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EXHIBIT 10.38
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PIERRE FOODS, INC. COMPENSATION
EXCHANGE PLAN
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Effective Date of Plan: August 1, 2000
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PIERRE FOODS, INC. COMPENSATION EXCHANGE PLAN
TABLE OF CONTENTS
ARTICLE PAGE
ARTICLE I
PURPOSE.........................................................1
ARTICLE II
DEFINITIONS.....................................................1
ARTICLE III
OPTION GRANT....................................................4
ARTICLE IV
OPTION EXERCISE.................................................7
ARTICLE V
AMENDMENT OR TERMINATION........................................9
ARTICLE VI
ADMINISTRATION.................................................10
ARTICLE VII
TRUST PROVISIONS...............................................12
ARTICLE VIII
MISCELLANEOUS PROVISIONS.......................................13
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PIERRE FOODS, INC. COMPENSATION EXCHANGE PLAN
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ARTICLE I
PURPOSE
1.1 PURPOSE. The purpose of the Plan is to provide the benefits of an option
plan to eligible Employees of the Employer and eligible members of the Board of
Directors in a form that will encourage the recipients to continue to provide
services to the Employer, and allow the recipients to diversify their investment
portfolios.
1.2 INTENT. The Plan is intended to be a nonqualified option plan within the
meaning of Section 83 of the Code and not an employee benefit plan as defined
under ERISA.
ARTICLE II
DEFINITIONS
As used herein, the following capitalized words and phrases will have the
respective meanings set forth below unless a different meaning is plainly
required by the context:
2.1 "ADMINISTRATIVE COMMITTEE" means the committee responsible for the general
administration of the Plan as described herein. The members of the
Administrative Committee shall be designated by the Executive Compensation
Committee, in its discretion, in accordance with Section 6.3 of this Plan.
2.2 "BENEFICIARY" means the person or persons designated by a Participant,
pursuant to Section 3.6, to exercise an Option after the Participant's death. If
there is no effective designation at the date of the Participant's death, then
the Beneficiary will be the spouse of the Participant, if then living. If there
is no effective designation at the date of the Participant's death and the
spouse of the Participant is not then living, then the Beneficiary will be the
Participant's estate.
2.3 "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of Pierre
Foods, Inc.
2.4 "CHANGE OF CONTROL" means any of the following: (a) any "person" (excluding
David R. Clark or James C. Richardson, Jr. or any entity in which they have,
directly or indirectly, jointly or severally, more than a 50% controlling
interest), as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Employer, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Employer
representing more than 50% of the combined voting power of the Employer's
then-outstanding securities; or (b) during any period of two consecutive years
(not including any period prior to the execution of this Plan),
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individuals who at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has entered into an
agreement with the Employer to effect a transaction described in clause (c) of
this definition) whose election by the Board or nomination for election by the
Employer's shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or (c) the
shareholders of the Employer approve a merger or consolidation of the Employer
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Employer outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Employer or such surviving
entity outstanding immediately after such merger or consolidation, or the
shareholders of the Employer approve a plan of complete liquidation of the
Employer or an agreement for the sale or disposition by the Employer of all or
substantially all the Employer's assets.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended, and any
regulations or rulings issued thereunder
2.6 "DISABILITY" means a period of disability during which a Participant
qualifies for disability benefits under the Participant's Employer's long-term
disability plan, or, if a Participant does not participate in such a plan, a
period of disability during which the Participant would have qualified for
disability benefits under such a plan had the Participant been a participant in
such a plan, as determined in the sole discretion of the Administrative
Committee. If the Participant's Employer does not sponsor such a plan, or
discontinues to sponsor such a plan, Disability will be determined by the
Administrative Committee in its sole discretion.
2.7 "EFFECTIVE DATE" means August 1, 2000.
2.8 "EMPLOYEE" means any common law employee of the Employer, as determined in
Section 3.1(a) of this Plan, and approved by the Executive Compensation
Committee, in its sole discretion.
