to be
withheld, rounded up to the nearest whole share.
(B) A Share Withholding election shall be subject to disapproval by the
Corporation.
(C) If the date as of which the amount of tax to be withheld is
determined (the "Tax Date") is deferred until after the exercise of an Option
or SAR, the expiration of the Restriction Period applicable to a Restricted
Stock Award or the payment of a Performance Award, and if the Holder elects
Share Withholding, the Corporation shall issue to the Holder the full number of
shares of Common Stock, if any, resulting from such exercise, expiration or
payment and the Holder shall be unconditionally obligated to deliver to the
Corporation on the Tax Date such number of shares of Common Stock as shall have
an aggregate fair market value equal to the amount to be withheld on the Tax
Date, rounded up to the nearest whole share.
(D) The fair market value of shares of Common Stock used for payment of
taxes, as provided in this Paragraph 11, shall be the mean sale price per
share, as reported for New York Stock Exchange Composite Transactions, on the
Tax Date.
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<PAGE> 15
12. TERMINATION OF PLAN
The Plan may be terminated at any time by the Board of Directors,
except with respect to any Options, SARS, Restricted Stock Awards or
Performance Awards then outstanding. The Corporation reserves the right to
restrict, in whole or in part, the exercise of any Options or SARs or the
delivery of Common Stock pursuant to any Restricted Stock Awards or Performance
Awards granted under the Plan until such time as:
(A) any legal requirements or regulations have been met relating
to the issuance of the shares covered thereby or to their registration
under the Securities Act of 1933 or to any applicable State laws; and
(B) satisfactory assurances are received that the shares when
issued will be duly listed on the New York Stock Exchange, Inc.
13. AMENDMENT OF THE PLAN
The Board of Directors may amend the Plan; provided, however, that
without approval of the shareholders the Board of Directors may not amend the
Plan, subject to Paragraph 10, to (a) increase the maximum number of shares
which may be issued on exercise of Options or SARs or pursuant to Restricted
Stock Awards or Performance Awards granted under the Plan or (b) effect any
change inconsistent with Section 422 of the Code.
14. EFFECT OF THE PLAN
Neither the adoption of the Plan nor any action of the Board of
Directors or of the Committee shall be deemed to give any person any right to
be granted an Option, a right to a Restricted Stock Award or a right to a
Performance Award or any rights hereunder except as may be evidenced by an
Option agreement, Restricted Stock Award agreement or Performance Award
agreement, duly executed on behalf of the Corporation, and then only to the
extent and on the terms and conditions expressly set forth therein.
15
<PAGE> 1
EXHIBIT 10b
NONQUALIFIED STOCK OPTION
NONQUALIFIED STOCK OPTION AGREEMENT dated as of
______________________, between WHITMAN CORPORATION, a
Delaware corporation (the "Corporation"), and
_____________________, an employee of the Corporation
or one of its subsidiaries (the "Holder").
WHEREAS, the Corporation desires, by affording the Holder an opportunity
to purchase shares of the Corporation's Common Stock as hereinafter provided,
to carry out the purposes of the Corporation's Revised Stock Incentive Plan (the
"Plan");
WHEREAS, the Management Resources and Compensation Committee of the Board
of Directors of the Corporation (the "Committee") has duly made all
determinations necessary or appropriate to the grant hereof,
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth and for other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto have agreed, and do hereby
agree, as follows:
1. The Corporation hereby irrevocably grants to the Holder, as a matter of
separate agreement and not in lieu of salary or any other compensation for
services, the right and option (the "Option"), to purchase __________ shares of
Common Stock of the Corporation on the tame and conditions herein set forth.
2. For each of said shares, purchase the Holder shall pay to the
Corporation $____________ per share (the "Option Price"),
3. Subject to the provisions of paragraphs 7, 8 and 9 hereof, this Option
shall be for a term of ten years from the date hereof and shall become
exercisable as to one-third of the shares covered by this Option on the first
anniversary hereof, as to two-thirds of the shares covered by this Option on
the second anniversary hereof (reduced by such number of shares as may have
theretofore been purchased hereunder after the first anniversary), and as to all
shares covered by this Option and not theretofore purchased on the third
anniversary hereof. The Corporation shall not be required to issue any
fractional shares upon exercise of this Option, and any fractional interests
resulting from the calculation of the number of shares in respect of which this
Option may be exercised prior to the third anniversary hereof shall be rounded
down to the nearest whole share. Except as provided in paragraphs 7, 8 and 9
hereof, this Option may not be exercised unless the Holder shall, at the time of
exercise, be an employee of the Corporation or one of its "subsidiaries", as
defined in the Plan.
<PAGE> 2
4. This Option may be exercised only by one or more notices in writing of
the Holder's intent to exercise this Option, accompanied by payment by check to
the Corporation in an amount equal to the aggregate Option Price of the total
number of whole shares then being purchased. Unless otherwise specified by the
Corporation, each such notice and check shall be delivered to Muriel E. Ramsey,
Manager of Administrative Services, at the principal office of the Corporation
or, at the risk of the Holder, mailed to said Muriel E. Ramsey at said office.
5. Following the exercise of this Option, the Corporation will advise the
Holder of the applicable Federal, state and FICA taxes required to be withheld
by reason of such exercise. Thereupon, the Holder shall forthwith deliver to the
Corporation a check payable to the Corporation or the subsidiary of the
Corporation which employs the Holder, as the case may be, representing said
taxes.
6. This Option is not transferable by the Holder otherwise than by will or
the laws of descent and distribution and may be exercised, during the lifetime
of the Holder, only by the Holder.
7. In the event of the termination of employment of the Holdier with the
Corporation or one of its subsidiaries, other than by reason of Retirement (as
defined in the Plan) or death, the Holder may exercise this Option at any time
within three months (or one Year, if the Holder is permanently and totally
disabled within the meaning of Section 22(e)(3) of the Federal Internal Revenue
Code) after such termination of employment, but only if and to the extent this
Option was exercisable at the date of termination, and in no event after the
date on which this Option would otherwise terminate; provided however, if such
termination of employment was for cause or a voluntary termination without the
written consent of the Corporation, then this Agreement shall be of no further
force or effect and all rights of the Holder under this Option shall thereupon
cease.
8. In the event of the termination of employment of the Hold with the
Corporation or one of its subsidiaries by reason of Retirement, then all shares
subject to this Option shall be fully exercisable, and, subject to paragraph 9
hereof, this Option shall be exercisable by the Holder at any time up to and
including (but not after) the date on which this Option would otherwise
terminate.
9. In the event of the death of the Holder (i) while employed by the
Corporation or one of its subsidiaries or after Retirement, (ii) within three
months after termination of the Holder's employment (other than a termination by
reason of permanent and total disability within the meaning of Section 22(e)(3)
of the Federal Internal Revenue Code), or (iii) within one year after
termination of the Holder's employment by reason of such disability, then all
shares subject to this Option shall be fully exercisable and this Option may be
exercised by the legatees under the last will of the Holder, or by the personal
representatives or distributees of the Holder, at any time within a period of
one year after the Holder's death, but in no event after the date on which this
Option would otherwise terminate.
2
<PAGE> 3
10. If, prior to the termination of this Option, the number of outstanding
shares of Common Stock of the Corporation shall be increased or decreased by
reason, stock split, stock dividend, reverse stock split or combination thereof,
then the number of shares at the time subject to this Option, the number of
shares reserved for issuance pursuant to exercise hereof, and the Option Price
per share shall be proportionately adjusted without any change in the aggregate
Option Price therefor.
11. If, prior to the termination of this Option, the outstanding shares of
Common Stock of the Corporation shall be affected by any change other than those
specifically mentioned in the preceding paragraph (e.g., by reason of a
spin-off, split-up, recapitalization, merger, consolidation, combination or
exchange of shares), then the aggregate number and class of shares thereafter
subject to this Option and the Option Price thereof, and the number and class of
shares reserved for issuance pursuant to exercise hereof, may be appropriately
adjusted in such manner as the Committee shall in its sole discretion determine
to be equitable and consistent with the purposes of the Plan. Such determination
shall be conclusive for all purposes of this Option
12. This Option and each and every obligation of the Corporation hereunder
are subject to the requirement that if at any time the Corporation shall
determine, upon advice of counsel, that the listing, registration, or
qualification of the shares covered hereby, upon any securities exchange or
under any state or Federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of or in connection
with the granting of this Option or the purchase of shares hereunder, this
Option may not be exercised, in whole or in part unless and until such listing
registration, qualification, consent or approval shall have been effected
obtained free of any conditions not acceptable to the Board of Directors of the
Corporation.
13. In the event of a "change in control" or a "Pooling Transaction," as
those terms are defined in the Plan, the Holder shall have all of the rights
specified in Paragraph 1O(B) and, if applicable, Paragraph 10(D) of the Plan;
provided, however, that the acquisition or ownership by PepsiCo, Inc. together
with its subsidiaries and affiliates, of Common Stock of the Corporation or its
successor by merger constituting less than 50% of the total number of shares of
such Common Stock outstanding shall not constitute a "change in control" for any
purpose of Paragraph 10 of the Plan.
14. Nothing herein contained shall confer on the Holder any right to
continue in the employment of the Corporation or any of its subsidiaries or
interfere in any way with right of the Corporation or any subsidiary to
terminate the Holder's employment at anytime; confer on the Holder any of the
rights of a shareholder with respect to any of the shares subject to this
Option until such shares shall be issued upon the exercise of this Option;
affect the Holder's right to participate in and receive benefits under and in
accordance with the provisions of any pension, profit-sharing, insurance, or
other employee benefit plan or program of the Corporation or any of its
subsidiaries; or limit or otherwise affect the right of the Board of Directors
of the Corporation
3
<PAGE> 4
(subject to any required approval, by the shareholders) at any time or from time
to time to alter, amend, suspend or discontinue the Plan and the rules for its
administration, provided, however, that no termination or amendment of the Plan
may, without the consent of the Holder, adversely affect the Holder's rights
under this Option.
IN WITNESS WHEREOF, this Nonqualified Stock Option Agreement has been duly
executed by the Corporation and the Holder as of the day and year first above
written.
WHITMAN CORPORATION
By:
------------------------------------
Senior Vice President
------------------------------------
Holder
5/20/99
4
<PAGE> 1
EXHIBIT 10c
5/21/99
CHANGE IN CONTROL AGREEMENT
This CHANGE IN CONTROL AGREEMENT dated ______________, among
WHITMAN CORPORATION, a Delaware corporation (the "Company"), PEPSI-COLA GENERAL
BOTTLERS, INC., a Delaware corporation ("Pepsi General"), and __________________
(the "Executive").
WHEREAS, the Company's Board of Directors has determined that,
in light of the importance of the Executive's continued services to the
stability and continuity of management of the Company and its subsidiaries, it
is appropriate and in the best interests of the Company and of its shareholders
to reinforce and encourage the Executive's continued disinterested attention and
undistracted dedication to his duties in the potentially disturbing
circumstances of a possible change in control of the Company by providing some
degree of personal financial security;
WHEREAS, Pepsi General is a wholly-owned Subsidiary of the
Company;
WHEREAS, in order to induce the Executive to remain in the
employ of the Company or a subsidiary of the Company (a "Subsidiary"), the
Company's Board of Directors has determined that it is desirable to pay the
Executive the severance compensation set forth below if the Executive's
employment with the Company or a Subsidiary terminates in one of the
circumstances described below following a Change in Control (as defined below);
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the Company and the Executive
agree as follows:
1. Term of Agreement. (a) The term of this Agreement shall
commence on the date hereof (the "Effective Date") and shall terminate, except
to the extent that any obligation of the Company hereunder remains unpaid as of
such time, on the earlier to occur of the date on which the Executive reaches
age 65 and the third anniversary of the Effective Date, subject to extension as
provided in Section 1(b) below; provided, however, that this Agreement shall
continue in effect until the earlier to occur of the date on which the Executive
reaches age 65 and the date three years beyond the initial or any extended date
of termination of this
<PAGE> 2
Agreement if a Change in Control shall have occurred prior to such date of
termination of this Agreement (and shall continue for such additional period as
any obligation of the Company under this Agreement shall remain unpaid).
(b) Commencing on the date after the Effective Date
and continuing on each date thereafter (each such date being hereinafter
referred to as a "Renewal Date"), the term of this Agreement shall be
automatically extended so as to terminate three years thereafter, unless at
least 60 days prior to a specified Renewal Date the Company shall give written
notice to the Executive that the term of this Agreement shall not be so
extended.
2. Change in Control. No compensation shall be payable under
this Agreement unless and until (a) there shall have been a Change in Control
while the Executive is still an employee of the Company or a Subsidiary, and (b)
the Executive's employment by the Company or a Subsidiary thereafter shall have
been terminated in accordance with Section 3 of this Agreement.
For purposes of this Agreement, a "Change in Control" shall
mean:
(i) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of 50% or more of either (A) the then
outstanding shares of common stock of the Company (the
"Outstanding Common Stock") or (B) the combined voting power
of the then outstanding securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Voting Securities"); excluding, however, the following: (1)
any acquisition by the Company, (2) any acquisition by an
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the
Company or (3) any acquisition by any corporation pursuant to
a transaction which complies with clauses (A), (B) and (C) of
clause (iii) in this definition of Change in Control;
(ii) individuals who, as of the Effective Date, constitute the
Board of Directors of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of such
Board; provided that any individual who becomes a director of
the Company subsequent to the Effective Date whose election,
or nomination for election by the Company's shareholders, was
approved by the vote of at least a majority of the directors
then comprising the Incumbent Board shall be deemed a member
of the Incumbent Board; and provided further, that any
individual who was initially elected as a director of the
Company as a result of an actual or threatened election
contest, as such terms are used in Rule 14a-11 of Regulation
2
<PAGE> 3
14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf
of any Person other than the Board shall not be deemed a
member of the Incumbent Board;
(iii) the consummation of a reorganization, merger or
consolidation of the Company or sale or other disposition of
all or substantially all of the assets of the Company (a
"Corporate Transaction"); excluding, however, a Corporate
Transaction pursuant to which (A) all or substantially all of
the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Common Stock and the
Outstanding Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or
indirectly, more than 80% of, respectively, the outstanding
shares of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
indirectly) in substantially the same proportions relative to
each other as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Common Stock and the
Outstanding Voting Securities, as the case may be, (B) no
Person (other than: the Company; any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; the corporation
resulting from such Corporate Transaction; and any Person
which beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, 25% or more of the
Outstanding Common Stock or the Outstanding Voting Securities,
as the case may be) will beneficially own, directly or
indirectly, 50% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors and (C) individuals who
were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(iv) the consummation of a plan of complete liquidation or
dissolution of the Company.
3. Termination Following Change in Control. (a) If a Change in
Control shall have occurred while the Executive is still an employee of the
Company or a Subsidiary, the Executive shall be entitled to the compensation
provided in Section 4 of this Agreement upon the subsequent termination of the
Executive's employment with the Company or Subsidiary within three years of the
date upon which the Change in Control shall have occurred, unless such
termination is as a result of (i) the Executive's death, (ii) the Executive's
Disability (as defined in Section 3(b) below), (iii) the Executive's Retirement
(as defined in Section 3(c) below), (iv) the
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<PAGE> 4
Executive's termination for Cause (as defined in Section 3(d) below), or (v) the
Executive's decision to terminate employment other than for Good Reason (as
defined in Section 3(e) below). Notwithstanding anything to the contrary in this
Agreement, if a Change in Control occurs and if the Executive's employment with
the Company or a Subsidiary was terminated prior to the date on which the Change
in Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who had
taken steps reasonably calculated to effect the Change in Control, or (ii)
otherwise arose in connection with or anticipation of the Change in Control,
then for all purposes of this Agreement, the termination of the Executive's
employment shall be deemed to have occurred immediately following the Change in
Control.
(b) Disability. If, as a result of the Executive's
incapacity due to a medically determinable physical or mental illness which can
be expected to be permanent or of indefinite duration (as certified in writing
by a physician selected by the Company and reasonably acceptable to the
Executive), the Executive shall qualify for benefits under the long-term
disability plan of the Company or a Subsidiary and shall have been absent from
his duties with the Company or a Subsidiary on a full-time basis for a
continuous period of six months commencing with the date of the Change in
Control or the first day of such absence (whichever is later) the Company or
such Subsidiary may terminate the Executive's employment for "Disability"
without the Executive being entitled to the compensation provided in Section 4.
(c) Retirement. The term "Retirement" as used in this
Agreement shall mean termination by the Company or a Subsidiary or the
Executive of the Executive's employment based on the Executive having reached
age 65 without the Executive being entitled to the compensation provided in
Section 4. Termination based on "Retirement" shall not include, for purposes of
this Agreement, the Executive's taking of early retirement by reason of a
termination by the Executive of his employment for Good Reason.
(d) Cause. The Company or a Subsidiary may terminate
the Executive's employment for Cause without the Executive being entitled to
the compensation provided in Section
4
<PAGE> 5
4. For purposes of this Agreement, the Company or Subsidiary shall have "Cause"
to terminate the Executive's employment only on the basis of (i) the Executive's
wilful and continued failure substantially to perform his duties with the
Company or Subsidiary (other than any such failure resulting from his incapacity
due to physical or mental illness or any such failure resulting from the
Executive's termination for Good Reason), after a written demand for substantial
performance is delivered to the Executive by the Chief Executive Officer (or if
the Executive is Chief Executive Officer, by the Board of Directors) which
specifically identifies the manner in which the Chief Executive Officer (or the
Board of Directors if the Executive is Chief Executive Officer) believes that
the Executive has not substantially performed his duties, or (ii) the
Executive's wilful engagement in gross conduct materially and demonstrably
injurious to the Company or a Subsidiary. For purposes of this subsection, no
act or failure to act on the Executive's part shall be considered "wilful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company or a Subsidiary. The Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a written statement of the Chief Executive Officer (or if the
Executive is Chief Executive Officer, a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the entire membership of the
Board of Directors at a duly convened meeting of the Board of Directors),
finding that in the good faith opinion of the Chief Executive Officer (or the
Board of Directors if the Executive is Chief Executive Officer) the Executive
was guilty of conduct set forth in clause (i) or (ii) of the second sentence of
this Section 3(d) and specifying the particulars thereof in detail.
(e) Good Reason. The Executive may terminate the
Executive's employment with the Company or a Subsidiary for Good Reason within
three years after a Change in Control and during the term of this Agreement and
become entitled to the compensation provided in Section 4. For purposes of this
Agreement, "Good Reason" shall mean any of the following events, unless it
occurs with the Executive's express prior written consent:
(i) the assignment to the Executive by the Company or
a Subsidiary of any duties inconsistent with, or a diminution
of, the Executive's position, duties, titles,
5
<PAGE> 6
offices, responsibilities or status with the Company or a
Subsidiary immediately prior to a Change in Control, or any
removal of the Executive from or any failure to reelect the
Executive to any of such positions, except in connection with
the termination of the Executive's employment for Disability,
Retirement or Cause or as a result of the Executive's death or
by the Executive other than for Good Reason;
(ii) a reduction by the Company or a Subsidiary in
the Executive's base salary as in effect on the date hereof or
as the same may be increased from time to time during the term
of this Agreement or the Company's or Subsidiary's failure to
increase (within 15 months of the Executive's last increase in
base salary) the Executive's base salary after a Change in
Control in an amount which is substantially similar, on a
percentage basis, to the average percentage increase in base
salary for all officers of the Company or the Subsidiary
effected during the preceding 12 months, other than a
reduction of the Executive's base salary pursuant to the terms
of the short-term or long-term disability plans of the Company
or a Subsidiary during a period in which the Executive is
disabled (within the meaning of such plan or plans) and
qualifies for benefits under such plan or plans;
(iii) any failure by the Company or a Subsidiary to
continue in effect any benefit plan or arrangement (including,
without limitation, any pension or retirement plan, employee
stock ownership plan, group life insurance plan, medical,
dental, accident and disability plans and educational
assistance reimbursement plan) in which the Executive is
participating at the time of a Change in Control (or to
substitute and continue other plans providing the Executive
with substantially similar benefits) (hereinafter referred to
as "Benefit Plans"), the taking of any action by the Company
or a Subsidiary which would adversely affect the Executive's
participation in or materially reduce the
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<PAGE> 7
Executive's benefits under any such Benefit Plan or deprive
the Executive of any material fringe benefit enjoyed by the
Executive at the time of a Change in Control, or the failure
by the Company or Subsidiary to provide the Executive with the
number of paid vacation days to which the Executive is
entitled in accordance with the vacation policies in effect at
the time of a Change in Control;
(iv) any failure by the Company or a Subsidiary to
continue in effect any incentive plan or arrangement
(including, without limitation, the Company's annual bonus and
contingent bonus arrangements and credits and the right to
receive performance awards and similar incentive compensation
benefits) in which the Executive is participating at the time
of a Change in Control (or to substitute and continue other
plans or arrangements providing the Executive with
substantially similar benefits) (hereinafter referred to as
"Incentive Plans") or the taking of any action by the Company
or a Subsidiary which would adversely affect the Executive's
participation in any such Incentive Plan or reduce the
Executive's benefits under any such Incentive Plan in an
amount which is not substantially similar, on a percentage
basis, to the average percentage reduction of benefits under
any such Incentive Plan effected during the preceding 12
months for all officers of the Company or a Subsidiary
participating in any such Incentive Plan;
(v) any failure by the Company or a Subsidiary to
continue in effect any plan or arrangement to receive
securities of the Company or awards the value of which is
derived from securities of the Company (including, without
limitation, the Company's Revised Stock Incentive Plan and any
other plan or arrangement to receive and exercise stock
options, stock appreciation rights, restricted stock, phantom
stock or grants thereof or to acquire stock or other
securities of the Company) in which the Executive is
participating at the time of a Change in Control (or to
substitute and continue plans or arrangements providing the
Executive with substantially similar benefits) (hereinafter
referred to as "Securities
7
<PAGE> 8
Plans") or the taking of any action by the Company or a
Subsidiary which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits
under any such Securities Plan;
(vi) a relocation of the Company's principal
executive offices or the Executive's relocation to any
metropolitan area other than the metropolitan area in which
the Executive performed the Executive's duties immediately
prior to a Change in Control;
(vii) a substantial increase in the Executive's
business travel obligations over such obligations as they
existed at the time of a Change in Control;
(viii) any material breach by the Company or a
Subsidiary of any provision of this Agreement;
(ix) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of the
Company pursuant to Section 7(a); or
(x) any purported termination by the Company or a
Subsidiary of the Executive's employment which is not effected
pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), including any purported
termination of employment under the circumstances described in
the last sentence of Section 3(a).
(f) Notice of Termination. Any termination of the Executive's
employment by the Company or a Subsidiary pursuant to Section 3(b), 3(c) or 3(d)
or by the Executive pursuant to Section 3(e) shall be communicated to the other
party by a Notice of Termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. For
purposes of this Agreement, no such purported termination by the Company or
Subsidiary shall be effective without such Notice of Termination.
8
<PAGE> 9
(g) Date of Termination. "Date of Termination" shall mean (a)
if the Executive's employment is terminated by the Company or a Subsidiary for
Disability, 30 days after Notice of Termination is given to the Executive
(provided that the Executive shall not have returned to the performance of the
Executive's duties on a full-time basis during such 30-day period) or (b) if the
Executive's employment is terminated for any other reason, the date on which a
Notice of Termination is given.
4. Severance Compensation upon Termination. (a) If the
Executive's employment by the Company or a Subsidiary is terminated (i) by the
Company or Subsidiary pursuant to Section 3(b), 3(c) or 3(d) or by reason of
death or (ii) by the Executive other than for Good Reason, the Executive shall
not be entitled to any severance compensation under this Agreement, but the
absence of the Executive's entitlement to any benefits under this Agreement
shall not prejudice the Executive's right to the full realization of any and all
other benefits to which the Executive shall be entitled pursuant to the terms of
any employee benefit plans or other agreements or policies of the Company or a
Subsidiary in which the Executive is a participant or to which the Executive is
a party.
(b) If the Executive's employment by the Company or a
Subsidiary is terminated (x) by the Company or such Subsidiary other than
pursuant to Section 3(b), 3(c) or 3(d) or by reason of death or (y) by the
Executive for Good Reason, then the Executive shall be entitled to the severance
compensation provided below:
(i) In lieu of any further salary or incentive
payments to the Executive for periods subsequent to the Date
of Termination, the Company shall pay in cash as severance
compensation to the Executive at the time specified in
subsection (ii) below, a lump-sum severance payment equal to
three (3) times the Executive's Adjusted Annual Compensation.
For purposes of this Agreement, "Adjusted Annual Compensation"
shall mean the sum of (x) an amount equal to the highest level
of the Executive's annual base salary in effect (calculated
prior to any deferral of salary, qualified or nonqualified)
between the time of the Change in
9
<PAGE> 10
Control and the Date of Termination, (y) an amount equal to
the greater of the amounts earned by the Executive under the
annual incentive compensation plan of the Company or a
Subsidiary (or under the Whitman Management Incentive
Compensation Plan, if applicable) for the two preceding
calendar years (calculated prior to any deferral of salary,
qualified or nonqualified), or, if the Executive has
participated in such plan for only one year, an amount equal
to the amount earned under such plan for the preceding
calendar year, and (z) an amount equal to one-third of the sum
of the amounts of the current "Target" values for the
Executive under any annual or long term incentive compensation
plans of the Company or a Subsidiary, such Target values to be
prorated from the beginning of the applicable measurement
period for each such plan through the end of the month in
which the Date of Termination occurs.
(ii) The severance compensation provided for in
subsection (i) above shall be paid not later than the 10th day
following the Date of Termination; provided, however, that, if
the amount of such compensation cannot be finally determined
on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such compensation and shall
pay the remainder of such compensation (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Internal
Revenue Code of 1986, as amended (the "Code")) as soon as the
amount thereof can be determined, but in no event later than
the 30th day after the Date of Termination. In the event that
the amount of the estimated payment exceeds the amount
subsequently determined to have been payable, such excess
shall constitute a loan by the Company to the Executive
payable on the 30th day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of
the Code, commencing on the 31st day following such demand).
10
<PAGE> 11
(iii) The Company shall arrange to provide the
Executive for a period of thirty-six (36) months following the
Date of Termination or until the Executive's earlier death,
with life, medical, dental, accident and disability insurance
benefits and a package of "executive benefits", including to
the extent applicable capital assessments and dues for
pre-existing club memberships and the use of an automobile or
an allowance therefor (collectively, "Employment Benefits"),
substantially similar to those which the Executive was
receiving immediately prior to the Date of Termination.
(iv) During the term of this Agreement and through
the period of thirty-six (36) months following the Date of
Termination, all benefits under any pension or retirement
plans, employee stock ownership plan or any other plan or
agreement relating to retirement benefits (collectively,
"Retirement Benefits") in which the Executive participates
shall continue to accrue to the Executive, crediting of
service of the Executive with respect to Retirement Benefits
shall continue, and the Executive shall be entitled to receive
all Retirement Benefits provided to the Executive as a fully
vested participant under any such plan or agreement relating
to retirement benefits. No contributions shall be required to
be made by the Executive to any plan providing for employee
contributions following the Date of Termination. To the extent
that the amount of any Retirement Benefits are or would be
payable from a nonqualified plan, the Company shall, as soon
as practicable following the Date of Termination (but in no
event later than the 30th day after the Date of Termination),
pay directly to the Executive in one lump sum, cash in an
amount equal to the additional benefits that would have been
provided had such accrual or crediting been taken into account
in calculating such Retirement Benefits. Such lump sum payment
shall be calculated as provided in the relevant plan and, in
the case of a defined contribution plan, shall include an
amount equal to the gross amount of the maximum employer
contributions.
11
<PAGE> 12
(c) In the event the severance compensation payable
under this Section 4, either alone or together with any other payments to the
Executive from the Company or a Subsidiary (including, but not limited to,
payments under the Company's Revised Stock Incentive Plan or any agreement or
award issued pursuant to such Plan or any successor plan), would constitute a
"parachute payment" (as defined in Section 280G of the Code), and subject the
Executive to the excise tax imposed by Section 4999 of the Code, the Company
shall pay the Executive, as additional severance compensation hereunder and
payable at the same time or times as such severance compensation, the amount of
such excise tax and any additional taxes payable by the Executive by reason of
such payment (on the basis of a customary "gross-up" formula), as calculated by
the Company. The Company agrees to indemnify and hold harmless the Executive
from and against any liability for the payment of additional taxes arising from
any deficiency in the amount of such excise tax and any additional taxes thereon
so calculated by the Company, together with any interest or penalties applicable
thereto; provided, however, that it shall be a condition of this obligation to
indemnify and hold harmless the Executive that the Executive shall have timely
notified the Company of any proposed assessment relating to any claimed
deficiency therein and offered the Company the right to contest such assessment
or participate in, at the expense of the Company, any proceeding relating
thereto.
5. Payment of Taxes; Continuation of Employment.
Notwithstanding any other provision of this Agreement or the premises hereto, in
the event the Executive is entitled to receive compensation (whether in the form
of cash, securities or other form of compensation) under or pursuant to any plan
or agreement of or with the Company or a Subsidiary as the result of a Change in
Control, the Company shall pay to the Executive any applicable excise tax, and
any taxes thereon, and shall indemnify and hold harmless the Executive in
respect thereof, as provided in Section 4(c) above, regardless of whether the
employment of the Executive with the Company or a Subsidiary shall have
terminated.
6. No Obligation To Mitigate Damages; No Effect on other
Contractual Rights. (a) The Executive shall not be required to mitigate damages
or the amount of any payment
12
<PAGE> 13
provided for under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by the Executive after the termination of the
Executive's employment with the Company or a Subsidiary.
(b) The provisions of this Agreement, and any payment
provided for hereunder, shall not reduce any amounts otherwise payable, or in
any way diminish the Executive's existing rights, or rights which would accrue
solely as a result of the passage of time, under any Benefit Plan, Incentive
Plan or Securities Plan, employment agreement or other contract, plan or
arrangement of the Company or any Subsidiary.
7. Successor to the Company. (a) The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. Any failure of the Company to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be a material breach of
this Agreement and shall entitle the Executive to terminate the Executive's
employment for Good Reason. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor or assign to its business
and/or assets as aforesaid which executes and delivers the agreement provided
for in this Section 7 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to the Executive
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
13
<PAGE> 14
accordance with the terms of this Agreement to the Executive's devisees,
legatees, or other designees or, if there be no such designee, to the
Executive's estate.
