Document:

exv10w37

 

Exhibit 10.37

OFFICER INDEMNIFICATION AGREEMENT

     This Officer Indemnification Agreement, dated as of                                                              , 2005 (this “Agreement”),
is made by and between Michaels Stores, Inc., a Delaware corporation (the “Company”), and
                                         (“Indemnitee”).

RECITALS:

     A. Section 141 of the Delaware General Corporation Law provides that the business and affairs
of a corporation shall be managed under the direction of its board of directors.

     B. Pursuant to Sections 141 and 142 of the Delaware General Corporation Law, significant
authority with respect to the management of the Company has been delegated to the officers of the
Company.

     C. By virtue of the managerial prerogatives vested in the officers of a Delaware corporation,
officers act as fiduciaries of the corporation and its stockholders.

     D. Thus, it is critically important to the Company and its stockholders that the Company be
able to attract and retain the most capable persons reasonably available to serve as officers of
the Company.

     E. In recognition of the need for corporations to be able to induce capable and responsible
persons to accept positions in corporate management, Delaware law authorizes (and in some instances
requires) corporations to indemnify their directors and officers, and further authorizes
corporations to purchase and maintain insurance for the benefit of their directors and officers.

     F. The Delaware courts have recognized that indemnification by a corporation serves the dual
policies of (1) allowing corporate officials to resist unjustified lawsuits, secure in the
knowledge that, if vindicated, the corporation will bear the expense of litigation and (2)
encouraging capable women and men to serve as corporate directors and officers, secure in the
knowledge that the corporation will absorb the costs of defending their honesty and integrity.

     G. The number of lawsuits challenging the judgment and actions of officers of Delaware
corporations, the costs of defending those lawsuits, and the threat to officers’ personal assets
have all materially increased over the past several years, chilling the willingness of capable
women and men to undertake the responsibilities imposed on corporate officers.

     H. Recent federal legislation and rules adopted by the Securities and Exchange Commission and
the national securities exchanges have imposed additional disclosure and corporate governance
obligations on officers of public companies and have exposed such officers to new and substantially
broadened civil liabilities.

 

 

     I. These legislative and regulatory initiatives have also exposed officers of public companies
to a significantly greater risk of criminal proceedings, with attendant defense costs and potential
criminal fines and penalties.

     J. Under Delaware law, an officer’s right to be reimbursed for the costs of defense of
criminal actions, whether such claims are asserted under state or federal law, does not depend upon
the merits of the claims asserted against the officer and is separate and distinct from any right
to indemnification the officer may be able to establish, and indemnification of the officer against
criminal fines and penalties is permitted if the officer satisfies the applicable standard of
conduct.

     K. Indemnitee is an officer of the Company or a Controlled Affiliate (as defined below) and
his/her willingness to serve in such capacity is predicated, in substantial part, upon the
Company’s willingness to indemnify him/her in accordance with the principles reflected above, to
the fullest extent permitted by the laws of the state of Delaware, and upon the other undertakings
set forth in this Agreement.

     L. Therefore, in recognition of the need to provide Indemnitee with substantial protection
against personal liability, in order to procure Indemnitee’s continued service as an officer of the
Company or a Controlled Affiliate and to enhance Indemnitee’s ability to serve the Company or a
Controlled Affiliate in an effective manner, and in order to provide such protection pursuant to
express contract rights (intended to be enforceable irrespective of, among other things, any
amendment to the Company’s certificate of incorporation or bylaws (collectively, the “Constituent
Documents”), any change in the composition of the Company’s Board of Directors (the “Board”) or any
change-in-control or business combination transaction relating to the Company), the Company wishes
to provide in this Agreement for the indemnification of and the advancement of Expenses (as defined
in Section 1(c)) to Indemnitee as set forth in this Agreement and for the continued coverage of
Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

     M. In light of the considerations referred to in the preceding recitals, it is the Company’s
intention and desire that the provisions of this Agreement be construed liberally, subject to their
express terms, to maximize the protections to be provided to Indemnitee hereunder.

AGREEMENT:

     NOW, THEREFORE, the parties hereby agree as follows:

     1. Certain Definitions. In addition to terms defined elsewhere herein, the
following terms have the following meanings when used in this Agreement with initial capital
letters:

          (a) “Change in Control” means the occurrence after the date of this Agreement of any
of the following events:

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	 	(i)	 	the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the combined
voting power of the then-outstanding Voting Stock of the Company;
provided, however, that:

          (A) for purposes of this Section 1(a)(i), the following acquisitions shall not
constitute a Change in Control: (1) any acquisition of Voting Stock of the Company directly from
the Company that is approved by a majority of the Incumbent Directors, (2) any acquisition of
Voting Stock of the Company by the Company or any Subsidiary, (3) any acquisition of Voting Stock
of the Company by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, and (4) any acquisition of Voting Stock of the Company by any Person
pursuant to a Business Combination that complies with clauses (1), (2) and (3) of Section 1(a)(iii)
below;

          (B) if any Person acquires beneficial ownership of 20% or more of combined voting
power of the then-outstanding Voting Stock of the Company as a result of a transaction described in
clause (A)(1) of Section 1(a)(i) and such Person thereafter becomes the beneficial owner of any
additional shares of Voting Stock of the Company representing 1% or more of the then-outstanding
Voting Stock of the Company, other than in an acquisition directly from the Company that is
approved by a majority of the Incumbent Directors or other than as a result of a stock dividend,
stock split or similar transaction effected by the Company in which all holders of Voting Stock are
treated equally, such subsequent acquisition shall be deemed to constitute a Change in Control;

          (C) a Change in Control will not be deemed to have occurred if a Person acquires
beneficial ownership of 20% or more of the Voting Stock of the Company as a result of a reduction
in the number of shares of Voting Stock of the Company outstanding unless and until such Person
thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Company
representing 1% or more of the then-outstanding Voting Stock of the Company, other than in an
acquisition directly from the Company that is approved by a majority of the Incumbent Directors or
other than as a result of a stock dividend, stock split or similar transaction effected by the
Company in which all holders of Voting Stock are treated equally; and

          (D) if at least a majority of the Incumbent Directors determine in good faith that a
Person has acquired beneficial ownership of 20% or more of the Voting Stock of the Company
inadvertently, and such Person divests as promptly as practicable a sufficient number of shares so
that such Person beneficially owns less than 20% of the Voting Stock of the Company, then no Change
in Control shall have occurred as a result of such Person’s acquisition; or

	 	(ii)	 	a majority of the Directors are not Incumbent Directors; or

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	 	(iii)	 	the consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or substantially all
of the assets of the Company or the acquisition of assets of another
corporation, or other transaction (each, a “Business Combination”),
unless, in each case, immediately following such Business Combination
(A) all or substantially all of the individuals and entities who were
the beneficial owners of Voting Stock of the Company immediately prior
to such Business Combination beneficially own, directly or indirectly,
more than 60% of the combined voting power of the then outstanding
            shares of Voting Stock of the entity resulting from such Business
Combination (including, without limitation, an entity which as a result
of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries),
(B) no Person (other than the Company, such entity resulting from such
Business Combination, or any employee benefit plan (or related trust)
sponsored or maintained by the Company, any Subsidiary or such entity
resulting from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of the combined voting power of the then
outstanding shares of Voting Stock of the entity resulting from such
Business Combination, and (C) at least a majority of the members of the
Board of Directors of the entity resulting from such Business
Combination were Incumbent Directors at the time of the execution of
the initial agreement or of the action of the Board providing for such
Business Combination; or

	 	(iv)	 	approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a
Business Combination that complies with clauses (A), (B) and (C) of
Section 1(a)(iii).
	 
	 	(v)	 	For purposes of this Section 1(a), the following terms shall
have the following meanings:

          (A) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

          (B) “Incumbent Directors” means the individuals who, as of the date hereof, are
Directors of the Company and any individual becoming a Director subsequent to the date hereof whose
election, nomination for election by the Company’s stockholders, or appointment, was approved by a
vote of at least two-thirds of the then Incumbent Directors (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination); provided, however, that an individual shall not be
an Incumbent Director if such individual’s

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election or appointment to the Board occurs as a result of an actual or threatened election
contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to the election or
removal of Directors or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board.

          (C) “Subsidiary” means an entity in which the Company directly or indirectly
beneficially owns 50% or more of the outstanding Voting Stock.

          (D) “Voting Stock” means securities entitled to vote generally in the election of
directors (or similar governing bodies).

          (b) “Claim” means (i) any threatened, asserted, pending or completed claim, demand,
action, suit or proceeding, whether civil, criminal, administrative, arbitrative, investigative or
other, and whether made pursuant to federal, state or other law; and (ii) any inquiry or
investigation, whether made, instituted or conducted by the Company or any other party, including
without limitation any federal, state or other governmental entity, that Indemnitee determines
might lead to the institution of any such claim, demand, action, suit or proceeding.

          (c) “Controlled Affiliate” means any corporation, limited liability company,
partnership, joint venture, trust or other entity or enterprise, whether or not for profit, that is
directly or indirectly controlled by the Company. For purposes of this definition, “control” means
the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of an entity or enterprise, whether through the ownership of voting
securities, through other voting rights, by contract or otherwise; provided that direct or indirect
beneficial ownership of capital stock or other interests in an entity or enterprise entitling the
holder to cast 20% or more of the total number of votes generally entitled to be cast in the
election of directors (or persons performing comparable functions) of such entity or enterprise
shall be deemed to constitute control for purposes of this definition.

          (d) “Disinterested Director” means a director of the Company who is not and was not
a party to the Claim in respect of which indemnification is sought by Indemnitee.

          (e) “Expenses” means attorneys’ and experts’ fees and expenses and all other costs
and expenses paid or payable in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to investigate, defend, be a witness in or
participate in (including on appeal), any Claim.

          (f) “Indemnifiable Claim” means any Claim based upon, arising out of or resulting
from (i) any actual, alleged or suspected act or failure to act by Indemnitee in his or her
capacity as a director, officer, employee or agent of the Company or as a director, officer,
employee, member, manager, trustee or agent of any other corporation, limited liability company,
partnership, joint venture, trust or other entity or enterprise, whether or not for profit, as to
which Indemnitee is or was serving at the request of the Company as a director, officer, employee,
member, manager, trustee or agent, (ii) any actual, alleged or

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suspected act or failure to act by Indemnitee in respect of any business, transaction,
communication, filing, disclosure or other activity of the Company or any other entity or
enterprise referred to in clause (i) of this sentence, or (iii) Indemnitee’s status as a current or
former director, officer, employee or agent of the Company or as a current or former director,
officer, employee, member, manager, trustee or agent of the Company or any other entity or
enterprise referred to in clause (i) of this sentence or any actual, alleged or suspected act or
failure to act by Indemnitee in connection with any obligation or restriction imposed upon
Indemnitee by reason of such status. In addition to any service at the actual request of the
Company, for purposes of this Agreement, Indemnitee shall be deemed to be serving or to have served
at the request of the Company as a director, officer, employee, member, manager, trustee or agent
of another entity or enterprise if Indemnitee is or was serving as a director, officer, employee,
member, manager, trustee or agent of such entity or enterprise and (i) such entity or enterprise is
or at the time of such service was a Controlled Affiliate, (ii) such entity or enterprise is or at
the time of such service was an employee benefit plan (or related trust) sponsored or maintained by
the Company or a Controlled Affiliate, or (iii) the Company or a Controlled Affiliate directly or
indirectly caused Indemnitee to be nominated, elected, appointed, designated, employed, engaged or
selected to serve in such capacity.