2.9 "EMPLOYER" means Pierre Foods, Inc., its current or future subsidiaries, and
any successor(s) thereto.
2.10 "ERISA" means the Employee Retirement Income Security Act of 1974, any
amendments thereto, and any regulations or rulings issued thereunder.
2.11 "EXECUTIVE COMPENSATION COMMITTEE" means the Executive Compensation
Committee of the Board of Directors.
2.12 "EXERCISE DATE" means the date upon which the Administrative Committee
approves the Option exercise form that is completed and submitted by a
Participant to the Administrative Committee with respect to the Option being
exercised.
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2.13 "EXERCISE PERIOD" means the period during which a Participant may exercise
an Option, as determined under Section 4.1.
2.14 "EXERCISE PRICE" means the price to be paid by a Participant to exercise an
Option, as determined under Section 3.3.
2.15 "FAIR MARKET VALUE" means the closing price of a share of Stock (as defined
in Section 2.22) reflected in the consolidated trading tables of The Wall Street
Journal, or other recognized market source, as determined by the Administrative
Committee, on the applicable date of reference hereunder or, if there is no sale
of the Stock on such date, then the closing price on the last previous day on
which a sale is reported.
2.16 "GRANT DATE" means, with respect to any Option, the date on which the
Option is awarded or granted by the Administrative Committee to a Participant
pursuant to Section 3.2.
2.17 "NORMAL RETIREMENT AGE" means normal retirement age as defined under the
Pierre Foods, Inc. 401(k) Retirement Plan.
2.18 "OPTION" means the right of a Participant, granted by the Employer in
accordance with Section 3.2, to purchase Stock from the Employer at the Option's
Exercise Price.
2.19 "OPTION AGREEMENT" means an agreement executed by the Employer and by a
Participant to whom Options have been awarded, acknowledging the issuance of the
Options and setting forth terms of the Options.
2.20 "PARTICIPANT" means any individual who meets the eligibility requirements
of Section 3.1, who has received an award of Options in accordance with Section
3.2, and whose Options have not been completely exercised or lapsed. For
purposes of Section 4.3:
(a) After a Participant's death, his Beneficiary is to be treated as a
Participant under this Plan with respect to any Options that are
outstanding at the time of the Participant's death;
(b) In the event of a Participant's legal incapacity, the Participant's
legal representative is to be treated as a Participant under this Plan
with respect to any Options that are outstanding at the time the
Participant incurred the legal incapacity; and
(c) If a Participant has assigned Options under Section 3.8, then the
assignee of such Options is to be treated as a Participant under this
Plan with respect to the assigned Options.
2.21 "PLAN" means the Pierre Foods, Inc. Compensation Exchange Plan as adopted
by the Employer and set forth herein and from time to time amended.
2.22 "PLAN YEAR" means the year beginning on January 1 and ending on December 31
of each calendar year.
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2.23 "STOCK" means shares of a registered investment company regulated by the
Investment Company Act of 1940, as amended, which shares are designated by the
Administrative Committee as subject to purchase through the exercise of an
Option.
2.24 "TERMINATION OF EMPLOYMENT" means an Employee's separation from the service
of the Employer by reason of resignation, discharge, death, Disability or other
termination. The Administrative Committee may determine, in its sole discretion,
whether any leave or other absence from service constitutes a Termination of
Employment for purposes of the Plan.
2.25 "TRUST" means the trust, if any, which may be established pursuant to
Article VII to hold the Stock that is subject to purchase through the exercise
of an Option.
2.26 "TRUST AGREEMENT" means an agreement, if any, setting forth the terms of
the Trust.
2.27 "TRUST FUND" means the Stock that is held in the Trust, if any.
2.28 "TRUSTEE" means the persons or institution acting as trustee of the Trust.