8. Notices. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
given by United States certified mail (return receipt requested, postage
prepaid), by personal delivery or by a nationally recognized express delivery
service, and shall be deemed to have been given when actually received, as
follows:
If to the Company or Pepsi General:
3501 Algonquin Road
Rolling Meadows, Illinois 60008
Attention of: General Counsel
If to the Executive, to the Executive's home address as shown on
the Company's personnel records; or such other address as either party may have
given to the other in writing in accordance herewith.
9. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois.
10. Employment. The Executive agrees to be bound by the terms and
conditions of this Agreement and to remain in the employ of the Company or a
Subsidiary during any period following any public announcement by any person of
any proposed transaction or transactions which, if effected, would result in a
Change in Control until a Change in Control has taken place
14
<PAGE> 15
or, in the opinion of the Board of Directors, such person has abandoned or
terminated its efforts to effect a Change in Control. Subject to the foregoing
and to the last sentence of Section 3(a), nothing contained in this Agreement
shall impair or interfere in any way with the right of the Executive to
terminate the Executive's employment or the right of the Company or any
Subsidiary to terminate the employment of the Executive with or without cause
prior to a Change in Control. Nothing contained in this Agreement shall be
construed as a contract of employment between the Company or any Subsidiary and
the Executive or as a right of the Executive to continue in the employ of the
Company or any Subsidiary, or as a limitation of the right of the Company or any
Subsidiary to discharge the Executive with or without cause prior to a Change in
Control.
11. Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
13. Legal Fees and Expenses. (a) The Company shall pay all
legal fees and expenses which the Executive may incur as a result of the Company
or a Subsidiary contesting the validity, enforceability or the Executive's
interpretation of, or determinations under, this Agreement.
(b) The Company shall pay all legal fees and expenses
which the Executive may incur by reason of the termination of the Executive's
employment, other than as a result of (i) the Executive's death, (ii) the
Executive's Disability (as defined in Section 3(b) above), (iii) the Executive's
Retirement (as defined in Section 3(c) above), (iv) the Executive's termination
for Cause (as defined in Section 3(d) above), or (v) the Executive's decision to
terminate employment other than for Good Reason (as defined in Section 3(e)
above; such fees and expenses shall include, without limitation, those incurred
in contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement.
15
<PAGE> 16
(c) The Company shall pay all legal fees and
expenses which the Executive may incur as a result of any tax assessments or
proceedings arising from payments made by the Company pursuant to Section 4(c)
or Section 5 above.
(d) If the payment by the Company of any legal fees
and expenses pursuant to this Section 13 shall constitute compensation to the
Executive, the Company agrees, as a separate and independent undertaking, to pay
to the Executive upon demand any and all taxes, of whatever nature or
description, applicable to such payment, together with any taxes thereon (on the
basis of a customary "gross-up" formula).
14. Confidentiality. The Executive shall retain in confidence
any and all confidential information known to the Executive concerning the
Company and its Subsidiaries and their business so long as such information is
not otherwise publicly disclosed.
15. Effective Date of this Agreement and Termination of Prior
Agreement(s). This Agreement shall become effective on the Effective Date,
whereupon any and all Prior Agreements shall be terminated and be of no further
force or effect. Whitman and Pepsi General shall each be and be deemed to be a
third-party beneficiary of this Section 15.
16. Change in Control of Pepsi General. In the event there
shall be a Change in Control of Pepsi General, within the meaning of clauses
(i), (iii) or (iv) of Section 2 of this Agreement (as if Pepsi General were the
"Company" thereunder), and if the Executive's employment with the Company or a
Subsidiary thereafter shall have been terminated in accordance with Section 3 of
this Agreement, then the Executive shall be entitled to the compensation and all
other rights and benefits provided for in this Agreement to the same tenor and
effect as if a Change in Control of the Company had occurred.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
16
<PAGE> 17
WHITMAN CORPORATION
By
----------------------------------------------
Name: Lawrence J. Pilon
Title: Senior Vice President-Administration
PEPSI-COLA GENERAL BOTTLERS, INC.
By
----------------------------------------------
Name: Peter M. Perez
Title: Senior Vice President-Human Resources
EXECUTIVE
By
----------------------------------------------
Name:
17
<PAGE> 1
EXHIBIT 10d
WHITMAN CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
(AS ADOPTED MAY 20, 1999)
1. PURPOSE - The primary purpose of this Plan is to establish a method
for the payment of compensation to directors of Whitman Corporation and its
predecessor (the "Company") which will assist the Company in attracting and
retaining as members of its Board of Directors those persons whose abilities,
experience, and judgment will contribute to the continued progress of the
Company.
2. EFFECTIVE DATE - This Plan is a continuation, amendment and
restatement of the Company's Deferred Compensation Plan for Directors
originally adopted March 20, 1970, and subsequently amended from time to time.
The effective date of the Plan as described herein is May 20, 1999.
3. RIGHT TO DEFER COMPENSATION - Any present or future director of the
Company who is not a full time employee of the Company may, by written election
delivered to the Secretary of the Company, defer the payment of compensation to
which he may be entitled for services as a director, consisting of the annual
cash retainer (including, if applicable, the portion thereof attributable to
services as Chairman of a Board Committee) or Board and Committee meeting fees,
or both such retainer and meeting fees, but not any other compensation to which
he may be entitled as a director. An election to defer payments of compensation
hereunder shall be made (i) prior to May 1 of any year in respect of
compensation earned on and after such May 1,
<PAGE> 2
or (ii) at the time a director is first elected to office. Elections to defer
compensation hereunder shall in any event be made prior to the time such
compensation is earned, and shall be irrevocable as to all compensation which
shall have been earned while such election was in effect.
4. DEFERRED COMPENSATION ACCOUNT - The Company shall maintain a
bookkeeping account for each director who has elected to defer compensation
hereunder to which there shall be credited the amount of compensation deferred,
plus accrued interest thereon, compounded annually, based upon the Prime Rate
of interest, as reported in The Wall Street Journal, on June 30 and December 31
of each year.
5. PAYMENT OF DEFERRED COMPENSATION -
(a) Payment of deferred compensation to a retired director shall be
made in equal monthly payments, commencing with the month following the month
in which the director ceases to be a director of the Company, over a term equal
to the greater of (i) 36 months, or (ii) the number of months during which the
director had in effect an election to defer compensation hereunder.
(b) With the approval of the Board of Directors of the Company, a
director may elect prior to retirement to receive payment of deferred
compensation to which he is entitled either in one lump sum or in equal monthly
payments over a term not greater than the period during which the director had
in effect an election to defer compensation hereunder and not less than 36
months.
2
<PAGE> 3
(c) Monthly payments of deferred compensation shall be calculated by
first determining the total amount of deferred compensation and accrued
interest as provided in paragraph 4, above, to the date of the first monthly
payment. To the gross amount so determined (the "principal" shall be applied an
interest rate equal to the simple average of the Prime Rate of interest, as
reported in The Wall Street Journal, on December 31 of each of the three years
immediately preceding the date of the first monthly payment, with the principal
and interest at such rate amortized over the term of the monthly payments in
accordance with a standard amortization table such that each monthly payment
shall be in an equal amount. The Company may make such monthly payments at such
time during any month as may be convenient for the Company.
(d) Any payment of a director's deferred compensation in one lump
sum shall be made within 30 days after the date the director ceases to be a
director of the Company, and shall include interest calculated to the date of
payment as provided in paragraph 4, above.
6. CONDITIONS - A director shall forfeit permanently any payment of
deferred compensation to which he would be entitled for any calendar month or
portion thereof in which he engages, either as an officer, director, employee,
proprietor, partner, shareholder owning more than 10% of the capital stock of
any corporation, or consultant, in any business competitive with that being
carried on by the Company at the time the payment of deferred compensation is to
be made.
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7. PAYMENTS UPON DEATH OR DISABILITY -
(a) In the event an active or former director dies prior to
receiving payment of the amount of deferred compensation to which he is
entitled, the unpaid balance shall be paid to such beneficiary as shall have
been designated by the director in his written election to defer the payment of
compensation, or as shall otherwise have been designated in a written
instrument filed with the Secretary of the Company. If such beneficiary is a
natural person, any amounts of deferred compensation remaining unpaid upon the
death of the designated beneficiary shall be paid to the estate of such
beneficiary.
(b) If, in the opinion of the Board of Directors, a director whose
service has terminated for any reason shall be mentally or physically disabled,
any deferred compensation to which such person would be entitled may, with the
approval of the Board of Directors, be paid to such person, to his legal
representative, or to any other person for the benefit of the disabled
director.
(c) Payments of deferred compensation pursuant to this paragraph 7
may be made either in periodic payments or in a lump sum (in which event
unearned interest shall be deducted therefrom) at the discretion of the Board
of Directors.
8. CHANGE IN CONTROL - Notwithstanding the payment provisions of
paragraph 5 of this Plan, in the event that any person or group acquires
beneficial ownership of capital stock of the Company having ordinary voting
power of more than 50% of the total voting power of all of the Company's
outstanding capital stock, then each director or retired director shall
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thereupon be entitled to receive a lump sum payment consisting of all deferred
compensation, including interest thereon through the date of payment, which has
accrued for his account under this Plan.
9. MISCELLANEOUS -
(a) Deferred compensation payable hereunder may not be voluntarily
or involuntarily sold, transferred or assigned and shall not be subject to any
legal attachment, levy or garnishment.
(b) Participation in this Plan by any director shall not confer
upon him any right to be nominated for reelection to the Board of Directors or
to be reelected to the Board of Directors.
(c) The Company shall not be required to reserve, or otherwise set
aside, assets or funds for the payment of its obligations hereunder. A director
shall have no interest in any particular asset of the Company by virtue of the
existence of any credit in the bookkeeping account for his deferred
compensation.
(d) The term "retired director" means any person who served as a
member of the Board of Directors of the Company on or after the effective date
of this Plan and who ceases to be a director because of retirement, resignation
or for any other reason.
(e) Unless an incumbent director participating in the Plan prior to
this amendment and restatement shall elect to the contrary, all payments of
deferred compensation to such director upon retirement shall be made in
accordance with the provisions hereof.
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(f) The Board of Directors may terminate this Plan at any time, or
amend or modify it from time to time in any respect. The amendment or
termination of this Plan shall not in any way affect the rights of those
participating, or their designated beneficiaries, to the extent of credits to
their account at the time of amendment or termination.
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Exhibit 10e
[WHITMAN LOGO]
1982 STOCK OPTION, RESTRICTED STOCK AWARD
AND PERFORMANCE AWARD PLAN
As amended through June 16, 1989.
<PAGE> 2
WHITMAN CORPORATION
1982 STOCK OPTION, RESTRICTED STOCK AWARD
AND PERFORMANCE AWARD PLAN
1. DEFINITIONS
The following definitions shall be applicable throughout this Plan:
(a) "Alternate Stock Right" shall have the meaning specified in
paragraph 7(G).
(b) "Code" shall mean the Internal Revenue Code of 1986, as the same
may be amended from time to time. Reference in the Plan to any section of
the Code shall be deemed to include any amendments or successor provision
to such section and any regulations under such section.
(c) "Committee" shall mean not less than three members of the Board of
Directors who are not eligible to receive Options, Restricted Stock Awards
or Performance Awards and who are selected by the Board of Directors as
provided in Paragraph 4.
(d) "Common Stock" shall mean common stock of the Corporation without
par value.
(e) "Corporation" shall mean Whitman Corporation, a Delaware
corporation.
(f) "Holder" shall mean an individual who has been granted an Option,
Restricted Stock Award or Performance Award.
(g) "Option" shall mean any option granted under the Plan for the
purchase of Common Stock.
(h) "Performance Award" shall mean an award granted under the
Performance Award provisions of the Plan.
(1) "Plan" shall mean the Corporation's 1982 Stock Option, Restricted
Stock Award and Performance Award Plan, as amended.
(j) "Restricted Stock Award" shall mean an award of Common Stock
granted under the Restricted Stock Award provisions of the Plan.
2. PURPOSE
It Is the purpose of the Plan to provide a means through which the
Corporation may attract able persons to enter its employ and the employ of its
subsidiaries and to provide a means whereby those persons (salaried officers
and other key employees) upon whom the responsibilities of the successful
administration and management of the Corporation or its subsidiaries rest, and
whose present and potential contributions to the welfare of the Corporation or
its subsidiaries are of importance, can acquire and maintain stock ownership.
Such key employees should thus have a greater than ordinary concern for the
welfare of the Corporation or its subsidiaries and would be expected to
strengthen and maintain a desire to remain in the employ of the Corporation or
its subsidiaries. It is a further purpose of the Plan to provide such key
employees with additional incentive and reward opportunities designed to enhance
the
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profitable growth of the Corporation. So that the maximum incentive can be
provided each particular employee participating in the Plan by granting him an
option or award best suited to his circumstances, the Plan provides for granting
"Incentive stock options" (as defined in Section 422A of the Code), nonqualified
stock options, Restricted Stock Awards and Performance Awards, or any
combination of the foregoing.
3. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective upon adoption by the Board of Directors of
the Corporation, but is subject to approval by the affirmative vote of the
shareholders of the Corporation at the annual meeting of shareholders to be held
on May 6, 1982, or any adjournment thereof. The Plan shall remain in effect
until all Options granted under the Plan have been exercised, all restrictions
imposed upon Restricted Stock Awards have been eliminated and all Performance
Awards have been satisfied.
4. ADMINISTRATION
A Committee consisting of not less than three members of the Board of
Directors who are not eligible to receive Options, Restricted Stock Awards or
Performance Awards under the Plan, whom the Board of Directors may select and
appoint from time to time, shall administer the Plan. A majority of the
Committee shall constitute a quorum. Subject to the express provisions of the
Plan, the Committee shall have authority, in its discretion, to determine the
individuals to receive Options, Restricted Stock Awards and Performance Awards,
the time or times when they shall receive them, whether an "incentive stock
option" under Section 422A of the Code or nonqualified option shall be granted,
the number of shares to be subject to each Option and Restricted Stock Award and
the value of each Performance Award. In making such determinations the Committee
shall take into account the nature of the services rendered by the respective
employees, their present and potential contribution to the Corporation's
success, and such other factors as the Committee shall deem relevant.
The Committee shall have such additional powers as are delegated to it by
the other provisions of the Plan and, subject to the express provisions of the
Plan, to construe the respective Option, Restricted Stock Award and Performance
Award agreements and the Plan to prescribe, amend, and rescind rules and
regulations relating to the Plan and to determine the terms, restrictions and
provisions of the Option, and Restricted Stock Award and Performance Award
agreements (which need not be identical) including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee to cause
certain Options to quality as "incentive stock options" under Section 422A of
the Code, and to make all certain other determinations necessary or advisable
for administering the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option, Restricted
Stock Award or Performance Award agreement in the manner and to the extent it
shall deem expedient to carry it into effect, and it shall be the sole and final
judge of such expediency. The determinations of the Committee on matters
referred to in this Paragraph 4 shall be conclusive.
The Committee shall act by majority action at a meeting, except that action
permitted to be taken at a meeting may be taken without a meeting if written
consent thereto is given by all members of the Committee.
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<PAGE> 4
5. GRANT OF OPTIONS, RESTRICTED STOCK AWARDS AND PERFORMANCE AWARDS; SHARES
SUBJECT TO THE PLAN
The Committee may from time to time grant both "incentive stock options"
under Section 422A of the Code and nonqualified options to purchase shares of
Common Stock, Restricted Stock Awards and Performance Awards to one or more
officers or employees determined by it to be eligible for participation in
accordance with the provisions of Paragraph 6 and providing for the issuance of
such number of shares and, in the case of Performance Awards, having such value
as in the discretion of the Committee may be fitting and proper. Subject to
Paragraph 10, not over 11,000,000 shares of Common Stock will be issued upon
exercise of Options or pursuant to Restricted Stock Awards or Performance Awards
granted under the Plan, of which not more than 5,000,000 shares will be issued
upon exercise of or pursuant to Options, Restricted Stock Awards or Performance
Awards granted under the Plan on or after March 1, 1988.
The stock to be offered under the Plan pursuant to Options, Restricted
Stock Awards and Performance Awards may be authorized but unissued Common Stock
or Common Stock previously issued and outstanding and reacquired by the
Corporation. No "incentive stock options" under Section 422A of the Code shall
be granted after January 10, 1992.
Any shares of Common Stock subject to an Option, Alternate Stock Right,
Restricted Stock Award or Performance Award which for any reason lapses or is
terminated as to such shares shall again be available for grants of Options,
Alternate Stock Rights, Restricted Stock Awards or Performance Awards under the
Plan.
6. ELIGIBILITY
Options, Restricted Stock Awards or Performance Awards may be granted only
to persons who, at the time of the grant or award, are officers or other key
employees of the Corporation or any of its present and future subsidiaries
within the meaning of Section 425(f) of the Code (herein called subsidiaries),
including officers who are also directors of the Corporation, but not including
(a) directors who are not officers or employees of the Corporation or any of its
subsidiaries or (b) any person who immediately after such Option is granted or
to whom such Restricted Stock Award or Performance Award is made, is the owner
directly or indirectly of more than 10% of the total combined voting power of
all classes of stock of the Corporation or its subsidiaries. Options, Restricted
Stock Awards or Performance Awards, or any combination thereof, may be granted
on more than one occasion to the same person. A person who has received or is
eligible to receive options to purchase stock of any subsidiary of the
Corporation or incentive awards from any subsidiary of the Corporation will not,
by reason thereof, be ineligible to receive Options, Restricted Stock Awards or
Performance Awards under this Plan unless prohibited by the plan of such
subsidiary.
Nothing in the Plan or any Option, Restricted Stock Award or Performance
Award agreement shall be construed to constitute or be evidence of an agreement
or understanding, expressed or implied, on the part of the Corporation or its
subsidiaries to employ any person for any specific period of time.
7. PROVISIONS APPLICABLE TO OPTIONS; ALTERNATE STOCK RIGHTS
(A) Period of Option and Certain Limitations on the Right To Exercise.
The term of each Option granted under the Plan shall be for such period as the
Committee shall determine but shall be subject to the
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<PAGE> 5
provisions of Paragraph 7(E) and shall not be more than ten years in
duration. Except as otherwise provided in Paragraph 7(E), an Option may
not be exercised by the Holder unless such Holder is then, and continually
(except for sick leave, military service or other approved leaves of
absence) after the grant of the Option has been, an employee of the
Corporation or a subsidiary. With respect to each Option, the Committee
shall determine the number of shares subject to the Option and the manner
and the time of exercise of such Option. The Committee shall make such
other determinations which in its discretion appear to be fitting and
proper.
(B) Stock Option Agreement. Each Option shall be evidenced by a stock
option agreement in such form containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall
approve, including, without limitation, provisions to qualify certain
Options as "incentive stock options" under Section 422A of the Code.
(C) Option Price and Payment. The purchase price of the Common Stock
under each Option shall be determined by the Committee but shall be a price
not less than 100% of the fair market value of the Common Stock at the date
such Option is granted, as determined by the Committee.
The purchase price shall be paid in full when the Option is exercised.
The price may be paid in (a) cash or (b) whole shares of Common Stock
evidenced by negotiable certificates, valued at their fair market value on
the date of exercise, as determined by the Committee. If certificates
representing shares of Common Stock are used to pay the purchase price of
an Option, separate certificates shall be delivered by the Corporation
representing the same number of shares as each certificate so used and an
additional certificate shall be delivered representing the additional
shares to which the Holder is entitled as a result of exercise of the
Option.
(D) Non transferability of Options. No Option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution and an Option may be exercised, during the lifetime of the
Holder thereof, only by said Holder.
(E) Termination of Employment or Death of Holder. In the event of any
termination of the employment of a Holder, including by reason of
retirement pursuant to Corporation policy or disability, other than (a) a
termination that is either (i) for cause or (ii) voluntary on the part of a
Holder and without the written consent of the Corporation, or (b) a
termination by reason of death, the Holder may (unless otherwise provided
in the Option agreement) exercise his Option at any time within three
months after such termination of his employment, but in no event after the
expiration of the term of the Option, to the extent of the number of shares
covered by his Option which were purchasable by him at the date of the
termination of his employment; provided, however, that in the case of such
an employee who becomes disabled within the meaning of Section 105(d)(4) of
the Code, such three-month period shall be extended to one year. In the
event of the termination of the employment of a Holder that is either (i)
for cause or (ii) voluntary on the part of a Holder and without the written
consent of the Corporation, any Option held by him under the Plan, to the
extent not theretofore exercised by him, shall terminate unless otherwise
provided in the Option agreement.
If a Holder shall die (i) while he is employed by the Corporation or a
subsidiary, (ii) within three months after the termination of his
employment other than by reason of disability within the meaning of Section
105(d)(4) of the Code or (iii) within one year after the termination of
his employment by reason of such disability, such Option (unless it shall
have previously terminated pursuant to the provisions of
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<PAGE> 6
this Paragraph 7(E)) may be exercised by the legatees of the Holder under his
last will, or by his personal representatives or distributees, at any time
within a period of nine months after his death, but in no event after the
expiration of the term of the Option, (a) if death occurs while he is employed
by the Corporation or a subsidiary, to the extent of the remaining shares
covered by his Option, whether or not such shares have become purchasable by
such Holder at the date of his death, or (b) if death occurs within such
three-month or one-year period, to the extent of the number of shares
purchasable by such Holder pursuant to the provisions of this Paragraph 7(E) at
the date of his death.
(F) Privileges of the Holder as Shareholder. The Holder shall be
entitled to all the privileges and rights of a shareholder with respect only to
such shares of stock as have been actually purchased under the Option and for
which certificates of stock have been registered in the Holder's name.
(G) Alternate Stock Rights. The Committee may, in its sole discretion,
grant (concurrently with the grant of the Option or subsequent to such grant) to
any Holder of any Option granted under the Plan (or his legatees, personal
representatives or distributees then entitled to exercise such Option) the right
("Alternate Stock Right") to receive, upon the written request of any such
Holder, from the Corporation in exchange for the surrender of any Option or any
portion thereof which is exercisable on the date of such request, shares of
Common Stock, cash or a combination thereof, in the discretion of the Committee,
having an aggregate fair market value equal to the excess of the fair market
value as of the date of such request of one share of Common Stock, as determined
by the Committee, over the purchase price specified in such Option multiplied by
the number of shares of Common Stock covered by such Option or portion thereof
which is so surrendered. An Alternate Stock Right shall be exercisable upon such
additional terms and conditions as may from time to time be prescribed by the
Committee, and in the event of the exercise of such right, the number of shares
reserved for issuance hereunder shall be reduced by the number of shares of
Common Stock covered by such Option or portion thereof which is so surrendered.
No fractional share shall be issued in the exercise of any such right.
8. PROVISIONS APPLICABLE TO RESTRICTED STOCK AWARDS
(A) Restriction Period To Be Established by the Committee. At the time
of the making a Restricted Stock Award, the Committee shall establish a period
of time (the "Restriction Period") applicable to such award. The Committee may
establish different Restriction Periods from time to time and each Restricted
Stock Award may have a different Restriction Period, in the discretion of the
Committee. Restriction Periods, when established for each Restricted Stock
Award, shall not be changed except as permitted by Paragraph 8(B).
(B) Other Terms and Conditions. Common Stock, when awarded, pursuant to
a Restricted Stock Award, will be represented by a stock certificate registered
in the name of the Holder who receives the Restricted Stock Award. The Holder
will have the right to receive dividends during the Restriction Period and will
also have the right to vote such Common Stock and all other shareholder's
rights, with the exception that (i) the Holder will not be entitled to delivery
of the stock certificate until the Restriction Period, established by the
Committee pursuant to Paragraph 8(A), shall have expired, (ii) the Corporation
will retain custody of the stock during the Restriction Period, (iii) the Holder
may not sell, transfer, pledge, exchange, hypothecate or dispose of the stock
during the Restriction Period, and (iv) a breach of restriction or breach of
terms and conditions established by the Committee pursuant to the Restricted
Stock Award will cause a forfeiture of the Restricted Stock Award. The Committee
may, in addition,
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<PAGE> 7
prescribe additional restrictions, terms or conditions upon or to the Restricted
Stock Award in the manner prescribed by Paragraph 4. The Committee may, in its
sole discretion, also establish rules pertaining to the Restricted Stock Award
in the event of termination of employment (by retirement, disability, death or
otherwise) of a Holder of such award prior to the expiration of the Restriction
Period.
(C) Restricted Stock Award Agreement. Each Restricted Stock Award shall be
evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve.
(D) Payment for Restricted Stock. Restricted Stock Awards may be made by
the Committee whereby the Holder receives Common Stock subject to those terms,
conditions and restrictions established by the Committee but is not required to
make any payment for said Common Stock. The Committee may also establish terms
as to each Holder whereby such Holder, as a condition to the Restricted Stock
Award, is required to pay all (or any lesser amount than all) of the fair market
value of the Common Stock, determined as of the date the Restricted Stock Award
is made. Such purchase price shall be paid in cash no later than the expiration
of the Restriction Period.
9. PROVISIONS APPLICABLE TO PERFORMANCE AWARDS
(A) Performance Period. The Committee shall establish with respect to each
Performance Award a performance period over which the performance of the Holder
shall be measured. The performance period shall be established at the time of
such award.
(B) Performance Awards. Each Performance Award shall have a maximum value
established by the Committee at the time of such award.
(C) Performance Measures. Performance Awards shall be awarded to an
employee contingent upon future performance of the Corporation and/or of the
Corporation's subsidiary, division or department for which he is employed over
the performance period. The Committee shall establish the performance measures
applicable to such performance. The performance measures determined by the
Committee shall be established prior to the beginning of each performance period
but may be subject to such later revisions to reflect significant, unforeseen
events or changes, as the Committee shall deem appropriate.
(D) Award Criteria. In determining the value of Performance Awards, the
Committee shall take into account an employee's responsibility level,
performance, potential, cash compensation level, unexercised stock options,
other incentive awards and such other considerations as it deems appropriate.
(E) Payment. Following the end of each performance period, the Holder of
each Performance Award will be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Award, based on the achievement
of the performance measures for such performance period, as determined by the
Committee. Payment of Performance Awards may be made wholly in cash, wholly in
shares of Common Stock or a combination thereof, all at the discretion of the
Committee. Payment shall be made in a lump sum or in installments, and shall be
subject to such vesting and other terms and conditions as may be prescribed by
the Committee for such purpose. Any payment to be made in Common Stock shall be
based on the fair market value of the Common Stock on the payment date, as
determined by the Committee.
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(F) Termination of Employment. A Performance Award to an employee shall
terminate for all purposes if he does not remain continuously in the employ of
the Corporation at all times during the applicable performance period, except as
may otherwise be determined by the Committee.
In the event that a Holder of a Performance Award ceases to be an employee
of the Corporation following the end of the applicable performance period but
prior to full payment according to the terms of the Performance Award, payment
shall be made in accordance with terms established by the Committee for the
payment of such Performance Award.
(G) Other Terms and Conditions. When a Performance Award is payable in
installments in Common Stock, if determined by the Committee, the total number
of stock certificates representing shares of Common Stock which would have been
issuable to the Holder of the Performance Award if such payment had been made in
full on the day following the end of the applicable performance period may be
registered in the name of such Holder, and during the period until such
installment becomes due such Holder will have the right to receive dividends and
will also have the right to vote such Common Stock and all other shareholders
rights with the exception that (i) the Holder will not be entitled to delivery
of any stock certificate representing shares of Common Stock until the
installment payable in shares becomes due, (ii) the Corporation will retain
custody of such shares until such time and (iii) the Holder may not sell,
transfer, pledge, exchange, hypothecate or dispose of such shares until such
time.
(H) Performance Award Agreements. Performance Awards shall be evidenced by
Performance Award agreements in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CHANGE IN CONTROL
Notwithstanding any other provision of the Plan, each Option, Restricted
Stock Award or Performance Award agreement may contain such provisions as the
Committee shall determine to be appropriate for the adjustment of the number and
class of shares or other consideration subject to any Option or to be delivered
pursuant to any Restricted Stock Award or Performance Award and the Option or
Restricted Stock Award price in the event of changes in the outstanding Common
Stock by reason of stock dividends, spin-offs, split-ups, recapitalizations,
mergers, consolidations, combinations or exchanges of shares, and the like. In
the event of any such change in the outstanding Common Stock, the aggregate
number and class of shares available under the Plan, and the maximum number and
class of shares which an employee may own in order to be eligible to receive
Options, Restricted Stock Awards or Performance Awards under the Plan, may be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
In the event of a "change in control" (as hereinafter defined):
(A) each Holder of an Option (i) shall have the right at any time
thereafter to exercise the Option in full, and (ii) shall have the right,
exercisable by written notice to the Corporation within 60 days after the
change in control, to receive, in exchange for the surrender of the Option
or any portion thereof to the extent the Option is then exercisable in
accordance with clause (i), an amount of cash equal to the difference
between the fair market value (as determined by the Committee) on the date
of exercise of the Common Stock covered by the Option or portion thereof
which is so surrendered and the purchase price of such Common Stock under
the Option, provided that the right
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described in this clause (ii) shall be exercisable only if a positive
amount would be payable to the Holder pursuant to the formula specified in
this clause (ii);
(B) each Holder of a Restricted Stock Award shall have the right,
exercisable by written notice to the Corporation within 60 days after the
change in control, to receive, in exchange for the surrender of the
Restricted Stock Award, an amount of cash equal to the fair market value
(as determined by the Committee) on the date of exercise of the Common
Stock subject to the Restricted Stock Award;
(C) each Holder of a Performance Award for which the performance period
has not expired shall have the right, exercisable by written notice to the
Corporation within 60 days after the change in control, to receive, in
exchange for the surrender of the Performance Award, an amount of cash
equal to the product of the value of the Performance Award and a fraction
the numerator of which is the number of whole months which have elapsed
from the beginning of the performance period to the date of the change in
control and the denominator of which is the number of whole months in the
performance period; and
(D) each Holder of a Performance Award that has been earned but not yet
paid shall receive an amount of cash equal to the value of the Performance
Award.