          (g) “Indemnifiable Losses” means any and all Losses relating to, arising out of or
resulting from any Indemnifiable Claim.

          (h) “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither presently is, nor in the past five years has
been, retained to represent: (i) the Company or Indemnitee in any matter material to either such
party (other than with respect to matters concerning the Indemnitee under this Agreement, or of
other indemnitees under similar indemnification agreements), or (ii) any other party to the
Indemnifiable Claim giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term “Independent Counsel” shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under
this Agreement.

          (i) “Losses” means any and all Expenses, damages, losses, liabilities, judgments,
fines, penalties (whether civil, criminal or other) and amounts paid or payable in settlement,
including without limitation all interest, assessments and other charges paid or payable in
connection with or in respect of any of the foregoing.

          2. Indemnification Obligation. Subject to Section 7, the Company shall indemnify,
defend and hold harmless Indemnitee, to the fullest extent permitted by the laws of the State of
Delaware in effect on the date hereof or as such laws may from time to time hereafter be amended to
increase the scope of such permitted indemnification, against any and all Indemnifiable Claims and
Indemnifiable Losses; provided, however, that, except as provided in Sections 5 and 20, Indemnitee
shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim
initiated by Indemnitee against the

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Company or any director or officer of the Company unless the Company has joined in or
consented to the initiation of such Claim.

     3. Advancement of Expenses. Indemnitee shall have the right to advancement by the
Company prior to the final disposition of any Indemnifiable Claim of any and all Expenses relating
to, arising out of or resulting from any Indemnifiable Claim paid or incurred by Indemnitee or
which Indemnitee determines are reasonably likely to be paid or incurred by Indemnitee.
Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of
conduct. Without limiting the generality or effect of the foregoing, within five business days
after any request by Indemnitee, the Company shall, in accordance with such request (but without
duplication), (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an
amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses; provided
that Indemnitee shall repay, without interest any amounts actually advanced to Indemnitee that, at
the final disposition of the Indemnifiable Claim to which the advance related, were in excess of
amounts paid or payable by Indemnitee in respect of Expenses relating to, arising out of or
resulting from such Indemnifiable Claim. In connection with any such payment, advancement or
reimbursement, Indemnitee shall execute and deliver to the Company an undertaking, which need not
be secured and shall be accepted without reference to Indemnitee’s ability to repay the Expenses,
by or on behalf of the Indemnitee, to repay any amounts paid, advanced or reimbursed by the Company
in respect of Expenses relating to, arising out of or resulting from any Indemnifiable Claim in
respect of which it shall have been determined, following the final disposition of such
Indemnifiable Claim and in accordance with Section 7, that Indemnitee is not entitled to
indemnification hereunder.

     4. Indemnification for Additional Expenses. Without limiting the generality or
effect of the foregoing, the Company shall indemnify and hold harmless Indemnitee against and, if
requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within five
business days of such request, any and all Expenses paid or incurred by Indemnitee or which
Indemnitee determines are reasonably likely to be paid or incurred by Indemnitee in connection with
any Claim made, instituted or conducted by Indemnitee for (a) indemnification or reimbursement or
advance payment of Expenses by the Company under any provision of this Agreement, or under any
other agreement or provision of the Constituent Documents now or hereafter in effect relating to
Indemnifiable Claims, and/or (b) recovery under any directors’ and officers’ liability insurance
policies maintained by the Company, regardless in each case of whether Indemnitee ultimately is
determined to be entitled to such indemnification, reimbursement, advance or insurance recovery, as
the case may be; provided, however, that Indemnitee shall return, without interest, any such
advance of Expenses (or portion thereof) which remains unspent at the final disposition of the
Claim to which the advance related.

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     5. Partial Indemnity. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any Indemnifiable Loss but not
for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled.

     6. Procedure for Notification. To obtain indemnification under this Agreement in
respect of an Indemnifiable Claim or Indemnifiable Loss, Indemnitee shall submit to the Company a
written request therefor, including a brief description (based upon information then available to
Indemnitee) of such Indemnifiable Claim or Indemnifiable Loss. If, at the time of the receipt of
such request, the Company has directors’ and officers’ liability insurance in effect under which
coverage for such Indemnifiable Claim or Indemnifiable Loss is potentially available, the Company
shall give prompt written notice of such Indemnifiable Claim or Indemnifiable Loss to the
applicable insurers in accordance with the procedures set forth in the applicable policies. The
Company shall provide to Indemnitee a copy of such notice delivered to the applicable insurers, and
copies of all subsequent correspondence between the Company and such insurers regarding the
Indemnifiable Claim or Indemnifiable Loss, in each case substantially concurrently with the
delivery or receipt thereof by the Company. The failure by Indemnitee to timely notify the Company
of any Indemnifiable Claim or Indemnifiable Loss shall not relieve the Company from any liability
hereunder unless, and only to the extent that, the Company did not otherwise learn of such
Indemnifiable Claim or Indemnifiable Loss and such failure results in forfeiture by the Company of
substantial defenses, rights or insurance coverage.

     7. Determination of Right to Indemnification.

          (a) To the extent that Indemnitee shall have been successful on the merits or
otherwise in defense of any Indemnifiable Claim or any portion thereof or in defense of any issue
or matter therein, including without limitation dismissal without prejudice, Indemnitee shall be
indemnified against all Indemnifiable Losses relating to, arising out of or resulting from such
Indemnifiable Claim in accordance with Section 2 and no Standard of Conduct Determination (as
defined in Section 7(b)) shall be required.

          (b) To the extent that the provisions of Section 7(a) are inapplicable to an
Indemnifiable Claim that shall have been finally disposed of, any determination of whether
Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally
required condition precedent to indemnification of Indemnitee hereunder against Indemnifiable
Losses relating to, arising out of or resulting from such Indemnifiable Claim (a “Standard of
Conduct Determination”) shall be made as follows: (i) if a Change of Control shall not have
occurred, or if a Change of Control shall have occurred but Indemnitee shall have requested that
the Standard of Conduct Determination be made pursuant to this clause (i), (A) by a majority vote
of the Disinterested Directors, even if less than a quorum of the Board, (B) if such Disinterested
Directors so direct, by a majority vote of a committee of Disinterested Directors designated by a
majority vote of all Disinterested Directors, or (C) if there are no such Disinterested Directors,
by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be
delivered to Indemnitee; and (ii) if a Change in Control shall have occurred and Indemnitee shall
not have requested

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that the Standard of Conduct Determination be made pursuant to clause (i), by Independent
Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to
Indemnitee. Indemnitee will cooperate with the person or persons making such Standard of Conduct
Determination, including providing to such person or persons, upon reasonable advance request, any
documentation or information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such determination. The
Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall
reimburse Indemnitee for, or advance to Indemnitee, within five business days of such request, any
and all costs and expenses (including attorneys’ and experts’ fees and expenses) incurred by
Indemnitee in so cooperating with the person or persons making such Standard of Conduct
Determination.

          (c) The Company shall use its reasonable best efforts to cause any Standard of
Conduct Determination required under Section 7(b) to be made as promptly as practicable. If (i)
the person or persons empowered or selected under Section 7 to make the Standard of Conduct
Determination shall not have made a determination within 30 days after the later of (A) receipt by
the Company of written notice from Indemnitee advising the Company of the final disposition of the
applicable Indemnifiable Claim (the date of such receipt being the “Notification Date”) and (B) the
selection of an Independent Counsel, if such determination is to be made by Independent Counsel,
that is permitted under the provisions of Section 7(e) to make such determination and (ii)
Indemnitee shall have fulfilled his/her obligations set forth in the second sentence of Section
7(b), then Indemnitee shall be deemed to have satisfied the applicable standard of conduct;
provided that such 30-day period may be extended for a reasonable time, not to exceed an additional
30 days, if the person or persons making such determination in good faith requires such additional
time for the obtaining or evaluation or documentation and/or information relating thereto.

          (d) If (i) Indemnitee shall be entitled to indemnification hereunder against any
Indemnifiable Losses pursuant to Section 7(a), (ii) no determination of whether Indemnitee has
satisfied any applicable standard of conduct under Delaware law is a legally required condition
precedent to indemnification of Indemnitee hereunder against any Indemnifiable Losses, or (iii)
Indemnitee has been determined or deemed pursuant to Section 7(b) or (c) to have satisfied any
applicable standard of conduct under Delaware law which is a legally required condition precedent
to indemnification of Indemnitee hereunder against any Indemnifiable Losses, then the Company shall
pay to Indemnitee, within five business days after the later of (x) the Notification Date in
respect of the Indemnifiable Claim or portion thereof to which such Indemnifiable Losses are
related, out of which such Indemnifiable Losses arose or from which such Indemnifiable Losses
resulted and (y) the earliest date on which the applicable criterion specified in clause (i), (ii)
or (iii) above shall have been satisfied, an amount equal to the amount of such Indemnifiable
Losses.

          (e) If a Standard of Conduct Determination is to be made by Independent Counsel
pursuant to Section 7(b)(i), the Independent Counsel shall be selected by the Board of Directors,
and the Company shall give written notice to Indemnitee advising him or her of the identity of the
Independent Counsel so selected. If a Standard of Conduct Determination is to be made by
Independent Counsel pursuant to Section 7(b)(ii), the

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Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice
to the Company advising it of the identity of the Independent Counsel so selected. In either case,
Indemnitee or the Company, as applicable, may, within five business days after receiving written
notice of selection from the other, deliver to the other a written objection to such selection;
provided, however, that such objection may be asserted only on the ground that the Independent
Counsel so selected does not satisfy the criteria set forth in the definition of “Independent
Counsel” in Section 1(h), and the objection shall set forth with particularity the factual basis of
such assertion. Absent a proper and timely objection, the person or firm so selected shall act as
Independent Counsel. If such written objection is properly and timely made and substantiated, (i)
the Independent Counsel so selected may not serve as Independent Counsel unless and until such
objection is withdrawn or a court has determined that such objection is without merit and (ii) the
non-objecting party may, at its option, select an alternative Independent Counsel and give written
notice to the other party advising such other party of the identity of the alternative Independent
Counsel so selected, in which case the provisions of the two immediately preceding sentences and
clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable,
the provisions of clause (ii) of the immediately preceding sentence shall apply to successive
alternative selections. If no Independent Counsel that is permitted under the foregoing provisions
of this Section 7(e) to make the Standard of Conduct Determination shall have been selected within
30 days after the Company gives its initial notice pursuant to the first sentence of this Section
7(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 7(e),
as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the
State of Delaware for resolution of any objection which shall have been made by the Company or
Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person or firm selected by the Court or by such other person as the Court
shall designate, and the person or firm with respect to whom all objections are so resolved or the
person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay
all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the
Independent Counsel’s determination pursuant to Section 7(b).

