UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrantx   Filed by a Party other than the Registrant¨

Check the appropriate box:

The Hershey Company

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

The Hershey Company

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

By order of the Board of Directors,

Burton H. SnyderLeslie M. Turner

Senior Vice President,

General Counsel and Secretary

March 22, 201019, 2013

Your vote is important. Instructions on how to vote are contained in our proxy statement and in the Notice of Internet Availability of Proxy Materials. Please cast your vote by telephone or over the Internet as described in those materials. Alternatively, if you requested a copy of the proxy/voting instruction card by mail, you may mark, sign, date and return the proxy/voting instruction card in the envelope provided.

The Hershey Company

100 Crystal A Drive

Hershey, Pennsylvania 17033

March 22, 201019, 2013

PROXY STATEMENT

For the Annual Meeting of Stockholders

To Be Held on May 4, 2010April 30, 2013

The Board of Directors of The Hershey Company, a Delaware corporation, is furnishing this proxy statement to you in connection with the solicitation of proxies for our 20102013 annual meeting of stockholders. The meeting will be held on May 4, 2010,April 30, 2013, at 10:00 a.m. Eastern Daylight Time, or EDT, at GIANT Center, 550 West Hersheypark Drive, Hershey, Pennsylvania 17033. Valid proxies received in connection with the annual meeting may be voted at the annual meeting and at any adjournments or postponements of that meeting.

Important Notice Regarding the Availability of Proxy Materials for the

20102013 Annual Meeting of Stockholders to be held on May 4, 2010April 30, 2013

Our notice of annual meeting and proxy statement, annual report to stockholders, electronic proxy card and other annual meeting materials are available on the Internet at www.proxyvote.com.www.proxyvote.com. We intend to begin mailing our Notice of Internet Availability of Proxy Materials to stockholders on or about March 22, 2010.19, 2013. At that time, we also will begin mailing paper copies of our proxy materials to stockholders who requested them. Please see page 2 of this proxy statement for more information on how these materials will be distributed.

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Annual Meeting Information

What is a proxy statement and why is it important?

We hold a meeting of stockholders annually. This year’s meeting will be held on May 4, 2010.April 30, 2013. There will be certain items of business that must be voted on by our stockholders at the meeting, and our Board of Directors is seeking your proxy to vote on these items. This proxy statement contains important information about The Hershey Company and the matters that will be voted on at the meeting. Please read these materials carefully so that you have the information you need to make informed decisions. Throughout this proxy statement, we will refer to ourselves as “The Hershey Company,” “Hershey,” “we,” “our” or the “Company.”

How are proxy solicitation and other required annual meeting materials distributed?

The Securities and Exchange Commission, or SEC, has adopted rules that allow us to mail a notice to our stockholders advising that our proxy statement, annual report to stockholders, electronic proxy card and related materials are available for viewing, free of charge, on the Internet. Stockholders may then access these materials and vote over the Internet or request delivery of a full set of materials by mail or email. We have elected to utilize this process for the 20102013 annual meeting. We intend to begin mailing the required notice, called Notice of Internet Availability of Proxy Materials, or Notice, to stockholders on or about March 22, 2010.19, 2013. The proxy materials will be posted on the Internet, atwww.proxyvote.com, no later than the day we begin mailing the Notice. If you receive a Notice, you will not receive a paper or email copy of the proxy materials unless you request one in the manner set forth in the Notice.

The Notice of Internet Availability of Proxy Materials contains important information, including:

These rules give us the opportunity to serve you more efficiently by making the proxy materials available quickly online and reducing costs associated with printing and postage.

What is a proxy?

A proxy is your legal designation of another person to vote the stock that you own. The person you designate to vote your shares is also called a proxy. We have provided an electronic proxy card atwww.proxyvote.com that you will use to vote your shares online or by telephone. If you requested a paper copy of our proxy materials, you also can vote using the proxy card enclosed with those materials. On our proxy card, you will find the names of the persons designated by the Company to act as proxies to vote your shares at the annual meeting. When you submit a valid proxy, the people named on the proxy card as proxies are required to vote your shares at the annual meeting in the manner you have instructed. Please turn to page 4 for more information about voting your shares.

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What is the record date and why is it important?

The record date is the date used by our Board of Directors to determine which stockholders of the Company are entitled to receive notice of, and vote on the items presented at, the annual meeting. Our Board established March 8, 20104, 2013, as the record date for the 20102013 annual meeting.

What is the difference between a registered stockholder and a stockholder who owns stock in street name?

If you hold shares of Hershey stock directly in your name, you are a registered stockholder. If you own your Hershey shares indirectly through a broker, bank or other holder of record, those shares are held in street name.

How do I gain admission to the annual meeting?

If you owned Hershey stock on the record date, you may attend the annual meeting. If you are aregistered stockholder, you must bring with you the Notice of Internet Availability of Proxy Materials and a government-issued photo identification (such as a valid driver’s license or passport) to gain admission to the meeting. If you did not receive a Notice because you elected to receive a paper copy of the proxy materials, please bring the admission ticket printed on the top half of the proxy card supplied with those materials, together with your government-issued photo identification, to gain admission to the meeting. If you receive your proxy materials by email, please call our Investor Relations Department at (800) 539-0261 and request an admission ticket for the meeting.

If you hold your shares are held instreet name and you want to gain admission toattend the meeting,, you must bring your government-issued photo identification, together with:

What will occur at the annual meeting?

Following opening remarks, stockholders will be offered an opportunity to submit completed voting ballots on the proposals to be presented at this year’s meeting. Following the vote, we will provide an update on our business followed by an opportunity for stockholders to ask questions. Finally, we will provide a preliminary report on the votes cast for each of the proposals presented at the meeting.

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What proposals will I be voting on, and how does the Board of Directors recommend I vote?

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What other matters might arise at the meeting?

We are not aware of any other matters that will be brought before the stockholders at the annual meeting. Except under very limited circumstances, stockholder proposals and nominations for director had to be submitted to us in advance and meet certain requirements in order to be eligible for consideration at the meeting. We described those requirements in our 20092012 proxy statement. If any other item of business is properly presented for a vote at the annual meeting, the proxies will vote validly-executed proxies returned to us in accordance with their best judgment. Procedures for submitting stockholder proposals and nominations for director for the 20112014 annual meeting are described beginning on page 87.

Voting Information

Does Hershey have more than one class of stock outstanding?