For purpose of this paragraph, the term "change in control" shall be deemed to
occur upon (1) the approval by the shareholders of the Corporation of (A) any
consolidation or merger of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares of Common Stock
would be converted into cash, securities or other property, other than a merger
in which the holders of Common Stock immediately prior to the merger will have
the same proportionate ownership of Common Stock of the surviving corporation
immediately after the merger, (B) any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all or substantially
all the assets of the Corporation, or (C) adoption of any plan or proposal for
the liquidation or dissolution of the Corporation, or (2) any "person" (as
defined in Section 13(d) of the Securities Exchange Act of 1934), other than the
Corporation or any subsidiary or employee benefit plan or trust maintained by
the Corporation or any of its subsidiaries, shall become the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of more than 25% of the Common Stock outstanding at the time,
without the prior approval of the Board of Directors of the Corporation.
The Committee shall have authority to amend any outstanding Option
previously granted under the Corporation's Stock Option and Restricted Stock
Award Plan, as amended (adopted by the Board of Directors on February 16, 1979
and approved by the shareholders of the Corporation on May 3, 1979), to provide
to the holder of such Option rights corresponding to those described in clause
(A) of the immediately preceding paragraph in the event of a "change in control"
(as defined therein).
11. WITHHOLDING TAXES
The following provisions of this Paragraph 11 shall be applicable only with
respect to Holders who are subject to Section 16(b) of the Securities Exchange
Act of 1934 or who have been granted Restricted Stock Awards or Performance
Awards under the Plan.
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(A) A Holder of an Option, Restricted Stock Award or Performance Award
granted under the Plan may elect, by written notice to the Corporation at the
office of the Corporation designated for that purpose, to pay through
withholding by the Corporation all or a portion of the estimated federal, state
and local taxes arising from (1) the exercise of a Nonqualified Option and (2)
the vesting or distribution of shares of Common Stock pursuant to a Restricted
Stock Award or Performance Award, by (a) having the Corporation withhold shares
of Common Stock, (b) tendering back shares received in connection with the
exercise of such Option or pursuant to such Award or (c) delivering other
previously owned shares (collectively, "Share Withholding"), in each case being
such number of shares of Common Stock as shall have a fair market value equal to
the amount of taxes to be withheld, rounded down to the nearest whole share.
(B) A Share Withholding election shall be irrevocable by the Holder, but
subject to disapproval by the Committee. In addition, a Share Withholding
election is subject to the following additional restrictions: (1) it may not be
made within six months after the grant of the Option or Award (except in the
case of the death or disability of the Holder) and (2) it must be made either
(a) six months or more prior to the date as of which the amount of tax to be
withheld is determined (the "Tax Date"), or (b) within a ten-day "window period"
beginning on the third business day following the release of the Corporation's
quarterly or annual summary statement of sales and earnings.
(C) If the Tax Date of a Holder is deferred until six months after the
exercise of a Nonqualified Option granted under the Plan and the Holder elects
Share Withholding, the Corporation shall issue to the Holder the full number of
shares of Common Stock resulting from such exercise and the Holder shall be
unconditionally obligated to tender back or deliver to the Corporation on the
Tax Date such number of shares of Common Stock as shall have an aggregate fair
market value equal to the amount to be withheld on the Tax Date, rounded down to
the nearest whole share.
(D) The fair market value of shares of Common Stock used for payment of
taxes, as provided In this Paragraph 11, shall be the mean sale price per share,
as reported for New York Stock Exchange -- Composite Transactions, on the Tax
Date.
12. TERMINATION OF PLAN
The Plan may be terminated at any time by the Board of Directors, except
with respect to any Options, Restricted Stock Awards or Performance Awards then
outstanding. The Corporation reserves the right to restrict, in whole or in
part, the exercise of any Options or the delivery of Common Stock pursuant to
any Restricted Stock Awards or Performance Awards granted under the Plan until
such time as:
(A) any legal requirements or regulations have been met relating to the
issuance of the shares covered thereby or to their registration under the
Securities Act of 1933 or to any applicable State laws; and
(B) satisfactory assurances are received that the shares when issued
will be duly listed on the Now York Stock Exchange, Inc.
9
<PAGE> 11
13. AMENDMENT OF THE PLAN
The Board of Directors may amend the Plan; provided, however, that without
approval of the shareholders the Board of Directors may not amend the Plan:
(A) to increase the maximum number of shares which may be issued on
exercise of Options or pursuant to Restricted Stock Awards or Performance
Awards granted under the Plan;
(B) to change the minimum Option Price;
(C) to extend the maximum Option term; or
(D) to change the class of employees eligible to receive Options,
Restricted Stock Awards or Performance Awards.
14. EFFECT OF THE PLAN
Neither the adoption of the Plan nor any action of the Board of Directors
or of the Committee shall be deemed to give any officer or any employee any
right to be granted an Option to purchase Common Stock, a right to a Restricted
Stock Award or a right to a Performance Award or any rights hereunder except as
may be evidenced by an Option agreement, Restricted Stock Award agreement or
Performance Award agreement, duly executed on behalf of the Corporation, and
then only to the extent and on the terms and conditions expressly set forth
therein.
10
<PAGE> 1
Exhibit 10f
WHITMAN CORPORATION
AMENDMENT NO. 2
TO
1982 STOCK OPTION, RESTRICTED STOCK AWARD
AND PERFORMANCE AWARD PLAN
This Amendment is made as of September 1, 1992 to the Whitman
Corporation 1982 Stock Option, Restricted Stock Award and Performance Award
Plan, as amended through June 16, 1989 (the "Plan").
1. Paragraph 5 of the Plan is hereby amended by deleting the third
paragraph and inserting in lieu thereof the following:
"Any shares of Common Stock subject to an Option or Alternate Stock
Right which for any reason lapses or is terminated as to such shares shall
again be available for grants of Options, Alternate Stock Rights,
Restricted Stock Awards or Performance Awards under the Plan."
2. Paragraph 7(G) of the Plan is hereby amended by adding at the end
thereof the following:
"No Alternate Stock Right granted under the Plan shall be transferable
otherwise than by will or the laws of descent and distribution and an
Alternate Stock Right may be exercised, during the lifetime of the holder
thereof, only by said holder."
3. Paragraph 10(A) of the Plan is hereby amended by deleting Paragraph
10(A) and inserting in lieu thereof the following:
"(A) (i) each Option granted under this Plan shall be exercisable in
full and (ii) each Holder of an Option shall receive from the Corporation
within 60 days after the change in control, in exchange for the surrender
of the Option or any portion thereof to the extent the Option is then
exercisable in accordance with clause (i), an amount of cash equal to the
difference between the fair market value (as determined by the Committee)
on the date of exercise of the Common Stock covered by the Option or
portion thereof which is so surrendered and the purchase price of such
Common Stock under the Option, provided that the right described in this
clause (ii) shall be exercisable only if a positive amount would be payable
to the Holder pursuant to the formula specified in this clause (ii);"
<PAGE> 2
4. Paragraph 10(B) of the Plan is hereby amended by deleting Paragraph
10(B) and inserting in lieu thereof the following:
"(B) each Holder of a Restricted Stock Award shall receive from the
Corporation within 60 days after the change in control, in exchange for the
surrender of the Restricted Stock Award, an amount of cash equal to the
fair market value (as determined by the Committee) on the date of the
change in control of the Common Stock subject to the Restricted Stock
Award;"
5. Paragraph 10(C) of the Plan is hereby amended by deleting Paragraph
10(C) and inserting in lieu thereof the following:
"(C) each Holder of a Performance Award for which the performance
period has not expired shall receive from the Corporation within 60 days
after the change in control, in exchange for the surrender of the
Performance Award, an amount of cash equal to the product of the value of
the Performance Award and a fraction the numerator of which is the number
of whole months which have elapsed from the beginning of the performance
period to the date of the change in control and the denominator of which
is the number of whole months in the performance period; and"
6. Paragraph 10 of the Plan is hereby amended by adding at the end
thereof the following:
"No right to receive cash under this Paragraph 10, whether or not such
right is a derivative security, shall be transferable otherwise than by
will or the laws of descent and distribution."
7. Paragraph 11(B) of the Plan is hereby amended by deleting Paragraph
11(B) and inserting in lieu thereof the following:
"(B) A Share Withholding election shall be subject to disapproval by
the Committee. In addition, Share Withholding, including a Share
Withholding election, shall be in compliance with Section 16 of the
Securities Exchange Act of 1934 and the rules thereunder."
8. Paragraph 11(C) of the Plan is hereby amended by deleting Paragraph
11(C) and inserting in lieu thereof the following:
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<PAGE> 3
(C) If the date as of which the amount of tax to be withheld is
determined (the "Tax Date") is deferred until after the exercise of a
Nonqualified Option, the expiration of the Restriction Period applicable to
a Restricted Stock Award or the payment of a Performance Award, and the
Holder elects Share Withholding, the Corporation shall issue to the
Holder the full number of shares of Common Stock, if any, resulting from
such exercise, expiration or payment and the Holder shall be
unconditionally obligated to tender back or deliver to the Corporation on
the Tax Date such number of shares of Common Stock as shall have an
aggregate fair market value equal to the amount to be withheld on the Tax
Date, rounded down to the nearest whole share.
9. This Amendment is made pursuant to Paragraph 13 of the Plan.
IN WITNESS WHEREOF, the Company has caused this amendment to be signed
on its behalf by its duly authorized representative and its corporate seal to be
affixed and attested this 19th day of June, 1992.
WHITMAN CORPORATION
By: /s/ WILLIAM B. MOORE
-------------------------------------
Its Vice President
-------------------------------------
(Corporate Seal)
Attest:
/s/ [ILLEGIBLE]
- ---------------------------------
Its: Assistant Secretary
----------------------------
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<PAGE> 1
Exhibit 10g
FORM OF
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT dated as of _________________,
between WHITMAN CORPORATION, a Delaware corporation (the
"Corporation"), and _____________, an employee of the Corporation or
one of its a subsidiaries (the "Holder").
WHEREAS, the Corporation desires, by affording the Holder an
opportunity to purchase shares of the Corporation's Common Stock as hereinafter
provided, to carry out the purposes of the Corporation's 1982 Stock Option,
Restricted Stock Award and Performance Award Plan (the "Plan"), as approved by
the shareholders of the Corporation on May 6, 1982, and as amended by the Board
of Directors on June 19, 1992;
WHEREAS, the Management Resources and Compensation Committee of the
Board of Directors of the Corporation (the "Committee") has duly made all
determinations necessary or appropriate to the grant hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth and for other good and valuable consideration,
receipt of which in hereby acknowledged, the parties hereto have agreed, and do
hereby agree, as follows:
1. The Corporation hereby irrevocably grants to the Holder, as a matter
of separate agreement and not in lieu of salary or any other compensation for
services, the right and option (the "Option"), to purchase _____ shares of
Common Stock of the Corporation on the terms and conditions herein set forth.
2. For each of said shares purchased, the Holder shall pay to the
Corporation $______ per share (the "Option Price").
3. Subject to the provisions of paragraphs 7, 8 and 9 hereof, this
Option shall be for a term of ten years from the date hereof and shall become
exercisable as to one-third of the shares covered by this Option on the first
anniversary hereof, as to two-thirds of the shares covered by this Option on the
second anniversary hereof (reduced by such number of shares as may have
therefore been purchased hereunder after the first anniversary), and as to all
shares covered by this Option and not theretofore purchased on the third
anniversary hereof. The Corporation shall not be required to issue any
fractional shares upon exercise of this Option, and any fractional interests
resulting from the calculation of the number of shares in respect of which this
Option may be exercised prior to the third anniversary hereof shall be rounded
down to the nearest whole share. Except as provided in paragraphs 7, 8 and 9
hereof, this Option may not be exercised unless the
<PAGE> 2
Holder shall, at the time of exercise, be an employee of the Corporation or one
of its "subsidiaries" as defined in the Plan.
4. This Option may be exercised only by one or more notices in writing
of the Holder's intent to exercise this Option, delivered to Muriel E. Ramsey,
Manager of Administrative Services, at the Corporate office or, at the risk of
the Holder, mailed to Muriel E. Ramsey, Manager of Administrative services, at
the Corporate office, and accompanied by payment by check to the Corporation in
an amount equal to the aggregate Option Price of the total number of whole
shares then being purchased.
5. Following the exercise of this Option, the Corporation will advise
the Holder of the applicable Federal and state income taxes required to be
withheld by reason of such exercise. Thereupon, the Holder shall forthwith
deliver to the Corporation a check payable to the Corporation or the subsidiary
of the Corporation which employs the Holder, as the case may be, representing
said taxes.
6. This Option is not transferable by the Holder otherwise than by will
or the laws of descent and distribution, and may be exercised, during the
lifetime of the Holder, only by the Holder.
7. In the event of the termination of employment of the Holder with the
Corporation or one of its subsidiaries, other than by reason of retirement
pursuant to Corporation policy, the Holder may exercise this Option at any time
within three months (or one year, if the Holder is permanently disabled within
the meaning of Section 105(d)(4) of the Federal Internal Revenue Code) after
such termination, but only if and to the extent this Option was exercisable at
the date of termination, and in no event after the date on which this Option
would otherwise terminate; provided, however, if such termination was for
cause or a voluntary termination without the written consent of the
Corporation, then this Agreement shall be of no further force or effect and all
rights of the Holder under this Option shall thereupon cease.
8. In the event of the termination of employment of the Holder with
the Corporation or one of its subsidiaries by reason of retirement pursuant to
Corporation policy, then all shares subject to this Option shall be deemed to be
fully exercisable, and, subject to paragraph 9 hereof, this Option shall be
exercisable by the Holder at any time up to and including (but not after) the
date on which this Option would otherwise terminate.
9. In the event of the death of the Holder (i) while he is employed by
the Corporation or one of its subsidiaries or retired pursuant to Corporation
Policy, (ii) within three months after termination of the Holder's employment
(other than a termination by reason of permanent disability within the meaning
of Section, 105(d)(4) of the Code), or (iii) within one year after termination
of the Holder's employment by reason of such disability, then this option may be
exercised by the legatees of the Holder under his last will, or by his personal
representatives or distributees, at any time within a period of nine months
after the Holder's death, but
-2-
<PAGE> 3
only if and to the extent this Option was exercisable at the date of death
(unless death occurs while the Holder is employed by the Corporation or one of
its subsidiaries, in which case all shares subject to this Option Shall be
deemed to be fully exercisable), and in no event after the date on which this
Option would otherwise terminate.
10. If, prior to the termination of this Option, the number of
outstanding shares of Common Stock of the Corporation Shall be increased or
decreased by reason of a stock split, stock dividend, reverse stock split or
combination thereof, then the number of shares at the time subject to this
Option, the number of shares reserved for issuance pursuant to exercise hereof,
and the Option Price per share shall be proportionately adjusted without any
change in the aggregate Option Price therefor.
11. If, prior to the termination of this Option, the outstanding shares
of Common Stock of the Corporation shall be affected by any change other than
those specifically mentioned in the preceding paragraph (e.g., by reason of a
recapitalization, merger, consolidation exchange of shares, and the like), then
the aggregate number and class of shares thereafter subject to this Option and
the Option Price thereof, and the number and class of shares reserved for
issuance pursuant to exercise hereof, may be appropriately adjusted in such
manner as the Committee shall in its sole discretion determine to be equitable
and consistent with the purposes of the Plan. Such determination shall be
conclusive for all purposes of this option.
12. This Option and each and every obligation of the Corporation
hereunder are subject to the requirement that if at any time the Corporation
shall determine, upon advise of counsel, that the listing, registration, or
qualification of the shares covered hereby upon any securities exchange or under
any state or Federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of or in connection
with the granting of this Option or the purchase of shares hereunder, this
Option may not be exercised in whole or in part unless and until such listing,
registration, qualification consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board of Directors of the
Corporation.
13. In the event of a "change in control", as that term is defined in
the Plan the Holder shall have all of the rights specified in Paragraph 10(A)
of the Plan.
14. Nothing herein contained shall confer on the Holder any right to
continue in the employment of the Corporation or any of its subsidiaries or
interfere in any way with the right of the Corporation or any subsidiary to
terminate the Holder's employment at any time; confer on the Holder any of the
rights of a shareholder with respect to any of the shares subject to this
Option until such shares shall be issued upon the exercise of this Option;
affect the Holder's right to participate in and receive benefits under and in
accordance with the provisions of any pension, profit-sharing, insurance, or
other employee benefit plan or program of the
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<PAGE> 4
Corporation or any of its subsidiaries; or limit or otherwise affect the right
of the Board of Directors of the Corporation (subject to any required approval
by the shareholders) at any time or from time to time to alter, amend, suspend
or discontinue the Plan and the rules for its administration; provided, however,
that no termination or amendment of the Plan may, without the consent of the
Holder, adversely affect the Holder's rights under this Option.
IN WITNESS WHEREOF, the Corporation has caused this Nonqualified Stock
Option Agreement to be duly executed by an officer thereunto duly authorized,
and the Holder has hereunto set his hand, all as of the day and year first above
written.
WHITMAN CORPORATION
By:
-----------------------------------------
Senior Vice President
-----------------------------------------
Holder
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<PAGE> 1
EXHIBIT 10h
WHITMAN
STOCK INCENTIVE PLAN
as amended through February 19, 1993
<PAGE> 2
WHITMAN CORPORATION
STOCK INCENTIVE PLAN
(as amended through February 19, 1993)
1. DEFINITIONS
The following definitions shall be applicable throughout this Plan:
(a) "Code" shall mean the Internal Revenue Code of 1986, as the same
may be amended from time to time. Reference in the Plan to any section of
the Code shall be deemed to include any amendments or successor provision
to such section and any regulations under such section.
(b) "Committee" shall mean not less than three members of the Board
of Directors, each of whom shall be a "disinterested person" within the
meaning of Rule 16b-3 under the Exchange Act, and who are selected by the
Board of Directors as provided in Paragraph 4.
(c) "Common Stock" shall mean common stock of the Corporation without
par value.
(d) "Corporation" shall mean Whitman Corporation, a Delaware
corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Holder" shall mean an individual who has been granted an Option,
Restricted Stock Award or Performance Award.
(g) "Option" shall mean any option granted under the Plan for the
purchase of Common Stock.
(h) "Performance Award" shall mean an award granted under the
Performance Award provisions of the Plan.
(i) "Plan" shall mean the Corporation's Stock Incentive Plan, as
amended.
(j) "Restricted Stock Award" shall mean an award of Common Stock
granted under the Restricted Stock Award provisions of the Plan.
(k) "Retirement" shall mean cessation of active employment with the
Corporation or a subsidiary pursuant to the Corporation's retirement
policies and programs.
(1) "SAR" shall mean a stock appreciation right which is issued in
tandem with, or by reference to, an Option, which entitles the Holder
thereof to receive, upon exercise of such SAR and surrender for
cancellation of all or a portion of such Option, shares of Common Stock,
cash or a combination thereof with an aggregate value equal to the excess
of the fair market value of one share of Common Stock on the date of
exercise over the purchase price specified in such Option, multiplied by
the number of shares of Common Stock subject to such Option, or portion
thereof, which is surrendered.
2. Purpose
It is the purpose of the Plan to provide a means through which the
Corporation may attract able persons to enter its employ and the employ of its
subsidiaries and to provide a means whereby those persons (salaried officers
and other key employees) upon whom the responsibilities of the successful
administration and management of the Corporation or its subsidiaries rest, and
whose present and potential contributions to the welfare of the Corporation or
its subsidiaries are of importance, can acquire and maintain stock ownership.
Such key employees should thus have a greater than ordinary concern for the
welfare of the Corporation or its subsidiaries and would be expected to
strengthen and maintain a desire to remain in the employ of the Corporation or
its subsidiaries. It is a further purpose of the Plan to provide such key
employees with additional incentive and reward opportunities designed to
enhance the profitable growth of the Corporation, So that the maximum incentive
can be provided each particular employee participating in the Plan by granting
him an Option or award best suited to his circumstances, the Plan provides for
granting "incentive stock options" (as defined in Section 422 of the Code) and
nonqualified stock options (with or without SARs), Restricted Stock Awards and
Performance Awards, or any combination of the foregoing.
1
<PAGE> 3
3. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective upon adoption by the Board of Directors of
the Corporation, but is subject to approval by the affirmative vote of the
shareholders of the Corporation at the annual meeting of shareholders to be
held on May 6, 1982, or any adjournment thereof. The Plan shall remain in
effect until all Options granted under the Plan have been exercised, all
restrictions imposed upon Restricted Stock Awards have been eliminated and all
Performance Awards have been satisfied.
4. ADMINISTRATION
A Committee consisting of not less than three members of the Board of
Directors, each of whom shall be a "disinterested person" within the meaning of
Rule 16b-3 under the Exchange Act, shall be selected by the Board of Directors
to administer the Plan. A majority of the Committee shall constitute a quorum.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the individuals to receive Options
(with or without SARs), Restricted Stock Awards and Performance Awards, the
time or times when they shall receive them, whether an "incentive stock option"
under Section 422 of the Code or nonqualified option shall be granted, the
number of shares to be subject to each Option and Restricted Stock Award and
the value of each Performance Award. In making such determinations the
Committee shall take into account the nature of the services rendered by each
individual, his present and potential contribution to the Corporation's
success, and such other factors as the Committee shall deem relevant.
The Committee shall have such additional powers as are delegated to it by
the other provisions of the Plan and, subject to the express provisions of the
Plan, to construe the respective Option, Restricted Stock Award and Performance
Award agreements and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and to determine the terms, restrictions and
provisions of the Option, Restricted Stock Award and Performance Award
agreements (which need not be identical) including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee to cause
certain Options to qualify as "incentive stock options" under Section 422 of the
Code, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option, Restricted
Stock Award or Performance Award agreement in the manner and to the extent it
shall deem expedient to carry it into effect, and it shall be the sole and final
judge of such expediency. The determinations of the Committee on matters
referred to in this Paragraph 4 shall be conclusive.
The Committee shall act by majority action at a meeting except that action
permitted to be taken at a meeting may be taken without a meeting if written
consent thereto is given by all members of the Committee.
5. GRANT OF OPTIONS, RESTRICTED STOCK AWARDS AND PERFORMANCE AWARDS; SHARES
SUBJECT TO THE PLAN
The Committee may from time to time grant both "incentive stock options"
under Section 422 of the Code and nonqualified options to purchase shares of
Common Stock (with or without SARs), Restricted Stock Awards and Performance
Awards to one or more officers or employees determined by it to be eligible for
participation in accordance with the provisions of Paragraph 6 and providing
for the issuance of such number of shares and, in the case of Performance
Awards, having such value as in the discretion of the Committee may be fitting
and proper. Subject to Paragraph 10, not more than 7,500,000 shares of Common
Stock, plus the number of shares of Common Stock available for issuance as of
February 18, 1993 under the Plan, may be issued upon exercise of Options or
SARs or pursuant to Restricted Stock Awards or Performance Awards granted under
the Plan on or after February 19, 1993. Performance Awards which may be
exercised or paid only in cash shall not affect the number of shares of Common
Stock available for issuance under the Plan.
The stock to be offered under the Plan pursuant to Options, SARs,
Restricted Stock Awards and Performance Awards may be authorized but unissued
Common Stock or Common Stock previously issued and outstanding and reacquired
by the Corporation.
The number of shares of Common Stock available for issuance under the Plan
shall be reduced by the sum of the aggregate number of shares of Common Stock
(i) then subject to outstanding Options and
2
<PAGE> 4
outstanding Performance Awards which may be paid solely in shares of Common
Stock or in either shares of Common Stock or cash or (ii) issued upon the grant
of a Restricted Stock Award. To the extent (i) that an outstanding Option
expires or terminates unexercised or is cancelled or forfeited (other than in
connection with the exercise of an SAR) or (ii) that an outstanding Performance
Award which may be paid solely in shares of Common Stock or in either shares of
Common Stock or cash expires or terminates without vesting or is cancelled or
forfeited, then the shares of Common Stock subject to such expired, terminated,
unexercised, cancelled or forfeited portion of such Option or Performance Award
shall again be available for issuance under the Plan. In the event all or a
portion of an SAR is exercised, the number of shares of Common Stock subject to
the related Option (or portion thereof) shall again be available for issuance
under the Plan, except to the extent that shares of Common Stock were issued
(or would have been issued but were withheld to satisfy tax withholding
obligations) upon exercise of the SAR.
6. ELIGIBILITY
Options, Restricted Stock Awards or Performance Awards may be granted only
to persons who, at the time of the grant or award, are officers or other key
employees of the Corporation or any of its present and future subsidiaries
within the meaning of Section 424(f) of the Code (herein called subsidiaries),
including officers who are also directors of the Corporation. Options,
Restricted Stock Awards or Performance Awards, or any combination thereof, may
be granted on more than one occasion to the same person. A person who has
received or is eligible to receive options to purchase stock of any subsidiary
of the Corporation or incentive awards from any subsidiary of the Corporation
will not, by reason thereof, be ineligible to receive Options, Restricted Stock
Awards or Performance Awards under this Plan unless prohibited by the plan of
such subsidiary.
Nothing in the Plan or any Option, Restricted Stock Award or Performance
Award agreement shall be construed to constitute or be evidence of an agreement
or understanding, expressed or implied, on the part of the Corporation or its
subsidiaries to employ any person for any specific period of time.
7. PROVISIONS APPLICABLE TO OPTIONS; SARS
(A) Period of Option and Certain Limitations on the Right to Exercise. The
term of each Option granted under the Plan shall be for such period as the
Committee shall determine but shall be subject to the provisions of Paragraph
7(E) and shall not be more than ten years in duration. Except as otherwise
provided in Paragraph 7(E), an Option may not be exercised by the Holder unless
such Holder is then, and continually (except for sick leave, military service
or other approved leaves of absence) after the grant of the Option has been, an
employee of the Corporation or a subsidiary. With respect to each Option, the
Committee shall determine the number of shares subject to the Option and the
manner and the time of exercise of such Option. The Committee shall make such
other determinations which in its discretion appear to be fitting and proper.
(B) Stock Option Agreement. Each Option shall be evidenced by a stock
option agreement in such form containing such provisions not inconsistent with
the provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify certain Options as
"incentive stock options" under Section 422 of the Code. To the extent that the
aggregate fair market value (determined as of the date of grant) of shares of
Common Stock with respect to which Options designated as incentive stock
options are exercisable for the first time by a person during any calendar year
exceeds the amount (currently $100,000) established by the Code, such Options
shall be deemed to be non-qualified stock options.
(C) Option Price and Payment. The purchase price of the Common Stock under
each Option shall be determined by the Committee but shall be a price not less
than 100% of the fair market value of the Common Stock at the date such Option
is granted, as determined by the Committee; provided that if an incentive stock
option shall be granted to any person who, at the time such Option is granted,
owns capital stock of the Corporation possessing more than ten percent of the
total combined voting power of all classes of capital stock of the Corporation
(or of any parent or subsidiary of the Corporation), such purchase price shall
be the price (currently 110% of fair market value) required by the Code in
order to constitute an incentive stock option.
3
<PAGE> 5
An Option may be exercised by giving written notice to the Corporation
specifying the number of shares of Common Stock to be purchased and
accompanied by payment of the purchase price in full. As determined by the
Committee at the time of grant of an Option and set forth in the agreement
evidencing the Option, the purchase price may be paid in (a) cash or (b)
previously-owned whole shares of Common Stock evidenced by negotiable
certificates valued at their fair market value on the date of exercise. If
applicable, a person exercising an Option shall surrender to the
Corporation any SARs which are cancelled by reason of the exercise of such
Option.
(D) Nontransferability of Options. No Option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution and an Option may be exercised, during the lifetime of the
Holder thereof, only by said Holder.
(E) Termination of Employment or Death of Holder. In the event of any
termination of the employment of a Holder with the Corporation or one of
its subsidiaries, other than by reason of Retirement or death, the Holder
may (unless otherwise provided in the Option agreement) exercise each
Option held by such Holder at any time within three months (or one year if
the Holder is permanently and totally disabled within the meaning of
Section 22(e)(3) of the Code) after such termination of employment, but
only if and to the extent such Option is exercisable at the date of such
termination of employment, and in no event after the date on which such
Option would otherwise terminate; provided, however, that if such
termination of employment is for cause or voluntary on the part of the
Holder without the written consent of the Corporation, any Option held by
him under the Plan shall terminate unless otherwise provided in the Option
agreement.
In the event of the termination of employment of a Holder by reason of
Retirement, then each Option held by the Holder shall be fully exercisable,
and, subject to the following paragraph and to the agreement evidencing the
Option, such Option shall be exercisable by the Holder at any time up to
and including (but not after) the date on which the Option would otherwise
terminate.
In the event of the death of a Holder (i) while he is employed by the
Corporation or one of its subsidiaries or after Retirement, (ii) within
three months after termination of the Holder's employment (other than a
termination by reason of permanent and total disability within the meaning
of Section 22(e)(3) of the Code), or (iii) within one year after
termination of the Holder's employment by reason of such disability, then
each Option held by such Holder may be exercised by the legatees of the
Holder under his last will, or by his personal representatives or
distributees, at any time within a period of nine months after the Holder's
death, but only if and to the extent such Option is exercisable at the date
of death (unless death occurs while the Holder is employed by the
Corporation or one of its subsidiaries, in which case each Option held by
the Holder shall be fully exercisable), and in no event after the date on
which such Option would otherwise terminate.
(F) Privileges of the Holder as Shareholder. The Holder shall be entitled
to all the privileges and rights of a shareholder with respect only to such
shares of Common Stock as have been actually purchased under the Option and
for which certificates have been registered in the Holder's name,
(G) SARs. The Committee may, in its sole discretion, grant an SAR
(concurrently with the grant of the Option or subsequent to such grant) to
any Holder of any Option granted under the Plan (or his legatees, personal
representatives or distributees then entitled to exercise such Option). An
SAR may be exercised (i) by giving written notice to the Corporation
specifying the number of SARs which are being exercised and (ii) by
surrendering to the Corporation any Options which are cancelled by reason
of the exercise of the SAR. An SAR shall be exercisable upon such
additional terms and conditions as may from time to time be prescribed by
the Committee. No fractional share shall be issued upon the exercise of any
SAR. No SAR granted under the Plan shall be transferable otherwise than by
will or the laws of descent and distribution and an SAR may be exercised
during the lifetime of the Holder only by the Holder.
4
<PAGE> 6
8. PROVISIONS APPLICABLE TO RESTRICTED STOCK AWARDS
(A) Restriction Period To Be Established by the Committee. At the time of
the making of a Restricted Stock Award, the Committee shall establish a
period of time (the "Restriction Period") applicable to such award. The
Committee may establish different Restriction Periods from time to time and
each Restricted Stock Award may have a different Restriction Period, in the
discretion of the Committee.