     8. Presumption of Entitlement.

          (a) In making any Standard of Conduct Determination, the person or persons making
such determination shall presume that Indemnitee has satisfied the applicable standard of conduct,
and the Company may overcome such presumption only by its adducing clear and convincing evidence to
the contrary. Any Standard of Conduct Determination that is adverse to Indemnitee may be
challenged by the Indemnitee in the Court of Chancery of the State of Delaware. No determination
by the Company (including by its directors or any Independent Counsel) that Indemnitee has not
satisfied any applicable standard of conduct shall be a defense to any Claim by Indemnitee for
indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create
a presumption that Indemnitee has not met any applicable standard of conduct.

     9. No Other Presumption. For purposes of this Agreement, the termination of any
Claim by judgment, order, settlement (whether with or without court approval) or

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conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption
that Indemnitee did not meet any applicable standard of conduct or that indemnification hereunder
is otherwise not permitted.

     10. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any
other rights Indemnitee may have under the Constituent Documents, or the substantive laws of the
Company’s jurisdiction of incorporation, any other contract or otherwise (collectively, “Other
Indemnity Provisions”); provided, however, that (a) to the extent that Indemnitee otherwise would
have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be
deemed to have such greater right hereunder and (b) to the extent that any change is made to any
Other Indemnity Provision which permits any greater right to indemnification than that provided
under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right
hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect
of which would be to deny, diminish or encumber Indemnitee’s right to indemnification under this
Agreement or any Other Indemnity Provision.

     11. Liability Insurance and Funding. For the duration of Indemnitee’s service as a
director and/or officer of the Company or a Controlled Affiliate, and thereafter for so long as
Indemnitee shall be subject to any pending or possible Indemnifiable Claim, the Company shall use
commercially reasonable efforts (taking into account the scope and amount of coverage available
relative to the cost thereof) to cause to be maintained in effect policies of directors’ and
officers’ liability insurance providing coverage for directors and/or officers of the Company that
is at least substantially comparable in scope and amount to that provided by the Company’s current
policies of directors’ and officers’ liability insurance. Upon request, the Company shall provide
Indemnitee with a copy of all directors’ and officers’ liability insurance applications, binders,
policies, declarations, endorsements and other related materials, and shall provide Indemnitee with
a reasonable opportunity to review and comment on the same. Without limiting the generality or
effect of the two immediately preceding sentences, the Company shall not discontinue or
significantly reduce the scope or amount of coverage from one policy period to the next (i)
without the prior approval thereof by a majority vote of the Incumbent Directors, even if less than
a quorum, or (ii) if at the time that any such discontinuation or significant reduction in the
scope or amount of coverage is proposed there are no Incumbent Directors, without the prior written
consent of Indemnitee (which consent shall not be unreasonably withheld or delayed). In all
policies of directors’ and officers’ liability insurance obtained by the Company, Indemnitee shall
be named as an insured in such a manner as to provide Indemnitee the same rights and benefits,
subject to the same limitations, as are accorded to the Company’s directors and officers most
favorably insured by such policy. The Company may, but shall not be required to, create a trust
fund, grant a security interest or use other means, including without limitation a letter of
credit, to ensure the payment of such amounts as may be necessary to satisfy its obligations to
indemnify and advance expenses pursuant to this Agreement.

     12. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the related rights of recovery of Indemnitee
against other persons or entities (other than Indemnitee’s successors), including

11

 

any entity or enterprise referred to in clause (i) of the definition of “Indemnifiable Claim”
in Section 1(f). Indemnitee shall execute all papers reasonably required to evidence such rights
(all of Indemnitee’s reasonable Expenses, including attorneys’ fees and charges, related thereto to
be reimbursed by or, at the option of Indemnitee, advanced by the Company).

     13. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment to Indemnitee in respect of any Indemnifiable Losses to the extent
Indemnitee has otherwise actually received payment (net of Expenses incurred in connection
therewith) under any insurance policy, the Constituent Documents and Other Indemnity Provisions or
otherwise (including from any entity or enterprise referred to in clause (i) of the definition of
“Indemnifiable Claim” in Section 1(f)) in respect of such Indemnifiable Losses otherwise
indemnifiable hereunder.

     14. Defense of Claims. The Company shall be entitled to participate in the defense
of any Indemnifiable Claim or to assume the defense thereof, with counsel reasonably satisfactory
to the Indemnitee; provided that if Indemnitee believes, after consultation with counsel selected
by Indemnitee, that (a) the use of counsel chosen by the Company to represent Indemnitee would
present such counsel with an actual or potential conflict, (b) the named parties in any such
Indemnifiable Claim (including any impleaded parties) include both the Company and Indemnitee and
Indemnitee shall conclude that there may be one or more legal defenses available to him or her that
are different from or in addition to those available to the Company, or (c) any such representation
by such counsel would be precluded under the applicable standards of professional conduct then
prevailing, then Indemnitee shall be entitled to retain separate counsel (but not more than one law
firm plus, if applicable, local counsel in respect of any particular Indemnifiable Claim) at the
Company’s expense. The Company shall not be liable to Indemnitee under this Agreement for any
amounts paid in settlement of any threatened or pending Indemnifiable Claim effected without the
Company’s prior written consent. The Company shall not, without the prior written consent of the
Indemnitee, effect any settlement of any threatened or pending Indemnifiable Claim which the
Indemnitee is or could have been a party unless such settlement solely involves the payment of
money and includes a complete and unconditional release of the Indemnitee from all liability on any
claims that are the subject matter of such Indemnifiable Claim. Neither the Company nor Indemnitee
shall unreasonably withhold its consent to any proposed settlement; provided that Indemnitee may
withhold consent to any settlement that does not provide a complete and unconditional release of
Indemnitee.

15. Successors and Binding Agreement.

          (a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Company expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to perform if no such succession
had taken place. This Agreement shall be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any person acquiring directly or
indirectly all or substantially all of the business or assets of the

12

 

Company whether by purchase, merger, consolidation, reorganization or otherwise (and such
successor will thereafter be deemed the “Company” for purposes of this Agreement), but shall not
otherwise be assignable or delegatable by the Company.

          (b) This Agreement shall inure to the benefit of and be enforceable by the
Indemnitee’s personal or legal representatives, executors, administrators, heirs, distributees,
legatees and other successors.

          (c) This Agreement is personal in nature and neither of the parties hereto shall,
without the consent of the other, assign or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 15(a) and 15(b). Without limiting the
generality or effect of the foregoing, Indemnitee’s right to receive payments hereunder shall not
be assignable, whether by pledge, creation of a security interest or otherwise, other than by a
transfer by the Indemnitee’s will or by the laws of descent and distribution, and, in the event of
any attempted assignment or transfer contrary to this Section 15(c), the Company shall have no
liability to pay any amount so attempted to be assigned or transferred.

     16. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid or one business day after having been sent for next-day delivery
by a nationally recognized overnight courier service, addressed to the Company (to the attention of
the Secretary of the Company) and to Indemnitee at the addresses shown on the signature page
hereto, or to such other address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of changes of address will be effective only upon receipt.

     17. Governing Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by and construed in accordance with the substantive laws of the
State of Delaware, without giving effect to the principles of conflict of laws of such State. The
Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the Chancery Court of
the State of Delaware for all purposes in connection with any action or proceeding which arises out
of or relates to this Agreement and agree that any action instituted under this Agreement shall be
brought only in the Chancery Court of the State of Delaware.

     18. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstance is held invalid, unenforceable or otherwise illegal,
the remainder of this Agreement and the application of such provision to any other person or
circumstance shall not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal shall be reformed to the extent, and only to the extent, necessary to make it
enforceable, valid or legal. In the event that any court or other adjudicative body shall decline
to reform any provision of this Agreement held to be invalid, unenforceable or

13

 

otherwise illegal as contemplated by the immediately preceding sentence, the parties thereto
shall take all such action as may be necessary or appropriate to replace the provision so held to
be invalid, unenforceable or otherwise illegal with one or more alternative provisions that
effectuate the purpose and intent of the original provisions of this Agreement as fully as possible
without being invalid, unenforceable or otherwise illegal.

     19. Miscellaneous. No provision of this Agreement may be waived, modified or
discharged unless such waiver, modification or discharge is agreed to in writing signed by
Indemnitee and the Company. No waiver by either party hereto at any time of any breach by the
other party hereto or compliance with any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made by either party that
are not set forth expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.

     20. Legal Fees and Expenses. It is the intent of the Company that Indemnitee not be
required to incur legal fees and or other Expenses associated with the interpretation, enforcement
or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost
and expense thereof would substantially detract from the benefits intended to be extended to
Indemnitee hereunder. Accordingly, without limiting the generality or effect of any other
provision hereof, if it should appear to Indemnitee that the Company has failed to comply with any
of its obligations under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the
benefits provided or intended to be provided to Indemnitee hereunder, the Company irrevocably
authorizes the Indemnitee from time to time to retain counsel of Indemnitee’s choice, at the
expense of the Company as hereafter provided, to advise and represent Indemnitee in connection with
any such interpretation, enforcement or defense, including without limitation the initiation or
defense of any litigation or other legal action, whether by or against the Company or any director,
officer, stockholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to Indemnitee’s entering into an attorney-client
relationship with such counsel, and in that connection the Company and Indemnitee agree that a
confidential relationship shall exist between Indemnitee and such counsel. Without respect to
whether Indemnitee prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all attorneys’ and related fees
and expenses incurred by Indemnitee in connection with any of the foregoing.

     21. Certain Interpretive Matters. No provision of this Agreement shall be
interpreted in favor of, or against, either of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or thereof.

14

 

     22. Entire Agreement. This Agreement and the Constituent Documents constitute the
entire agreement, and supersede all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter of this Agreement. Any prior
agreements or understandings between the parties hereto with respect to indemnification are hereby
terminated and of no further force or effect.

     23. Counterparts. This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original but all of which together shall constitute one and the
same agreement.

[Signatures Appear On Following Page]

15

 

     IN WITNESS WHEREOF, Indemnitee has executed and the Company has caused its duly authorized
representative to execute this Agreement as of the date first above written.