We have two classes of stock outstanding, Common Stock and Class B Common Stock. As of the record date for the annual meeting, there were 166,182,457162,966,507 shares of Common Stock outstanding and 60,708,90860,628,737 shares of Class B Common Stock outstanding. All of the outstanding shares of Common Stock and Class B Common Stock are entitled to be voted at the meeting.

What are the voting rights of each class of stock?

You may cast one vote for each share of Common Stock that you held as of the close of business on the record date. You may cast ten votes for each share of Class B Common Stock that you held as of the close of business on the record date.

What is a quorum and why is it important?

A quorum is the minimum number of votes requiredentitled to be cast that must be present, either in person or by proxy, at the annual meeting in order to conduct business.business at the annual meeting. Votes will be deemed to be “present” at the meeting if a stockholder of record:

In

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On most instances,matters, the votes of the holders of the Common Stock and Class B Common Stock voteare counted together. However, there are some matters that must be voted on only by the holders of one class of stock. We will have a quorum for all matters to be voted uponon at the annual meeting if the following number of votes is present, in person or by proxy:

It is possible that we could have a quorum for certain items of business to be voted on at the annual meeting and not have a quorum for other matters. If that occurs, we will proceed with a vote only on the matters for which a quorum is present.

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Abstentions are counted as being present and entitled to vote in determining whether a quorum is present. Shares as to which "broker non-votes"“broker non-votes” exist will be counted as present and entitled to vote in determining whether a quorum is present for any matter requiring the vote of the Common Stock and Class B Common Stock voting together as a class, but will not be counted as present and entitled to vote in determining whether a quorum is present for any matter requiring the vote of the Common Stock or Class B Common Stock voting separately as a class. A “broker non-vote” occurs when a nominee, such as a broker, bank or other holder of record, holding shares for astreet nameowner, cannot vote on a particular proposal because the nominee does not have discretionary voting power for that particular matter and has not received instructions on how to vote from thestreet nameowner.

What vote is required to approve each proposal?

Proposal No. 1: Election of Directors. EightTen directors are to be elected at our annual meeting. As required by our certificate of incorporation and by-laws:

You can cast your vote “FOR” any or all of the director nominees named on the proxy card or “WITHHOLD” your vote on any or all of the nominees. Please refer to the voter website,www.proxyvote.com, for voting instructions. If you requested a paper copy of the proxy materials, voting instructions are also contained on the proxy card enclosed with those materials.

Directors will be elected byplurality. That means the nominees who receive the greatest number of properly cast “FOR” votes will be elected.

David L. Shedlarz hasRobert M. Malcolm and Anthony J. Palmer have been nominated by the Board for election by the holders of our Common Stock voting separately at the 20102013 annual meeting. The other director nominees have been nominated for election by the holders of our Common Stock and Class B Common Stock voting together. Please go to page 2827 for more information about Proposal No. 1.

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Proposal No. 2.Nos. 2 and 3. HoldersEach of Proposal Nos. 2 and 3 will be approved if the holders of record of our Common Stock and Class B Common Stock representing a majority of the votes present (in person or by proxy) and entitled to vote at the annual meeting will approve Proposal No. 2 if they cast more votesvote in favor of the proposal than against theeach proposal. We have provided additional information about Proposal No. 2these proposals in this proxy statement.

How can I vote my shares before the meeting?

You mayIf you are aregistered stockholder, there are three ways to vote your shares priorbefore the meeting:

If your shares are held instreet name, your broker, bank or other holder of record may provide you with a Notice of Internet Availability of Proxy Materials. Follow the instructions on the Notice to access our proxy materials and vote online or to request a paper or email copy of our proxy materials. If you received these materials in paper form, the meeting by following thematerials included a voting instruction card so you can instruct your broker, bank or other holder of record how to vote your shares.

Further instructions on how to vote your shares are provided on the Notice of Internet Availability of Proxy Materials, this proxy statement and the voter website, www.proxyvote.com.www.proxyvote.com and elsewhere in this proxy statement. If you requested a paper copy of the proxy materials, voting instructions also are also contained on the proxy card enclosed with those materials.

By Internet (www.proxyvote.com): Use the Internet to transmit your voting instructions until 11:59 p.m. EDT on May 3, 2010. Have your Notice of Internet Availability of Proxy Materials with you when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.

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By telephone (800-690-6903): Submit your vote by telephone until 11:59 p.m. EDT on May 3, 2010. Have your Notice of Internet Availability of Proxy Materials or proxy card in hand when you call and then follow the instructions you receive from the telephone voting site.

By mail: If you requested a paper copy of the proxy materials, mark, sign and date the proxy card enclosed with those materials and return it in the postage-paid envelope we have provided. To be valid, proxy cards must be received before the start of the annual meeting. Proxy cards should be returned to The Hershey Company, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717.

Can I vote at the meeting?

If you are aregistered stockholder, you can vote at the meeting any shares that were registered in your name as the stockholder of record as of the record date.

If your shares are held instreet name, you are not a holder of record of those shares and cannot vote them at the annual meeting unless you have a legal proxy from the holder of record. If you plan to attend and vote your street-name shares at the annual meeting, you should request a legal proxy from your broker, bank or other holder of record and bring it with you to the meeting.

If you plan to vote at the meeting, please pick up a ballot at the registration tabledesignated voting booth upon your arrival. You may then either deposit your ballot in any of the designated votingballot boxes located inside the meeting room before the meeting begins or submit your ballot to a meeting usher at the time designated during the meeting.Ballots will not be distributed during the meeting. Shares may not be voted after the polls close.

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Whether or not you plan to attend the meeting, we strongly encourage you to vote by proxy prior to the meeting.

Can I revoke my proxy or change my voting instructions once submitted?

If you are aregistered stockholder, you can revoke your proxy and change your vote prior to the annual meeting by:

If your shares are held instreet name, you should contact your broker, bank or other holder of record about revoking your voting instructions and changing your vote prior to the meeting.

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If you are eligible to vote at the annual meeting, you also can revoke your proxy or voting instructions and change your vote at the annual meeting by submitting a written ballot before the polls close.

What will happen if I providesubmit my proxy but do not vote on a proposal?

You should provide voting instructions for all proposals appearing on the proxy/voting instruction card. The persons named as proxies on the proxy card will vote your shares according to your instructions. However, ifIf you submit a valid proxy but fail to provide instructions on how you want your shares to be voted, properly submitted proxies will be voted:

If any other item is properly presented for a vote at the meeting, the shares represented by your properly submitted proxy will be voted byat the proxies using their own best judgment.discretion of the proxies.

What will happen if I do not provideneither submit my proxy ornor vote my shares in person at the annual meeting?

If you are aregistered stockholder, your shares will not be voted.