(B) Other Terms and Conditions. Common Stock, when awarded pursuant to a
Restricted Stock Award, will be represented by a stock certificate
registered in the name of the Holder who receives the Restricted Stock
Award or a nominee for the benefit of the Holder. The Holder will have the
right to receive dividends (or the cash equivalent thereof) during the
Restriction Period and will also have the right to vote such Common Stock
and all other shareholder's rights, with the exception that (i) the Holder
will not be entitled to delivery of the stock certificate until the
Restriction Period established by the Committee pursuant to Paragraph 8(A)
shall have expired, (ii) the Corporation will retain custody of the stock
during the Restriction Period, (iii) the Holder may not sell, transfer,
pledge, exchange, hypothecate or dispose of the stock during the
Restriction Period, and (iv) a breach of restriction or breach of terms and
conditions established by the Committee pursuant to the Restricted Stock
Award will cause a forfeiture of the Restricted Stock Award, A distribution
with respect to shares of Common Stock, other than a distribution in cash,
shall be subject to the same restrictions as the shares of Common Stock
with respect to which such distribution was made, unless otherwise
determined by the Committee. The Committee may, in addition, prescribe
additional restrictions, terms or conditions upon or to the Restricted
Stock Award in the manner prescribed by Paragraph 4. The Committee may, in
its sole discretion, also establish rules pertaining to the Restricted
Stock Award in the event of termination of employment (by Retirement,
disability, death or otherwise) of a Holder of such award prior to the
expiration of the Restriction Period.
(C) Restricted Stock Award Agreement. Each Restricted Stock Award shall
be evidenced by an agreement in such form and containing such provisions
not inconsistent with the provisions of the Plan as the Committee from time
to time shall approve.
(D) Payment for Restricted Stock. Restricted Stock Awards may be made by
the Committee whereby the Holder receives Common Stock subject to those
terms, conditions and restrictions established by the Committee but is not
required to make any payment for said Common Stock. The Committee may also
establish terms as to each Holder whereby such Holder, as a condition to
the Restricted Stock Award, is required to pay all (or any lesser amount
than all) of the fair market value of the Common Stock, determined as of
the date the Restricted Stock Award is made. Such purchase price shall be
paid in cash no later than the expiration of the Restriction Period.
9. PROVISIONS APPLICABLE TO PERFORMANCE AWARDS
(A) Performance Period. The Committee shall establish with respect to
each Performance Award a performance period over which the performance of
the Holder shall be measured. The performance period shall be established
at the time of such award.
(B) Performance Awards. Each Performance Award shall have a maximum value
established by the Committee at the time of such award.
(C) Performance Measures. Performance Awards shall be awarded to an
employee contingent upon future performance of the Corporation and/or of
the Corporation's subsidiary, division or department for which he is
employed over the performance period. The Committee shall establish the
performance measures applicable to such performance. The performance
measures determined by the Committee shall be established prior to the
beginning of each performance period but may be subject to such later
revisions to reflect significant, unforeseen events or changes, as the
Committee shall deem appropriate.
(D) Award Criteria. In determining the value of Performance Awards, the
Committee shall take into account an employee's responsibility level,
performance, potential, cash compensation level, unexercised stock options,
other incentive awards and such other considerations as it deems
appropriate.
5
<PAGE> 7
(E) Payment. Following the end of each performance period, the Holder of
each Performance Award will be entitled to receive payment of an amount,
not exceeding the maximum value of the Performance Award, based on the
achievement of the performance measures for such performance period, as
determined by the Committee. Payment of Performance Awards may be made
wholly in cash, wholly in shares of Common Stock or a combination thereof,
all at the discretion of the Committee. Payment shall be. made in a lump
sum or in installments, and shall be subject to such vesting and other
terms and conditions as may be prescribed by the Committee for such
purpose.
(F) Termination of Employment. A Performance Award to an employee shall
terminate for all purposes if he does not remain continuously in the employ
of the Corporation at all times during the applicable performance period,
except as may otherwise be determined by the Committee.
In the event that a Holder of a Performance Award ceases to be an
employee of the Corporation following the end of the applicable performance
period but prior to full payment according to the terms of the Performance
Award, payment shall be made in accordance with terms established by the
Committee for the payment of such Performance Award.
(G) Other Terms and Conditions. When a Performance Award is payable in
installments in Common Stock, if determined by the Committee, the total
number of stock certificates representing shares of Common Stock which
would have been issuable to the Holder of the Performance Award if such
payment had been made in full on the day following the end of the
applicable performance period may be registered in the name of such Holder,
and during the period until such installment becomes due such Holder will
have the right to receive dividends and will also have the right to vote
such Common Stock and all other shareholder's rights, with the exception
that (i) the Holder will not be entitled to delivery of any stock
certificate representing shares of Common Stock until the installment
payable in shares becomes due, (ii) the Corporation will retain custody of
such shares until such time and (iii) the Holder may not sell, transfer,
pledge, exchange, hypothecate or dispose of such shares until such time. A
distribution with respect to shares of Common Stock payable in installments
which has not become due, other than a distribution in cash, shall be
subject to the same restrictions as the shares of Common Stock with respect
to which such distribution was made, unless otherwise determined by the
Committee.
(H) Performance Award Agreements. Performance Awards shall be evidenced
by Performance Award agreements in such form and containing such provisions
not inconsistent with the provisions of the Plan as the Committee from time
to time shall approve.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CHANGE IN CONTROL
Notwithstanding any other provision of the Plan, each Option, Restricted
Stock Award or Performance Award agreement may contain such provisions as
the Committee shall determine to be appropriate for the adjustment of (i)
the number and class of shares or other consideration subject to any Option
or to be delivered pursuant to any Restricted Stock Award or Performance
Award and (ii) the Option or Restricted Stock Award price, in the event of
a stock dividend, spin-off, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, or the like. In such
event, the maximum number and class of shares available under the Plan, and
the number and class of shares subject to Options, SARs, Restricted Stock
Awards or Performance Awards, shall be appropriately adjusted by the
Committee, whose determination shall be conclusive.
In the event of a "change in control" (as hereinafter defined):
(A) (i) each Option granted under the Plan shall be exercisable in
full, (ii) each Holder of an Option shall receive from the Corporation
within 60 days after the change in control, in exchange for the surrender
of the Option or any portion thereof to the extent the Option is then
exercisable in accordance with clause (i), an amount of cash equal to the
difference between the fair market value (as determined by the Committee)
on the date of the change in control of the Common Stock covered by the
Option or portion thereof which is so surrendered and the purchase price
of such Common Stock under the Option and (iii) each SAR shall be
surrendered by the Holder thereof and shall be cancelled simultaneously
with the cancellation of the related Option;
6
<PAGE> 8
(B) each Holder of a Restricted Stock Award shall receive from the
Corporation within 60 days after the change in control, in exchange for
the surrender of the Restricted Stock Award, an amount of cash equal to
the fair market value (as determined by the Committee) on the date of
the change in control of the Common Stock subject to the Restricted
Stock Award;
(C) each Holder of a Performance Award for which the performance
period has not expired shall receive from the Corporation within 60
days after the change in control, in exchange for the surrender of the
Performance Award, an amount of cash equal to the product of the value
of the Performance Award and a fraction the numerator of which is the
number of whole months which have elapsed from the beginning of the
performance period to the date of the change in control and the
denominator of which is the number of whole months in the performance
period; and
(D) each Holder of a Performance Award that has been earned but
not yet paid shall receive an amount of cash equal to the value of the
Performance Award.
For purposes of this paragraph, the term "change in control" shall be
deemed to have occurred if (i) there shall be consummated (A) any
consolidation or merger of the Corporation in which the Corporation is not
the continuing or surviving corporation or pursuant to which shares of the
Common Stock would be converted into cash, securities or other property,
other than a merger of the Corporation in which the holders of the Common
Stock immediately prior to the merger have substantially the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of the Corporation, or (ii) the
shareholders of the Corporation shall approve any plan or proposal for the
liquidation or dissolution of the Corporation, or (iii) any person (as
such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act,
other than the Corporation or a subsidiary or any employee benefit plan
sponsored by the Corporation or a subsidiary, shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities ordinarily
(and apart from rights accruing in special circumstances) having the right
to vote in the election of directors, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise,
or (iv) at any time during a period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of
the Corporation shall cease for any reason to constitute at least a
majority thereof unless the election or the nomination for election by the
Corporation's shareholders of each new director during such two-year
period was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such two-year
period.
No right to receive cash under this Paragraph 10, whether or not such
right is a derivative security, shall be transferable otherwise than by
will or the laws of descent and distribution.
11. WITHHOLDING TAXES
The following provisions of this Paragraph 11 shall be applicable
only with respect to Holders who are subject to Section 16(b) of the
Exchange Act or who have been granted Restricted Stock Awards or
Performance Awards under the Plan.
(A) A Holder of an Option, SAR, Restricted Stock Award or Performance
Award granted under the Plan may elect, by written notice to the
Corporation at the office of the Corporation designated for that purpose,
to pay through withholding by the Corporation all or a portion of the
estimated federal, state, local and other taxes arising from (1) the
exercise of an Option or SAR and (2) the vesting or distribution of shares
of Common Stock pursuant to a Restricted Stock Award or Performance Award
(a) by having the Corporation withhold shares of Common Stock or (b) if
provided in the agreement for such Option, SAR, Restricted Stock Award or
Performance Award, by delivering previously-owned shares (collectively,
"Share Withholding"), in each case being such number of shares of Common
Stock as shall have a fair market value equal to the amount of taxes to be
withheld, rounded down to the nearest whole share.
7
<PAGE> 9
(B) A Share Withholding election shall be subject to disapproval by
the Committee. The Corporation may require that Share Withholding,
including a Share Withholding election, be in compliance with Section 16
of the Exchange Act and the rules thereunder.
(C) If the date as of which the amount of tax to be withheld is
determined (the "Tax Date") is deferred until after the exercise of an
Option or SAR, the expiration of the Restriction Period applicable to a
Restricted Stock Award or the payment of a Performance Award, and the
Holder elects Share Withholding, the Corporation shall issue to the Holder
the full number of shares of Common Stock, if any, resulting from such
exercise, expiration or payment and the Holder shall be unconditionally
obligated to deliver to the Corporation on the Tax Date such number of
shares of Common Stock as shall have an aggregate fair market value equal
to the amount to be withheld on the Tax Date, rounded down to the nearest
whole share.
(D) The fair market value of shares of Common Stock used for payment
of taxes, as provided in this Paragraph 11, shall be the mean sale price
per share, as reported for New York Stock Exchange Composite Transactions,
on the Tax Date,
12. TERMINATION OF PLAN
The Plan may be terminated at any time by the Board of Directors,
except with respect to any Options, SARs, Restricted Stock Awards or
Performance Awards then outstanding. The Corporation reserves the right to
restrict, in whole or in part, the exercise of any Options or SARs or the
delivery of Common Stock pursuant to any Restricted Stock Awards or
Performance Awards granted under the Plan until such time as:
(A) any legal requirements or regulations have been met relating
to the issuance of the shares covered thereby or to their
registration under the Securities Act of 1933 or to any applicable
State laws; and
(B) satisfactory assurances are received that the shares when
issued will be duly listed on the New York Stock Exchange, Inc.
13. AMENDMENT OF THE PLAN
The Board of Directors may amend the Plan; provided, however, that
without approval of the shareholders the Board of Directors may not amend
the Plan:
(A) to increase the maximum number of shares which may be issued
on exercise of Options or SARs or pursuant to Restricted Stock Awards
or Performance Awards granted under the Plan;
(B) to change the minimum Option price;
(C) to extend the maximum Option term; or
(D) to change the class of employees eligible to receive
Options, SARs, Restricted Stock Awards or Performance Awards.
14. EFFECT OF THE PLAN
Neither the adoption of the Plan nor any action of the Board of
Directors or of the Committee shall be deemed to give any officer or any
employee any right to be granted an Option to purchase Common Stock, a
right to a Restricted Stock Award or a right to a Performance Award or any
rights hereunder except as may be evidenced by an Option agreement,
Restricted Stock Award agreement or Performance Award agreement, duly
executed on behalf of the Corporation, and then only to the extent and on
the terms and conditions expressly set forth therein.
8
<PAGE> 1
EXHIBIT 10(i)
REVISED 1-1-84
[WHITMAN LOGO]
WHITMAN CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
(ADOPTED JANUARY 1, 1971)
<PAGE> 2
I
PURPOSE
This Plan is designed to provide a significant and variable economic
opportunity to key management and professional executives as a reflection
of their individual and group contributions to the success of Whitman
Corporation and/or their respective operating companies.
II
ELIGIBILITY
Participation in the plan shall be limited to employees whose positions
have at least 1,000 total Hay points, reflecting their opportunity to have
a substantial impact on Whitman Corporation and/or operating company
results. Exceptions to this guideline will be considered on a case-by-case
basis, including previous participation in the Plan.
*Each participant must be employed at the time of bonus payment and for at
least six months of the incentive year. Exception to this provision may be
made in the case of death, disability or retirement during the year.
Incentive compensation for periods of less than one year shall be pro-rated
on the number of months of active employment.
* Amended 10/6/75 as follows: "In the event an employee with more than
one year of service with a Whitman company works in a subsequent year
in a capacity covered by the MIC Plan - and assuming he would have
otherwise qualified for an award for his performance that year - then
an award will be paid to him (or his beneficiary, if applicable), based
on the number of months of service in that year - in the event he
retires, is disabled, or dies before the payment date the following
year."
- 2 -
<PAGE> 3
III
DETERMINATION OF INDIVIDUAL AWARDS
Individual awards will be influenced in varying relationships, by the
combined effects of Corporate, Company, Group, Division and Individual
accomplishment. Performance ratings will be Distinguished, Excellent,
Commendable, Adequate or less. No awards will be made in cases where a
rating of Individual accomplishment is determined as less than Commendable.
However, where Individual accomplishment exceeds an Adequate rating, awards
may be granted even though Corporate or unit results are below the level
which produces awards.
1) CORPORATE ACCOMPLISHMENT
Incentive awards for all participating Whitman staff and for the
CEO of each operating company will relate in part to Whitman's
accomplishment. Corporate performance will be initially measured by
earnings per common share. These standards of accomplishment will
be reviewed annually and determined at the beginning of each new
fiscal year.
2) UNIT ACCOMPLISHMENT
Each participant will be identified primarily with a unit: Whitman
staff; operating company; group or division of an operating
company. His/her incentive opportunity will vary to reflect the
accomplishment of his particular unit and his/her own personal
achievement. Measures of performance as well as standards of
accomplishment will, therefore, be established for each operating
company, group and division.
Emphasis will be placed on achievement against targets (profit
plans) that reflect current challenge and opportunity. Degree of
unit achievement against the predetermined criteria will,
therefore,
- 3 -
<PAGE> 4
establish the portion of the participant's award that is based on
his/her unit's accomplishment for the incentive period.
3) INDIVIDUAL ACCOMPLISHMENT
Finally, a judgment will be made of each individual's
accomplishment during the incentive year. Appropriate standards, as
well as supervisory judgment, will be used to determine differing
levels of accomplishment for the portion of the incentive award
that is based on each individual's personal performance. (See
attached Planning for Performance Objectives Planning Worksheet)
Examples of how selected award opportunities will reflect a combination of
corporate, operating company, group, division, or individual results
accomplishment are as follows:
<TABLE>
<CAPTION>
CORPORATE COMPANY GROUP DIVISION INDIVIDUAL TOTAL
--------- ------- ----- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
CEO (WHITMAN) 100 100
PRESIDENT 70 30 100
MGMNT POLICY 30 100
COMMITTEE 70
CORP. Staff 60 40 100
SUB. CEO 10 60 30 100
SUB. Staff 60 40 100
GROUP President 10 60 30 100
GROUP Staff 60 40 100
Div. President 10 60 30 100
Div. Staff 60 40 100
</TABLE>
- 4 -
<PAGE> 5
The incentive percentage weightings for those line management positions
reflected in the above table will be determined by the respective Chief
Executive Officers of the operating companies, subject to approval of
Whitman's Chief Executive Officer.
IV
ADMINISTRATION
Whitman's performance and the final determination of all incentive awards
will be subject to specific approval by the Management Resources and
Compensation Committee of the Board of Directors. Whitman's Chief Executive
Officer will review Corporate and operating company results at the end of
the year so as to evaluate Corporate and unit performance Measurement of
individual performance will be made by each participant's supervisor and
approved by the next level of management with ultimate review by Whitman's
Chief Executive Officer.
Any individual who receives a job change during the year will have all of
their calculations pro-rated on the number of months he/she was employed
in each position, and that employee's award will be further based on the
targets of the division and/or group for each of the positions and his/her
performance in each position.
If a job change occasioned an increase/decrease in the individual's total
Hay points, a proration will be applied in the calculation at year-end
based on the number of months at each of the old and new Hay points for the
positions involved.
- 5 -
<PAGE> 6
Award payments are to be made as soon as practicable after the close of the
Corporation's fiscal year. Although in future years the option of various
forms of payment may be offered recipients, payments in the early years of
the Plan are to be in cash.
The Plan will become effective January 1, 1971, which will be the
beginning of the first incentive year under the Plan.
8-1-89
- 6 -
<PAGE> 1
EXHIBIT 10(j)
1992 LONG TERM PERFORMANCE COMPENSATION PROGRAM
I. INTRODUCTION
The Long Term Performance Compensation Program ("LTP") is intended to
provide guidelines for awards of performance based restricted shares of
common stock and non-qualified stock options in 1992 and subsequent years
made by the Management Resources and Compensation Committee ("Committee")
under the Whitman Corporation 1982 Stock Option, Restricted Stock Award and
Performance Award Plan (the "Plan").
The LTP will be implemented in two phases. The first phase involves
formula-based stock options for the category of executives who were eligible
for stock options under the Plan in 1991. In the second phase, awards will
consist of performance based restricted stock and stock options. Award
values and vesting will depend on compensation practices at comparable
companies and Whitman shareholder returns exceeding designated percentiles
of the S&P 500.
Restricted shares will comprise 50% of the value of performance awards for
senior management policy makers. The remaining 50% of their awards and
100% of the awards for the remaining executives will be made in
non-qualified stock options based on the same performance criteria as
restricted stock.
One hundred and twelve executives of Whitman and its three operating
companies are eligible under these guidelines. Twenty-eight are classified
as senior management and will be eligible for restricted shares and stock
options. The remaining eighty-four executives will be eligible for stock
options only.
II. SUMMARY DESCRIPTION OF THE LTP
A. Purpose
1. To motivate key executives to balance achievement of short and long
term strategic business objectives in order to promote long term
growth in shareholder value.
2. To permit key executives to share in the creation of shareholder
value through a competitive long-term capital accumulation plan,
which will:
o link executive and shareholder self interest;
o reward superior performance as measured by relative total
return to shareholders compared to the results of other
companies in the S&P 500 index;
o integrate appropriately with base salary and annual incentive
arrangements.
<PAGE> 2
B. Award Vehicles
Subject to the approval of the Committee, awards will be made annually
in the form of shares of restricted common stock and non-qualified
stock options based on total return against the S&P 500.
1. For senior management executives ("SMEs"), annual awards will be
50% in restricted shares and 50% in stock options.
2. For all other key executives, annual awards will be made 100% in
stock options.
C. Participants
1. All awards of stock options and restricted stock are made at the
discretion of the Committee. The Committee may modify or terminate
the LTP at any time. Participation by an executive in one year
would not guarantee participation in future years.
2. SMEs who qualify for a combination of restricted shares and stock
options are defined as those individuals who make policy affecting
the investment and optimization of the financial and human
resources necessary to the attainment of the strategic objectives
of the Company.
3. Key executives who are eligible for stock options only are defined
as those individuals who participate in the Company's Management
Incentive Compensation Plan, who are not SMEs and who are primarily
responsible for implementation of strategies affecting the
investment of the financial and human resources of the Company.
D. Grant Values
An individual's target award is the total dollar value of the LTP award
when Whitman's cumulative total return to shareholders (stock price
plus dividends) is equal to the cumulative total return of the S&P 500
at the 60th percentile. The dollar value of the individual target
awards will reflect job classifications and be based on a comparator
group of companies for comparable jobs.
Restricted stock award values shall be expressed in terms of the dollar
value of each restricted share of common stock based on market price at
time of award. Stock option values shall be expressed in terms of the
present dollar value of each option share based on an independent
evaluation method as of the date of award.
The LTP is designed to reward superior performance. Target awards will
be made for performance at the 60th percentile of the S&P 500.
Performance at the 80th percentile and above will produce an award of
200% of the target award; and performance at the 49th percentile or
below will produce no award. For each 1% increase of percentile
performance above the 60th percentile, the target award will increase
5% up to the maximum of 200% of target at the 80th percentile of the
S&P 500. For each 1% decrease in percentile performance from the 60th
2
<PAGE> 3
percentile, the target award will decrease 5% down to a minimum award
of 50% of target at the 50th percentile of the S&P 500.
E. Terms of Grant
1. With respect to restricted shares and stock options:
a. For 1992, stock options only shall be granted for all
participants in the LTP based on formulas reflecting long term
compensation values for executives with comparable
responsibilities at peer group companies. Such options will be
exercisable and vest in accordance with section E.3.b. below.
b. Performance Based Restricted Shares ("PBRS") and Performance
Based Stock Options ("PBSOs") will be awarded in 1993 and in
each succeeding year following and based on the performance
results of the measurement period ending in such year.
c. PBRS and PBSO award amounts and vesting shall be determined by
relative total return to shareholders from the first to the
last business day of a measurement period based on stock price
appreciation and dividends.
2. Performance Based Restricted Shares
a. Beginning with the awards granted in 1993, one-half of the
awards to SMEs will be in PBRS based on the percentile
performance relationship of the Company to the S&P 500 for the
applicable measurement period. (1) Beginning in 1995, a rolling
three year average will be used.
(1) For 1993 the measurement period is 4/29/91 - 3/31/93.
For 1994 the measurement period is 4/2/91 - 3/31/94.
For 1995 and subsequent years the measurement period is the
three year period ending on March 31st.
b. Subject to the performance criteria, 1/3 of the restrictions
for each PBRS award will be released in each of the next three
succeeding years in which an award is made based on continuing
performance at or above the 50th percentile. For years in which
performance is below the 50th percentile, release of
restrictions will be deferred until performance is at the 50th
percentile or above.
3. Performance Based Stock Options
a. Beginning with awards granted in 1993, one half of the awards
granted to SMEs and all awards granted to other key employees
will be in PBSOs based on the percentile performance
relationship of the Company to the S&P 500 over the appropriate
measurement period.(2)
(2) The above measurement period for PBRS. (E.2.a.)
3
<PAGE> 4
b. One third of PBSO's shall vest and be exercisable one year from
the date of grant and one third each year thereafter.
F. Performance Measurement Methodology
Relative total return to shareholders includes stock price
appreciation, plus dividend return for the measurement period (two
years ending March 31, 1993 and three years ending each succeeding
March 31). Whitman's relative total return performance will be
determined using the stock prices for the five business days before and
after March 31st of a year, if appropriate in order to avoid
distortions. Relative total return will be determined by Whitman's
percentile rank in the S&P 500 for the measurement period.
G. Change in Control
In the event of a "change in control", as defined in the Plan, each
executive holding outstanding but unvested PBRS or PBSOs shall have
all of the rights of a "Holder" specified in Paragraphs 10(b) and
10(a), respectively, of the Plan. In such event, participants in the
LTP shall also have the rights specified in Paragraphs 10(c) and 10(d)
of the Plan in respect of partially completed measurement periods or a
completed measurement period for which PBRS and PBSOs have been earned
but not yet awarded.
4
<PAGE> 1
EXHIBIT 10K
WHITMAN CORPORATION
EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective January 1, 1998
WHITMAN CORPORATION EXECUTIVE RETIREMENT PLAN
Whitman Corporation amends and restates, effective as of January 1, 1998, an
unfunded, deferred compensation plan on behalf of certain designated management
or highly compensated employees of Whitman Corporation. This document defines
the provisions of such plan and shall be known as the "Whitman Corporation
Executive Retirement Plan."
This plan is intended in part to be an unfunded, deferred compensation plan for
a select group of management or highly compensated employees, as described in
sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and in part to be an excess benefit plan
described in section 3(36) of ERISA.
Table of Contents
ARTICLE I
DEFINITIONS
1.1 "Accounting Period"
1.2 "Accounts"
1.3 "Actuarial Equivalent"
1.4 "Appendix"
1.5 "Beneficiary"
1.6 "Benefit Trust Committee"
1.7 "Board of Directors"
1.8 "Change of Control"
1.9 "Company"
1.10 "Company Stock"
1.11 "Compensation"
1.12 "Compensation Committee"
1.13 "Compensation Limit"
1.14 "Contribution Dollar Limit"
1.15 "Conversion Election"
1.16 "Death Benefit"
1.17 "Deferrals"
1.18 "Deferral Election" or "Election"
1.19 "Deferral Percentage"
<PAGE> 2
1.20 "Designated Participant"
1.21 "Effective Date"
1.22 "Eligible Employee"
1.23 "Employee"
1.24 "Enrollment Election"
1.25 "ERISA"
1.26 "Exchange Act"
1.27 "Insider"
1.28 "Installment Form of Payment"
1.29 "Internal Revenue Code" or "Code"
1.30 "Investment Election"
1.31 "Investment Fund" or "Fund"
1.32 "Investment Grade Rating"
1.33 "Maximum Annual Additions Limitation"
1.34 "Maximum Annual Benefit Limitation"
1.35 "MIC Award"
1.36 "Notice Date"
1.37 "Parent"
1.38 "Participant"
1.39 "Payment Date"
1.40 "Pension Plan"
1.41 "Plan"
1.42 "Plan Year"
1.43 "Retirement Benefit"
1.44 "RSP"
1.45 "Section 401(m) Limitation"
1.46 "Settlement Date"
1.47 "Spouse"
1.48 "Successor Plan"
1.49 "Sweep Date"
1.50 "Termination of Employment"
1.51 "Trade Date"
1.52 "Trust"
ARTICLE II
PARTICIPATION
2.1 Eligibility
2.2 Enrollment Election
ARTICLE III
PARTICIPANT DEFERRAL ELECTIONS
3.1 Employee Deferral Election
3.2 Election Procedures
3.3 Coordination with RSP
ARTICLE IV
DEFERRALS AND POSTINGS
4.1 Replacement RSP Employer Deferral
<PAGE> 3
4.2 MIC Deferral
4.3 Pay Based Deferral
4.4 Replacement RSP Employee Deferral
4.5 RSP Employer Deferral
4.6 RSP Employee Deferral
ARTICLE V
EXCESS RETIREMENT AND DEATH BENEFITS
5.1 Amount of Pension Benefits
5.2 Amount of Death Benefit
5.3 Pre-1994 Benefits
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
6.1 Individual Participant Accounting
6.2 Accounting for Investment Funds
ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS
7.1 General
7.2 Investment of Deferrals
7.3 Investment of Accounts
7.4 Insiders
7.5 Investment Returns on MIC Deferrals
7.6 Restrictions on Measurement
7.7 Procedures
ARTICLE VIII
VESTING AND FORFEITURES
8.1 Fully Vested Deferral Accounts
ARTICLE IX
WITHDRAWALS
9.1 Withdrawals for Hardship
9.2 Withdrawal Processing
ARTICLE X
DISTRIBUTIONS
10.1 Retirement Benefit
10.2 Pension Death Benefit
10.3 Accounts
10.4 MIC Account
10.5 Death Benefit of Accounts
10.6 Prior to 1994
<PAGE> 4
10.7 Payments of Retirement and Death Benefit Due to an Investment
Grade Rating Change
10.8 Payment of Accounts Due to an Investment Grade Rating Change
10.9 Payment of Retirement and Death Benefits Due to a Change of
Control
10.10 Payment of Accounts Due to a Change of Control
ARTICLE XI
AMENDMENT
11.1 Prior to a Change of Control
11.2 After a Change of Control
ARTICLE XII
TERMINATION
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Administration
13.2 Finality of Determination
13.3 Expenses
13.4 Indemnification and Exculpation
13.5 Funding
13.6 Corporate Action
13.7 Interests not Transferable
13.8 Effect on Other Benefit Plans
13.9 Legal Fees and Expenses
13.10 Deduction of Taxes from Amounts Payable
13.11 Facility of Payment
13.12 Merger
13.13 Gender and Number
13.14 Invalidity of Certain Provisions
13.15 Headings
13.16 Notice and Information Requirements
13.17 Governing Law
ARTICLE I
DEFINITIONS
The following sections of this Article I provide basic definitions of terms
used throughout this Plan, and whenever used herein in a capitalized form,
except as otherwise expressly provided, the terms shall be deemed to have the
following meanings:
I.1 "Accounting Period" means each business day.
<PAGE> 5
I.2 "Accounts" means the record of a Participant's interest in this Plan
represented by his or her:
(a) "MIC Deferral Account" which means a Participant's interest in
this Plan composed of MIC Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, if any (as identified
by the Benefit Trust Committee) for such Plan Year, plus all interest
deemed credited to and minus all withdrawals and distributions actually
charged to such account.
(b) "Pay Based Account" which means a Participant's interest in this
Plan composed of Pay Based Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, plus all income and
gains deemed credited to and minus all losses deemed charged to such
account, as measured by the investment returns of each Investment Fund
designated by the Participant, and minus all withdrawals and distributions
actually charged to such account.
(c) "Replacement RSP Accounts" which consists of the following two
accounts:
(1) "Replacement RSP Employee Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employee Deferrals posted for each Plan Year on or after January 1,
1994 to the Participant under this Plan, if any (as identified by the
Benefit Trust Committee) for such Plan Year, plus all income and gains
deemed credited to and minus all losses deemed charged to such
account, as measured by the investment returns of each Investment Fund
designated by the Participant, and minus all withdrawals and
distributions actually charged to such account; and
(2) "Replacement RSP Employer Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employer Deferrals posted for each Plan Year on or after January 1,
1994 to the Participant under this Plan (as identified by the Benefit
Trust Committee) for such Plan Year, plus all income and gains deemed
credited to and minus all losses deemed charged to such account, as
measured by the investment returns of each Investment Fund designated
by the Participant, and minus all withdrawals and distributions
actually charged to such account.