ARTICLE III
OPTION GRANT
3.1 ELIGIBILITY AND PARTICIPATION.
(a) PARTICIPANT DESIGNATION. Options may be granted to any Employee
whose base salary, excluding any bonus or other compensation, has
exceeded, or is reasonably expected to exceed, "compensation" as
determined for highly compensated employees under Section 414(q)(1) of
the Code for the applicable Plan year, or to any member of the Board of
Directors of the Employer. Such designations of eligible individuals
will be made pursuant to Employer's internal guidelines, and shall be
approved by the Executive Compensation Committee, in its sole
discretion.
(b) PARTICIPANT TERMINATION. At any time during the Plan Year, a
Participant may cease participation under this Plan. A Participant's
termination of participation is effective as soon as administratively
feasible after the Participant provides the Administrative Committee
written notice of his or her intent to cease participation in this
Plan. A Participant may resume participation under this Plan on the
first day of the subsequent Plan Year in accordance with paragraph (a)
above.
3.2 GRANT OF OPTIONS.
(a) IN GENERAL. Options may be granted by the Administrative Committee
on or after the Effective Date and prior to the termination of the
Plan. Options will become effective upon the applicable Grant Date(s)
set forth in the Option Agreement. The Option Agreement will specify
the Stock, the number of shares subject to the Option, the Exercise
Price as of the Grant Date, and such other terms and in such form as
the Administrative Committee may from time to time determine in
accordance with the Plan.
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The minimum grant of Options to be made under the Plan will be a grant
for that number of Options having an aggregate intrinsic value (Fair
Market Value of the underlying Stock minus Exercise Price) equal to
$2,500. Any terms not specified in the Plan will be specified in the
Option Agreement. No Administrative Committee member may take part in
any way in determining the amount of any award of Options to himself.
(b) EFFECT OF DIVIDENDS AND DISTRIBUTIONS WITH RESPECT TO STOCK.
(1) CASH DIVIDENDS AND DISTRIBUTIONS. The Employer agrees to
reinvest all cash dividends and distributions received in cash
with respect to Stock in additional property of the same kind
(or as nearly the same kind as feasible, if property of the
same kind is not available). Any Stock acquired through
reinvestment will become subject to an Option in favor of the
Participant.
(2) NONCASH DISTRIBUTIONS OR SIMILAR TRANSACTION. In the event of
a Stock dividend, Stock split, reverse Stock split, rights
offering, recapitalization or similar transaction that
materially affects the Fair Market Value of the Stock, the
Administrative Committee will adjust the Exercise Price so
that it retains the same ratio to the Fair Market Value of the
Stock as existed immediately before such transaction.
3.3 EXERCISE PRICE. The Exercise Price of an Option initially will be determined
by the Executive Compensation Committee, and will be noted by the Administrative
Committee in the Option Agreement pertaining to the Option. The Executive
Compensation Committee has determined that the initial Exercise Price on the
Grant Date for all Options will equal twenty-five percent (25%) of the Fair
Market Value of the Stock on the Grant Date. Upon a request to exercise any
Option, the Exercise Price required to be paid by the Participant shall be the
greater of the Exercise Price on the Grant Date or twenty-five percent (25%) of
the Fair Market Value of the Stock on the Exercise Date.
3.4 SUBSTITUTION OF OPTION PROPERTY. The Administrative Committee, in its sole
discretion, after consultation with the Participant, may amend an Option in
order to change the Stock that is subject to purchase by the Participant upon
exercise of the Option, provided that the substituted Stock is of equal
aggregate Fair Market Value as of the date of substitution. Notwithstanding the
foregoing, the Administrative Committee will amend an Option in order to change
the Stock that is subject to the purchase by the Participant upon exercise of
the Option if Stock to which the Option relates loses its publicly traded
status, provided that the substituted Stock is of equal aggregate Fair Market
Value as of the date of the substitution. Notwithstanding anything to the
contrary in this Plan, a change in Stock pursuant to this paragraph may be made
no more than four times during any calendar year, or at additional times upon
special circumstances as determined by the Administrative Committee, in its sole
discretion.
