SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 2007
Commission file number 1-4858
INTERNATIONAL FLAVORS & FRAGRANCES INC.
(Exact name of registrant as specified in its charter)
New York 13-1432060
-------------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
521 West 57th Street, New York, N.Y. 10019-2960
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 765-5500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Number of shares outstanding as of July 27, 2007: 89,344,457
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(Unaudited)
ASSETS 6/30/07 12/31/06
---------------------------------------------------------------------------------------- ------------- -------------
Current Assets:
Cash and cash equivalents $ 124,171 $ 114,508
Short-term investments 583 604
Trade receivables 427,608 369,870
Allowance for doubtful accounts (12,597) (12,715)
Inventories: Raw materials 218,854 213,675
Work in process 9,201 12,686
Finished goods 226,682 220,245
------------- -------------
Total Inventories 454,737 446,606
Deferred income taxes 64,255 89,448
Other current assets 95,559 71,482
------------- -------------
Total Current Assets 1,154,316 1,079,803
------------- -------------
Property, Plant and Equipment, at cost 1,103,172 1,074,772
Accumulated depreciation (620,311) (579,648)
------------- -------------
482,861 495,124
------------- -------------
Goodwill 665,582 665,582
Intangible Assets, net 73,023 80,134
Other Assets 171,206 158,261
------------- -------------
Total Assets $ 2,546,988 $ 2,478,904
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY 6/30/07 12/31/06
---------------------------------------------------------------------------------------- ------------- -------------
Current Liabilities:
Bank borrowings and overdrafts $ 18,982 $ 15,897
Accounts payable 114,157 111,661
Accrued payrolls and bonuses 39,383 71,976
Dividends payable 19,017 18,764
Income taxes - 45,251
Other current liabilities 160,408 183,222
------------- -------------
Total Current Liabilities 351,947 446,771
------------- -------------
Other Liabilities:
Long-term debt 785,774 791,443
Deferred gains 63,172 64,686
Retirement liabilities 167,664 170,719
Other liabilities 183,775 100,117
------------- -------------
Total Other Liabilities 1,200,385 1,126,965
------------- -------------
Commitments and Contingencies (Note 12)
Shareholders' Equity:
Common stock 12 1/2 cents par value; authorized 500,000,000 shares;
issued 115,761,840 shares 14,470 14,470
Capital in excess of par value 84,823 96,635
Retained earnings 2,011,852 1,909,599
Accumulated other comprehensive income:
Cumulative translation adjustment (14,852) (31,854)
Accumulated gains (losses) on derivatives qualifying as hedges (net of tax) 155 (2,465)
Pension and postemployment liability adjustment (net of tax) (156,011) (162,553)
------------- -------------
1,940,437 1,823,832
Treasury stock, at cost - 26,470,300 shares in 2007 and 26,344,638 shares in 2006 (945,781) (918,664)
------------- -------------
Total Shareholders' Equity 994,656 905,168
------------- -------------
Total Liabilities and Shareholders' Equity $ 2,546,988 $ 2,478,904
============= =============
See Notes to Consolidated Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
3 Months Ended 6/30 6 Months Ended 6/30
------------------------------- -------------------------------
2007 2006 2007 2006
-------------- --------------- -------------- ---------------
Net sales $ 573,726 $ 530,505 $ 1,139,827 $ 1,041,937
-------------- --------------- -------------- ---------------
Cost of goods sold 327,668 302,889 657,050 597,707
Research and development expenses 48,760 45,588 95,392 91,190
Selling and administrative expenses 91,198 87,684 182,469 173,272
Amortization of intangibles 3,555 3,711 7,111 7,421
Restructuring and other charges - (304) - 357
Interest expense 8,396 6,300 16,710 11,673
Other (income) expense, net (2,819) (286) (2,986) 153
-------------- --------------- -------------- ---------------
476,758 445,582 955,746 881,773
-------------- --------------- -------------- ---------------
Income before taxes on income 96,968 84,923 184,081 160,164
Taxes on income 18,596 23,741 43,020 45,292
-------------- --------------- -------------- ---------------
Net income 78,372 61,182 141,061 114,872
Other comprehensive income:
Foreign currency translation adjustments 17,659 9,517 17,002 14,354
Accumulated gains (losses) on derivatives qualifying
as hedges (net of tax) 1,177 (18,553) 2,620 (17,747)
Pension and postemployment plan
adjustment (net of tax) 2,756 - 6,542 -
-------------- --------------- -------------- ---------------
Comprehensive income $ 99,964 $ 52,146 $ 167,225 $ 111,479
============== =============== ============== ===============
Net Income per share - basic $0.88 $0.67 $1.58 $1.26
Net Income per share - diluted $0.87 $0.67 $1.56 $1.25
Average number of shares outstanding - basic 89,174 90,869 89,276 91,202
Average number of shares outstanding - diluted 90,124 91,787 90,391 91,997
Dividends declared per share $0.210 $0.185 $0.420 $0.370
See Notes to Consolidated Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
Six Months Ended June 30,
--------------------------------
2007 2006
-------------- ---------------
Cash flows from operating activities:
Net income $ 141,061 $ 114,872
Adjustments to reconcile to net cash provided by operations:
Depreciation and amortization 42,287 44,602
Deferred income taxes 4,629 329
Gain on disposal of assets (6,737) (3,881)
Equity based compensation 8,248 8,094
Changes in assets and liabilities:
Current receivables (54,058) (60,327)
Inventories (1,258) 1,163
Current payables (38,535) (2,336)
Changes in other assets 2,361 16,358
Changes in other liabilities 1,836 1,886
-------------- ---------------
Net cash provided by operations 99,834 120,760
-------------- ---------------
Cash flows from investing activities:
Net change in short-term investments (311) 25
Additions to property, plant and equipment (21,331) (19,806)
Proceeds from disposal of assets 8,751 6,504
-------------- ---------------
Net cash used in investing activities (12,891) (13,277)
-------------- ---------------
Cash flows from financing activities:
Cash dividends paid to shareholders (37,230) (33,990)
Net change in bank borrowings and overdrafts (496) (32,508)
Proceeds from long-term debt - 281,521
Repayments of long-term debt - (499,306)
Proceeds from issuance of stock under stock-based compensation plans 36,461 23,146
Excess tax benefits on stock options exercised 3,914 205
Purchase of treasury stock (80,711) (91,315)
-------------- ---------------
Net cash used in financing activities (78,062) (352,247)
-------------- ---------------
Effect of exchange rate changes on cash and cash equivalents 782 2,052
-------------- ---------------
Net change in cash and cash equivalents 9,663 (242,712)
Cash and cash equivalents at beginning of year 114,508 272,545
-------------- ---------------
Cash and cash equivalents at end of period $ 124,171 $ 29,833
============== ===============
Interest paid $ 19,553 $ 24,051
Income taxes paid $ 21,866 $ 19,594
See Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
------------------------------------------
These interim statements and management's related discussion and analysis
should be read in conjunction with the consolidated financial statements and
their related notes and management's discussion and analysis of results of
operations and financial condition included in the Company's 2006 Annual Report
on Form 10-K. These interim statements are unaudited. In the opinion of the
Company's management, all adjustments, including normal recurring accruals
necessary for a fair presentation of the results for the interim periods, have
been made.
Note 1. New Accounting Pronouncements:
In September 2006, the FASB issued SFAS No. 157 "Fair Value Measurements"
("FAS 157"). This standard defines fair value, establishes a framework for
measuring fair value and expands disclosures regarding fair value measurements.
FAS 157 is effective for years beginning after November 15, 2007. The Company is
currently evaluating the potential impact of this standard.
In February 2007, the FASB issued SFAS 159 "The Fair Value Option for
Financial Assets and Liabilities - Including an amendment of FASB No. 115" ("FAS
159"). This standard allows companies to elect, at specific election dates, to
measure eligible financial assets and liabilities at fair value that are not
otherwise required to be measured at fair value. If a company elects the fair
value option, subsequent changes in that item's fair value must be recognized in
current earnings. FAS 159 is effective for years beginning after November 15,
2007. The Company is currently evaluating the potential impact of this standard.
Note 2. Reclassifications:
Certain reclassifications have been made to the prior period's financial
statements to conform to 2007 classifications.
Note 3. Net Income Per Share:
Net income per share is based on the weighted average number of shares
outstanding. A reconciliation of the shares used in the computation of basic and
diluted net income per share is as follows:
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------- -----------------------------------
(Shares in thousands) 2007 2006 2007 2006
----------------------------------------- ---------------- ---------------- ---------------- ----------------
Basic 89,174 90,869 89,276 91,202
Assumed conversion under stock plan 950 918 1,115 795
---------------- ---------------- ---------------- ----------------
Diluted 90,124 91,787 90,391 91,997
================ ================ ================ ================
Stock options to purchase 142,496 and 131,248 shares were outstanding for
the second quarter and the first six months of 2007, respectively, and 1,014,897
and 1,445,136 for the second quarter and first six months of 2006, respectively,
but were not included in the computation of diluted net income per share for the
respective periods since the impact was anti-dilutive.
Note 4. Restructuring and Other Charges:
As described in Note 2 to the Consolidated Financial Statements in the
Company's 2006 Annual Report, the Company had undertaken a significant
reorganization, including management changes, consolidation of production
facilities and related actions.
Movements in restructuring liabilities, included in Other current
liabilities in the accompanying balance sheet, were (in millions):
Asset-
Employee- Related
Related and Other Total
------------- -------------- --------------
Balance December 31, 2006 $ 12.9 $ 2.4 $ 15.3
Cash and other costs (7.5) (2.1) (9.6)
-------------- ------------- --------------
Balance June 30, 2007 $ 5.4 $ 0.3 $ 5.7
============== ============= ==============
The balance of the employee-related liabilities are expected to be utilized
by 2008 as obligations are satisfied; the asset-related charges are expected to
be utilized in 2007 on final decommissioning and disposal of the affected
equipment.
Note 5. Goodwill and Other Intangible Assets, Net:
Goodwill by operating segment at June 30, 2007 and December 31, 2006 is as
follows:
(DOLLARS IN THOUSANDS) Amount
-------------------------------------------------------- --------------
Flavors $ 319,479
Fragrances 346,103
--------------
Total $ 665,582
==============
Trademark and other intangible assets consist of the following amounts:
June 30, December 31,
(DOLLARS IN THOUSANDS) 2007 2006
------------------------------------------------------ --------------- ----------------
Gross carrying value $ 165,406 $ 165,406
Accumulated amortization 92,383 85,272
--------------- ----------------
Total $ 73,023 $ 80,134
=============== ================
Amortization expense for the six months ended June 30, 2007 was $7.1
million compared to $7.4 million for the six months ended June 30, 2006;
estimated annual amortization is $13 million in 2007, $6 million in 2008 through
2012 and $37 million thereafter.
Note 6. Comprehensive Income:
Changes in the Accumulated other comprehensive income component of
shareholders' equity were as follows:
Accumulated (losses) Pension and
gains on derivatives postemployment
Translation qualifying as hedges, plan adjustment,
(DOLLARS IN THOUSANDS) adjustments net of tax net of tax Total
---------------------------------- -------------------- ------------------------- ---------------------- -------------------
Balance December 31, 2006 $ (31,854) $ (2,465) $ (162,553) $ (196,872)
Change 17,002 2,620 6,542 26,164
-------------------- ------------------------- ---------------------- -------------------
Balance June 30, 2007 $ (14,852) $ 155 $ (156,011) $ (170,708)
==================== ========================= ====================== ===================
Accumulated (losses) Minimum
gains on derivatives pension
Translation qualifying as hedges, obligation,
(DOLLARS IN THOUSANDS) adjustments net of tax net of tax Total
---------------------------------- -------------------- ------------------------- ---------------------- -------------------
Balance December 31, 2005 $ (47,369) $ (2,606) $ (100,380) $ (150,355)
Change 14,354 (17,747) - (3,393)
-------------------- ------------------------- ---------------------- -------------------
Balance June 30, 2006 $ (33,015) $(20,353) $ (100,380) $ (153,748)
==================== ========================= ====================== ===================
Note 7. Borrowings:
Debt consists of the following:
(DOLLARS IN THOUSANDS) Rate Maturities June 30, 2007 December 31, 2006
--------------------------------------------------- ------------- ------------ ---------------------- ----------------------
Bank borrowings and overdrafts $ 18,982 $ 15,897
---------------------- ----------------------
Total current debt 18,982 15,897
---------------------- ----------------------
Senior notes 5.94% 2009-16 375,000 375,000
Bank borrowings 4.29% Various 289,584 287,904
Japanese Yen notes 2.45% 2008-11 120,377 127,684
Other 2011 32 38
Deferred realized gains on interest rate swaps 781 817
---------------------- ----------------------
Total long-term debt 785,774 791,443
---------------------- ----------------------
Total debt $ 804,756 $ 807,340
====================== ======================
Note 8. Income Taxes:
In June 2006, the FASB issued Interpretation No. 48 ("FIN 48"), Accounting
for Uncertainty in Income Taxes, which clarifies the application of FAS 109 by
prescribing the minimum threshold a tax position must meet before being
recognized in the financial statements. Under FIN 48, the financial statement
effect of a tax position is initially recognized when it is more likely than not
the position will be sustained upon examination. A tax position that meets the
"more likely than not" recognition threshold is initially and subsequently
measured as the largest amount of benefit, determined on a cumulative
probability basis, that is more likely than not to be realized upon ultimate
settlement with the taxing authority.
As a result of adopting FIN 48, the Company recognized a $1 million
increase in Other liabilities for unrecognized tax benefits and recorded a
corresponding $1 million cumulative effect adjustment to Shareholders' Equity.
Also as prescribed by FIN 48, certain tax related amounts in the Consolidated
Balance Sheet are classified differently than in prior periods. Amounts
receivable from various tax jurisdictions are now included in Other current
assets and tax reserves previously classified as accrued taxes on income are now
included in Other liabilities.
As of the adoption date, the Company had $73 million of gross unrecognized
tax benefits; if recognized, $72 million, net of federal benefits, would have
been recorded as a component of income tax expense and affect the effective tax
rate. At June 30, 2007, the Company had $71 million of gross unrecognized tax
benefits. If recognized, $70 million, net of federal benefits, would be recorded
as a component of income tax expense and affect the effective tax rate.
The Company has consistently recognized interest and penalties related to
unrecognized tax benefits as a component of income tax expense. At December 31,
2006, the Company had accrued $7 million of interest and penalties. On adoption
of FIN 48, this balance was reclassified to Other liabilities.
The Company conducts business globally and remains open to examination in
several tax jurisdictions for various years from 2000 to 2006. The Company is
currently under examination in several significant tax jurisdictions for various
years from 2001 to 2006. Each examination is expected to be completed during the
next twelve months and it is reasonably possible that a change in certain
unrecognized tax benefits may occur; currently, it is not reasonably possible to
estimate the magnitude of these changes.
During the second quarter 2007, the effective tax rate was favorably
impacted by the reversal of $10 million of previously established tax accruals
no longer required based on rulings obtained from applicable tax jurisdictions.
The effective tax rate for the quarter was 19% compared with 28% in the prior
year quarter, reflecting the above tax ruling benefit. This tax ruling favorably
impacted the effective tax rate for the quarter by approximately 11%.
Note 9. Equity Compensation Plans:
The Company has various plans under which the Company's officers, senior
management, other key employees and directors may be granted equity-based awards
including restricted stock, restricted stock units ("RSU's"), stock settled
appreciation rights ("SSAR's") or stock options to purchase the Company's common
stock.
In 2007, the Company's Board of Directors determined to change the
operating methodology of the Company's Long Term Incentive Plan ("LTIP") for
executive officers and other Company executives beginning with the three year
cycle from 2007 through 2009 and thereafter. Under the modified LTIP plan,
awards will be based on meeting certain targeted financial and/or strategic
goals established by the Compensation Committee of the Board of Directors at the
start of each cycle. The targeted payout of the LTIP 2007 - 2009 cycle and
thereafter will be 50% cash and 50% Company stock. The number of shares for the
50% stock portion will be determined by the closing share price on the first
trading day at the beginning of the cycle. The executive generally must remain
employed with the Company during the cycle to receive the award.
Principal assumptions used in the Binomial model were:
2007 2006
------- --------
Weighted average fair value of options and
SSAR's granted during the period $11.50 $7.60
Assumptions:
Expected volatility 21.8% 21.3%
Expected dividend yield 1.6% 2.1%
Risk-free interest rate 5.0% 5.0%
Expected life, in years 5 5
Stock option and SSAR activity for the six months ended June 30, 2007 was
as follows:
Weighted
Shares Subject to Average
(SHARE AMOUNTS IN THOUSANDS) Options/SSAR's Exercise Price
---------------------------------------------- ----------------- -----------------
Balance at December 31, 2006 3,633 $33.56
Exercised (439) $31.72
Cancelled (4) $30.82
----------------- ------------------
Balance at March 31, 2007 3,190 $33.91
Granted 254 $51.47
Exercised (590) $36.51
Cancelled (53) $41.50
----------------- ------------------
Balance at June 30, 2007 2,801 $35.41
================= ==================
Restricted stock and RSU activity for the six months ended June 30, 2007
was as follows:
Weighted
Average Grant Date
Number Fair Value
(SHARE AMOUNTS IN THOUSANDS) of Shares Per Share
----------------------------------------------- ------------- -------------------
Balance at December 31, 2006 1,346 $37.22
Cancelled (16) $38.10
------------- -------------------
Balance at March 31, 2007 1,330 $37.21
Granted 418 $51.78
Vested (420) $50.89
Cancelled (20) $38.40
------------- -------------------
Balance at June 30, 2007 1,308 $42.53
============= ===================
Pre-tax expense related to all forms of equity compensation were as
follows:
Three Months Ended Six Months Ended
(DOLLARS IN THOUSANDS) 2007 2006 2007 2006
----------------------------------- ------------------ ----------------- -------------- --------------
Restricted stock and RSU's $ 2,971 $ 4,392 $ 6,441 $ 5,915
Stock options and SSAR's 1,000 840 1,807 2,179
------------------ ----------------- -------------- --------------
Total equity compensation expense $ 3,971 $ 5,232 $ 8,248 $ 8,094
================== ================= ============== ==============
Tax related benefits of $1.5 million and $2.6 million were recognized for
the second quarter and first six months of 2007, respectively, and $1.4 million
and $2.6 million for the second quarter and first six months of 2006,
respectively.
Note 10. Segment Information:
On January 1, 2007, the Company was reorganized into two business segments,
Flavors and Fragrances; these segments align with the internal structure used to
manage these businesses. Accounting policies used for segment reporting are
identical to those described in Note 1 of the Notes to the Consolidated
Financial Statements included in the Company's 2006 Annual Report. Prior year
segment information, which had been reported by major geographic region, has
been reclassified to conform to the current presentation.
The Company evaluates the performance of its business segments based on
segment profit which is Income before taxes on income, excluding Interest
expense, Other income (expense), net and the effects of Restructuring and other
charges and accounting changes. The Global Expense caption represents corporate
and headquarters-related expenses which include legal, finance, human resources
and other administrative expenses that are not allocable to individual business
units. Unallocated assets are principally cash, short-term investments and other
corporate and headquarters-related assets.
The Company's reportable segment information follows:
Three Months Ended June 30, 2007
--------------------------------------------------------------------
Global
(DOLLARS IN THOUSANDS) Flavors Fragrances Expenses Consolidated
--------------------------------------------------------------------------------------------------------------------
Net sales $ 252,541 $ 321,185 $ - $ 573,726
====================================================================
Operating profit $ 52,580 $ 58,273 $ (8,308) 102,545
================================================
Interest expense (8,396)
Other income (expense), net 2,819
--------------------
Income before taxes on income $ 96,968
====================
Three Months Ended June 30, 2006
--------------------------------------------------------------------
Global
(DOLLARS IN THOUSANDS) Flavors Fragrances Expenses Consolidated
--------------------------------------------------------------------------------------------------------------------
Net sales $ 226,920 $ 303,585 $ - $ 530,505
====================================================================
Segment profit $ 38,438 $ 58,794 $ (6,599) $ 90,633
Restructuring and other charges 1,625 (897) (424) 304
--------------------------------------------------------------------
Operating profit $ 40,063 $ 57,897 $ (7,023) 90,937
================================================
Interest expense (6,300)
Other income (expense), net 286
--------------------
Income before taxes on income $ 84,923
====================
Six Months Ended June 30, 2007
--------------------------------------------------------------------
Global
(DOLLARS IN THOUSANDS) Flavors Fragrances Expenses Consolidated
--------------------------------------------------------------------------------------------------------------------
Net sales $ 495,983 $ 643,844 $ - $1,139,827
====================================================================
Operating profit $ 97,394 $ 117,141 $(16,730) 197,805
================================================
Interest expense (16,710)
Other income (expense), net 2,986
--------------------
Income before taxes on income $ 184,081
====================
Six Months Ended June 30, 2006
--------------------------------------------------------------------
Global
(DOLLARS IN THOUSANDS) Flavors Fragrances Expenses Consolidated
--------------------------------------------------------------------------------------------------------------------
Net sales $ 446,430 $ 595,507 $ - $1,041,937
====================================================================
Segment profit $ 76,541 $ 110,398 $ (14,592) $ 172,347
Restructuring and other charges 973 (874) (456) (357)
--------------------------------------------------------------------
Operating profit $ 77,514 $ 109,524 $ (15,048) 171,990
================================================
Interest expense (11,673)
Other income (expense), net (153)
--------------------
Income before taxes on income $ 160,164
====================
Segment assets were $973 million for Flavors and $1,245 million for
Fragrances at December 31, 2006. Global segment assets were $261 million at
December 31, 2006. There were no significant changes in segment assets from
December 31, 2006 to June 30, 2007.