(d) "RSP Employee Account" which means a Participant's interest in
this Plan composed of RSP Employee Deferrals posted under this Plan prior
to January 1, 1994, if any (as identified by the Benefit Trust Committee),
plus all income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all withdrawals
and distributions actually charged to such account.
(e) "RSP Employer Account" which means a Participant's interest in
<PAGE> 6
this Plan composed of RSP Employer Deferrals posted under this Plan prior
to January 1, 1994, if any (as identified by the Benefit Trust Committee),
plus all income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all withdrawals
and distributions actually charged to such account.
I.3 "Actuarial Equivalent" means an amount equal in value to the benefit
replaced as determined (i) in accordance with the terms of the Pension Plan with
respect to the determination of any form of benefit other than a single sum, or
(ii) with respect to a single sum distribution, by: (A) using an assumed annual
discount rate equal to the weekly average, as of the last full week of the
fourth calendar month prior to the month containing the date the single sum will
be paid, of the Bond Buyer's Average of 20 Municipal Bonds, rounded to the
nearest 1/4%, as published weekly by the Federal Reserve Bank of St. Louis and
(B) assuming the payee lives for the duration of his life expectancy where such
life expectancy is calculated according to the UP94 Mortality Table.
I.4 "Appendix" means a written supplement attached to this Plan and made a
part hereof which has been added in accordance with the provisions of this Plan.
I.5 "Beneficiary" means
(a) with respect to the Death Benefit payable upon the death of a
Participant, any person designated by the Participant (actually or by
default) to receive any retirement benefits which are payable with respect
to the death of a Participant under the Pension Plan; and
(b) with respect to the balance of a Participant's Accounts as of the
death of such Participant, each person designated by the Participant on his
or her most recent Enrollment Election form approved by the Benefit Trust
Committee; provided that if a Participant fails to designate a Beneficiary
on an Enrollment Election form or if all such designated persons predecease
the Participant without the Participant completing a new, approved
Enrollment Election form, then Beneficiary means any person designated by
the Participant (actually or by default) to receive the balance of any of
his or her accounts which are payable with respect to the death of such
Participant under the RSP.
An individual who is entitled to receive a Death Benefit on and after the
death of a Participant will remain a Beneficiary until the latest of (a) receipt
of the balance of all of such Accounts to which he or she is entitled to
receive; or (b) receipt of such Beneficiary's Death Benefit, if any, is
completed (or made in a single sum).
I.6 "Benefit Trust Committee" means the Benefit Trust Committee appointed
pursuant to the terms of the Trust which will have the power to manage and
control the operation and administration of this Plan.
I.7 "Board of Directors" means the board of directors of the Company or the
Parent.
<PAGE> 7
I.8 "Change of Control" means an event which shall be deemed to have
occurred if (i) there shall be consummated (A) any consolidation or merger of
the Parent, if one exists, or the Company in which either the Parent or the
Company, respectively, is not the continuing or surviving corporation or
pursuant to which shares of the Parent's or the Company's common stock are
converted into cash, securities or other property, other than a merger in which
the holders of the Parent's or the Company's common stock, respectively,
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (B) any sale, lease, exchange or other transfer (in one transaction
or in a series of related transactions) of all or substantially all the assets
of either the Parent or the Company, or (ii) the shareholders of either the
Parent or the Company shall approve any plan or proposal for such corporation's
liquidation or dissolution, or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act, other than the Parent, Company
or its subsidiaries, or any employee benefit plan sponsored by the Company or
its subsidiaries, shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of securities of either the Parent or the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Parent's or the Company's, respectively, then outstanding securities
ordinarily (and apart from rights accruing in special circumstances) having the
right to vote in the election of directors, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, or
(iv) at any time during a period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors shall cease for
any reason to constitute at least a majority thereof, unless the election or the
nomination for election by the Parent's or the Company's shareholders,
respectively, of each new director during such two-year period was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such two-year period.
I.9 "Company" means Whitman Corporation or any successor entity by
operation of law or any successor entity which affirmatively adopts the Plan,
the Trust and the obligations of Whitman Corporation with respect to the Plan
and the Trust.
I.10 "Company Stock" means common stock issued by the Parent, or if none,
then by the Company.
I.11 "Compensation" means
(a) for purposes of Replacement RSP Employee Deferrals, Replacement
RSP Employer Deferrals and Pay Based Deferrals for any Plan Year, a
Participant's "Compensation", as defined in the RSP (disregarding any
provision having the effect of excluding Replacement RSP Employee Deferrals
and MIC Deferrals), for a Plan Year to the Participant;
(b) for purposes of RSP Employee Deferrals and RSP Employer Deferrals,
a Participant's Compensation, as defined in the RSP (disregarding any
provision having the effect of excluding RSP Employee Deferrals), for a
Plan Year;
<PAGE> 8
(c) for purposes of MIC Deferrals, a Participant's MIC Award (other
than that portion of the MIC Award which is a Replacement RSP Employee
Deferral and excluding an amount equal to the sum of (i) the Employee's
portion of taxes imposed by the Federal Insurance Contributions Act with
respect to the MIC Award, with respect to the Replacement RSP Employer
Deferrals on the portion of the MIC Award which is a Replacement RSP
Employee Deferral, and if needed, with respect to the Retirement Benefit
accrual, for that Plan Year plus, if needed, (ii) other applicable
withholding amounts); and
(d) for purposes of computing the Retirement Benefit, a Participant's
"Compensation," as defined in the Pension Plan (disregarding any provision
having the effect of excluding RSP Employee Deferrals, Replacement RSP
Employee Deferrals and MIC Deferrals), for a Plan Year, as adjusted by the
Benefit Trust Committee from Plan Year to Plan Year, and effective January
1, 1994, Compensation shall include a Participant's MIC Award earned for
services rendered during such Plan Year, but shall not include an MIC Award
paid during the same Plan Year for services rendered during the prior Plan
Year.
Notwithstanding the above, the definition of "Compensation" in the RSP and
the Pension Plan shall not include the Compensation Limit.
I.12 "Compensation Committee" means the Compensation Committee of the Board
of Directors.
I.13 "Compensation Limit" means the limitation on the amount of
Compensation which may be considered after application of Code section
401(a)(17).
I.14 "Contribution Dollar Limit" means the annual limit imposed on each
Participant pursuant to section 402(g) of the Code, which is seven thousand
dollars ($7,000) per Plan Year (as indexed for cost of living adjustments
pursuant to Code section 402(g)(5) and 415(d)).
I.15 "Conversion Election" means, effective on or after January 1, 1994, an
election, on such form that may be required by the Benefit Trust Committee, by a
Participant to change the method of measuring the investment return on all or
some specified portion of such Participant's Accounts. No Conversion Election
shall be deemed to have been given to the Benefit Trust Committee unless it is
complete and delivered in accordance with the procedures established by such
Benefit Trust Committee for this purpose.
I.16 "Death Benefit" means a monthly (or single sum) benefit payable to a
Beneficiary and determined in accordance with this Plan.
I.17 "Deferrals" means amounts posted to this Plan by the Company or an
Eligible Employee. Specific types of deferrals include:
<PAGE> 9
(a) "MIC". An amount posted after 1993 based upon the Participant's
Deferral Election to defer some or all of his or her Compensation.
(b) "Pay Based". An amount posted and allocated on a pay based formula
to an eligible Participant's Accounts.
(c) "Replacement RSP Employee". An amount posted after 1993 based upon
the Participant's Deferral Election to defer some of his or her
Compensation.
(d) "Replacement RSP Employer". An amount posted after 1993 based upon
the Replacement RSP Employee Deferral made by the eligible Participant.
(e) "RSP Employee". An amount posted prior to 1994 on a pre-tax basis
which the Participant could have elected if he or she were participating
actively in the RSP.
(f) "RSP Employer". An amount posted prior to January 1, 1994 related
to pre-tax contributions which the Participant could not make to the RSP or
which are made on behalf of Designated Participants without regard to such
pre-tax contributions.
I.18 "Deferral Election" or "Election" means irrevocable elections made by
a Participant (a) to reduce his or her Compensation for a Plan Year by an amount
equal to the product of his or her Deferral Percentage and such Compensation
subject to the Deferral Election; (b) to select whether Deferrals for that Plan
Year will be paid in an Installment Form of Payment; and (c) to select a Payment
Date for the MIC Deferrals for that Plan Year.
I.19 "Deferral Percentage" means (a) with respect to Replacement RSP
Employee Deferrals, the percentage of a Participant's Compensation for a Plan
Year which is to be deferred and posted to this Plan; and (b) with respect to
MIC Deferrals, the percentage of a Participant's Compensation for a Plan Year
which is to be deferred and posted to this Plan.
I.20 "Designated Participant" means an individual on the list of Employees
set forth in an Appendix to the Pension Plan as not being an eligible employee
for the purpose of the Pension Plan.
I.21 "Effective Date" means generally January 1, 1991 and, where noted,
January 1, 1994, the dates upon which certain provisions of this document become
effective.
I.22 "Eligible Employee" means with respect to each Plan Year:
(a) with respect to the Retirement Benefit, each Employee who is a
participant in the Pension Plan or would be a participant in the Pension
Plan if they were not a Designated Participant.
(b) prior to 1994 with respect to Deferrals:
<PAGE> 10
(1) each Employee who is a Participant in the RSP for that Plan
Year and whose pre-tax contributions which would otherwise have been
made for that Plan Year to the RSP are limited by the Contribution
Dollar Limit; or
(2) each Employee who is a Designated Participant for that Plan
Year.
(c) after 1993 with respect to Deferrals, each Employee who is
participating in the Whitman Corporation Management Incentive Compensation
Plan during that Plan Year.
I.23 "Employee" means any person who is considered to be an employee of the
Company pursuant to the personnel policies of the Company; and on and after a
Change of Control, who renders services as a common law employee to the Company.
I.24 "Enrollment Election" means irrevocable elections made by a
Participant (a) to select the term of his or her Installment Form of Payment;
(b) to select the Payment Date of his or her Accounts following Termination of
Employment; and (c) to select the form of payment of his or her Accounts as of
December 31, 1993.
I.25 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
I.26 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
I.27 "Insider" means for a Plan Year, or any portion thereof, the
Participant is subject to the reporting requirements of Section 16 of the
Exchange Act.
I.28 "Installment Form of Payment" means separately with respect to (a) his
or her Accounts (other than his or her MIC Account) or (b) his or her MIC
Account, the term of years selected by the Participant in his or her Enrollment
Election form over which to pay such Accounts in annual installments commencing
as of what would otherwise have been the Payment Date of such Accounts and
payable on each January 1 thereafter over a period of not less than two (2) nor
more than fifteen (15) years (stated as a number of whole integers), with each
installment being an amount equal to the amount determined by dividing the
applicable balance of such Accounts as of the date of payment by the number of
dates of payment remaining in the installment period (including the current date
of payment).
I.29 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code sections shall be deemed to refer to comparable
sections of any subsequent Internal Revenue Code.
I.30 "Investment Election" means, effective on and after January 1, 1994,
an election, on such form that may be required by the Benefit Trust Committee,
<PAGE> 11
made by a Participant to direct the method of measuring the investment return on
his or her Deferrals (other than MIC Deferrals). No Investment Election shall be
deemed to have been given to the Benefit Trust Committee unless it is complete
and delivered in accordance with the procedures established by such Benefit
Trust Committee for this purpose.
I.31 "Investment Fund" or "Fund" means one or more of the investment
alternatives which are available under the RSP at any determination date unless
designated otherwise by the Benefit Trust Committee, and which are used by this
Plan as a measurement of investment return on Accounts other than the MIC
Account.
I.32 "Investment Grade Rating" means a rating either (a) at or above Baa3
by Moody's Investors Service, Inc. or (b) at or above BBB by Standard & Poor's
Corporation, or the prevailing equivalent ratings at the time.
I.33 "Maximum Annual Additions Limitation" means the limitation imposed by
Code section 415 on benefits payable by defined contribution plans qualified
under Code section 401(a).
I.34 "Maximum Annual Benefit Limitation" means the limitation imposed by
Code section 415 on benefits payable by defined benefit pension plans qualified
under Code sections 401(a) including application of the combination limitations
of Code section 415(e) to cause a further reduction, if any, of such benefits.
I.35 "MIC Award" means the amount of award payable to a Participant under
the Whitman Corporation Management Incentive Compensation Plan.
I.36 "Notice Date" means the date established by the Benefit Trust
Committee as the deadline for it to receive a Deferral Election or any other
notification with respect to an administrative matter in order to be effective
under this Plan.
I.37 "Parent" means any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than any employee benefit plan sponsored by
the Parent or the Company, (i) having directly or indirectly a beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities ordinarily
(and apart from rights accruing in special circumstances) having the right to
vote in the election of directors; and (ii) with an Investment Grade Rating.
I.38 "Participant" means an Eligible Employee who begins to participate in
this Plan after completing the eligibility requirements. An individual will
remain a Participant until the latest of (a) distribution of the balance of all
of his or her Accounts; or (b) payment of his or her Retirement Benefit, if any,
is completed (or made in a single sum).
I.39 "Payment Date" means:
(a) with respect to Accounts, the date payment is made in accordance
<PAGE> 12
with Article X or the first day of the fifteenth (15th) month following a
Participant's Termination of Employment unless such Participant has
selected an earlier Payment Date for (1) his or her Accounts on an
Enrollment Election form or (2) his or her MIC Accounts on a Deferral
Election Form; or
(b) the date a Participant's Retirement Benefit is distributed or
commences to be distributed as described in Article X.
I.40 "Pension Plan" means the Whitman Corporation Pension Plan; effective
January 1, 1992, the Pepsi-Cola General Bottlers, Inc. Pension Plan for Salaried
Employees and any Successor Plan.
I.41 "Plan" means the Whitman Corporation Executive Retirement Plan, as it
may be validly amended from time to time.
I.42 "Plan Year" means the annual accounting period of this Plan which ends
on each December 31.
I.43 "Retirement Benefit" means a monthly (or single sum) pension benefit
payable to a Participant and determined in accordance with Article V.
I.44 "RSP" means the Whitman Corporation Retirement Savings Plan, as
amended from time to time and any Successor Plan.
I.45 "Section 401(m) Limitation" means the limit imposed by Code section
401(m).
I.46 "Settlement Date" means the date on which financial transactions from
a Trade Date are considered to be settled which is deemed to be the same date as
of which such transaction would have settled under the RSP with respect to the
same type of financial transaction (e.g. Investment Election, Conversion
Election, Payment Date).
I.47 "Spouse" means a person who is considered the Participant's spouse
under the RSP and Pension Plan, whichever is applicable.
I.48 "Successor Plan" means a tax-qualified, retirement plan described in
section 401(a) of the Code into which the assets and liabilities have been
merged or transferred in accordance with section 414(l) of the Code and section
208 of ERISA from the Pension Plan or the RSP, respectively, and which provides
benefits, options, features and rights, each comparable in material respects to
those available in the Pension Plan or RSP, whichever is applicable.
I.49 "Sweep Date" means the date established by the Benefit Trust Committee
as the cutoff date and time for the Benefit Trust Committee to receive
notification with respect to a financial transaction in order to be processed
with respect to such Trade Date.
I.50 "Termination of Employment" occurs when a person ceases to be an
Employee as determined by the personnel policies of the Company; provided
<PAGE> 13
however, transfer of employment from the Company, or from one affiliate of the
Company, to another affiliate of the Company shall not constitute a Termination
of Employment for purposes of this Plan. If a person would cease to be an
Employee because of a Change of Control, solely for the purpose of this Plan,
such person will not be considered to have incurred a Termination of Employment
if the person's successor employer, either expressly or by operation of law,
assumes the Plan and Trust, the obligations and liabilities of the Plan and
Trust, and agrees to the responsibilities of the Company under the Plan and
Trust.
I.51 "Trade Date" means the date as of which a financial transaction is
considered by this Plan to have occurred which is deemed to be the same date as
of which such transaction would have occurred under the RSP with respect to the
same type of financial transaction (e.g. Investment Election, Conversion
Election, Payment Date).
I.52 "Trust" means the trust created by the Whitman Corporation Benefit
Trust Agreement as it may be validly amended from time to time.
ARTICLE II
PARTICIPATION
II.1 Eligibility. On or after the Effective Date:
(a) Participant on January 1, 1991. Each person who has a balance in
his or her Accounts, or who has accrued a Retirement Benefit, as of January
1, 1991 shall be a Participant as of January 1, 1991.
(b) Other Eligible Employee. Each other Eligible Employee shall become
a Participant with respect to the Plan Year in which he or she becomes an
Eligible Employee; provided however, on or after January 1, 1994, a person
who was an Employee prior to becoming an Eligible Employee shall become a
Participant as of the first day of the Plan Year commencing on or after the
date he or she became an Eligible Employee.
II.2 Enrollment Election.
(a) Participant on January 1, 1994. Each person who is a Participant
on January 1, 1994 shall complete, sign and return an Enrollment Election
form provided for that purpose by the Benefit Trust Committee, to the
Benefit Trust Committee no later than the designated Notice Date.
(b) Other Eligible Employees. Each person first eligible to become a
Participant shall complete, sign and return an Enrollment Election form
provided for that purpose by the Benefit Trust Committee, to the Benefit
Trust Committee no later than the designated Notice Date.
<PAGE> 14
ARTICLE III
PARTICIPANT DEFERRAL ELECTIONS
III.1 Employee Deferral Election. Prior to the date payments of Accounts
are accelerated under Section 10.8, the following shall apply; after such date,
no Deferral Elections will be effective.
(a) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have Replacement
RSP Employee Deferrals made on his or her behalf shall file a Deferral
Election pursuant to procedures specified by the Benefit Trust Committee
specifying (1) his or her Deferral Percentage of not less than two percent
(2%) nor more than ten percent (10%) (stated as a whole integer percentage)
and authorizing the Compensation otherwise payable to him or her for a Plan
Year to be reduced and deferred hereunder to such Participant's Payment
Date; and (2) whether or not the Replacement RSP Employee Account created
with respect to such Plan Year will be distributed in the Installment Form
of Payment.
(b) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have an MIC
Deferral made on his or her behalf shall file a Deferral Election pursuant
to procedures specified by the Benefit Trust Committee specifying (1) his
or her Deferral Percentage of not less than 5% nor more than 100% (stated
as a whole integer percentage) and authorizing his or her Compensation
payable for a Plan Year to be reduced and deferred hereunder to a fixed
Payment Date not earlier than two (2) full Plan Years after the date the
Deferral Election is received by the Benefit Trust Committee; and (2)
whether or not the MIC Account created with respect to such Plan Year will
be distributed in the Installment Form of Payment.
(c) Notwithstanding Subsection (a) hereof, for any Plan Year the
Benefit Trust Committee may, without amending this Plan, determine that the
maximum Deferral Percentage shall be greater or lesser than the percentages
set forth in Subsection (a) hereof. Otherwise, the maximum Deferral
Percentage as provided in Subsection (a) hereof shall apply.
(d) Any Replacement RSP Employee Deferral Election which has not been
properly completed, or which is submitted at a time when the Participant
does not have outstanding a properly completed Investment Election, will be
deemed not to have been received and be void. A Participant's Deferral
Election shall be effective only if received by the Benefit Trust Committee
on or before the Notice Date for a Plan Year.
III.2 Election Procedures. If properly received by the Benefit Trust
Committee, a Deferral Election may be effective only with respect to
Compensation paid in a Plan Year to which the Deferral Election applies and only
with respect to Compensation paid after the Notice Date for the Deferral
Election. Consistent with the above, the Benefit Trust Committee may establish
rules and procedures governing when a Deferral Election will be effective and
what Compensation will be deferred by the Deferral Election; provided such rules
<PAGE> 15
and procedures are not more permissive than the terms and provisions of this
Plan.
III.3 Coordination with RSP. Notwithstanding a Participant's Deferral
Election, if a Participant makes a "401(k) Hardship" withdrawal from the RSP
during a Plan Year, the "401(k) Hardship" withdrawal rules of the RSP, which are
intended to be applicable to this Plan, are incorporated by reference herein and
made a part hereof, but only to the extent required by Treas. Reg. '1.401(k)-1,
in order for the RSP to be a qualified cash or deferred arrangement.
ARTICLE IV
DEFERRALS AND POSTINGS
IV.1 Replacement RSP Employer Deferral.
(a) Frequency and Eligibility. For each period after 1993 for which a
Participant makes a Replacement RSP Employee Deferral, the Company shall
post to this Plan on behalf of such Participant an Replacement RSP Employer
Deferral as described in the following Posting and Allocation Method
paragraph.
(b) Posting and Allocation Method. The Replacement RSP Employer
Deferral for each period shall total one hundred percent (100%) of each
eligible Participant's Replacement RSP Employee Deferral for the period,
provided that no Replacement RSP Employer Deferral shall be made based upon
a Participant's Replacement RSP Employee Deferral in excess of six percent
(6%) of his or her Compensation. The Replacement RSP Employer Deferral
shall be posted to the Replacement RSP Employer Account of such Participant
as of the same date the Replacement RSP Employee Deferral which it matches
is posted.
IV.2 MIC Deferral.
(a) Frequency and Eligibility. For each period after 1993 for which a
Deferral Election is in effect, the Company shall post to this Plan on
behalf of each Participant an amount equal to the amount designated by the
Participant as an MIC Deferral on his or her Deferral Election.
(b) Posting. The MIC Deferral shall be posted to the MIC Deferral
Account of such Participant as of the date his or her MIC Award would
otherwise have been paid to the Participant.
IV.3 Pay Based Deferral.
(a) Frequency and Eligibility. For each Plan Year, the Company may
make a Pay Based Deferral in an amount determined by the Company on behalf
of each Participant who is an Eligible Employee and who would have
qualified for a similar deferral in the RSP had such person been eligible
to participate in the RSP and in an amount determined in the Posting and
Allocation Method paragraph.
<PAGE> 16
(b) Posting and Allocation Method. The Pay Based Deferral for each
period shall be posted as of the date determined by the Benefit Trust
Committee (but not later than the tax filing deadline for the Company's
federal income tax return for the Plan Year with respect to which the Pay
Based Deferral relates, including extensions) to the Pay Based Account of
each of the Participants for the Plan Year in direct proportion to their
Compensation.
IV.4 Replacement RSP Employee Deferral.
(a) Frequency and Eligibility. For each period for which a Deferral
Election is in effect, the Company shall post to this Plan on behalf of
each Participant an amount equal to the amount designated by the
Participant as an Replacement RSP Employee Deferral on his or her Deferral
Election.
(b) Posting. The Replacement RSP Employee Deferral shall be posted to
the Replacement RSP Employee Account of such Participant as of the date
such Compensation amount would otherwise have been paid to the Participant.
IV.5 RSP Employer Deferral.
(a) Frequency and Eligibility.
(1) Pre-1991. Amounts posted to a Participant's Accounts for each
Plan Year prior to 1991 are determined under the terms and provisions
of this Plan as it existed during any such Plan Year.
(2) Post-1990 and Pre-1994. For each Plan Year after 1990 and
prior to 1994, the Company shall post to this Plan on behalf of each
Participant whose pre-tax contribution to the RSP was limited by the
Contribution Dollar Limit for that Plan Year, and who is not a
Designated Participant for that Plan Year, an RSP Employer Deferral as
described in (b)(2) of the following Posting and Allocation Method
paragraph.
(3) Designated Participant. For each Plan Year after 1990 and
prior to 1994, the Company shall post to this Plan on behalf of each
Participant who is a Designated Participant and an Employee for that
Plan Year, an RSP Employer Deferral as described in (b)(3) of the
following Allocation Method paragraph.
(b) Posting and Allocation Method.
(1) Pre-1991. RSP Employer Deferrals for Plan Years prior to 1991
shall be posted as of January 1, 1991, to the RSP Employer Account.
(2) Post-1990 and Pre-1994. The RSP Employer Deferral for each
Plan Year after 1990 and prior to 1994 shall be an amount equal to (A)
minus (B) where:
<PAGE> 17
(A) is equal to the amount of matching contribution which
would have been made to the RSP for the Plan Year based on the
assumptions that (i) the Participant has made pre-tax
contributions to the RSP at the rate of six percent (6%) of his
or her compensation as defined in the RSP, without regard to the
Maximum Annual Additions Limitation, the Contribution Dollar
Limit and the Compensation Limit; and (ii) matching contributions
to the RSP were made with respect to such amounts in accordance
with the terms of the RSP without regard to the Maximum Annual
Additions Limitation and the Section 401(m) Limitation; and
(B) is equal to the actual amount of matching contribution
made on behalf of the Participant to the RSP for the Plan Year.
The RSP Employer Deferral after 1990 shall be posted to the RSP
Employer Account as of the same date it would have been made as a
matching contribution to the RSP, if it could have been made (or as a
pay based contribution to the RSP in 1991, if it could have been
made).
(3) Designated Participant. The RSP Employer Deferral for each
Plan Year after 1990 and prior to 1994 shall be an amount equal to six
percent (6%) of the Participant's Compensation, without regard to the
Maximum Annual Benefit Limitation. For the 1991 Plan Year, an amount
shall be posted equal to 2% of such Participant's Compensation. The
RSP Employer Deferral after 1990 shall be posted to the RSP Employer
Account as of the same date it would have been made as a matching
contribution to the RSP, if it could have been made (or as a pay based
contribution to the RSP in 1991, if it could have been made).
IV.6 RSP Employee Deferral.
(a) Frequency and Eligibility. Amounts posted to a Participant's
Accounts for each Plan Year prior to 1994 are determined under the terms
and provisions of this Plan as it existed during any such Plan Year.
(b) Allocation Method. RSP Employee Deferrals for Plan Years prior to
1994 shall be posted to the RSP Employee Account in accordance with the
terms of the Plan at that time.
ARTICLE V
EXCESS RETIREMENT AND DEATH BENEFITS
V.1 Amount of Pension Benefits. Effective on and after January 1, 1994, a
Retirement Benefit will be paid under this Plan, only as provided in Article X,
to a Participant in an annual amount payable monthly equal to the amount by
which (a) exceeds (b).
<PAGE> 18
(a) The amount of the annual retirement benefit payable in the form of
a single life annuity the Participant would have been entitled to receive
under the Pension Plan (1) had the Pension Plan (and any other plan
referenced by the Pension Plan for the purpose of determining an "Offset
Benefit" as defined in the Pension Plan) not applied the Maximum Annual
Benefit Limitation in determining benefits payable from the Pension Plan;
and (2) had the Participant not been excluded from being an "Eligible
Employee" by being listed on an Appendix to the Pension Plan (and any other
plan referenced by the Pension Plan for the purpose of determining an
"Offset Benefit" as defined in the Pension Plan). For purposes of this
Section 5.1(a), the compensation used for determining retirement benefits
payable from the Pension Plan (and any other plan referenced by the Pension
Plan for the purpose of determining an "Offset Benefit" as defined in the
Pension Plan) shall mean Compensation as defined in this Plan for a Plan
Year.
(b) The Actuarial Equivalent of the amount of the annual retirement
benefit payable monthly which the Participant is entitled to receive under
the Pension Plan if it were to commence on the Payment Date and to be paid
in the form elected by such Participant under the Pension Plan, or if the
Participant has not made such an election under the Pension Plan, then in
the form of either a joint and 100% contingent annuity, if married, or a
single life annuity, if not married.
V.2 Amount of Death Benefit. Effective on and after January 1, 1994, a
Death Benefit will be paid under this Plan, only as provided in Article X, to a
Beneficiary of a deceased Participant in an annual amount payable monthly equal
to the amount by which (a) exceeds (b):
(a) The amount of the annual death benefit payable in the form of a
single life annuity the Beneficiary of a deceased Participant would have
been entitled to receive under the Pension Plan (1) had the Pension Plan
not applied the Maximum Annual Benefit Limitation in determining benefits
payable from the Pension Plan; and (2) had the Participant not been
excluded from being an "Eligible Employee" by being listed on an Appendix
to the Pension Plan. For purposes of this Section 5.3(a), the compensation
used for determining death benefits payable from the Pension Plan means
Compensation as defined in this Plan for a Plan Year.
(b) The Actuarial Equivalent of the amount of the annual death benefit
payable monthly which the Beneficiary of a deceased Participant is entitled
to receive under the Pension Plan if it were to commence on the same date
as the Death Benefit under this Plan and to be paid in the form of single
life annuity.
V.3 Pre-1994 Benefits. Any Retirement Benefit accrued by a Participant
prior to 1994, who is never an Eligible Employee after 1993, shall be determined
and paid solely under the terms of this Plan as it existed prior to 1991.
<PAGE> 19
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
VI.1 Individual Participant Accounting.
(a) Account Maintenance. The Benefit Trust Committee shall cause the
Accounts for each Participant to reflect transactions involving amounts
posted to the Accounts and the measurement of investment returns on
Accounts in accordance with this Plan. Investment returns during or with
respect to an Accounting Period shall be accounted for at the individual
account level by "posting" such returns to each of the appropriate Accounts
of each affected Participant. Account values shall be maintained in shares,
units or dollars.
(b) Trade Date Accounting and Investment Cycle. For any financial
transaction involving a change in the measurement of investment returns,
withdrawals or distributions to be processed as of a Trade Date, the
Benefit Trust Committee must receive instructions by the Sweep Date and
such instructions shall apply only to amounts posted to the Accounts as of
the Trade Date. Such financial transactions in an Investment Fund shall be
posted to a Participant's Accounts as of the Trade Date and based upon the
Trade Date values. All such transactions shall be effected on the
Settlement Date (or as soon as is administratively feasible) relating to
the Trade Date as of which the transaction occurs.
(c) Suspension of Transactions. Whenever the Benefit Trust Committee
considers such action to be appropriate, the Benefit Trust Committee, in
its discretion, may suspend from time to time the Trade Date.
(d) Error Correction. The Benefit Trust Committee may correct any
errors or omissions in the administration of this Plan by restoring or
charging any Participant's Accounts with the amount that would be credited
or charged to the Accounts had no error or omission been made.
VI.2 Accounting for Investment Funds. The investment returns of each
Investment Fund shall be tracked in the same manner as such Investment Funds are
tracked under the RSP. Investment income, earnings, and losses charged against
the Accounts shall be based solely upon the actual performance (net of expenses
and charges allowed under the RSP) of each of the Investment Funds for the
period of time all or some portion of each of the Accounts has been designated
to use such Investment Fund as a measurement of investment returns. A change of
measurement of returns from one Investment Fund to another, or a distribution or
withdrawal, shall be determined as of the same dates and in the same manner as
if amounts posted in Accounts were actually invested in the RSP and such
financial transactions were being implemented in the RSP.