	 	 	 	 	 	 	 
	 	 	MICHAELS STORES, INC.	 	 
	 	 	8000 Bent Branch Drive	 	 
	 	 	Irving, TX 75063	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	[NAME OF INDEMNITEE]	 	 
	 	 	8000 Bent Branch Drive	 	 
	 	 	Irving, TX 75063	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	[Name of Indemnitee]	 	 

16exv10w7

 

Exhibit
10.7

DOANE PET CARE COMPANY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Effective March 27, 2006

 

 

DOANE PET CARE COMPANY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	FOREWORD	 	 	 	i	 
	 
	 	 	 	 	 	 	 
	ARTICLE I	 	DEFINITIONS	 	1	 
	 
	 	 	 	 	 	 	 
	 
	 	1.1	 	Actuarial Equivalent	 	1	 
	 
	 	1.2	 	Affiliate	 	1	 
	 
	 	1.3	 	Appropriate Form	 	1	 
	 
	 	1.4	 	Basic Plan	 	1	 
	 
	 	1.5	 	Beneficiary	 	2	 
	 
	 	1.6	 	Board of Directors	 	2	 
	 
	 	1.7	 	Change of Control	 	2	 
	 
	 	1.8	 	Code	 	3	 
	 
	 	1.9	 	Company	 	3	 
	 
	 	1.10	 	Compensation	 	3	 
	 
	 	1.11	 	Disability	 	3	 
	 
	 	1.12	 	Earliest Retirement Date	 	4	 
	 
	 	1.13	 	Early Retirement Date	 	4	 
	 
	 	1.14	 	Effective Date	 	4	 
	 
	 	1.15	 	Employee	 	4	 
	 
	 	1.16	 	Employer	 	4	 
	 
	 	1.17	 	ERISA	 	4	 
	 
	 	1.18	 	Final Average Compensation	 	5	 
	 
	 	1.19	 	Hypothetical Contribution Amount	 	5	 
	 
	 	1.20	 	Key Employee	 	5	 
	 
	 	1.21	 	Normal Retirement Date	 	6	 

 

 

DOANE PET CARE COMPANY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 
	 	1.22	 	Parent	 	6	 
	 
	 	1.23	 	Participant	 	6	 
	 
	 	1.24	 	Plan	 	6	 
	 
	 	1.25	 	Plan Administrator	 	6	 
	 
	 	1.26	 	Plan Year	 	6	 
	 
	 	1.27	 	Primary Insurance Amount	 	6	 
	 
	 	1.28	 	Separation from Service	 	7	 
	 
	 	1.29	 	Service	 	7	 
	 
	 	1.30	 	Social Security Act	 	7	 
	 
	 	 	 	 	 	 	 
	ARTICLE II	 	PARTICIPATION	 	9	 
	 
	 	2.1	 	Designation to Participate	 	9	 
	 
	 	2.2	 	Continuation of Participation	 	9	 
	 
	 	2.3	 	Adopting Entities	 	9	 
	 
	 	 	 	 	 	 	 
	ARTICLE III	 	RETIREMENT BENEFITS	 	11	 
	 
	 	3.1	 	Normal Retirement Benefit	 	11	 
	 
	 	3.2	 	Early Retirement Benefit	 	12	 
	 
	 	3.3	 	Vested Retirement Benefit	 	13	 
	 
	 	3.4	 	Disability Retirement Benefit	 	14	 
	 
	 	3.5	 	Benefits Upon Change of Control	 	15	 
	 
	 	 	 	 	 	 	 
	ARTICLE IV	 	DEATH BENEFITS	 	18	 
	 
	 	4.1	 	Pre-Retirement Death Benefits	 	18	 
	 
	 	 	 	 	 	 	 
	ARTICLE V	 	PAYMENT OF RETIREMENT BENEFITS	 	21	 
	 
	 	5.1	 	Payment of Benefits	 	21	 
	 
	 	5.2	 	Automatic Form of Payment	 	21	 

 

 

DOANE PET CARE COMPANY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 
	 	5.3	 	Optional Forms of Payment	 	21	 
	 
	 	 	 	 	 	 	 
	ARTICLE VI	 	ADMINISTRATION OF PLAN	 	25	 
	 
	 	6.1	 	Plan Administrator	 	25	 
	 
	 	6.2	 	Powers and Duties	 	25	 
	 
	 	6.3	 	Rules and Regulations of the Plan Administrator	 	26	 
	 
	 	6.4	 	Claims Procedure	 	26	 
	 
	 	 	 	 	 	 	 
	ARTICLE VII	 	GENERAL MATTERS	 	31	 
	 
	 	7.1	 	Benefits from General Assets	 	31	 
	 
	 	7.2	 	No Assignment	 	31	 
	 
	 	7.3	 	Expenses of Plan	 	32	 
	 
	 	7.4	 	Amendment or Termination	 	32	 
	 
	 	7.5	 	Limitation on Benefits and Payments	 	32	 
	 
	 	7.6	 	Time of Payment Obligations	 	33	 
	 
	 	7.7	 	Limitation of Liability	 	33	 
	 
	 	7.8	 	Agent for Service of Process	 	34	 
	 
	 	7.9	 	Delivery of Elections to Plan Administrator	 	34	 
	 
	 	7.10	 	Delivery of Notice to Participants	 	34	 
	 
	 	7.11	 	No Enlargement of Employee Rights	 	34	 
	 
	 	7.12	 	Tax Withholding	 	35	 
	 
	 	7.13	 	Incapacity of Recipient	 	35	 
	 
	 	7.14	 	Unclaimed Benefit	 	35	 
	 
	 	 	 	 	 	 	 
	ARTICLE VIII	 	CONSTRUCTION OF THE PLAN	 	37	 
	 
	 	8.1	 	Construction of the Plan	 	37	 
	 
	 	8.2	 	Headings	 	37	 

 

 

DOANE PET CARE COMPANY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 		Page	 
	 
	 	8.3	 	Separability	 	 	37	 
	 
	 	8.4	 	Counterparts	 	 	37	 
	 
	 	 	 	 	 	 	 	 
	APPENDIX A	 	COMPENSATION (OTHER THAN PERFORMANCE

BONUSES) OF CERTAIN PARTICIPANTS AS IN EFFECT

IMMEDIATELY PRECEDING THE EFFECTIVE DATE	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	APPENDIX B	 	REDUCTION FACTORS UNDER SECTION 3.2(b)	 	 	40	 

 

 

DOANE PET CARE COMPANY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

FOREWORD

Doane Pet Care Company adopted the Doane Pet Care Company Supplemental Executive Retirement Plan
(the “Plan”) for the benefit of certain of its executives, effective as of March 27, 2006.

The Plan is intended to enable the Employer (as hereinafter defined) to attract and retain highly
qualified executives and to encourage those executives to devote their full-time best efforts to
the Employer by providing to them supplemental retirement income in consideration of those efforts.
The Plan is intended to replace the individual Non-Qualified Salary Continuation Agreements in
effect for certain executives immediately prior to the Effective Date (as hereinafter defined) of
the Plan.

The Plan is intended to constitute an unfunded plan maintained primarily for the purpose of
providing deferred compensation benefits for a select group of management or highly compensated
employees for purposes of the Employee Retirement Income Security Act of 1974.

  i

 

 

ARTICLE I

DEFINITIONS

Where the following words and phrases appear in the Plan, they shall have the respective meanings
as set forth below unless the context clearly indicates the contrary.

	1.1	 	“Actuarial Equivalent” means a benefit of equivalent value when computed on the basis of
interest at 6% per annum and the RP-2000 Mortality Table. Notwithstanding the foregoing,
solely for purposes of determining the benefit payable pursuant to Section 3.5, the Actuarial
Equivalent present value shall be computed on the basis of interest at the average annual rate
of interest on 30-year Treasury securities for the second calendar month preceding the month
in which a Change of Control occurs and the RP-2000 Mortality Table.
	 
	1.2	 	“Affiliate” means, with respect to a person (as defined in Section 7701(a)(1) of the Code),
any other person with whom the person would be considered a single employer under Section
414(b) of the Code (employees of controlled group of corporations), and any other person with
whom the person would be considered a single employer under Section 414(c) of the Code
(employees of partnerships, proprietorships, etc., which are under common control).
	 
	1.3	 	“Appropriate Form” means the written form provided or prescribed by the Plan Administrator
for the particular purpose.
	 
	1.4	 	“Basic Plan” means the Doane Pet Care Retirement Savings Plan.
	 
	1.5	 	“Beneficiary” means the person, persons or entity designated by the Participant to receive
benefits in the event of the Participant’s death; provided, however,

1

 

	 	 	that for purposes of Sections 4.1(b) and 5.3(a)(i), a Participant may designate only one
person as the Beneficiary to receive the benefits under such Sections and may not designate
an entity as the Beneficiary under such Sections. In the absence of any effective
designation, a Participant’s Beneficiary shall be the Participant’s surviving legal spouse.
If such spouse dies before receiving payment to which he or she is entitled hereunder, then
payment shall be made to such person or persons, including his or her estate, as he or she
may designate in the last Beneficiary designation received by the Plan Administrator from
such spouse prior to his or her death. If the Participant is not survived by a legal
spouse, or if such spouse shall fail to so appoint, the said payment shall be made to the
then living children of the Participant, if any, in equal shares. If there are no
surviving children, the payment will be made to the estate of the later to die of the
Participant and (if any) his or her legal spouse.
	 
	1.6	 	“Board of Directors” means the Board of Directors of the Company.
	 
	1.7	 	“Change of Control” means, with respect to Parent, a change in the ownership or effective
control of Parent or in the ownership of a substantial portion of Parent’s assets, within the
meaning of Code Section 409A(a)(2)(A)(v) (and applicable administrative guidance thereunder).
With respect to an Employer other than Parent, the Employer shall be deemed to have undergone
a “Change of Control” in the event that the Employer ceases to be an Affiliate of Parent,
provided that the transaction or series of transactions that resulted in such cessation
constitutes a change in the ownership or effective control of the Employer or a majority
shareholder of the Employer (or any corporation in a chain of corporations in which each
corporation is a majority shareholder of another corporation in the chain, with the chain
ending at the Employer), within the meaning of Section 409A(a)(2)(A)(v) of the Code (and
applicable administrative guidance thereunder). In the case of a non-corporate Employer, the
preceding sentence shall be applied by analogy to such non-corporate

2

 

	 	 	Employer in the manner prescribed in applicable administrative guidance under Section 409A
of the Code.
	 
	1.8	 	“Code” means the Internal Revenue Code of 1986, as amended from time to time. Reference to a
specific provision of the Code shall include such provision, any valid regulation or ruling
promulgated thereunder and any comparable provision of future law that amends, supplements or
supersedes such provision.
	 
	1.9	 	“Company” means Doane Pet Care Company and any successor thereto by merger, purchase,
reorganization or otherwise.
	 
	1.10	 	“Compensation” means for each Plan Year (including periods that would be Plan Years but for
the fact that they occurred prior to the Effective Date) the base salary plus any performance
bonuses earned under the Employer’s Annual Bonus Plan (or any successor annual performance
bonus plan) paid by the Employer to or for the benefit of a Participant for services rendered
or labor performed. A Participant’s base salary and performance bonuses shall be determined
before any reductions in compensation made pursuant to any salary reduction agreement under
(a) Section 125, 132(f)(4), 401(k) or 402(h)(1)(B) of the Code or (b) any nonqualified
deferred compensation plan maintained by the Employer.
	 