If your shares are held instreet name, your broker, bank or other holder of record might be authorized tomay vote your shares on certain “routine” matters. The ratification of independent auditors is currently considered to be a routine matter. On this matter, your broker, bank or nomineeother holder of record can:

The election of directors isother matters you are being asked to vote on are not routine and cannot be voted by your broker, bank or other holder of record without your instructions. When a broker, bank or nomineeother holder of record is unable to vote shares for this reason, it is called a “broker non-vote.”

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Are abstentions and broker non-votes counted in the vote totals?

When a stockholder abstains from votingIf you mark or vote “abstain” on any proposal (other than the election of directors),either Proposal No. 2 or 3, the abstention iswill have the effect of being counted as a vote “AGAINST” the proposal. Broker non-votes with respect to Proposal Nos. 1, 2 and 3 are not included in vote totals and will not affect the outcome of the vote.vote on those proposals.

How do I vote if I am a participant in one of the Company’s 401(k) Plans?

If you are a participant in either The Hershey Company 401(k) Plan or The Hershey Company Puerto Rico 401(k) Plan, and you meet the vesting requirements of the plan, you may have certain voting rights regarding shares of our Common Stock credited to your account in the plan. You do not own these shares. They are owned by the plan trustee.

The plan provides you with voting rights based on the number of shares of Hershey Common Stock that were constructively invested in your plan account as of the close of business on the record date. We originally contributed these shares to the plan on your behalf as matching or supplemental retirement contributions. You may vote these shares in much the same way as

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registered stockholders vote their shares, but you have an earlier deadline. Your vote must be received by the plan trustee by 11:59 p.m. EDT on April 29, 2010.25, 2013. You may vote these shares by following the instructions provided on the Notice of Internet Availability of Proxy Materials and on the voter website, www.proxyvote.com.www.proxyvote.com. If you requested a paper copy of the proxy materials, you also may vote by mail by signing, dating and returning the proxy/voting instruction card included with those materials.

By submitting voting instructions, you will direct the plan trustee:

The plan trustee will submit one proxy to vote all shares of Common Stock in the plan. The trustee will vote the shares of participants submitting voting instructions in accordance with their instructions and will vote the remaining shares of Common Stock in the plan in the same proportion as the final votes of all participants who actually voted. Please note that, if you do not submit voting instructions for the shares of Common Stock in your account by the voting deadline, those shares will be included with the other undirected shares and voted by the trustee as described above. Because the trustee submits one proxy to vote all shares of Common Stock in the plan, you may not vote plan shares in person at the annual meeting.

How do I vote my shares in the Company’s Automatic Dividend Reinvestment Service Plan?

BNY Mellon Shareowner Services,Computershare, our transfer agent, has arranged for any shares that you hold in the Automatic Dividend Reinvestment Service Plan to be included in the total registered shares of Common Stock shown on the Notice of Internet Availability of Proxy Materials or proxy card we have provided you. By voting these shares, you also will also be voting your shares in the Automatic Dividend Reinvestment Service Plan.

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Additional Information about the Annual Meeting

Who will pay the cost of soliciting votes for the annual meeting?

We will pay the cost of preparing, assembling and furnishing proxy solicitation and other required annual meeting materials. We do not use a third-party solicitor. It is possible that our directors, officers and employees might solicit proxies by mail, telephone, telefax, electronically over the Internet or by personal contact, without receiving additional compensation. We will reimburse brokers, banks and other nominees, fiduciaries and custodians who nominally hold shares of our stock as of the record date for the reasonable costs they incur furnishing proxy solicitation and other required annual meeting materials to street-name holders who beneficially own those shares on the record date.

What is householding?

The SEC has adopted rules that allow us to send in a single envelope our Notice of Internet Availability of Proxy Materials or a single copy of our proxy solicitation and other required annual meeting materials to two or more stockholders sharing the same address. We may do this only if the stockholders at that address share the same last name or if we reasonably believe that the stockholders are members of the same family. If we are sending a Notice, the envelope must contain a separate Notice for each stockholder at the shared address. Each Notice must also

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contain a unique control number that each stockholder will use to gain access to our proxy materials and vote online. If we are mailing a paper copy of our proxy materials, the rules require us to send each stockholder at the shared address a separate proxy card.

We believe this rule is beneficial to both our stockholders and to us. Our printing and postage costs are lowered anytime we eliminate duplicate mailings to the same household. However, stockholders at a shared address may revoke their consent to the householding program and receive their Notice in a separate envelope, or, if they have elected to receive a full copy of our proxy materials in the mail, receive a separate copy of these materials. If you have elected to receive paper copies of our proxy materials and want to receive a separate copy of these materials for our 20102013 annual meeting, please call our Investor Relations Department, toll free, at (800) 539-0261. If you consented to the householding program and wish to revoke your consent for future years, simply call, toll free, (800) 542-1061, or write to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.

What does it mean if I received more than one Notice or proxy card?

You probably have multiple accounts with us and/or brokers, banks or other nominees.holders of record. You should vote all of the shares represented by these Notices/proxy cards. Certain brokers, banks and nomineesother holders of record have procedures in place to discontinue duplicate mailings upon a stockholder’s request. You should contact your broker, bank or nomineeother holder of record for more information. Additionally, our transfer agent, BNY Mellon Shareowner Services,Computershare, can assist you if you want to consolidate multiple registered accounts existing in your name. To contact our transfer agent, write to BNY Mellon Shareowner Services, 480 Washington Boulevard, Jersey City, New Jersey 07310-1900,Computershare, P.O. Box 43006, Providence, Rhode Island 02940-3006; or for overnight delivery, to Computershare, 250 Royall Street, Canton, Massachusetts 02021-1011; or call:

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Will you publish the results of voting?

Preliminary results of voting will be announced at the annual meeting. We also will publish voting results in a current report on Form 8-K that we will file with the SEC within four business days following the meeting, with the day the meeting ends counted as the first day.meeting. If on the date of this filing the Inspector of Elections for the annual meeting has not yet certified the voting results as final on the day we file the Form 8-K, we will note in the filing that the results are preliminary and publish the final results in a subsequent Form 8-K filing within four business days after the final voting results are known. The final results also will be posted in the Investor Relations“Investors” section of the Company’s website, www.hersheys.com,www.thehersheycompany.com, as soon as they are certified by the Inspector of Elections for the annual meeting. To find the voting results on our website, select “Investor Relations,” then select the “Voting Results” tab located along the left-hand column of the page. Questions also may be directed to our Investor Relations Department at (800) 539-0261.

