10-Q

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No. 1 of 22 Pages

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

FOR QUARTERLY AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

[X] QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2002

or

[ ] 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 1-5111

THE J. M. SMUCKER COMPANY

(Exact name of registrant as specified in its charter)

Ohio	34-0538550
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Strawberry Lane
Orrville, Ohio	44667-0280
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code (330) 682-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common shares, no par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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 at least the past 90 days. [X] Yes [ ] No

The Company had 49,731,152 common shares outstanding on November 30, 2002.

The Exhibit Index is located at Sequential Page No. 22.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATION
INDEX OF EXHIBITS
EX-10 1998 Equity and Performance Incentive Plan

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No. 2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE J. M. SMUCKER COMPANY

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)

		Three Months Ended						Six Months Ended
		October 31,						October 31,
		2002			2001			2002			2001
		(Dollars in thousands, except per share data)
Net sales		$	366,975		$	172,844		$	641,911		$	342,636
Cost of products sold			240,563			117,024			423,147			229,636
Gross Profit			126,412			55,820			218,764			113,000
Selling, distribution, and administrative expenses			74,948			41,307			134,895			82,992
Merger and integration costs			2,470			—			7,357			—
Operating Income			48,994			14,513			76,512			30,008
Other income (expense)
	Interest income		606			602			1,175			1,333
	Interest expense		(2,296	)		(2,356	)		(4,609	)		(4,637	)
	Other – net		(389	)		(130	)		(329	)		(63	)
Income Before Income Taxes			46,915			12,629			72,749			26,641
Income taxes			17,828			4,925			27,645			10,390
Net Income		$	29,087		$	7,704		$	45,104		$	16,251
Net income per common share		$	0.59		$	0.34		$	1.00		$	0.71
Net income per common share – assuming dilution		$	0.58		$	0.33		$	0.99		$	0.70
Dividends declared on common shares		$	0.20		$	0.17		$	0.40		$	0.34

See notes to unaudited condensed consolidated financial statements.

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THE J. M. SMUCKER COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

				October 31, 2002			April 30, 2002
				(Dollars in thousands)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$	98,825		$	91,914
	Trade receivables, less allowances				120,191			57,371
	Inventories:
			Finished products		98,700			52,817
			Raw materials, containers, and supplies		89,890			63,722
					188,590			116,539
	Other current assets				17,579			13,989
			Total Current Assets		425,185			279,813
PROPERTY, PLANT, AND EQUIPMENT
	Land and land improvements				23,710			16,911
	Buildings and fixtures				105,844			87,126
	Machinery and equipment				341,015			242,590
	Construction in progress				13,885			7,504
					484,454			354,131
	Less allowances for depreciation				(204,790	)		(191,342	)
			Total Property, Plant, and Equipment		279,664			162,789
OTHER NONCURRENT ASSETS
	Goodwill				498,248			33,510
	Other intangible assets				331,083			14,825
	Other assets				30,794			33,955
			Total Other Noncurrent Assets		860,125			82,290
				$	1,564,974		$	524,892
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
	Accounts payable			$	67,562		$	32,390
	Other current liabilities				103,911			48,041
			Total Current Liabilities		171,473			80,431
NONCURRENT LIABILITIES
	Long-term debt				135,000			135,000
	Other noncurrent liabilities				168,157			29,317
			Total Noncurrent Liabilities		303,157			164,317
SHAREHOLDERS’ EQUITY
	Common shares				12,405			6,217
	Additional capital				810,942			33,184
	Retained income				293,141			267,793
	Less:
		Deferred compensation			(3,118	)		(2,725	)
		Amount due from ESOP			(8,093	)		(8,562	)
		Accumulated other comprehensive loss			(14,933	)		(15,763	)
			Total Shareholders’ Equity		1,090,344			280,144
				$	1,564,974		$	524,892

See notes to unaudited condensed consolidated financial statements.

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THE J. M. SMUCKER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

			Six Months Ended
			October 31,
			2002			2001
			(Dollars in thousands)
OPERATING ACTIVITIES
	Net income		$	45,104		$	16,251
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation		15,862			12,155
		Amortization		1,582			2,317
		Other adjustments		(20,546	)		(23,825	)
Net cash provided by operating activities				42,002			6,898
INVESTING ACTIVITIES
	Business acquired, net of cash acquired			(9,936	)		(5,639	)
	Additions to property, plant, and equipment			(15,782	)		(12,736	)
	Disposals of property, plant, and equipment			78			103
	Other – net			850			790
Net cash used for investing activities				(24,790	)		(17,482	)
FINANCING ACTIVITIES
	Purchase of treasury shares			—			(539	)
	Dividends paid			(13,070	)		(7,740	)
	Other – net			2,108			1,271
Net cash used for financing activities				(10,962	)		(7,008	)
Effect of exchange rate changes				661			(315	)
Net increase (decrease) in cash and cash equivalents				6,911			(17,907	)
Cash and cash equivalents at beginning of period				91,914			51,125
Cash and cash equivalents at end of period			$	98,825		$	33,218

(   ) Denotes use of cash

See notes to unaudited condensed consolidated financial statements.

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No. 5

THE J. M. SMUCKER COMPANY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A – Basis of Presentation

     The accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended October 31, 2002, are not necessarily indicative of the results that may be expected for the year ending April 30, 2003. For further information, reference is made to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2002.

Note B – Merger

     On June 1, 2002, the Company merged the Jif peanut butter and Crisco shortening and oils businesses of The Procter & Gamble Company (P&G) with and into the Company in a tax-free stock transaction. Under the terms of the agreement, P&G spun off its Jif and Crisco businesses to its shareholders and immediately thereafter those businesses were merged with and into the Company. P&G shareholders received one Company common share for every 50 P&G common shares that they held as of the record date for the distribution of the Jif and Crisco businesses to the P&G shareholders. The Company’s shareholders received 0.9451 of a new Company common share for each Company common share that they held immediately prior to the merger. Approximately 26,000,000 common shares were issued to the P&G shareholders, valued at approximately $781,485,000 based on the average market price of the Company’s common shares over the period from three days before to three days after the terms of the merger were announced. Upon completion of the merger, the Company had 49,531,376 common shares outstanding.

     The conversion of the Company’s common shares into new Company common shares has been treated in a manner similar to a reverse stock split. All per share data for all periods presented have been restated to reflect the effects of the conversion.

     The merger and the combination of three brands – Smucker’s, Jif, and Crisco – enhances the Company’s strategic and market position. The merger was accounted for as a purchase business combination. For accounting purposes, the Company is the acquiring enterprise. Accordingly, the results of the Jif and Crisco operations are included in the Company’s consolidated financial statements from the date of the merger.

     The aggregate purchase price was approximately $791,421,000 including $9,936,000 of acquisition related expenses. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upon their preliminary estimated fair values at the date of acquisition. Final estimated fair values will be determined by independent appraisals, discounted cash flows, quoted market prices, and management estimates. The Company currently expects to finalize the purchase price allocation by May 31, 2003.

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     The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of the merger. The allocation of the purchase price is preliminary and subject to adjustment following completion of the valuation process.

(Dollars in thousands)		June 1, 2002
Assets:
	Tangible assets	$	157,684
	Intangible assets not subject to amortization		280,000
	Intangible assets subject to amortization (15 year weighted-average useful life)		37,333
	Goodwill		463,029
Total assets acquired			938,046
Total liabilities assumed			(146,625	)
Net assets acquired		$	791,421

     The $463,029,000 of goodwill relates to the U.S. retail market segment and will not be deductible for tax purposes.

     Had the merger of the Jif and Crisco businesses with and into the Company occurred at the beginning of fiscal 2002, pro forma consolidated results would have been as follows:

	Three Months Ended				Six Months Ended
	October 31,				October 31,
(Dollars in thousands)	2002		2001		2002		2001
Net sales	$	367,000	$	369,000	$	685,000	$	674,000
Operating income, excluding indirect expenses of the Jif and Crisco businesses	$	51,000	$	84,000	$	96,000	$	134,000

Note C – Change in Accounting Principle

     Effective May 1, 2002, the Company adopted Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets (SFAS 142). In accordance with SFAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed at least annually for impairment.

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     Prior to the adoption of SFAS 142, amortization expense was recorded for goodwill and other intangible assets. The following table sets forth a reconciliation of net income and earnings per share information adjusted for the nonamortization provisions of SFAS 142.

		Three Months Ended				Six Months Ended
		October 31,				October 31,
(Dollars in thousands)		2002		2001		2002		2001
Net income, as reported		$	29,087	$	7,704	$	45,104	$	16,251
Goodwill and indefinite lived intangible asset amortization			—		547		—		1,097
Net income, as adjusted		$	29,087	$	8,251	$	45,104	$	17,348
Earnings per common share:
	Net income, as reported	$	0.59	$	0.34	$	1.00	$	0.71
	Goodwill and indefinite lived intangible asset amortization		—		0.02		—		0.05
	Net income, as adjusted	$	0.59	$	0.36	$	1.00	$	0.76
	Net income, as reported – assuming dilution	$	0.58	$	0.33	$	0.99	$	0.70
	Goodwill and indefinite lived intangible asset amortization – assuming dilution		—		0.02		—		0.05
	Net income, as adjusted – assuming dilution	$	0.58	$	0.35	$	0.99	$	0.75

     In the second quarter of fiscal 2003, the Company completed the initial impairment test for goodwill, under SFAS 142. This test confirmed that the fair value of the Company’s reporting units exceeds their carrying values, and that no impairment loss needed to be recognized for goodwill upon the adoption of SFAS 142.

Note D – Common Shares

     At October 31, 2002, 150,000,000 common shares were authorized. There were 49,620,208 and 23,504,129 (restated) shares outstanding at October 31, 2002, and April 30, 2002, respectively. Shares outstanding are shown net of 7,047,725 and 7,140,338 (restated) treasury shares at October 31, 2002, and April 30, 2002, respectively.

Note E – Operating Segments

     Effective June 1, 2002, the Company realigned its business segment structure in recognition of the changes resulting from the addition of the Jif and Crisco businesses. Prior year segment information has been restated to conform to the new structure.