	1.11	 	“Disability” means a Participant’s physical or mental condition for which the Participant
qualifies for permanent disability benefits under the Company’s or other Employer’s long-term
disability plan for active employees, or, if a Participant does not participate in such a
plan, a physical or mental condition for which the Participant would have qualified for
permanent disability benefits under such a plan had the Participant been a participant in such
a plan, as determined in the sole discretion of the Plan Administrator. If the Company or

3

 

	 	 	other Employer does not sponsor such a plan, or discontinues sponsoring such a plan,
Disability shall be defined as any physical or mental condition resulting from bodily
injury or disease occurring after the Effective Date that (a) during the first 24 months of
such condition prevents the Participant from performing substantially all the work of his
or her regular occupation, and (b) thereafter, wholly prevents the Participant from
engaging in any gainful occupation for which he or she may become reasonably fitted by
reason of his or her education, training or experience. The Plan Administrator will apply
the provisions of this Section 1.11 in a consistent and uniform manner.
	 
	1.12	 	“Earliest Retirement Date” has the meaning contained in Section 4.1(b)(i).
	 
	1.13	 	“Early Retirement Date” means the first day of the month coinciding with or next following
the date on which the Participant attains at least age 55 and completes at least 5 years of
Service, but before the Participant’s Normal Retirement Date.
	 
	1.14	 	“Effective Date” means March 27, 2006.
	 
	1.15	 	“Employee” means an employee of the Employer on whose behalf benefits are payable under the
Basic Plan.
	 
	1.16	 	“Employer” means the Company and any other adopting entity that adopts the Plan pursuant to
the provisions of Section 2.3.
	 
	1.17	 	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time. Reference to a specific provision of ERISA shall include such provision, any valid
regulation or ruling promulgated thereunder and any comparable provision of future law that
amends, supplements or supersedes such provision.

4

 

	1.18	 	“Final Average Compensation” means the annual average of the Participant’s Compensation
during the period of five full consecutive Plan Years (including periods that would be Plan
Years but for the fact that they occurred prior to the Effective Date) that produces the
highest such average, or during the actual number of such full consecutive Plan Years
(including periods that would be Plan Years but for the fact that they occurred prior to the
Effective Date) if less than five.
	 
	1.19	 	“Hypothetical Contribution Amount” means the aggregate of the individual amounts deemed to be
contributed for each plan year under the Basic Plan that the Participant is eligible to
participate thereunder (whether before or after the Effective Date). For each such plan year,
the amount deemed to be contributed shall be the maximum permitted amount of Employer matching
contributions under the Basic Plan for such plan year, determined based on the assumption that
the Participant made the maximum permitted amount of employee contributions (including salary
deferrals) under the Basic Plan for such plan year. For the plan year in which the
Participant is first eligible to participate in the Basic Plan and the plan year in which the
Participant incurs a Separation from Service, the amount deemed to be contributed will be
prorated based on the number of full calendar months while such Participant is eligible to
participate in the Basic Plan divided by 12. The amount deemed to be contributed for each
plan year of the Basic Plan shall be assumed to have been made on the first day of such plan
year with interest credited at a rate of 6% per annum.
	 
	1.20	 	“Key Employee” means a key employee within the meaning of Section 416(i) of the Code, without
regard to Section 416(i)(5) thereof, provided that the capital stock of the Company or any
Affiliate of the Company is publicly traded on an established securities market or otherwise.

5

 

	1.21	 	“Normal Retirement Date” means the first day of the month coinciding with or next following
the date on which a Participant attains age 65.
	 
	1.22	 	“Parent” means Doane Pet Care Enterprises, Inc.
	 
	1.23	 	“Participant” means an Employee who has been designated for participation in the Plan
pursuant to Section 2.1.
	 
	1.24	 	“Plan” means the Doane Pet Care Company Supplemental Executive Retirement Plan, as set forth
herein and as may be amended from time to time.
	 
	1.25	 	“Plan Administrator” means the person, persons or committee designated by the Board of
Directors to administer and supervise the Plan in accordance with Section 6.1. In the absence
of any such designation, the Company shall be the Plan Administrator.
	 
	1.26	 	“Plan Year” means the twelve consecutive month period beginning each January 1 and ending
December 31.
	 
	1.27	 	“Primary Insurance Amount” means the monthly amount of a Participant’s “old-age insurance
benefit”, as defined in Section 402 of the federal Social Security Act in effect on the date
of the Participant’s Separation from Service, payable on the later of the Participant’s Normal
Retirement Date or Separation from Service, whether or not the Participant actually applies
for and receives such amount for any month. The Primary Insurance Amount shall be determined
by assuming that the Participant will receive Compensation in the amount applicable during the
Plan Year in which such Separation from Service occurs over a further period of employment, if
any, extending to his or her Normal Retirement Date. The Primary Insurance Amount shall be
determined on the

6

 

	 	 	basis of the actual Compensation paid to the Participant by the Employer during all periods
of employment with the Employer during which the Participant was covered by the Social
Security Act. With respect to years before the Participant’s commencement of service with
the Employer, it will be assumed that the Participant received compensation for such
service in an amount computed by projecting backwards the actual Compensation paid to the
Participant by the Employer during the first full year of employment with the Employer,
utilizing relative rates that approximate the national average wages used for indexing
purposes under the Social Security Act from the determination date to the Participant’s
twenty-first birthday, subject to the Participant’s furnishing evidence of his or her
actual past compensation for such years treated as wages under the Social Security Act.
For any Participant for whom the Primary Insurance Amount cannot be ascertained as herein
provided, said amount shall be the amount that the Plan Administrator shall reasonably
determine.
	 
	1.28	 	“Separation from Service” means a Participant’s separation from service with the Employer and
its Affiliates within the meaning of Section 409A(a)(2)(A)(i) of the Code (and applicable
administrative guidance thereunder).
	 
	1.29	 	“Service” means the total of all consecutive 12-month periods of the Participant’s employment
with the Employer (whether before or after the Effective Date), plus 1/12 fractions thereof
for each additional completed month of such employment.
	 
	1.30	 	“Social Security Act” means the United States Social Security Act, as amended from time to
time. Reference to a specific provision of the Social Security Act shall include such
provision, any valid regulation or ruling promulgated thereunder and any comparable provision
of future law that amends, supplements or supersedes such provision.

7

 

ARTICLE II

PARTICIPATION

	2.1	 	Designation to Participate
	 
	 	 	Upon the designation of the Employer, and subject to the approval of
the Board of Directors, Employees may become Participants as of the
date designated by the Employer.
	 
	2.2	 	Continuation of Participation
	 
	 	 	An Employee who has become a Participant shall remain a Participant as
long as benefits are payable to or with respect to such Participant
under the Plan.
	 
	2.3	 	Adopting Entities
	 
	 	 	It is contemplated that other entities may adopt the Plan and thereby
become an Employer. Any such entity, whether or not presently
existing, may become a party hereto by appropriate action of its
officers and upon approval of the Board of Directors, but without the
need for approval of such entity’s board of directors (or noncorporate
counterpart) or of the Plan Administrator; provided, however, that
such entity must be an Affiliate of Parent. The provisions of the
Plan shall apply separately and equally to each Employer and its
employees in the same manner as is expressly provided for the Company
and its employees, except that the power to amend or terminate the
Plan and to approve the designation of Employees as Participants shall
be exercised by the Board of Directors alone. In determining the
period of Service of any Participant employed by an adopting Employer,
the Board of Directors may determine the extent, if any, to which
credit is granted for service with such Employer or its 

8

 

	 	 	predecessors or affiliated companies prior to the time such Employer adopts
the Plan. Any Employer may, by appropriate action of its officers and upon approval of the
Board of Directors, but without the need for approval of such Employer’s board of directors
(or noncorporate counterpart) or of the Plan Administrator, terminate its participation in
the Plan effective immediately prior to the start of any subsequent Plan Year. Moreover,
the Plan Administrator or the Board of Directors may, in its discretion, terminate an
Employer’s Plan participation effective immediately prior to the start of any subsequent
Plan Year; provided, however, that if an Employer ceases to be an Affiliate of Parent, such
Employer’s Plan participation may be terminated by the Plan Administrator effective
immediately upon such cessation. In no event shall the termination of an Employer’s Plan
participation have a material adverse impact upon the accrued benefits of anyone
participating in the Plan as of the date of such termination, unless he or she consents to
the same in writing.

9

 

ARTICLE III

RETIREMENT BENEFITS

	3.1	 	Normal Retirement Benefit
	 
	(a)	 	Upon a Participant’s Separation from Service for a reason other than death on or after his or
her Normal Retirement Date, the Participant shall be entitled to receive a monthly benefit
payable in the form of payment described in Section 5.2, beginning on the first day of the
calendar month coinciding with or immediately following his or her Separation from Service,
equal to the excess, if any, of one-twelfth of 2% of the Participant’s Final Average
Compensation multiplied by his or her years of Service, minus the sum of each of the following
amounts:

	 	(i)	 	the monthly amount of the annuity equivalent of the Participant’s
Hypothetical Contribution Amount, expressed as a single life annuity for the life of
the Participant (payable beginning on the first day of the calendar month coinciding
with or immediately following the later of the Participant’s Normal Retirement Date or
Separation from Service) determined by applying an Actuarial Equivalent factor to such
Hypothetical Contribution Amount, and
	 
	 	(ii)	 	50% of the Participant’s Primary Insurance Amount.

	(b)	 	Solely with respect to an individual who is a Participant on the Effective Date, in no event
shall the monthly benefit described above be less than the Actuarial Equivalent amount payable
for the Participant’s lifetime of an annual amount of 40% of the Participant’s Compensation,
determined without regard to performance bonuses, as in effect on the day immediately
preceding the

10

 

	 	 	Effective Date (which Compensation amount for each such Participant is set forth on
Appendix A), payable over a ten-year period commencing at age 65.

	3.2	 	Early Retirement Benefit
	 
	(a)	 	Upon a Participant’s Separation from Service for a reason other than death on or after his or
her Early Retirement Date and prior to his or her Normal Retirement Date, the Participant
shall be entitled to receive a monthly benefit payable in the form of payment described in
Section 5.2 beginning on the first day of the calendar month coinciding with or immediately
following his or her Separation from Service. The monthly benefit shall be the amount that
otherwise would have commenced on his or her Normal Retirement Date, calculated in accordance
with the provisions of Section 3.1(a) (but considering the Participant’s Final Average
Compensation and years of Service to the date of his or her Separation from Service), and
shall be reduced for early commencement by multiplying such amount by a reduction factor in
accordance with the following table:

	 	 	 	 	 
	Commencement Age	 	Reduction Factor
	65
	 	 	100	%
	64
	 	 	90.83	%
	63
	 	 	82.70	%
	62
	 	 	75.47	%
	61
	 	 	69.01	%
	60
	 	 	63.22	%
	59
	 	 	58.02	%
	58
	 	 	53.34	%
	57
	 	 	49.11	%
	56
	 	 	45.28	%
	55
	 	 	41.81	%

11

 

The reduction factors described above shall be applied proportionately to the nearest
monthly interval.

