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NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT
XXXXXXX PURINA COMPANY (the "Company"), effective September 26, 1996,
grants this Non-Qualified Performance Stock Option to [NAME] ("Optionee") to
purchase a total of [SHARES] shares of Common Stock of the Company ("Stock") at
a price of $67.25 per share pursuant to its 1996 Incentive Stock Plan (the
"Plan"). One-half of the total shares subject to this Option Agreement are
defined as "Base Award" shares and the remaining half are defined as "Peer Group
Award" shares.
Subject to the provisions of the Plan and the following terms, Optionee may
exercise this Option from time to time by tendering to the Company written
notice of exercise together with the purchase price in (a) cash or by check,
bank draft or money order payable to the order of the Company; (b) shares of
previously acquired Stock, which have been duly endorsed and are free of any
restrictions and encumbrances; or (c) any combination of (a) or (b). Shares of
Stock used to pay the purchase price must have been owned by Optionee for at
least six months, and will be valued as of the date of exercise at their Fair
Market Value as defined in the Plan. In the event of any conflict between the
terms of the Plan and the terms of this Option Agreement, the terms of this
Option Agreement shall prevail.
1. Definitions. Unless otherwise defined in this Option Agreement, defined
terms used herein shall have the same meaning as set forth in the Plan.
"Change of Control" shall occur when (i) a person, as defined
under the securities laws of the United States, acquires beneficial
ownership of more than 50% of the outstanding voting securities of the
Company; or (ii) the directors of the Company immediately before a
business combination between the Company and another entity, or a
proxy contest for the election of directors, shall, as a result
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thereof, cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company.
"Company Service" shall mean vesting service credited to Optionee
under the Xxxxxxx Purina Retirement Plan or a successor plan or, if
Optionee does not participate in such plan, the period of Optionee's
continuous service as an employee of the Company and/or its affiliates
ending at retirement or other termination;
"Committee" shall mean the Human Resources Committee of the Board
of Directors of the Company, or any successor committee of the Board.
"Date of Grant" shall mean September 26, 1996.
"Involuntary Termination of Employment" shall mean Optionee's
involuntary termination of employment by the Company or any of its
wholly owned subsidiaries, other than a Termination for Cause or a
termination directly related to the occurrence of events described in
Section IV, paragraphs A.3 or 4 of the Plan. An Involuntary
Termination of Employment shall include, but is not limited to, the
sale or other disposition of the stock of a subsidiary, or of
substantially all of the assets of a subsidiary or division, by which
the Optionee is employed, if, following such event, the Optionee is no
longer employed by the Company or one of its wholly owned
subsidiaries.
"Peer Group" shall mean, at Date of Grant, the companies
comprising Standard & Poor's Foods Index, those comprising Standard &
Poor's Household Products Index, Duracell, and Xxxxxxxx; and
thereafter, such other companies as may, from time to time, be
selected in accordance with paragraph 2 of this Option Agreement.
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"Peer Group Target" shall be deemed achieved if Total Shareholder
Return for the Company for any relevant period is within the top 25th
percentile of Total Shareholder Return of members of the Peer Group
for such period.
"Performance Price Target" shall be deemed achieved if the
closing price for a share of Stock, as quoted in the New York
Stock Exchange Composite Transactions, as of a Target Date is
equal to or exceeds the price for such date set forth in the
Stock Performance Table below.
Stock Performance Table
Stock Price at Date of Grant: $67.25
Target Date Performance Price
Target
September 26, 1997 $70.61
December 31, 1997 $71.48
March 31, 1998 $72.36
June 30, 1998 $73.24
September 26, 1998 $74.14
December 31, 1998 $75.05
March 31, 1999 $75.97
June 30, 1999 $76.91
September 26, 1999 $77.85
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December 31, 1999 $78.81
March 31, 2000 $79.77
June 30, 2000 $80.75
September 26, 2000 $81.74
December 31, 2000 $82.75
March 31, 2001 $83.76
June 30, 2001 $84.79
September 26, 2001 $85.83
December 31, 2001 $86.88
March 31, 2002 $87.95
June 30, 2002 $89.03
September 26, 2002 $90.12
December 31, 2002 $91.23
March 31, 2003 $92.35
June 30, 2003 $93.48
September 26, 2003 $94.63
December 31, 2003 $95.79
March 31, 2004 $96.96
June 30, 2004 $98.15
September 26, 2004 $99.36
December 31, 2004 $100.58
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March 31, 2005 $101.81
June 30, 2005 $103.06
"Plan" shall mean the Company's 1996 Incentive Stock Plan.