3.5 PURCHASE OF OPTION PROPERTY. Upon the grant of an Option, the Employer shall
acquire an amount of Stock that represents the excess of (a) the Fair Market
Value of the Stock (taken as of the Grant Date) subject to purchase under the
Option, over (b) the Exercise Price of the Option (taken as of the Grant Date).
The Employer shall contribute such amount of
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Stock to the Trust established in accordance with Article VII. The Employer will
not give any person a security interest in the Stock it acquires or enter into
any contract (other than the Plan) under which any person may acquire an
interest in the Stock.
Upon a change in Option property pursuant to Section 3.4 above, the Employer
shall acquire, and shall contribute to any Trust, the new Stock that represents
the difference between (a) the Fair Market Value (taken as of the Grant Date of
the amended Option) of the new Stock subject to purchase under the amended
Option, and (b) the Exercise Price of the new Option (taken as of the Grant Date
of the amended Option), and the Employer, in its sole discretion, may release
any Stock it or any Trust holds that no longer represents Stock subject to the
Option.
3.6 DESIGNATION OF BENEFICIARY. As soon as practicable after the grant of an
Option, the Participant will designate one or more Beneficiaries and successor
Beneficiaries, and may change a Beneficiary designation at any time, by filing
the prescribed form with the Administrative Committee. The consent of the
Participant's current Beneficiary will not be required for a change of
Beneficiary. No Beneficiary will have any rights under the Plan or an Option
Agreement during the lifetime of the Participant, except as may otherwise be
provided herein. A Participant who dies without having designated a Beneficiary
in accordance with this Section 3.6 will be deemed to have named the
Participant's legal spouse as primary Beneficiary and the Participant's estate
as contingent Beneficiary.
3.7 GENERAL NON-TRANSFERABILITY. No Option granted under this Plan may be
transferred, assigned, or alienated (whether by operation of law or otherwise),
except as provided herein, and no Option will be subject to execution,
attachment or similar process. Except as otherwise provided in Section 3.8, an
Option may be exercised only by a Participant.
3.8 PERMITTED TRANSFERS. Notwithstanding the provisions of Section 3.7, and
subject to approval by the Administrative Committee, a Participant may at any
time prior to death, assign an Option to: (a) the Participant's spouse; (b) the
Participant's lineal descendants; (c) a trust established by the Participant; or
(d) a family partnership in which the Participant is a partner, subject to
approval by the Administrative Committee, in its sole discretion. Any such
assignment will be permitted only if an assignment is expressly permitted in the
Option Agreement, or approved in writing by the Administrative Committee, and
the Participant receives no consideration for the assignment. Any such
assignment will be evidenced by an appropriate written document executed by the
Participant, and delivered to the Administrative Committee on or before the
effective date of the assignment. In the event of such assignment, the spouse,
lineal descendant, trustee of the trust, partner of the partnership, or
tax-exempt organization will be entitled to all of the rights of the Participant
under Section 4.3 with respect to the assigned Option, and such Option will
continue to be subject to all of the terms, conditions and restrictions
applicable to the Option, as set forth in the Plan and the Option Agreement.
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ARTICLE IV
OPTION EXERCISE
4.1 EXERCISE PERIOD.
(a) A Participant may exercise an Option pursuant to Section 4.3
at any time during the period beginning ninety (90) calendar
days after the Grant Date and ending on the earliest of:
(i) ninety (90) calendar days after the Participant's
Termination of Employment (or such later date as
designated by the Administrative Committee in its
sole discretion), if the Termination of Employment is
on account of any reason other than the Participant's
attainment of Normal Retirement Age; or
(ii) ten (10) years after the Grant Date (or at such later
date as designated by the Administrative Committee in
its sole discretion).