	(b)	 	Solely with respect to an individual who is a Participant on the Effective Date and has
completed at least 10 years of Service as of the date of his or her Separation from Service
that occurs on or after his or her Early Retirement Date but before his or her Normal
Retirement Date, in no event shall the monthly benefit described in Section 3.2(a) be less
than the Actuarial Equivalent amount payable for the Participant’s lifetime of an annual
amount of 40% of the Participant’s Compensation, determined without regard to performance
bonuses, as in effect on the day immediately preceding the Effective Date (which Compensation
amount for each Participant on the Effective Date is set forth on Appendix A), payable over a
ten-year period commencing on the first day of the calendar month coinciding with or next
following the Participant’s Separation from Service and reduced for early commencement by
multiplying such amount by a reduction factor in accordance with the table contained in
Appendix B.
	 
	3.3	 	Vested Retirement Benefit
	 
	(a)	 	A Participant shall have a 100 percent vested nonforfeitable right to a monthly benefit upon
the earlier of his or her completion of five years of Service or attainment of age 65. If the
Participant subsequently incurs a Separation from Service for reasons other than retirement
under Sections 3.1 or 3.2, Disability or death, he or she shall be eligible for a vested
retirement benefit determined pursuant to the provisions of paragraph (b) below. If the
Participant incurs a Separation from Service for reasons other than retirement under Sections
3.1 or 3.2 or death prior to the date upon which he or she has a 100 percent vested
nonforfeitable right to a monthly benefit as provided above, then no benefit

12

 

	 	 	under the Plan (other than the benefit described in Section 3.4, if applicable) shall be
payable under the Plan to or on behalf of such Participant.

	(b)	 	The vested retirement benefit payable in the form of payment described in Section 5.2 shall
begin on the Participant’s Early Retirement Date and shall be equal to the amount that
otherwise would have commenced on the Participant’s Normal Retirement Date, calculated in
accordance with the provisions of Section 3.1(a) (but considering the Participant’s Final
Average Compensation and years of Service to the date of his or her Separation from Service),
reduced for early commencement in accordance with the provisions of Section 3.2(a).
	 
	3.4	 	Disability Retirement Benefit
	 
	 	 	A Participant who has incurred a Disability while in the employment of the Employer and
prior to his or her Normal Retirement Date shall be entitled to receive a monthly benefit
calculated in accordance with the provisions of Section 3.1 and payable in the form of
payment described in Section 5.2 commencing on the Participant’s Normal Retirement Date,
notwithstanding that the Participant has incurred a Separation from Service as a result of
the Disability. For purposes of the preceding sentence, (a) Service shall continue to be
granted during the period of Disability until the earliest of the Participant’s recovery
from Disability, Normal Retirement Date or death, notwithstanding that the Participant has
incurred a Separation from Service as a result of the Disability, and (b) the Participant’s
Final Average Compensation shall be determined by assuming that his or her Compensation
continued during the period described in clause (a) of this sentence in an amount equal to
his or her Compensation during the 12 calendar month period immediately preceding the date
he or she incurred a Disability.

13

 

	3.5	 	Benefits Upon Change of Control
	 
	(a)	 	Notwithstanding the provisions of Section 3.3, a Participant shall have a 100 percent
nonforfeitable vested right to retirement benefits upon the occurrence of a Change of Control
of Parent that occurs on or after the first anniversary of the Effective Date, without regard
to any Service or age requirement, if the Participant is employed by the Employer immediately
prior to the date upon which such Change of Control of Parent occurs. In addition, a
Participant who is employed by an Employer other than Parent immediately prior to a Change of
Control of that Employer that occurs on or after the first anniversary of the Effective Date
shall have a 100 percent nonforfeitable vested right to retirement benefits upon the
occurrence of such Change of Control.
	 
	(b)	 	Upon the occurrence of a Change of Control of Parent that occurs on or after the first
anniversary of the Effective Date, a retirement benefit shall be payable to (i) each
Participant employed by the Employer immediately prior to the date upon which such Change of
Control occurs or (ii) each Participant who has incurred a Separation from Service with the
Employer and is entitled to a vested retirement benefit under Section 3.3 or a Disability
retirement benefit under Section 3.4, neither of which is in pay status as of the date upon
which such Change of Control occurs, and, in each such case, such retirement benefit shall be
in lieu of any other benefit under the preceding provisions of this Article III or under
Article IV. Such retirement benefit shall be calculated as if the Participant incurred a
Separation from Service as of the earlier of the date of such Change of Control or the date of
the Participant’s actual Separation from Service (or, in the case of a Participant described
in Section 3.4, as if the Participant recovered from his or her Disability as of the earlier
of the actual date of such recovery or the date of such Change of Control), shall be paid in a
lump sum upon the date of such Change of Control and shall be the Actuarial Equivalent present
value of the Participant’s monthly benefit calculated in 

14

 

	 	 	accordance with the provisions of Section 3.3 or 3.4, whichever is applicable,
as if the commencement date of such benefit were the Participant’s Normal Retirement Date,
payable in the form of payment described in Section 5.2.

	(c)	 	Upon the occurrence of a Change of Control of an Employer other than Parent that occurs on or
after the first anniversary of the Effective Date, a retirement benefit shall be payable to
(i) each Participant employed by that Employer immediately prior to the date upon which such
Change of Control occurs or (ii) each Participant who has incurred a Separation from Service
with that Employer and is entitled to a vested retirement benefit under Section 3.3 or a
Disability retirement benefit under Section 3.4, neither of which is in pay status as of the
date upon which such Change of Control occurs, and, in each such case, such retirement benefit
shall be in lieu of any other benefit under the preceding provisions of this Article III or
under Article IV. Such retirement benefit shall be calculated as if the Participant incurred
a Separation from Service as of the earlier of the date of such Change of Control or the date
of the Participant’s actual Separation from Service (or, in the case of a Participant
described in Section 3.4, as if the Participant recovered from his or her Disability as of the
earlier of the actual date of such recovery or the date of such Change of Control), shall be
paid in a lump sum upon the date of such Change of Control and shall be the Actuarial
Equivalent present value of the Participant’s monthly benefit calculated in accordance with
the provisions of Section 3.3 or 3.4, whichever is applicable, as if the commencement date of
such benefit were the Participant’s Normal Retirement Date, payable in the form of payment
described in Section 5.2.
	 
	(d)	 	To the extent permitted under Section 409A of the Code, the benefit of any Participant in pay
status as of the date of a Change of Control of Parent that occurs on or after the first
anniversary of the Effective Date shall be commuted

15

 

	 	 	and the Actuarial Equivalent present value
of such commuted benefit shall be paid to such Participant in a lump sum on the date of such
Change of Control.

	(e)	 	To the extent permitted under Section 409A of the Code, the benefit of any Participant who
has incurred a Separation from Service with an Employer other than Parent, which benefit is in
pay status as of the date of a Change of Control of that Employer that occurs on or after the
first anniversary of the Effective Date, shall be commuted and the Actuarial Equivalent
present value of such commuted benefit shall be paid to such Participant in a lump sum on the
date of such Change of Control.

16

 

ARTICLE IV

DEATH BENEFITS

	4.1	 	Pre-Retirement Death Benefits
	 
	(a)	 	This Section 4.1(a) shall apply only with respect to an individual who is a Participant as of
the Effective Date. If such a Participant dies prior to incurring a Separation from Service,
a pre-retirement death benefit will be payable to the Participant’s Beneficiary. The
pre-retirement death benefit payable pursuant to this Section 4.1(a) shall be an annual amount
equal to (i) the Participant’s Compensation, determined without regard to performance bonuses,
as in effect at his or her date of death, payable on the first day of the calendar month
following the month in which the Participant’s date of death occurs, and (ii) 50% of the
Participant’s Compensation, determined without regard to performance bonuses, as in effect at
his or her date of death, payable commencing on the first day of the calendar month following
the month in which the first anniversary of the Participant’s date of death occurs and ending
with the last annual payment on the first day of the calendar month following the later of (A)
the month in which the anniversary of the Participant’s date of death by which he or she would
have first attained age 64 occurs or (B) the month in which the ninth anniversary of the
Participant’s date of death occurs.
	 
	(b)	 	If a Participant who has completed five years of Service dies prior to commencement of his or
her payments under Article III, whether or not he or she has incurred a Separation from
Service prior to his or her date of death, a pre-retirement death benefit will be payable to
the Participant’s Beneficiary. The pre-retirement death benefit payable pursuant to this
paragraph shall be a monthly amount payable to, and during the life of, the Participant’s
Beneficiary and shall be based on the benefit that would have been payable to the

17

 

	 	 	Participant under Article III on his or her date of death, calculated in accordance with
(i) or (ii) below, as applicable, and (iii), if applicable:

	 	(i)	 	If the Participant’s death occurs prior to the earliest date on which he or
she would have been eligible to receive retirement benefits pursuant to Section 3.2,
3.3 or 3.4 (“Earliest Retirement Date”), the pre-retirement death benefit shall be
calculated as if the Participant had terminated employment on the earlier of his or
her Separation from Service or date of death, had survived until his or her Earliest
Retirement Date, had retired at that time and elected to have payments commence
immediately in the form of a 100 percent joint and survivor annuity, as described in
Section 5.3(a)(i), that is the Actuarial Equivalent of the monthly benefit that
otherwise would be payable pursuant to Section 5.2 and had died on the day after his
or her Earliest Retirement Date. Benefit payments under such annuity shall commence
on the date on which the Participant would have attained his or her Earliest
Retirement Date. Benefits commencing prior to the date that would have been the
Participant’s Normal Retirement Date shall be reduced for early commencement in
accordance with the provisions of Section 3.2(a).
	 
	 	(ii)	 	If the Participant’s death occurs on or after his or her Earliest Retirement
Date, the pre-retirement death benefit shall be calculated as if the Participant had
retired on the first day of the month coinciding with or immediately preceding the
earlier of his or her Separation from Service or date of death, with payments
commencing immediately in the form of a 100 percent joint and survivor annuity, as
described in Section 5.3(a)(i), that is the Actuarial Equivalent of the monthly
benefit that otherwise would be payable pursuant to Section 5.2 and had died on the
day after his or her retirement. Benefit payments under such annuity shall commence
on the first day of the calendar month following the

18

 

	 	 	 	month in which the Participant’s death occurs. Benefits commencing
prior to the date that would have been the Participant’s Normal Retirement Date
shall be reduced for early commencement in accordance with the provisions of
Section 3.2(a).

	 	(iii)	 	The pre-retirement death benefit payable pursuant to this Section 4.1(b) is
in addition to and not in substitution for the pre-retirement death benefit, if any,
payable pursuant to Section 4.1(a), provided that the amount of the pre-retirement
death benefit payable pursuant to this Section 4.1(b) shall be offset, but not below
zero, by the Actuarial Equivalent of the pre-retirement death benefit, if any, payable
pursuant to Section 4.1(a).