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GOVERNANCE OF THE COMPANY

What is corporate governance?

Corporate governance is the process by which companies govern themselves.

At The Hershey Company, day-to-day business activities are carried out by our employees under the direction and supervision of our Chief Executive Officer, or CEO. The Board of Directors

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oversees these activities. In doing so, each director is required to use his or her business judgment in the best interests of the Company. The Board’s responsibilities include:

What principles has the Board established with respect to corporate governance?

The general principles governing the functions of our Board and its committees are contained in the following documents:

You can view the Corporate Governance Guidelines, committee charters and Code of Ethical Business Conduct in the Investor RelationsInvestors section of our website, www.hersheys.com. Once you are in the Investor Relations section, look for the heading “Corporate Governance” in the right-hand column of the page and select the appropriate subheading.www.thehersheycompany.com. We will post amendments to any of these documents on our website as soon as possible after the effective date of the amendment. If any amendment or waiver of the Code of Ethical Business Conduct applies to directors or executive officers, our posting will appear within four business days of the amendment or waiver.

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What is the composition of the Board and how often are members elected?

There currently are seventen members of the Board. Each member’s term will expire at the annual meeting. As discussed in greater detail beginning on page 28,27, the Board is recommending that

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you reelect each of these seventen members for an additional one-year term and elect one new member for an initial one-year term at the annual meeting.

Which directors are independent, and how does the Board make that determination?

The Board determines which of our directors are independent. For a director to be considered independent under the listing standards of the New York Stock Exchange, the Board must affirmatively determine that the director has no direct or indirect material relationship with The Hershey Company. The Board has adopted categorical standards for independence that the Board uses whenin determining which directors are independent. Rather than have one set of standards for Board members as a whole and additional standards for Audit Committee members, as permitted by the New York Stock Exchange, the Board bases its determination of independence for all directors on the more stringent standards applicable to Audit Committee members. These standards are contained in our Corporate Governance Guidelines. You can review these standards by turning to page A-2Guidelines, which are available for viewing in the Investors section of Appendix A.our website,www.thehersheycompany.com.

Applying the categorical standards for independence, the listing standards of the New York Stock Exchange and rules of the SEC, the Board determined that the following directors recommended for election at the annual meeting are independent: Pamela M. Arway, Robert F. Cavanaugh, Charles A. Davis, Robert M. Malcolm, James M. Mead, James E. Nevels, Anthony J. Palmer, Thomas J. Ridge and David L. Shedlarz and LeRoy S. Zimmerman. The Board also determined that Arnold G. Langbo and Charles B. Strauss, directors who resigned from the Board on August 10, 2009, and Kenneth L. Wolfe, our former non-executive Chairman of the Board who resigned from the Board on February 16, 2009, were independent during the periods of their respective service in 2009.Shedlarz. The Board determined that David J. West,John P. Bilbrey, President and Chief Executive Officer of The Hershey Company, is not independent because he is an executive officer of the Company.

The Board determinedAlthough there were no transactions, relationships or arrangements of the type or category described under the categorical standards that Ms. Arway and Mr. Ridge have no relationship withwould disqualify any of the Companydirectors, other than their relationship as director, director nominee and stockholder.Mr. Bilbrey, from being independent, in making its independence determinations with respect to Messrs. Cavanaugh, Davis,Mead and Nevels, Shedlarz and Zimmerman have certain relationships with the Company, in addition to being directors and stockholders, that the Board considered but determined ultimately not to be material. Messrs. Strauss and Wolfe also had certain immaterial relationships with the Company during the time they were directors. Mr. Langbo had no relationship with the Company other than his relationshipeach of their roles as a director and stockholder during the time he was a director in 2009.

Robert F. Cavanaugh, James E. Nevels and LeRoy S. Zimmerman.  Messrs. Cavanaugh, Nevels and Zimmerman are independent members of the board of directors of Hershey Trust Company and the board of managers (governing body) of Milton Hershey School. Mr. Cavanaugh was initially recommendedSchool and certain transactions the Company had or may have with these entities.

Hershey Trust Company, as trustee for nomination to our Boardthe trust established by theMilton S. and Catherine S. Hershey that has as its sole beneficiary Milton Hershey School, is our controlling stockholder. Throughout this proxy statement, as the context permits, we refer to Hershey Trust Company, in 2003. Messrs. Nevels and Zimmerman were initially elected toits capacity as trustee for the Board on November 11, 2007 by thebenefit of Milton Hershey School, Trust acting by written consent. Our Board elected Mr. Nevelsas the non-executive Chairman of the Board on February 16, 2009. None of these individuals receive any compensation from The Hershey Company, from Hershey Trust Company or from Milton“Milton Hershey School other than compensation they receive in the ordinary course as board members of each of those entities. We do not expect these individuals to receive other forms of compensation from these entities in 2010. Hershey Trust Company and the Milton Hershey School Trust are stockholders of the Company whose holdings are described in greater detail beginning on page 41 of this proxy statement. Under SEC rules,Trust.” Hershey Trust Company, the Milton Hershey School Trust and companies controlledowned by the Milton Hershey School Trust are considered affiliates of the Company.Company under SEC rules. During 2009,2012, we had a number of transactions with the Milton Hershey

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School Trust and companies owned by the Milton Hershey School Trust involving the purchase and sale of goods and services in the ordinary course of business. We also leased a facility frombusiness and the Milton Hershey School Trust in 2009. Messrs. Cavanaugh, Nevels and Zimmerman did not participate in Board decisions in connection with these transactions.leasing of real estate at market rates. We have outlined these transactions and transactions we contemplate for 2010 in greater detail in the section entitled “Certain Transactions and Relationships,” beginning on page 84 of this proxy statement. We have provided information about Company stock owned by the Milton Hershey School Trust and by Hershey Trust Company as investments beginning on page 37.

Charles A. Davis.  Mr. Davis is a director of AXIS Capital Holdings Limited. During 2009, AXIS Capital Holdings Limited provided a portion of our directors’

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Messrs. Cavanaugh, Mead and officers’ liability insurance and fiduciary liability insurance coverage. This insurance coverage was purchasedNevels do not receive any compensation from The Hershey Company, from Hershey Trust Company or from Milton Hershey School other than compensation they receive or will receive in the ordinary course as board members of our business at market rates. Weeach of those entities. In addition, Messrs. Cavanaugh, Mead and Nevels do not expect this coverage orparticipate in Board decisions in connection with the amounts of payments to change materially during 2010. We also made a $6,000 charitable contribution in 2009 toCompany’s transactions with the Stone Point Capital Foundation Charity Golf Tournament. The Stone Point Capital Foundation is operatedMilton Hershey School Trust and companies owned by the principals of Stone Point Capital LLC, of which Mr. Davis is Chief Executive Officer.