Note 11. Retirement Benefits:
Pension expense included the following components:
U.S. Plans Three Months Ended June 30, Six Months Ended June 30,
(DOLLARS IN THOUSANDS) 2007 2006 2007 2006
---------------------------------------------------- ----------------- ----------------- -------------- ----------------
Service cost for benefits earned $ 2,504 $ 2,636 $ 5,008 $ 5,272
Interest cost on projected benefit obligation 5,687 5,465 11,374 10,930
Expected return on plan assets (5,922) (5,493) (11,844) (10,986)
Net amortization and deferrals 1,551 2,015 3,102 4,030
----------------- ----------------- -------------- ----------------
Defined benefit plans 3,820 4,623 7,640 9,246
Defined contribution and other retirement plans 1,667 731 2,662 1,545
----------------- ----------------- -------------- ----------------
Total pension expense $ 5,487 $ 5,354 $ 10,302 $ 10,791
================= ================= ============== ================
Non-U.S. Plans Three Months Ended June 30, Six Months Ended June 30,
(DOLLARS IN THOUSANDS) 2007 2006 2007 2006
---------------------------------------------------- ----------------- ----------------- -------------- ----------------
Service cost for benefits earned $ 2,617 $ 3,189 $ 5,234 $ 6,378
Interest cost on projected benefit obligation 8,173 7,007 16,346 14,014
Expected return on plan assets (12,124) (9,459) (24,248) (18,918)
Net amortization and deferrals 1,395 2,103 2,790 4,206
----------------- ----------------- -------------- ----------------
Defined benefit plans 61 2,840 122 5,680
Defined contribution and other retirement plans 1,029 812 1,938 1,615
----------------- ----------------- -------------- ----------------
Total pension expense $ 1,090 $ 3,652 $ 2,060 $ 7,295
================= ================= ============== ================
The Company expects to contribute $3 million to its qualified U.S. pension
plans in 2007. No contributions were made to these plans in the first six months
of 2007. In the quarter and six months ended June 30, 2007, $1 million and $2
million of benefit payments were made, respectively, with respect to the
non-qualified plan. The Company expects to contribute $24 million to its
non-U.S. pension plans in 2007. In the quarter and six months ended June 30,
2007, $4 million and $7 million of contributions were made, respectively, to
these plans.
Expense recognized for postretirement benefits other than pensions included
the following components:
Three Months Ended June 30, Six Months Ended June 30,
(DOLLARS IN THOUSANDS) 2007 2006 2007 2006
--------------------------------------------- ------------------- ------------------ ----------------- ------------------
Service cost for benefits earned $ 766 $ 856 $ 1,532 $ 1,712
Interest on benefit obligation 1,542 1,575 3,084 3,150
Net amortization and deferrals (37) 191 (74) 382
------------------- ------------------ ----------------- ------------------
Total postretirement benefit expense $ 2,271 $ 2,622 $ 4,542 $ 5,244
=================== ================== ================= ==================
The Company expects to contribute $3 million to its postretirement benefit
plans in 2007. In the quarter and six months ended June 30, 2007, $1 million and
$2 million of contributions were made, respectively.
Note 12. Commitments and Contingencies:
The Company is party to a number of lawsuits and claims related primarily
to flavoring supplied by the Company to manufacturers of butter flavor popcorn.
At each balance sheet date, or more frequently as conditions warrant, the
Company reviews the status of each pending claim, as well as its insurance
coverage for such claims with due consideration given to potentially applicable
deductibles, retentions and reservation of rights under its insurance policies,
and the advice of its outside legal counsel and a third party expert in modeling
insurance deductible amounts with respect to all these matters. While the
ultimate outcome of any litigation cannot be predicted, management believes that
adequate provision has been made with respect to all known claims. Based on
information presently available and in light of the merits of its defenses and
the availability of insurance, the Company does not expect the outcome of the
above cases, singly or in the aggregate, to have a material adverse effect on
the Company's financial condition, results of operation or liquidity. There can
be no assurance that future events will not require the Company to increase the
amount it has accrued for any matter or accrue for a matter that has not been
previously accrued.
The Company has recognized its expected liability with respect to these
claims in Other current liabilities and expected recoveries from its insurance
carrier group in other receivables recorded in Other current assets in the
accompanying balance sheet. The Company believes that realization of the
insurance receivable is probable due to the terms of the insurance policies, the
financial strength of the insurance carrier group and the payment experience to
date of the carrier group as it relates to these claims.
Item 2. Management's Discussion and Analysis of Results of Operations and
---------------------------------------------------------------------------
Financial Condition
-------------------
Overview
--------
The Company is a leading creator and manufacturer of compounds used to
impart or improve the flavor or fragrance in a wide variety of consumer
products.
Fragrance compounds are used in perfumes, cosmetics, toiletries, hair care
products, deodorants, soaps, detergents and softeners as well as air care
products. Flavor products are sold to the food and beverage industries for use
in consumer products such as prepared foods, beverages, dairy, food and
confectionery products. The Company is also a leading manufacturer of synthetic
ingredients used in making fragrances. Approximately 55% of the Company's
ingredient production is consumed internally; the balance is sold to third party
customers.
Changing social habits resulting from such factors as changes in disposable
income, leisure time, health concerns, urbanization and population growth
stimulate demand for consumer products utilizing flavors and fragrances. These
developments expand the market for products with finer fragrance quality, as
well as the market for colognes and toiletries. Such developments also stimulate
demand for convenience foods, soft drinks and low-fat food products that must
conform to expected tastes. These developments necessitate the creation and
development of flavors and fragrances and ingredients that are compatible with
newly introduced materials and methods of application used in consumer products.
Flavors and fragrances are generally:
- created for the exclusive use of a specific customer;
- sold in solid or liquid form, in amounts ranging from a few pounds to
several tons depending on the nature of the end product in which they
are used;
- a small percentage of the volume and cost of the end product sold to the
consumer; and
- a major factor in consumer selection and acceptance of the product.
The flavor and fragrance industry is impacted by macroeconomic factors in
all product categories and geographic regions. Such factors include the impact
of currency on the price of raw materials and operating costs as well as on
translation of reported results. In addition, pricing pressure placed on the
Company's customers by large and powerful retailers and distributors is
inevitably passed along to the Company, and its competitors. Leadership in
innovation and creativity mitigates the impact of pricing pressure. Success and
growth in the industry is dependent upon creativity and innovation in meeting
the many and varied needs of the customers' products in a cost-efficient and
effective manner, and with a consistently high level of timely service and
delivery.
The Company's strategic direction is defined by the following:
- Be a global leader in fragrances and flavors; and
- Provide our customers with differentiated solutions.
The Company's plan to achieve this strategy is to:
- Execute on our business unit focus that will align management and
resources with the needs of its strategic customers and provide greater
accountability; this will drive improved results.
- Focus its research and development efforts on those projects considered
most likely to drive future profitable growth. The Company anticipates
much of this research will be conducted internally, but such efforts
may be augmented by joint research undertakings and through acquisition
of technology.
- Provide quality products, safe and suitable for inclusion in its
customers' end products; an essential element is the consistent quality
and safety of raw materials achieved through a combination of steps
including but not limited to vendor certification and quality assurance
testing.
- Continuously improving its operations, customer service and related
initiatives.
- Build a culture that attracts, retains and develops the best talent in
the world. The customers, shareholders and employees expect the best.
As implementation of our strategy progresses, setting strategic initiatives
requires regular establishment and reassessment of priorities and necessitates
choices in order to provide the best opportunity for continuous improvement in
shareholder value.
Operations
----------
Second Quarter 2007
-------------------
Second quarter 2007 sales totaled $574 million, increasing 8% over the
prior year quarter; fragrance and flavor sales increased 6% and 11%,
respectively. Reported sales for the 2007 quarter benefited from the generally
weaker U.S. dollar, mainly against the Euro and Pound Sterling, during the
quarter; at comparable exchange rates, sales would have increased 5%.
Fragrance sales increased 6%, led by 11% growth in fine fragrance and
beauty care sales, as a result of new product introductions and the continued
success of existing creations. Functional fragrance and ingredient sales
increased 4% and 1%, respectively.
Flavor sales grew 11%, due to a combination of new wins and volume growth.
Flavor sales increased in each region, both in local currency and U.S. dollars.
Sales performance by region and product category in comparison to the prior
year quarter in both reported dollars and local currency, where applicable,
follows:
% Change in Sales- Second Quarter 2007 vs. Second Quarter 2006
----------------------------------------------------------------------------
Fine Func'l. Ingr. Total Frag. Flavors Total
----------------------------------------------------------------------------
North America Reported 7% 11% -1% 6% 7% 7%
Europe Reported 13% 14% 1% 11% 11% 11%
Local Currency 6% 7% -4% 4% 5% 4%
Latin America Reported 7% -11% -5% -6% 18% 1%
Greater Asia Reported 15% - 8% 5% 13% 10%
Local Currency 12% -1% 9% 4% 10% 8%
Total Reported 11% 4% 1% 6% 11% 8%
Local Currency 7% 2% -2% 3% 8% 5%
----------------------------------------------------------------------------
- North America fine fragrance growth was driven mainly by new product
introductions of $3 million partially offset by volume declines; functional
fragrance growth was primarily volume related. Ingredients volume growth
was offset by pricing declines. Flavors sales growth resulted mainly from
new product introductions of $6 million.
- Europe sales growth was strong across both business segments. Flavor sales
growth resulted mainly from new product introductions of $7 million. Fine
fragrance and functional fragrance growth was strong primarily due to new
product introductions of $9 million and $6 million, respectively.
Ingredients performance was negatively impacted by pricing and some
shifting of orders by customers.
- Latin America sales growth resulted primarily from new product
introductions of $3 million in fine fragrances. Functional fragrance
performance reflects the short-term impact of some product erosion. Volume
and pricing declines impacted ingredient sales. Flavors growth was the
result of new product introductions of $5 million.
- Greater Asia sales growth was driven by new product introductions of $8
million and volume increases of $3 million in flavors. Fragrance growth was
mainly the result of new product introductions of $6 million. Ingredient
growth was volume related.
The percentage relationship of cost of goods sold and other operating
expenses to sales for the second quarter 2007 and 2006 are detailed below.
Second Quarter
------------------------
2007 2006
----------- ----------
Costs of Goods Sold 57.1% 57.1%
Research and Development Expenses 8.5% 8.6%
Selling and Adminstrative Expenses 15.9% 16.5%
- Gross profit, as a percentage of sales, totaled 42.9%, same as the prior
year quarter. The sales growth drove improved expense absorption, most
notably in flavors; lower selling prices for fragrance ingredients and the
impact of scaling up production in the new fragrance ingredient facility in
China offset this improvement.
- Research and Development ("R&D") expenses, as a percentage of sales, were
essentially the same as the prior year quarter.
- Selling and Administrative ("S&A") expenses, as a percentage of sales, were
15.9% in the current quarter compared to 16.5% in 2006; reflecting good
cost control.
- Interest expense increased by $2 million from the prior year, primarily due
to higher average interest rates on borrowings; the average interest rate
for the second quarter was 4.2% compared to 3.3% for the 2006 quarter.
- The Company's second quarter effective tax rate was 19% compared to 28% in
the prior year quarter. During the second quarter 2007, the tax rate
benefited by 11 percentage points resulting from the reversal of $10
million of previously established tax accruals no longer required based on
rulings obtained from applicable tax jurisdictions.
First Six Months 2007
---------------------
Sales for the six-month period ended June 30, 2007 totaled $1,140 million.
Fragrance sales were led by higher fine and beauty sales of 11%, driven by
both new product introductions and continued success of existing creations.
Fragrance ingredient sales grew 10%, driven mainly by higher volumes, partially
offset by lower average selling prices. Functional fragrance sales increased 5%.
Flavor sales increased 11% due to a combination of new wins and volume
growth of existing creations.
Sales performance by region and product category in comparison to the prior
year period in both reported dollars and local currency, where applicable,
follows:
% Change in Sales- Six Months 2007 vs. Six Months 2006
------------------------------------------------------------------------
Fine Func'l. Ingr. Total Frag. Flavors Total
------------------------------------------------------------------------
North America Reported 12% 13% 1% 10% 6% 8%
Europe Reported 10% 12% 20% 13% 11% 12%
Local Currency 2% 4% 12% 5% 3% 4%
Latin America Reported 14% -11% 5% -2% 16% 3%
Greater Asia Reported 11% 1% 3% 4% 16% 11%
Local Currency 9% -1% 3% 2% 13% 8%
Total Reported 11% 5% 10% 8% 11% 9%
Local Currency 7% 2% 7% 5% 8% 6%
------------------------------------------------------------------------
- North America fine fragrance growth was driven mainly by new product
introductions of $6 million; functional fragrances growth resulted from new
product introductions of $2 million and volume increases of $5 million.
Ingredients volume growth was partially offset by pricing declines. Flavors
sales growth resulted mainly from new product introductions of $8 million.
- Europe flavor sales growth resulted mainly from new product introductions
and volume increases of $9 million and $2 million, respectively. Functional
fragrance growth was strong primarily due to new product introductions of
$11 million. The growth in fine fragrance related to new product
introductions of $14 million but was offset by volume declines. Ingredient
performance growth of $13 million was volume related.
- Latin America sales growth resulted primarily from new product
introductions of $6 million in fine fragrances. Functional fragrance
performance was primarily volume related, reflecting the short-term impact
of some product erosion. Flavors growth was the result of new product
introductions of $8 million.
- Greater Asia sales growth was driven by new product introductions of $12
million and volume increases of $12 million in flavors. Fragrance growth
was mainly the result of new product introductions of $6 million.
The percentage relationship of cost of goods sold and other operating
expenses to sales for the six-month period ended June 30, 2007 and 2006 are
detailed below.
First Six Months
-------------------------
2007 2006
----------- -----------
Costs of Goods Sold 57.6% 57.4%
Research and Development Expenses 8.4% 8.8%
Selling and Adminstrative Expenses 16.0% 16.6%
- Gross profit, as a percentage of sales, declined slightly from the prior
year period mainly as a result of product mix, notably higher sales of
fragrance ingredients and flavor compounds; lower selling prices for
fragrance ingredients contributed to the decline. Gross margin was also
impacted by under absorption of manufacturing costs at the new fragrance
ingredient facility in China, which continues to scale up production.
- Research and Development ("R&D") expenses, as a percentage of sales,
declined compared to the prior year mainly due to such expenses increasing
at a slower rate than sales during the year.
- Selling and Administrative (S&A) expenses, as a percentage of sales, were
16.0% in the current quarter compared to 16.6% in the prior year quarter,
reflecting good cost control. In addition, savings were further supported
by headcount reductions in 2006, many of whom left the Company after the
2006 first quarter.
- Interest expense increased by $5 million in comparison to the prior year
period, primarily due to higher average interest rates on borrowings; the
average interest rate for the 2007 period was 4.2% compared to 2.8% for the
comparable 2006 period.
- The effective tax rate was 23% compared to 28% in the prior year period. In
2007, the tax rate benefited by 6% resulting from the reversal of $10
million of previously established tax accruals no longer required based on
rulings obtained from applicable tax jurisdictions. The Company currently
expects the effective tax rate to approximate 27.0% for 2007.
Income Taxes
------------
In June 2006, the FASB issued Interpretation No. 48 ("FIN 48"), Accounting
for Uncertainty in Income Taxes, which clarifies the application of FAS 109 by
prescribing the minimum threshold a tax position must meet before being
recognized in the financial statements. The adoption of FIN 48 did not have a
material impact on the Consolidated Financial Statements. See Note 8 for more
information.
Restructuring and Other Charges
-------------------------------
As described in Note 2 to the Consolidated Financial Statements in the
Company's 2006 Annual Report, the Company had undertaken a significant
reorganization, including management changes, consolidation of production
facilities and related actions. There have been no charges in the second quarter
or first six months of 2007.
Movements in restructuring liabilities, included in Other current
liabilities in the accompanying balance sheet, were (in millions):
Asset-
Employee- Related
Related and Other Total
------------- -------------- --------------
Balance December 31, 2006 $ 12.9 $ 2.4 $ 15.3
Cash and other costs (7.5) (2.1) (9.6)
-------------- ------------- --------------
Balance June 30, 2007 $ 5.4 $ 0.3 $ 5.7
============== ============= ==============
The balance of the employee-related liabilities are expected to be utilized
by 2008 as obligations are satisfied; the asset-related charges are expected to
be utilized in 2007 on final decommissioning and disposal of the affected
equipment.
Financial Condition
-------------------
Cash, cash equivalents and short-term investments totaled $125 million at
June 30, 2007 compared to $115 million at December 31, 2006. Working capital
totaled $802 million at June 30, 2007 compared to $633 million at December 31,
2006. Gross additions to property, plant and equipment were $21 million during
the first six months of 2007. Gross additions to property, plant and equipment
are expected to approximate $70 million in 2007.
Operating cash flows for the six months ended June 30, 2007 were $ 100
million compared to $121 million for the six months ended June 30, 2006. The
decrease in 2007 compared to the prior year period was mainly due to payout of
$45 million of incentive compensation with respect to 2006 operating results
paid in 2007; in the 2006 period, payouts totaled $9 million with respect to
2005 results.
At June 30, 2007, the Company had $805 million of debt outstanding.
In April 2007, the Company paid a quarterly cash dividend of $.21 per share
to shareholders, unchanged from the prior quarter dividend payment. In May 2007,
the Company declared a quarterly cash dividend of $.21 per share payable in July
2007. In July 2007, the Company's Board of Directors increased its quarterly
dividend to $.23 per share payable on October 4, 2007 to shareholders of record
on September 20, 2007.
Under the share repurchase program of $300 million authorized in October
2006, the Company repurchased approximately 1 million shares in the second
quarter of 2007 at a cost of $49 million. For 2007, the Company has repurchased
1.6 million shares at a cost of $81 million. At June 30, 2007, the Company had
approximately $125 million remaining under the October 2006 Stock Repurchase
Plan. In July 2007, the October 2006 Stock Repurchase Plan was terminated and
superseded by a new program authorized by the Company's Board of Directors to
repurchase up to 15% or $750 million worth of the Company's outstanding common
stock, whichever is less. Funding for the program will be from existing
operating cash flows and incremental borrowings of approximately $300-400
million. The Company's current borrowing facilities require that it maintain, at
the end of each quarter, a ratio of net debt for borrowed money to EBITDA
(Earning Before Interest, Taxes, Depreciation and Amortization) in respect of
the previous 12-month period of not more than 3.25 to 1. The additional
contemplated borrowings in connection with the July 2007 program will not impact
compliance with this covenant. Repurchased shares are available for use in
connection with the Company's employee benefit plans and for other general
corporate purposes.
The Company anticipates that its financing requirements will be funded from
internal sources, credit facilities currently in place and incremental
borrowings. Cash flows from operations and availability under its existing
credit facilities are expected to be sufficient to fund the Company's currently
anticipated normal capital spending and other currently expected cash
requirements for at least the next eighteen months.
Non-GAAP Financial Measures
---------------------------
To supplement the Company's financial results presented in accordance with
U.S. Generally Accepted Accounting Principles ("GAAP"), the Company uses certain
non-GAAP financial measures. These non-GAAP financial measures should not be
considered in isolation, or as a substitute for, or superior to, financial
measures calculated in accordance with GAAP. These non-GAAP financial measures
as disclosed by the Company may also be calculated differently from similar
measures disclosed by other companies. To ease the use and understanding of our
supplemental non-GAAP financial measures, the Company includes the most directly
comparable GAAP financial measure.
The Company discloses, and management internally monitors, the sales
performance of international operations on a basis that eliminates the positive
or negative effects that result from translating foreign currency sales into
U.S. dollars. Management uses this measure because it believes that it enhances
the assessment of the sales performance of its international operations and the
comparability between reporting periods.
Cautionary Statement Under The Private Securities Litigation Reform Act of 1995
-------------------------------------------------------------------------------
Statements in this report, which are not historical facts or information, are
"forward-looking statements" within the meaning of The Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based on
management's current assumptions, estimates and expectations. Certain of such
forward-looking information may be identified by such terms as "expect,"
"believe," "outlook," "guidance," "may," and similar terms or variations
thereof. All information concerning future revenues, tax rates or benefits,
interest savings, earnings and other future financial results or financial
position, constitutes forward-looking information. Such forward-looking
statements involve significant risks, uncertainties and other factors. Actual
results of the Company may differ materially from any future results expressed
or implied by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions in the Company's
markets, including economic, population health and political uncertainties;
interest rates; the price, quality and availability of raw materials; the
Company's ability to implement its business strategy, including the achievement
of anticipated cost savings, profitability and growth targets; the impact on
cash and the impact of increased borrowings related to the July 2007 announced
share repurchase program; the impact of currency fluctuation or devaluation in
the Company's principal foreign markets and the success of the Company's hedging
and risk management strategies; the outcome of uncertainties related to
litigation; uncertainties related to any potential claims and rights of
indemnification or other recovery for customer and consumer reaction to its
earlier contamination issue; the impact of possible pension funding obligations
and increased pension expense on the Company's cash flow and results of
operations; and the effect of legal and regulatory proceedings, as well as
restrictions imposed on the Company, its operations or its representatives by
foreign governments. The Company intends its forward-looking statements to speak
only as of the time of such statements and does not undertake or plan to update
or revise them as more information becomes available or to reflect changes in
expectations, assumptions or results.
Any public statements or disclosures by IFF following this release that modify
or impact any of the outlook or other forward-looking statements contained in or
accompanying this release or as part of the webcast will be deemed to modify or
supersede such outlook or other forward-looking statements in or accompanying
this release or the webcast.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
------------------------------------------------------------------
There are no material changes in market risk from the information provided
in the Company's 2006 Annual Report on Form 10-K.
Item 4. Controls and Procedures
-------------------------------
The Company's Chief Executive Officer and Chief Financial Officer, with the
assistance of other members of the Company's management, have evaluated the
effectiveness of the Company's disclosure controls and procedures as of the end
of the period covered by this Quarterly Report on Form 10-Q. Based on such
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
have concluded that the Company's disclosure controls and procedures are
effective as of the end of the reporting period covered by this report.
The Company's Chief Executive Officer and Chief Financial Officer have also
concluded that there have not been any changes in the Company's internal control
over financial reporting during the quarter ended June 30, 2007 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
-----------------
The Company is subject to various claims and legal actions in the ordinary
course of its business.
In September 2001, the Company was named as a defendant in a purported
class action brought against it in the Circuit Court of Jasper County, Missouri,
on behalf of employees of a plant owned and operated by Gilster-Mary Lee Corp.
in Jasper, Missouri (Benavides case). The plaintiffs alleged that they sustained
respiratory injuries in the workplace due to the use by Gilster-Mary Lee of a
BBA and/or IFF flavor. For purposes of reporting these actions, BBA and/or IFF
are referred to as the "Company".
In January 2004, the Court ruled that class action status was not
warranted. As a result of this decision, each of the 47 plaintiff cases was to
be tried separately. Subsequently, 8 cases were tried to a verdict, 4 verdicts
resulted for the plaintiffs and 4 verdicts resulted for the Company, all of
which were appealed by the losing party. Subsequently all plaintiff cases
related to the Benavides case, including those on appeal, were settled.