"Service Vesting Requirement" shall, subject to achievement of
the Performance Price Target or the Peer Group Target, as the case may
be, be deemed satisfied with respect to the Base Award and Peer Group
Award shares at the rate of 33-1/3% of the shares of their respective
portions of the Option on September 26 of the years 1998, 2001 and
2004.
"Special Separation" shall mean a termination of employment
designated in writing as such at the sole discretion of the Chief
Executive Officer.
"Stock" shall mean shares of the Company's Common Stock, par
value $.10 per share.
"Target Date" shall mean any anniversary of the Date of Grant, or
the last day of a calendar quarter between any such anniversary dates,
during the Term of this Option.
"Term" of this Option shall mean the period from Date of Grant
through September 25, 2006.
"Termination for Cause" shall mean Optionee's termination of
employment with the Company because of the willful engaging by
Optionee in gross misconduct; provided, however, that a Termination
for Cause shall not include termination attributable to (i) poor work
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performance, bad judgment or negligence on the part of Optionee, (ii)
an act or omission believed by Optionee in good faith to have been in
or not opposed to the best interests of the Company and reasonably
believed by Optionee to be lawful, or (iii) the good faith conduct of
Optionee in connection with a Change of Control (including opposition
to or support of such Change of Control).
"Total Shareholder Return" for a member of the Peer Group in any
specified period during the term of this Option shall mean the
increase in value, between September 26, 1996 and the end of any such
period, of an investment in a share of common stock of such Peer Group
member based on the closing price for such stock quoted in the New
York Stock Exchange-Composite Transactions, assuming reinvestment of
all dividends paid during that time. If there are no prices so
reported, then the Committee may exercise its discretion to determine
Total Shareholder Return for that Peer Group member in a manner it
deems reasonable under the circumstances.
2. Normal Exercise - Base Award. The Base Award shares become exercisable at
the rate of 33-1/3% of the total of such shares granted on September 26 in
each of the years 1998, 2001 and 2004, provided that the relevant
Performance Price Target is met on that date. The shares with respect to
which the applicable Service Vesting Requirement has been met, but for
which the corresponding Performance Price Target has not been met, remain
unexercisable until the earliest Target Date thereafter on which the
Performance Price Target associated with such Target Date as set forth in
the Stock Performance Table in paragraph 1 of this Agreement is met. If
the New York Stock Exchange is closed on any of such dates, then the
applicable Performance Price Target must be met on the next trading day
thereafter. Subject to the forfeiture provisions of paragraph 3 below, the
requirement that Performance Price Targets be achieved shall be waived on
September 26, 2005, and any unexercised Base Award shares are exercisable
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on or after that date. Once both the Service Vesting Requirement and
Performance Price Target are met with respect to Base Award shares, such
shares remain exercisable through September 25, 2006, unless Optionee is no
longer employed by the Company, in which case the Option is exercisable
only to the extent permitted by paragraph 5 below.