     The Company operates in one industry: the manufacturing and marketing of food products. The Company has two reportable segments: U.S. retail market and special markets. The U.S. retail market segment includes the consumer and the consumer oils business areas. This segment represents the primary strategic focus area for the Company – the sale of branded food products with leadership positions to consumers through mainstream domestic retail outlets. The special markets segment represents the aggregation of the foodservice, international, industrial, and beverage business areas. Special markets segment products are distributed through/to foreign countries, foodservice distributors and operators (i.e., restaurants, schools and universities, health care operations), other food manufacturers, and health and natural food stores.

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     The following table sets forth operating segments information:

		Three Months Ended						Six Months Ended
		October 31,						October 31,
(Dollars in thousands)		2002			2001			2002			2001
Net sales:
	U.S. retail market	$	257,530		$	83,733		$	425,786		$	169,510
	Special markets		109,445			89,111			216,125			173,126
Total net sales		$	366,975		$	172,844		$	641,911		$	342,636
Segment profit:
	U.S. retail market	$	56,605		$	16,411		$	91,058		$	34,306
	Special markets		13,855			10,287			27,622			19,623
Total segment profit			70,460			26,698			118,680			53,929
	Interest income		606			602			1,175			1,333
	Interest expense		(2,296	)		(2,356	)		(4,609	)		(4,637	)
	Amortization expense		(894	)		(1,171	)		(1,582	)		(2,317	)
	Merger and integration costs		(2,470	)		—			(7,357	)		—
	Corporate administrative expenses		(18,236	)		(11,040	)		(33,386	)		(21,691	)
	Other unallocated (expenses) income		(255	)		(104	)		(172	)		24
Income before income taxes		$	46,915		$	12,629		$	72,749		$	26,641

Note F – Earnings Per Share

     The following table sets forth the computation of earnings per common share and earnings per common share – assuming dilution:

		Three Months Ended				Six Months Ended
		October 31,				October 31,
		2002		2001		2002		2001
		(Dollars in thousands, except per share data)
Numerator:
Net income		$	29,087	$	7,704	$	45,104	$	16,251
Denominator:
Denominator for earnings per common share – weighted-average shares			49,451,890		22,952,213		45,048,893		22,944,347
Effect of dilutive securities:
	Stock options		369,806		348,789		335,273		278,940
	Restricted stock		87,438		63,151		78,781		47,813
Denominator for earnings per common share – assuming dilution			49,909,134		23,364,153		45,462,947		23,271,100
Net income per common share		$	0.59	$	0.34	$	1.00	$	0.71
Net income per common share – assuming dilution		$	0.58	$	0.33	$	0.99	$	0.70

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Note G – Derivative Financial Instruments

     The Company is exposed to market risks, such as changes in interest rates, currency exchange rates, and commodity pricing. To manage the volatility relating to these exposures, the Company enters into various derivative transactions pursuant to the Company’s policies in areas such as counterparty exposure and hedging practices. Hedge effectiveness designation is performed on a specific exposure basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in fair value or cash flows of the underlying exposures being hedged.

     Interest rate hedging. The Company’s policy is to manage interest cost using a mix of fixed- and variable-rate debt. To manage this mix in a cost efficient manner, the Company periodically enters into interest rate swaps in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount.

     Commodity price management. Raw materials used by the Company’s Crisco business are subject to price volatility caused by supply conditions, political and economic variables, and other unpredictable factors. To manage the volatility related to anticipated inventory purchases to be made by Crisco, the Company uses futures and options with maturities generally less than one year. These instruments are designated as cash flow hedges. The mark-to-market gain or loss on qualifying hedges is included in other comprehensive income to the extent effective, and reclassified into cost of products sold in the period during which the hedged transaction affects earnings. The mark-to-market gains or losses on nonqualifying, excluded, and ineffective portions of hedges are recognized in cost of products sold immediately and were not significant.

Note H – Financing Arrangements

     The Company has uncommitted lines of credit providing up to $120,000,000 for short-term borrowings. No amounts were outstanding at October 31, 2002.

Note I – Comprehensive Income

     During the three-month periods ended October 31, 2002 and 2001, total comprehensive income was $28,837,000 and $5,806,000, respectively. Total comprehensive income for the six-month periods ended October 31, 2002 and 2001, was $45,934,000 and $12,760,000, respectively. Comprehensive income consists of net income, foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains and losses on commodity hedging activity, net of income taxes.

Note J – Goodwill and Other Intangibles

     A summary of changes in the Company’s goodwill during the six months ended October 31, 2002, by reportable operating segment is as follows:

	Balance at							Balance at
(Dollars in thousands)	April 30, 2002		Acquisitions		Other		October 31, 2002
U.S. retail market	$	13,353	$	463,029	$	—		$	476,382
Special markets		20,157		—		1,709			21,866
Total	$	33,510	$	463,029	$	1,709		$	498,248

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     The Company’s other intangible assets and related accumulated amortization is as follows:

(Dollars in thousands)	As of October 31, 2002						As of April 30, 2002
			Accumulated						Accumulated
	Acquisition cost		amortization		Net		Acquisition cost		amortization		Net
Patents	$	37,333	$	1,037	$	36,296	$	—	$	—	$	—
Customer lists and formulas		3,887		389		3,498		3,887		194		3,693
Total intangible assets subject to amortization		41,220		1,426		39,794		3,887		194		3,693
Trademarks with indefinite lives		291,289		—		291,289		11,132		—		11,132
Total intangible assets not subject to amortization		291,289		—		291,289		11,132		—		11,132
Total other intangible assets	$	332,509	$	1,426	$	331,083	$	15,019	$	194	$	14,825

     The amounts in the above charts include preliminary estimates related to the goodwill and other intangible assets acquired in the Jif and Crisco merger.

     Amortization expense for other intangible assets was approximately $720,000 and $1,232,000 for the three months and six months ended October 31, 2002, respectively. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding 5 years is $2,670,000 for fiscal 2003 and $2,878,000 for fiscal 2004 through 2007.

Note K – Recently Issued Accounting Standards

     In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets to be held and used, to be disposed of other than by sale and to be disposed of by sale. The Company adopted SFAS 144 as of May 1, 2002. The adoption of SFAS 144 did not have an impact on the Company’s consolidated financial statements.

     In July 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146). SFAS 146 addresses financial accounting and reporting for costs associated with exit and disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) (EITF 94-3). The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS 146 is not expected to have a material impact on the Company’s consolidated financial statements.

Note L – Reclassifications

     Certain prior year amounts have been reclassified to conform to current year classifications.

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Item 2. Management’s Discussion and Analysis

     This discussion and analysis deals with comparisons of material changes in the unaudited, condensed, consolidated financial statements for the three-month and six-month periods ended October 31, 2002 and October 31, 2001, respectively.

     On June 1, 2002, The Company merged the Jif peanut butter and Crisco shortening and oils businesses of The Procter & Gamble Company with and into the Company in a tax-free stock transaction. The transition of the Jif and Crisco businesses has been completed.

     With the addition of the Jif and Crisco businesses, reportable segments have been restated to U.S. retail market and special markets. The U. S. retail market segment is composed of the Company’s consumer and consumer oils business areas and includes domestic sales of Smucker’s, Jif, and Crisco brand products at retail. The special markets segment is composed of the foodservice, international, industrial, and beverage business areas.

Results of Operations

     Sales were $367.0 million for the second quarter ended October 31, 2002, more than doubling the sales of $172.8 million in the comparable period last year. The Jif and Crisco brands contributed $173.4 million to sales in the second quarter of fiscal 2003. Excluding the Jif and Crisco contribution, second quarter sales increased $20.8 million, or 12 percent, over the second quarter of fiscal 2002.

     Sales for the six-month period ended October 31, 2002, were up 87 percent to $641.9 million versus $342.6 million for the first six months of fiscal 2002. The contribution of the Jif and Crisco brands in the first six months was $260.4 million. Excluding sales from those brands, sales were up 11 percent.

     Net income was $29.1 million or $0.58 per share for the second quarter, versus $7.7 million or $0.33 per share in the comparable period last year. Income in the second quarter included $2.5 million, or $0.03 per share, of costs associated with the merger of the Jif and Crisco brands into the Company. Excluding these costs, the Company’s earnings per share would have been $0.61 in the second quarter.

     Net income and earnings per share for the first six months of the fiscal year were $45.1 million and $0.99, respectively. This compares to $16.3 million and $0.70 per share in the first half of fiscal 2002. Earnings per share prior to merger-related costs of $7.4 million, or $0.10 per share, would have been $1.09. Total nonrecurring costs associated with the merger are anticipated to aggregate approximately $10 million in fiscal 2003 and $15 million in total, in line with previously announced estimates. It is anticipated that virtually all of the merger related costs will have been incurred by the end of the current fiscal year.

     Earnings per share for the second quarter and for the first six months of fiscal 2002 have been restated to reflect the effect of the merger exchange ratio of 0.9451 on the weighted average shares outstanding for those periods. In addition, for comparative purposes, if the nonamortization provisions of Statement of Financial Accounting Standards 142, Accounting for Goodwill and Other Intangible Assets (SFAS 142), had been in effect last year, earnings per share would have been $0.02 higher for the second quarter and $0.05 higher for the first six months of fiscal 2002.

     Sales for the second quarter in the U.S. retail market segment were $257.5 million compared to $83.7 million last year. For the first six months of fiscal 2003, sales in the segment more than doubled to $425.8 million, up from $169.5 million last year. Jif and Crisco sales accounted for $168.1 million of the increase in the quarter and $253.0 million of the increase in the six-month period. In the consumer business area, sales increased 103 percent with sales of Jif products accounting for much of the increase. Jif sales were up approximately 6 percent in volume over the same period last year. The traditional Smucker’s business grew 7 percent in sales, with sales up in most key categories, including fruit spreads, toppings, natural peanut butter, and Goober. The retail rollout during the first half of the

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year of Smucker’s Uncrustables to approximately one-half of the United States also contributed to the consumer area results. Based on the positive results to date, the Company plans to increase its investment spending in support of Smucker’s Uncrustables during the second half of the year and accelerate the rollout of the product. The additional spending in support of the Smucker’s Uncrustables product is expected to occur predominately in the fourth quarter and will result in the product being available at retail in approximately 70 percent of the United States by the end of the fiscal year.