Fifteen other actions based on similar claims of alleged respiratory
illness due to workplace exposure to flavor ingredients are currently pending
against the Company and other flavor suppliers and related companies.
In March 2003, the Company and another flavor supplier were named
defendants in a lawsuit filed in the Court of Common Pleas of Hamilton County,
Ohio by 29 former and current workers at a Marion, Ohio factory. All claims in
this case have been settled or dismissed (Arthur case). In May 2004, the Company
and another flavor supplier were named defendants, and subsequently a number of
third party defendants were added, in a lawsuit by 4 former workers at a
Ridgeway, Illinois factory in an action brought in the Circuit Court for the
Second Judicial Circuit, Gallatin County, Illinois (Barker case) and another
concerning 8 other workers and 4 spouses at this same plant was filed in July
2004 and is pending in this same Court against the same defendants (Batteese
case). In an action filed in January 2006, the Company and three other flavor
suppliers were named defendants in a lawsuit by 1 worker at a Sioux City, Iowa
facility which is pending in U.S. District Court for the Northern District of
Iowa. This case has settled (Kuiper case). In June 2004, the Company and 3 other
flavor suppliers were named defendants in a lawsuit by 1 plaintiff brought in
the Court of Common Pleas, Hamilton County, Ohio. Summary judgment in favor of
the Company was granted in June 2007 (Mitchell case). In June 2004, the Company
and 2 other flavor suppliers were named defendants in a lawsuit by 1 former
worker and spouse at a Northlake, Illinois facility in an action brought in the
Circuit Court of Cook County, Illinois. Fourteen third party defendants have
been added (Lopez case). In August 2004, the Company and another flavor supplier
were named defendants in a lawsuit by 15 former workers at a Marion, Ohio
factory in an action brought in the Court of Common Pleas, Marion County, Ohio.
This case was fully settled in May 2007 (Williams case). In March 2005, the
Company and 6 other companies were named defendants in a lawsuit by 1 former
employee and spouse of Bell Flavors and Fragrances, Inc. in an action brought in
the Circuit Court of Cook County, Illinois (Robinson case). In July 2005, the
Company and 9 other flavor and chemical suppliers were named defendants in a
lawsuit by 1 former worker and spouse of Brach's Confections, Inc. in an action
brought in the Circuit Court of Cook County, Illinois. Brach's has been added as
a third party defendant (Campbell case). In August 2005, the Company and 8 other
companies, including a flavor trade association and consulting agency, were
named defendants in a lawsuit by 3 former employees of the Gilster-Mary Lee
facility in McBride, Missouri in the Missouri Circuit Court, 32nd Judicial
Circuit (Fults case). In November 2005, the Company, a flavor trade association,
and a consulting agency were named defendants in a lawsuit by 1 former employee
of the Snappy Popcorn Company in Breda, Iowa brought in U.S. District Court for
the Northern District of Iowa, Western Division. This case was settled in July
2007 (Weimer case). In August 2006, the Company and 3 other flavor and chemical
suppliers were named defendants in a lawsuit by 39 current and former employees
and/or a neighbor of the Gilster-Mary Lee facility in Jasper, Missouri in the
Missouri Circuit Court of Jasper County (Arles case) and 5 other current and
former employees in the same Court (Bowan case). In November 2006, the Company
and 15 other flavor and chemical suppliers were named defendants in a lawsuit
filed in the Circuit Court of Cook County, Illinois by 1 plaintiff allegedly
injured by exposure to butter flavor and other substances at various facilities
in which he worked (Solis case). In January 2007, the Company and 3 other flavor
suppliers were named defendants in a lawsuit filed in Hamilton County, Ohio
Court of Common Pleas by 4 former employees of a popcorn packaging plant in Iowa
City, Iowa (Blood case). In January 2007, the Company and another flavor
supplier were named defendants in a lawsuit filed in Hamilton County, Ohio Court
of Common Pleas by approximately 233 current and former employees of two
separate Marion, Ohio factories and 103 spouses of such employees (Aldrich
case). In June 2007, the Company and another flavor supplier were named
defendants in a lawsuit filed in Hamilton County, Ohio Court of Common Pleas by
58 current and former employees of a Marion, Ohio facility and 18 spouses of
such employees (Arnold case). In May 2007, the Company and 14 other companies
were named defendants in a lawsuit filed in Circuit Court of Cook County,
Illinois by 5 former employees of Brach's Confections, Inc. in Chicago, Illinois
(Williams case). In June 2007, the Company and 19 other companies were named
defendants in a lawsuit filed in Circuit Court of Perry County, Missouri by 5
former employees of a McBride, Missouri facility (Geile case). In July 2007, the
Company and another flavor manufacturer were named defendants in a lawsuit filed
in Hamilton County, Ohio Court of Common Pleas by 128 current and former workers
of two Ohio facilities and 52 spouses of such employees (Adamson case).
The Company believes that all IFF and BBA flavors at issue in these matters
meet the requirements of the U.S. Food and Drug Administration and are safe for
handling and use by workers in food manufacturing plants when used according to
specified safety procedures. These procedures are detailed in instructions that
IFF and BBA provided to all their customers for the safe handling and use of
their flavors. It is the responsibility of IFF's customers to ensure that these
instructions, which include the use of appropriate engineering controls, such as
adequate ventilation, prior handling procedures and respiratory protection for
workers, are followed in the workplace.
At each balance sheet date, or more frequently as conditions warrant, the
Company reviews the status of each pending claim, as well as its insurance
coverage for such claims with due consideration given to potentially applicable
deductibles, retentions and reservation of rights under its insurance policies,
and the advice of its outside legal counsel and a third party expert in modeling
insurance deductible amounts with respect to all these matters. While the
ultimate outcome of any litigation cannot be predicted, management believes that
adequate provision has been made with respect to all known claims. Based on
information presently available and in light of the merits of its defenses and
the availability of insurance, the Company does not expect the outcome of the
above cases, singly or in the aggregate, to have a material adverse effect on
the Company's financial condition, results of operation or liquidity. There can
be no assurance that future events will not require the Company to increase the
amount it has accrued for any matter or accrue for a matter that has not been
previously accrued. See Note 12 of the Notes to the Consolidated Financial
Statements.
Over the past 20 years, various federal and state authorities and private
parties have claimed that the Company is a potentially responsible party as a
generator of waste materials for alleged pollution at a number of waste sites
operated by third parties located principally in New Jersey and seek to recover
costs incurred and to be incurred to clean up the sites.
The waste site claims and suits usually involve million dollar amounts, and
most of them are asserted against many potentially responsible parties. Remedial
activities typically consist of several phases carried out over a period of
years. Most site remedies begin with investigation and feasibility studies,
followed by physical removal, destruction, treatment or containment of
contaminated soil and debris, and sometimes by groundwater monitoring and
treatment. To date, the Company's financial responsibility for some sites has
been settled through agreements granting the Company, in exchange for one or
more cash payments made or to be made, either complete release of liability or,
for certain sites, release from further liability for early and/or later
remediation phases, subject to certain "re-opener" clauses for later-discovered
conditions. Settlements in respect of some sites involve, in part, payment by
the Company and other parties of a percentage of the site's future remediation
costs over a period of years.
The Company believes that the amounts it has paid and anticipates paying in
the future for clean-up costs and damages at all sites are not and will not be
material to the Company's financial condition, results of operations or
liquidity, because of the involvement of other large potentially responsible
parties at most sites, because payment will be made over an extended time period
and because, pursuant to an agreement reached in July 1994 with three of the
Company's liability insurers, defense costs and indemnity amounts payable by the
Company in respect of the sites will be shared by the insurers up to an agreed
amount.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
-----------------------------------------------------------
(c) Issuer Purchases of Equity Securities
-------------------------------------
Total Number of Shares Approximate Dollar Value of
Total Number of Purchased as Part of Shares that may yet be
Shares Purchased Average Price Publicly Announced Program purchased under the Program (1)
(1) Paid per Share (1)
------------------- ------------------ ------------------------------ -------------------------------
April 1 - 30, 2007 0 $0 0 $174,746,000
May 1 - 31, 2007 300,000 $51.23 300,000 $159,378,000
June 1 - 30, 2007 665,000 $50.92 665,000 $125,515,000
(1) An aggregate of 965,000 shares of common stock were repurchased during the
second quarter of 2007 under a repurchase program announced in October
2006. Under the program, the Board of Directors approved the repurchase by
the Company of up to $300 million of its common stock. In July 2007, the
October 2006 Stock Repurchase Plan was terminated and superseded by a new
program authorized by the Company's Board of Directors to repurchase up to
15% or $750 million worth of the Company's outstanding common stock,
whichever is less.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The following matters were submitted to a vote of security holders during
the Company's annual meeting of shareholders held on May 8, 2007:
Votes Cast For Authority Withheld
1.) Election of Directors
Margaret Hayes Adame 77,955,200 3,390,558
Robert M. Amen 78,918,887 2,426,871
Gunter Blobel 78,830,691 2,515,067
J. Michael Cook 79,092,168 2,253,590
Peter A. Georgescu 77,780,235 3,565,523
Alexandra A. Herzan 79,095,888 2,249,870
Henry W. Howell, Jr. 79,280,455 2,065,303
Arthur C. Martinez 78,265,307 3,080,451
Burton M. Tansky 79,095,553 2,250,204
2.) For Against Abstentions Broker
Non-Votes
-------------------------------- ----------------- ---------------- ----------------- --------------
Ratification of
PricewaterhouseCoopers LLP as 77,255,888 2,765,011 1,324,858 ---
independent registered public
accounting firm
-------------------------------- ----------------- ---------------- ----------------- --------------
3.) For Against Abstentions Broker
Non-Votes
-------------------------------- ----------------- ---------------- ----------------- --------------
Reapproval of the business
criteria used for setting 70,386,170 3,641,504 1,631,312 5,686,762
performance goals under the
2000 Stock Award and Incentive
Plan
-------------------------------- ----------------- ---------------- ----------------- --------------
Item 6. Exhibits
------ --------
3(ii) By-laws of registrant, incorporated by reference to Exhibit 3
(ii) to Registrants Report on Form 8-K filed on July 16, 2007.
10.1 2000 Supplemental Stock Award Plan, as amended and restated
effective as of March 6, 2007.
10.2 Form of International Flavors & Fragrances Inc. 2000 Stock
Award and Incentive Plan Purchased Restricted Stock Agreement.
10.3 Form of International Flavors & Fragrances Inc. 2000 Stock
Award and Incentive Plan Restricted Stock Unit Agreement.
10.4 Form of International Flavors & Fragrances Inc. 2000 Stock
Award and Incentive Plan Stock Settled Appreciation Rights
Agreement.
10.5 Form of International Flavors & Fragrances Inc. 2000 Stock
Award and Incentive Plan Non-Employee Director Restricted
Stock Units Agreement.
31.1 Certification of Robert M. Amen pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Douglas J. Wetmore pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32 Certification of Robert M. Amen and Douglas J. Wetmore
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the
Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL FLAVORS & FRAGRANCES INC.
Dated: August 7, 2007 By: /s/ Douglas J. Wetmore
-------------------------------------------
Name: Douglas J. Wetmore
Title: Senior Vice President
and Chief Financial Officer
Dated: August 7, 2007 By: /s/ Dennis M. Meany
-------------------------------------------
Name: Dennis M. Meany
Title: Senior Vice President,
General Counsel and Secretary
Exhibit 31.1
CERTIFICATION
-------------
I, Robert M. Amen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of International Flavors
& Fragrances Inc.;
2. Based on my knowledge, this 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 included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: August 7, 2007
By: /s/ Robert M. Amen
-------------------------------
Name: Robert M. Amen
Title: Chairman of the Board
and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
-------------
I, Douglas J. Wetmore, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of International Flavors
& Fragrances Inc.;
2. Based on my knowledge, this 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 included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: August 7, 2007
By: /s/ Douglas J. Wetmore
-------------------------------
Name: Douglas J. Wetmore
Title: Senior Vice President
and Chief Financial Officer
Exhibit 32
CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of International Flavors &
Fragrances Inc. (the "Company") for the quarterly period ended June 30, 2007 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Robert M. Amen, as Chief Executive Officer of the Company, and
Douglas J. Wetmore, as Chief Financial Officer, each hereby certifies, pursuant
to 18 U.S.C. (section) 1350, as adopted pursuant to (section) 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 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.
By: /s/ Robert M. Amen
----------------------------------------------------------
Name: Robert M. Amen
Title: Chairman of the Board
and Chief Executive Officer
Dated: August 7, 2007
By: /s/ Douglas J. Wetmore
----------------------------------------------------------
Name: Douglas J. Wetmore
Title: Senior Vice President
and Chief Financial Officer
Dated: August 7, 2007
Exhibit 10.1
INTERNATIONAL FLAVORS & FRAGRANCES INC.
--------------------------------------------------------------------------------
2000 Supplemental Stock Award Plan
As Amended and Restated March 6, 2007
--------------------------------------------------------------------------------
INTERNATIONAL FLAVORS & FRAGRANCES INC.
2000 Supplemental Stock Award Plan
As Amended and Restated March 6, 2007
Page
1. Purpose................................................ 1
2. Definitions............................................ 1
3. Administration......................................... 2
4. Stock Subject to Plan.................................. 3
5. Eligibility ........................................... 3
6. Specific Terms of Awards............................... 4
7. Certain Provisions Applicable to Awards................ 7
8. Change in Control...................................... 7
9. Additional Award Forfeiture Provisions................. 10
10. General Provisions..................................... 12
INTERNATIONAL FLAVORS & FRAGRANCES INC.
2000 Supplemental Stock Award Plan
As Amended and Restated March 6, 2007
1. Purpose. The purpose of this 2000 Supplemental Stock Award Plan (the
"Plan") is to aid International Flavors & Fragrances Inc., a New York
corporation (the "Company"), in attracting, retaining, motivating and rewarding
employees, other than executive officers and directors of the Company, and
certain other persons who provide substantial services to the Company or its
subsidiaries or affiliates, to provide for equitable and competitive
compensation opportunities, to recognize individual contributions and reward
achievement of Company goals, and promote the creation of long-term value for
shareholders by closely aligning the interests of Participants with those of
shareholders. The Plan authorizes stock-based incentives for Participants.
2. Definitions. In addition to the terms defined in Section 1 above and
elsewhere in the Plan, the following capitalized terms used in the Plan have the
respective meanings set forth in this Section:
(a) "Award" means any Option, SAR, Restricted Stock, Deferred Stock,
Stock granted as a bonus or in lieu of another award, Dividend Equivalent,
Other Stock-Based Award, or Performance Award, together with any related
right or interest, granted to a Participant under the Plan.
(b) "Beneficiary" means any family member or members, including by
marriage or adoption, any trust in which the Participant or any family
member or members have more than 50% of the beneficial interest, and any
other entity in which the Participant or any family member or members own
more than 50% of the voting interests, in each case designated by the
Participant in his most recent written Beneficiary designation filed with
the Committee as entitled to exercise rights or receive benefits in
connection with the Award (or any portion thereof), or if there is no
surviving designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to exercise rights
or receive benefits in connection with the Award on behalf or in lieu of
such non-surviving designated Beneficiary.
(c) "Board" means the Company's Board of Directors.
(d) "Change in Control" and related terms have the meanings specified
in Section 8.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
References to any provision of the Code or regulation (including a proposed
regulation) thereunder shall include any successor provisions and
regulations.
(f) "Committee" means a committee of two or more directors designated
by the Board to administer the Plan; provided, however, that, directors
appointed or serving as members of a Board committee designated as the
Committee shall not be employees of the Company or any subsidiary or
affiliate. The full Board may perform any function of the Committee
hereunder, and the Committee may delegate authority as provided in Section
3(b), in which case the term "Committee" shall refer to the Board or such
delegee.
(g) "Deferred Stock" means a right, granted to a Participant under
Section 6(e), to receive Stock or other Awards or a combination thereof at
the end of a specified deferral period. Such Awards may be denominated as
"Restricted Stock Units" as well.
(h) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g), to receive cash, Stock, other Awards or other property
equal in value to all or a specified portion of the dividends paid with
respect to a specified number of shares of Stock.
(i) "Effective Date" means the effective date specified in Section
10(o).
(j) "Eligible Person" has the meaning specified in Section 5.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act or rule (including
a proposed rule) thereunder shall include any successor provisions and
rules.
(l) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of Stock shall be the closing sale price reported on
the composite tape of the New York Stock Exchange on the day as of which
such value is being determined or, if there is no sale on that day, then on
the last previous day on which a sale was reported.
(m) "Option" means a right, granted to a Participant under Section
6(b), to purchase Stock or other Awards at a specified price during
specified time periods.
(n) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h).
(o) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(p) "Performance Award" means a conditional right, granted to a
Participant under Section 6(i), to receive Stock or other Awards or
payments, as determined by the Committee, based upon performance criteria
specified by the Committee.
(q) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) which is subject to certain restrictions and to a risk of
forfeiture.
(r) "Stock" means the Company's Common Stock, and any other equity
securities of the Company that may be substituted or resubstituted for
Stock pursuant to Section 10(c).
(s) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c).
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, which shall have full and final authority, in each case subject to
and consistent with the provisions of the Plan, to select Eligible Persons to
become Participants; to grant Awards; to determine the type and number of
Awards, the dates on which Awards may be exercised and on which the risk of
forfeiture or deferral period relating to Awards shall lapse or terminate, the
acceleration of any such dates, the expiration date of any Award, whether, to
what extent, and under what circumstances an Award may be settled, or the
exercise price of an Award may be paid, in cash, Stock, other Awards, or other
property, and other terms and conditions of, and all other matters relating to,
Awards; to prescribe documents evidencing or setting terms of Awards (such Award
documents need not be identical for each Participant), amendments thereto, and
rules and regulations for the administration of the Plan and amendments thereto;
to construe and interpret the Plan and Award documents and correct defects,
supply omissions or reconcile inconsistencies therein; and to make all other
decisions and determinations as the Committee may deem necessary or advisable
for the administration of the Plan. Decisions of the Committee with respect to
the administration and interpretation of the Plan shall be final, conclusive,
and binding upon all persons interested in the Plan, including Participants,
Beneficiaries, transferees under Section 10(b) and other persons claiming rights
from or through a Participant, and shareholders.
(b) Manner of Exercise of Committee Authority. The Committee may delegate
to officers or managers of the Company or any subsidiary or affiliate, or
committees thereof, the authority, subject to such terms as the Committee shall
determine, to perform such functions, including administrative functions, as the
Committee may determine. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee.
(c) Limitation of Liability. The Committee and each member thereof, and any
person acting pursuant to authority delegated by the Committee, shall be
entitled, in good faith, to rely or act upon any report or other information
furnished by any executive officer, other officer or employee of the Company or
a subsidiary or affiliate, the Company's independent auditors, consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee, any person acting pursuant to authority delegated by the Committee,
and any officer or employee of the Company or a subsidiary or affiliate acting
at the direction or on behalf of the Committee or a delegee shall not be
personally liable for any action or determination taken or made in good faith
with respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or
determination.
4. Stock Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Subject to adjustment
as provided in Section 10(c), the total number of shares of Stock reserved and
available for delivery in connection with Awards under the Plan shall be
4,500,000 shares; provided, however, that the total number of shares which may
be issued and delivered in connection with Awards other than Options and SARs
shall not exceed 100,000. Any shares of Stock delivered under the Plan shall
consist of authorized and unissued shares, unless the Company's General Counsel
determines that treasury shares shall be delivered under the Plan.
(b) Share Counting Rules. The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as, for
example, in the case of tandem or substitute awards) and make adjustments if the
number of shares of Stock actually delivered differs from the number of shares
previously counted in connection with an Award; provided, however, that shares
withheld in payment of taxes upon vesting of Restricted Stock and shares equal
to the number of outstanding shares surrendered in payment of the exercise price
or taxes relating to an Award shall not become available again under the Plan if
the withholding or surrender transaction occurs more than ten years after the
date of adoption of the Plan, and otherwise shares shall not become available
under this Section 4(b) in an event that would constitute a "material revision"
of the Plan subject to shareholder approval under then applicable rules of the
New York Stock Exchange. Shares subject to an Award that is canceled, expired,
forfeited, settled in cash or otherwise terminated without a delivery of shares
to the Participant will again be available for Awards, and shares withheld in
payment of the exercise price or taxes relating to an Award and shares equal to
the number surrendered in payment of any exercise price or taxes relating to an
Award shall be deemed to constitute shares not delivered to the Participant and
shall be deemed to again be available for Awards under the Plan. In addition, in
the case of any Award granted in substitution for an award of a company or
business acquired by the Company or a subsidiary or affiliate, shares issued or
issuable in connection with such substitute Award shall not be counted against
the number of shares reserved under the Plan, but shall be available under the
Plan by virtue of the Company's assumption of the plan or arrangement of the
acquired company or business.
5. Eligibility. Awards may be granted under the Plan only to Eligible
Persons. For purposes of the Plan, an "Eligible Person" means a person who is
not an executive officer or director of the Company but who is an employee of
the Company or any subsidiary or affiliate, a consultant or other person who
provides substantial services to the Company or a subsidiary or affiliate, or a
person who has been offered employment by the Company or a subsidiary or
affiliate, provided that such prospective employee or consultant or other person
may not receive any payment or exercise any right relating to an Award until
such person has commenced employment with or providing of services to the
Company or a subsidiary or affiliate. An employee on leave of absence may be
considered as still in the employ of the Company or a subsidiary or affiliate
for purposes of eligibility for participation in the Plan. For purposes of the
Plan, a joint venture in which the Company or a subsidiary has a substantial
direct or indirect equity investment shall be deemed an affiliate, if so
determined by the Committee.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth in
this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section 10(e)),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms requiring forfeiture
of Awards in the event of termination of employment or service by the
Participant and terms permitting a Participant to make elections relating to his
or her Award. The Committee shall retain full power and discretion with respect
to any term or condition of an Award that is not mandatory under the Plan. The
Committee shall require the payment of lawful consideration for an Award to the
extent necessary to satisfy the requirements of the New York Business
Corporation Law, and may otherwise require payment of consideration for an Award
except as limited by the Plan.
(b) Options. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee, provided that such
exercise price shall be not less than the Fair Market Value of a share of
Stock on the date of grant of such Option, subject to Sections 6(f) and
7(a).