If a Participant fails to exercise an Option within the
Exercise Period, then the Option expires and the Participant
or his or her Beneficiary or assignee loses any rights he or
she had with respect to the Option. Notwithstanding the
foregoing, at no time will the Exercise Period be less than
ninety (90) calendar days from the Grant Date and, in the
event of the Participant's death, no less than one (1) year
after the date of the Participant's death.
(b) Notwithstanding Section 4.1(a), if a Participant's Termination
of Employment is on account of the Participant's retirement
following the attainment of Normal Retirement Age, he or she
may exercise an Option at any time for the period beginning
ninety (90) calendar days following the Grant Date and ending
ten (10) years after the Grant Date (or at such later date as
designated by the Administrative Committee in its sole
discretion).
(c) Notwithstanding Section 4.1(a), in the event of a Change in
Control, all Options become immediately exercisable whether or
not ninety (90) calendar days have elapsed since their Grant
Date.
4.2 NOTICE. The Administrative Committee will provide to the Participant notice
that the ten year term for his or her Option is set to expire (unless the Option
has been exercised or the Option's term has expired under Section 4.1(a) above).
Such notice will be given approximately six months prior to the expiration of
the Exercise Period described in Section 4.1(b) above. If the Options are not
exercised ninety (90) calendar days prior to the expiration of the Option
Exercise Period, notice will be provided again. The required notice must be a
written notice and such notice must list the Option property and the date on
which the Option Exercise Period would expire. Failure to give or receive notice
with respect to an Option will not extend in any way the Exercise Period of the
Option or increase a Participant's rights with respect to the Option.
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4.3 OPTION EXERCISE. A Participant may exercise an Option by giving written
notice to the Administrative Committee and tendering full payment of the
Exercise Price by cash or other means acceptable to the Administrative Committee
on the Exercise Date. Notwithstanding the foregoing, a Participant will vest in
an Option, and therefore may exercise such Option, only to the extent provided
under the Option Agreement pertaining to that Option.
The minimum amount of Options that can be exercised by a Participant at any one
time is the number of Options for which the aggregate intrinsic value (Fair
Market Value of the underlying Stock minus Exercise Price) totals $5,000,
provided, however, that the Administrative Committee, in its sole discretion,
may permit the exercise of fewer Options. For these purposes, the term
"underlying Stock" means the Stock that will be acquired by the Participant upon
the exercise of the Option. A Participant will not have any of the rights and
privileges of a shareholder with respect to any Stock purchasable or issuable
upon the exercise of an Option prior to the date of exercise of such Option in
accordance with this Section 4.3.
In the event that the listing, registration or qualification of the Option
or the Stock on any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary as a
condition of, or in connection with, the exercise of the Option, then the Option
will not be exercised in whole or in part until such listing, registration,
qualification, consent or approval has been effected or obtained.
4.4 DELIVERY OF STOCK. As soon as administratively feasible following the date
that a Participant satisfies the conditions for exercising an Option in
accordance with Section 4.3, the Employer will deliver or cause to be delivered
the Stock subject to such Option to the Participant.
4.5 TAX WITHHOLDING. Whenever Stock is to be delivered upon exercise of an
Option under the Plan, the Employer will require as a condition of such delivery
payment by the Participant of an amount sufficient to satisfy all federal, state
and local tax withholding requirements related thereto. Such payment will take
the form of whichever of the following is acceptable to the Administrative
Committee, at the election of the Administrative Committee: (a) cash; (b) the
withholding of such amount from any Stock to be delivered to the Participant; or
(c) the withholding of such amount from compensation otherwise due to the
Participant. Such election will be made before the date on which the amount of
tax to be withheld is determined by the Employer, and such election will be
irrevocable. With the consent of the Administrative Committee, the Participant
may elect a greater amount of withholding, not to exceed the estimated amount of
the Participant's total tax liability with respect to the exercise of Options
under the Plan. Such election will be made at the same time and in the same
manner as provided above.