     The consumer oils business area met management’s expectations overall in the second quarter. Sales were behind the comparable period last year by approximately 2 percent in volume, with increases in sales to nonretail customers partially offsetting a shortfall in retail. The retail shortfall was primarily due to timing of shipments in comparison to last October. Last year, Procter & Gamble made large shipments in October in anticipation of its Fall Bake holiday promotions. Shipments this year are expected to be spread more evenly through the holiday period, in line with the Company’s scheduled promotions.

     Second quarter sales in the special markets segment were $109.5 million versus $89.1 million for the second quarter of fiscal 2002. Each of the four business areas in the segment was up at least 16 percent over the prior year. For the six-month period ended October 31, 2002, sales in this segment were $216.1 million compared to $173.1 million during the prior year, an increase of 25 percent.

     In the foodservice area, sales were up 16 percent for the quarter, as sales of Smucker’s Uncrustables to schools achieved record levels. In addition, sales in the traditional foodservice business increased nearly 10 percent, a very strong result given the ongoing effects of a soft economy on the travel and leisure industries.

     Sales in the industrial area were up by 26 percent over the same quarter of last year. The increase in sales is mainly due to the contribution by the International Flavors and Fragrances, Inc. (IFF) fruit preparations business acquired in October of 2001, plus new product sales, offset by approximately $5 million in sales from contracts that the Company previously announced would be discontinued due to low margins. Of the $40 to $50 million in sales that the Company announced would be discontinued, it now expects that approximately $20 million will occur by the end of this fiscal year and the remainder will occur in fiscal 2004.

     Sales in the international markets were up 33 percent during the quarter as the Company realized increases in every geographic region except Asia. The majority of the dollar increase came from Canada and Brazil. In Canada, Crisco sales accounted for much of the increase, although the traditional business also was up 5 percent. In Brazil, the majority of the increase was due to the addition of that portion of the IFF business located there. Export sales were also up 7 percent over the prior year’s second quarter.

     Sales in the beverage area increased nearly 17 percent resulting from growth in sales of R. W. Knudsen & Sons and Santa Cruz Organic brand products and new products.

     Second quarter operating income increased $37 million over last year and improved as a percentage of sales from 8.4 percent to 14.0 percent, excluding merger-related costs. Gross margin improved for the quarter from 32.3 percent last year to 34.4 percent this year. In addition, operational efficiencies at several of the Company’s manufacturing facilities resulted in lower-than-planned expenses. Year-to-date, gross margin is 34.1 percent compared to 33.0 percent for the first six months of last year.

     Selling, distribution, and administrative (SD&A) costs were 20.4 percent of sales in the quarter versus 23.9 percent in the second quarter last year. A reduction in corporate overhead and selling expenses as a percent of sales caused the improvement. For the year, SD&A expenses were 21.0 percent of sales versus 24.2 percent last year.

Sequential Page
No. 13

Financial Condition – Liquidity and Capital Resources

     The financial position of the Company remains strong. Cash and cash equivalents increased $6.9 million during the first six months. Significant uses of cash during the first six months of the year were the payment of merger related costs, capital expenditures, and the payment of dividends. Additional debt was not required to complete the merger of the Jif and Crisco businesses with and into the Company, and total long-term debt as a percent of total capitalization was reduced from approximately 33% at April 30, 2002, to 11% at October 31, 2002. The Company anticipates capital expenditure spending to total approximately $45 to $50 million for fiscal 2003. This is approximately $10 to $15 million less than budgeted for the year. The reduction in anticipated spending is timing related and amounts not spent in this fiscal year likely will be spent in fiscal 2004.

     Assuming there are no material acquisitions or other significant investments, the Company believes that cash on hand together with cash generated by operations and existing lines of credit will be sufficient to meet its fiscal 2003 requirements, including the payment of dividends and interest on outstanding debt.

Recently Issued Accounting Standards

     In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets to be held and used, to be disposed of other than by sale, and to be disposed of by sale. The Company adopted SFAS 144 as of May 1, 2002. The adoption of SFAS 144 did not have a material impact on the Company’s consolidated financial statements.

     In July 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146). SFAS 146 addresses financial accounting and reporting for costs associated with exit and disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) (EITF 94-3). The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS 146 is not expected to have a material impact on the Company’s consolidated financial statements.

Sequential Page
No. 14

Certain Forward-Looking Statements

     This quarterly report includes certain forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to:

• the success of the Company’s pricing strategies with regard to the Jif and Crisco businesses as well as the Company’s other businesses;

• the success and cost of new marketing and sales programs and strategies intended to promote growth in the Jif and Crisco businesses as well as the Company’s other businesses;

• the success and cost of introducing new products;

• general competitive activity in the market;

• the ability of the business areas to achieve sales targets and the costs associated with attempting to do so;

• the ability to improve sales and earnings performance in the Company’s industrial business;

• the exact time frame in which the loss of sales associated with discontinued industrial contracts will occur and the Company’s ability to successfully cover or eliminate the overhead associated with those sales;

• costs associated with the implementation of new business and information systems;

• the strength of commodity markets from which raw materials are procured and the related impact on costs;

• raw material and ingredient cost trends;

• foreign currency exchange and interest rate fluctuations; and

• other factors affecting share prices and capital markets generally.

Sequential Page
No. 15

Item 4. Controls and Procedures

     Evaluation of disclosure controls and procedures. Based on their evaluation as of a date within 90 days of the filing date of this Report, the Company’s principal executive officers and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

     Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Sequential Page
No. 16

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

     The annual meeting of shareholders of the Company was held on August 13, 2002. At the meeting, the names of Vincent C. Byrd, Elizabeth Valk Long, and William Wrigley, Jr. were placed in nomination for the Board of Directors to serve three-year terms ending in 2005. All three nominees were elected with the results as follows:

	Votes For		Votes Withheld		Broker Nonvotes
Vincent C. Byrd		35,350,335		366,173		0
Elizabeth Valk Long		35,352,963		363,545		0
William Wrigley, Jr.		35,370,194		346,314		0

The shareholders also voted on the amendment and restatement of the 1998 Equity and Performance Incentive Plan and the appointment of Ernst & Young LLP as the Company’s independent auditors for the 2003 fiscal year. The measures were approved as follows:

	Votes For		Votes Against		Abstentions		Broker Nonvotes
Amendment and restatement of the 1998 Equity and Performance Incentive Plan		107,026,255		6,354,104		2,297,783		0
Appointment of Auditors		34,742,763		775,698		198,047		0

Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits
	See the Index of Exhibits that appears on Sequential Page No. 22 of this report.
(b)	Reports on Form 8-K
	No reports on Form 8-K were required to be filed during the quarter for which this report is filed.

Sequential Page
No. 17

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

December 13, 2002	THE J. M. SMUCKER COMPANY
	/s/ Steven J. Ellcessor
	BY STEVEN J. ELLCESSOR
	Vice President—Finance and Administration,
	Secretary, and Chief Financial Officer
	/s/ Timothy P. Smucker
	AND TIMOTHY P. SMUCKER
	Chairman and Co-Chief Executive Officer

Sequential Page
No. 18

CERTIFICATION

     In connection with the Form 10-Q of The J. M. Smucker Company for the period ended October 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy P. Smucker, Co-Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002, that:

(1)	I have reviewed the Report.
(2)	Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report.
(3)	Based on my knowledge, the financial statements, and other financial information contained in the Report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for the periods presented in the Report.
(4)	The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:

a.	Designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	Evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c.	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

(5) The Company’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Company’s auditors and the audit committee of the Company’s board of directors:

a.	All significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

(6) The Company’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any correction actions with regard to significant deficiencies and material weaknesses.

Date: December 13, 2002
	/s/ Timothy P. Smucker
	Name: Timothy P. Smucker
	Title: Co-Chief Executive Officer

Sequential Page
No. 19

CERTIFICATION

     In connection with the Form 10-Q of The J. M. Smucker Company for the period ended October 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard K. Smucker, Co-Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002, that:

(1)	I have reviewed the Report.
(2)	Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report.
(3)	Based on my knowledge, the financial statements, and other financial information contained in the Report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for the periods presented in the Report.
(4)	The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:

a.	Designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	Evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c.	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

(5) The Company’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Company’s auditors and the audit committee of the Company’s board of directors:

a.	All significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

(6) The Company’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any correction actions with regard to significant deficiencies and material weaknesses.

Date: December 13, 2002
	/s/ Richard K. Smucker
	Name: Richard K. Smucker
	Title: Co-Chief Executive Officer

Sequential Page
No. 20

CERTIFICATION

     In connection with the Form 10-Q of The J. M. Smucker Company for the period ended October 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven J. Ellcessor, Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002, that:

(1)	I have reviewed the Report.
(2)	Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report.
(3)	Based on my knowledge, the financial statements, and other financial information contained in the Report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for the periods presented in the Report.
(4)	The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:

a.	Designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	Evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c.	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

(5) The Company’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Company’s auditors and the audit committee of the Company’s board of directors:

a.	All significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

(6) The Company’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any correction actions with regard to significant deficiencies and material weaknesses.

Date: December 13, 2002
	/s/ Steven J. Ellcessor
	Name: Steven J. Ellcessor
	Title: Chief Financial Officer

Sequential Page
No. 21

CERTIFICATION

     In connection with the Form 10-Q of The J. M. Smucker Company for the period ended October 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: December 13, 2002

/s/ Timothy P. Smucker

Name: Timothy P. Smucker

Title:   Co-Chief Executive Officer

/s/ Richard K. Smucker

Name: Richard K. Smucker

Title:   Co-Chief Executive Officer

/s/ Steven J. Ellcessor

Name: Steven J. Ellcessor

Title:   Chief Financial Officer

Sequential Page
No. 22

INDEX OF EXHIBITS

That are filed with the Commission and

The New York Stock Exchange

Assigned		Sequential
Exhibit No.*	Description	Page No.
10	1998 Equity and Performance Incentive Plan

* Exhibits 2, 3, 4, 11, 15, 18, 19, 22, 23, 24, 27 and 99 are either inapplicable to the Company or require no answer.