<PAGE> 20
ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS
VII.1 General. Prior to January 1, 1994, a Participant's Investment
Election and Conversion Election (except as provided in Section 7.4) with
respect to this Plan were deemed to be identical to each comparable investment
direction made by the Participant under the RSP. Effective January 1, 1994, this
Plan will no longer use a Participant's RSP investment directions, and other
than as provided in Section 7.5, a separate Investment Election and Conversion
Election must be made with respect to the Deferrals and Accounts; provided
however, if no Investment Election or Conversion Election is received from a
Participant on or after January 1, 1994, such Participant will be deemed to have
submitted a Conversion Election, effective January 1, 1994 with respect to his
or her Accounts as of December 31, 1993, which designates a percentage of such
Accounts to have its investment returns measured by an Investment Fund which is
the same percentage and investment fund in the RSP that such Participant had
previously been deemed to have designated prior to January 1, 1994, with the
exception that any amounts designated to measure the investment returns of the
Windsor Fund shall instead use the Large Company Fund.
VII.2 Investment of Deferrals.
(a) Investment Election. Each Participant may direct, by submission to
the Benefit Trust Committee of a completed Investment Election form
provided for that purpose by the Benefit Trust Committee, to select a
measurement of investment returns for Deferrals (other than MIC Deferrals)
posted to his or her Accounts (and the portion of such Accounts
attributable to such Deferrals) in one or more Investment Funds. Each
Investment Election shall apply proportionately to all Deferrals (other
than MIC Deferrals) based upon the relative amount of each.
(b) Effective Date of Investment Election; Change of Investment
Election. A Participant's initial Investment Election will be effective
with respect to a Fund on the Trade Date which relates to the Sweep Date on
which or prior to which the Investment Election is received pursuant to
procedures specified by the Benefit Trust Committee. Any Investment
Election which has not been properly completed will be deemed not to have
been received. A Participant's Investment Election shall continue in
effect, notwithstanding any change in his or her Compensation or his or her
Deferral Percentage, until the effective date of a new Investment Election.
A change in Investment Election shall be effective with respect to a Fund
on the Trade Date which relates to the Sweep Date on which or prior to
which the Benefit Trust Committee receives the Participant's new Investment
Election.
VII.3 Investment of Accounts.
(a) Conversion Election. Notwithstanding a Participant's Investment
Election, a Participant or Beneficiary may direct the Benefit Trust
Committee, by submission of a completed Conversion Election form provided
for that purpose to the Benefit Trust Committee, to change the measurement
of investment returns of his or her Accounts (other than the MIC Deferral
<PAGE> 21
Account). Each Conversion Election shall apply proportionately to all
affected Accounts based upon the relative balance of each.
(b) Effective Date of Conversion Election. A Conversion Election to
change a Participant's measurement of investment returns of his or her
Accounts in one Investment Fund to another Fund shall be effective with
respect to such Funds on and after the Trade Date which relates to the
Sweep Date on which or prior to which the Election is received pursuant to
procedures specified by the Benefit Trust Committee. Notwithstanding the
foregoing, to the extent required by any provisions of an Investment Fund,
the effective date of any Conversion Election may be delayed or the amount
of any permissible Conversion Election may be reduced. Any Investment
Election which has not been properly completed will be deemed not to have
been received.
VII.4 Insiders.
Prior to January 1, 1994, and as of the later of May 5, 1992 or the date on
which such Participant becomes an Insider (as determined by the Benefit Trust
Committee) ("Transfer Date"):
(a) The measurement of investment returns for an RSP Employer Deferral
hereunder shall initially be assumed to be the same as the Investment Funds
in which the Insider's pre-tax contributions are initially invested in the
RSP; and if the Insider does not make pre-tax contributions to the RSP,
then it shall be assumed to be that of the Investment Fund primarily
invested in Company Stock.
(b) Each Insider's change in investment directions under the RSP shall
be disregarded for purposes of this Plan:
(1) if such change would cause any portion of the Insider's
Deferral or Accounts to use the Fund invested primarily in Company
Stock as a measurement of investment return; or
(2) if such change is not in amounts and effective as of such
dates as are determined by the Benefit Trust Committee under a set of
rules applicable to all Insiders.
VII.5 Investment Returns on MIC Deferrals. All MIC Deferral Accounts shall
have interest as a measurement of investment return. The rate of interest deemed
to be earned on such Accounts on any day during a 6-month period shall be the
stated prime rate of interest charged by Bank of America, Illinois, N.A. on the
first business day in January or July of such period.
VII.6 Restrictions on Measurement. The following additional restrictions
shall apply to the measurement of investment return of Deferrals and Accounts
other than those described in Section 7.5:
(a) Effective after January 1, 1994, no Investment Election shall be
<PAGE> 22
permitted which results in a measurement of investment return for Deferrals
to be an Investment Fund invested primarily in Company Stock and no
Conversion Election shall be permitted which results in a measurement of
investment return for Accounts into or out of an Investment Fund invested
primarily in Company Stock;
(b) Any limitations, conditions or restrictions which may be imposed
by the Benefit Trust Committee; and
(c) Any limitation, condition or restriction which is imposed on the
measurement of investment returns in or the liquidation of funds out of any
Investment Fund in the RSP.
VII.7 Procedures. The procedures, frequency and time deadlines for making
an Investment Election or Conversion Election shall be the same as the
applicable procedures, frequency and time deadlines in the RSP, except to the
extent provided otherwise in this Plan or by the Benefit Trust Committee.
ARTICLE VIII
VESTING AND FORFEITURES
VIII.1 Fully Vested Deferral Accounts.
A Participant shall be fully vested and have a nonforfeitable right to his
or her Accounts at all times.
ARTICLE IX
WITHDRAWALS
IX.1 Withdrawals for Hardship.
(a) Requirements. A Participant may request the withdrawal of any
amount from the portion of his or her Accounts (not in excess of the
balance of such Accounts) needed to satisfy a financial need by making a
withdrawal request in accordance with a procedure established by the
Benefit Trust Committee. A financial need for this purpose is a severe,
unanticipated hardship, the occurrence of which is beyond the Participant's
control and for which the amount needed to satisfy the hardship is
determined only after the Participant has used other readily available
funds or resources (other than this Plan and the RSP).
(b) Account Sources for Withdrawal. The withdrawal amount shall come
only from the following Accounts, in the following priority order:
RSP Employee Account
RSP Employer Account
Replacement RSP Employer Account
<PAGE> 23
Replacement RSP Employee Account
Pay Based Account
MIC Deferral Account
IX.2 Withdrawal Processing.
(a) Minimum Amount. There is no minimum payment for any type of
withdrawal.
(b) Application by Participant. A Participant must submit a withdrawal
request, in accordance with a procedure established by the Benefit Trust
Committee, to the Benefit Trust Committee to apply for any type of
withdrawal.
(c) Approval by Benefit Trust Committee. The Benefit Trust Committee
is responsible for determining that a withdrawal request conforms to the
requirements described in this Section and notifying the Company of any
payments to be made in a timely manner. Any request to make a withdrawal by
a member of the Benefit Trust Committee may be approved only by
disinterested members of the Benefit Trust Committee, or if none, the
Compensation Committee.
(d) Time of Processing. The Company shall process all withdrawal
requests which it receives by a Sweep Date, based on the value as of the
Trade Date to which it relates, and fund them on the next Settlement Date.
The Company shall then make payment to the Participant as soon thereafter
as is administratively feasible; provided however, if such payment will
result in any portion of the payment (or any other amount paid to such
Participant during the same Plan Year) not being deductible by reason of
Code section 162(m), the Compensation Committee may defer payment to a
later Payment Date designated by it.
(e) Medium and Form of Payment. The medium of payment for withdrawals
is cash. The form of payment for withdrawals shall be a single installment.
(f) Investment Fund Sources. Within each Account used for funding a
withdrawal, amounts shall be taken by type of investment measurement in
direct proportion to the value of the Participant's Accounts in each
Investment Fund at the time the withdrawal is made.
ARTICLE X
DISTRIBUTIONS
Benefits payable under this Plan shall be paid in the form and time
prescribed below.
X.1 Retirement Benefit. A Participant who has a nonforfeitable right to
receive a retirement benefit from the Pension Plan (or would have a
nonforfeitable right if such Participant were eligible to participate in the
<PAGE> 24
Pension Plan) shall receive a Retirement Benefit (less any amounts previously
paid to the Participant under Section 10.7) in the following Actuarial
Equivalent form of payment and as of the following Payment Date:
(a) Form of Payment. The Participant may elect a form of payment of
the Retirement Benefit in the same manner and form as permitted under the
Pension Plan (other than the Social Security Leveling Option) without the
necessity of spousal consent; provided, however, (1) the Compensation
Committee in its discretion, or (2) such Participant by irrevocably
electing in writing on a form delivered to the Benefit Trust Committee on
or prior to his or her Termination of Employment, and if a voluntary
Termination of Employment by delivering such form to the Benefit Trust
Committee at least six (6) months prior to the Payment Date, may convert
the Retirement Benefit payable under this Plan into an Actuarial Equivalent
single sum form of payment.
(b) Time of Payment. The Payment Date of a Participant's Retirement
Benefit shall be the earliest date on or after the Participant's
Termination of Employment as of which he or she could have commenced
payment of his or her retirement benefits from the Pension Plan; provided
however, if payment is made in a single sum and will result in any portion
of the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer such Actuarial Equivalent single sum
payment to a later Payment Date designated by it.
X.2 Pension Death Benefit.
(a) Form of Payment. The Death Benefit payable to the Beneficiary of a
Participant who is entitled to a Retirement Benefit (less any amounts
previously paid to the Participant under Section 10.7) and who dies on or
after his or her Payment Date shall be in the form selected by the
Participant commencing as of such Payment Date. Where a Participant who is
entitled to a Retirement Benefit (less any amounts previously paid to the
Participant under Section 10.7) dies prior to his Payment Date, the form of
payment of his or her Beneficiary's Death Benefit shall be the same as the
form of payment of any death benefit payable under the Pension Plan;
provided however, the Compensation Committee in its discretion, or such
Participant by electing in writing on a form delivered to the Benefit Trust
Committee prior to his or her Payment Date, may convert the Death Benefit
payable under this Plan into an Actuarial Equivalent single sum form of
payment.
(b) Time of Payment. A Beneficiary's Death Benefit shall commence to
be paid as of the earliest date as of which he or she could have commenced
payment of a death benefit from the Pension Plan; provided however, if
payment is made in a single sum and will result in any portion of the
payment (or any other amount paid to such Beneficiary during the same Plan
Year) not being deductible by reason of Code section 162(m), the Benefit
Trust Committee may defer such Actuarial Equivalent single sum payment to a
later Payment Date designated by it.
<PAGE> 25
X.3 Accounts.
(a) Form of Payment. The form of payment of the balance of a
Participant's Accounts (other than his or her MIC Account for each Plan
Year) will be a single sum payment except with respect to those Accounts
for which the Participant has selected the Installment Form of Payment on
his or her Deferral Election Form, in which case such Accounts will be paid
in the Installment Form of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's Accounts (other than his or her MIC Account) shall be the
Payment Date following Termination of Employment selected by the
Participant on his or her Enrollment Election form; provided however, if
such payment will result in any portion of the payment (or any other amount
paid to such Participant during the same Plan Year) not being deductible by
reason of Code section 162(m), the Benefit Trust Committee may defer
payment to a later Payment Date designated by it and such Accounts shall
continue to have investment returns measured under this Plan.
X.4 MIC Account.
(a) Form of Payment. The form of payment of the balance of a
Participant's MIC Account for each Plan Year will be a single sum payment
except with respect to those MIC Accounts for which the Participant has
selected the Installment Form of Payment on his or her Deferral Election
Form, in which case such MIC Accounts will be paid in the Installment Form
of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's MIC Account for each Plan Year shall be the earlier of the
fixed Payment Date selected by the Participant on the Deferral Election
Form for the Plan Year or the Payment Date following a Termination of
Employment selected in his or her Enrollment Election form; provided
however, if payment is made in a single sum and will result in any portion
of the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer payment to a later Payment Date
designated by it and such Accounts shall continue to have investment
returns measured under this Plan.
X.5 Death Benefit of Accounts. Upon the death of a Participant, the
remaining balance in his or her Accounts shall be paid to the Participant's
Beneficiary in a single sum as soon as administratively possible after the
Participant's death; provided however, if such payment will result in any
portion of the payment (or any other amount paid to such Beneficiary during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer payment to a later Payment Date designated by
it and such Accounts shall continue to have investment returns measured under
this Plan.
<PAGE> 26
X.6 Prior to 1994. The timing and form of payment of a Retirement Benefit,
Death Benefit and balance of Accounts with respect to a Participant or
Beneficiary as of any date of determination prior to 1994 shall be determined by
the terms and provisions of this Plan as of such date.
X.7 Payments of Retirement and Death Benefit Due to an Investment Grade
Rating Change. Notwithstanding Sections 10.1, 10.2 or 10.6, the following shall
apply:
(a) Retirement Benefit. If, prior to a Change of Control or more than
three (3) years after a Change of Control, either (1) the Company or (2)
the Parent is rated below an Investment Grade Rating, then on such date,
and on each December 31 after such date and prior to the date the Company
and the Parent both have an Investment Grade Rating, a single sum payment
shall be made immediately to such Participant of the amount by which the
Actuarial Equivalent of (1) exceeds the sum of (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant incurs a
Termination of Employment as of the date of determination, and (C)
benefits payable from the Pension Plan would commence upon the
earliest payment date allowed under the Pension Plan immediately
following such Termination of Employment.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in Section 10.7(a)(1).
(3) the Actuarial Equivalent of amounts paid to such Participant
based on any prior determination date pursuant to this Section
10.7(a).
(b) Retirement Benefit After Payment Date. On or after the Payment
Date of a Participant's Retirement Benefit, if either (1) the Company or
(2) the Parent is rated below an Investment Grade Rating, then an Actuarial
Equivalent single sum payment of such unpaid Retirement Benefit shall be
made immediately to such Participant.
(c) Death Benefit. If either (1) the Company or (2) the Parent is
rated below an Investment Grade Rating, then a Beneficiary who is
receiving, or would as of such date otherwise be eligible to commence to
receive a Death Benefit shall be paid immediately an Actuarial Equivalent
single sum payment of such unpaid Death Benefit.
X.8 Payment of Accounts Due to an Investment Grade Rating Change.
Notwithstanding Sections 10.3, 10.4 or 10.5, if either (1) the Company or (2)
the Parent is rated below an Investment Grade Rating, then the balance of his or
her Accounts shall be paid immediately in a single sum to such Participant as if
such Participant had incurred a Termination of Employment as of such date the
rating drops below an Investment Grade Rating.
<PAGE> 27
X.9 Payment of Retirement and Death Benefits Due to a Change of Control. On
and after a Change of Control and notwithstanding Sections 10.1, 10.2 or 10.6,
the following shall apply:
(a) Termination of Employment. Upon Termination of Employment of a
Participant within three (3) years following a Change of Control, a single
sum payment shall be made immediately to such Participant of the amount by
which the Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant's early retirement
benefit under the Pension Plan is determined using the Table of
reduction factors that would have been available to such Participant
had he or she not incurred a Termination of Employment until the third
(3rd) anniversary of the Change of Control date and based upon the
Participant's age as of the Payment Date, and (C) benefits payable
from the Pension Plan would commence upon the earliest payment date
allowed under the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in Section 10.9(a)(1)
except (A).
(3) the Actuarial Equivalent of any amounts previously paid to
the Participant under Section 10.7.
(b) Investment Grade Rating Within Three Years. If, within three (3)
years following a Change of Control, either (1) the Company or (2) the
Parent, if any, is rated below an Investment Grade Rating, then a single
sum payment shall be made immediately to such Participant of an amount
determined in Section 10.9(a) hereof as if such Participant had incurred a
Termination of Employment as of such date the rating drops below an
Investment Grade Rating.
X.10 Payment of Accounts Due to a Change of Control. On and after a Change
of Control and notwithstanding Sections 10.3, 10.4 or 10.5, in the event of a
Participant's Termination of Employment within three (3) years following a
Change of Control, the balances of his or her Accounts shall be paid immediately
in a single sum.
ARTICLE XI
AMENDMENT
XI.1 Prior to a Change of Control. The Company reserves the right to amend
this Plan from time to time by action of the Board of Directors, but without the
written consent of each Participant and Beneficiary of a deceased Participant,
no such action may reduce or relieve the Company of any obligation with respect
<PAGE> 28
to any Retirement Benefit (or Death Benefit) accrued or balance of Accounts
maintained under this Plan by such Participant (or Beneficiary) as of the date
of such amendment, except to the extent such amendment is required by written
opinion of counsel to the Company to avoid recognition of income by a
Participant or Beneficiary subject to federal income taxation.
XI.2 After a Change of Control. This Plan may not be amended following a
Change of Control.
ARTICLE XII
TERMINATION
The Company, by action of the Board of Directors, reserves the right to
terminate this Plan, provided the Company pays to each Participant and
Beneficiary, on such date of termination of this Plan, the Actuarial Equivalent
single sum value of a Participant's unpaid Retirement Benefit (or of a
Beneficiary's unpaid Death Benefit) and the balance of Accounts maintained for
such Participant (or for a Beneficiary) as of the date of termination shall be
paid as soon as administratively possible; provided however, for this purpose a
Participant's Retirement Benefit shall be equal to the amount by which the
Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant's early retirement
benefit under the Pension Plan is determined using the Table of
reduction factors that would have been available to such Participant
had he or she not incurred a Termination of Employment until the day
preceding his or her sixty-fifth (65th) birthday and based upon the
Participant's age as of the Payment Date, and (C) benefits payable
from the Pension Plan would commence upon the earliest payment date
allowed under the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in subsection (a)(1)
above except (A).
(3) the Actuarial Equivalent of any amounts previously paid to
the Participant under Section 10.7.
If within ten (10) days after a Change of Control, the requirements of
Sections 10.9(b), (d), (e) and 10.10(b) hereof are not satisfied, the Plan shall
automatically terminate upon final payment of all amounts due in accordance with
Sections 10.9(b), (d), (e), 10.10, 13.3, 13.4 and 13.9 of this Plan.
<PAGE> 29
ARTICLE XIII
MISCELLANEOUS PROVISIONS
XIII.1 Administration. This Plan shall be administered by the Benefit Trust
Committee. The Benefit Trust Committee shall have, to the extent appropriate,
the same powers, rights, duties, and obligations with respect to this Plan as
the committee of the Trust has under the Trust document (other than the power to
amend this Plan).
XIII.2 Finality of Determination. The determination of the Benefit Trust
Committee as to any disputed questions arising under this Plan, including
questions of construction and interpretation shall be final, binding, and
conclusive upon all persons.
XIII.3 Expenses. The expenses of administering this Plan shall be borne by
the Company.
XIII.4 Indemnification and Exculpation. The members of the Benefit Trust
Committee, its agents and officers, directors and employees of the Company shall
be indemnified and held harmless by the Company against and from any and all
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by them in connection with or resulting from any claim, action, suit,
or proceeding to which they may be a party or in which they may be involved by
reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by them in settlement (with the Company's written
approval) or paid by them in satisfaction of a judgment in any such action,
suit, or proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability, or expense is due to such person's gross
negligence or willful misconduct.
XIII.5 Funding. While all benefits payable under this Plan constitute
general corporate obligations, the Company may establish a separate irrevocable
grantor trust for the benefit of all Participants, which trust shall be subject
to the claims of the general creditors of the Company in the event of such
corporation's insolvency, to be used as a reserve for the discharge of the
Company's obligations under this Plan to such Participants. Any payments made to
a Participant under the separate trust for his benefit shall reduce dollar for
dollar the amount payable to the Participant from the general assets of the
Company. The amounts payable under this Plan shall be reflected on the
accounting records of the Company but shall not be construed to create or
require the creation of a trust, custodial, or escrow account, except as
described above in this section. No Participant (or Beneficiary of a
Participant) shall have any right, title, or interest whatever in or to any
investment reserves, accounts, or funds that the Company may purchase,
establish, or accumulate to aid in providing benefits under this Plan. Nothing
contained in this Plan, and no action taken pursuant to its provisions, shall
create a trust or fiduciary relationship of any kind between the Company, the
Parent or Compensation Committee and a Participant, Beneficiary or any other
person. Neither a Participant nor Beneficiary shall acquire any interest greater
than that of an unsecured, general creditor.
XIII.6 Corporate Action. Any action required of or permitted by the Company
under this Plan shall be by resolution of its Board of Directors, the
<PAGE> 30
Compensation Committee or any person or persons authorized by resolution of such
Compensation Committee.
XIII.7 Interests not Transferable. The interests of the Participants and
their Beneficiaries under this Plan are not subject to the claims of their
creditors and may not be voluntarily or involuntarily transferred, assigned,
alienated, or encumbered by them.
XIII.8 Effect on Other Benefit Plans. Amounts credited or paid under this
Plan shall not be considered to be compensation for the purposes of a qualified
pension plan maintained by the Company or the Parent. The treatment of such
amounts under other employee benefits plans shall be determined pursuant to the
provisions of such plans.
XIII.9 Legal Fees and Expenses. After a Change of Control, the Company
shall pay all reasonable legal fees and expenses which the Participant or a
Beneficiary may incur as a result of the Company's contesting the validity,
enforceability or the Participant's interpretation of, or determinations made
under, this Plan or the Trust.
XIII.10 Deduction of Taxes from Amounts Payable.
(a) Distribution. The Company shall deduct from the amount to be
distributed such amount as the Company, in its sole discretion, deems
proper to protect the Company against liability for the payment of death,
succession, inheritance, income, or other taxes, and out of money so
deducted, the Company may discharge any such liability and pay the amount
remaining to the Participant, the Beneficiary or the deceased Participant's
estate, as the case may be.
(b) Withholding. The Company may withhold whatever taxes (including
FICA, state or federal taxes) it, in its sole discretion, deems proper to
protect the Company against liability for the payment of such withholding
taxes and out of the money so deducted, the Company may discharge any such
liability. Withholding for this purpose may come from any wages due to the
Participant, or if none, from the Participant's Accounts hereunder.
XIII.11 Facility of Payment. If a Participant or Beneficiary is declared an
incompetent or is a minor and a conservator, guardian, or other person legally
charged with his or her care has been appointed, any benefits to which such
Participant or Beneficiary is entitled shall be payable to such conservator,
guardian, or other person legally charged with his or her care. The decision of
the Benefit Trust Committee in such matters shall be final, binding, and
conclusive upon the Company and upon each Participant, Beneficiary, and every
other person or party interested or concerned. The Company and the Benefit Trust
Committee shall not be under any duty to see to the proper application of such
payments.
XIII.12 Merger. This Plan shall be binding and enforceable with respect to
the obligation of the Company against any successor to the Company by operation
of law or by express assumption of the Plan, and such successor shall be
substituted hereunder for the Company.
<PAGE> 31
XIII.13 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
XIII.14 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and this Plan shall be construed
and enforced as if such provisions, to the extent invalid or unenforceable, had
not been included.
XIII.15 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.
XIII.16 Notice and Information Requirements. Except as otherwise provided
in this Plan or as otherwise required by law, the Company shall have no duty or
obligation to affirmatively disclose to any Participant or Beneficiary, nor
shall any Participant or Beneficiary have any right to be advised of, any
material information regarding the Company, or at any time prior to, upon or in
connection with the Company's purchase, or any other distribution or transfer
(or decision to defer any such distribution) of any Company Stock or any other
stock held under this Plan.
XIII.17 Governing Law. This Plan shall be governed by the laws of the State
of Delaware.
Adopted on the ______ day of _______________ by the Board of Directors of
the Company as to its obligations.
By:
---------------------------
Title:
---------------------------
<PAGE> 1
EXHIBIT 10L
Pepsi-Cola General Bottlers, Inc.
Executive Retirement Plan
As Amended and Restated Effective January 1, 1998
PEPSI-COLA GENERAL BOTTLERS, INC. EXECUTIVE RETIREMENT PLAN
Pepsi-Cola General Bottlers, Inc. amends and restates, effective as of January
1, 1998, an unfunded, deferred compensation plan on behalf of certain designated
management or highly compensated employees of Pepsi-Cola General Bottlers, Inc.
This document defines the provisions of such plan and shall be known as the
"Pepsi-Cola General Bottlers, Inc. Executive Retirement Plan."
This plan is intended in part to be an unfunded, deferred compensation plan for
a select group of management or highly compensated employees, as described in
sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and in part to be an excess benefit plan
described in section 3(36) of ERISA.
Table of Contents
ARTICLE I
DEFINITIONS
1.1 "Accounting Period"
1.2 "Accounts"
1.3 "Actuarial Equivalent"
1.4 "Appendix"
1.5 "Beneficiary"
1.6 "Benefit Trust Committee"
1.7 "Board of Directors"
1.8 "Change of Control"
1.9 "Company"
1.10 "Company Stock"
1.11 "Compensation"
1.12 "Compensation Committee"
1.13 "Compensation Limit"
1.14 "Contribution Dollar Limit"
1.15 "Conversion Election"
1.16 "Death Benefit"
1.17 "Deferrals"
<PAGE> 2
1.18 "Deferral Election" or "Election"
1.19 "Deferral Percentage"
1.20 "Designated Participant"
1.21 "Effective Date"
1.22 "Eligible Employee"
1.23 "Employee"
1.24 "Enrollment Election"
1.25 "ERISA"
1.26 "Exchange Act"
1.27 "Insider"
1.28 "Installment Form of Payment"
1.29 "Internal Revenue Code" or "Code"
1.30 "Investment Election"
1.31 "Investment Fund" or "Fund"
1.32 "Investment Grade Rating"
1.33 "Maximum Annual Additions Limitation"
1.34 "Maximum Annual Benefit Limitation"
1.35 "MIC Award"
1.36 "Notice Date"
1.37 "Parent"
1.38 "Participant"
1.39 "Payment Date"
1.40 "Pension Plan"
1.41 "Plan"
1.42 "Plan Year"
1.43 "Retirement Benefit"
1.44 "RSP"
1.45 "Section 401(m) Limitation"
1.46 "Settlement Date"
1.47 "Spouse"
1.48 "Successor Plan"
1.49 "Sweep Date"
1.50 "Termination of Employment"
1.51 "Trade Date"
1.52 "Trust"
ARTICLE II
PARTICIPATION
2.1 Eligibility
2.2 Enrollment Election
ARTICLE III
PARTICIPANT DEFERRAL ELECTIONS
3.1 Employee Deferral Election
3.2 Election Procedures
3.3 Coordination with RSP
<PAGE> 3
ARTICLE IV
DEFERRALS AND POSTINGS
4.1 Replacement RSP Employer Deferral
4.2 MIC Deferral
4.3 Pay Based Deferral
4.4 Replacement RSP Employee Deferral
4.5 RSP Employer Deferral
4.6 RSP Employee Deferral
ARTICLE V
EXCESS RETIREMENT AND DEATH BENEFITS
5.1 Amount of Pension Benefits
5.2 Amount of Death Benefit
5.3 Pre-1994 Benefits
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
6.1 Individual Participant Accounting
6.2 Accounting for Investment Funds
ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS
7.1 General
7.2 Investment of Deferrals
7.3 Investment of Accounts
7.4 Insiders
7.5 Investment Returns on MIC Deferrals
7.6 Restrictions on Measurement
7.7 Procedures
ARTICLE VIII
VESTING AND FORFEITURES
8.1 Fully Vested Deferral Accounts
ARTICLE IX
WITHDRAWALS
9.1 Withdrawals for Hardship
9.2 Withdrawal Processing
ARTICLE X
DISTRIBUTIONS
10.1 Retirement Benefit
10.2 Pension Death Benefit
10.3 Accounts
10.4 MIC Account
<PAGE> 4
10.5 Death Benefit of Accounts
10.6 Prior to 1994
10.7 Payments of Retirement and Death Benefit Due to an
Investment Grade Rating Change
10.8 Payment of Accounts Due to an Investment Grade Rating
Change
10.9 Payment of Retirement and Death Benefits Due to a
Change of Control
10.10 Payment of Accounts Due to a Change of Control
ARTICLE XI
AMENDMENT
11.1 Prior to a Change of Control
11.2 After a Change of Control
ARTICLE XII
TERMINATION
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Administration
13.2 Finality of Determination
13.3 Expenses
13.4 Indemnification and Exculpation
13.5 Funding
13.6 Corporate Action
13.7 Interests not Transferable
13.8 Effect on Other Benefit Plans
13.9 Legal Fees and Expenses
13.10 Deduction of Taxes from Amounts Payable
13.11 Facility of Payment
13.12 Merger
13.13 Gender and Number
13.14 Invalidity of Certain Provisions
13.15 Headings
13.16 Notice and Information Requirements
13.17 Governing Law
ARTICLE I
DEFINITIONS
The following sections of this Article I provide basic definitions of terms
used throughout this Plan, and whenever used herein in a capitalized form,
except as otherwise expressly provided, the terms shall be deemed to have the
following meanings:
I.1 "Accounting Period" means each business day.
<PAGE> 5
I.2 "Accounts" means the record of a Participant's interest in this Plan
represented by his or her:
(a) "MIC Deferral Account" which means a Participant's interest in
this Plan composed of MIC Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, if any (as identified
by the Benefit Trust Committee) for such Plan Year, plus all interest
deemed credited to and minus all withdrawals and distributions actually
charged to such account.
(b) "Pay Based Account" which means a Participant's interest in this
Plan composed of Pay Based Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, plus all income and
gains deemed credited to and minus all losses deemed charged to such
account, as measured by the investment returns of each Investment Fund
designated by the Participant, and minus all withdrawals and distributions
actually charged to such account.
(c) "Replacement RSP Accounts" which consists of the following two
accounts:
(1) "Replacement RSP Employee Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employee Deferrals posted for each Plan Year on or after January 1,
1994 to the Participant under this Plan, if any (as identified by the
Benefit Trust Committee) for such Plan Year, plus all income and gains
deemed credited to and minus all losses deemed charged to such
account, as measured by the investment returns of each Investment Fund
designated by the Participant, and minus all withdrawals and
distributions actually charged to such account; and
(2) "Replacement RSP Employer Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employer Deferrals posted for each Plan Year on or after January 1,
1994 to the Participant under this Plan (as identified by the Benefit
Trust Committee) for such Plan Year, plus all income and gains deemed
credited to and minus all losses deemed charged to such account, as
measured by the investment returns of each Investment Fund designated
by the Participant, and minus all withdrawals and distributions
actually charged to such account.