David L. Shedlarz.  Mr. Shedlarz is a director of Pitney Bowes Inc. During 2009, we purchased or leased office suppliesMilton Hershey School Trust. The Board therefore concluded that the relationships Messrs. Cavanaugh, Mead and equipment suchNevels have with the Company, other than as postage meters and copiers from Pitney Bowes Inc. All purchases and leases were in the ordinary course of our business. We do not expect these transactions or amounts of payments to change materially in 2010.

Charles B. Strauss.  Mr. Strauss is a director of The Hartford Financial Services Group. The Hartford Financial Services Group provided a portion of our directors’ and officers’ liability insurance coverage through June 30, 2009, when the coverage expired. This insurance coverage was purchased in the ordinary course of our business at market rates.

Kenneth L. Wolfe.  Mr. Wolfe was formerly the Company’s Chairman of the Board and Chief Executive Officer. He retired on January 1, 2002. Mr. Wolfe again became a director in November 2007 and resigned as non-executive Chairman of the Board in February 2009. As a former director, Mr. Wolfe participates in the Directors’ Charitable Award Program, which is described in greater detail on page 24 of this proxy statement. As a retireedirectors of the Company, Mr. Wolfe receives retiree life insurance, paid for by the Company, and he and his wife are covered under a fully-insured Medicare advantage program, the cost of which is shared by the Company and Mr. Wolfe. These programs and benefits are provided solely in connection with Mr. Wolfe’s former service as a director or his retirement and were not conditioned on his service as a director in 2009.material.

Do our independent directors meet separately in regularly-scheduled executive sessions, and, if so, who presides at those meetings?

Our independent directors meet regularly in executive session at the conclusion of every Board meeting and at other times as the independent directors deem necessary. Each executive session is chaired by James E. Nevels, our non-executive Chairman of the Board. In the Chairman’s absence, executive sessions are chaired by an independent director assigned on a rotating basis. Members of the Audit Committee, Compensation and Executive Organization Committee, Finance and Risk Management Committee, Governance Committee and GovernanceExecutive Committee also meet regularly in executive session at the conclusion of committee meetings. Additional information about executive sessions is contained in our Corporate Governance Guidelines. To learn more, please turn to page A-5Guidelines, which are available for viewing in the Investors section of Appendix A.

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our website,www.thehersheycompany.com.

Can I communicate with directors?

You may communicate with our directors in several ways. Communications regarding accounting, internal accounting controls or auditing matters may be addressed to the Audit Committee at the following address:

Audit Committee

c/o Corporate Secretary

The Hershey Company

100 Crystal A Drive

P. O.P.O. Box 810

Hershey, PA 17033-0810

You also may email the Audit Committee at auditcommittee@hersheys.com. Finally, you may submit your comments, confidentially and anonymously, if you desire, to the Audit Committee by calling the Hershey Concern Line at (800) 362-8321 or by accessing the Hershey Concern Line website atwww.HersheysConcern.com.

You may contact the independent directors at the following address:

Independent Directors

c/o Corporate Secretary

The Hershey Company

100 Crystal A Drive

P. O.P.O. Box 810

Hershey, PA 17033-0810

You also may email the independent directors at independentdirectors@hersheys.com or contact the independent directors using the Hershey Concern Line telephone number or website noted above.

Under the procedures approved by our Board, the

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The Audit Committee will address communications from any interested party in accordance with our Board-approved Procedures for Submission and Handling of Complaints Regarding Compliance Matters, which are available for viewing in the Investor RelationsInvestors section of our website at www.hersheys.com.www.thehersheycompany.com. Communications to the Audit Committee, and/or our independent directors and Hershey Concern Line are processed by the Office of General Counsel. The Office of General Counsel reviews and summarizes these communications and provides reports to the Audit Committee on a periodic basis. Communications regarding any accounting, internal control or auditing matter are reported immediately to the Audit Committee, as are allegations about our officers. Solicitations, junk mail and obviously frivolous or inappropriate communications are not forwarded to the Audit Committee, but copies are retained and made available to any director who wishes to review them.

How often did the Board meet in 2009?2012?

The Board held six regular meetings and eighttwo special meetings in 2009.2012. Each director attended at least 84%87% of all of the meetings of the Board and committees of the Board on which he or she served (during the period he served) in 2009.2012. Average attendance for all of these meetings equaled 95%97%.

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What is the Company’s policy regarding Board members’ attendance at the annual meeting?

Directors are expected to attend our annual meetings of stockholders. All of the nineten directors standing for election at our 20092012 annual meeting, held on April 30, 2009,May 1, 2012, were in attendance at that meeting.

What is the Board’s leadership structure, and why is it the best structure for the Company at this time?

The Board’s current leadership structure separates the roles of the Chairman of the Board of Directors and the Chief Executive Officer. Our non-executive Chairman of the Board presides at all meetings of stockholdersBoard and of the Board of Directors,stockholder meetings, approves the agendas for all Board meetings and sees that all orders, resolutions and policies adopted or established by the Board are carried into effect. The Board has determined that our Chairman is an independent member of the Board under the listing standards of the New York Stock Exchange and our Corporate Governance Guidelines. Our Chief Executive Officer managesis responsible for the Company’s strategic focus and directsoversees the day-to-day operations of the Company. He also serves as a member of the Board of Directors and is the primary liaison between the Board and Company management.

Our Board believes that separation of the roles of Chairman and Chief Executive Officer is the best governance model for the Company at this time. Under this model, our Chairman can devote his attention to assuring that the Company has the proper governance controls in place, that our Board is properly structured from the standpoints of membership, size and diversity, and that management has the support it needs from the Board to carry out the Company’s strategic priorities. The Chief Executive Officer, relieved of the duties normally performed by the Chairman, is free to focus his entire attention on growing and strengthening the business.

What is the Board’s role in risk oversight?

Our Board takes an active role in risk oversight. Prior to August 2009, the Board delegated to the Audit Committee primary responsibility for oversight of the Company’s risk management programs. The Audit Committee would receive reports from management on various risk topics at Committee meetings throughout the year in accordance with the Committee’s rolling agenda. The Committee would then provide reports to the Board on these topics at the Board’s next regularly-scheduled meeting.