(ii) Option Term; Time and Method of Exercise. The Committee shall
determine the term of each Option, provided that in no event shall the term
of any Option exceed a period of ten years from the date of grant. The
Committee shall determine the time or times at which or the circumstances
under which an Option may be exercised in whole or in part (including based
on achievement of performance goals and/or future service requirements),
the methods by which such exercise price may be paid or deemed to be paid
and the form of such payment (subject to Section 10(j)), including, without
limitation, cash, Stock, other Awards or awards granted under other plans
of the Company or any subsidiary or affiliate, or other property (including
through "cashless exercise" arrangements, to the extent permitted by
applicable law, but excluding any exercise method in which a personal loan
would be made from the Company to the Participant), and the methods by or
forms in which Stock will be delivered or deemed to be delivered in
satisfaction of Options to Participants (including deferred delivery of
shares representing the Option "profit," at the election of the Participant
or as mandated by the Committee, with such deferred shares subject to any
vesting, forfeiture or other terms as the Committee may specify).
(c) Stock Appreciation Rights. The Committee is authorized to grant SAR's
to Participants on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Participant to whom
it is granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one share of Stock on the date of exercise over
(B) the grant price of the SAR as determined by the Committee, but which in
no event will be less than 100% of the Fair Market Value of a share of
Stock on the date of grant of the SAR.
(ii) Other Terms. The Committee shall determine the term of each SAR,
provided that in no event shall the term of any SAR exceed a period of ten
years from the date of grant. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances under
which a SAR may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the
method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed
to be delivered to Participants, and whether or not a SAR shall be
free-standing or in tandem or combination with any other Award. Limited
SARs that may only be exercised in connection with a Change in Control or
other event as specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
(d) Restricted Stock. The Committee is authorized to grant Restricted Stock
to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or future service
requirements), in such installments or otherwise and under such other
circumstances as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the Plan and
any Award document relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a shareholder, including
the right to vote the Restricted Stock and the right to receive dividends
thereon (subject to any mandatory reinvestment or other requirement imposed
by the Committee).
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall
be forfeited and reacquired by the Company; provided that the Committee may
provide, by rule or regulation or in any Award document, or may determine
in any individual case, that restrictions or forfeiture conditions relating
to Restricted Stock will lapse in whole or in part, including in the event
of terminations resulting from specified causes.
(iii) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Company retain physical
possession of the certificates, and that the Participant deliver a stock
power to the Company, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an Award of
Restricted Stock, the Committee may require that any dividends paid on a
share of Restricted Stock shall be either (A) paid with respect to such
Restricted Stock at the dividend payment date in cash, in kind, or in a
number of shares of unrestricted Stock having a Fair Market Value equal to
the amount of such dividends, or (B) automatically reinvested in additional
Restricted Stock or held in kind, which shall be subject to the same terms
as applied to the original Restricted Stock to which it relates, or (C)
deferred as to payment, either as a cash deferral or with the amount or
value thereof automatically deemed reinvested in shares of Deferred Stock,
other Awards or other investment vehicles, subject to such terms as the
Committee shall determine or permit a Participant to elect. Unless
otherwise determined by the Committee, Stock distributed in connection with
a Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to the
same extent as the Restricted Stock with respect to which such Stock or
other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred Stock to
Participants, which are rights to receive Stock, other Awards, or a combination
thereof at the end of a specified deferral period, subject to the following
terms and conditions:
(i) Award and Restrictions. Issuance of Stock will occur upon
expiration of the deferral period specified for an Award of Deferred Stock
by the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times (including
based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise,
and under such other circumstances as the Committee may determine at the
date of grant or thereafter. Deferred Stock may be satisfied by delivery of
Stock, other Awards, or a combination thereof (subject to Section 10(j)),
as determined by the Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable deferral period
or portion thereof to which forfeiture conditions apply (as provided in the
Award document evidencing the Deferred Stock), all Deferred Stock that is
at that time subject to such forfeiture conditions shall be forfeited;
provided that the Committee may provide, by rule or regulation or in any
Award document, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Deferred Stock will lapse in whole or
in part, including in the event of terminations resulting from specified
causes.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee, Dividend Equivalents on the specified number of shares of Stock
covered by an Award of Deferred Stock shall be either (A) paid with respect
to such Deferred Stock at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock, either as a
cash deferral or with the amount or value thereof automatically deemed
reinvested in additional Deferred Stock, other Awards or other investment
vehicles having a Fair Market Value equal to the amount of such dividends,
as the Committee shall determine or permit a Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of obligations of the Company or a subsidiary or affiliate to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, subject to such terms as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
other Awards, or other property equivalent to all or a portion of the dividends
paid with respect to a specified number of shares of Stock. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to restrictions on
transferability, risks of forfeiture and such other terms as the Committee may
specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock or factors that may influence
the value of Stock, including, without limitation, convertible or exchangeable
debt securities, other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon performance of
the Company or business units thereof or any other factors designated by the
Committee, and Awards valued by reference to the book value of Stock or the
value of securities of or the performance of specified subsidiaries or
affiliates or other business units. The Committee shall determine the terms and
conditions of such Awards. Stock delivered pursuant to an Award in the nature of
a purchase right granted under this Section 6(h) shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Stock, other Awards, or other property, as
the Committee shall determine. Cash awards, as an element of or supplement to
any other Award under the Plan, may also be granted pursuant to this Section
6(h).
(i) Performance Awards. The Committee is authorized to grant Performance
Awards to Participants. Performance Awards may be denominated as a number of
shares of Stock, shares of Stock having a specified cash value at a future date,
or a number of other Awards (or a combination) which may be earned upon
achievement or satisfaction of performance conditions specified by the
Committee. In addition, the Committee may specify that any other Award shall
constitute a Performance Award by conditioning the right of a Participant to
exercise the Award or have it settled, and the timing thereof, upon achievement
or satisfaction of such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures of
performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the amounts
payable under any Award subject to performance conditions.
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or, subject to the restriction on repricing
in Section 11(e), in substitution or exchange for, any other Award or any award
granted under another plan of the Company, any subsidiary or affiliate, or any
business entity to be acquired by the Company or a subsidiary or affiliate, or
any other right of a Participant to receive payment from the Company or any
subsidiary or affiliate. Awards granted in addition to or in tandem with other
Awards or awards may be granted either as of the same time as or a different
time from the grant of such other Awards or awards. Subject to Section 10(j),
and subject to the restriction on repricing in Section 10(e), the Committee may
determine that, in granting a new Award, the in-the-money value or other value
of any surrendered Award or award may be applied to reduce the exercise price of
any Option, grant price of any SAR, or purchase price of any other Award.
(b) Term of Awards. The term of each Award shall be for such period as may
be determined by the Committee.
(c) Form and Timing of Payment under Awards; Deferrals. Subject to the
terms of the Plan (including Section 10(j)) and any applicable Award document,
payments to be made by the Company or a subsidiary or affiliate upon the
exercise of an Option or other Award or settlement of an Award may be made in
such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single payment
or transfer, in installments, or on a deferred basis. The settlement of any
Award may be accelerated, and cash paid in lieu of Stock in connection with such
settlement, in the discretion of the Committee or upon occurrence of one or more
specified events (subject to Section 10(j)). Installment or deferred payments
may be required by the Committee (subject to Section 10(e)) or permitted at the
election of the Participant on terms and conditions established by the
Committee. Payments may include, without limitation, provisions for the payment
or crediting of reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
8. Change in Control.
(a) Effect of "Change in Control" on Non-Performance Based Awards. In the
event of a "Change in Control," the following provisions shall apply to
non-performance based Awards, including Awards as to which performance
conditions previously have been satisfied or are deemed satisfied under Section
8(b), unless otherwise provided by the Committee in the Award document:
(i) All deferral of settlement, forfeiture conditions and other
restrictions applicable to Awards granted under the Plan shall lapse and
such Awards shall be fully payable as of the time of the Change in Control
without regard to deferral and vesting conditions, except to the extent of
any waiver by the Participant or other express election to defer beyond a
Change in Control and subject to applicable restrictions set forth in
Section 10(a);
(ii) Any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested as of the
time of the Change in Control and shall remain exercisable and vested for
the balance of the stated term of such Award without regard to any
termination of employment or service by the Participant other than a
termination for "cause" (as defined in any employment or severance
agreement between the Company or a subsidiary or affiliate and the
Participant then in effect or, if none, as defined by the Committee and in
effect at the time of the Change in Control), subject only to applicable
restrictions set forth in Section 10(a); and
(iii) The Committee may, in its discretion, determine to extend to any
Participant who holds an Option the right to elect, during the 60-day
period immediately following the Change in Control, in lieu of acquiring
the shares of Stock covered by such Option, to receive in cash the excess
of the Change in Control Price over the exercise price of such Option,
multiplied by the number of shares of Stock covered by such Option, and to
extend to any Participant who holds other types of Awards denominated in
shares the right to elect, during the 60-day period immediately following
the Change in Control, in lieu of receiving the shares of Stock covered by
such Award, to receive in cash the Change in Control Price multiplied by
the number of shares of Stock covered by such Award.
(b) Effect of "Change in Control" on Performance-Based Awards. In the event
of a "Change in Control," with respect to an outstanding Award subject to
achievement of performance goals and conditions, such performance goals and
conditions shall be deemed to be met or exceeded if and to the extent so
provided by the Committee in the Award document governing such Award or other
agreement with the Participant.
(c) Definition of "Change in Control." A "Change in Control" shall be
deemed to have occurred if, after the Effective Date, there shall have occurred
any of the following:
(i) Any "person," as such term is used in Section 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of stock of the
Company), acquires voting securities of the Company and immediately
thereafter is a "40% Beneficial Owner." For purposes of this provision, a
"40% Beneficial Owner" shall mean a person who is the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 40% or more of the combined
voting power of the Company's then-outstanding voting securities; provided,
however, that the term "40% Beneficial Owner" shall not include any person
who was a beneficial owner of outstanding voting securities of the Company
at February 20, 1990, or any person or persons who was or becomes a
fiduciary of any such person or persons who is, or in the aggregate, are a
"40% Beneficial Owner" (an "Existing Shareholder"), including any group
that may be formed which is comprised solely of Existing Shareholders,
unless and until such time after February 20, 1990 as any such Existing
Shareholder shall have become the beneficial owner (other than by means of
a stock dividend, stock split, gift, inheritance or receipt or exercise of,
or accrual of any right to exercise, a stock option granted by the Company
or receipt or settlement of any other stock-related award granted by the
Company) by purchase of any additional voting securities of the Company;
and provided further, that the term "40% Beneficial Owner" shall not
include any person who shall become the beneficial owner of 40% or more of
the combined voting power of the Company's then-outstanding voting
securities solely as a result of an acquisition by the Company of its
voting securities, until such time thereafter as such person shall become
the beneficial owner (other than by means of a stock dividend or stock
split) of any additional voting securities and becomes a 40% Beneficial
Owner in accordance with this Section 8(c)(i);
(ii) Individuals who on September 1, 2000 constitute the Board, and
any new director (other than a director whose initial assumption of office
is in connection with an actual or threatened election consent, including
but not limited to a consent solicitation, relating to the election of
directors of the Company) whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on September 1, 2000 or whose election or nomination for election
was previously so approved or recommended, cease for any reason to
constitute at least a majority thereof;
(iii) There is consummated a merger, consolidation, recapitalization,
or reorganization of the Company, or a reverse stock split of any class of
voting securities of the Company, if, immediately following consummation of
any of the foregoing, either (A) individuals who, immediately prior to such
consummation, constitute the Board do not constitute at least a majority of
the members of the board of directors of the Company or the surviving or
parent entity, as the case may be, or (B) the voting securities of the
Company outstanding immediately prior to such recommendation do not
represent (either by remaining outstanding or by being converted into
voting securities of a surviving or parent entity) at least 60% or more of
the combined voting power of the outstanding voting securities of the
Company or such surviving or parent entity; or
(iv) The shareholders of the Company have approved a plan of complete
liquidation of the Company or there is consummated an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets (or any transaction have a similar effect).
(d) Definition of "Change in Control Price." The "Change in Control Price"
means an amount in cash equal to the higher of (i) the amount of cash and fair
market value of property that is the highest price per share paid (including
extraordinary dividends) in any transaction triggering the Change in Control or
any liquidation of shares following a sale of substantially all assets of the
Company, or (ii) the highest Fair Market Value per share at any time during the
60-day period preceding and 60-day period following the Change in Control.
9. Additional Award Forfeiture Provisions.
(a) Forfeiture of Options and Other Awards and Gains Realized Upon Prior
Option Exercises or Award Settlements. Unless otherwise determined by the
Committee, each Award granted hereunder shall be subject to the following
additional forfeiture conditions, to which the Participant, by accepting an
Award hereunder, agrees. If any of the events specified in Section 9(b)(i),
(ii), or (iii) occurs (a "Forfeiture Event"), all of the following forfeitures
will result:
(i) The unexercised portion of the Option, whether or not vested, and
any other Award not then settled (except for an Award that has not been
settled solely due to an elective deferral by the Participant and otherwise
is not forfeitable in the event of any termination of service of the
Participant) will be immediately forfeited and canceled upon the occurrence
of the Forfeiture Event; and
(ii) The Participant will be obligated to repay to the Company, in
cash, within five business days after demand is made therefor by the
Company, the total amount of Award Gain (as defined herein) realized by the
Participant upon each exercise of an Option or settlement of an Award
(regardless of any elective deferral) that occurred on or after (A) the
date that is six months prior to the occurrence of the Forfeiture Event, if
the Forfeiture Event occurred while the Participant was employed by the
Company or a subsidiary or affiliate, or (B) the date that is six months
prior to the date the Participant's employment by the Company or a
subsidiary or affiliate terminated, if the Forfeiture Event occurred after
the Participant ceased to be so employed. For purposes of this Section, the
term "Award Gain" shall mean (i), in respect of a given Option exercise,
the product of (X) the Fair Market Value per share of Stock at the date of
such exercise (without regard to any subsequent change in the market price
of shares) minus the exercise price times (Y) the number of shares as to
which the Option was exercised at that date, and (ii), in respect of any
other settlement of an Award granted to the Participant, the Fair Market
Value of the cash or Stock paid or payable to the Participant (regardless
of any elective deferral) less any cash or the Fair Market Value of any
Stock or property (other than an Award or award which would have itself
then been forfeitable hereunder and excluding any payment of tax
withholding) paid by the Participant to the Company as a condition of or in
connection such settlement. For purposes of this Section 9(a), an Award
that is electively deferred shall be treated as settled at the date it
would have settled but for such elective deferral.
(b) Events Triggering Forfeiture. The forfeitures specified in Section 9(a)
will be triggered upon the occurrence of any one of the following Forfeiture
Events at any time during the Participant's employment by the Company or a
subsidiary or affiliate or during the one-year period following termination of
such employment:
(i) The Participant, acting alone or with others, directly or
indirectly, prior to a Change in Control, (A) engages, either as employee,
employer, consultant, advisor, or director, or as an owner, investor,
partner, or shareholder unless the Participant's interest is insubstantial,
in any business in an area or region in which the Company conducts business
at the date the event occurs, which is directly in competition with a
business then conducted by the Company or a subsidiary or affiliate; (B)
induces any customer or supplier of the Company or a subsidiary or
affiliate, or other company with which the Company or a subsidiary or
affiliate has a business relationship, to curtail, cancel, not renew, or
not continue his or her or its business with the Company or any subsidiary
or affiliate; or (C) induces, or attempts to influence, any employee of or
service provider to the Company or a subsidiary or affiliate to terminate
such employment or service. The Committee shall, in its discretion,
determine which lines of business the Company conducts on any particular
date and which third parties may reasonably be deemed to be in competition
with the Company. For purposes of this Section 9(b)(i), a Participant's
interest as a shareholder is insubstantial if it represents beneficial
ownership of less than five percent of the outstanding class of stock, and
a Participant's interest as an owner, investor, or partner is insubstantial
if it represents ownership, as determined by the Committee in its
discretion, of less than five percent of the outstanding equity of the
entity;
(ii) The Participant discloses, uses, sells, or otherwise transfers,
except in the course of employment with or other service to the Company or
any subsidiary or affiliate, any confidential or proprietary information of
the Company or any subsidiary or affiliate, including but not limited to
information regarding the Company's current and potential customers,
organization, employees, finances, and methods of operations and
investments, so long as such information has not otherwise been disclosed
to the public or is not otherwise in the public domain, except as required
by law or pursuant to legal process, or the Participant makes statements or
representations, or otherwise communicates, directly or indirectly, in
writing, orally, or otherwise, or takes any other action which may,
directly or indirectly, disparage or be damaging to the Company or any of
its subsidiaries or affiliates or their respective officers, directors,
employees, advisors, businesses or reputations, except as required by law
or pursuant to legal process; or
(iii) The Participant fails to cooperate with the Company or any
subsidiary or affiliate by making himself or herself available to testify
on behalf of the Company or such subsidiary or affiliate in any action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative, or otherwise fails to assist the Company or any subsidiary
or affiliate in any such action, suit, or proceeding by providing
information and meeting and consulting with members of management of, other
representatives of, or counsel to, the Company or such subsidiary or
affiliate, as reasonably requested.
(c) Agreement Does Not Prohibit Competition or Other Participant
Activities. Although the conditions set forth in Section 9(a) and 9(b) shall be
deemed to be incorporated into an Award, a Participant is not thereby prohibited
from engaging in an activity identified in Section 9(b), including but not
limited to competition with the Company and its subsidiaries and affiliates.
Rather, the non-occurrence of the Forfeiture Events set forth in Section 9(b) is
a condition to the Participant's right to realize and retain value from his or
her compensatory Options and Awards, and the consequence under the Plan if the
Participant engages in an activity giving rise to any such Forfeiture Event are
the forfeitures specified herein. The Company and the Participant shall not be
precluded by this provision or otherwise from entering into other agreements
concerning the subject matter of Section 9(a) and 9(b).
(d) Forfeitures Resulting from Financial Reporting Misconduct. If the
Company is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial
reporting requirement under the securities laws, and if a Participant, knowingly
or through gross negligence, caused or failed to prevent such misconduct, the
Participant (i) shall forfeit any Performance Award (including any Annual
Incentive Award) that was or would be deemed to be earned in whole or in part
based on performance during the period covered by the noncompliant financial
report and during the 12-month period following the first public issuance or
filing with the Securities and Exchange Commission (whichever first occurs) of
the non-compliant financial report; and (ii) shall forfeit any other Award that
was granted hereunder during the 12-month period following such first public
issuance or filing of the non-compliant financial report and thereafter until
the accounting restatement correcting such non-compliant financial report has
been filed, and (iii) shall forfeit any profits realized from the sale of shares
during the 12-month period following such first public issuance or filing if
such shares were acquired upon exercise or settlement of Awards. For purposes of
this Section 9(d), (A) if an Award subject to forfeiture has become vested or
settled, the Participant will be liable to repay the Award Gain (as defined
above), (B) "profit" shall be calculated based on the excess of any selling
price of shares over the average market price of shares in the 20 trading days
ending the day before the first public issuance or filing of the non-compliant
report, and (C) the term "misconduct" and other terms shall have meanings and be
interpreted in a manner consistent with the meanings and interpretation of such
terms under Section 304 of the Sarbanes-Oxley Act of 2002. This Section 9(d)
will apply to Awards granted on and after March 6, 2007 and, with the consent of
the Participant, to Awards granted prior to that date.
(e) Committee Discretion. The Committee may, in its discretion, waive in
whole or in part the Company's right to forfeiture under this Section, but no
such waiver shall be effective unless evidenced by a writing signed by a duly
authorized officer of the Company. In addition, the Committee may impose
additional conditions on Awards, by inclusion of appropriate provisions in the
document evidencing or governing any such Award.
10. General Provisions.
(a) Compliance with Legal and Other Requirements. The Company may, to the
extent deemed necessary or advisable by the Committee, postpone the issuance or
delivery of Stock or payment of other benefits under any Award until completion
of such registration or qualification of such Stock or other required action
under any federal or state law, rule or regulation, listing or other required
action with respect to any stock exchange or automated quotation system upon
which the Stock or other securities of the Company are listed or quoted, or
compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
shall take or cause to be taken no action, and shall undertake or permit to
arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under
any Award or the imposition of any other conditions on such issuance, delivery
or payment, to the extent that such postponement or other condition would
represent a greater burden on a Participant than existed on the 90th day
preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Company or a subsidiary or affiliate
thereof), or assigned or transferred by such Participant, and such Awards or
rights that may be exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or legal
representative, except that (i) Awards and related rights shall be transferred
to a Participant's Beneficiary or Beneficiaries upon the death of the
Participant, and (ii) Awards and other rights may be transferred to one or more
Beneficiaries during the lifetime of the Participant, and rights thereunder may
be exercised by such transferees in accordance with the terms of such Award, but
only if and to the extent such transfers are then permitted by the Committee and
the Committee has determined that there will be no transfer of the Award to a
third party for value, and subject to any terms and conditions which the
Committee may impose thereon (including limitations the Committee may deem
appropriate in order that offers and sales under the Plan will meet applicable
requirements of registration forms under the Securities Act of 1933 specified by
the Securities and Exchange Commission). A Beneficiary or other person claiming
any rights under the Plan from or through any Participant shall be subject to
all terms and conditions of the Plan and any Award document applicable to such
Participant, except as otherwise determined by the Committee, and to any
additional terms and conditions deemed necessary or appropriate by the
Committee.
(c) Adjustments. In the event that any large, special and non-recurring
dividend or other distribution (whether in the form of cash or property other
than Stock), recapitalization, forward or reverse split, Stock dividend,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Stock such that an adjustment is determined by the Committee
to be appropriate under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and kind of shares of
Stock which may be delivered in connection with Awards granted thereafter,
including al applicable limitations specified in Section 4(a), (ii) the number
and kind of shares of Stock subject to or deliverable in respect of outstanding
Awards, (iii) any fixed market price of Common Stock referred to in a
performance condition or otherwise incorporated as a term of an Award, and (iv)
the exercise price, grant price or purchase price relating to any Award or, if
deemed appropriate, the Committee may make provision for a payment of cash or
property to the holder of an outstanding Option (subject to Section 10(j)). In
addition, the Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including Performance
Awards and performance goals relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, events described in the
preceding sentence, as well as acquisitions and dispositions of businesses and
assets) affecting the Company, any subsidiary or affiliate or other business
unit, or the financial statements of the Company or any subsidiary or affiliate,
or in response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or in view of the
Committee's assessment of the business strategy of the Company, any subsidiary
or affiliate or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant.
(d) Tax Provisions.