(d) "RSP Employee Account" which means a Participant's interest in
this Plan composed of RSP Employee Deferrals posted under this Plan prior
to January 1, 1994, if any (as identified by the Benefit Trust Committee),
plus all income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all withdrawals
and distributions actually charged to such account.
(e) "RSP Employer Account" which means a Participant's interest in
<PAGE> 6
this Plan composed of RSP Employer Deferrals posted under this Plan prior
to January 1, 1994, if any (as identified by the Benefit Trust Committee),
plus all income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all withdrawals
and distributions actually charged to such account.
I.3 "Actuarial Equivalent" means an amount equal in value to the benefit
replaced as determined (i) in accordance with the terms of the Pension Plan with
respect to the determination of any form of benefit other than a single sum, or
(ii) with respect to a single sum distribution, by: (A) using an assumed annual
discount rate equal to the weekly average, as of the last full week of the
fourth calendar month prior to the month containing the date the single sum will
be paid, of the Bond Buyer's Average of 20 Municipal Bonds, rounded to the
nearest 1/4%, as published weekly by the Federal Reserve Bank of St. Louis and
(B) assuming the payee lives for the duration of his life expectancy where such
life expectancy is calculated according to the UP94 Mortality Table.
I.4 "Appendix" means a written supplement attached to this Plan and made a
part hereof which has been added in accordance with the provisions of this Plan.
I.5 "Beneficiary" means
(a) with respect to the Death Benefit payable upon the death of a
Participant, any person designated by the Participant (actually or by
default) to receive any retirement benefits which are payable with respect
to the death of a Participant under the Pension Plan; and
(b) with respect to the balance of a Participant's Accounts as of the
death of such Participant, each person designated by the Participant on his
or her most recent Enrollment Election form approved by the Benefit Trust
Committee; provided that if a Participant fails to designate a Beneficiary
on an Enrollment Election form or if all such designated persons predecease
the Participant without the Participant completing a new, approved
Enrollment Election form, then Beneficiary means any person designated by
the Participant (actually or by default) to receive the balance of any of
his or her accounts which are payable with respect to the death of such
Participant under the RSP.
An individual who is entitled to receive a Death Benefit on and after the
death of a Participant will remain a Beneficiary until the latest of (a) receipt
of the balance of all of such Accounts to which he or she is entitled to
receive; or (b) receipt of such Beneficiary's Death Benefit, if any, is
completed (or made in a single sum).
I.6 "Benefit Trust Committee" means the Benefit Trust Committee appointed
pursuant to the terms of the Trust which will have the power to manage and
control the operation and administration of this Plan.
I.7 "Board of Directors" means the board of directors of the Company or the
Parent.
<PAGE> 7
I.8 "Change of Control" means an event which shall be deemed to have
occurred if (i) there shall be consummated (A) any consolidation or merger of
the Parent, if one exists, or the Company in which either the Parent or the
Company, respectively, is not the continuing or surviving corporation or
pursuant to which shares of the Parent's or the Company's common stock are
converted into cash, securities or other property, other than a merger in which
the holders of the Parent's or the Company's common stock, respectively,
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (B) any sale, lease, exchange or other transfer (in one transaction
or in a series of related transactions) of all or substantially all the assets
of either the Parent or the Company, or (ii) the shareholders of either the
Parent or the Company shall approve any plan or proposal for such corporation's
liquidation or dissolution, or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act, other than the Parent, Company
or its subsidiaries, or any employee benefit plan sponsored by the Company or
its subsidiaries, shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of securities of either the Parent or the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Parent's or the Company's, respectively, then outstanding securities
ordinarily (and apart from rights accruing in special circumstances) having the
right to vote in the election of directors, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, or
(iv) at any time during a period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors shall cease for
any reason to constitute at least a majority thereof, unless the election or the
nomination for election by the Parent's or the Company's shareholders,
respectively, of each new director during such two-year period was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such two-year period.
I.9 "Company" means Pepsi-Cola General Bottlers, Inc. or any successor
entity by operation of law or any successor entity which affirmatively adopts
the Plan, the Trust and the obligations of Pepsi-Cola General Bottlers, Inc.
with respect to the Plan and the Trust.
I.10 "Company Stock" means common stock issued by the Parent, or if none,
then by the Company.
I.11 "Compensation" means
(a) for purposes of Replacement RSP Employee Deferrals, Replacement
RSP Employer Deferrals and Pay Based Deferrals for any Plan Year, a
Participant's "Compensation", as defined in the RSP (disregarding any
provision having the effect of excluding Replacement RSP Employee Deferrals
and MIC Deferrals), for a Plan Year to the Participant;
(b) for purposes of RSP Employee Deferrals and RSP Employer Deferrals,
a Participant's Compensation, as defined in the RSP (disregarding any
<PAGE> 8
provision having the effect of excluding RSP Employee Deferrals), for a
Plan Year;
(c) for purposes of MIC Deferrals, a Participant's MIC Award (other
than that portion of the MIC Award which is a Replacement RSP Employee
Deferral and excluding an amount equal to the sum of (i) the Employee's
portion of taxes imposed by the Federal Insurance Contributions Act with
respect to the MIC Award, with respect to the Replacement RSP Employer
Deferrals on the portion of the MIC Award which is a Replacement RSP
Employee Deferral, and if needed, with respect to the Retirement Benefit
accrual, for that Plan Year plus, if needed, (ii) other applicable
withholding amounts); and
(d) for purposes of computing the Retirement Benefit, a Participant's
"Compensation," as defined in the Pension Plan (disregarding any provision
having the effect of excluding RSP Employee Deferrals, Replacement RSP
Employee Deferrals and MIC Deferrals), for a Plan Year, as adjusted by the
Benefit Trust Committee from Plan Year to Plan Year, and effective January
1, 1994, Compensation shall include a Participant's MIC Award earned for
services rendered during such Plan Year, but shall not include an MIC Award
paid during the same Plan Year for services rendered during the prior Plan
Year.
Notwithstanding the above, the definition of "Compensation" in the RSP and
the Pension Plan shall not include the Compensation Limit.
I.12 "Compensation Committee" means the Compensation Committee of the Board
of Directors.
I.13 "Compensation Limit" means the limitation on the amount of
Compensation which may be considered after application of Code section
401(a)(17).
I.14 "Contribution Dollar Limit" means the annual limit imposed on each
Participant pursuant to section 402(g) of the Code, which is seven thousand
dollars ($7,000) per Plan Year (as indexed for cost of living adjustments
pursuant to Code section 402(g)(5) and 415(d)).
I.15 "Conversion Election" means, effective on or after January 1, 1994, an
election, on such form that may be required by the Benefit Trust Committee, by a
Participant to change the method of measuring the investment return on all or
some specified portion of such Participant's Accounts. No Conversion Election
shall be deemed to have been given to the Benefit Trust Committee unless it is
complete and delivered in accordance with the procedures established by such
Benefit Trust Committee for this purpose.
I.16 "Death Benefit" means a monthly (or single sum) benefit payable to a
Beneficiary and determined in accordance with this Plan.
I.17 "Deferrals" means amounts posted to this Plan by the Company or an
Eligible Employee. Specific types of deferrals include:
<PAGE> 9
(a) "MIC". An amount posted after 1993 based upon the Participant's
Deferral Election to defer some or all of his or her Compensation.
(b) "Pay Based". An amount posted and allocated on a pay based formula
to an eligible Participant's Accounts.
(c) "Replacement RSP Employee". An amount posted after 1993 based upon
the Participant's Deferral Election to defer some of his or her
Compensation.
(d) "Replacement RSP Employer". An amount posted after 1993 based upon
the Replacement RSP Employee Deferral made by the eligible Participant.
(e) "RSP Employee". An amount posted prior to 1994 on a pre-tax basis
which the Participant could have elected if he or she were participating
actively in the RSP.
(f) "RSP Employer". An amount posted prior to January 1, 1994 related
to pre-tax contributions which the Participant could not make to the RSP or
which are made on behalf of Designated Participants without regard to such
pre-tax contributions.
I.18 "Deferral Election" or "Election" means irrevocable elections made by
a Participant (a) to reduce his or her Compensation for a Plan Year by an amount
equal to the product of his or her Deferral Percentage and such Compensation
subject to the Deferral Election; (b) to select whether Deferrals for that Plan
Year will be paid in an Installment Form of Payment; and (c) to select a Payment
Date for the MIC Deferrals for that Plan Year.
I.19 "Deferral Percentage" means (a) with respect to Replacement RSP
Employee Deferrals, the percentage of a Participant's Compensation for a Plan
Year which is to be deferred and posted to this Plan; and (b) with respect to
MIC Deferrals, the percentage of a Participant's Compensation for a Plan Year
which is to be deferred and posted to this Plan.
I.20 "Designated Participant" means an individual on the list of Employees
set forth in an Appendix to the Pension Plan as not being an eligible employee
for the purpose of the Pension Plan.
I.21 "Effective Date" means generally January 1, 1991 and, where noted,
January 1, 1994, the dates upon which certain provisions of this document become
effective.
I.22 "Eligible Employee" means with respect to each Plan Year:
(a) with respect to the Retirement Benefit, each Employee who is a
participant in the Pension Plan or would be a participant in the Pension
Plan if they were not a Designated Participant.
<PAGE> 10
(b) prior to 1994 with respect to Deferrals:
(1) each Employee who is a Participant in the RSP for that Plan
Year and whose pre-tax contributions which would otherwise have been
made for that Plan Year to the RSP are limited by the Contribution
Dollar Limit; or
(2) each Employee who is a Designated Participant for that Plan
Year.
(c) after 1993 with respect to Deferrals, each Employee who is
participating in the Whitman Corporation Management Incentive Compensation
Plan during that Plan Year.
I.23 "Employee" means any person who is considered to be an employee of the
Company pursuant to the personnel policies of the Company; and on and after a
Change of Control, who renders services as a common law employee to the Company.
I.24 "Enrollment Election" means irrevocable elections made by a
Participant (a) to select the term of his or her Installment Form of Payment;
(b) to select the Payment Date of his or her Accounts following Termination of
Employment; and (c) to select the form of payment of his or her Accounts as of
December 31, 1993.
I.25 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
I.26 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
I.27 "Insider" means for a Plan Year, or any portion thereof, the
Participant is subject to the reporting requirements of Section 16 of the
Exchange Act.
I.28 "Installment Form of Payment" means separately with respect to (a) his
or her Accounts (other than his or her MIC Account) or (b) his or her MIC
Account, the term of years selected by the Participant in his or her Enrollment
Election form over which to pay such Accounts in annual installments commencing
as of what would otherwise have been the Payment Date of such Accounts and
payable on each January 1 thereafter over a period of not less than two (2) nor
more than fifteen (15) years (stated as a number of whole integers), with each
installment being an amount equal to the amount determined by dividing the
applicable balance of such Accounts as of the date of payment by the number of
dates of payment remaining in the installment period (including the current date
of payment).
I.29 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code sections shall be deemed to refer to comparable
sections of any subsequent Internal Revenue Code.
<PAGE> 11
I.30 "Investment Election" means, effective on and after January 1, 1994,
an election, on such form that may be required by the Benefit Trust Committee,
made by a Participant to direct the method of measuring the investment return on
his or her Deferrals (other than MIC Deferrals). No Investment Election shall be
deemed to have been given to the Benefit Trust Committee unless it is complete
and delivered in accordance with the procedures established by such Benefit
Trust Committee for this purpose.
I.31 "Investment Fund" or "Fund" means one or more of the investment
alternatives which are available under the RSP at any determination date unless
designated otherwise by the Benefit Trust Committee, and which are used by this
Plan as a measurement of investment return on Accounts other than the MIC
Account.
I.32 "Investment Grade Rating" means a rating either (a) at or above Baa3
by Moody's Investors Service, Inc. or (b) at or above BBB by Standard & Poor's
Corporation, or the prevailing equivalent ratings at the time.
I.33 "Maximum Annual Additions Limitation" means the limitation imposed by
Code section 415 on benefits payable by defined contribution plans qualified
under Code section 401(a).
I.34 "Maximum Annual Benefit Limitation" means the limitation imposed by
Code section 415 on benefits payable by defined benefit pension plans qualified
under Code sections 401(a) including application of the combination limitations
of Code section 415(e) to cause a further reduction, if any, of such benefits.
I.35 "MIC Award" means the amount of award payable to a Participant under
the Whitman Corporation Management Incentive Compensation Plan.
I.36 "Notice Date" means the date established by the Benefit Trust
Committee as the deadline for it to receive a Deferral Election or any other
notification with respect to an administrative matter in order to be effective
under this Plan.
I.37 "Parent" means any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than any employee benefit plan sponsored by
the Parent or the Company, (i) having directly or indirectly a beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities ordinarily
(and apart from rights accruing in special circumstances) having the right to
vote in the election of directors; and (ii) with an Investment Grade Rating.
I.38 "Participant" means an Eligible Employee who begins to participate in
this Plan after completing the eligibility requirements. An individual will
remain a Participant until the latest of (a) distribution of the balance of all
of his or her Accounts; or (b) payment of his or her Retirement Benefit, if any,
is completed (or made in a single sum).
<PAGE> 12
I.39 "Payment Date" means:
(a) with respect to Accounts, the date payment is made in accordance
with Article X or the first day of the fifteenth (15th) month following a
Participant's Termination of Employment unless such Participant has
selected an earlier Payment Date for (1) his or her Accounts on an
Enrollment Election form or (2) his or her MIC Accounts on a Deferral
Election Form; or
(b) the date a Participant's Retirement Benefit is distributed or
commences to be distributed as described in Article X.
I.40 "Pension Plan" means the Pepsi-Cola General Bottlers, Inc. Pension
Plan for Salaried Employees and any Successor Plan.
I.41 "Plan" means the Pepsi-Cola General Bottlers, Inc. Executive
Retirement Plan, as it may be validly amended from time to time.
I.42 "Plan Year" means the annual accounting period of this Plan which ends
on each December 31.
I.43 "Retirement Benefit" means a monthly (or single sum) pension benefit
payable to a Participant and determined in accordance with Article V.
I.44 "RSP" means the Whitman Corporation Retirement Savings Plan, as
amended from time to time and any Successor Plan.
I.45 "Section 401(m) Limitation" means the limit imposed by Code section
401(m).
I.46 "Settlement Date" means the date on which financial transactions from
a Trade Date are considered to be settled which is deemed to be the same date as
of which such transaction would have settled under the RSP with respect to the
same type of financial transaction (e.g. Investment Election, Conversion
Election, Payment Date).
I.47 "Spouse" means a person who is considered the Participant's spouse
under the RSP and Pension Plan, whichever is applicable.
I.48 "Successor Plan" means a tax-qualified, retirement plan described in
section 401(a) of the Code into which the assets and liabilities have been
merged or transferred in accordance with section 414(l) of the Code and section
208 of ERISA from the Pension Plan or the RSP, respectively, and which provides
benefits, options, features and rights, each comparable in material respects to
those available in the Pension Plan or RSP, whichever is applicable.
I.49 "Sweep Date" means the date established by the Benefit Trust Committee
as the cutoff date and time for the Benefit Trust Committee to receive
notification with respect to a financial transaction in order to be processed
with respect to such Trade Date.
<PAGE> 13
I.50 "Termination of Employment" occurs when a person ceases to be an
Employee as determined by the personnel policies of the Company; provided
however, transfer of employment from the Company, or from one affiliate of the
Company, to another affiliate of the Company shall not constitute a Termination
of Employment for purposes of this Plan. If a person would cease to be an
Employee because of a Change of Control, solely for the purpose of this Plan,
such person will not be considered to have incurred a Termination of Employment
if the person's successor employer, either expressly or by operation of law,
assumes the Plan and Trust, the obligations and liabilities of the Plan and
Trust, and agrees to the responsibilities of the Company under the Plan and
Trust.
I.51 "Trade Date" means the date as of which a financial transaction is
considered by this Plan to have occurred which is deemed to be the same date as
of which such transaction would have occurred under the RSP with respect to the
same type of financial transaction (e.g. Investment Election, Conversion
Election, Payment Date).
I.52 "Trust" means the trust created by the Pepsi-Cola General Bottlers,
Inc. Benefit Trust Agreement as it may be validly amended from time to time.
ARTICLE II
PARTICIPATION
II.1 Eligibility. On or after the Effective Date:
(a) Participant on January 1, 1991. Each person who has a balance in
his or her Accounts, or who has accrued a Retirement Benefit, as of January
1, 1991 shall be a Participant as of January 1, 1991.
(b) Other Eligible Employee. Each other Eligible Employee shall become
a Participant with respect to the Plan Year in which he or she becomes an
Eligible Employee; provided however, on or after January 1, 1994, a person
who was an Employee prior to becoming an Eligible Employee shall become a
Participant as of the first day of the Plan Year commencing on or after the
date he or she became an Eligible Employee.
II.2 Enrollment Election.
(a) Participant on January 1, 1994. Each person who is a Participant
on January 1, 1994 shall complete, sign and return an Enrollment Election
form provided for that purpose by the Benefit Trust Committee, to the
Benefit Trust Committee no later than the designated Notice Date.
(b) Other Eligible Employees. Each person first eligible to become a
Participant shall complete, sign and return an Enrollment Election form
provided for that purpose by the Benefit Trust Committee, to the Benefit
Trust Committee no later than the designated Notice Date.
<PAGE> 14
ARTICLE III
PARTICIPANT DEFERRAL ELECTIONS
III.1 Employee Deferral Election. Prior to the date payments of Accounts
are accelerated under Section 10.8, the following shall apply; after such date,
no Deferral Elections will be effective.
(a) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have Replacement
RSP Employee Deferrals made on his or her behalf shall file a Deferral
Election pursuant to procedures specified by the Benefit Trust Committee
specifying (1) his or her Deferral Percentage of not less than two percent
(2%) nor more than ten percent (10%) (stated as a whole integer percentage)
and authorizing the Compensation otherwise payable to him or her for a Plan
Year to be reduced and deferred hereunder to such Participant's Payment
Date; and (2) whether or not the Replacement RSP Employee Account created
with respect to such Plan Year will be distributed in the Installment Form
of Payment.
(b) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have an MIC
Deferral made on his or her behalf shall file a Deferral Election pursuant
to procedures specified by the Benefit Trust Committee specifying (1) his
or her Deferral Percentage of not less than 5% nor more than 100% (stated
as a whole integer percentage) and authorizing his or her Compensation
payable for a Plan Year to be reduced and deferred hereunder to a fixed
Payment Date not earlier than two (2) full Plan Years after the date the
Deferral Election is received by the Benefit Trust Committee; and (2)
whether or not the MIC Account created with respect to such Plan Year will
be distributed in the Installment Form of Payment.
(c) Notwithstanding Subsection (a) hereof, for any Plan Year the
Benefit Trust Committee may, without amending this Plan, determine that the
maximum Deferral Percentage shall be greater or lesser than the percentages
set forth in Subsection (a) hereof. Otherwise, the maximum Deferral
Percentage as provided in Subsection (a) hereof shall apply.
(d) Any Replacement RSP Employee Deferral Election which has not been
properly completed, or which is submitted at a time when the Participant
does not have outstanding a properly completed Investment Election, will be
deemed not to have been received and be void. A Participant's Deferral
Election shall be effective only if received by the Benefit Trust Committee
on or before the Notice Date for a Plan Year.
III.2 Election Procedures. If properly received by the Benefit Trust
Committee, a Deferral Election may be effective only with respect to
Compensation paid in a Plan Year to which the Deferral Election applies and only
with respect to Compensation paid after the Notice Date for the Deferral
Election. Consistent with the above, the Benefit Trust Committee may establish
<PAGE> 15
rules and procedures governing when a Deferral Election will be effective and
what Compensation will be deferred by the Deferral Election; provided such rules
and procedures are not more permissive than the terms and provisions of this
Plan.
III.3 Coordination with RSP. Notwithstanding a Participant's Deferral
Election, if a Participant makes a "401(k) Hardship" withdrawal from the RSP
during a Plan Year, the "401(k) Hardship" withdrawal rules of the RSP, which are
intended to be applicable to this Plan, are incorporated by reference herein and
made a part hereof, but only to the extent required by Treas. Reg. '1.401(k)-1,
in order for the RSP to be a qualified cash or deferred arrangement.
ARTICLE IV
DEFERRALS AND POSTINGS
IV.1 Replacement RSP Employer Deferral.
(a) Frequency and Eligibility. For each period after 1993 for which a
Participant makes a Replacement RSP Employee Deferral, the Company shall
post to this Plan on behalf of such Participant an Replacement RSP Employer
Deferral as described in the following Posting and Allocation Method
paragraph.
(b) Posting and Allocation Method. The Replacement RSP Employer
Deferral for each period shall total one hundred percent (100%) of each
eligible Participant's Replacement RSP Employee Deferral for the period,
provided that no Replacement RSP Employer Deferral shall be made based upon
a Participant's Replacement RSP Employee Deferral in excess of six percent
(6%) of his or her Compensation. The Replacement RSP Employer Deferral
shall be posted to the Replacement RSP Employer Account of such Participant
as of the same date the Replacement RSP Employee Deferral which it matches
is posted.
IV.2 MIC Deferral.
(a) Frequency and Eligibility. For each period after 1993 for which a
Deferral Election is in effect, the Company shall post to this Plan on
behalf of each Participant an amount equal to the amount designated by the
Participant as an MIC Deferral on his or her Deferral Election.
(b) Posting. The MIC Deferral shall be posted to the MIC Deferral
Account of such Participant as of the date his or her MIC Award would
otherwise have been paid to the Participant.
IV.3 Pay Based Deferral.
(a) Frequency and Eligibility. For each Plan Year, the Company may
make a Pay Based Deferral in an amount determined by the Company on behalf
of each Participant who is an Eligible Employee and who would have
<PAGE> 16
qualified for a similar deferral in the RSP had such person been eligible
to participate in the RSP and in an amount determined in the Posting and
Allocation Method paragraph.
(b) Posting and Allocation Method. The Pay Based Deferral for each
period shall be posted as of the date determined by the Benefit Trust
Committee (but not later than the tax filing deadline for the Company's
federal income tax return for the Plan Year with respect to which the Pay
Based Deferral relates, including extensions) to the Pay Based Account of
each of the Participants for the Plan Year in direct proportion to their
Compensation.
IV.4 Replacement RSP Employee Deferral.
(a) Frequency and Eligibility. For each period for which a Deferral
Election is in effect, the Company shall post to this Plan on behalf of
each Participant an amount equal to the amount designated by the
Participant as an Replacement RSP Employee Deferral on his or her Deferral
Election.
(b) Posting. The Replacement RSP Employee Deferral shall be posted to
the Replacement RSP Employee Account of such Participant as of the date
such Compensation amount would otherwise have been paid to the Participant.
IV.5 RSP Employer Deferral.
(a) Frequency and Eligibility.
(1) Pre-1991. Amounts posted to a Participant's Accounts for each
Plan Year prior to 1991 are determined under the terms and provisions
of this Plan as it existed during any such Plan Year.
(2) Post-1990 and Pre-1994. For each Plan Year after 1990 and
prior to 1994, the Company shall post to this Plan on behalf of each
Participant whose pre-tax contribution to the RSP was limited by the
Contribution Dollar Limit for that Plan Year, and who is not a
Designated Participant for that Plan Year, an RSP Employer Deferral as
described in (b)(2) of the following Posting and Allocation Method
paragraph.
(3) Designated Participant. For each Plan Year after 1990 and
prior to 1994, the Company shall post to this Plan on behalf of each
Participant who is a Designated Participant and an Employee for that
Plan Year, an RSP Employer Deferral as described in (b)(3) of the
following Allocation Method paragraph.
(b) Posting and Allocation Method.
(1) Pre-1991. RSP Employer Deferrals for Plan Years prior to 1991
shall be posted as of January 1, 1991, to the RSP Employer Account.
<PAGE> 17
(2) Post-1990 and Pre-1994. The RSP Employer Deferral for each
Plan Year after 1990 and prior to 1994 shall be an amount equal to (A)
minus (B) where:
(A) is equal to the amount of matching contribution which
would have been made to the RSP for the Plan Year based on the
assumptions that (i) the Participant has made pre-tax
contributions to the RSP at the rate of six percent (6%) of his
or her compensation as defined in the RSP, without regard to the
Maximum Annual Additions Limitation, the Contribution Dollar
Limit and the Compensation Limit; and (ii) matching contributions
to the RSP were made with respect to such amounts in accordance
with the terms of the RSP without regard to the Maximum Annual
Additions Limitation and the Section 401(m) Limitation; and
(B) is equal to the actual amount of matching contribution
made on behalf of the Participant to the RSP for the Plan Year.
The RSP Employer Deferral after 1990 shall be posted to the RSP
Employer Account as of the same date it would have been made as a
matching contribution to the RSP, if it could have been made (or as a
pay based contribution to the RSP in 1991, if it could have been
made).
(3) Designated Participant. The RSP Employer Deferral for each
Plan Year after 1990 and prior to 1994 shall be an amount equal to six
percent (6%) of the Participant's Compensation, without regard to the
Maximum Annual Benefit Limitation. For the 1991 Plan Year, an amount
shall be posted equal to 2% of such Participant's Compensation. The
RSP Employer Deferral after 1990 shall be posted to the RSP Employer
Account as of the same date it would have been made as a matching
contribution to the RSP, if it could have been made (or as a pay based
contribution to the RSP in 1991, if it could have been made).
IV.6 RSP Employee Deferral.
(a) Frequency and Eligibility. Amounts posted to a Participant's
Accounts for each Plan Year prior to 1994 are determined under the terms
and provisions of this Plan as it existed during any such Plan Year.
(b) Allocation Method. RSP Employee Deferrals for Plan Years prior to
1994 shall be posted to the RSP Employee Account in accordance with the
terms of the Plan at that time.
ARTICLE V
EXCESS RETIREMENT AND DEATH BENEFITS
V.1 Amount of Pension Benefits. Effective on and after January 1, 1994, a
Retirement Benefit will be paid under this Plan, only as provided in Article X,
<PAGE> 18
to a Participant in an annual amount payable monthly equal to the amount by
which (a) exceeds (b):
(a) The amount of the annual retirement benefit payable in the form of
a single life annuity the Participant would have been entitled to receive
under the Pension Plan (1) had the Pension Plan (and any other plan
referenced by the Pension Plan for the purpose of determining an "Offset
Benefit" as defined in the Pension Plan) not applied the Maximum Annual
Benefit Limitation in determining benefits payable from the Pension Plan;
and (2) had the Participant not been excluded from being an "Eligible
Employee" by being listed on an Appendix to the Pension Plan (and any other
plan referenced by the Pension Plan for the purpose of determining an
"Offset Benefit" as defined in the Pension Plan). For purposes of this
Section 5.1(a), the compensation used for determining retirement benefits
payable from the Pension Plan (and any other plan referenced by the Pension
Plan for the purpose of determining an "Offset Benefit" as defined in the
Pension Plan) shall mean Compensation as defined in this Plan for a Plan
Year.
(b) The Actuarial Equivalent of the amount of the annual retirement
benefit payable monthly which the Participant is entitled to receive under
the Pension Plan if it were to commence on the Payment Date and to be paid
in the form elected by such Participant under the Pension Plan, or if the
Participant has not made such an election under the Pension Plan, then in
the form of either a joint and 100% contingent annuity, if married, or a
single life annuity, if not married.
V.2 Amount of Death Benefit. Effective on and after January 1, 1994, a
Death Benefit will be paid under this Plan, only as provided in Article X, to a
Beneficiary of a deceased Participant in an annual amount payable monthly equal
to the amount by which (a) exceeds (b):
(a) The amount of the annual death benefit payable in the form of a
single life annuity the Beneficiary of a deceased Participant would have
been entitled to receive under the Pension Plan (1) had the Pension Plan
not applied the Maximum Annual Benefit Limitation in determining benefits
payable from the Pension Plan; and (2) had the Participant not been
excluded from being an "Eligible Employee" by being listed on an Appendix
to the Pension Plan. For purposes of this Section 5.3(a), the compensation
used for determining death benefits payable from the Pension Plan means
Compensation as defined in this Plan for a Plan Year.
(b) The Actuarial Equivalent of the amount of the annual death benefit
payable monthly which the Beneficiary of a deceased Participant is entitled
to receive under the Pension Plan if it were to commence on the same date
as the Death Benefit under this Plan and to be paid in the form of single
life annuity.
V.3 Pre-1994 Benefits. Any Retirement Benefit accrued by a Participant
prior to 1994, who is never an Eligible Employee after 1993, shall be determined
and paid solely under the terms of this Plan as it existed prior to 1991.
<PAGE> 19
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
VI.1 Individual Participant Accounting.
(a) Account Maintenance. The Benefit Trust Committee shall cause the
Accounts for each Participant to reflect transactions involving amounts
posted to the Accounts and the measurement of investment returns on
Accounts in accordance with this Plan. Investment returns during or with
respect to an Accounting Period shall be accounted for at the individual
account level by "posting" such returns to each of the appropriate Accounts
of each affected Participant. Account values shall be maintained in shares,
units or dollars.
(b) Trade Date Accounting and Investment Cycle. For any financial
transaction involving a change in the measurement of investment returns,
withdrawals or distributions to be processed as of a Trade Date, the
Benefit Trust Committee must receive instructions by the Sweep Date and
such instructions shall apply only to amounts posted to the Accounts as of
the Trade Date. Such financial transactions in an Investment Fund shall be
posted to a Participant's Accounts as of the Trade Date and based upon the
Trade Date values. All such transactions shall be effected on the
Settlement Date (or as soon as is administratively feasible) relating to
the Trade Date as of which the transaction occurs.
(c) Suspension of Transactions. Whenever the Benefit Trust Committee
considers such action to be appropriate, the Benefit Trust Committee, in
its discretion, may suspend from time to time the Trade Date.
(d) Error Correction. The Benefit Trust Committee may correct any
errors or omissions in the administration of this Plan by restoring or
charging any Participant's Accounts with the amount that would be credited
or charged to the Accounts had no error or omission been made.