	(c)	 	To the extent that the Employer acquires an insurance policy in connection with the
liabilities assumed by it hereunder pursuant to the provisions of Section 7.1, the
pre-retirement death benefit payable pursuant to the provisions of this Section 4.1 shall be
provided by the Employer to the extent, if any, not provided by the proceeds of such insurance
policy. Any such insurance policy shall be issued to the Employer, which shall have and may
exercise all ownership rights in such policy that do not compromise or reduce the
pre-retirement death benefit payable to the Beneficiary. If a Participant dies while eligible
for an insured pre-retirement death benefit as described in this Section 4.1(c), the Employer
shall take such action as may be necessary to obtain payment from the insurer of the amounts
payable to the Beneficiary as provided herein.

19

 

ARTICLE V

PAYMENT OF RETIREMENT BENEFITS

	5.1	 	Payment of Benefits
	 
	 	 	A Participant’s monthly retirement benefit shall commence in accordance with the provisions
of Section 3.1, 3.2, 3.3 or 3.4, whichever is applicable, provided, however, that if the
Participant is a Key Employee on September 1 of the calendar year prior to the Plan Year in
which the Participant incurs a Separation from Service, the Participant’s monthly
retirement benefit under Article III may not commence to be paid prior to the date that is
the six-month anniversary of the Participant’s Separation from Service. Any Participant or
Beneficiary who is subject to delayed payments pursuant to this Section 5.1 shall receive a
lump sum cash payment in an amount equal to the payments such individual would have
otherwise received during the period of delay plus interest at the rate of 6% compounded
annually, and such payment shall be made on the first day following the expiration of the
delay period under this Section 5.1.
	 
	5.2	 	Automatic Form of Payment
	 
	 	 	If a Participant has not elected an optional form of payment as provided in Section 5.3,
the Participant’s retirement benefits shall be paid in monthly installments ending with the
last monthly payment before death.
	 
	5.3	 	Optional Forms of Payment
	 
	(a)	 	Any Participant may, by written notice received by the Plan Administrator during the election
period and pursuant to the procedures specified in Section

20

 

5.3(b), elect to receive the retirement benefits payable to him or her in a benefit form of
Actuarial Equivalent value, as provided in one of the options named below.

	 	(i)	 	Reduced monthly benefit payments during the life of the Participant,
continuing after the Participant’s death at the rate of 50 percent or 100 percent of
such reduced monthly payments, as the Participant elects, during the life of and to
the Beneficiary named by him or her when he or she elected the option.
	 
	 	(ii)	 	Reduced monthly benefit payments during the life of the Participant ending
with the last monthly payment before the Participant’s death, unless the Participant
has not received 120 monthly installments (the “period certain”). In the event of the
death of the Participant prior to the expiration of the period certain, payments shall
continue to be made to his or her Beneficiary until all guaranteed payments have been
made. If the Beneficiary also dies before the expiration of the period certain,
further monthly payments shall be made for the remainder of the period certain to the
alternate Beneficiary designated by the Participant. If there is no surviving
alternate Beneficiary to receive the remainder of any guaranteed payments, a single
sum payment that is the Actuarial Equivalent of the remaining guaranteed payments
shall be paid to the estate of the last surviving Beneficiary.
	 
	 	(iii)	 	Monthly cash installments over a period of 120 months, with no life
contingency. In the event of the death of the Participant prior to receiving 120
monthly payments, payments shall continue to be made to his or her Beneficiary until
all guaranteed payments have been made. If the Beneficiary also dies before all
guaranteed payments have been made, further monthly payments shall be made for the
remainder of the

21

 

	 	 	 	guaranteed period to the alternate Beneficiary designated by the Participant. If
there is no surviving alternate Beneficiary to receive the remainder of any
guaranteed payments, a single sum payment that is the Actuarial Equivalent of the
remaining guaranteed payments shall be paid to the estate of the last surviving
Beneficiary.
	 
	 	(iv)	 	Monthly benefit payments ending with the last monthly payment before the
Participant’s death.

	(b)	 	An election of a form of payment under paragraph (a) above may be made on the Appropriate
Form within 30 days of the effective date of participation described in Section 2.1 (or, with
respect to an individual who is a Participant on the Effective Date, within 30 days after the
date of adoption of the Plan by the Board of Directors). For purposes of applying the
procedures for changing an elected form of payment set forth in the remaining provisions of
this Section 5.3(b), a Participant who did not timely elect an optional form of payment as
provided in the preceding sentence shall be deemed to have elected the optional form of
payment described in Section 5.3(a)(iv). An election of an optional form of payment not made
within the time limit described in the first sentence of this Section 5.3(b) may be made on
the Appropriate Form within a reasonable period prior to the date on which monthly retirement
benefits are due to commence pursuant to Section 5.1, except that (i) the election of the
optional form described in Section 5.3(a)(iii) may not take effect until at least 12 months
after the date on which the election is made, (ii) the election of such optional form must be
made at least one year prior to the date on which monthly retirement benefits are due to
commence pursuant to Section 5.1, and (iii) payment pursuant to such optional form may not
commence for at least five years following the date on which monthly retirement benefits are
due to commence pursuant to Section 5.1. An election of an optional form of payment may be
revoked on the Appropriate Form and a new election made at any time

22

 

and any number of times during the applicable election period, provided that a revocation
of an optional form described in Section 5.3(a)(i), (ii) or (iv) and new election of the
optional form described in Section 5.3(a)(iii) is subject to the provisions of the
preceding sentence regarding timing and payment commencement and a revocation of the
optional form described in Section 5.3(a)(iii) and new election of an optional form
described in Section 5.3(a)(i), (ii) or (iv) is subject to the provisions of the preceding
sentence regarding timing and payment commencement as if the appropriate optional form
described in Section 5.3(a)(i), (ii) or (iv) were substituted for the optional form
described in Section 5.3(a)(iii). An election of an optional form of payment shall become
effective on the date payments commence and may not be changed or revoked thereafter.

An election of the optional form described in Section 5.3(a)(i) shall be deemed to be
revoked in the event the Beneficiary named under the option shall die prior to the date
payments commence and the Participant may make another election, subject to the conditions
required therefor. If a Participant who has elected an option shall die prior to the
effective date of his or her election, the option shall not become operative and the
provisions of Section 4.1 shall apply. A Participant may change the Beneficiary named in
his or her election at any time prior to the date distribution under the option actually
commences, or, in the case of the optional form described in Section 5.3(a)(ii), at any
time prior to the expiration of the period certain.

23

 

ARTICLE VI

ADMINISTRATION OF PLAN

	6.1	 	Plan Administrator
	 
	 	 	The general administration of the Plan and the responsibility for carrying out the
provisions of the Plan shall be delegated to the Plan Administrator. The Plan
Administrator shall be either an individual appointed by the Board of Directors, an office
or position of the Company whose occupant is to act in this capacity or a committee, as
determined from time to time by the Board of Directors.
	 
	6.2	 	Powers and Duties
	 
	 	 	The Plan Administrator shall have full charge of the administration of the Plan with all
powers necessary to enable it properly to carry out its duties. The Plan Administrator
shall have discretionary authority to determine eligibility and to grant or deny benefits,
including the right to make factual determinations in connection therewith and to make a
determination in its discretion as to the right of any person to a benefit under the Plan,
and shall have the exclusive right to construe and interpret the Plan and to decide any and
all matters arising thereunder or in connection with the administration of the Plan. The
decisions of the Plan Administrator will, to the extent permitted by law, be conclusive and
binding upon all persons having or claiming to have any right or interest in or under the
Plan.

24

 

	6.3	 	Rules and Regulations of the Plan Administrator
	 
	 	 	The Plan Administrator may promulgate such rules and regulations in connection with its
administration of the Plan as are consistent with the terms and provisions hereof.
	 
	6.4	 	Claims Procedure
	 
	(a)	 	Claim for Benefits
	 
	 	 	For purposes of the Plan, a claim for benefits is a written application for a benefit or
benefits filed with the Plan Administrator or its delegate. A Participant or Beneficiary
or either of their authorized representative who believes that he or she is entitled to
payments other than those initially determined to be payable (“claimant”) may file a claim
for benefits stating the nature of his or her claim, the facts supporting the claimant’s
claim, the amount claimed and the claimant’s name and current address.
	 
	(b)	 	Notice of Denial of Claim
	 
	 	 	In the event that the Plan Administrator determines that any claim for benefits should be
denied in whole or in part, the Plan Administrator shall, by written or electronic
communication, notify such claimant within a reasonable period of time but not later than
90 days after receipt of such claim that the claimant’s claim has been denied. Such
notification shall be written in a manner calculated to be understood by the claimant and
shall include:

	 	(i)	 	the specific reason or reasons for the denial,

25

 

	 	(ii)	 	specific references to the pertinent Plan provisions on which the denial is
based,
	 
	 	(iii)	 	a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or information
is necessary, and
	 
	 	(iv)	 	an explanation of how the claimant can obtain review of such denial,
including the Plan’s review procedures, the time limits applicable to such procedures,
and a statement of the claimant’s right to bring a civil action under Section 502(a)
of ERISA following an adverse benefit determination on review.

	(c)	 	Review of Claim Denial
	 
	 	 	Within 60 days after receipt by the claimant of notice of denial of claim, such claimant
may request, by mailing or delivery of written notice to the Plan Administrator, a review
by the Plan Administrator of the decision denying the claim. Unless the Plan Administrator
for good cause extends the 60-day period, if the claimant fails to request such a review
within such 60-day period, it shall be conclusively determined for all purposes of this
Plan that the denial of such claim by the Plan Administrator is correct. If a review is
requested, the claimant may submit written comments, documents, records and other
information relating to the claim for benefits. The claimant shall be provided, upon
request and free of charge, reasonable access to, and copies of, all documents, records,
and other information relevant to the claimant’s claim for benefits. Any such review shall
take into account all comments, documents, records, and other information submitted by the
claimant relating to the claim, without regard to whether such information was submitted or
considered in the initial benefit determination. After such review, the Plan Administrator
shall

26

 

within a reasonable period of time, but not later than 60 days after receipt of the
claimant’s request for review, determine whether such denial of the claim was correct and
shall notify such claimant by written or electronic communication of its determination. In
the case of an adverse determination on review, such notification shall be written in a
manner calculated to be understood by the claimant and shall include:

	 	(i)	 	the specific reason or reasons for the adverse determination,
	 
	 	(ii)	 	specific reference to the pertinent Plan provisions on which the decision is
based,
	 
	 	(iii)	 	a statement that the claimant is entitled to receive, upon request and free
of charge, reasonable access to, and copies of, all documents, records, and other
information relevant to the claimant’s claim for benefits, and
	 
	 	(iv)	 	a statement of the claimant’s right to bring an action under Section 502(a)
of ERISA.

	(d)	 	Extension for Special Circumstances
	 
	 	 	The 90-day and 60-day periods for the Plan Administrator’s review of a claim or a claim
denial as described in subsections (b) and (c) above, respectively, may be extended for as
much as a second 90-day or 60-day period, as the case may be, if the Plan Administrator
determines that special circumstances (such as the need to hold a hearing) require an
extension of time for processing the claim or request for review of claim denial, whichever
is applicable. If the Plan Administrator determines that an extension of time for
processing is required, written notice of the extension shall be furnished to the claimant
prior to the

27

 

termination of the initial period, indicating the special circumstances requiring such
extension of time and the date by which a final determination is expected.