EX-10 3 l97773aexv10.txt EX-10 1998 EQUITY AND PERFORMANCE INCENTIVE PLAN Exhibit 10 THE J. M. SMUCKER COMPANY 1998 EQUITY AND PERFORMANCE INCENTIVE PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF OCTOBER 29, 2002) 1. PURPOSE. The purpose of the 1998 Equity and Performance Incentive Plan (As Amended and Restated Effective as of October 29, 2002) is to attract and retain consultants, officers and other key employees for The J. M. Smucker Company, an Ohio corporation, and its Subsidiaries and to provide to such persons incentives and rewards for superior performance. 2. DEFINITIONS. As used in this Plan, "Appreciation Right" means a right granted pursuant to Section 5 of this Plan, and shall include both Tandem Appreciation Rights and Free-Standing Appreciation Rights. "Base Price" means the price to be used as the basis for determining the Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem Appreciation Right. "Board" means the Board of Directors of the Company and, to the extent of any delegation by the Board to a committee (or subcommittee thereof) pursuant to Section 15 of this Plan, such committee (or subcommittee). "Change in Control" shall have the meaning provided in Section 11 of this Plan. "Common Shares" means common shares, without par value, of the Company or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 10 of this Plan. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Company" means The J. M. Smucker Company, an Ohio corporation. "Covered Employee" means a Participant who is, or is determined by the Board to be likely to become, a "covered employee" within the meaning of Section 162(m) of the Code (or any successor provision). "Date of Grant" means the date specified by the Board on which a grant of Option Rights, Appreciation Rights, Performance Shares or Performance Units or a grant or sale of Restricted Shares or Deferred Shares shall become effective (which date shall not be earlier than the date on which the Board takes action with respect thereto). "Deferral Period" means the period of time during which Deferred Shares are subject to deferral limitations under Section 7 of this Plan. "Deferred Shares" means an award made pursuant to Section 7 of this Plan of the right to receive Common Shares at the end of a specified Deferral Period. "Director" means a member of the Board of Directors of the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time. "Evidence of Award" means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee which sets forth the terms and conditions of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares or Performance Units. An Evidence of Award may be in any electronic medium, may be limited to a notation on the books and records of the Company and, with the approval of the Committee, need not be signed by a representative of the Company or a Participant. "Free-Standing Appreciation Right" means an Appreciation Right granted pursuant to Section 5 of this Plan that is not granted in tandem with an Option Right. "Incentive Stock Options" means Option Rights that are intended to qualify as "incentive stock options" under Section 422 of the Code or any successor provision. "Management Objectives" means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares or Performance Units or, when so determined by the Board, Option Rights, Appreciation Rights, Restricted Shares and dividend credits pursuant to this Plan. Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or of the Subsidiary, division, department, region or function within the Company or Subsidiary in which the Participant is employed. The Management Objectives may be made relative to the performance of other corporations. The Management Objectives applicable to any award to a Covered Employee that is intended to comply with Section 162(m) of the Code shall be based on specified levels of or growth in one or more of the following criteria: 1. cash flow/net assets ratio; 2. debt/capital ratio; 3. return on total capital; 4. return on equity; 5. return on assets; 6. earnings per share; 7. revenue; 8. total return to shareholders; 9. margin performance; and 10. return on invested capital. 2 If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Management Objectives unsuitable, the Committee may in its discretion modify such Management Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable, except in the case of a Covered Employee where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code. In such case, the Committee shall not make any modification of the Management Objectives or minimum acceptable level of achievement. "Market Value per Share" means, as of any particular date, (i) the closing sale price per Common Share as reported on new York Stock Exchange on the Date of Grant, or if there are no sales on such day, on the next preceding trading day during which a sale occurred, or (ii) if clause (i) does not apply, the fair market value of the Common Shares as determined by the Board. "Optionee" means the optionee named in an Evidence of Award evidencing an outstanding Option Right. "Option Price" means the purchase price payable on exercise of an Option Right. "Option Right" means the right to purchase Common Shares upon exercise of an option granted pursuant to Section 4 of this Plan. "Participant" means a person who is selected by the Board to receive benefits under this Plan and who is at the time a consultant, an officer, or other key employee of the Company or any one or more of its Subsidiaries, or who has agreed to commence serving in any of such capacities within 90 days of the Date of Grant. "Performance Period" means, in respect of a Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating to such Performance Share or Performance Unit are to be achieved. "Performance Share" means a bookkeeping entry that records the equivalent of one Common Share awarded pursuant to Section 8 of this Plan. "Performance Unit" means a bookkeeping entry that records a unit equivalent to $1.00 awarded pursuant to Section 8 of this Plan. "Plan" means The J. M. Smucker Company 1998 Equity and Performance Incentive Plan (As Amended and Restated Effective as of October 29, 2002). 3 "Restricted Shares" means Common Shares granted or sold pursuant to Section 6 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers referred to in such Section 6 has expired. "Spread" means the excess of the Market Value per Share on the date when an Appreciation Right is exercised, or on the date when Option Rights are surrendered in payment of the Option Price of other Option Rights, over the Option Price or Base Price provided for in the related Option Right or Free-Standing Appreciation Right, respectively. "Subsidiary" means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company except that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, "Subsidiary" means any corporation in which at the time the Company owns or controls, directly or indirectly, more than 50 percent of the total combined voting power represented by all classes of stock issued by such corporation. "Tandem Appreciation Right" means an Appreciation Right granted pursuant to Section 5 of this Plan that is granted in tandem with an Option Right. "Voting Power" means at any time, the total votes relating to the then-outstanding securities entitled to vote generally in the election of Directors. 3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as provided in Section 3(b) and Section 10 of this Plan, the number of Common Shares that may be issued or transferred (i) upon the exercise of Option Rights or Appreciation Rights, (ii) as Restricted Shares and released from substantial risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of Performance Shares or Performance Units that have been earned or (v) in payment of dividend equivalents paid with respect to awards made under the Plan shall not exceed in the aggregate 3,793,140 Common Shares, plus any shares described in Section 3(b). Such shares may be shares of original issuance or treasury shares or a combination of the foregoing. The 3,793,140 maximum number of Common Shares described above consists of 1,323,140 Common Shares that were approved in 1998 (as adjusted to reflect the combination of the Company's former Class A and Class B common shares in 2000 and the merger of the Jif/Crisco businesses in 2002), and 2,470,000 Common Shares that were added by the Amendment and Restatement Effective as of September 1, 2002. (b) The number of shares available in Section 3(a) above shall be adjusted to account for shares relating to awards that expire, are forfeited or are transferred, surrendered or relinquished upon the payment of any Option Price by the transfer to the Company of Common Shares or upon satisfaction of any withholding amount. Upon payment in cash of the benefit 4 provided by any award granted under this Plan, any shares that were covered by that award shall again be available for issue or transfer hereunder. (c) Notwithstanding anything in this Section 3, or elsewhere in this Plan, to the contrary and subject to adjustment as provided in Section 10 of this Plan, (i) the aggregate number of Common Shares actually issued or transferred by the Company upon the exercise of Incentive Stock Options shall not exceed 3,793,140 Common Shares; (ii) no Participant shall be granted Option Rights and Appreciation Rights, in the aggregate, for more than 300,000 Common Shares during any calendar year; and (iii) the number of shares issued as Restricted Shares and Deferred Shares shall not exceed 925,295 Common Shares in total, consisting of 425,295 Common Shares provided for in 1998 (as adjusted for the combination and the Jif/Crisco transaction) and 500,000 Common Shares added by the Amendment and Restatement Effective as of September 1, 2002, and no more than 50 percent of the total number of Shares issuable as Restricted Shares and Deferred Shares under this Section 3(c)(iii) may be issued as Deferred Shares. (d) Notwithstanding any other provision of this Plan to the contrary, in no event shall any Participant in any calendar year receive an award of Performance Shares or Performance Units having an aggregate maximum value as of their respective Dates of Grant in excess of $1,000,000. 4. OPTION RIGHTS. The Board may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of options to purchase Common Shares. Each such grant may utilize any or all of the authorizations, and shall be subject to all of the requirements contained in the following provisions: (a) Each grant shall specify the number and class of Common Shares to which it pertains subject to the limitations set forth in Section 3 of this plan. (b) Each grant shall specify an Option Price per share, which may not be less than the Market Value per Share on the Date of Grant. (c) Each grant shall specify whether the Option Price shall be payable (i) in cash or by check acceptable to the Company, (ii) by the actual or constructive transfer to the Company of Common Shares owned by the Optionee for at least 6 months (or other consideration authorized pursuant to Section 4(d) having a value at the time of exercise equal to the total Option Price, or (iii) by a combination of such methods of payment. (d) The Board may determine, at or after the Date of Grant, that payment of the Option Price of any Option Right (other than an Incentive Stock Option) may also be made in whole or in part in the form of Restricted Shares or other Common Shares that are forfeitable or subject to restrictions on transfer, Deferred Shares, Performance Shares (based, in each case, on the Market Value per Share on the date of exercise), other Option Rights (based on the Spread on the date of exercise) or Performance Units. Unless otherwise determined by the Board at or after the Date of Grant, whenever any Option Price is paid in whole or in part by means of any of the 5 forms of consideration specified in this Section 4(d), the Common Shares received upon the exercise of the Option Rights shall be subject to such risks of forfeiture or restrictions on transfer as may correspond to any that apply to the consideration surrendered, but only to the extent, determined with respect to the consideration surrendered, of (i) the number of shares or Performance Shares, (ii) the Spread of any unexercisable portion of Option Rights, or (iii) the stated value of Performance Units. (e) Any grant may provide for deferred payment of the Option Price from the proceeds of sale through a broker on a date satisfactory to the Company of some or all of the shares to which such exercise relates. (f) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised. (g) Each grant shall specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary that is necessary before the Option Rights or installments thereof will become exercisable and may provide for the earlier exercise of such Option Rights in the event of a Change in Control. (h) Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights. (i) Option Rights granted under this Plan may be (i) options, including, without limitation, Incentive Stock Options, that are intended to qualify under particular provisions of the Code, (ii) options that are not intended so to qualify, or (iii) combinations of the foregoing. (j) The Board may, at or after the Date of Grant of any Option Rights (other than Incentive Stock Options), provide for the payment of dividend equivalents to the Optionee on either a current or deferred or contingent basis or may provide that such equivalents shall be credited against the Option Price. (k) The exercise of an Option Right shall result in the cancellation on a share-for-share basis of any Tandem Appreciation Right authorized under Section 5 of this Plan. (l) No Option Right shall be exercisable more than 10 years from the Date of Grant. (m) Each grant of Option Rights shall be evidenced by an Evidence of Award, which shall contain such terms and provisions, consistent with this Plan, as the Board may approve. 5. APPRECIATION RIGHTS. (a) The Board may authorize the granting (i) to any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A Tandem Appreciation Right 6 shall be a right of the Optionee, exercisable by surrender of the related Option Right, to receive from the Company an amount determined by the Board, which shall be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights may be granted at any time prior to the exercise or termination of the related Option Rights; provided, however, that a Tandem Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently with such Incentive Stock Option. A Free-Standing Appreciation Right shall be a right of the Participant to receive from the Company an amount determined by the Board, which shall be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise. (b) Each grant of Appreciation Rights may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (i) Any grant may specify that the amount payable on exercise of an Appreciation Right may be paid by the Company in cash, in Common Shares or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives. (ii) Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Board at the Date of Grant. (iii) Any grant may specify waiting periods before exercise and permissible exercise dates or periods. (iv) Any grant may specify that such Appreciation Right may be exercised only in the event of, or earlier in the event of, a Change in Control. (v) Any grant may provide for the payment to the Participant of dividend equivalents thereon in cash or Common Shares on a current, deferred or contingent basis. (vi) Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such Rights. (vii) Each grant of Appreciation Rights shall be evidenced by an Evidence of Award, which shall describe such Appreciation Rights, identify the related Option Rights (if applicable), state that such Appreciation Rights are subject to all the terms and conditions of this Plan, and contain such other terms and provisions, consistent with this Plan, as the Board may approve. (c) Any grant of Tandem Appreciation Rights shall provide that such Rights may be exercised only at a time when the related Option Right is also exercisable and at a time when the Spread is positive, and by surrender of the related Option Right for cancellation. 