VI.2 Accounting for Investment Funds. The investment returns of each
Investment Fund shall be tracked in the same manner as such Investment Funds are
tracked under the RSP. Investment income, earnings, and losses charged against
the Accounts shall be based solely upon the actual performance (net of expenses
and charges allowed under the RSP) of each of the Investment Funds for the
period of time all or some portion of each of the Accounts has been designated
to use such Investment Fund as a measurement of investment returns. A change of
measurement of returns from one Investment Fund to another, or a distribution or
withdrawal, shall be determined as of the same dates and in the same manner as
if amounts posted in Accounts were actually invested in the RSP and such
financial transactions were being implemented in the RSP.
<PAGE> 20
ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS
VII.1 General. Prior to January 1, 1994, a Participant's Investment
Election and Conversion Election (except as provided in Section 7.4) with
respect to this Plan were deemed to be identical to each comparable investment
direction made by the Participant under the RSP. Effective January 1, 1994, this
Plan will no longer use a Participant's RSP investment directions, and other
than as provided in Section 7.5, a separate Investment Election and Conversion
Election must be made with respect to the Deferrals and Accounts; provided
however, if no Investment Election or Conversion Election is received from a
Participant on or after January 1, 1994, such Participant will be deemed to have
submitted a Conversion Election, effective January 1, 1994 with respect to his
or her Accounts as of December 31, 1993, which designates a percentage of such
Accounts to have its investment returns measured by an Investment Fund which is
the same percentage and investment fund in the RSP that such Participant had
previously been deemed to have designated prior to January 1, 1994, with the
exception that any amounts designated to measure the investment returns of the
Windsor Fund shall instead use the Large Company Fund.
VII.2 Investment of Deferrals.
(a) Investment Election. Each Participant may direct, by submission to
the Benefit Trust Committee of a completed Investment Election form
provided for that purpose by the Benefit Trust Committee, to select a
measurement of investment returns for Deferrals (other than MIC Deferrals)
posted to his or her Accounts (and the portion of such Accounts
attributable to such Deferrals) in one or more Investment Funds. Each
Investment Election shall apply proportionately to all Deferrals (other
than MIC Deferrals) based upon the relative amount of each.
(b) Effective Date of Investment Election; Change of Investment
Election. A Participant's initial Investment Election will be effective
with respect to a Fund on the Trade Date which relates to the Sweep Date on
which or prior to which the Investment Election is received pursuant to
procedures specified by the Benefit Trust Committee. Any Investment
Election which has not been properly completed will be deemed not to have
been received. A Participant's Investment Election shall continue in
effect, notwithstanding any change in his or her Compensation or his or her
Deferral Percentage, until the effective date of a new Investment Election.
A change in Investment Election shall be effective with respect to a Fund
on the Trade Date which relates to the Sweep Date on which or prior to
which the Benefit Trust Committee receives the Participant's new Investment
Election.
VII.3 Investment of Accounts.
(a) Conversion Election. Notwithstanding a Participant's Investment
Election, a Participant or Beneficiary may direct the Benefit Trust
Committee, by submission of a completed Conversion Election form provided
<PAGE> 21
for that purpose to the Benefit Trust Committee, to change the measurement
of investment returns of his or her Accounts (other than the MIC Deferral
Account). Each Conversion Election shall apply proportionately to all
affected Accounts based upon the relative balance of each.
(b) Effective Date of Conversion Election. A Conversion Election to
change a Participant's measurement of investment returns of his or her
Accounts in one Investment Fund to another Fund shall be effective with
respect to such Funds on and after the Trade Date which relates to the
Sweep Date on which or prior to which the Election is received pursuant to
procedures specified by the Benefit Trust Committee. Notwithstanding the
foregoing, to the extent required by any provisions of an Investment Fund,
the effective date of any Conversion Election may be delayed or the amount
of any permissible Conversion Election may be reduced. Any Investment
Election which has not been properly completed will be deemed not to have
been received.
VII.4 Insiders.
Prior to January 1, 1994, and as of the later of May 5, 1992 or the date on
which such Participant becomes an Insider (as determined by the Benefit Trust
Committee) ("Transfer Date"):
(a) The measurement of investment returns for an RSP Employer Deferral
hereunder shall initially be assumed to be the same as the Investment Funds
in which the Insider's pre-tax contributions are initially invested in the
RSP; and if the Insider does not make pre-tax contributions to the RSP,
then it shall be assumed to be that of the Investment Fund primarily
invested in Company Stock.
(b) Each Insider's change in investment directions under the RSP shall
be disregarded for purposes of this Plan:
(1) if such change would cause any portion of the Insider's
Deferral or Accounts to use the Fund invested primarily in Company
Stock as a measurement of investment return; or
(2) if such change is not in amounts and effective as of such
dates as are determined by the Benefit Trust Committee under a set of
rules applicable to all Insiders.
VII.5 Investment Returns on MIC Deferrals. All MIC Deferral Accounts shall
have interest as a measurement of investment return. The rate of interest deemed
to be earned on such Accounts on any day during a 6-month period shall be the
stated prime rate of interest charged by Bank of America, Illinois, N.A. on the
first business day in January or July of such period.
VII.6 Restrictions on Measurement. The following additional restrictions
shall apply to the measurement of investment return of Deferrals and Accounts
other than those described in Section 7.5:
<PAGE> 22
(a) Effective after January 1, 1994, no Investment Election shall be
permitted which results in a measurement of investment return for Deferrals
to be an Investment Fund invested primarily in Company Stock and no
Conversion Election shall be permitted which results in a measurement of
investment return for Accounts into or out of an Investment Fund invested
primarily in Company Stock;
(b) Any limitations, conditions or restrictions which may be imposed
by the Benefit Trust Committee; and
(c) Any limitation, condition or restriction which is imposed on the
measurement of investment returns in or the liquidation of funds out of
any Investment Fund in the RSP.
VII.7 Procedures. The procedures, frequency and time deadlines for making
an Investment Election or Conversion Election shall be the same as the
applicable procedures, frequency and time deadlines in the RSP, except to the
extent provided otherwise in this Plan or by the Benefit Trust Committee.
ARTICLE VIII
VESTING AND FORFEITURES
VIII.1 Fully Vested Deferral Accounts.
A Participant shall be fully vested and have a nonforfeitable right to his
or her Accounts at all times.
ARTICLE IX
WITHDRAWALS
IX.1 Withdrawals for Hardship.
(a) Requirements. A Participant may request the withdrawal of any
amount from the portion of his or her Accounts (not in excess of the
balance of such Accounts) needed to satisfy a financial need by making a
withdrawal request in accordance with a procedure established by the
Benefit Trust Committee. A financial need for this purpose is a severe,
unanticipated hardship, the occurrence of which is beyond the Participant's
control and for which the amount needed to satisfy the hardship is
determined only after the Participant has used other readily available
funds or resources (other than this Plan and the RSP).
(b) Account Sources for Withdrawal. The withdrawal amount shall come
only from the following Accounts, in the following priority order:
RSP Employee Account
RSP Employer Account
<PAGE> 23
Replacement RSP Employer Account
Replacement RSP Employee Account
Pay Based Account
MIC Deferral Account
IX.2 Withdrawal Processing.
(a) Minimum Amount. There is no minimum payment for any type of
withdrawal.
(b) Application by Participant. A Participant must submit a withdrawal
request, in accordance with a procedure established by the Benefit Trust
Committee, to the Benefit Trust Committee to apply for any type of
withdrawal.
(c) Approval by Benefit Trust Committee. The Benefit Trust Committee
is responsible for determining that a withdrawal request conforms to the
requirements described in this Section and notifying the Company of any
payments to be made in a timely manner. Any request to make a withdrawal by
a member of the Benefit Trust Committee may be approved only by
disinterested members of the Benefit Trust Committee, or if none, the
Compensation Committee.
(d) Time of Processing. The Company shall process all withdrawal
requests which it receives by a Sweep Date, based on the value as of the
Trade Date to which it relates, and fund them on the next Settlement Date.
The Company shall then make payment to the Participant as soon thereafter
as is administratively feasible; provided however, if such payment will
result in any portion of the payment (or any other amount paid to such
Participant during the same Plan Year) not being deductible by reason of
Code section 162(m), the Compensation Committee may defer payment to a
later Payment Date designated by it.
(e) Medium and Form of Payment. The medium of payment for withdrawals
is cash. The form of payment for withdrawals shall be a single installment.
(f) Investment Fund Sources. Within each Account used for funding a
withdrawal, amounts shall be taken by type of investment measurement in
direct proportion to the value of the Participant's Accounts in each
Investment Fund at the time the withdrawal is made.
ARTICLE X
DISTRIBUTIONS
Benefits payable under this Plan shall be paid in the form and time
prescribed below.
X.1 Retirement Benefit. A Participant who has a nonforfeitable right to
receive a retirement benefit from the Pension Plan (or would have a
<PAGE> 24
nonforfeitable right if such Participant were eligible to participate in the
Pension Plan) shall receive a Retirement Benefit (less any amounts previously
paid to the Participant under Section 10.7) in the following Actuarial
Equivalent form of payment and as of the following Payment Date:
(a) Form of Payment. The Participant may elect a form of payment of
the Retirement Benefit in the same manner and form as permitted under the
Pension Plan (other than the Social Security Leveling Option) without the
necessity of spousal consent; provided, however, (1) the Compensation
Committee in its discretion, or (2) such Participant by irrevocably
electing in writing on a form delivered to the Benefit Trust Committee on
or prior to his or her Termination of Employment, and if a voluntary
Termination of Employment by delivering such form to the Benefit Trust
Committee at least six (6) months prior to the Payment Date, may convert
the Retirement Benefit payable under this Plan into an Actuarial Equivalent
single sum form of payment.
(b) Time of Payment. The Payment Date of a Participant's Retirement
Benefit shall be the earliest date on or after the Participant's
Termination of Employment as of which he or she could have commenced
payment of his or her retirement benefits from the Pension Plan; provided
however, if payment is made in a single sum and will result in any portion
of the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer such Actuarial Equivalent single sum
payment to a later Payment Date designated by it.
X.2 Pension Death Benefit.
(a) Form of Payment. The Death Benefit payable to the Beneficiary of a
Participant who is entitled to a Retirement Benefit (less any amounts
previously paid to the Participant under Section 10.7) and who dies on or
after his or her Payment Date shall be in the form selected by the
Participant commencing as of such Payment Date. Where a Participant who is
entitled to a Retirement Benefit (less any amounts previously paid to the
Participant under Section 10.7) dies prior to his Payment Date, the form of
payment of his or her Beneficiary's Death Benefit shall be the same as the
form of payment of any death benefit payable under the Pension Plan;
provided however, the Compensation Committee in its discretion, or such
Participant by electing in writing on a form delivered to the Benefit Trust
Committee prior to his or her Payment Date, may convert the Death Benefit
payable under this Plan into an Actuarial Equivalent single sum form of
payment.
(b) Time of Payment. A Beneficiary's Death Benefit shall commence to
be paid as of the earliest date as of which he or she could have commenced
payment of a death benefit from the Pension Plan; provided however, if
payment is made in a single sum and will result in any portion of the
payment (or any other amount paid to such Beneficiary during the same Plan
Year) not being deductible by reason of Code section 162(m), the Benefit
Trust Committee may defer such Actuarial Equivalent single sum payment to a
later Payment Date designated by it.
<PAGE> 25
X.3 Accounts.
(a) Form of Payment. The form of payment of the balance of a
Participant's Accounts (other than his or her MIC Account for each Plan
Year) will be a single sum payment except with respect to those Accounts
for which the Participant has selected the Installment Form of Payment on
his or her Deferral Election Form, in which case such Accounts will be paid
in the Installment Form of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's Accounts (other than his or her MIC Account) shall be the
Payment Date following Termination of Employment selected by the
Participant on his or her Enrollment Election form; provided however, if
such payment will result in any portion of the payment (or any other amount
paid to such Participant during the same Plan Year) not being deductible by
reason of Code section 162(m), the Benefit Trust Committee may defer
payment to a later Payment Date designated by it and such Accounts shall
continue to have investment returns measured under this Plan.
X.4 MIC Account.
(a) Form of Payment. The form of payment of the balance of a
Participant's MIC Account for each Plan Year will be a single sum payment
except with respect to those MIC Accounts for which the Participant has
selected the Installment Form of Payment on his or her Deferral Election
Form, in which case such MIC Accounts will be paid in the Installment Form
of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's MIC Account for each Plan Year shall be the earlier of the
fixed Payment Date selected by the Participant on the Deferral Election
Form for the Plan Year or the Payment Date following a Termination of
Employment selected in his or her Enrollment Election form; provided
however, if payment is made in a single sum and will result in any portion
of the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer payment to a later Payment Date
designated by it and such Accounts shall continue to have investment
returns measured under this Plan.
X.5 Death Benefit of Accounts. Upon the death of a Participant, the
remaining balance in his or her Accounts shall be paid to the Participant's
Beneficiary in a single sum as soon as administratively possible after the
Participant's death; provided however, if such payment will result in any
portion of the payment (or any other amount paid to such Beneficiary during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer payment to a later Payment Date designated by
it and such Accounts shall continue to have investment returns measured under
this Plan.
<PAGE> 26
X.6 Prior to 1994. The timing and form of payment of a Retirement Benefit,
Death Benefit and balance of Accounts with respect to a Participant or
Beneficiary as of any date of determination prior to 1994 shall be determined by
the terms and provisions of this Plan as of such date.
X.7 Payments of Retirement and Death Benefit Due to an Investment Grade
Rating Change. Notwithstanding Sections 10.1, 10.2 or 10.6, the following shall
apply:
(a) Retirement Benefit. If, prior to a Change of Control or more than
three (3) years after a Change of Control, either (1) the Company or (2)
the Parent is rated below an Investment Grade Rating, then on such date,
and on each December 31 after such date and prior to the date the Company
and the Parent both have an Investment Grade Rating, a single sum payment
shall be made immediately to such Participant of the amount by which the
Actuarial Equivalent of (1) exceeds the sum of (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant incurs a
Termination of Employment as of the date of determination, and (C)
benefits payable from the Pension Plan would commence upon the
earliest payment date allowed under the Pension Plan immediately
following such Termination of Employment.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in Section 10.7(a)(1).
(3) the Actuarial Equivalent of amounts paid to such Participant
based on any prior determination date pursuant to this Section
10.7(a).
(b) Retirement Benefit After Payment Date. On or after the Payment
Date of a Participant's Retirement Benefit, if either (1) the Company or
(2) the Parent is rated below an Investment Grade Rating, then an Actuarial
Equivalent single sum payment of such unpaid Retirement Benefit shall be
made immediately to such Participant.
(c) Death Benefit. If either (1) the Company or (2) the Parent is
rated below an Investment Grade Rating, then a Beneficiary who is
receiving, or would as of such date otherwise be eligible to commence to
receive a Death Benefit shall be paid immediately an Actuarial Equivalent
single sum payment of such unpaid Death Benefit.
X.8 Payment of Accounts Due to an Investment Grade Rating Change.
Notwithstanding Sections 10.3, 10.4 or 10.5, if either (1) the Company or (2)
the Parent is rated below an Investment Grade Rating, then the balance of his or
her Accounts shall be paid immediately in a single sum to such Participant as if
such Participant had incurred a Termination of Employment as of such date the
rating drops below an Investment Grade Rating.
<PAGE> 27
X.9 Payment of Retirement and Death Benefits Due to a Change of Control. On
and after a Change of Control and notwithstanding Sections 10.1, 10.2 or 10.6,
the following shall apply:
(a) Termination of Employment. Upon Termination of Employment of a
Participant within three (3) years following a Change of Control, a single
sum payment shall be made immediately to such Participant of the amount by
which the Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant's early retirement
benefit under the Pension Plan is determined using the Table of
reduction factors that would have been available to such Participant
had he or she not incurred a Termination of Employment until the third
(3rd) anniversary of the Change of Control date and based upon the
Participant's age as of the Payment Date, and (C) benefits payable
from the Pension Plan would commence upon the earliest payment date
allowed under the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in Section 10.9(a)(1)
except (A).
(3) the Actuarial Equivalent of any amounts previously paid to
the Participant under Section 10.7.
(b) Investment Grade Rating Within Three Years. If, within three (3)
years following a Change of Control, either (1) the Company or (2) the
Parent, if any, is rated below an Investment Grade Rating, then a single
sum payment shall be made immediately to such Participant of an amount
determined in Section 10.9(a) hereof as if such Participant had incurred a
Termination of Employment as of such date the rating drops below an
Investment Grade Rating.
X.10 Payment of Accounts Due to a Change of Control. On and after a Change
of Control and notwithstanding Sections 10.3, 10.4 or 10.5, in the event of a
Participant's Termination of Employment within three (3) years following a
Change of Control, the balances of his or her Accounts shall be paid immediately
in a single sum.
ARTICLE XI
AMENDMENT
XI.1 Prior to a Change of Control. The Company reserves the right to amend
this Plan from time to time by action of the Board of Directors, but without the
written consent of each Participant and Beneficiary of a deceased Participant,
no such action may reduce or relieve the Company of any obligation with respect
<PAGE> 28
to any Retirement Benefit (or Death Benefit) accrued or balance of Accounts
maintained under this Plan by such Participant (or Beneficiary) as of the date
of such amendment, except to the extent such amendment is required by written
opinion of counsel to the Company to avoid recognition of income by a
Participant or Beneficiary subject to federal income taxation.
XI.2 After a Change of Control. This Plan may not be amended following a
Change of Control.
ARTICLE XII
TERMINATION
The Company, by action of the Board of Directors, reserves the right to
terminate this Plan, provided the Company pays to each Participant and
Beneficiary, on such date of termination of this Plan, the Actuarial Equivalent
single sum value of a Participant's unpaid Retirement Benefit (or of a
Beneficiary's unpaid Death Benefit) and the balance of Accounts maintained for
such Participant (or for a Beneficiary) as of the date of termination shall be
paid as soon as administratively possible; provided however, for this purpose a
Participant's Retirement Benefit shall be equal to the amount by which the
Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant's early retirement
benefit under the Pension Plan is determined using the Table of
reduction factors that would have been available to such Participant
had he or she not incurred a Termination of Employment until the day
preceding his or her sixty-fifth (65th) birthday and based upon the
Participant's age as of the Payment Date, and (C) benefits payable
from the Pension Plan would commence upon the earliest payment date
allowed under the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in subsection (a)(1)
above except (A).
(3) the Actuarial Equivalent of any amounts previously paid to
the Participant under Section 10.7.
If within ten (10) days after a Change of Control, the requirements of
Sections 10.9(b), (d), (e) and 10.10(b) hereof are not satisfied, the Plan shall
automatically terminate upon final payment of all amounts due in accordance with
Sections 10.9(b), (d), (e), 10.10, 13.3, 13.4 and 13.9 of this Plan.
<PAGE> 29
ARTICLE XIII
MISCELLANEOUS PROVISIONS
XIII.1 Administration. This Plan shall be administered by the Benefit Trust
Committee. The Benefit Trust Committee shall have, to the extent appropriate,
the same powers, rights, duties, and obligations with respect to this Plan as
the committee of the Trust has under the Trust document (other than the power to
amend this Plan).
XIII.2 Finality of Determination. The determination of the Benefit Trust
Committee as to any disputed questions arising under this Plan, including
questions of construction and interpretation shall be final, binding, and
conclusive upon all persons.
XIII.3 Expenses. The expenses of administering this Plan shall be borne by
the Company.
XIII.4 Indemnification and Exculpation. The members of the Benefit Trust
Committee, its agents and officers, directors and employees of the Company shall
be indemnified and held harmless by the Company against and from any and all
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by them in connection with or resulting from any claim, action, suit,
or proceeding to which they may be a party or in which they may be involved by
reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by them in settlement (with the Company's written
approval) or paid by them in satisfaction of a judgment in any such action,
suit, or proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability, or expense is due to such person's gross
negligence or willful misconduct.
XIII.5 Funding. While all benefits payable under this Plan constitute
general corporate obligations, the Company may establish a separate irrevocable
grantor trust for the benefit of all Participants, which trust shall be subject
to the claims of the general creditors of the Company in the event of such
corporation's insolvency, to be used as a reserve for the discharge of the
Company's obligations under this Plan to such Participants. Any payments made to
a Participant under the separate trust for his benefit shall reduce dollar for
dollar the amount payable to the Participant from the general assets of the
Company. The amounts payable under this Plan shall be reflected on the
accounting records of the Company but shall not be construed to create or
require the creation of a trust, custodial, or escrow account, except as
described above in this section. No Participant (or Beneficiary of a
Participant) shall have any right, title, or interest whatever in or to any
investment reserves, accounts, or funds that the Company may purchase,
establish, or accumulate to aid in providing benefits under this Plan. Nothing
contained in this Plan, and no action taken pursuant to its provisions, shall
create a trust or fiduciary relationship of any kind between the Company, the
Parent or Compensation Committee and a Participant, Beneficiary or any other
person. Neither a Participant nor Beneficiary shall acquire any interest greater
than that of an unsecured, general creditor.
XIII.6 Corporate Action. Any action required of or permitted by the Company
under this Plan shall be by resolution of its Board of Directors, the
Compensation Committee or any person or persons authorized by resolution of such
Compensation Committee.
<PAGE> 30
XIII.7 Interests not Transferable. The interests of the Participants and
their Beneficiaries under this Plan are not subject to the claims of their
creditors and may not be voluntarily or involuntarily transferred, assigned,
alienated, or encumbered by them.
XIII.8 Effect on Other Benefit Plans. Amounts credited or paid under this
Plan shall not be considered to be compensation for the purposes of a qualified
pension plan maintained by the Company or the Parent. The treatment of such
amounts under other employee benefits plans shall be determined pursuant to the
provisions of such plans.
XIII.9 Legal Fees and Expenses. After a Change of Control, the Company
shall pay all reasonable legal fees and expenses which the Participant or a
Beneficiary may incur as a result of the Company's contesting the validity,
enforceability or the Participant's interpretation of, or determinations made
under, this Plan or the Trust.
XIII.10 Deduction of Taxes from Amounts Payable.
(a) Distribution. The Company shall deduct from the amount to be
distributed such amount as the Company, in its sole discretion, deems
proper to protect the Company against liability for the payment of death,
succession, inheritance, income, or other taxes, and out of money so
deducted, the Company may discharge any such liability and pay the amount
remaining to the Participant, the Beneficiary or the deceased Participant's
estate, as the case may be.
(b) Withholding. The Company may withhold whatever taxes (including
FICA, state or federal taxes) it, in its sole discretion, deems proper to
protect the Company against liability for the payment of such withholding
taxes and out of the money so deducted, the Company may discharge any such
liability. Withholding for this purpose may come from any wages due to the
Participant, or if none, from the Participant's Accounts hereunder.
XIII.11 Facility of Payment. If a Participant or Beneficiary is declared an
incompetent or is a minor and a conservator, guardian, or other person legally
charged with his or her care has been appointed, any benefits to which such
Participant or Beneficiary is entitled shall be payable to such conservator,
guardian, or other person legally charged with his or her care. The decision of
the Benefit Trust Committee in such matters shall be final, binding, and
conclusive upon the Company and upon each Participant, Beneficiary, and every
other person or party interested or concerned. The Company and the Benefit Trust
Committee shall not be under any duty to see to the proper application of such
payments.
XIII.12 Merger. This Plan shall be binding and enforceable with respect to
the obligation of the Company against any successor to the Company by operation
of law or by express assumption of the Plan, and such successor shall be
substituted hereunder for the Company.
<PAGE> 31
XIII.13 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
XIII.14 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and this Plan shall be construed
and enforced as if such provisions, to the extent invalid or unenforceable, had
not been included.
XIII.15 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.
XIII.16 Notice and Information Requirements. Except as otherwise provided
in this Plan or as otherwise required by law, the Company shall have no duty or
obligation to affirmatively disclose to any Participant or Beneficiary, nor
shall any Participant or Beneficiary have any right to be advised of, any
material information regarding the Company, or at any time prior to, upon or in
connection with the Company's purchase, or any other distribution or transfer
(or decision to defer any such distribution) of any Company Stock or any other
stock held under this Plan.
XIII.17 Governing Law. This Plan shall be governed by the laws of the State
of Delaware.
Adopted on the ______ day of _______________ by the Board of Directors of
the Company as to its obligations.
By:
-----------------------------------------
Title:
-----------------------------------------
<PAGE> 1
EXHIBIT 12
WHITMAN CORPORATION
STATEMENT OF CALCULATION
OF RATIO OF EARNINGS TO FIXED CHARGES
(in Millions, Except Ratios)
<TABLE>
<CAPTION>
First Half Fiscal Years
---------------------- -------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income from Continuing
Operations before Taxes $ (5.3) $ 60.6 $ 152.2 $ 69.9 $ 127.7 $ 118.2 $ 80.3
Fixed Charges 30.3 26.1 51.5 75.6 74.4 76.7 72.2
--------- --------- -------- -------- -------- --------- ---------
Earnings as Adjusted $ 25.0 $ 86.7 $ 203.7 $ 145.5 $ 202.1 $ 194.9 $ 152.5
========= ========= ======== ======== ======== ========= =========
Fixed Charges:
Interest Expense $ 27.6 $ 23.5 $ 46.4 $ 69.0 $ 68.2 $ 70.3 $ 67.0
Preferred Stock Dividend Requirements
Of Majority Owned Subsidiary -- -- -- 1.7 1.5 1.4 1.1
Portion of Rents Representative
of Interest Factor 2.7 2.6 5.1 4.9 4.7 5.0 4.1
--------- --------- -------- -------- -------- --------- ---------
Fixed Charges $ 30.3 $ 26.1 $ 51.5 $ 75.6 $ 74.4 $ 76.7 $ 72.2
========= ========= ======== ======== ======== ========= =========
Ratio of Earnings to
Fixed Charges* 0.8x 3.3x 4.0x 1.9x 2.7x 2.5x 2.1x
========= ========= ======== ======== ======== ========= =========
</TABLE>
* Intercompany interest income from Hussmann and Midas was $1.6 million for
the first half of 1998 and was $1.6 million, $23.1 million, $23.7 million,
$21.8 million and $20.6 million for the fiscal years 1998, 1997, 1996, 1995
and 1994, respectively. Such amounts are included in income from continuing
operations before taxes. If this intercompany interest income had reduced
interest expense, thereby reducing fixed charges and earnings as adjusted,
the ratio of earnings to fixed charges for the first half of 1998 and for
the fiscal years 1998, 1997, 1996, 1995 and 1994 would have been 3.5x,
4.1x, 2.3x, 3.5x, 3.2x and 2.6x, respectively.
Whitman Corporation recorded special charges of $49.3 million during the
third and fourth quarters of 1997. Excluding these special charges, the
ratio of earnings to fixed charges for fiscal 1997 would have been 2.6x. If
the fixed charges for 1997 were adjusted for the intercompany interest
income noted above, the ratio of earnings to fixed charges would have been
3.3x.
Whitman Corporation recorded special charges of $79.7 million and a pretax
gain on the sale of operations in Marion, Virginia, Princeton, West
Virginia and the St. Petersburg area of Russia of $11.4 million during the
first half of 1999. Excluding these non-recurring items, the ratio of
earnings to fixed charges for the first half of 1999 would have been 3.1x.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WHITMAN
CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001084230
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JAN-01-2000 JAN-02-1999
<PERIOD-END> JUL-03-1999 JUN-30-1998
<CASH> 123,800 0
<SECURITIES> 0 0
<RECEIVABLES> 274,300 0
<ALLOWANCES> 4,300 0
<INVENTORY> 119,000 0
<CURRENT-ASSETS> 548,100 0
<PP&E> 1,343,800 0
<DEPRECIATION> 508,000 0
<TOTAL-ASSETS> 2,879,800 0
<CURRENT-LIABILITIES> 765,800 0
<BONDS> 802,900 0
0 0
0 0
<COMMON> 1,633,800 0
<OTHER-SE> (458,400) 0
<TOTAL-LIABILITY-AND-EQUITY> 2,879,800 0
<SALES> 885,500 758,900
<TOTAL-REVENUES> 885,500 758,900
<CGS> 517,800 448,600
<TOTAL-COSTS> 817,500<F1> 670,400<F6>
<OTHER-EXPENSES> 47,800 10,100
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 25,500<F2> 17,800<F7>
<INCOME-PRETAX> (5,300) 60,600
<INCOME-TAX> (15,900) 27,200
<INCOME-CONTINUING> 4,000<F3> 24,500<F8>
<DISCONTINUED> (27,200) (500)
<EXTRAORDINARY> 0 (18,300)
<CHANGES> 0 0
<NET-INCOME> (23,200) 5,700
<EPS-BASIC> (0.22)<F4> 0.06<F9>
<EPS-DILUTED> (0.22)<F5> 0.06<F10>
<FN>
<F1>TOTAL COSTS INCLUDE COSTS OF GOODS SOLD, S,G&A EXPENSES, SPECIAL CHARGES AND
AMORTIZATION EXPENSE OF $517,800, $266,900, $23,400 AND $9,400, RESPECTIVELY.
<F2>INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE AND INTEREST INCOME OF $27,600
AND $2,100, RESPECTIVELY.
<F3>INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $6,600.
<F4>BASIC INCOME PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.04
DISCONTINUED OPERATIONS (0.26)
NET INCOME $(0.22)
<F5>DILUTED INCOME PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.04
DISCONTINUED OPERATIONS (0.26)
NET INCOME $(0.22)
<F6>TOTAL COSTS INCLUDE COSTS OF GOODS SOLD, S,G&A EXPENSES AND AMORTIZATION
EXPENSE OF $448,600, $213,900 AND $7,900, RESPECTIVELY.
<F7>INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE, INTEREST INCOME FROM HUSSMANN
INTERNATIONAL, INC. ("HUSSMANN") AND MIDAS, INC. ("MIDAS") AND OTHER INTEREST
INCOME OF $23,500, $1,600 AND $4,100, RESPECTIVELY. INTEREST INCOME FROM
HUSSMANN AND MIDAS RELATED TO INTERCOMPANY LOANS AND ADVANCES. THE RELATED
INTEREST EXPENSE RECORDED BY HUSSMANN AND MIDAS IS INCLUDED IN INCOME FROM
DISCONTINUED OPERATIONS AFTER TAXES.
<F8>INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $8,900.
<F9>BASIC INCOME PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.24
EXTRAORDINARY LOSS (0.18)
NET INCOME $ 0.06
<F10>DILUTED INCOME PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.24
EXTRAORDINARY LOSS (0.18)
NET INCOME $ 0.06
</FN>
</TABLE>