(i) Withholding. The Company and any subsidiary or affiliate is
authorized to withhold from any Award granted, any payment relating to an
Award under the Plan, including from a distribution of Stock, or any
payroll or other payment to a Participant, amounts of withholding and other
taxes due or potentially payable in connection with any transaction
involving an Award, and to take such other action as the Committee may deem
advisable to enable the Company and Participants to satisfy obligations for
the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock
or other property and to make cash payments in respect thereof in
satisfaction of a Participant's withholding obligations, either on a
mandatory or elective basis in the discretion of the Committee. Other
provisions of the Plan notwithstanding, only the minimum amount of Stock
deliverable in connection with an Award necessary to satisfy statutory
withholding requirements will be withheld.
(ii) Required Consent to and Notification of Code Section 83(b)
Election. No election under Section 83(b) of the Code (to include in gross
income in the year of transfer the amounts specified in Code Section 83(b))
or under a similar provision of the laws of a jurisdiction outside the
United States may be made unless expressly permitted by the terms of the
Award document or by action of the Committee in writing prior to the making
of such election. In any case in which a Participant is permitted to make
such an election in connection with an Award, the Participant shall notify
the Company of such election within ten days of filing notice of the
election with the Internal Revenue Service or other governmental authority,
in addition to any filing and notification required pursuant to regulations
issued under Code Section 83(b) or other applicable provision.
(e) Changes to the Plan. The Board may amend, suspend or terminate the Plan
or the Committee's authority to grant Awards under the Plan without the consent
of shareholders or Participants; provided, however, that, without the consent of
an affected Participant, no such Board action may materially and adversely
affect the rights of such Participant under any outstanding Award. Without the
approval of shareholders, the Committee will not amend or replace previously
granted Options or SARs in a transaction that constitutes a "repricing," which
for this purpose means any of the following or any other action that has the
same effect:
- Lowering the exercise price of an Option or SAR after it is granted;
- Any other action that is treated as a repricing under generally accepted
accounting principles;
- Canceling an Option or SAR at a time when its exercise price exceeds the
fair market value of the underlying Stock, in exchange for another
Option or SAR, restricted stock, or other equity;
provided, however, that the foregoing transactions shall not be deemed a
repricing if pursuant to an adjustment authorized under Section 10(c). The
Committee shall have no authority to waive or modify any other Award term
after the Award has been granted to the extent that the waived or modified
term was mandatory under the Plan.
(f) Right of Setoff. The Company or any subsidiary or affiliate may, to the
extent permitted by applicable law, deduct from and set off against any amounts
the Company or a subsidiary or affiliate may owe to the Participant from time to
time, including amounts payable in connection with any Award, owed as wages,
fringe benefits, or other compensation owed to the Participant, such amounts as
may be owed by the Participant to the Company, including but not limited to
amounts owed under Section 9(a), although the Participant shall remain liable
for any part of the Participant's payment obligation not satisfied through such
deduction and setoff. By accepting any Award granted hereunder, the Participant
agrees to any deduction or setoff under this Section 10(f).
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation
of trusts and deposit therein cash, Stock, other Awards or other property, or
make other arrangements to meet the Company's obligations under the Plan. Such
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval shall
be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements, apart from the
Plan, as it may deem desirable, and such other arrangements may be either
applicable generally or only in specific cases.
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash consideration, the Participant
shall be repaid the amount of such cash consideration. No fractional shares of
Stock shall be issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards or other property shall be
issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.
(j) Certain Limitations Relating to Accounting Treatment of Awards. Other
provisions of the Plan notwithstanding, the Committee's authority under the Plan
(including under Sections 7(c), 7(d), 10(c) and 10(d)) is limited to the extent
necessary to ensure that any Option or other Award of a type that the Committee
has intended to be subject to fixed accounting with a measurement date at the
date of grant or the date performance conditions are satisfied under APB 25
shall not become subject to "variable" accounting solely due to the existence of
such authority, unless the Committee specifically determines that the Award
shall remain outstanding despite such "variable" accounting. In addition, other
provisions of the Plan notwithstanding, (i) if any right under this Plan would
cause a transaction to be ineligible for pooling-of-interests accounting that
would, but for the right hereunder, be eligible for such accounting treatment,
such right shall be automatically adjusted so that pooling-of-interests
accounting shall be available, including by substituting Stock or cash having a
Fair Market Value equal to any cash or Stock otherwise payable in respect of any
right to cash which would cause the transaction to be ineligible for
pooling-of-interests accounting, and (ii) if any authority under Section 8(c)
would cause a transaction to be ineligible for pooling-of-interests accounting
that would, but for such authority, be eligible for such accounting treatment,
such authority shall be limited to the extent necessary so that such transaction
would be eligible for pooling-of-interests accounting.
(k) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award document shall be
determined in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of laws, and applicable provisions of federal
law.
(l) Awards to Participants Outside the United States. The Committee may
modify the terms of any Award under the Plan made to or held by a Participant
who is then resident or primarily employed outside of the United States in any
manner deemed by the Committee to be necessary or appropriate in order that such
Award shall conform to laws, regulations, and customs of the country in which
the Participant is then resident or primarily employed, or so that the value and
other benefits of the Award to the Participant, as affected by foreign tax laws
and other restrictions applicable as a result of the Participant's residence or
employment abroad shall be comparable to the value of such an Award to a
Participant who is resident or primarily employed in the United States. An Award
may be modified under this Section 10(l) in a manner that is inconsistent with
the express terms of the Plan, so long as such modifications will not contravene
any applicable law or regulation.
(m) Limitation on Rights Conferred under Plan. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in the
employ or service of the Company or a subsidiary or affiliate, (ii) interfering
in any way with the right of the Company or a subsidiary or affiliate to
terminate any Eligible Person's or Participant's employment or service at any
time, (iii) giving an Eligible Person or Participant any claim to be granted any
Award under the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the rights of a
shareholder of the Company unless and until the Participant is duly issued or
transferred shares of Stock in accordance with the terms of an Award or an
Option is duly exercised. Except as expressly provided in the Plan and an Award
document, neither the Plan nor any Award document shall confer on any person
other than the Company and the Participant any rights or remedies thereunder.
(n) Severability; Entire Agreement. If any of the provisions of this Plan
or any Award document is finally held to be invalid, illegal or unenforceable
(whether in whole or in part), such provision shall be deemed modified to the
extent, but only to the extent, of such invalidity, illegality or
unenforceability, and the remaining provisions shall not be affected thereby;
provided, that, if any of such provision is finally held to be invalid, illegal,
or unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such provision shall be
deemed to be modified to the minimum extent necessary to modify such scope in
order to make such provision enforceable hereunder. The Plan and any Award
documents contain the entire agreement of the parties with respect to the
subject matter thereof and supersede all prior agreements, promises, covenants,
arrangements, communications, representations and warranties between them,
whether written or oral with respect to the subject matter thereof.
(o) Plan Effective Date and Termination. The Plan shall become effective at
November 14, 2000. Unless earlier terminated by action of the Board of
Directors, the Plan will remain in effect until such time as no Stock remains
available for delivery under the Plan and the Company has no further rights or
obligations under the Plan with respect to outstanding Awards under the Plan.
Exhibit 10.2
INTERNATIONAL FLAVORS & FRAGRANCES INC.
2000 Stock Award and Incentive Plan,
as amended and restated effective as of March 6, 2007 (the "Plan")
Purchased Restricted Stock Agreement
This Purchased Restricted Stock Agreement (the "Agreement") confirms the
grant on May 8, 2007 (the "Grant Date") by INTERNATIONAL FLAVORS &
FRAGRANCES INC., a New York corporation (the "Company"), to David Insoft
("Employee"), for the purpose set forth in Section 1 of the Plan, of an
Award of Restricted Stock (the "Restricted Stock"), as follows:
Restricted Stock granted: 1158 Shares
Purchase Price per Share: $25.89 per Share, being 50% of the fair
market value thereof on the Grant Date
Aggregate Purchase Price: $29980.62 (equal to the number of Shares
granted times the Purchase Price per
Share); the Company acknowledges receipt of
the Purchase Price from Employeein cash, as
of the Grant Date
Restricted Stock Vests: As to 100% of the Restricted Stock on the
third anniversary of the Grant Date (the
"Stated Vesting Date"), except that
different vesting provisions may apply upon
the occurrence of certain events specified
in Section 3 or 5 hereof
The Restricted Stock is an award of shares of the Company's Common Stock (the
"Common Stock") granted under Section 6(d) of the Plan, and is subject to the
risk of forfeiture and other restrictions specified in the Plan and this
Agreement, including the Terms and Conditions of Purchased Restricted Stock
attached hereto. The number and kind of shares of Restricted Stock and other
terms of the Restricted Stock are subject to adjustment in accordance with
Section 4 hereof and Section 11(c) of the Plan.
Employee acknowledges and agrees that (i) the Restricted Stock is
nontransferable, (ii) the Restricted Stock, and certain amounts of gain realized
upon vesting and delivery of the Shares, is subject to forfeiture in the event
Employee fails to meet applicable requirements relating to non-competition,
confidentiality, non-solicitation of customers, suppliers, business associates,
employees and service providers, non-disparagement and cooperation in litigation
with respect to the Company and its subsidiaries and affiliates, and financial
reporting, as set forth in Section 7 hereof and Section 10 of the Plan, (iii)
the Restricted Stock is subject to forfeiture in the event of Employee's
Termination of Employment in certain circumstances prior to vesting, as
specified in Section 3 hereof, (iv) sales of shares delivered upon vesting of
the Restricted Stock will be subject to the Company's policies regulating
trading by employees and (v) a copy of the Plan and related prospectus have
previously been delivered to Employee, are being delivered to Employee or are
available as specified in Section 1 hereof. In addition, and without limiting
the foregoing, Employee consents, acknowledges and agrees that, as a condition
to the grant of Restricted Stock hereunder, Section 10(d) of the Plan, which
relates to forfeitures of Awards (as defined in the Plan) in the event of
financial reporting misconduct, will apply to the Restricted Stock granted
hereunder as well as to any other Awards that may have been granted to Employee
prior to the Grant Date set forth above.
IN WITNESS WHEREOF, INTERNATIONAL FLAVORS & FRAGRANCES INC. has caused this
Agreement to be executed by its officer thereunto duly authorized, and Employee
has duly executed this Agreement, by which each has agreed to the terms of this
Agreement.
Employee INTERNATIONAL FLAVORS &
FRAGRANCES INC.
By: /s/ Dennis M. Meany
------------------------------ -------------------------------
David Insoft Dennis M. Meany
Senior Vice President, General
Counsel & Secretary
TERMS AND CONDITIONS OF PURCHASED RESTRICTED STOCK
The following Terms and Conditions apply to the Restricted Stock granted to
Employee by INTERNATIONAL FLAVORS & FRAGRANCES INC. (the "Company"), as
specified in the Purchased Restricted Stock Agreement (of which these Terms and
Conditions form a part). Certain terms of the Restricted Stock, including the
number of Shares granted, Purchase Price per Share and vesting date, are set
forth on the preceding pages.
1. General. The Restricted Stock is granted to Employee under the Company's
2000 Stock Award and Incentive Plan (the "Plan"), a copy of which is available
for review, along with other documents constituting the "prospectus" for the
Plan, on the Company's intranet site at One IFF/Corporate/Law Department. All of
the applicable terms, conditions and other provisions of the Plan are
incorporated by reference herein. Capitalized terms used in this Agreement but
not defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this document and mandatory provisions of the
Plan, the provisions of the Plan govern. By accepting the grant of the
Restricted Stock, Employee agrees to be bound by all of the terms and provisions
of the Plan (as presently in effect or later amended), the rules and regulations
under the Plan adopted from time to time, and the decisions and determinations
of the Company's Compensation Committee (the "Committee") made from time to
time, provided that no such Plan amendment, rule or regulation or Committee
decision or determination shall materially and adversely affect the rights of
the Employee with respect to outstanding Restricted Stock without the consent of
Employee.
2. Nontransferability. Until such time as the Restricted Stock has become
vested in accordance with the terms of this Agreement, Employee may not transfer
Restricted Stock or any rights hereunder to any third party other than by will
or the laws of descent and distribution. This restriction on transfer precludes
any sale, assignment, pledge, or other encumbrance or disposition of the shares
of Restricted Stock (except for forfeitures to the Company).
3. Termination Provisions. The following provisions will govern the vesting
and forfeiture of the Restricted Stock in the event of Employee's Termination of
Employment (as defined below), provided that the Committee retains its powers to
accelerate vesting or modify these terms subject to the consent of Employee in
the case of a modification materially adverse to Employee:
(a) Voluntary Resignation and Termination by the Company for Cause. In the
event of Employee's Termination of Employment due to his or her voluntarily
resignation (other than a Normal or Early Retirement governed by clause (b) or
(c) below) or Termination of Employment by the Company for Cause (as defined
below), all unvested Restricted Stock will be immediately forfeited.
(b) Disability or Normal Retirement. In the event of Employee's Termination
of Employment due to Disability (as defined below) or Normal Retirement (as
defined below), Employee's unvested Restricted Stock will not be forfeited, but
will remain outstanding and will become vested at the applicable date under this
Agreement as though Employee had not had such a Termination of Employment;
provided that Employee shall forfeit the unvested Restricted Stock if during the
period following Termination of Employment up to the date of vesting Employee
engages in activity that results in a Forfeiture Event set forth in Section 10
of the Plan. Employee acknowledges that the Committee has relied on the
discretion granted to it under Section 10(d) of the Plan in requiring forfeiture
upon occurrence of a Forfeiture Event during the applicable post-Termination
period.
(c) Termination by the Company Not for Cause or Early Retirement. In the
event of Employee's Termination of Employment by the Company not for Cause or
Employee's Early Retirement, the following rules apply:
- A pro rata portion of Employee's then unvested Restricted Stock will not be
forfeited, but will remain outstanding and will become vested at the
applicable date under this Agreement as though Employee had not had such a
Termination of Employment. This pro rata portion will be determined by
multiplying the number of unvested Shares of Restricted Stock by a fraction
the numerator of which is the number of days from the Grant Date to the
date of Employee's Termination of Employment and the denominator of which
is 1,095; provided that Employee shall forfeit the unvested Restricted
Stock if during the period following Termination of Employment up to the
date of vesting Employee engages in activity that results in a Forfeiture
Event set forth in Section 10 of the Plan. Employee acknowledges that the
Committee has relied on the discretion granted to it under Section 10(d) of
the Plan in requiring forfeiture upon occurrence of a Forfeiture Event
during the applicable post-Termination period.
- Employee's Shares of Restricted Stock that had not become vested before
such Termination of Employment and which are not included in the pro rata
portion subject to continued vesting will be immediately forfeited.
(d) Death. In the event of Employee's Termination of Employment due to
death or the death of Employee following Termination but prior to vesting of
Restricted Stock not otherwise forfeited hereunder, Employee's unvested
Restricted Stock will not be forfeited but will become immediately vested.
(e) Certain Definitions. The following definitions apply for purposes of
this Agreement:
(i) "Cause" has the meaning as defined in the Company's Executive
Separation Policy or any successor policy thereto, as in effect at the time
of Employee's Termination of Employment.
(ii) "Disability" means a disability entitling Employee to long-term
disability benefits under the Company's long-term disability policy as in
effect at the date of Employee's termination of employment, upon written
evidence of such permanent disability from a medical doctor in a form
satisfactory to the Company.
(iii) "Early Retirement" means Termination of Employment by either the
Company or Employee after Employee has attained age 55 and before he or she
has attained age 62 if at the time of Termination Employee has ten or more
years in the employ of the Company and/or its subsidiaries.
(iv) "Normal Retirement" means Termination of Employment by either the
Company or Employee after Employee has attained age 62.
(v) "Termination of Employment" means the event by which Employee
ceases to be employed by the Company or any subsidiary of the Company and,
immediately thereafter, is not employed by or providing substantial
services to any of the Company or a subsidiary of the Company. If Employee
is granted a leave of absence for military or governmental service or other
purposes approved by the Board, he or she shall be considered as continuing
in the employ of the Company, or of a subsidiary of the Company, for the
purpose of this subsection, while on such authorized leave of absence.
4. Dividends and Distributions and Adjustments.
(a) Dividends and Distributions. Employee shall be entitled to receive with
respect to the Restricted Stock all dividends and distributions payable on
Common Stock (including for this purpose any forward stock split) if and to the
extent that he is the record owner of such Restricted Stock on any record date
for such a dividend or distribution and he has not forfeited such Restricted
Stock on or before the payment date for such dividend or distribution, subject
to the following terms and conditions (except as provided in Section 4(b)
below):
(i) In the event of a cash dividend or cash distribution on Common
Stock other than an extraordinary dividend or distribution with a per-Share
value at the payment date exceeding 8% of the then Fair Market Value of a
Share, such dividend or distribution shall be paid in cash to Employee and
shall be non-forfeitable;
(ii) In the event of any non-cash dividend or distribution in the form
of property other than Common Stock payable on Common Stock, such as shares
of a subsidiary of the Company distributed in a spin-off, the Company shall
retain in its custody the property so distributed in respect of Employee's
Restricted Stock, which property thereafter will become vested if and to
the same extent as the original Restricted Stock with respect to which the
property was distributed becomes vested and, to the greatest extent
practicable, shall be subject to all other terms and conditions as applied
to the original Restricted Stock, including in the event of any dividends
or distributions paid in respect of such property or with respect to the
placement of any legend on certificate(s) or documents representing such
property; provided, however, that any dividend or distribution of rights
that expire before the applicable vesting date will be unrestricted and
exercisable by Employee in accordance with their terms;
(iii) In the event of a dividend or distribution in the form of Common
Stock or split-up of shares, the Common Stock issued or delivered as such
dividend or distribution or resulting from such split-up will be deemed to
be additional Restricted Stock and will become vested if and to the same
extent as the original Restricted Stock with respect to which the dividend
or distribution was payable becomes vested, and shall be subject to all
other terms and conditions as applied to the original Restricted Stock; and
(iv) In the event of an extraordinary cash dividend or distribution
not payable under clause (i) above, the amount of such cash shall be deemed
reinvested in additional Restricted Stock at the Fair Market Value of
Shares on the payment date, and the resulting Restricted Stock will become
vested if and to the same extent as the original Restricted Stock with
respect to which the dividend or distribution was payable becomes vested,
and shall be subject to all other terms and conditions as applied to the
original Restricted Stock.
(b) Adjustments. The number and kind of shares of Restricted Stock and
other terms and conditions of Restricted Stock or otherwise contained in this
Agreement, including the Purchase Price per Share (for purposes of Section 6),
shall be appropriately adjusted, in order to prevent dilution or enlargement of
Employee's rights hereunder, to reflect any changes in the number of outstanding
shares of Common Stock resulting from any event referred to in Section 11(c) of
the Plan, taking into account any Restricted Stock or other amounts paid or
credited to Employee in connection with such event under Section 4(a) hereof, in
the sole discretion of the Committee. In addition, the Committee may vary the
treatment of any dividend or distribution as specified under Section 4(a)(ii),
(iii) or (iv), in its discretion. The Committee may determine how to treat or
settle any fractional share resulting under this Agreement.
5. Change in Control Provisions. The provisions of Section 9(a) of the Plan
shall apply to the Restricted Stock, such that vesting of Restricted Stock shall
accelerate upon a Change in Control.
6. Refund of Purchase Price Upon Forfeiture. In the event of Employee's
forfeiture of Restricted Stock under Section 3, the Company will repay to
Employee, for each Share of Restricted Stock forfeited, an amount equal to the
lesser of the Purchase Price per Share (subject to any adjustment under Section
4(b)) or 100% of the Fair Market Value of a Share at the date of forfeiture. In
the case of any forfeiture under Section 7, a refund will be paid calculated as
the greater of the amount determined under this Section 6 or the amount, if any,
payable under Section 10 of the Plan.
7. Additional Forfeiture Provisions. Employee agrees that, by signing this
Agreement and accepting the grant of the Restricted Stock, the forfeiture
conditions set forth in Section 10 of the Plan shall apply to the Restricted
Stock and to gains realized upon the vesting of the Restricted Stock.
8. Other Terms of Restricted Stock.
(a) Voting and Other Shareholder Rights. Employee shall be entitled to vote
Restricted Stock on any matter submitted to a vote of holders of Common Stock,
and shall have all other rights of a shareholder of the Company except as
expressly limited by this Agreement.
(b) Employee Representations and Warranties Upon Vesting. As a condition to
the vesting of Restricted Stock, the Company may require Employee to make any
representation or warranty to the Company as may be required under any
applicable law or regulation, and to make a representation and warranty that no
Forfeiture Event has occurred or is contemplated within the meaning of Section
10 of the Plan.
(c) Certificates/DRS. Restricted Stock shall be evidenced by issuance of
one or more certificates or in certificate-less form under the Direct
Registration System ("DRS") established by the Company, in the name of Employee,
bearing an appropriate legend referring to the terms, conditions, and
restrictions applicable hereunder, and shall remain in the physical custody of
the General Counsel of the Company or his designee until such time as such
Shares of Restricted Stock have been vested and the restrictions hereunder have
therefore lapsed. In addition, Restricted Stock shall be subject to such
stop-transfer orders and other restrictive measures as the General Counsel of
the Company shall deem advisable under federal or state securities laws, rules
and regulations thereunder, and the rules of the New York Stock Exchange, or to
implement the terms, conditions and restrictions hereunder, and the General
Counsel may cause a legend or legends to be placed on any such certificates or
DRS accounts to make appropriate reference to the terms, conditions and
restrictions hereunder.
(d) Stock Powers. Employee agrees to execute and deliver to the Company one
or more stock powers, in such form as may be specified by the General Counsel,
authorizing the transfer of the Restricted Stock to the Company, upon the
request of the Company.
(e) Mandatory Tax Withholding. Unless otherwise determined by the
Committee, at the time of settlement the Company will withhold from any Shares
deliverable to Employee, in accordance with Section 11(d) of the Plan, the
number of shares having a value nearest to, but not exceeding, the amount of
income taxes, employment taxes or other withholding amounts required to be
withheld under applicable local laws and regulations, and pay the amount of such
withholding taxes in cash to the appropriate taxing authorities. Employee will
be responsible for any taxes relating to the Restricted Stock not satisfied by
means of such mandatory withholding.