4.6 FAILURE TO EXERCISE. No Option will be exercised, in whole or in part, after
the end of the Option's Exercise Period as stated in Section 4.1. The Employer
will have no obligation to deliver or cause to be delivered to the Participant
the Stock subject to such Option after the end of the Option's Exercise Period.
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ARTICLE V
AMENDMENT OR TERMINATION
5.1 PLAN AMENDMENT. The Executive Compensation Committee, from time to time in
its sole discretion, may amend any provision of the Plan, in whole or in part,
with respect to any Participant or group of Participants. Such amendment will be
effective as of the date specified therein and will be binding upon the
Administrative Committee, all Participants and Beneficiaries, and all other
persons claiming an interest under the Plan. Such amendment will not affect any
Options that are outstanding as of the amendment date without the Participant's
consent. Notwithstanding anything herein to the contrary, any amendments that
modify the Plan must be approved by the Executive Compensation Committee, in
accordance with Section 6.3 of this Plan.
5.2 PLAN TERMINATION. The Plan will terminate as provided by the Executive
Compensation Committee, in its sole discretion, provided that (a) the Plan will
continue to operate until the exercise or expiration of all outstanding Options,
or (b) the Employer will cancel all outstanding Options and pay to each optionee
in cash the difference between the Fair Market Value of the Underlying Stock of
the Options he or she held and the Exercise Price of such Options, both
determined as of the date the Options are cancelled. Such termination will be
effective as of the date determined by the Executive Compensation Committee and
will be binding upon the Administrative Committee, all Participants and
Beneficiaries, and all other persons claiming an interest under the Plan.
5.3 AMENDMENT OF OPTIONS. Notwithstanding Section 5.1, an Option may be amended
by the Administrative Committee at any time after the Grant Date if the
Administrative Committee determines that an amendment is necessary as a result
of:
(a) any addition to or change in the Code or ERISA, a federal or
state securities law or any other law or regulation, which
occurs after the Grant Date and by its terms applies to the
Option;
(b) substitution of Stock;
(c) any Plan amendment pursuant to Section 5.1, or Plan
termination pursuant to Section 5.2, provided that the
amendment does not materially affect the terms, conditions and
restrictions applicable to the Option; or
(d) any circumstances not specified in paragraphs (a), (b) or (c)
with the consent of the Participant.
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ARTICLE VI
ADMINISTRATION
6.1 THE ADMINISTRATIVE COMMITTEE. The Plan will be administered by the
Administrative Committee.
6.2 POWERS OF THE ADMINISTRATIVE COMMITTEE. In carrying out its duties with
respect to the general administration of the Plan, the Administrative Committee
will have, in addition to any other powers conferred by the Plan or by law, the
following powers:
(a) to grant Options and to determine the form, amount and timing
of such Options as well as the type of property subject to an
Option;
(b) to determine the terms and provisions of the Option Agreements
and to modify such Option Agreements as provided in Section
5.3;
(c) to maintain all records necessary for the administration of
the Plan;
(d) to prescribe, amend, and rescind rules for the administration
of the Plan to the extent not inconsistent with the terms
thereof;
(f) to employ counsel, accountants and other consultants to aid in
exercising its powers and carrying out its duties under the
Plan; and
(g) to perform any other acts necessary and proper for the conduct
of its affairs and the administration of the Plan, except
those specifically reserved by the Board or the Executive
Compensation Committee.
6.3. POWERS OF THE EXECUTIVE COMPENSATION COMMITTEE. In carrying out its duties
with respect to the Plan, the Executive Compensation Committee will have, in
addition to any other powers conferred by the Plan or by law, the following
powers:
(a) to determine the members of the Administrative Committee, in
accordance with Section 2.1;
(b) to establish, maintain, and terminate a trust to hold all
Stock contributed by the Employer, pursuant to Article VII of
this Plan;
(c) to amend any provision of the Plan, in whole or in part, with
respect to any Participant or group of Participants, pursuant
to Section 5.1 of this Plan;
(d) to terminate the Plan, in whole or in part, in accordance with
Section 5.2 of this Plan;
(e) to appoint such individuals and subcommittees as it deems
desirable for the conduct of its affairs and the
administration of the Plan; and
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(f) to perform any other acts necessary and proper for the conduct
of its affairs.