7 (d) Regarding Free-standing Appreciation Rights only: (i) Each grant shall specify in respect of each Free-standing Appreciation Right a Base Price, which shall be equal to or greater or less than the Market Value per Share on the Date of Grant; (ii) Successive grants may be made to the same Participant regardless of whether any Free-standing Appreciation Rights previously granted to the Participant remain unexercised; and (iii) No Free-standing Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant. 6. RESTRICTED SHARES. The Board may also authorize the grant or sale of Restricted Shares to Participants. Each such grant or sale may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each such grant or sale shall constitute an immediate transfer of the ownership of Common Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than Market Value per Share at the Date of Grant. (c) Each such grant or sale shall provide that the Restricted Shares covered by such grant or sale shall be subject to a "substantial risk of forfeiture" within the meaning of Section 83 of the Code for a period of not less than 3 years to be determined by the Board at the Date of Grant and may provide for the earlier lapse of such substantial risk of forfeiture in the event of a Change in Control. (d) Each such grant or sale shall provide that during the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Board at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee). (e) Any grant of Restricted Shares may specify Management Objectives that, if achieved, will result in termination or early termination of the restrictions applicable to such shares. Each grant may specify in respect of such Management Objectives a minimum acceptable level of achievement and may set forth a formula for determining the number of 8 Restricted Shares on which restrictions will terminate if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives. (f) Any such grant or sale of Restricted Shares may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and reinvested in additional Restricted Shares, which may be Subject to the same restrictions as the underlying award. (g) Each grant or sale of Restricted Shares shall be evidenced by an Evidence of Award, which shall contain such terms and provisions, consistent with this Plan, as the Board may approve. The Board may require that certificates representing Restricted Shares shall be held in custody by the Company until all restrictions thereon shall have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such Shares. Such Shares shall bear an appropriate legend indicating the nature of the restrictions provided for in this Section. 7. DEFERRED SHARES. The Board may also authorize the granting or sale of Deferred Shares to Participants. Each such grant or sale may utilize any or all of the authorizations, and shall be subject to all of the requirements contained in the following provisions: (a) Each such grant or sale shall constitute the agreement by the Company to deliver Common Shares to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the Deferral Period as the Board may specify. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant. (c) Each such grant or sale shall be subject to a Deferral Period of not less than 1 year, as determined by the Board at the Date of Grant, and may provide for the earlier lapse or other modification of such Deferral Period in the event of a Change in Control. (d) During the Deferral Period, the Participant shall have no right to transfer any rights under his or her award and shall have no rights of ownership in the Deferred Shares and shall have no right to vote them, but the Board may, at or after the Date of Grant, authorize the payment of dividend equivalents on such Shares on either a current or deferred or contingent basis, either in cash or in additional Common Shares. (e) Each grant or sale of Deferred Shares shall be evidenced by an Evidence of Award, which shall contain such terms and provisions, consistent with this Plan, as the Board may approve. 8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also authorize the granting of Performance Shares and Performance Units that will become payable to a 9 Participant upon achievement of specified Management Objectives. Each such grant may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each grant shall specify the number of Performance Shares or Performance Units to which it pertains, which number may be subject to adjustment to reflect changes in compensation or other factors; provided, however, that no such adjustment shall be made in the case of a Covered Employee where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code. (b) The Performance Period with respect to each Performance Share or Performance Unit shall be such period of time (not less than 3 years), commencing with the Date of Grant as shall be determined by the Board at the time of grant which may be subject to earlier lapse or other modification in the event of a Change in Control as set forth in the Evidence of Award. (c) Any grant of Performance Shares or Performance Units shall specify Management Objectives which, if achieved, will result in payment or early payment of the award, and each grant may specify in respect of such specified Management Objectives a minimum acceptable level of achievement and shall set forth a formula for determining the number of Performance Shares or Performance Units that will be earned if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives. The grant of Performance Shares or Performance Units shall specify that, before the Performance Shares or Performance Units shall be earned and paid, the Board must certify that the Management Objectives have been satisfied. (d) Each grant shall specify the time and manner of payment of Performance Shares or Performance Units that have been earned. Any grant may specify that the amount payable with respect thereto may be paid by the Company in cash, in Common Shares or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives. (e) Any grant of Performance Shares may specify that the amount payable with respect thereto may not exceed a maximum specified by the Board at the Date of Grant. Any grant of Performance Units may specify that the amount payable or the number of Common Shares issued with respect thereto may not exceed maximums specified by the Board at the Date of Grant. (f) The Board may, at or after the Date of Grant of Performance Shares, provide for the payment of dividend equivalents to the holder thereof on either a current or deferred or contingent basis, either in cash or in additional Common Shares. (g) Each grant of Performance Shares or Performance Units shall be evidenced by an Evidence of Award, which shall state that such Performance Shares or 10 Performance Units are subject to all the terms and conditions of this Plan, and contain such other terms and provisions, consistent with this Plan, as the Board may approve. 9. TRANSFERABILITY. (a) Except as otherwise determined by the Board, no Option Right, Appreciation Right or other derivative security granted under the Plan shall be transferable by a Participant other than by will or the laws of descent and distribution. Except as otherwise determined by the Board, Option Rights and Appreciation Rights shall be exercisable during the Optionee's lifetime only by him or her or by his or her guardian or legal representative. (b) The Board may specify at the Date of Grant that part or all of the Common Shares that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Deferral Period applicable to Deferred Shares or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, shall be subject to further restrictions on transfer. 10. ADJUSTMENTS. The Board may make or provide for such adjustments in the numbers of Common Shares covered by outstanding Option Rights, Appreciation Rights, Deferred Shares, and Performance Shares granted hereunder, in the prices per share applicable to such Option Rights and Appreciation Rights and in the kind of shares covered thereby, as the Board, in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event, the Board, in its discretion, may provide in substitution for any or all outstanding awards under this Plan such alternative consideration as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. The Board may also make or provide for such adjustments in the numbers of shares specified in Section 3 of this Plan as the Board in its sole discretion, exercised in good faith, may determine is appropriate to reflect any transaction or event described in this Section 10; provided, however, that any such adjustment to the number specified in Section 3(c)(i) shall be made only if and to the extent that such adjustment would not cause any Option intended to qualify as an Incentive Stock Option to fail so to qualify. 11. CHANGE IN CONTROL. For purposes of this Plan, except as may be otherwise prescribed by the Board in an Evidence of Award, a "Change in Control" shall have occurred if at any time any of the following events shall have occurred: (a) A filing pursuant to any federal or state law in connection with any tender offer for shares of the Company (other than a tender offer by the Company); 11 (b) The occurrence of or the signing of any agreement for a merger, consolidation, combination (as defined in Section 1701.01(Q), Ohio Revised Code), or majority share acquisition (as defined in Section 1701.01(R), Ohio Revised Code) involving the Company and as a result of which the holders of shares of the Company prior to the transaction become, or will become, by reason of the transaction, the holders of such number of shares of the surviving or acquiring corporation as entitle them to exercise less than one-third of the voting power of such corporation in the election of directors; (c) The signing of any agreement for the sale of all or substantially all of the assets of the Company; (d) The adoption of any resolution of reorganization or dissolution of the Company by the shareholders; (e) The occurrence of any other event or series of events, which, in the opinion of the Board of Directors, will, or is likely to, if carried out, result in a change of control of the Company; (f) If during any period of two consecutive years, individuals who at the beginning of such period constitute the Directors of the Company cease for any reason to constitute a majority thereof (unless the election, or the nomination for election by the Company's shareholders, of each Director of the Company first elected during such period was approved by a vote of at least two-thirds of the Directors then still in office who were Directors of the Company at the beginning of any such period); or (g) The acquisition by any person (including a group within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act other than the Company (or any of its Subsidiaries) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting power of the Company's then outstanding voting securities, unless such acquisition is approved by the vote of at least two-thirds of the Directors of the Company then in office. 12. FRACTIONAL SHARES. The Company shall not be required to issue any fractional Common Shares pursuant to this Plan. The Board may provide for the elimination of fractions or for the settlement of fractions in cash. 13. WITHHOLDING TAXES. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Board) may include relinquishment of a portion of such benefit. The Company and a Participant or such other person may also make similar arrangements with respect to the payment of any taxes with respect to which withholding is not 12 required. For options issued after June 30, 2000, the Company shall withhold no more than the minimum tax withholding required by law. 14. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or combination of grants under this Plan, the Board may provide for such special terms for awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America as the Board may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Board may approve such supplements to or amendments, restatements or alternative versions of this Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, shall include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the shareholders of the Company. 15 ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by the Board, which may from time to time delegate all or any part of its authority under this Plan to a committee of the Board (or subcommittee thereof) consisting of not less than three non-employee Directors appointed by the Board. A majority of the committee (or subcommittee) shall constitute a quorum, and the action of the members of the committee (or subcommittee) present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the committee (or subcommittee). To the extent of any such delegation, references in this Plan to the Board shall be deemed to be references to any such committee or subcommittee. (b) The interpretation and construction by the Board of any provision of this Plan or of any Evidence of Award and any determination by the Board pursuant to any provision of this Plan or of any such Evidence of Award shall be final and conclusive. No member of the Board shall be liable for any such action or determination made in good faith. 16 AMENDMENTS, ETC. (a) The Board may at any time and from time to time amend the Plan in whole or in part; provided, however, that (i) any amendment which must be approved by the shareholders of the Company in order to comply with applicable law or a specific rule of the New York Stock Exchange, or if the Common Shares are not traded on the New York Stock Exchange, the principal national securities exchange upon which the Common Shares are traded or quoted, shall not be effective unless and until such approval has been obtained, and (ii) approval by a majority of the votes cast at a properly and duly called meeting of the shareholders of the Company shall be required for any amendment that would empower the Board either (x) to in any way modify the Option Price of an Option Right other than as provided in Section 10 of this Plan, or (y) to materially modify or waive any conditions or restrictions on or Management Objectives relating to any Deferred Shares, Restricted Shares, Performance Shares, or Performance Units issued under this Plan. Presentation of this Plan or any amendment hereof for shareholder approval shall not be construed to limit the Company's authority to offer similar or dissimilar benefits under other plans without shareholder approval. 13 (b) The Board shall not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Option Right to reduce the Option Price. Furthermore, no Option Right shall be canceled and replaced with awards having a lower Option Price without further approval of the shareholders of the Company. This Section 16(b) is intended to prohibit the repricing of "underwater" Option Rights and shall not be construed to prohibit the adjustments provided for in Section 10 of this Plan. (c) The Board also may permit Participants to elect to defer the issuance of Common Shares or the settlement of awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of this Plan. The Board also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts. (d) The Board may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant. (e) In case of termination of employment by reason of death, disability or normal or early retirement, or in the case of hardship or other special circumstances, of a Participant who holds an Option Right or Appreciation Right not immediately exercisable in full, or any Restricted Shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Deferred Shares as to which the Deferral Period has not been completed, or any Performance Shares or Performance Units which have not been fully earned, or who holds Common Shares subject to any transfer restriction imposed pursuant to Section 9(b) of this Plan, the Board may, in its sole discretion, accelerate the time at which such Option Right or Appreciation Right may be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Deferral Period will end or the time at which such Performance Shares or Performance Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award. (f) This Plan shall not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor shall it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant's employment or other service at any time. (g) To the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision shall be null and void with respect to such Option Right. Such provision, however, shall remain in effect for other Option Rights and there shall be no further effect on any provision of this Plan. Approved by Shareholders 8/13/02 (effective 9/1/02) Amended and Restated by the Executive Compensation Committee 10/29/02 14 10-Q 4 l97773ae10vqxpdfy.pdf COURTESY COPY OF SMUCKER'S 10-Q begin 644 l97773ae10vqxpdfy.pdf M)5!$1BTQ+C(-)>+CS],-"C@W(#`@;V)J#3P\(`TO3&EN96%R:7IE9"`Q(`TO M3R`X.2`-+T@@6R`W,S4@-#4W(%T@#2],(#(T-SDU-B`-+T4@,C(S-3<@#2]. 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EX-10