(f) Employee Consent. By signing this Agreement, Employee voluntarily
acknowledges and consents to the collection, use, processing and transfer of
personal data as described in this Section 8(f). Employee is not obliged to
consent to such collection, use, processing and transfer of personal data;
however, failure to provide the consent may affect Employee's ability to
participate in the Plan. The Company and its subsidiaries hold, for the purpose
of managing and administering the Plan, certain personal information about
Employee, including Employee's name, home address and telephone number, date of
birth, social security number or other employee identification number, salary,
nationality, job title, any shares of stock or directorships held in the
Company, and details of all options or any other entitlement to shares of stock
awarded, canceled, purchased, vested, unvested or outstanding in Employee's
favor ("Data"). The Company and/or its subsidiaries will transfer Data among
themselves as necessary for the purpose of implementation, administration and
management of Employee's participation in the Plan and the Company and/or any of
its subsidiaries may each further transfer Data to any third parties assisting
the Company in the implementation, administration and management of the Plan.
These recipients may be located in the European Economic Area, or elsewhere
throughout the world, such as the United States. Employee authorizes them to
receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing Employee's
participation in the Plan, including any requisite transfer of such Data as may
be required for the administration of the Plan and/or the subsequent holding of
shares on Employee's behalf to a broker or other third party with whom Employee
may elect to deposit any shares acquired pursuant to the Plan. Employee may, at
any time, review Data, require any necessary amendments to it or withdraw the
consents herein in writing by contacting the Company; however, withdrawing
consent may affect Employee's ability to participate in the Plan.
(g) Voluntary Participation. Employee's participation in the Plan is
voluntary. The value of the Restricted Stock is an extraordinary item of
compensation. As such, the Restricted Stock is not part of normal or expected
compensation for purposes of calculating any severance, resignation, redundancy,
end of service payments, bonuses, long-service awards, pension or retirement
benefits or similar payments. Rather, the awarding of Restricted Stock to
Employee under the Plan represents a mere investment opportunity.
(h) Consent to Electronic Delivery. EMPLOYEE HEREBY CONSENTS TO ELECTRONIC
DELIVERY OF THE PLAN, THE PROSPECTUS FOR THE PLAN AND OTHER DOCUMENTS RELATED TO
THE PLAN (COLLECTIVELY, THE "PLAN DOCUMENTS"). THE COMPANY WILL DELIVER THE PLAN
DOCUMENTS ELECTRONICALLY TO EMPLOYEE BY E-MAIL, BY POSTING SUCH DOCUMENTS ON ITS
INTRANET WEBSITE OR BY ANOTHER MODE OF ELECTRONIC DELIVERY AS DETERMINED BY THE
COMPANY IN ITS SOLE DISCRETION. THE COMPANY WILL SEND TO EMPLOYEE AN E-MAIL
ANNOUNCEMENT WHEN A NEW PLAN DOCUMENT IS AVAILABLE ELECTRONICALLY FOR EMPLOYEE'S
REVIEW, DOWNLOAD OR PRINTING AND WILL PROVIDE INSTRUCTIONS ON WHERE THE PLAN
DOCUMENT CAN BE FOUND. UNLESS OTHERWISE SPECIFIED IN WRITING BY THE COMPANY,
EMPLOYEE WILL NOT INCUR ANY COSTS FOR RECEIVING THE PLAN DOCUMENTS
ELECTRONICALLY THROUGH THE COMPANY'S COMPUTER NETWORK. EMPLOYEE WILL HAVE THE
RIGHT TO RECEIVE PAPER COPIES OF ANY PLAN DOCUMENT BY SENDING A WRITTEN REQUEST
FOR A PAPER COPY TO THE ADDRESS SPECIFIED IN SECTION 9(e) HEREOF. EMPLOYEE'S
CONSENT TO ELECTRONIC DELIVERY OF THE PLAN DOCUMENTS WILL BE VALID AND REMAIN
EFFECTIVE UNTIL THE EARLIER OF (I) THE TERMINATION OF EMPLOYEE'S PARTICIPATION
IN THE PLAN AND (II) THE WITHDRAWAL OF EMPLOYEE'S CONSENT TO ELECTRONIC DELIVERY
OF THE PLAN DOCUMENTS. THE COMPANY ACKNOWLEDGES AND AGREES THAT EMPLOYEE HAS THE
RIGHT AT ANY TIME TO WITHDRAW HIS OR HER CONSENT TO ELECTRONIC DELIVERY OF THE
PLAN DOCUMENTS BY SENDING A WRITTEN NOTICE OF WITHDRAWAL TO THE ADDRESS
SPECIFIED IN SECTION 9(e) HEREOF. IF EMPLOYEE WITHDRAWS HIS OR HER CONSENT TO
ELECTRONIC DELIVERY, THE COMPANY WILL RESUME SENDING PAPER COPIES OF THE PLAN
DOCUMENTS WITHIN TEN (10) BUSINESS DAYS OF ITS RECEIPT OF THE WITHDRAWAL NOTICE.
EMPLOYEE ACKNOWLEDGES THAT HE OR SHE IS ABLE TO ACCESS, VIEW AND RETAIN AN
E-MAIL ANNOUNCEMENT INFORMING EMPLOYEE THAT THE PLAN DOCUMENTS ARE AVAILABLE IN
EITHER HTML, PDF OR SUCH OTHER FORMAT AS THE COMPANY DETERMINES IN ITS SOLE
DISCRETION.
9. Miscellaneous.
(a) Binding Agreement; Written Amendments. This Agreement shall be binding
upon the heirs, executors, administrators and successors of the parties. This
Agreement constitutes the entire agreement between the parties with respect to
the Restricted Stock, and supersedes any prior agreements or documents with
respect thereto. No amendment or alteration of this Agreement which may impose
any additional obligation upon the Company shall be valid unless expressed in a
written instrument duly executed in the name of the Company, and no amendment,
alteration, suspension or termination of this Agreement which may materially
impair the rights of Employee with respect to the Restricted Stock shall be
valid unless expressed in a written instrument executed by Employee.
(b) No Promise of Employment. The Restricted Stock and the granting thereof
shall not constitute or be evidence of any agreement or understanding, express
or implied, that Employee has a right to continue as an officer or employee of
the Company for any period of time, or at any particular rate of compensation.
Employee acknowledges and agrees that the Plan is discretionary in nature and
limited in duration, and may be amended, cancelled, or terminated by the
Company, in its sole discretion, at any time, provided, however that any
outstanding Restricted Stock shall not be materially and adversely affected. The
grant of Restricted Stock under the Plan is a one-time benefit and does not
create any contractual or other right to receive a grant of restricted stock or
other equity awards or benefits in lieu of equity awards in the future. Future
grants, if any, will be at the sole discretion of the Company, including, but
not limited to, the timing of any grant, the number of Shares and vesting
provisions.
(d) Governing Law. THE VALIDITY, CONSTRUCTION, AND EFFECT OF THIS AGREEMENT
SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS (INCLUDING THOSE GOVERNING
CONTRACTS) OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS, AND APPLICABLE FEDERAL LAW. The Restricted Stock and the
granting thereof are subject to the Employee's compliance with the applicable
law of the jurisdiction of Employee's employment.
(e) Notices. Any notice to be given the Company under this Agreement shall
be addressed to the Company at 521 West 57th Street, New York, NY 10019,
attention: Corporate Secretary, and any notice to the Employee shall be
addressed to the Employee at Employee's address as then appearing in the records
of the Company.
Exhibit 10.3
INTERNATIONAL FLAVORS & FRAGRANCES INC.
2000 Stock Award and Incentive Plan,
as amended and restated effective as of March 6, 2007
U.S. Restricted Stock Units Agreement
This Restricted Stock Units Agreement (the "Agreement") confirms the grant on
May 8, 2007 (the "Grant Date") by INTERNATIONAL FLAVORS & FRAGRANCES INC., a New
York corporation (the "Company"), to David Insoft ("Employee") of Restricted
Stock Units (the "Units"), as follows:
Number granted: 579 Units
Units vest: All Units will vest on May 8, 2010 (the "Stated Vesting
Date"), if not previously forfeited. In addition, the Units will
become immediately vested upon a Change in Control or upon the
occurrence of certain events relating to termination of
employment in accordance with Section 4 hereof.
Settlement: Units granted hereunder will be settled by delivery of one
share of the Company's Common Stock, par value $.12-1/2 per
share, for each Unit being settled. Such settlement shall occur
promptly on or following the vesting (the lapse of the risk of
forfeiture) of each Unit as specified above, subject to Section
6. Any reference in this Agreement to settlement "promptly" upon
a settlement date requires that shares be delivered no more than
60 days after the settlement date. The foregoing notwithstanding,
settlement shall be deferred in certain cases if so elected by
Employee by filling out the following section, executing the
Agreement and returning it to the Company by June 8, 2007, or as
otherwise provided under Section 6 hereof:
Check Only One:
____ I hereby elect to have my Units settled at the date of vesting
(this includes any date following Termination of Employment
deemed to result from continued vesting under Section 4(b) or
(c)) (Note: this election will apply if this form is not returned
or if no box is checked).
____ I hereby elect to defer the settlement of my Units until the
first business day of the year (date must be after the Stated
Vesting Date) (subject to accelerated settlement of the deferred
Units in the event of a Change in Control (subject to Section 6)
and accelerated settlement of previously vested Units in the
event of Employee's Termination of Employment for any reason,
including Normal or Early Retirement, after the Stated Vesting
Date, at which time settlement will occur promptly but subject to
the six-month delay rule of Section 6(b), if applicable).
____ I hereby elect to defer the settlement of my Units until my
Termination of Employment for any reason, including Retirement,
at which time settlement will occur promptly but subject to the
six-month delay rule of Section 6(b), if applicable, and in all
events subject to accelerated settlement in the event of a Change
in Control (subject to Section 6).
If I elect to defer the settlement of my Units, I acknowledge and
agree that, if the Company declares and pays a dividend of any kind on
the Company's Common Stock, amounts equivalent to such dividends will
be paid on any vested Units after the Stated Vesting Date, even if
such Units have not been settled, and that such dividend equivalents
will be treated as compensation to me.
* * * * * *
The Units are granted under Section 6(e) of the 2000 Stock Award and Incentive
Plan, as amended and restated effective as of March 6, 2007 (the "Plan"), and
are subject to the terms and conditions of the Plan and this Agreement,
including the Terms and Conditions of Restricted Stock Units attached hereto.
The number of Units and the kind of shares deliverable in settlement of Units
are subject to adjustment in accordance with Section 5 hereof and Section 11(c)
of the Plan.
Employee acknowledges and agrees that (i) Units are nontransferable, except as
provided in Section 3 hereof and Section 11(b) of the Plan, (ii) Units, and
certain amounts of gain realized upon settlement of Units, are subject to
forfeiture in the event Employee fails to meet applicable requirements relating
to non-competition, confidentiality, non-solicitation of customers, suppliers,
business associates, employees and service providers, non-disparagement and
cooperation in litigation with respect to the Company and its subsidiaries and
affiliates, and financial reporting, as set forth in Section 7 hereof and
Section 10 of the Plan, (iii) Units are subject to forfeiture in the event of
Employee's Termination of Employment in certain circumstances prior to vesting,
as specified in Section 4 hereof, (iv) sales of shares delivered in settlement
of Units will be subject to the Company's policies regulating trading by
employees and (v) a copy of the Plan and related prospectus have previously been
delivered to Employee, are being delivered to Employee or are available as
specified in Section 1 hereof. In addition, and without limiting the foregoing,
Employee consents, acknowledges and agrees that, as a condition to the grant of
Units hereunder, Section 10(d) of the Plan, which relates to forfeitures of
Awards (as defined in the Plan) in the event of financial reporting misconduct,
will apply to the Units granted hereunder as well as to any other Awards that
may have been granted to Employee prior to the Grant Date set forth above.
IN WITNESS WHEREOF, INTERNATIONAL FLAVORS & FRAGRANCES INC. has caused this
Agreement to be executed by its officer thereunto duly authorized, and Employee
has duly executed this Agreement, by which each has agreed to the terms of this
Agreement.
Employee INTERNATIONAL FLAVORS &
FRAGRANCES INC.
By: /s/ Dannis M. Meany
-------------------------------- --------------------------------
David Insoft Dennis M. Meany
Senior Vice President, General
Counsel & Secretary
TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS
The following Terms and Conditions apply to the Units granted to Employee
by INTERNATIONAL FLAVORS & FRAGRANCES INC. (the "Company"), as specified in the
U.S. Restricted Stock Units Agreement (of which these Terms and Conditions form
a part). Certain terms of the Units, including the number of Units granted,
vesting date(s) and settlement date, are set forth on the preceding pages.
1. General. The Units are granted to Employee under the Company's 2000
Stock Award and Incentive Plan (the "Plan"), a copy of which is available for
review, along with other documents constituting the "prospectus" for the Plan,
on the Company's intranet site at One IFF/Corporate/Law Department. All of the
applicable terms, conditions and other provisions of the Plan are incorporated
by reference herein. Capitalized terms used in this Agreement but not defined
herein shall have the same meanings as in the Plan. If there is any conflict
between the provisions of this document and mandatory provisions of the Plan,
the provisions of the Plan govern. By accepting the grant of the Units, Employee
agrees to be bound by all of the terms and provisions of the Plan (as presently
in effect or later amended), the rules and regulations under the Plan adopted
from time to time, and the decisions and determinations of the Company's
Compensation Committee (the "Committee") made from time to time, provided that
no such Plan amendment, rule or regulation or Committee decision or
determination shall materially and adversely affect the rights of the Employee
with respect to outstanding Units.
2. Account for Employee. The Company shall maintain a bookkeeping account
for Employee (the "Account") reflecting the number of Units then credited to
Employee hereunder as a result of such grant of Units.
3. Nontransferability. Until Units become settleable in accordance with the
terms of this Agreement, Employee may not transfer Units or any rights hereunder
to any third party other than by will or the applicable laws of descent and
distribution, except for transfers to a Beneficiary upon death of Employee or
otherwise if and to the extent permitted by the Company and subject to the
conditions under Section 11(b) of the Plan.
4. Termination Provisions. The following provisions will govern the vesting
and forfeiture of the Units in the event of Employee's Termination of Employment
(as defined below), provided that the Committee retains its powers to accelerate
vesting or modify these terms, subject to the consent of Employee in the case of
a modification materially adverse to Employee and subject to Section 6(b)
hereof:
(a) Voluntary Resignation and Termination by the Company for Cause. In
the event of Employee's Termination of Employment due to his or her
voluntary resignation (other than a Normal or Early Retirement governed by
clause (b) or (c) below) or Termination of Employment by the Company for
Cause (as defined below), all unvested Units will be immediately forfeited,
and the portion of the then-outstanding Units that is vested and
non-forfeitable at the date of Termination will be settled promptly
following such Termination, subject to the six-month delay rule in Section
6(b) if applicable.
(b) Disability or Normal Retirement. In the event of Employee's
Termination of Employment due to Disability (as defined below) or Normal
Retirement (as defined below), Employee's unvested Units will not be
forfeited, but will remain outstanding and will become vested at the
applicable date under this Agreement as though Employee had not had such a
Termination of Employment; provided that Employee shall forfeit the
unvested Units if before the date of vesting Employee engages in an
activity that results in a Forfeiture Event set forth in Section 10 of the
Plan. Upon vesting, such Units will be settled promptly. Units vested prior
to such Termination will be settled promptly following such Termination,
subject to the six-month delay rule in Section 6(b) if applicable. Employee
acknowledges that the Committee has relied on the discretion granted to it
under Section 10(e) of the Plan in requiring forfeiture upon occurrence of
a Forfeiture Event during the applicable post-Termination period.
(c) Termination by the Company Not for Cause or Early Retirement. In
the event of Employee's Termination of Employment by the Company not for
Cause or Employee's Early Retirement, the following rules apply:
- A pro rata portion of Employee's then unvested Units will not be
forfeited, but will remain outstanding and will become vested at
the applicable date under this Agreement as though Employee had
not had such a Termination of Employment. This pro rata portion
will be determined by multiplying the number of unvested Units by
a fraction the numerator of which is the number of days from the
Grant Date to the date of Employee's Termination of Employment
and the denominator of which is 1,095; provided that Employee
shall forfeit such unvested Units if before the date of vesting
Employee engages in activity that results in a Forfeiture Event
set forth in Section 10 of the Plan. Employee acknowledges that
the Committee has relied on the discretion granted to it under
Section 10(e) of the Plan in requiring forfeiture upon occurrence
of a Forfeiture Event during the applicable post-Termination
period.
- Employee's Units that had not become vested before such
Termination of Employment and which are not included in the pro
rata portion subject to continued vesting will be immediately
forfeited.
- Upon vesting of the Units included in the pro rata portion
subject to continued vesting, such Units will be settled promptly
as provided herein.
- Units vested prior to such Termination will be settled promptly
after such Termination, subject to the six-month delay rule in
Section 6(b) if applicable.
(d) Death. In the event of Employee's Termination of Employment due to
death or the death of Employee following Termination (including death after
Termination but prior to vesting of Units not otherwise forfeited
hereunder), Employee's unvested Units will not be forfeited but will become
immediately vested, and such Units and any Units vested prior to death will
be settled promptly as provided herein.
(e) Certain Definitions. The following definitions apply for purposes
of this Agreement:
(i) "Cause" has the meaning as defined in the Company's Executive
Separation Policy or any successor policy thereto, as in effect at the
time of Employee's Termination of Employment.
(ii)"Disability" means a disability entitling Employee to
long-term disability benefits under the Company's long-term disability
policy as in effect at the date of Employee's termination of
employment, upon written evidence of such total disability from a
medical doctor in a form satisfactory to the Company.
(iii) "Early Retirement" means Termination of Employment by
either the Company or Employee after Employee has attained age 55 and
before he or she has attained age 62 if at the time of Termination
Employee has ten or more years in the employ of the Company and/or its
subsidiaries.
(iv)"Normal Retirement" means Termination of Employment by either
the Company or Employee after Employee has attained age 62.
(v) "Termination of Employment" means the event by which Employee
ceases to be employed by the Company or any subsidiary of the Company
and, immediately thereafter, is not employed by or providing
substantial services to any of the Company or a subsidiary of the
Company. If Employee is granted a leave of absence for military or
governmental service or other purposes approved by the Board, he or
she shall be considered as continuing in the employ of the Company, or
of a subsidiary of the Company, for the purpose of this subsection,
while on such authorized leave of absence.
5. Dividends and Adjustments.
(a) Dividends. No dividends or dividend equivalents will be credited
or paid on any unvested Units. Units that, at the relevant dividend record
date that occurs before the issuance of shares in settlement of Units,
previously have been vested (i.e., Units deferred as to settlement under
Section 6), shall be entitled to payments or credits equivalent to
dividends that would have been paid if the Units had been outstanding
shares at such record date. The form and timing of such payments will be in
the discretion of the Committee.
(b) Adjustments. The number of Units credited to Employee's Account
and/or the property deliverable upon settlement of Units shall be
appropriately adjusted, in order to prevent dilution or enlargement of
Employee's rights with respect to Units in connection with, or to reflect
any changes in the number and kind of outstanding shares of Common Stock
resulting from, any corporate transaction or event referred to in the first
sentence of Section 11(c) of the Plan (this provision takes precedence over
Section 5(a) in the case of a large and non-recurring cash dividend or any
non-cash dividend).
(c) Risk of Forfeiture and Settlement of Units Resulting from
Adjustments. Units (and other property deliverable in settlement of Units)
which directly or indirectly result from adjustments to a Unit granted
hereunder shall be subject to the same risk of forfeiture (including
additional forfeiture terms of Section 10 of the Plan) as applies to the
granted Unit and will be settled at the same time as the granted Unit.
6. Deferral of Settlement.
(a) Voluntary Deferral. Settlement of any Unit, which otherwise would
occur upon the vesting or lapse of the risk of forfeiture of such Unit,
will be deferred in certain cases if and to the extent so elected by
Employee in accordance with the cover page of this Agreement.
(b) Code Section 409A Compliance. Deferrals, whether elective or
mandatory under the terms of this Agreement (this generally includes terms
providing for post-termination vesting), shall comply with requirements
under Section 409A of the Internal Revenue Code (the "Code"). Other
provisions of this Agreement notwithstanding, under U.S. federal income tax
laws and Treasury Regulations (including any other applicable guidance) as
presently in effect or hereafter implemented, (i) a distribution in
settlement of Units to Employee triggered by a Termination of Employment
will occur only if the Termination constitutes a "separation from service"
within the meaning of Code Section 409A(a)(2)(A)(i) and, if at the time of
such separation from service Employee is a "specified employee" under Code
Section 409A(a)(2)(B)(i) and a delay in distribution is required in order
that Employee will not be subject to a tax penalty under Code Section 409A,
such distribution in settlement of Units will occur at the date six months
after Termination of Employment; (ii) any Units deemed to constitute a
deferral of compensation under Code Section 409A will be subject to
accelerated settlement under Section 9(a) of the Plan or otherwise upon a
Change in Control only if the Change in Control constitutes a change in the
ownership or effective control of the corporation or in the ownership of a
substantial portion of the assets of the corporation within the meaning of
Section 409A(a)(2)(A)(v);and (iii) any rights of Employee or retained
authority of the Company with respect to Units hereunder shall be
automatically modified and limited to the extent necessary so that Employee
will not be deemed to be in constructive receipt of income relating to the
Units prior to the distribution and so that Employee shall not be subject
to any penalty under Code Section 409A. . In this regard, the Company shall
have no retained discretion to accelerate the settlement of the Units
beyond that permitted under Code Section 409A without triggering any tax
penalty.
7. Additional Forfeiture Provisions. Employee agrees that, by signing this
Agreement and accepting the grant of the Units, the forfeiture conditions set
forth in Section 10 of the Plan shall apply to all Units hereunder and to gains
realized upon the vesting of the Units. For the purpose of the forfeiture
conditions set forth in Section 10 of the Plan, gains will be deemed to be
realized at the time of vesting for any Units the settlement of which is
deferred at the election of Employee.
8. Employee Representations and Warranties Upon Settlement. As a condition
to the settlement of the Units, the Company may require Employee to make any
representation or warranty to the Company as may be required under any
applicable law or regulation, and to make a representation and warranty that no
Forfeiture Event has occurred or is contemplated within the meaning of Section
10 of the Plan.
9. Other Terms Relating to Units.
(a) Fractional Units and Shares. The number of Units credited to
Employee's Account shall include fractional Units, if any, calculated to at
least three decimal places, unless otherwise determined by the Committee.
Unless settlement is effected through a third-party broker or agent that
can accommodate fractional shares (without requiring issuance of a
fractional share by the Company), upon settlement of the Units Employee
shall be paid, in cash, an amount equal to the value of any fractional
share that would have otherwise been deliverable in settlement of such
Units.
