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Exhibit 10.1
CHATTEM,
INC.
ANNUAL CASH INCENTIVE
PLAN
The purpose of the Plan is to
provide cash incentive compensation to Executive Officers and other
key employees within a pay-for-performance framework that enables
the Company to provide a total compensation opportunity that
attracts, motivates and retains such employees and contributes to
the Company’s ability to maximize its return to shareholders.
The Plan is intended to reward Participants for achieving specified
annual financial performance objectives, focuses strongly on
Company and individual performance, and is designed to ensure that
the Company’s total compensation package for Participants
remains competitive. The Plan is also intended to qualify the
compensation paid under the Plan as “performance-based
compensation” within the meaning of Section 162(m) so as
to exempt such eligible compensation from the deduction limits
imposed by Section 162(m) and to make such eligible
compensation deductible by the Company for federal income tax
purposes.
As used herein, the following
terms shall have the meanings ascribed to such terms
below:
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(a) |
“ Authorized Officers ” means the Chairman
and Chief Executive Officer of the Company and the President and
Chief Operating Officer of the Company. |
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(b) |
“ Award ” means any cash award payable under
the Plan, including any Incentive Award and any Discretionary
Bonus. |
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(c) |
“ Board ” means the board of directors of
the Company. |
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(d) |
“ Code ” means the Internal Revenue Code of
1986, as amended. |
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(e) |
“ Company ” means Chattem, Inc. |
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(f) |
“ Committee ” means the Compensation
Committee of the Board, which shall be comprised solely of two or
more “outside directors” as defined in regulations
promulgated under Section 162(m). |
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(g) |
“ Corporate Performance Levels ” means the
following levels of overall Company performance (or such other
levels as may be established by the Committee from time to time),
each of which shall correspond to a Performance Goal established by
the Committee in accordance with the Plan in respect of the
Incentive Awards: |
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(i) |
“ Level 1 ”, which term when used herein
shall mean “Minimal: Results which are the lowest permissible
for the payment of an Incentive Award under the
Plan.” |
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(ii) |
“ Level 2 ”, which term when used herein
shall mean “Good: Results which are fully adequate and
expected.” |
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(iii) |
“ Level 3 ”, which term when used herein
shall mean “Outstanding: Results which are measurably above
what could be expected as a norm.” |
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(iv) |
“ Level 4 ”, which term when used herein
shall mean “Exceptional: Results which are remarkable and
extraordinary.” |
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(h) |
“ Disability ” means a disability that
entitles the Participant to benefits under the Company’s
Long-Term Disability Plan, as amended from time to
time. |
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(i) |
“ Discretionary Bonus ” means any cash bonus
awarded to a Participant pursuant to Section 8
hereof. |
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(j) |
“ Executive Officer ” means an
“executive officer” as defined in Rule 3b-7 promulgated
under the Securities Exchange Act of 1934, as amended. |
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(k) |
“ Incentive Award ” means any annual cash
incentive award payable to a Participant under this Plan based on
the achievement of the Performance Goals associated with Corporate
Performance Levels with respect to a Performance
Period. |
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(l) |
“ Participant ” means (i) each
Executive Officer of the Company and (ii) each other key
employee of the Company recommended by the Authorized Officers and
approved by the Committee as a participant under the Plan, as
determined from time to time by the Committee. |
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(m) |
“ Participant Grouping ” means, with respect
to Incentive Awards, the grouping to which a Participant is
assigned for a given Performance Period based upon the
Participant’s position at the Company, as more fully
described in Section 5 hereof. |
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(n) |
“ Performance Goals ” means, with respect to
each Performance Period, one or more targeted levels of performance
based on one or more of the following objective business criteria:
revenues, sales, earnings before interest, taxes, depreciation and
amortization (EBITDA), earnings per share, earnings, price/earnings
ratio, debt or debt-to-equity, expenses, cost of goods sold, cost
reductions and savings, assets, operating income, operating
margins, stock price, working capital and components thereof,
return on revenues or productivity, return on capital, equity or
assets, cash flow, market share, total shareholder return (stock
price increase plus dividends), accounts receivable, manufacturing,
production or inventory, customer satisfaction, economic value
added or any increase or decrease of one or more of the foregoing
over a specified period. The Committee may, after taking into
account whether such action would result in the loss of an
otherwise available exemption for performance-based compensation
under Section 162(m), appropriately adjust any evaluation of
performance in respect of a Performance Goal to eliminate or offset
the effect of unusual, unplanned, non-recurring or extraordinary
items or occurrences affecting the Company or the financial
statements of the Company, including, without limitation, the
effect of mergers, acquisition, divestitures, changes in laws,