All decisions of the Executive Compensation Committee shall be subject to
the approval of the Board of Directors.
6.4 DETERMINATIONS BY THE ADMINISTRATIVE COMMITTEE. The Administrative Committee
will interpret and construe the Plan and the Option Agreements, and its
interpretations and determinations will be conclusive and binding on all
Participants, Beneficiaries and any other persons claiming an interest under the
Plan or any Option Agreement. The Administrative Committee's interpretations and
determinations under the Plan and the Option Agreements need not be uniform and
may be made by it selectively among Participants, Beneficiaries and any other
persons whether or not they are similarly situated.
6.5 INDEMNIFICATION OF THE ADMINISTRATIVE COMMITTEE. The Employer will indemnify
and hold harmless each member of the Administrative Committee against any and
all expenses and liabilities arising out of such member's action or failure to
act in such capacity, excepting only expenses and liabilities arising out of
such member's own willful misconduct or failure to act in good faith.
Expenses and liabilities against which a member of the Administrative
Committee is indemnified hereunder will include, without limitation, the amount
of any settlement or judgment, costs, counsel fees and related charges
reasonably incurred in connection with a claim asserted or a proceeding brought
against him or the settlement thereof.
This right of indemnification will be in addition to any other rights to
which any member of the Administrative Committee may be entitled.
The Employer, at its own expense, may settle any claim asserted or
proceeding brought against any member of the Administrative Committee when such
settlement appears to be in the best interest of the Employer.
6.6 INDEMNIFICATION OF THE EXECUTIVE COMPENSATION COMMITTEE. The Employer will
indemnify and hold harmless each member of the Executive Compensation Committee
against any and all expenses and liabilities arising out of such member's action
or failure to act in such capacity, excepting only expenses and liabilities
arising out of such member's own willful misconduct or failure to act in good
faith.
Expenses and liabilities against which a member of the Executive
Compensation Committee is indemnified hereunder will include, without
limitation, the amount of any settlement or judgment, costs, counsel fees and
related charges reasonably incurred in connection with a claim asserted or a
proceeding brought against him or the settlement thereof.
This right of indemnification will be in addition to any other rights to
which any member of the Executive Compensation may be entitled.
The Employer, at its own expense, may settle any claim asserted or
proceeding brought against any member of the Executive Compensation when such
settlement appears to be in the best interest of the Employer.
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6.7 EXPENSES OF THE ADMINISTRATIVE COMMITTEE. The members of the Administrative
Committee will serve without compensation for their services. All reasonable
expenses of the Administrative Committee will be paid by the Employer.
6.8 EXPENSES OF THE EXECUTIVE COMPENSATION COMMITTEE. The members of the
Executive Compensation Committee will serve without compensation for their
services. All reasonable expenses of the Executive Compensation Committee will
be paid by the Employer.
6.9 EXPENSES OF THE PLAN. The expenses of administering the Plan shall be the
obligation of the Employer. Provided, at the discretion of the Executive
Compensation Committee, all reasonable expenses of the Plan shall be paid by the
Plan Participants, in the manner directed by the Executive Compensation
Committee.
ARTICLE VII
TRUST PROVISIONS
7.1 ESTABLISHMENT OF THE TRUST. The Executive Compensation Committee may
establish a trust to hold all Stock contributed by the Employer pursuant to
Section 3.5. Except as otherwise provided in Section 7.2 of the Plan and the
terms of the Trust Agreement, the Trust, if any, will be irrevocable and no
portion of the Trust Fund, if any, will be used for any purpose other than the
delivery of Stock pursuant to the exercise of an Option under the Plan, and the
payment of expenses of the Plan and Trust.