In August 2009, the Board established a Finance and Risk Management Committee. This new Committee was established, in part, to relieve the Audit Committee of some of its substantial workload and to enhance the Board’s oversight of how senior management manages the material risks facing the Company. The Finance and Risk Management Committee is currently overseeing management’s development and implementation of a new enterprise-wide risk management program.

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The Finance and Risk Management Committee is composed of independent directors and operates in accordance with a written charter. The Committee receives regular reports frommeets periodically with management onto discuss risk topics pursuant to the Committee’s rolling agenda. Reports are then provided by the Committee to the Board at the Board’s next regularly-scheduled meeting. The Chair of the Finance and Risk Management Committee also meets at least annually with the Audit Committee to discuss the Company’s risk management programs. The Audit Committee includes a summary of these discussions in its report to the Board at the Board’s next regularly-scheduled meeting.

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In addition, when setting the performance measures and goals for the Company’s incentive plans for 2010,2012 and 2013, the Compensation and Executive Organization Committee of the Board received management’s views on whether the incentive plans’ measures or goals may encourage inappropriate risk-taking by the Company’s officers or employees. Management noted, and the Committee concurred and reported to the full Board, that the performance measures and goals were tied to the Company’s strategic objectives and achievable financial performance centered on the Company’s publicly-announced financial expectations and adherence with Hershey’s values.expectations. As such, the incentive plans were believed not to encourage risk-taking outside of the range of risks contemplated by the Company’s business plan.

What are the committees of the Board and what are their functions?

The Board has five standing committees: Audit, Compensation and Executive Organization, Finance and Risk Management, Governance, and Executive. The Board also establishes, from time to time, committees of limited duration for a special purpose. Our Corporate Governance Guidelines require that every member of the Audit Committee, Compensation and Executive Organization Committee, Finance and Risk Management Committee, and Governance Committee be independent.

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The Compensation and Executive Organization Committee recommends or establishes director and executive officer compensation in accordance with the authority granted by its charter and the Board-approved compensation plans the Committee oversees. The Committee may delegate its responsibilities under limited circumstances to a subcommittee composed only of a subset of Committee members. Also, under the terms of the Board- and stockholder-approved Incentive Plan, the Committee is authorized to provide our CEO with limited authority to make stock-based awards to non-executive employees other than executive officers in connection with recruitment, retention, performance recognition or promotion. The Incentive Plan does not authorize our CEO to make grants to our executive officers.

The Committee engaged Mercer (US) Inc. (“Mercer”), an executive compensation consultant, to provide independent assistance to the Committee with respect to the Committee’s development and refinement of our compensation policies and the Committee’s assessment of whether our compensation programs support our business objectives, are market competitive and are cost-efficient.

Under its engagement letter with the Committee, Mercer has acknowledged that the firm worksis retained by and performs its service for the Committee while working with management to provide advice, counsel and recommendations that reinforce the Company’s business strategy, economics, organization and management approach. Mercer has provided and continues to provide services and products to the Company in addition to its work for the Committee, including services related to global compensation studies and surveys for various geographies. During 2009,Mercer and its affiliates also provide products and services to the Company that are unrelated to compensation, including expatriate consulting services (provided by Mercer), international benefit claims processing services (provided by Mercer), corporate identity consulting services (provided by Lippincott) and property insurance consulting services (provided by Marsh USA Inc. and Marsh INSCO LLC). The Committee reviews and pre-approves all fees for services related to executive and director compensation provided by Mercer, as well as fees for compensation-related products and services provided to the Company in the United States if such fees exceed, in the aggregate, $10,000. The Committee also reviews fees paid to Mercer for compensation-related products or services provided to the Company outside the United States. The Committee has no role in the engagement of Mercer or Mercer affiliates that provide products or services to the Company that are unrelated to compensation, however, the Committee reviews the fees for such products and services concurrently with its review of compensation-related fees paid to Mercer.

The fees paid to Mercer and its affiliates for services provided in 2012 were as follows:

As a result of its review in December 2008,2011, the Board electedmade the following changes to keep thedirector compensation of our non-employee directors in 2009 at the level paid in 2008, as follows:for 2012:

On August 4, 2009, the Board approved the establishment of a Finance and Risk Management Committee, and, accordingly, the Chairfrom $10,000 to $15,000, effective January 1, 2012.

Therefore, compensation paid to non-executive directors in 2012 was as follows:

Payment of that Committee became eligible for payment of an annual committee chair fee of $10,000. For 2009, that fee was pro-rated to reflect the portion of the year the Committee was in existence.

Annual Retainer and Committee Chair Fees

Non-employee directors may elect to receive all or a portion of the annual retainer in cash or Common Stock. Non-employee directors also may elect to defer receipt of the retainer or

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committee chair fees until the date their membership on the Board ends. Committee chair fees that are not deferred are paid only in cash. Non-employee directors desiringchoosing to defer someall or alla portion of thetheir retainer or committee chair fees may invest the deferred amounts in two ways:

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Restricted Stock Units

Restricted stock units, or RSUs, wereare granted quarterly to non-employee directors on the first day of January, April, July and October 2009. TheOctober. In 2012, the number of RSUs granted in each quarter was determined by dividing $30,000 by the average closing price of a share of our Common Stock on the New York Stock Exchange on the last three trading days preceding the grant date. RSUs awarded to non-employee directors vest one year after the date of grant, or earlier upon termination of the director’s membership on the Board by reason of retirement (termination of service from the Board after the director’s 60^th birthday), death or disability, for any reason after a change in control, or such other circumstances as the Board may determine. Once vested, RSUs are paid to directors only in shares of Common Stock or, at the option of the director, deferred as common stock units under the Directors’ Compensation Plan until the director’s membership on the Board ends. Dividend equivalent units are credited at regular rates on the RSUs during the restriction period and, upon vesting of the RSUs, are paid currently in shares of Common Stock or deferred as common stock units together with RSUs the director has deferred. As of March 8, 2010, all of the non-employee directors, except4, 2013, Messrs. CavanaughDavis, Malcolm, Mead, Nevels, Ridge and Nevels,Shedlarz had attained retirement age for purposes of the vesting of RSUs.

Other Compensation, Reimbursements and Programs

The Board occasionally establishes committees of limited duration for special purposes. The Board will consider paying additional compensation to non-employee directors who serve on special committees, generally $1,250 per meeting, if the special committee holds six or more meetings, each lasting one hour or more. No director received compensation for service on a special committee in 2009.2012.