                                                                      Exhibit 10

                            THE J. M. SMUCKER COMPANY

                   1998 EQUITY AND PERFORMANCE INCENTIVE PLAN
           (AS AMENDED AND RESTATED EFFECTIVE AS OF OCTOBER 29, 2002)

         1. PURPOSE. The purpose of the 1998 Equity and Performance Incentive
Plan (As Amended and Restated Effective as of October 29, 2002) is to attract
and retain consultants, officers and other key employees for The J. M. Smucker
Company, an Ohio corporation, and its Subsidiaries and to provide to such
persons incentives and rewards for superior performance.

         2. DEFINITIONS. As used in this Plan,

                  "Appreciation Right" means a right granted pursuant to Section
5 of this Plan, and shall include both Tandem Appreciation Rights and
Free-Standing Appreciation Rights.

                  "Base Price" means the price to be used as the basis for
determining the Spread upon the exercise of a Free-Standing Appreciation Right
and a Tandem Appreciation Right.

                  "Board" means the Board of Directors of the Company and, to
the extent of any delegation by the Board to a committee (or subcommittee
thereof) pursuant to Section 15 of this Plan, such committee (or subcommittee).

                  "Change in Control" shall have the meaning provided in Section
11 of this Plan.

                  "Common Shares" means common shares, without par value, of the
Company or any security into which such Common Shares may be changed by reason
of any transaction or event of the type referred to in Section 10 of this Plan.

                  "Code" means the Internal Revenue Code of 1986, as amended
from time to time.

                  "Company" means The J. M. Smucker Company, an Ohio
corporation.

                  "Covered Employee" means a Participant who is, or is
determined by the Board to be likely to become, a "covered employee" within the
meaning of Section 162(m) of the Code (or any successor provision).

                  "Date of Grant" means the date specified by the Board on which
a grant of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares or Deferred Shares shall become
effective (which date shall not be earlier than the date on which the Board
takes action with respect thereto).

                  "Deferral Period" means the period of time during which
Deferred Shares are subject to deferral limitations under Section 7 of this
Plan.

                  "Deferred Shares" means an award made pursuant to Section 7 of
this Plan of the right to receive Common Shares at the end of a specified
Deferral Period.

                  "Director" means a member of the Board of Directors of the
Company.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, as such law, rules and
regulations may be amended from time to time.

                  "Evidence of Award" means an agreement, certificate,
resolution or other type or form of writing or other evidence approved by the
Committee which sets forth the terms and conditions of Option Rights,
Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares or
Performance Units. An Evidence of Award may be in any electronic medium, may be
limited to a notation on the books and records of the Company and, with the
approval of the Committee, need not be signed by a representative of the Company
or a Participant.

                  "Free-Standing Appreciation Right" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is not granted in tandem with an
Option Right.

                  "Incentive Stock Options" means Option Rights that are
intended to qualify as "incentive stock options" under Section 422 of the Code
or any successor provision.

                  "Management Objectives" means the measurable performance
objective or objectives established pursuant to this Plan for Participants who
have received grants of Performance Shares or Performance Units or, when so
determined by the Board, Option Rights, Appreciation Rights, Restricted Shares
and dividend credits pursuant to this Plan. Management Objectives may be
described in terms of Company-wide objectives or objectives that are related to
the performance of the individual Participant or of the Subsidiary, division,
department, region or function within the Company or Subsidiary in which the
Participant is employed. The Management Objectives may be made relative to the
performance of other corporations. The Management Objectives applicable to any
award to a Covered Employee that is intended to comply with Section 162(m) of
the Code shall be based on specified levels of or growth in one or more of the
following criteria:

                  1.       cash flow/net assets ratio;
                  2.       debt/capital ratio;
                  3.       return on total capital;
                  4.       return on equity;
                  5.       return on assets;
                  6.       earnings per share;
                  7.       revenue;
                  8.       total return to shareholders;
                  9.       margin performance; and
                 10.      return on invested capital.

                                       2

                  If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the Company, or the
manner in which it conducts its business, or other events or circumstances
render the Management Objectives unsuitable, the Committee may in its discretion
modify such Management Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems appropriate and
equitable, except in the case of a Covered Employee where such action would
result in the loss of the otherwise available exemption of the award under
Section 162(m) of the Code. In such case, the Committee shall not make any
modification of the Management Objectives or minimum acceptable level of
achievement.

                  "Market Value per Share" means, as of any particular date, (i)
the closing sale price per Common Share as reported on new York Stock Exchange
on the Date of Grant, or if there are no sales on such day, on the next
preceding trading day during which a sale occurred, or (ii) if clause (i) does
not apply, the fair market value of the Common Shares as determined by the
Board.

                  "Optionee" means the optionee named in an Evidence of Award
evidencing an outstanding Option Right.

                  "Option Price" means the purchase price payable on exercise of
an Option Right.

                  "Option Right" means the right to purchase Common Shares upon
exercise of an option granted pursuant to Section 4 of this Plan.

                  "Participant" means a person who is selected by the Board to
receive benefits under this Plan and who is at the time a consultant, an
officer, or other key employee of the Company or any one or more of its
Subsidiaries, or who has agreed to commence serving in any of such capacities
within 90 days of the Date of Grant.

                  "Performance Period" means, in respect of a Performance Share
or Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating to such Performance Share
or Performance Unit are to be achieved.

                  "Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this Plan.

                  "Performance Unit" means a bookkeeping entry that records a
unit equivalent to $1.00 awarded pursuant to Section 8 of this Plan.

                  "Plan" means The J. M. Smucker Company 1998 Equity and
Performance Incentive Plan (As Amended and Restated Effective as of October 29,
2002).

                                       3

                  "Restricted Shares" means Common Shares granted or sold
pursuant to Section 6 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 6 has
expired.

                  "Spread" means the excess of the Market Value per Share on the
date when an Appreciation Right is exercised, or on the date when Option Rights
are surrendered in payment of the Option Price of other Option Rights, over the
Option Price or Base Price provided for in the related Option Right or
Free-Standing Appreciation Right, respectively.

                  "Subsidiary" means a corporation, company or other entity (i)
more than 50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are, or
(ii) which does not have outstanding shares or securities (as may be the case in
a partnership, joint venture or unincorporated association), but more than 50
percent of whose ownership interest representing the right generally to make
decisions for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive
Stock Options, "Subsidiary" means any corporation in which at the time the
Company owns or controls, directly or indirectly, more than 50 percent of the
total combined voting power represented by all classes of stock issued by such
corporation.