Normal Exercise - Peer Group Award. The Peer Group Award shares become
exercisable at the rate of 33-1/3% of the total of such shares granted on
September 26 in each of the years 1998, 2001 and 2004, provided that the
Peer Group Target is met on that date. The shares with respect to which the
applicable Service Vesting Requirement has been met but for which the
corresponding Peer Group Target has not been met remain unexercisable until
the last day of the earliest calendar quarter (or anniversary date)
thereafter on which the Peer Group Target is met. If the New York Stock
Exchange is closed on any of such dates, then the applicable Peer Group
Target must be calculated as of the next trading day thereafter. The
Company will notify Optionee no less than ten business days after a
quarter-end (or an anniversary, if applicable) date on which a Peer Group
Target is met with respect to any Peer Group Award shares for which the
Service Vesting Requirement has been met. Once both the Service Vesting
Requirement and Peer Group Target are met or waived with respect to Peer
Group Award shares, such shares remain exercisable through September 25,
2006, unless Optionee is no longer employed by the Company, in which case
the Option is exercisable only to the extent permitted by paragraph 5
below.
The Human Resources Committee of the Company retains the right, in its sole
discretion, to determine which companies shall be deemed to constitute the
performance Peer Group for purposes of this Option. In exercising its
discretion, the Committee may at any time add or delete companies from the
Peer Group or select one or more new Peer Group indices to augment or
replace previously designated indices. Optionee will be notified in
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writing of any such changes. Companies included in an index will be
reflected in the calculation of Total Shareholder Return for a particular
measurement period only to the extent and in such manner as is deemed
appropriate by the Committee in its sole discretion.
3. Forfeiture. Prior to a Change of Control, if Optionee terminates
employment (i) voluntarily before age 55, or (ii) voluntarily or
involuntarily upon the occurrence of events described in Section IV,
paragraphs A.1, 3 or 4 of the Plan, Optionee shall forfeit in their
entirety all unexercised Base Award and Peer Group Award shares, whether or
not exercisable at the time of termination; and such shares shall not
thereafter be exercisable.
Prior to a Change of Control, the Committee may in its discretion declare
an event of forfeiture upon the occurrence of events described in Section
IV, paragraphs A.3 or A.4 of the Plan. If Optionee's employment is not
terminated in connection with such declaration, then Optionee shall forfeit
only that portion of the Base Award and Peer Group Award shares which were
not otherwise exercisable at the time of the declaration of forfeiture. Any
shares that were exercisable at the time of such event will remain
exercisable only for the period set forth in paragraph 5.D.
This Option is not subject to forfeiture for any reason after a Change in
Control.
4. Acceleration of Exercisability. Notwithstanding the Normal Exercise
provisions of paragraph 2, but subject to the forfeiture provisions of
paragraph 3, the conditions on exercise described in paragraph 2 will be
waived or adjusted as described in this paragraph upon the occurrence of
any of the following events on or after September 26, 1997:
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A. The termination of Optionee's employment with the Company on or after
the date Optionee attains the age of 55;
B. The Optionee's Involuntary Termination of Employment;
C. The declaration of Optionee's total and permanent disability during
Optionee's employment with the Company;
D. Optionee's death while employed with the Company.
Service Vesting Requirement: Upon the occurrence of any of the events
described above, the Service Vesting Requirement for both the Base Award
shares and the Peer Group Award shares shall be waived.
Performance Price Target - Base Award shares: Upon the occurrence of any
of the events described above, the Performance Price Target for all
unexercised Base Award shares for which a Performance Price Target had not
previously been met shall thereafter be fixed as of the Target Date listed
on the Stock Performance Table which nearest precedes the date of such
event, and the Optionee may exercise such Base Award shares if that fixed
Performance Price Target is met on any day during the applicable exercise
period. If Optionee has more than six months to exercise the Option, the
Performance Price Target shall remain fixed up to six months prior to the
end of the exercise period, or September 26, 2005, whichever is earlier.
The Performance Price Target shall be waived for all unexercised Base Award
shares when the entire or remaining exercise period is six months or less.
Peer Group Target - Peer Group Award shares: The Peer Group Target shall
not be waived or adjusted as a result of the occurrence of any of the
events described above. However, should the Peer Group Target not be met
on a Target Date prior to ten business days before the end of the
Optionee's exercise period as described in paragraph 5, but be met on a
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Target Date within ten days prior to the end of such period, the exercise
period shall be automatically extended 30 days after its original
expiration date, but in no event beyond September 25, 2006.