Prior to 1997, directors participated in our Directors’ Charitable Award Program. No directors have been added to the program since 1996 and our obligations under the program were not affected by the service of any director during 2009.2012. Under the program, upon the participating director’s death, the Company makes a charitable gift to an educational institution designated by the director. The amount of the donation varies, depending upon the director’s length of service, with a maximum donation of $1 million after five years of service. As of December 31, 2009,2012, there were 1716 former directors who participated in the program for whom we are committed to make charitable contributions aggregating $16.8$15.8 million. No current director participates in this program.

We reimburse our directors for travel and other out-of-pocket expenses they incur when attending Board and committee meetings and for minor incidental expenses they incur when performing directors’ services. We also provide reimbursement for at least one director continuing education

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program each year. Directors receive travel accident insurance while traveling on the Company’s business and receive discounts on the purchase of our products to the same extent and on the same terms as all of our employees. Directors also are eligible to participate in the Company’s Gift Matching Program. Under the Gift Matching Program, the Company will match, upon a director’s request, contributions made by the director to one or more charitable organizations, on a dollar-for-dollar basis up to a maximum aggregate contribution of $5,000 annually.

We do not award stock options or maintain a non-equity incentive plan or defined benefit pension plan for our non-employee directors.

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The following table and explanatory footnotes provide information with respect to the compensation paid or provided to thenon-employee directors during 20092012 in accordance with the policies and programs described above.

Director Compensation

20092012

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The following table provides information with respect to the number and market value of deferred common stock units and RSUs held by each director as of December 31, 2012, based on the $72.22 closing price of our Common Stock as reported by the New York Stock Exchange on December 31, 2012, the last trading day of the year. The information presented includes the accumulated value of each director’s common stock units and RSUs. Balances shown below include dividend equivalent units credited in the form of additional common stock units on retainers and committee chair fees that have been deferred as common stock units and dividend equivalent units credited in the form of additional common stock units on RSUs.

 

The following table provides information with respect to the number and market value of deferred common stock units and RSUs held by each director as of December 31, 2009, based on the $35.79 closing price of our Common Stock as reported by the New York Stock Exchange on December 31, 2009, the last trading day of the year. The information presented includes the accumulated value of each director’s common stock units and RSUs. Balances shown below include dividend equivalent units credited in the form of additional common stock units on retainers and committee chair fees that have been deferred as common stock units and dividend equivalent units credited in the form of additional common stock units on RSUs.

Name		Number of Deferred Common Stock Units (#)				Market Value of Retainers and Committee Chair Fees Deferred to the Common Stock Unit Account as of December 31, 2009 ($)				Number of RSUs (#)				Market Value of RSUs as of December 31, 2009 ($)		Number of Deferred Common Stock Units (#)					Market Value of Retainers and Committee Chair  Fees Deferred to the Common Stock Unit Account as of December 31, 2012 ($)					Number of RSUs (#)					Market Value of RSUs as of December 31, 2012 ($)
Pamela M. Arway																		—					—			1,853					133,824     ��
Robert F. Cavanaugh		21,135				756,422				3,395				121,507				31,700					2,289,374			1,853					133,824
Charles A. Davis		—				—				3,395				121,507				—					—			1,853					133,824
Arnold G. Langbo		—				—				—				—
Robert M. Malcolm																		—					—			2,000					144,440
James M. Mead																		1,470					106,163			1,853					133,824
James E. Nevels		—				—				3,395				121,507				—					—			1,853					133,824
Anthony J. Palmer																		—					—			1,853					133,824
Thomas J. Ridge		8,194				293,263				3,395				121,507				22,766					1,644,161			1,853					133,824
David L. Shedlarz		—				—				3,395				121,507				—					—			1,853					133,824
Charles B. Strauss		4,697				168,106				—				—
Kenneth L. Wolfe		—				—				—				—
LeRoy S. Zimmerman		8,416				301,209				3,395				121,507

 

(3)	This column represents the Company match for contributions made by the director to one or more charitable organizations during 20092012 under the Gift Matching Program.

Have there been any changes to director compensation since the end of 2009?2012?

Following a review of competitive data, the Compensation and Executive Organization Committee recommendedBoard elected to the Board that no changes be made for 2010 toincrease the annual compensationretainer paid to our directors and non-executivethe Chairman of the Board. The Board concurred withfrom $195,000 to $215,000, effective January 1, 2013. Except for this recommendation.

27change, all other elements of director compensation described above remain unchanged for 2013.

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PROPOSAL NO. 1 – ELECTION OF DIRECTORS

How many directors are standing for election?

EightTen directors are to be elected at the annual meeting. Each director is expected to serve until the next annual meeting and until his or her successor has been elected and qualified.

Which of the nominees currently serve on the Board?

Seven of the nominees are currently members of the Board. Nominee Pamela M. Arway is standing for election by the stockholders for the first time at the 2010 annual meeting. Our Board nominated Ms. Arway to be a director upon the recommendation of the Governance Committee. She was recommended to the Governance Committee by a third-party consultant retained by the Committee.

What happens if a nominee becomes unavailable for election?

All nominees for election as director have indicated their willingness to serve if elected. If a nominee becomes unavailable for election for any reason, the proxies will have discretionary authority to vote for a substitute.

Who are the nominees?

The Board unanimously recommends the following nominees for election at the annual meeting.meeting, each of whom is currently a member of the Board. These nominees were recommended to the Board by the Governance Committee. In making its recommendation, the Governance Committee considered the experience, qualifications, attributes and skills of each nominee as set forth in the biographies below. In the case of directors standing for reelection, theThe Governance Committee also reviewed each director’s past performance on our Board, as reflected in the Committee’s annual evaluation of Board and individual director performance. This evaluation considers, among other things, each director’s individual contributions to the Board, the director’s ability to work collaboratively with other directors and the effectiveness of the Board as a whole.