                  "Tandem Appreciation Right" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is granted in tandem with an
Option Right.

                  "Voting Power" means at any time, the total votes relating to
the then-outstanding securities entitled to vote generally in the election of
Directors.

         3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 3(b) and Section 10 of this Plan, the number of Common
Shares that may be issued or transferred (i) upon the exercise of Option Rights
or Appreciation Rights, (ii) as Restricted Shares and released from substantial
risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of
Performance Shares or Performance Units that have been earned or (v) in payment
of dividend equivalents paid with respect to awards made under the Plan shall
not exceed in the aggregate 3,793,140 Common Shares, plus any shares described
in Section 3(b). Such shares may be shares of original issuance or treasury
shares or a combination of the foregoing. The 3,793,140 maximum number of Common
Shares described above consists of 1,323,140 Common Shares that were approved in
1998 (as adjusted to reflect the combination of the Company's former Class A and
Class B common shares in 2000 and the merger of the Jif/Crisco businesses in
2002), and 2,470,000 Common Shares that were added by the Amendment and
Restatement Effective as of September 1, 2002.

                  (b) The number of shares available in Section 3(a) above shall
be adjusted to account for shares relating to awards that expire, are forfeited
or are transferred, surrendered or relinquished upon the payment of any Option
Price by the transfer to the Company of Common Shares or upon satisfaction of
any withholding amount. Upon payment in cash of the benefit

                                       4

provided by any award granted under this Plan, any shares that were covered by
that award shall again be available for issue or transfer hereunder.

                  (c) Notwithstanding anything in this Section 3, or elsewhere
in this Plan, to the contrary and subject to adjustment as provided in Section
10 of this Plan, (i) the aggregate number of Common Shares actually issued or
transferred by the Company upon the exercise of Incentive Stock Options shall
not exceed 3,793,140 Common Shares; (ii) no Participant shall be granted Option
Rights and Appreciation Rights, in the aggregate, for more than 300,000 Common
Shares during any calendar year; and (iii) the number of shares issued as
Restricted Shares and Deferred Shares shall not exceed 925,295 Common Shares in
total, consisting of 425,295 Common Shares provided for in 1998 (as adjusted for
the combination and the Jif/Crisco transaction) and 500,000 Common Shares added
by the Amendment and Restatement Effective as of September 1, 2002, and no more
than 50 percent of the total number of Shares issuable as Restricted Shares and
Deferred Shares under this Section 3(c)(iii) may be issued as Deferred Shares.

                  (d) Notwithstanding any other provision of this Plan to the
contrary, in no event shall any Participant in any calendar year receive an
award of Performance Shares or Performance Units having an aggregate maximum
value as of their respective Dates of Grant in excess of $1,000,000.

         4. OPTION RIGHTS. The Board may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants of
options to purchase Common Shares. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the requirements contained in the
following provisions:

                  (a) Each grant shall specify the number and class of Common
Shares to which it pertains subject to the limitations set forth in Section 3 of
this plan.

                  (b) Each grant shall specify an Option Price per share, which
may not be less than the Market Value per Share on the Date of Grant.

                  (c) Each grant shall specify whether the Option Price shall be
payable (i) in cash or by check acceptable to the Company, (ii) by the actual or
constructive transfer to the Company of Common Shares owned by the Optionee for
at least 6 months (or other consideration authorized pursuant to Section 4(d)
having a value at the time of exercise equal to the total Option Price, or (iii)
by a combination of such methods of payment.

                  (d) The Board may determine, at or after the Date of Grant,
that payment of the Option Price of any Option Right (other than an Incentive
Stock Option) may also be made in whole or in part in the form of Restricted
Shares or other Common Shares that are forfeitable or subject to restrictions on
transfer, Deferred Shares, Performance Shares (based, in each case, on the
Market Value per Share on the date of exercise), other Option Rights (based on
the Spread on the date of exercise) or Performance Units. Unless otherwise
determined by the Board at or after the Date of Grant, whenever any Option Price
is paid in whole or in part by means of any of the

                                       5

forms of consideration specified in this Section 4(d), the Common Shares
received upon the exercise of the Option Rights shall be subject to such risks
of forfeiture or restrictions on transfer as may correspond to any that apply to
the consideration surrendered, but only to the extent, determined with respect
to the consideration surrendered, of (i) the number of shares or Performance
Shares, (ii) the Spread of any unexercisable portion of Option Rights, or (iii)
the stated value of Performance Units.

                  (e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a broker on a date satisfactory to the
Company of some or all of the shares to which such exercise relates.

                  (f) Successive grants may be made to the same Participant
whether or not any Option Rights previously granted to such Participant remain
unexercised.

                  (g) Each grant shall specify the period or periods of
continuous service by the Optionee with the Company or any Subsidiary that is
necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change in Control.

                  (h) Any grant of Option Rights may specify Management
Objectives that must be achieved as a condition to the exercise of such rights.

                  (i) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.

                  (j) The Board may, at or after the Date of Grant of any Option
Rights (other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents shall be credited against the Option Price.

                  (k) The exercise of an Option Right shall result in the
cancellation on a share-for-share basis of any Tandem Appreciation Right
authorized under Section 5 of this Plan.

                  (l) No Option Right shall be exercisable more than 10 years
from the Date of Grant.

                  (m) Each grant of Option Rights shall be evidenced by an
Evidence of Award, which shall contain such terms and provisions, consistent
with this Plan, as the Board may approve.

         5. APPRECIATION RIGHTS. (a) The Board may authorize the granting (i) to
any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted
hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A
Tandem Appreciation Right

                                       6

shall be a right of the Optionee, exercisable by surrender of the related Option
Right, to receive from the Company an amount determined by the Board, which
shall be expressed as a percentage of the Spread (not exceeding 100 percent) at
the time of exercise. Tandem Appreciation Rights may be granted at any time
prior to the exercise or termination of the related Option Rights; provided,
however, that a Tandem Appreciation Right awarded in relation to an Incentive
Stock Option must be granted concurrently with such Incentive Stock Option. A
Free-Standing Appreciation Right shall be a right of the Participant to receive
from the Company an amount determined by the Board, which shall be expressed as
a percentage of the Spread (not exceeding 100 percent) at the time of exercise.

                  (b) Each grant of Appreciation Rights may utilize any or all
of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:

                           (i) Any grant may specify that the amount payable on
         exercise of an Appreciation Right may be paid by the Company in cash,
         in Common Shares or in any combination thereof and may either grant to
         the Participant or retain in the Board the right to elect among those
         alternatives.

                           (ii) Any grant may specify that the amount payable on
         exercise of an Appreciation Right may not exceed a maximum specified by
         the Board at the Date of Grant.

                           (iii) Any grant may specify waiting periods before
         exercise and permissible exercise dates or periods.

                           (iv) Any grant may specify that such Appreciation
         Right may be exercised only in the event of, or earlier in the event
         of, a Change in Control.

                           (v) Any grant may provide for the payment to the
         Participant of dividend equivalents thereon in cash or Common Shares on
         a current, deferred or contingent basis.

                           (vi) Any grant of Appreciation Rights may specify
         Management Objectives that must be achieved as a condition of the
         exercise of such Rights.

                           (vii) Each grant of Appreciation Rights shall be
         evidenced by an  Evidence of Award, which shall describe such
         Appreciation Rights, identify the related Option Rights (if
         applicable), state that such Appreciation Rights are subject to all the
         terms and conditions of this Plan, and contain such other terms and
         provisions, consistent with this Plan, as the Board may approve.

                  (c) Any grant of Tandem Appreciation Rights shall provide that
such Rights may be exercised only at a time when the related Option Right is
also exercisable and at a time when the Spread is positive, and by surrender of
the related Option Right for cancellation.

                                       7

                  (d) Regarding Free-standing Appreciation Rights only:

                           (i) Each grant shall specify in respect of each
                  Free-standing Appreciation Right a Base Price, which shall be
                  equal to or greater or less than the Market Value per Share on
                  the Date of Grant;

                           (ii) Successive grants may be made to the same
                  Participant regardless of whether any Free-standing
                  Appreciation Rights previously granted to the Participant
                  remain unexercised; and

                           (iii) No Free-standing Appreciation Right granted
                  under this Plan may be exercised more than 10 years from the
                  Date of Grant.

         6. RESTRICTED SHARES. The Board may also authorize the grant or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:

                  (a) Each such grant or sale shall constitute an immediate
transfer of the ownership of Common Shares to the Participant in consideration
of the performance of services, entitling such Participant to voting, dividend
and other ownership rights, but subject to the substantial risk of forfeiture
and restrictions on transfer hereinafter referred to.

                  (b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.

                  (c) Each such grant or sale shall provide that the Restricted
Shares covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period of not
less than 3 years to be determined by the Board at the Date of Grant and may
provide for the earlier lapse of such substantial risk of forfeiture in the
event of a Change in Control.

                  (d) Each such grant or sale shall provide that during the
period for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or restricted in
the manner and to the extent prescribed by the Board at the Date of Grant (which
restrictions may include, without limitation, rights of repurchase or first
refusal in the Company or provisions subjecting the Restricted Shares to a
continuing substantial risk of forfeiture in the hands of any transferee).

                  (e) Any grant of Restricted Shares may specify Management
Objectives that, if achieved, will result in termination or early termination of
the restrictions applicable to such shares. Each grant may specify in respect of
such Management Objectives a minimum acceptable level of achievement and may set
forth a formula for determining the number of

                                       8

Restricted Shares on which restrictions will terminate if performance is at or
above the minimum level, but falls short of full achievement of the specified
Management Objectives.

                  (f) Any such grant or sale of Restricted Shares may require
that any or all dividends or other distributions paid thereon during the period
of such restrictions be automatically deferred and reinvested in additional
Restricted Shares, which may be Subject to the same restrictions as the
underlying award.

                  (g) Each grant or sale of Restricted Shares shall be evidenced
by an Evidence of Award, which shall contain such terms and provisions,
consistent with this Plan, as the Board may approve. The Board may require that
certificates representing Restricted Shares shall be held in custody by the
Company until all restrictions thereon shall have lapsed, together with a stock
power or powers executed by the Participant in whose name such certificates are
registered, endorsed in blank and covering such Shares. Such Shares shall bear
an appropriate legend indicating the nature of the restrictions provided for in
this Section.

