-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O2GgeusuZeI9oKDU0vPb5BGXsGx4pGTEl9Q5IRNTKbNe4LUGxf65P1cdguc2MAxn Tr57XNSYaOZVP8QYyHOkWA== 0000950137-99-003104.txt : 19990818 0000950137-99-003104.hdr.sgml : 19990818 ACCESSION NUMBER: 0000950137-99-003104 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19990703 FILED AS OF DATE: 19990817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHITMAN CORP/NEW/ CENTRAL INDEX KEY: 0001084230 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 136167838 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-15019 FILM NUMBER: 99694583 BUSINESS ADDRESS: STREET 1: 700 ANDERSON HILL RD CITY: PURCHASE STATE: NY ZIP: 10577-1444 BUSINESS PHONE: 9142532000 MAIL ADDRESS: STREET 1: 700 ANDERSON HILL RD CITY: PURCHASE STATE: NY ZIP: 10577-1444 FORMER COMPANY: FORMER CONFORMED NAME: HEARTLAND TERRITORIES HOLDINGS INC DATE OF NAME CHANGE: 19990414 10-Q 1 FORM 10-Q 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. =============================================================================== 2 WHITMAN CORPORATION FORM 10-Q SECOND QUARTER 1999 CONTENTS 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
1 3 WHITMAN CORPORATION FORM 10-Q SECOND QUARTER 1999 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Second Quarter First Half ------------------------ ------------------------ 1999 1998 1999 1998 --------- -------- --------- -------- (in millions, except per share data) 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 ========= ======== ========= ========
See accompanying notes to condensed consolidated financial statements. 2 4 WHITMAN CORPORATION FORM 10-Q SECOND QUARTER 1999 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
July 3, January 2, 1999 1999 -------- --------- (in millions) 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 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 5 WHITMAN CORPORATION FORM 10-Q SECOND QUARTER 1999 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
First Half ------------------- 1999 1998 -------- -------- (in millions) 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 ====== ======
See accompanying notes to condensed consolidated financial statements. 4 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 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): 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 ========
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):
Second Quarter First Half -------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- --------- 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
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):
Second Quarter First Half --------------------- ---------------------- 1999 1998 1999 1998 -------- --------- -------- --------- 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
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 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):
Pepsi Whitman General Corporate Total ------- --------- -------- 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 ===== ===== =====
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 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:
Second Quarter First Half --------------------- ---------------------- 1999 1998 1999 1998 -------- --------- --------- --------- (in millions) 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 ====== ===== ====== =====
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:
Second Quarter First Half --------------------- ---------------------- 1999 1998 1999 1998 -------- --------- --------- --------- (in millions) 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) ====== ====== ====== ======
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 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:
First Half ---------------------- 1999 1998 --------- --------- (in millions) Interest paid $ 26.1 $ 29.3 Interest received 2.6 3.2 Income taxes paid, net of refunds 19.8 3.4
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):
First Half of 1999 First Half of 1998 ------------------ ------------------ Amount % Amount % ------ ------ ------ ------ 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 ====== =====
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 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 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):
Reported % Comparable % ------------------------ ------------------------ 1999 1998 Change 1999 1998 Change --------- --------- ------ --------- --------- ------ 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 ======== ========= ========= =========
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 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):
Reported % Comparable % ------------------------ ------------------------ 1999 1998 Change 1999 1998 Change --------- --------- ------ --------- --------- ------ 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 ======== ========= ========= =========
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 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):
Reported % Comparable % ------------------------ ------------------------ 1999 1998 Change 1999 1998 Change --------- --------- ------ --------- --------- ------ 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 ======== ========= ========= =========
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):
Reported % Comparable % ------------------------ ------------------------ 1999 1998 Change 1999 1998 Change --------- --------- ------ --------- --------- ------ 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 ======== ========= ========= =========
13 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 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 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 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 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: Votes for 61,561,944 Votes against 5,484,946 Votes withheld 204,328 Total votes received 67,251,218
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. 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
18 20 WHITMAN CORPORATION FORM 10-Q SECOND QUARTER 1999 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
(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 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 EX-3.A 2 CERTIFICATE OF INCORPORATION 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 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 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. 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. EX-3.B 3 BY-LAWS 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 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 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. 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 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 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. 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 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 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 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. 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. EX-4.A 4 FIRST SUPPLEMENTAL INDENTURE 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 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. 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. 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] EX-10.A 5 REVISED STOCK INCENTIVE PLAN 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. 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 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 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 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 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. 6 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 7 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 8 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 9 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 10 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: 11 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 12 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 13 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. 14 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 EX-10.B 6 NONQUALIFIED STOCK OPTION AGREEMENT 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. 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 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 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 EX-10.C 7 FORM OF CHANGE IN CONTROL AGREEMENT 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 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 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 3 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 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 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 6 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 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 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 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 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 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 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 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 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 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 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 EX-10.D 8 DEFERRED COMPENSATION PLAN FOR DIRECTORS 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, 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 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. 