(b) Mandatory Tax Withholding. Unless otherwise determined by the
Committee, at the time of settlement the Company will withhold from any
shares deliverable in settlement of the Units, in accordance with Section
11(d) of the Plan, the number of shares having a value nearest to, but not
exceeding, the amount of income taxes, employment taxes or other
withholding amounts required to be withheld under applicable local laws and
regulations, and pay the amount of such withholding taxes in cash to the
appropriate taxing authorities. Employee will be responsible for any taxes
relating to the Units not satisfied by means of such mandatory withholding.
(c) Statements. An individual statement of each Employee's Account
will be issued to each Employee at such times as may be determined by the
Company. Such a statement shall reflect the number of Units credited to
Employee's Account, transactions therein during the period covered by the
statement, and other information deemed relevant by the Committee. Such a
statement may be combined with or include information regarding other plans
and compensatory arrangements for employees. Any statement containing an
error shall not, however, represent a binding obligation to the extent of
such error.
(d) Employee Consent. By signing this Agreement, Employee voluntarily
acknowledges and consents to the collection, use processing and transfer of
personal data as described in this Section 9(d). Employee is not obliged to
consent to such collection, use, processing and transfer of personal data;
however, failure to provide the consent may affect Employee's ability to
participate in the Plan. The Company and its subsidiaries hold, for the
purpose of managing and administering the Plan, certain personal
information about Employee, including Employee's name, home address and
telephone number, date of birth, social security number or other employee
identification number, salary, nationality, job title, any shares of stock
or directorships held in the Company, and details of all options or any
other entitlement to shares of stock awarded, canceled, purchased, vested,
unvested or outstanding in Employee's favor ("Data"). The Company and/or
its subsidiaries will transfer Data among themselves as necessary for the
purpose of implementation, administration and management of Employee's
participation in the Plan and the Company and/or any of its subsidiaries
may each further transfer Data to any third parties assisting the Company
in the implementation, administration and management of the Plan. These
recipients may be located in the European Economic Area, or elsewhere
throughout the world, such as the United States. Employee authorizes them
to receive, possess, use, retain and transfer the Data, in electronic or
other form, for the purposes of implementing, administering and managing
Employee's participation in the Plan, including any requisite transfer of
such Data as may be required for the administration of the Plan and/or the
subsequent holding of shares on Employee's behalf to a broker or other
third party with whom Employee may elect to deposit any shares acquired
pursuant to the Plan. Employee may, at any time, review Data, require any
necessary amendments to it or withdraw the consents herein in writing by
contacting the Company; however, withdrawing consent may affect Employee's
ability to participate in the Plan.
(e) Voluntary Participation. Employee's participation in the Plan is
voluntary. The value of the Units is an extraordinary item of compensation.
As such, the Units are not part of normal or expected compensation for
purposes of calculating any severance, resignation, redundancy, end of
service payments, bonuses, long-service awards, pension or retirement
benefits or similar payments. Rather, the awarding of Units to Employee
under the Plan represents a mere investment opportunity.
(f) Consent to Electronic Delivery. EMPLOYEE HEREBY CONSENTS TO
ELECTRONIC DELIVERY OF THE PLAN, THE PROSPECTUS FOR THE PLAN AND OTHER
DOCUMENTS RELATED TO THE PLAN (COLLECTIVELY, THE "PLAN DOCUMENTS"). THE
COMPANY WILL DELIVER THE PLAN DOCUMENTS ELECTRONICALLY TO EMPLOYEE BY
E-MAIL, BY POSTING SUCH DOCUMENTS ON ITS INTRANET WEBSITE OR BY ANOTHER
MODE OF ELECTRONIC DELIVERY AS DETERMINED BY THE COMPANY IN ITS SOLE
DISCRETION. THE COMPANY WILL SEND TO EMPLOYEE AN E-MAIL ANNOUNCEMENT WHEN A
NEW PLAN DOCUMENT IS AVAILABLE ELECTRONICALLY FOR EMPLOYEE'S REVIEW,
DOWNLOAD OR PRINTING AND WILL PROVIDE INSTRUCTIONS ON WHERE THE PLAN
DOCUMENT CAN BE FOUND. UNLESS OTHERWISE SPECIFIED IN WRITING BY THE
COMPANY, EMPLOYEE WILL NOT INCUR ANY COSTS FOR RECEIVING THE PLAN DOCUMENTS
ELECTRONICALLY THROUGH THE COMPANY'S COMPUTER NETWORK. EMPLOYEE WILL HAVE
THE RIGHT TO RECEIVE PAPER COPIES OF ANY PLAN DOCUMENT BY SENDING A WRITTEN
REQUEST FOR A PAPER COPY TO THE ADDRESS SPECIFIED IN SECTION 10(e) HEREOF.
EMPLOYEE'S CONSENT TO ELECTRONIC DELIVERY OF THE PLAN DOCUMENTS WILL BE
VALID AND REMAIN EFFECTIVE UNTIL THE EARLIER OF (I) THE TERMINATION OF
EMPLOYEE'S PARTICIPATION IN THE PLAN AND (II) THE WITHDRAWAL OF EMPLOYEE'S
CONSENT TO ELECTRONIC DELIVERY OF THE PLAN DOCUMENTS. THE COMPANY
ACKNOWLEDGES AND AGREES THAT EMPLOYEE HAS THE RIGHT AT ANY TIME TO WITHDRAW
HIS OR HER CONSENT TO ELECTRONIC DELIVERY OF THE PLAN DOCUMENTS BY SENDING
A WRITTEN NOTICE OF WITHDRAWAL TO THE ADDRESS SPECIFIED IN SECTION 10(e)
HEREOF. IF EMPLOYEE WITHDRAWS HIS OR HER CONSENT TO ELECTRONIC DELIVERY,
THE COMPANY WILL RESUME SENDING PAPER COPIES OF THE PLAN DOCUMENTS WITHIN
TEN (10) BUSINESS DAYS OF ITS RECEIPT OF THE WITHDRAWAL NOTICE. EMPLOYEE
ACKNOWLEDGES THAT HE OR SHE IS ABLE TO ACCESS, VIEW AND RETAIN AN E-MAIL
ANNOUNCEMENT INFORMING EMPLOYEE THAT THE PLAN DOCUMENTS ARE AVAILABLE IN
EITHER HTML, PDF OR SUCH OTHER FORMAT AS THE COMPANY DETERMINES IN ITS SOLE
DISCRETION.
10. Miscellaneous.
(a) Binding Agreement; Written Amendments. This Agreement shall be
binding upon the heirs, executors, administrators and successors of the
parties. This Agreement constitutes the entire agreement between the
parties with respect to the Units, and supersedes any prior agreements or
documents with respect thereto. No amendment or alteration of this
Agreement which may impose any additional obligation upon the Company shall
be valid unless expressed in a written instrument duly executed in the name
of the Company, and no amendment, alteration, suspension or termination of
this Agreement which may materially impair the rights of Employee with
respect to the Units shall be valid unless expressed in a written
instrument executed by Employee.
(b) No Promise of Employment. The Units and the granting thereof shall
not constitute or be evidence of any agreement or understanding, express or
implied, that Employee has a right to continue as an officer or employee of
the Company for any period of time, or at any particular rate of
compensation. Employee acknowledges and agrees that the Plan is
discretionary in nature and limited in duration, and may be amended,
cancelled, or terminated by the Company, in its sole discretion, at any
time, provided, however that any outstanding Units shall not be materially
and adversely affected. The grant of Units under the Plan is a one-time
benefit and does not create any contractual or other right to receive a
grant of restricted stock units or stock options or benefits in lieu of
units or stock options in the future. Future grants, if any, will be at the
sole discretion of the Company, including, but not limited to, the timing
of any grant, the number of units and vesting provisions.
(c) Unfunded Plan. Any provision for distribution in settlement of
Employee's Account hereunder shall be by means of bookkeeping entries on
the books of the Company and shall not create in Employee any right to, or
claim against any, specific assets of the Company, nor result in the
creation of any trust or escrow account for Employee. With respect to
Employee's entitlement to any distribution hereunder, Employee shall be a
general creditor of the Company.
(d) Governing Law. THE VALIDITY, CONSTRUCTION, AND EFFECT OF THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS (INCLUDING THOSE
GOVERNING CONTRACTS) OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS, AND APPLICABLE FEDERAL LAW. The Units and
the granting thereof are subject to the Employee's compliance with the
applicable law of the jurisdiction of Employee's employment.
(e) Notices. Any notice to be given the Company under this Agreement
shall be addressed to the Company at 521 West 57th Street, New York, NY
10019, attention: Corporate Secretary, and any notice to the Employee shall
be addressed to the Employee at Employee's address as then appearing in the
records of the Company.
Exhibit 10.4
INTERNATIONAL FLAVORS & FRAGRANCES INC.
2000 Stock Award and Incentive Plan,
as amended and restated effective as of March 6, 2007 (the "Plan")
Stock-Settled Appreciation Rights Agreement
This Stock-Settled Appreciation Rights Agreement (the "Agreement") confirms
the grant on May 8, 2007 (the "Grant Date") by INTERNATIONAL FLAVORS &
FRAGRANCES INC., a New York corporation (the "Company"), to David Insoft
("Employee"), for the purpose set forth in Section 1 of the Plan, of stock
appreciation rights (the "SARs") covering shares of the Company's Common Stock,
par value $.12-1/2 per share (the "Shares"), pursuant to Section 6(c) of the
Plan, as follows:
Shares covered by SARs: 1,931 Shares
Base Price (akin to $51.78 per Share, being the fair market value
exercise price): thereof on the Grant Date
SARs vest and become As to 100% of the Shares covered by the SARs on
exercisable: the third anniversary of the Grant Date, except
that different vesting and exercisability
provisions may apply upon the occurrence of
certain events specified in Section 5 or 6
hereof
Expiration Date: The seventh anniversary of the Grant Date (at
the close of business) (the "Stated Expiration
Date") or, in the event Employee's employment by
the Company or its subsidiaries earlier
terminates, then at the date the SARs expire or
cease to be exercisable as provided under
Section 5 hereof, or, in the event of a Change
in Control, as provided in Section 6
Payment to Employee Upon Upon exercise of SARs, Employee shall be
Exercise: entitled to receive payment in Shares
determined by the following formula:
Shares = ((FMV - Base Price) * SARs Exercised)
/ FMV
Where: "Shares" is the number of Shares to be
delivered
"FMV" is the Fair Market Value of a
Share at the exercise date "Base
Price" is as set forth above "SARs
Exercised" is the number of Shares
covered by the SARs then being exercised
"*" means "multiplied by"
"/ " means "divided by"
Other Exercise Conditions SARs may only be exercised at a date that the
Fair Market Value of a Share exceeds the Base
Price, and only if the SARs are otherwise
exercisable at such date. If, on the date the
SARs expire or terminate, both conditions in the
preceding sentence have been met, the SARs shall
be automatically exercised.
The SARs are subject to the terms and conditions of the Plan and this Agreement,
including the Terms and Conditions of Stock Appreciation Rights Grant attached
hereto. The number and kind of shares purchasable and the Base Price are subject
to adjustment in accordance with Section 11(c) of the Plan.
Employee acknowledges and agrees that (i) the SARs are nontransferable, except
as provided in Section 4 hereof and Section 11(b) of the Plan, (ii) the SARs,
and certain amounts of gain realized upon exercise of the SARs, are subject to
forfeiture in the event Employee fails to meet applicable requirements relating
to non-competition, confidentiality, non-solicitation of customers, suppliers,
business associates, employees and service providers, non-disparagement and
cooperation in litigation with respect to the Company and its subsidiaries and
affiliates, as set forth in Section 7 hereof and Section 10 of the Plan, (iii)
the SARs are subject to forfeiture in the event of Employee's termination of
employment in certain circumstances, as provided in Section 10 of the Plan and
Section 5 hereof, (iv) sales of Shares will be subject to the Company's policies
regulating securities trading by employees and the securities laws of the United
States and (v) a copy of the Plan and related prospectus have previously been
delivered to Employee, are being delivered to Employee or are available as
specified in Section 1 hereof. In addition, and without limiting the foregoing,
Employee consents, acknowledges and agrees that, as a condition to the grant of
SARs hereunder, Section 10(d) of the Plan, which relates to forfeitures of
Awards (as defined in the Plan) in the event of financial reporting misconduct,
will apply to the SARs granted hereunder as well as to any other Awards that may
have been granted to Employee prior to the Grant Date set forth above.
IN WITNESS WHEREOF, International Flavors & Fragrances Inc. has caused this
Agreement to be executed by its officer thereunto duly authorized, and Employee
has duly executed this Agreement, as of the Grant Date, both parties intending
to be legally bound hereby.
Employee INTERNATIONAL FLAVORS &
FRAGRANCES INC.
By: /s/ Dennis M. Meany
-------------------------------- ----------------------------
David Insoft Dennis M. Meany
Senior Vice President, General
Counsel & Secretary
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS GRANT
The following Terms and Conditions apply to the SARs granted to Employee by
INTERNATIONAL FLAVORS & FRAGRANCES INC. (the "Company"), as specified on the
preceding page. Certain specific terms of the SARs, including the number of
shares purchasable, vesting and expiration dates, and the Base Price, are set
forth on the preceding page.
1. General. The SARs are granted to Employee under the Company's 2000 Stock
Award and Incentive Plan (the "Plan"), a copy of which is available for review,
along with other documents constituting the "prospectus" for the Plan, on the
Company's intranet site at One IFF/Corporate/Law Department. All of the terms,
conditions and other provisions of the Plan are incorporated by reference
herein. Capitalized terms used in this Agreement but not defined herein (or in
the preceding page) shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this document and mandatory provisions of the
Plan, the provisions of the Plan govern. By accepting the grant of the SARs,
Employee agrees to be bound by all of the terms and provisions of the Plan (as
presently in effect or later amended), rules and regulations under the Plan
adopted from time to time, and decisions and determinations of the Company's
Compensation Committee (the "Committee") made from time to time, provided that
no such Plan amendment, rule or regulation or Committee decision or
determination shall materially and adversely affect the rights of the Employee
with respect to the SARs without Employee's consent.
2. Right to Exercise SARs. Subject to all applicable laws, rules,
regulations and the terms of the Plan and this Agreement, Employee may exercise
the SARs if and to the extent it has become vested and exercisable but not after
the Stated Expiration Date of the SARs.
3. Method of Exercise. To exercise the SARs, unless otherwise permitted by
the Company, Employee must give written notice to the Company or its agent,
which notice shall specifically refer to this Agreement, state the number of
Shares as to which the SARs are being exercised, the name in which he or she
wishes the Shares to be issued, and be signed by Employee. Once Employee gives a
valid notice of exercise, such notice may not be revoked. When Employee
exercises the SARs, or part thereof, the Company will transfer Shares (or make a
certificate-less credit) to Employee's brokerage account at a designated
securities brokerage firm or otherwise deliver Shares to Employee. No Employee
or Beneficiary shall have at any time any rights with respect to shares covered
by this Agreement prior to issuance of certificates (or certificate-less credit)
therefor following exercise of the SARs as provided above. No adjustment shall
be made for dividends or other rights for which the record date is prior to the
date of issue of such stock certificates (or credit). If any fractional Share
would be deliverable upon exercise, after taking into account withholding for
mandatory taxes in accordance with Section 9(a), the Company will pay cash in
lieu of delivery of such fractional Share or will use such cash to apply towards
withholding for taxes.
4. Transferability. Except to the extent permitted under and subject to the
conditions of Section 11(b) of the Plan, the SARs may not be assigned or
transferred in any way by the Employee, except at the Employee's death, by his
or her will or pursuant to the applicable laws of descent and distribution or to
his or her designated Beneficiary, and in the event of his or her death the SARs
shall be exercisable as provided in Section 5 hereof. If Employee shall attempt
to make such prohibited assignment or transfer, the unexercised portion of the
SARs shall be null and void and the Company shall have no further liability
hereunder.
5. Termination Provisions. The following provisions will govern the
vesting, exercisability and expiration of the SARs in the event of Employee's
Termination of Employment (as defined below); provided that the Committee
retains its powers to accelerate vesting or modify these terms subject to the
consent of Employee in the case of a modification materially adverse to
Employee:
(a) Exercise While Employed; Voluntary Resignation and Termination by the
Company for Cause. Except as provided in this Section 5, Employee shall have the
right to exercise the SARs only so long as he or she remains in the employ of
the Company or a subsidiary of the Company, including a subsidiary which becomes
such after the date of this Agreement. Accordingly, in the event of Employee's
Termination of Employment due to his or her voluntarily resignation (other than
a Normal or Early Retirement governed by clause (b) or (c) below) or Termination
of Employment by the Company for Cause (as defined below), all unvested SARs
will be immediately forfeited, and all vested SARs (i) will cease to be
exercisable and will terminate on the date three months after Termination of
Employment due to such Voluntary Resignation (but in no event after the Stated
Expiration Date) and (ii) will cease to be exercisable and will terminate
immediately in the case of a Termination by the Company for Cause.
(b) Disability or Normal Retirement. In the event of Employee's Termination
of Employment due to Disability (as defined below) or Normal Retirement (as
defined below), the following rules will apply:
- Employee's unvested SARs will not be forfeited, but will remain
outstanding and will become exercisable at the applicable date under
this Agreement as though Employee had not had such a Termination of
Employment; provided that, in the case of Termination of Employment
due to Disability or Normal Retirement, Employee shall forfeit the
unvested SARs if before the date of vesting Employee engages in
activity that results in a Forfeiture Event set forth in Section 10 of
the Plan. Employee acknowledges that the Committee has relied on the
discretion granted to it under Section 10(e) of the Plan in requiring
forfeiture upon occurrence of a Forfeiture Event during the applicable
post-Termination period.
- Unless forfeited, Employee's SARs shall remain outstanding and
exercisable until the Stated Expiration Date, at which date the SARs
will cease to be exercisable and will terminate, except as otherwise
provided herein.
(c) Termination by the Company Not for Cause or Early Retirement. In the
event of Employee's Termination of Employment by the Company not for Cause or
Employee's Early Retirement, the following rules apply:
- A pro rata portion of Employee's then unvested SARs will not be
forfeited, but will remain outstanding and will become exercisable at
the applicable date under this Agreement as though Employee had not
had such a Termination of Employment. This pro rata portion will be
determined by multiplying the number of such unvested SARs by a
fraction the numerator of which is the number of days from the Grant
Date to the date of Employee's Termination of Employment and the
denominator of which is 1,095; provided that Employee shall forfeit
the unvested SARs if before the date of vesting Employee engages in
activity that results in a Forfeiture Event set forth in Section 10 of
the Plan. Employee acknowledges that the Committee has relied on the
discretion granted to it under Section 10(e) of the Plan in requiring
forfeiture upon occurrence of a Forfeiture Event during the applicable
post-Termination period.
- Employee's SARs that had not become vested before such Termination of
Employment and are not included in the pro rata portion subject to
continued vesting will be immediately forfeited.
- Employee's SARs that were vested at the time of such Termination of
Employment and those that thereafter become vested under this Section
5(c) shall remain outstanding and exercisable until the Stated
Expiration Date, at which date the SARs will cease to be exercisable
and will terminate.
(d) Death. In the event of Employee's Termination of Employment due to
death or death of Employee following Termination but prior to vesting of SARs
not otherwise forfeited hereunder, Employee's unvested SARs will not be
forfeited but will become immediately vested and exercisable, and all vested
SARs shall remain outstanding and exercisable until the Stated Expiration Date,
at which date the SARs will cease to be exercisable and will terminate, except
as otherwise provided herein. Any SARs exercisable under this Section 5(d)
following Employee's death may be exercised by Employee's legal representative,
distributee, legatee or designated Beneficiary, as the case may be.
(e) Certain Definitions. The following definitions apply for purposes of
this Agreement:
(i) "Cause" has the meaning as defined in the Company's Executive
Separation Policy or any successor policy thereto, as in effect at the time
of Employee's Termination of Employment.
(ii) "Disability" means a disability entitling Employee to long-term
disability benefits under the Company's long-term disability policy as in
effect at the date of Employee's termination of employment, upon written
evidence of such permanent disability from a medical doctor in a form
satisfactory to the Company.
(iii) "Early Retirement" means Termination of Employment by either the
Company or Employee after Employee has attained age 55 and before he or she has
attained age 62 if at the time of Termination Employee has ten or more years in
the employ of the Company and/or its subsidiaries.
(iv) "Normal Retirement" means Termination of Employment by either the
Company or Employee after Employee has attained age 62.
(v) "Termination of Employment" means the event by which Employee ceases to
be employed by the Company or any subsidiary of the Company and, immediately
thereafter, is not employed by or providing substantial services to any of the
Company or a subsidiary of the Company. If Employee is granted a leave of
absence for military or governmental service or other purposes approved by the
Board, he or she shall be considered as continuing in the employ of the Company,
or of a subsidiary of the Company, for the purpose of this subsection, while on
such authorized leave of absence.
6. Change in Control Provisions. The provisions of Section 9 of the Plan
shall not apply to the SARs, except as specifically provided in this Section 6.
In the event of a Change in Control (as defined in Section 9 of the Plan), the
SARs, if not previously forfeited, will be fully vested and exercisable for a
period of 90-days commencing at the date of the Change in Control, during which
period Employee may elect to receive, instead of shares upon exercise, cash in
an amount equal to (i) the Fair Market Value of a Share at the date of exercise
minus the Base Price per share of the SARs times (ii) the number of shares that
remained subject to the SARs (whether or not vested) at the time of the Change
in Control (this payment will be required only if it is a positive amount). Such
cash payment shall be made in a lump sum at the date of exercise. At the
expiration of such 90-day period following the Change in Control, Employee will
have no further rights with respect to the SARs, which thereupon will terminate.
7. Forfeiture Provisions. Employee agrees that, by signing this Agreement
and accepting the grant of the SARs, the forfeiture conditions set forth in
Section 5(b) hereof and in Section 10 of the Plan shall apply to the SARs and to
gains realized upon the exercise of the SARs (in addition to the requirements of
Section 5(b) and (c) applicable during any period of continued vesting following
Termination of Employment).
8. Employee Representations and Warranties, Consents and Acknowledgements.
(a) As a condition to the exercise of the SARs, the Company may require
Employee to make any representation or warranty to the Company as may be
required under any applicable law or regulation, and to make a representation
and warranty that no Forfeiture Event has occurred or is contemplated within the
meaning of Section 5(b) hereof and Section 10 of the Plan.