         7. DEFERRED SHARES. The Board may also authorize the granting or sale
of Deferred Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements
contained in the following provisions:

                  (a) Each such grant or sale shall constitute the agreement by
the Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify.

                  (b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than the Market Value per Share at the Date of Grant.

                  (c) Each such grant or sale shall be subject to a Deferral
Period of not less than 1 year, as determined by the Board at the Date of Grant,
and may provide for the earlier lapse or other modification of such Deferral
Period in the event of a Change in Control.

                  (d) During the Deferral Period, the Participant shall have no
right to transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them, but the
Board may, at or after the Date of Grant, authorize the payment of dividend
equivalents on such Shares on either a current or deferred or contingent basis,
either in cash or in additional Common Shares.

                  (e) Each grant or sale of Deferred Shares shall be evidenced
by an Evidence of Award, which shall contain such terms and provisions,
consistent with this Plan, as the Board may approve.

         8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also
authorize the granting of Performance Shares and Performance Units that will
become payable to a

                                       9

Participant upon achievement of specified Management Objectives. Each such grant
may utilize any or all of the authorizations, and shall be subject to all of the
requirements, contained in the following provisions:

                  (a) Each grant shall specify the number of Performance Shares
or Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment shall be made in the case of a Covered Employee
where such action would result in the loss of the otherwise available exemption
of the award under Section 162(m) of the Code.

                  (b) The Performance Period with respect to each Performance
Share or Performance Unit shall be such period of time (not less than 3 years),
commencing with the Date of Grant as shall be determined by the Board at the
time of grant which may be subject to earlier lapse or other modification in the
event of a Change in Control as set forth in the Evidence of Award.

                  (c) Any grant of Performance Shares or Performance Units shall
specify Management Objectives which, if achieved, will result in payment or
early payment of the award, and each grant may specify in respect of such
specified Management Objectives a minimum acceptable level of achievement and
shall set forth a formula for determining the number of Performance Shares or
Performance Units that will be earned if performance is at or above the minimum
level, but falls short of full achievement of the specified Management
Objectives. The grant of Performance Shares or Performance Units shall specify
that, before the Performance Shares or Performance Units shall be earned and
paid, the Board must certify that the Management Objectives have been satisfied.

                  (d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the Company
in cash, in Common Shares or in any combination thereof and may either grant to
the Participant or retain in the Board the right to elect among those
alternatives.

                  (e) Any grant of Performance Shares may specify that the
amount payable with respect thereto may not exceed a maximum specified by the
Board at the Date of Grant. Any grant of Performance Units may specify that the
amount payable or the number of Common Shares issued with respect thereto may
not exceed maximums specified by the Board at the Date of Grant.

                  (f) The Board may, at or after the Date of Grant of
Performance Shares, provide for the payment of dividend equivalents to the
holder thereof on either a current or deferred or contingent basis, either in
cash or in additional Common Shares.

                  (g) Each grant of Performance Shares or Performance Units
shall be evidenced by an Evidence of Award, which shall state that such
Performance Shares or

                                       10

Performance Units are subject to all the terms and conditions of this Plan, and
contain such other terms and provisions, consistent with this Plan, as the Board
may approve.

         9. TRANSFERABILITY. (a) Except as otherwise determined by the Board, no
Option Right, Appreciation Right or other derivative security granted under the
Plan shall be transferable by a Participant other than by will or the laws of
descent and distribution. Except as otherwise determined by the Board, Option
Rights and Appreciation Rights shall be exercisable during the Optionee's
lifetime only by him or her or by his or her guardian or legal representative.

                  (b) The Board may specify at the Date of Grant that part or
all of the Common Shares that are (i) to be issued or transferred by the Company
upon the exercise of Option Rights or Appreciation Rights, upon the termination
of the Deferral Period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or Performance Units or (ii) no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions on transfer.

         10. ADJUSTMENTS. The Board may make or provide for such adjustments in
the numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Deferred Shares, and Performance Shares granted hereunder, in the prices
per share applicable to such Option Rights and Appreciation Rights and in the
kind of shares covered thereby, as the Board, in its sole discretion, exercised
in good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants or Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it, in good faith, may determine to
be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 3 of this Plan as the
Board in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section 10;
provided, however, that any such adjustment to the number specified in Section
3(c)(i) shall be made only if and to the extent that such adjustment would not
cause any Option intended to qualify as an Incentive Stock Option to fail so to
qualify.

         11. CHANGE IN CONTROL. For purposes of this Plan, except as may be
otherwise prescribed by the Board in an Evidence of Award, a "Change in Control"
shall have occurred if at any time any of the following events shall have
occurred:

                  (a) A filing pursuant to any federal or state law in
connection with any tender offer for shares of the Company (other than a tender
offer by the Company);

                                       11

                  (b) The occurrence of or the signing of any agreement for a
merger, consolidation, combination (as defined in Section 1701.01(Q), Ohio
Revised Code), or majority share acquisition (as defined in Section 1701.01(R),
Ohio Revised Code) involving the Company and as a result of which the holders of
shares of the Company prior to the transaction become, or will become, by reason
of the transaction, the holders of such number of shares of the surviving or
acquiring corporation as entitle them to exercise less than one-third of the
voting power of such corporation in the election of directors;

                  (c) The signing of any agreement for the sale of all or
substantially all of the assets of the Company;

                  (d) The adoption of any resolution of reorganization or
dissolution of the Company by the shareholders;

                  (e) The occurrence of any other event or series of events,
which, in the opinion of the Board of Directors, will, or is likely to, if
carried out, result in a change of control of the Company;

                  (f) If during any period of two consecutive years, individuals
who at the beginning of such period constitute the Directors of the Company
cease for any reason to constitute a majority thereof (unless the election, or
the nomination for election by the Company's shareholders, of each Director of
the Company first elected during such period was approved by a vote of at least
two-thirds of the Directors then still in office who were Directors of the
Company at the beginning of any such period); or

                  (g) The acquisition by any person (including a group within
the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act other than the
Company (or any of its Subsidiaries) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined
voting power of the Company's then outstanding voting securities, unless such
acquisition is approved by the vote of at least two-thirds of the Directors of
the Company then in office.

         12. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.

         13. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board) may include relinquishment
of a portion of such benefit. The Company and a Participant or such other person
may also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not

                                       12

required. For options issued after June 30, 2000, the Company shall withhold no
more than the minimum tax withholding required by law.

         14. FOREIGN EMPLOYEES. In order to facilitate the making of any grant
or combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments or restatements, however, shall include any
provisions that are inconsistent with the terms of this Plan as then in effect
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the shareholders of the Company.

         15 ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by
the Board, which may from time to time delegate all or any part of its authority
under this Plan to a committee of the Board (or subcommittee thereof) consisting
of not less than three non-employee Directors appointed by the Board. A majority
of the committee (or subcommittee) shall constitute a quorum, and the action of
the members of the committee (or subcommittee) present at any meeting at which a
quorum is present, or acts unanimously approved in writing, shall be the acts of
the committee (or subcommittee). To the extent of any such delegation,
references in this Plan to the Board shall be deemed to be references to any
such committee or subcommittee.

                  (b) The interpretation and construction by the Board of any
provision of this Plan or of any Evidence of Award and any determination by the
Board pursuant to any provision of this Plan or of any such Evidence of Award
shall be final and conclusive. No member of the Board shall be liable for any
such action or determination made in good faith.

         16 AMENDMENTS, ETC. (a) The Board may at any time and from time to time
amend the Plan in whole or in part; provided, however, that (i) any amendment
which must be approved by the shareholders of the Company in order to comply
with applicable law or a specific rule of the New York Stock Exchange, or if the
Common Shares are not traded on the New York Stock Exchange, the principal
national securities exchange upon which the Common Shares are traded or quoted,
shall not be effective unless and until such approval has been obtained, and
(ii) approval by a majority of the votes cast at a properly and duly called
meeting of the shareholders of the Company shall be required for any amendment
that would empower the Board either (x) to in any way modify the Option Price of
an Option Right other than as provided in Section 10 of this Plan, or (y) to
materially modify or waive any conditions or restrictions on or Management
Objectives relating to any Deferred Shares, Restricted Shares, Performance
Shares, or Performance Units issued under this Plan. Presentation of this Plan
or any amendment hereof for shareholder approval shall not be construed to limit
the Company's authority to offer similar or dissimilar benefits under other
plans without shareholder approval.

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                  (b) The Board shall not, without the further approval of the
shareholders of the Company, authorize the amendment of any outstanding Option
Right to reduce the Option Price. Furthermore, no Option Right shall be canceled
and replaced with awards having a lower Option Price without further approval of
the shareholders of the Company. This Section 16(b) is intended to prohibit the
repricing of "underwater" Option Rights and shall not be construed to prohibit
the adjustments provided for in Section 10 of this Plan.

                  (c) The Board also may permit Participants to elect to defer
the issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of this Plan. The Board also may provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.

                  (d) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or deferral by
the Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Company or a Subsidiary to the
Participant.

                  (e) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any Restricted Shares
as to which the substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, or any Deferred Shares as to which the Deferral
Period has not been completed, or any Performance Shares or Performance Units
which have not been fully earned, or who holds Common Shares subject to any
transfer restriction imposed pursuant to Section 9(b) of this Plan, the Board
may, in its sole discretion, accelerate the time at which such Option Right or
Appreciation Right may be exercised or the time at which such substantial risk
of forfeiture or prohibition or restriction on transfer will lapse or the time
when such Deferral Period will end or the time at which such Performance Shares
or Performance Units will be deemed to have been fully earned or the time when
such transfer restriction will terminate or may waive any other limitation or
requirement under any such award.

                  (f) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Company or
any Subsidiary, nor shall it interfere in any way with any right the Company or
any Subsidiary would otherwise have to terminate such Participant's employment
or other service at any time.

                  (g) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as an Incentive Stock
Option from qualifying as such, that provision shall be null and void with
respect to such Option Right. Such provision, however, shall remain in effect
for other Option Rights and there shall be no further effect on any provision of
this Plan.

Approved by Shareholders 8/13/02 (effective 9/1/02)
Amended and Restated by the Executive Compensation Committee 10/29/02


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