3 4 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 4 5 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. 5 6 (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. 6 EX-10.E 9 1982 STK OPTION RESTRICT & PERFORMANCE AWARD PLAN 1 Exhibit 10e [WHITMAN LOGO] 1982 STOCK OPTION, RESTRICTED STOCK AWARD AND PERFORMANCE AWARD PLAN As amended through June 16, 1989. 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 1 3 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. 2 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 3 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 4 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, 5 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. 6 8 (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 7 9 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. 8 10 (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 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 EX-10.F 10 AMD #2 TO 1982 STK OPT, RESTRICT & PERFORM PLAN 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);" 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: -2- 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 ---------------------------- -3- EX-10.G 11 FORM OF NONQUALIFIED STOCK OPTION AGREEMENT 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 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- 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 -3- 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 -4- EX-10.H 12 AMD TO 1992 STK OPT RESTRICT. & PERFORM AWARD PLAN 1 EXHIBIT 10h WHITMAN STOCK INCENTIVE PLAN as amended through February 19, 1993 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 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 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 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 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 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 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 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 EX-10.I 13 MANAGEMENT INCENTIVE COMPENSATION PLAN 1 EXHIBIT 10(i) REVISED 1-1-84 [WHITMAN LOGO] WHITMAN CORPORATION MANAGEMENT INCENTIVE COMPENSATION PLAN (ADOPTED JANUARY 1, 1971) 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 - 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 - 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:
CORPORATE COMPANY GROUP DIVISION INDIVIDUAL TOTAL --------- ------- ----- -------- ---------- ----- 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
- 4 - 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 - 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 - EX-10.J 14 LONG TERM PERFORMANCE COMPENSATION PROGRAM 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. 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 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 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 EX-10.K 15 WHITMAN CORPORATION EXECUTIVE RETIREMENT PLAN 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" 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 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 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. 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 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. 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; 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: 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: 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, 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 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 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. 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 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. 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: 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). 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. 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. 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 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 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 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 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. 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. 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. 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 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. 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 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. 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: --------------------------- EX-10.L 16 PEPSI-COLA GENERAL BOTTLERS, INC. 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" 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 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 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. 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 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. 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 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: 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. 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. 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). 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. 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. 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 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 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. 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, 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. 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. 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 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: 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 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 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. 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. 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. 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 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. 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. 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. 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: ----------------------------------------- EX-12 17 STATEMENT OF CALCULATION OF RATIO OF EARNINGS 1 EXHIBIT 12 WHITMAN CORPORATION STATEMENT OF CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES (in Millions, Except Ratios)
First Half Fiscal Years ---------------------- ------------------------------------------------------------- 1999 1998 1998 1997 1996 1995 1994 --------- --------- -------- -------- -------- --------- --------- 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 ========= ========= ======== ======== ======== ========= =========
* 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. EX-27 18 FINANCIAL DATA SCHEDULE
5 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. 0001084230 WHITMAN CORPORATION 1,000 6-MOS 6-MOS JAN-01-2000 JAN-02-1999 JUL-03-1999 JUN-30-1998 123,800 0 0 0 274,300 0 4,300 0 119,000 0 548,100 0 1,343,800 0 508,000 0 2,879,800 0 765,800 0 802,900 0 0 0 0 0 1,633,800 0 (458,400) 0 2,879,800 0 885,500 758,900 885,500 758,900 517,800 448,600 817,500 670,400 47,800 10,100 0 0 25,500 17,800 (5,300) 60,600 (15,900) 27,200 4,000 24,500 (27,200) (500) 0 (18,300) 0 0 (23,200) 5,700 (0.22) 0.06 (0.22) 0.06 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. INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE AND INTEREST INCOME OF $27,600 AND $2,100, RESPECTIVELY. INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $6,600. BASIC INCOME PER COMMON SHARE: CONTINUING OPERATIONS $ 0.04 DISCONTINUED OPERATIONS (0.26) NET INCOME $(0.22) DILUTED INCOME PER COMMON SHARE: CONTINUING OPERATIONS $ 0.04 DISCONTINUED OPERATIONS (0.26) NET INCOME $(0.22) TOTAL COSTS INCLUDE COSTS OF GOODS SOLD, S,G&A EXPENSES AND AMORTIZATION EXPENSE OF $448,600, $213,900 AND $7,900, RESPECTIVELY. 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. INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $8,900. BASIC INCOME PER COMMON SHARE: CONTINUING OPERATIONS $ 0.24 EXTRAORDINARY LOSS (0.18) NET INCOME $ 0.06 DILUTED INCOME PER COMMON SHARE: CONTINUING OPERATIONS $ 0.24 EXTRAORDINARY LOSS (0.18) NET INCOME $ 0.06
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