7.2 TRUST STATUS. Any Trust which may be established pursuant to Section 7.1
will be designed as a grantor trust, within the meaning of section 671 of the
Code, of which the Employer is the grantor, and this Plan is to be construed in
accordance with that intention. Notwithstanding any other provision of this
Plan, the Trust Fund, if any, will remain the property of the Employer and will
be subject to the claims of its creditors in the event of its bankruptcy or
insolvency. No Participant will have any priority claim on the Trust Fund, if
any, or any security interest or other right superior to the rights of a general
creditor of the Employer.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 HEADINGS. The headings of Articles, Sections and Paragraphs are solely for
convenience of reference. If there is any conflict between such headings and the
text of this Plan, the text will control.
8.2 GENDER. Unless the context clearly requires a different meaning, all
pronouns will refer indifferently to persons of any gender.
<PAGE> 15
8.3 SINGULAR AND PLURAL. Unless the context clearly requires a different
meaning, singular terms will also include the plural and vice versa.
8.4 GOVERNING LAW. Except to the extent preempted by federal law, the
construction and operation of the Plan will be governed by the laws of the State
of North Carolina without regard to the choice of law principles of such state.
8.5 SEVERABILITY. If any provision of this Plan is held illegal or invalid by
any court or governmental authority for any reason, the remaining provisions
will remain in full force and effect and will be construed and enforced in
accordance with the purposes of the Plan as if the illegal or invalid provision
did not exist.
8.6 NO OBLIGATION TO EXERCISE. The granting of an Option will impose no
obligation upon a Participant to exercise such Option.
8.7 NO RIGHTS OF SHAREHOLDER. Neither the Participant, a Beneficiary nor any
assignee will be, or will have any of the rights and privileges of, a
stockholder with respect to any Stock subject to purchase or issuance or upon
the exercise of an Option, prior to the date of exercise of such Option in
accordance with Section 4.3 of the Plan.
8.8 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained in the Plan will be
deemed to give any person the right to be retained in the employ of the
Employer, or to interfere with the right of the Employer to discharge any person
at any time without regard to the effect that such discharge will have upon such
person's rights or potential rights, if any, under the Plan.
8.9 NOTICES. Unless otherwise specified in an Option Agreement, any notice to be
provided under the Plan to the Administrative Committee will be mailed (by
certified mail, postage prepaid) or delivered to the Administrative Committee in
care of the Employer at its executive offices, and any notice to the Participant
will be mailed (by certified mail, postage prepaid) or delivered to the
Participant at the current address shown on the payroll records of the Employer,
or at such address as a Participant will provide to the Administrative Committee
in accordance with this Section 8.9. No notice will be binding on the
Administrative Committee until received by the Administrative Committee, and no
notice will be binding on the Participant until received by the Participant.
8.10 CONFLICT BETWEEN PLAN AND OPTION AGREEMENT. Should there be a conflict or
other contradiction between the language of the Plan and that contained in any
Option Agreement, the terms and conditions of the Plan will control.
8.11 TAX LIABILITY. In the event that the Employer cancels an Option in
connection with a termination of the Plan pursuant to Section 5.2, the
Participant will bear all tax consequences associated with the cash payment made
in connection with the cancellation of the Option. Notwithstanding the above,
the Participant will be responsible for all taxes in conjunction with the
exercise of an Option as stated in Section 4.5.
<PAGE> 16
8.12 UNAUTHORIZED REPRESENTATION. The Employer will not be bound by the
representations of any person, other than the Administrative Committee,
regarding eligibility for participation under the Plan or any other matter
relating to the Plan.
IN WITNESS WHEREOF, Pierre Foods, Inc. has caused this Plan to be executed by
its duly authorized officers and its corporate seal to be hereunto affixed this
__________ day of ________________, _____________.
APPROVED:
By: _______________________________
Title: ____________________________
ATTESTED
By: _______________________________