	(e)	 	Electronic Communication
	 
	 	 	Any electronic communication provided under subsection (b) or (c), above, shall comply with
the standards imposed by Department of Labor Regulation Section 2520.104b-1(c)(1)(i), (iii)
and (iv).
	 
	(f)	 	Determination of Relevance
	 
	 	 	For purposes of subsection (c), above, a document, record or other information shall be
considered “relevant” to a claimant’s claim if such document, record, or other information

	 	(i)	 	was relied upon in making the benefit determination,
	 
	 	(ii)	 	was submitted, considered, or generated in the course of making the benefit
determination, without regard to whether such document, record, or other information
was relied upon in making the benefit determination, or
	 
	 	(iii)	 	was consistent with administrative processes and Plan document provisions
applicable in making the benefit determination.

	(g)	 	Exhaustion of Administrative Remedies
	 
	 	 	No claimant shall be entitled to challenge the Plan Administrator’s denial of benefits or
determination on review in judicial or administrative proceedings without first complying
with the procedures in this Section 6.4. The Plan

28

 

Administrator’s determinations made pursuant to this Section 6.4 are intended to be binding
and conclusive on claimants.

29

 

ARTICLE VII

GENERAL MATTERS

	7.1	 	Benefits from General Assets
	 
	 	 	Benefits under the Plan will be paid from the general assets of the Employer. In the event that the Employer
 shall decide to establish an advance accrual reserve on its books against the future expense of benefit payments or
 contributions, or establish a “grantor trust” within the meaning of Sections 671 through 679 of the Code,
 such reserve or grantor trust shall not under any circumstances be deemed to be an asset of the Plan but at all times
 shall remain a part of the general assets of the Employer, subject to claims of the Employer’s creditors.

	 
	 	 	Neither a Participant nor his or her Beneficiary will have any interest in any specific asset of the Employer as a
 result of the Plan. Any insurance policy that may be acquired by the Employer in connection with the liabilities
 assumed by it hereunder shall not be deemed to be held under any trust for the benefit of a Participant or his
 or her Beneficiary or to be security for the performance of the obligations of the Employer, but shall be, and
remain, a general, unpledged, unrestricted asset of the Employer.
	 
	7.2	 	No Assignment
	 
	 	 	Benefits payable under the Plan will not be subject to assignment, transfer, sale, pledge,
encumbrance, alienation or charge by a Participant, surviving spouse, contingent annuitant or
Beneficiary, nor may any such benefits be taken, either voluntarily or involuntarily for
the satisfaction of the debts of, or other obligations or claims against, such person or entity,
including claims for

30

 

	 	 	  alimony, support, separate maintenance and claims in bankruptcy proceedings.

	7.3	 	Expenses of Plan
	 
	 	 	All expenses of the Plan will be paid by the Employer.
	 
	7.4	 	Amendment or Termination
	 
	 	 	The Plan may be amended or terminated at any time by the Board of
Directors; provided, however, that, to the extent required by Section
409A of the Code, the Plan may not be amended or terminated in a
manner that would give rise to an impermissible acceleration of the
time or form of a payment of a benefit under the Plan pursuant to
Section 409A(a)(3) of the Code and any regulations or guidance issued
thereunder. Further, no amendment or termination of the Plan may have
a material adverse impact upon the accrued benefits of anyone
participating in the Plan as of the amendment or termination date,
unless he or she consents to such amendment in writing; provided,
however, that if the Board of Directors determines that the terms of
the Plan do not, in whole or in part, satisfy the requirements of
Section 409A of the Code, then the Board of Directors may, in its sole
discretion, amend the Plan without obtaining any such consent in such
manner as the Board of Directors deems appropriate to comply with
Section 409A of the Code and any regulations or guidance issued
thereunder.
	 
	7.5	 	Limitation on Benefits and Payments
	 
	 	 	A person entitled to benefits under the Plan shall have a claim upon
his or her Employer only to the extent of the monthly payments, if
any, due up to and including the then current month and shall not have
a claim against the

31

 

	 	 	Employer for any subsequent monthly payment unless and until such payment shall become due
and payable. Notwithstanding any provision of the Plan to the contrary, the right of a
Participant or the Participant’s Beneficiary to receive retirement benefits otherwise
payable hereunder shall cease upon the discharge of the Participant from employment with
the Employer for acts that constitute fraud, embezzlement, or dishonesty.
	 
	7.6	 	Time of Payment Obligations
	 
	 	 	Any obligation hereunder to make a payment on a specified date shall
be deemed to have been satisfied in the event that such payment is
made within (i) ten days of such specified date if the payment is due
pursuant to Section 3.5 or (ii) 60 days after such specified date if
the payment is due pursuant to any other provision of the Plan.
	 
	7.7	 	Limitation of Liability
	 
	 	 	The Plan Administrator shall not be liable for any act or omission on
its part, excepting only its own willful misconduct or gross
negligence or except as otherwise expressly provided by applicable
law. To the extent permitted by applicable law and not otherwise
covered by insurance, the Employer shall indemnify and save harmless
the Plan Administrator against any and all claims, demands, suits or
proceedings in connection with the Plan that may be brought by
Participants or their Beneficiaries, or by any other person,
corporation, entity, government or agency thereof; provided, however,
that such indemnification shall not apply with respect to acts or
omissions of willful misconduct or gross negligence. The Board of
Directors, at the expense of the Employer, may settle any such claim
or demand asserted or suit or proceeding brought against the Plan
Administrator when such settlement appears to be in the best interest
of the Employer.

32

 

	7.8	 	Agent for Service of Process
	 
	 	 	The Plan Administrator or such other person as may from time to time
be designated by the Plan Administrator shall be the agent for
service of process under the Plan.
	 
	7.9	 	Delivery of Elections to Plan Administrator
	 
	 	 	All elections, designation, requests, notices, instructions and other
communications required or permitted under the Plan from the
Employer, a Participant, Beneficiary or other person to the Plan
Administrator shall be on the Appropriate Form, shall be mailed by
first-class mail or delivered to such address as shall be specified
by the Plan Administrator, and shall be deemed to have been given or
delivered only upon actual receipt thereof by the Plan Administrator
at such location.
	 
	7.10	 	Delivery of Notice to Participants
	 
	 	 	All notices, statements, reports and other communications required or
permitted under the Plan from the Employer or the Plan Administrator
to any officer, Participant, Beneficiary or other person shall be
deemed to have been duly given when delivered to, or when mailed by
first-class mail, postage prepaid, and addressed to such person at
the address last appearing on the records of the Plan Administrator.
	 
	7.11	 	No Enlargement of Employee Rights
	 
	 	 	No Participant shall have any right to receive retirement benefits
under the Plan except in accordance with the terms of the Plan.
Establishment of the

33

 

	 	 	Plan shall not be construed to give any Participant the right to be retained in the service
of the Company or any Employer.

	7.12	 	Tax Withholding
	 
	 	 	The Employer shall withhold from Participants’ retirement benefits any taxes required to be
withheld under federal, state, or local law. Each Participant shall bear the ultimate
responsibility for payment of all taxes owed under this Plan.
	 
	7.13	 	Incapacity of Recipient
	 
	 	 	If any person entitled to a distribution under the Plan is deemed by
the Plan Administrator to be incapable of personally receiving and
giving a valid receipt for such payment, then, unless and until claim
therefor shall have been made by a duly appointed guardian or other
legal representative of such person, the Plan Administrator may
provide for such payment or any part thereof to be made to any other
person or institution then contributing toward or providing for the
care and maintenance of such person. Any such payment shall be a
payment for the account of such person and a complete discharge of
any liability of the Employer, the Plan Administrator and the Plan
therefor.
	 
	7.14	 	Unclaimed Benefit
	 
	 	 	In the event that all, or any portion, of the retirement benefits
payable to a Participant or Beneficiary hereunder shall, at the
expiration of five years after it shall become payable, remain unpaid
solely by reason of the inability of the Employer or the Plan
Administrator, after sending a registered letter, return receipt
requested, to the last known address, and after further diligent
effort,

34

 

	 	 	to ascertain the whereabouts of such Participant or Beneficiary, the amount so
distributable shall be treated as a forfeiture and shall be retained by the Employer as
part of its general assets.

35

 

ARTICLE VIII

CONSTRUCTION OF THE PLAN

	8.1	 	Construction of the Plan
	 
	 	 	The Plan is intended to constitute an arrangement that is unfunded and
maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees, within the meaning of ERISA. The provisions of the Plan
shall be construed, regulated and administered according to the laws
of the State of Tennessee, other than with respect to choice of law
and except to the extent preempted by federal law.
	 
	8.2	 	Headings
	 
	 	 	The headings in this document and in the table of contents prefixed
hereto are inserted only as a matter of convenience and for reference
and in no way define, limit, enlarge or describe the scope of intent
of the Plan and shall in no way affect the Plan or the construction of
any provisions thereof.
	 
	8.3	 	Separability
	 
	 	 	If any provision of the Plan is held invalid or unenforceable, its
invalidity or unenforceability shall not affect any other provisions
of the Plan.
	 
	8.4	 	Counterparts
	 
	 	 	This Plan has been established by the Company in accordance with the
resolutions adopted by the Board of Directors and may be executed in
any number of counterparts, each of which shall be deemed to be an
original. All the counterparts shall constitute one instrument, which
may be sufficiently evidenced by any one counterpart.

36

 

IN WITNESS WHEREOF, and as evidence of the adoption of the Plan by Doane Pet Care Company, the
undersigned officer duly authorized has appended his or her signature this       day
of March, 2006.

	 	 	 	 	 
	ATTEST:	 	DOANE PET CARE COMPANY
	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 

37

 

APPENDIX A

COMPENSATION (OTHER THAN PERFORMANCE BONUSES)

OF CERTAIN PARTICIPANTS AS IN EFFECT IMMEDIATELY

PRECEDING THE EFFECTIVE DATE

	 	 	 	 	 
	Participant Name	 	Compensation Amount*
	Douglas J. Cahill
	 	$	450,000	 
	Philip K. Woodlief
	 	$	275,000	 
	David L. Horton
	 	$	275,000	 
	Joseph J. Meyers
	 	$	250,000	 
	Kenneth H. Koch
	 	$	250,000	 

 

			
	* Compensation, determined without regard to performance bonuses, as in effect on the day
immediately preceding the Effective Date.

38

 

APPENDIX B

REDUCTION FACTORS UNDER SECTION 3.2(b)

	 	 	 	 	 
	Commencement Age	 	Reduction Factor
	65
	 	 	100	%
	64
	 	 	94.3	%
	63
	 	 	89.0	%
	62
	 	 	84.0	%
	61
	 	 	79.2	%
	60
	 	 	74.7	%
	59
	 	 	70.5	%
	58
	 	 	66.5	%
	57
	 	 	62.7	%
	56
	 	 	59.2	%
	55
	 	 	55.8	%

The reduction factors described above shall be applied proportionately to the nearest monthly
interval.

39

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