(b) By signing this Agreement, Employee voluntarily acknowledges and
consents to the collection, use processing and transfer of personal data as
described in this clause (b). Employee is not obliged to consent to such
collection, use, processing and transfer of personal data; however, failure to
provide the consent may affect Employee's ability to participate in the Plan.
The Company and its subsidiaries hold, for the purpose of managing and
administering the Plan, certain personal information about Employee, including
Employee's name, home address and telephone number, date of birth, social
security number or other employee identification number, salary, nationality,
job title, any shares of stock or directorships held in the Company, details of
all options and SARs or any other entitlement to shares of stock awarded,
canceled, purchased, vested, unvested or outstanding in Employee's favor
("Data"). The Company and/or its subsidiaries will transfer Data among
themselves as necessary for the purpose of implementation, administration and
management of Employee's participation in the Plan and the Company and/or any of
its subsidiaries may each further transfer Data to any third parties assisting
the Company in the implementation, administration and management of the Plan.
These recipients may be located in the European Economic Area, or elsewhere
throughout the world, such as the United States. Employee authorizes them to
receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing Employee's
participation in the Plan, including any requisite transfer of such Data as may
be required for the administration of the Plan and/or the subsequent holding of
Shares on Employee's behalf to a broker or other third party with whom Employee
may elect to deposit any Shares acquired pursuant to the Plan. Employee may, at
any time, review Data, require any necessary amendments to it or withdraw the
consents herein in writing by contacting the Company; however, withdrawing
consent may affect Employee's ability to participate in the Plan.
(c) Employee's participation in the Plan is voluntary. The value of the
SARs is an extraordinary item of compensation. As such, the SARs are not part of
normal or expected compensation for purposes of calculating any severance,
resignation, redundancy, end of service payments, bonuses, long-service awards,
pension or retirement benefits or similar payments. Rather, the awarding of the
SARs to Employee under the Plan represents a mere investment opportunity.
(d) EMPLOYEE HEREBY CONSENTS TO ELECTRONIC DELIVERY OF THE PLAN, THE
PROSPECTUS FOR THE PLAN AND OTHER DOCUMENTS RELATED TO THE PLAN (COLLECTIVELY,
THE "PLAN DOCUMENTS"). THE COMPANY WILL DELIVER THE PLAN DOCUMENTS
ELECTRONICALLY TO EMPLOYEE BY E-MAIL, BY POSTING SUCH DOCUMENTS ON ITS INTRANET
WEBSITE OR BY ANOTHER MODE OF ELECTRONIC DELIVERY AS DETERMINED BY THE COMPANY
IN ITS SOLE DISCRETION. THE COMPANY WILL SEND TO EMPLOYEE AN E-MAIL ANNOUNCEMENT
WHEN A NEW PLAN DOCUMENT IS AVAILABLE ELECTRONICALLY FOR EMPLOYEE'S REVIEW,
DOWNLOAD OR PRINTING AND WILL PROVIDE INSTRUCTIONS ON WHERE THE PLAN DOCUMENT
CAN BE FOUND. UNLESS OTHERWISE SPECIFIED IN WRITING BY THE COMPANY, EMPLOYEE
WILL NOT INCUR ANY COSTS FOR RECEIVING THE PLAN DOCUMENTS ELECTRONICALLY THROUGH
THE COMPANY'S COMPUTER NETWORK. EMPLOYEE WILL HAVE THE RIGHT TO RECEIVE PAPER
COPIES OF ANY PLAN DOCUMENT BY SENDING A WRITTEN REQUEST FOR A PAPER COPY TO THE
ADDRESS SPECIFIED IN SECTION 9(e) HEREOF. EMPLOYEE'S CONSENT TO ELECTRONIC
DELIVERY OF THE PLAN DOCUMENTS WILL BE VALID AND REMAIN EFFECTIVE UNTIL THE
EARLIER OF (I) THE TERMINATION OF EMPLOYEE'S PARTICIPATION IN THE PLAN AND (II)
THE WITHDRAWAL OF EMPLOYEE'S CONSENT TO ELECTRONIC DELIVERY OF THE PLAN
DOCUMENTS. THE COMPANY ACKNOWLEDGES AND AGREES THAT EMPLOYEE HAS THE RIGHT AT
ANY TIME TO WITHDRAW HIS OR HER CONSENT TO ELECTRONIC DELIVERY OF THE PLAN
DOCUMENTS BY SENDING A WRITTEN NOTICE OF WITHDRAWAL TO THE ADDRESS SPECIFIED IN
SECTION 9(e) HEREOF. IF EMPLOYEE WITHDRAWS HIS OR HER CONSENT TO ELECTRONIC
DELIVERY, THE COMPANY WILL RESUME SENDING PAPER COPIES OF THE PLAN DOCUMENTS
WITHIN TEN (10) BUSINESS DAYS OF ITS RECEIPT OF THE WITHDRAWAL NOTICE. EMPLOYEE
ACKNOWLEDGES THAT HE OR SHE IS ABLE TO ACCESS, VIEW AND RETAIN AN E-MAIL
ANNOUNCEMENT INFORMING EMPLOYEE THAT THE PLAN DOCUMENTS ARE AVAILABLE IN EITHER
HTML, PDF OR SUCH OTHER FORMAT AS THE COMPANY DETERMINES IN ITS SOLE DISCRETION.
9. Miscellaneous.
(a) Mandatory Tax Withholding. Unless otherwise determined by the
Committee, at the time of exercise the Company will withhold from any shares
deliverable upon exercise, in accordance with Section 11(d) of the Plan, the
number of shares having a value nearest to, but not exceeding, the amount of
income taxes, employment taxes or other withholding amounts required to be
withheld under applicable local laws and regulations, and pay the amount of such
withholding taxes in cash to the appropriate taxing authorities. Employee will
be responsible for any taxes relating to the SARs and the exercise thereof not
satisfied by means of such mandatory withholding.
(b) Binding Agreement; Written Amendments. This Agreement shall be binding
upon the heirs, executors, administrators and successors of the parties. This
Agreement constitutes the entire agreement between the parties with respect to
the SARs, and supersedes any prior agreements or documents with respect to the
SARs. No amendment or alteration of this Agreement which may impose any
additional obligation upon the Company shall be valid unless expressed in a
written instrument duly executed in the name of the Company, and no amendment,
alteration, suspension or termination of this Agreement which may materially and
adversely affect the rights of Employee under the SARs shall be valid unless
expressed in a written instrument executed by Employee.
(c) No Promise of Employment. The SARs and the granting thereof shall not
constitute or be evidence of any agreement or understanding, express or implied,
that Employee has a right to continue as an employee of the Company for any
period of time, or at any particular rate of compensation. Employee acknowledges
and agrees that the Plan is discretionary in nature and limited in duration, and
may be amended, cancelled, or terminated by the Company, in its sole discretion,
at any time, provided, however that any outstanding SARs shall not be affected.
The grant of stock SARs under the Plan is a one-time benefit and does not create
any contractual or other right to receive a grant of stock SARs or benefits in
lieu of stock SARs in the future. Future grants, if any, will be at the sole
discretion of the Company, including, but not limited to, the timing of any
grant, the number of SARs, vesting provisions and the exercise or base price.
(d) Governing Law. The validity, construction, and effect of this Agreement
shall be determined in accordance with the laws (including those governing
contracts) of the State of New York, without giving effect to principles of
conflicts of laws, and applicable federal law. The SARs and the granting thereof
are subject to the Company's compliance with the applicable law of the
jurisdiction of Employee's employment.
(e) Notices. Any notice to be given the Company under this Agreement shall
be addressed to the Company at 521 West 57th Street, New York, NY 10019,
attention: Corporate Secretary, and any notice to the Employee shall be
addressed to the Employee at Employee's address as then appearing in the records
of the Company.
Exhibit 10.5
INTERNATIONAL FLAVORS & FRAGRANCES INC.
2000 Stock Award and Incentive Plan
As Amended and Restated
Restricted Stock Units Agreement--Non-Employee Director
This Restricted Stock Units Agreement (the "Agreement") confirms the grant on
May 8, 2007 (the "Grant Date") by INTERNATIONAL FLAVORS & FRAGRANCES INC., a New
York corporation (the "Company"), to Henry W. Howell, Jr. ("Grantee") of
Restricted Stock Units (the "Units"), as follows:
Number granted: 1,931 Units (equal to $100,000 divided by the Fair
Market Value of one Share on May 8, 2007).
Units vest: All Units will vest on the third anniversary of the
Grant Date, May 8, 2010 (the "Stated Vesting Date"),
if not previously forfeited. In addition, the Units
will become immediately vested upon a Change in
Control or upon the occurrence of certain events
relating to termination of service, in accordance
with Section 4 hereof.
Settlement: Units granted hereunder will be settled by delivery
of one share of the Company's Common Stock, par value
$.12-1/2 per share, for each Unit being settled. Such
settlement of Units not otherwise forfeited shall
occur promptly upon the Grantee's Termination of
Service, except as otherwise provided in Section 4(b)
(relating to Units unvested at the time of Retirement)
or Section 6 (relating to Change in Control and other
cases). Any reference in this Agreement to settlement
"promptly" upon a settlement date requires that
shares be delivered no more than 60 days after the
settlement date.
The Units are subject to the terms and conditions of the 2000 Stock Award and
Incentive Plan, as amended and restated (the "Plan"), and this Agreement,
including the Terms and Conditions of Restricted Stock Units attached hereto.
The number of Units and the kind of shares deliverable in settlement of Units
are subject to adjustment in accordance with Section 5 hereof and Section 11(c)
of the Plan.
Grantee acknowledges and agrees that (i) Units are nontransferable, except
as provided in Section 3 hereof and Section 11(b) of the Plan, (ii) Units are
subject to forfeiture in the event of Grantee's Termination of Service in
certain circumstances prior to vesting, as specified in Section 4 hereof, (iii)
sales of shares delivered in settlement of Units will be subject to the
Company's policies regulating trading by directors and (iv) a copy of the Plan
and related prospectus have previously been delivered to Grantee or are being
delivered to Grantee.
IN WITNESS WHEREOF, INTERNATIONAL FLAVORS & FRAGRANCES INC. has caused this
Agreement to be executed by its officer thereunto duly authorized, and Grantee
has duly executed this Agreement, by which each has agreed to the terms of this
Agreement.
INTERNATIONAL FLAVORS &
FRAGRANCES INC.
By:
-------------------------------- -------------------------------
Henry W. Howell, Jr. Name: Dennis M. Meany
Title: Senior Vice President,
General Counsel and Secretary
Attest:
-----------------------------------
Assistant Secretary
TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS
The following Terms and Conditions apply to the Units granted to Grantee by
INTERNATIONAL FLAVORS & FRAGRANCES INC. (the "Company"), as specified in the
Restricted Stock Units Agreement (of which these Terms and Conditions form a
part). Certain terms of the Units, including the number of Units granted,
vesting date(s) and settlement date, are set forth on the preceding pages.
1. General. The Units are granted to Grantee under the Company's 2000 Stock
Award and Incentive Plan (the "Plan"), a copy of which, along with other
documents constituting the "prospectus" for the Plan, have previously been
delivered to Grantee or are being delivered to Grantee. All of the applicable
terms, conditions and other provisions of the Plan are incorporated by reference
herein. Capitalized terms used in this Agreement but not defined herein shall
have the same meanings as in the Plan. If there is any conflict between the
provisions of this document and mandatory provisions of the Plan, the provisions
of the Plan govern. By accepting the grant of the Units, Grantee agrees to be
bound by all of the terms and provisions of the Plan (as presently in effect or
later amended), the rules and regulations under the Plan adopted from time to
time, and the decisions and determinations of the Company's Compensation
Committee of the Company's Board of Directors (the "Committee") made from time
to time, provided that no such Plan amendment, rule or regulation or Committee
decision or determination shall materially and adversely affect the rights of
the Grantee with respect to outstanding Units.
2. Account for Grantee. The Company shall maintain a bookkeeping account
for Grantee (the "Account") reflecting the number of Units then credited to
Grantee hereunder as a result of such grant of Units.
3. Nontransferability. Until Units become settleable in accordance with the
terms of this Agreement, Grantee may not transfer Units or any rights hereunder
to any third party other than by will or the applicable laws of descent and
distribution, except for transfers to a Beneficiary or otherwise if and to the
extent permitted by the Company and subject to the conditions under Section
11(b) of the Plan.
4. Termination Provisions. The following provisions will govern the vesting
and forfeiture of the Units in the event of Grantee's Termination of Service (as
defined below), unless otherwise determined by the Committee (subject to Section
8(a) hereof):
(a) Death or Disability. In the event of Grantee's death or
Termination of Service due to Disability (as defined below), all of the
Units, to the extent then outstanding but not previously vested, will vest
and become non-forfeitable immediately, and such Units, together with any
then-outstanding Units that previously became vested and non-forfeitable,
will be settled as promptly as practicable thereafter if not previously
settled.
(b) Retirement. In the event of Grantee's Termination of Service due
to Retirement (as defined below), the Units, to the extent outstanding and
whether or not previously vested or otherwise forfeited, will continue to
be outstanding (i.e., will not be forfeited and, in that respect, will be
deemed vested) and will be settled at the time the Units would have become
vested if Grantee had not Retired or earlier as provided under Section 4(a)
or Section 6. Then outstanding Units that became vested and non-forfeitable
prior to Retirement will be settled as promptly as practicable following
Retirement, if not previously settled.
(c) Other Terminations. In the event of Grantee's Termination of
Service for any reason other than death, Disability, or Retirement, any
then-outstanding Units not vested at the date of Termination of Service
will be forfeited, and Units that became vested and non-forfeitable prior
to Termination of Service will be settled promptly following Termination,
if not previously settled.
(d) Certain Definitions. The following definitions apply for purposes
of this Agreement:
(i) "Disability" means Grantee's physical or mental impairment
which is expected to be of long-duration and which renders Grantee
unable to perform his or her duties as a director. Determination of
Disability will be in the sole discretion of the Board.
(ii) "Retirement" means retirement after attaining age 62.
(iii) "Termination of Service" means the event by which Grantee
ceases to be a director of the Company, provided that such event
constitutes a separation from service within the meaning of Treasury
Regulation ss. 1.409A-1(h).
5. Dividends and Adjustments.
(a) Dividends. No dividends or dividend equivalents will be credited or
paid on any unvested Units. Units that, at the relevant dividend record date
that occurs before the issuance of shares in settlement of Units, previously
have been vested (i.e., Units deferred as to settlement under Section 6), shall
be entitled to credits equivalent to dividends that would have been paid if the
Units had been outstanding shares at such record date. The form and timing of
such payments will be in the discretion of the Committee.
(b) Adjustments. The number of Units credited to Grantee's Account and/or
the property deliverable upon settlement of Units shall be appropriately
adjusted, in order to prevent dilution or enlargement of Grantee's rights with
respect to Units in connection with, or to reflect any changes in the number and
kind of outstanding shares of Common Stock resulting from, any corporate
transaction or event referred to in the first sentence of Section 11(c) of the
Plan (this provision takes precedence over Section 5(a) in the case of a large
and non-recurring cash dividend or any non-cash dividend).
(c) Risk of Forfeiture and Settlement of Units Resulting from Adjustments.
Units (and other property deliverable in settlement of Units) which directly or
indirectly result from adjustments to a Unit granted hereunder shall be subject
to the same risk of forfeiture as applies to the granted Unit and will be
settled at the same time as the granted Unit.
6. Deferral of Settlement; Compliance with Section 409A. Terms relating to
the settlement of Units shall comply with the requirements under Section 409A of
the Internal Revenue Code (the "Code"). Units will be subject to accelerated
settlement under Section 9(a) of the Plan or otherwise upon a Change in Control
only if the Change in Control constitutes a change in the ownership or effective
control of the corporation or in the ownership of a substantial portion of the
assets of the corporation within the meaning of Section 409A(a)(2)(A)(v). Other
provisions of this Agreement notwithstanding, under U.S. federal income tax laws
and Treasury Regulations (including proposed regulations) as presently in effect
or hereafter implemented, (i) if the timing of any distribution in settlement of
Units would result in Grantee's constructive receipt of income relating to the
Units prior to such distribution, the date of distribution will be the earliest
date after the specified date of distribution that distribution could occur
under Treasury Regulation ss. 1.409A-3 and can be effected without resulting in
such constructive receipt; and (ii) any rights of Grantee or retained authority
of the Company with respect to Units hereunder shall be automatically modified
and limited to the extent necessary so that Grantee will not be deemed to be in
constructive receipt of income relating to the Units prior to the distribution
and so that Grantee shall not be subject to any penalty under Section 409A. In
this regard, the Company shall have no retained discretion to accelerate the
settlement of the Units beyond that permitted under Code Section 409A without
triggering any tax penalty.
7. Other Terms Relating to Units.
(a) Fractional Units and Shares. The number of Units credited to Grantee's
Account shall include fractional Units, if any, calculated to at least three
decimal places, unless otherwise determined by the Committee. Unless settlement
is effected through a third-party broker or agent that can accommodate
fractional shares (without requiring issuance of a fractional share by the
Company), upon settlement of the Units Grantee shall be paid, in cash, an amount
equal to the value of any fractional share that would have otherwise been
deliverable in settlement of such Units.
(b) Taxes. Grantee shall be responsible for any income taxes and other
taxes resulting from the grant, vesting or settlement of Units.
(c) Statements. An individual statement of each Grantee's Account will be
issued to Grantee at such times as may be determined by the Company. Such a
statement shall reflect the number of Units credited to Grantee's Account,
transactions therein during the period covered by the statement, and other
information deemed relevant by the Committee. Such a statement may be combined
with or include information regarding other plans and compensatory arrangements
for non-employee directors. Any statement containing an error shall not,
however, represent a binding obligation to the extent of such error.
(d) Grantee Consent. By signing this Agreement, Grantee voluntarily
acknowledges and consents to the collection, use, processing and transfer of
personal data as described in this Section 7(d). Grantee is not obliged to
consent to such collection, use, processing and transfer of personal data;
however, failure to provide the consent may affect Grantee's ability to
participate in the Plan. The Company and its subsidiaries hold, for the purpose
of managing and administering the Plan, certain personal information about
Grantee, including Grantee's name, home address and telephone number, date of
birth, social security number or other Grantee identification number, salary,
nationality, job title, any shares of stock or directorships held in the
Company, and details of all options or any other entitlement to shares of stock
awarded, canceled, purchased, vested, unvested or outstanding in Grantee's favor
("Data"). The Company and/or its subsidiaries will transfer Data among
themselves as necessary for the purpose of implementation, administration and
management of Grantee's participation in the Plan and the Company and/or any of
its subsidiaries may each further transfer Data to any third parties assisting
the Company in the implementation, administration and management of the Plan.
These recipients may be located in the European Economic Area, or elsewhere
throughout the world, such as the United States. Grantee authorizes them to
receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing Grantee's
participation in the Plan, including any requisite transfer of such Data as may
be required for the administration of the Plan and/or the subsequent holding of
shares on Grantee's behalf to a broker or other third party with whom Grantee
may elect to deposit any shares acquired pursuant to the Plan. Grantee may, at
any time, review Data, require any necessary amendments to it or withdraw the
consents herein in writing by contacting the Company; however, withdrawing
consent may affect Grantee's ability to participate in the Plan.
(e) Consent to Electronic Delivery. Grantee hereby consents to electronic
delivery of the Plan, the Prospectus for the Plan and other documents related to
the Plan (collectively, the "Plan Documents"). The Company will deliver the Plan
documents electronically to Grantee by e-mail, by posting such documents on its
intranet website or by another mode of electronic delivery as determined by the
Company in its sole discretion. The Company will send to the Grantee an e-mail
announcement when a new plan document is available electronically for Grantee's
review, download or printing and will provide instructions on where the plan
document can be found. Unless otherwise specified in writing to the Company,
Grantee will not incur any costs for receiving the plan documents electronically
through the Company's computer network. Grantee will have the right to receive
paper copies of any plan document by sending a written request for a paper copy
to the address specified in Section 8(e) hereof. Grantee's consent to electronic
delivery of the plan documents will be valid and remain effective until the
earlier of (i) the termination of Grantee's participation in the Plan and (ii)
the withdrawal of Grantee's consent to electronic delivery of the Plan
documents. The Company acknowledges and agrees that Grantee has the right at any
time to withdraw his or her consent to electronic delivery of the Plan documents
by sending a written notice of withdrawal to the address specified in Section
8(e) hereof. If Grantee withdraws his or her consent to electronic delivery, the
Company will resume sending paper copies of the Plan documents within ten (10)
business days of its receipt of the withdrawal notice. Grantee acknowledges that
he or she is able to access, view and retain an e-mail announcement informing
Grantee that the Plan documents are available in either HTML, PDF or such other
format as the company determines in sole discretion.
8. Miscellaneous.
(a) Binding Agreement; Written Amendments. This Agreement shall be binding
upon the heirs, executors, administrators and successors of the parties. This
Agreement constitutes the entire agreement between the parties with respect to
the Units, and supersedes any prior agreements or documents with respect
thereto. No amendment or alteration of this Agreement which may impose any
additional obligation upon the Company shall be valid unless expressed in a
written instrument duly executed in the name of the Company, and no amendment,
alteration, suspension or termination of this Agreement which may materially
impair the rights of Grantee with respect to the Units shall be valid unless
expressed in a written instrument executed by Grantee.
(b) No Promise of Continued Service as Director. The Units and the granting
thereof shall not constitute or be evidence of any agreement or understanding,
express or implied, that Grantee has a right to continue as a director of the
Company for any period of time, or at any particular rate of compensation.
(c) Unfunded Plan. Any provision for distribution in settlement of
Grantee's Account hereunder shall be by means of bookkeeping entries on the
books of the Company and shall not create in Grantee any right to, or claim
against any, specific assets of the Company, nor result in the creation of any
trust or escrow account for Grantee. With respect to Grantee's entitlement to
any distribution hereunder, Grantee shall be a general creditor of the Company.
(d) Governing Law. THE VALIDITY, CONSTRUCTION, AND EFFECT OF THIS AGREEMENT
SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS (INCLUDING THOSE GOVERNING
CONTRACTS) OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS, AND APPLICABLE FEDERAL LAW.
(e) Notices. Any notice to be given the Company under this Agreement shall
be addressed to the Company at 521 West 57th Street, New York, NY 10019,
attention: Corporate Secretary, and any notice to the Grantee shall be addressed
to the Grantee at Grantee's address as then appearing in the records of the
Company.