regulations or accounting principles or such other objective
adjustments as may be consistent with the purposes of the
Performance Goals set for the given Performance Period and
specified by the Committee within the Performance Period. The
Performance Goals may be expressed in terms of overall Company
performance or the performance of any business unit, division,
subsidiary, acquired business, partnership or joint venture of the
Company. The portion of any Award paid under the Plan based on the
achievement of the Performance Goals is intended to constitute
“performance-based compensation” within the meaning of
Section 162(m). |
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(o) |
“ Performance Period ” means the Plan Year
or such other shorter or longer period as may be designated by the
Committee, during which performance will be measured in order to
determine a Participant’s eligibility to receive payment of
an Award. The Committee may establish different Performance Periods
for different Participants, and the Committee may establish
concurrent or overlapping Performance Periods. |
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(p) |
“ Plan ” means the Chattem, Inc. Annual Cash
Incentive Plan, as set forth herein and as may be amended from time
to time. |
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(q) |
“ Plan Year ” means the 12-month period
beginning on the first day of the Company’s fiscal year and
ending on the last day of such fiscal year. |
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(r) |
“ Retirement ” means separation from service
with the Company and its subsidiaries, by a Participant at or after
age 65, or as otherwise approved by the Committee in its sole
discretion. |
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(s) |
“ Section 162(m) ” means Section 162(m)
of the Code and any regulations promulgated thereunder. |
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ADMINISTRATION OF THE PLAN |
The Plan shall be
administered by and under the direction of the Committee. The
Committee shall review the Plan on a periodic basis. The Committee
shall have full, exclusive and final authority in all
determinations and decisions affecting the Plan and Participants,
including sole authority to interpret and construe any provision of
the Plan, to adopt, amend and rescind such rules and regulations
for administering the Plan as it may deem necessary or appropriate
under the circumstances and to make any other determination it
deems necessary or appropriate for the administration of the Plan,
in each case subject to and consistent with the provisions of the
Plan. Without limiting the generality of the foregoing, the
Committee shall have the power, duty and authority (a) to
establish Performance Periods and the Performance Goals, the
performance measurement and evaluation criteria and guidelines to
be used to determine Awards and the maximum potential Incentive
Awards payable to Participants for such Performance Periods,
(b) to designate or approve eligible persons to become
Participants and the Participant Groupings that may apply to
Participants each Performance Period, (c) to resolve all
questions relating to the eligibility of Participants, Participant
Groupings and the right of any Participant to receive an Award
under the Plan, (d) to calculate the amount (including any
reduction thereof pursuant to Section 7(a) hereof) and approve
the payment of the Incentive Award payable to each Participant each
Performance Period, (e) to determine the extent to which the
Performance Goals actually were achieved each Performance Period,
(f) to correct defects, supply omissions or reconcile
inconsistencies with respect to the Plan, (g) to engage any
administrative, legal, consulting, clerical or other services it
deems appropriate in administering the Plan, and (h) to
approve the grant of Discretionary Bonuses and the Performance
Goals, Performance Periods and all other criteria thereunder. All
actions taken or determinations made by the Committee with respect
to the Plan shall be final, binding and conclusive upon all
parties. The Committee, in its sole discretion and on such terms
and conditions as it may provide, may delegate all or part of its
administrative authority and powers under the Plan to one or more
directors or employees of the Company to the extent permitted under
the exemption for performance-based compensation under
Section 162(m). Any expenses relating to administration of the
Plan shall be borne by the Company.
Eligibility for participation
in any Incentive Award for any Performance Period is limited to
Participants, as determined on the first day of such Performance
Period. Any person who is hired or promoted into a position
qualifying such person as a Participant or who is otherwise
designated or approved by the Committee as a Participant eligible
for an Incentive Award after the commencement of such Performance
Period but prior to the date on which 25% of the Performance Period
has elapsed shall be eligible to receive a pro rata portion (based
on the number of days in the Performance Period during which such
person was such a Participant) of the Incentive Award such person
would have received if he or she had participated for the entire
Performance Period provided attainment of the Performance Goal is
substantially uncertain at the date of eligibility. No person shall
participate in any Incentive Award for a Performance Period in
which such person first becomes a Participant on or after the date
on which 25% of the Performance Period has elapsed or when the
attainment of a Performance Goal is not substantially uncertain
unless otherwise approved by the Committee based upon (i) a
determination that satisfaction of the Performance Goal is
substantially uncertain, or (ii) such alternative Performance
Period or Performance Goal as may be determined by the Committee in
compliance with the exemption for performance-based compensation
under Section 162(m). In the event a Participant’s
employment with the Company is terminated due to his or her
Retirement, Disability or death during a Performance Period, the
Participant (or his or her beneficiary or estate)
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