Notwithstanding the above, upon a Change of Control, all conditions to
exercise which have not been met as of such Change of Control are waived,
and all Base Award shares and Peer Group Award shares which have not
previously been forfeited or exercised will be immediately exercisable.
5. Exercise After Certain Events. Subject to the terms set forth in
paragraphs 3 and 4 regarding acceleration and forfeiture, any Base Award
shares or Peer Group Award shares which are exercisable at the time of the
following events, or which become exercisable because of the occurrence of
such events, shall remain exercisable for the period indicated below, but
in no event later than September 25, 2006:
A. (i) Optionee's Involuntary Termination of Employment, (ii) Optionee's
voluntary termination of employment at or after age 62, or (iii)
Optionee's voluntary termination of employment at or after age 55 with
at least 15 years of Company Service: five years following such event.
B. Optionee's voluntary termination of employment at or after age 55 but
with less than 15 years of Company Service: six months following such
event.
C. Optionee's death or the declaration of Optionee's total and permanent
disability: five years following such event.
D. (i) Prior to a Change of Control, a declaration of forfeiture as a
result of the occurrence of the events described in Section IV,
paragraphs A.3 and A.4, if Optionee's employment does not terminate on
account of such conduct; or (ii) following a Change of Control,
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occurrence of the events described in Section IV, paragraph A.1, A.3
or A.4: seven days following the event.
6. Repayment of Gain. Optionee agrees to pay to the Company an amount in cash
equal to the difference between the Option exercise price and the Fair
Market Value of a share of Stock as of the date of exercise of the Option,
multiplied by the number of shares exercised before payment of taxes
("Recoverable Gain"), if Optionee terminates employment within one year
after such exercise of this Option for reasons other than events described
in paragraph 4, subparagraphs A, B, C or D hereof or a Special Separation.
Such payment shall be made within 10 days of Optionee's date of
termination.
Optionee hereby grants the Company the right, exercisable at its discretion
and to the extent permitted by law, to withhold from any and all amounts
payable to Optionee by the Company an amount equal to the Recoverable Gain,
in full or partial satisfaction of Optionee's obligation to the Company
pursuant to this paragraph 6.
Optionee agrees to execute, at the time of each exercise of this Option, an
acknowledgment of the terms and conditions of this paragraph 6.
Optionee acknowledges and agrees that the Company's grant of this Option,
and Optionee's acceptance thereof subject to the terms herein set forth, do
not constitute a contract of employment between the parties and do not
limit any rights the Company otherwise has to terminate Optionee's
employment at any time.
The provisions of this paragraph 6 regarding repayment of Recoverable Gain
shall be void with respect to termination of employment after a Change of
Control.
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7. Adjustments. Upon any stock split-up, stock dividend, issuance of any
targeted stock, combination or reclassification with respect to any
outstanding class or series of Stock, or consolidation, merger or sale of
all or substantially all of the assets of the Company, the Committee shall
cause appropriate adjustments to be made to the terms of this Award.
8. Employment with the Company. All references to Optionee's employment
status in this Option Agreement shall refer to Optionee's employment with
the Company or any of its wholly-owned subsidiaries.
9. Severability. The invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of the
remainder hereof in that jurisdiction, or the validity or enforceability of
this Option, including that provision, in any other jurisdiction. To the
extent permitted by applicable law, the Company and Optionee each waive any
provision of law that renders any provision hereof invalid, prohibited or
unenforceable in any respect. If any provision of this Option is held to
be unenforceable for any reason, it shall be adjusted rather than voided,
if possible, in order to achieve the intent of the parties to the extent
possible.
10. Governing Law. The validity, interpretation and effect of this Agreement
shall be governed exclusively by the laws of the State of Missouri, without
giving effect to the conflict of laws provisions thereof.
ACKNOWLEDGED AND ACCEPTED: XXXXXXX PURINA COMPANY
Optionee
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By:
X. X. Xxxxxxx
Date Chairman of the Board and
Chief Executive Officer
Location