 

		PAMELA M. ARWAY, age 56,59, has been nominated for election as a new Hershey director atsince May 2010. She chairs the annual meeting. If elected, she will serve onGovernance Committee and is a member of the Audit Committee, and the Compensation and Executive Organization Committee and the Executive Committee. Ms. Arway retired in October 2008 as Senior Advisor to the Chairman and Chief Executive Officer of American Express Company, Inc., New York, New York, a global payments, network and travel company. She held that position during 2008 until her retirement. From October 2005 to January 2008, she was President, Japan/Asia Pacific/Australia Region, American Express International, Inc., Singapore; from December 2004 to October 2005, she was Chief Executive Officer, American Express Australia Ltd., Sydney, Australia; and from July 2000 to December 2004, she was Executive Vice President and General Manager, Corporate Travel North America, American Express Company, Inc. Throughout her twenty-one year21-year career with American Express Company, Inc., Ms. Arway gained experience in the areas of finance, marketing, international business, government affairs, consumer products and human resources. She has been a director of DaVita HealthCare Partners, Inc., since July 2009. Ms. Arway holds a bachelor’s degree in languages from Memorial University of Newfoundland and a Masters of Business Administration degree in marketing from Queen’s University, Kingston, Ontario.Ontario, Canada.
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		JOHN P. BILBREY, age 56, has been a Hershey director since June 2011. He was elected President and Chief Executive Officer of The Hershey Company effective May 17, 2011. From November 2010 to May 2011, he was Executive Vice President, Chief Operating Officer, and from December 2007 until November 2010, he was Senior Vice President, President Hershey North America. From November 2005 to December 2007, he was Senior Vice President, President International Commercial Group, and was Senior Vice President, President Hershey International from November 2003 until November 2005. As our President and Chief Executive Officer, Mr. Bilbrey is responsible for day-to-day global operations and commercial activities and has a thorough and comprehensive knowledge of all aspects of the Company’s business. He has extensive experience in the consumer packaged goods and fast-moving consumer goods categories in the United States and international markets and has the benefit of having served as both a Chief Executive Officer and Chief Operating Officer of the Company. Prior to joining Hershey, Mr. Bilbrey held executive positions at Mission Foods and Danone Waters of North America, Inc., a division of Groupe Danone, Paris, France, responsible for all operations of Groupe Danone’s North American water division. He also served in positions of increasing responsibility in the United States as well as numerous international assignments during his 22 years at The Procter & Gamble Company. Mr. Bilbrey has been a director of McCormick & Company, Incorporated since November 2005. He holds a bachelor’s degree in psychology from Kansas State University.
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		ROBERT F. CAVANAUGH, age 51,54, has been a Hershey director since October 2003. He chairs the Compensation and Executive Organization Committee and is a member of the Audit Committee, the Finance and Risk Management Committee, the Governance Committee and the Executive Committee. Mr. Cavanaugh is a directorChairman of the board of directors of Hershey Trust Company and the board of managers of Milton Hershey School. He is one of three representatives of the Milton Hershey School Trust currently serving on our Board. Mr. Cavanaugh, a 1977 graduate of Milton Hershey School, brings unique perspectives to our Board not only as a representative of our largest stockholder, but also of the school that is its sole beneficiary. Mr. Cavanaugh is the Chief Executive Officer of ValueRock Investment Partners, Irvine, California, an owner/operator of real estate properties located throughout the western United States. He has held this position since January 2013. From October 2011 to January 2013, Mr. Cavanaugh was Chief Investment Officer of Vestar Development Company, Phoenix, Arizona, one of the leading privately held real estate companies in the western United States. From October 1999 to October 2011, he was Managing Director of DLJ Real Estate Capital Partners, Los Angeles, California, a subsidiary of Credit Suisse, a leading global bankingreal estate private equity firm. He has held that position since October 1999. Prior to joining DLJ Real Estate Capital Partners, Mr. Cavanaugh held positions with Deutsche Banc Alex BrownBank Securities (where he founded and oversaw that firm’s real estate investment banking effort on the West Coast), Goldman, Sachs and& Co. and LaSalle Partners. He has experience in investment banking, finance, real estate and risk management and qualifies as an audit committee financial expert.management. Mr. Cavanaugh holds a bachelor’s degree in economics,cum laude, in economics from the Wharton School of the University of Pennsylvania and a Masters of Business Administration degree from Harvard Business School.School where he earned academic honors.
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		CHARLES A. DAVIS, age 61,64, has been a Hershey director since November 2007. He chairs the Finance and Risk ManagementAudit Committee and is a member of the Audit Committee and the Executive Committee. Mr. Davis is Chief Executive Officer of Stone Point Capital LLC, Greenwich, Connecticut, a global private equity firm. Mr. Davis has held that position since June 2005 when the firm was established. Prior to that, Mr. Davis was with MMC Capital, Inc., the private equity business of Marsh & McLennan Companies, Inc., serving as President from April 1998 to December 2002, Chief Executive Officer from January 1999 to May 2005 and Chairman from January 2002 to May 2005. He also served as a Vice Chairman of Marsh & McLennan Companies, Inc., a global professional services firm and the parent of MMC Capital, Inc., from September 1999 to May 2005. Prior to joining MMC Capital, Inc. in 1998, Mr. Davis was withspent 23 years at Goldman, Sachs & Co. for twenty-three years where he served as head of Investment Banking Services worldwide, co-head of the Americas Group, head of the Financial Services Industry Group, a member of the International Executive Committee and a General Partner. He has experience in finance, investment banking, international business and real estate, in addition to having experience as a chief executive officer, and qualifies as an audit committee financial expert. Mr. Davis has been a director of AXIS Capital Holdings Limited since November 2001 and a director of The Progressive Corporation since October 1996. Mr. Davis was formerly a director of Merchants Bancshares, Inc., from June 1985 to February 2008. Mr. Davis holds a bachelor’s degree from the University of Vermont and a Masters of Business Administration degree from Columbia University Graduate School of Business.
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		JAMES E. NEVELSROBERT M. MALCOLM, age 58,60, has been a Hershey director since 2007.December 2011. He chairs the Governance Committee and the Executive Committee and is a member of the Compensation and Executive Organization Committee and the Finance and Risk Management Committee. He has been nominated for election by the holders of the Common Stock voting separately as a class. Mr. Malcolm retired in December 2008 as President, Global Marketing, Sales & Innovation of Diageo PLC, London, UK, the world’s leading premium drinks company. He held that position from June 2002. From September 2001 to June 2002, he was President, Global Market, Sales and Innovation for Guinness UDV, a division of Diageo. From December 1999 to September 2001, Mr. Malcolm served as Global Marketing Director – United Distillers & Vintners, a division of Diageo, and was based in London. At the time of his retirement, Mr. Malcolm was responsible for strategy, equity management, innovation and global orchestration for more than 120 brands, as well as functional performance for both the marketing and global sales organization. Prior to joining Diageo, Mr. Malcolm spent 24 years at The Procter & Gamble Company in positions of increasing responsibility, departing in June 1999 as Vice President, General Manager, Beverages Europe, Middle East, Africa. He is a globally recognized expert in strategic marketing and is currently a professor at the Wharton School of the University of Pennsylvania, in the Wharton MBA and Executive programs. He has experience in international business and in the marketing and sales of consumer products, including consumer packaged goods and fast moving consumer goods. Mr. Malcolm serves on the board of directors of the American Marketing Association, on the advisory boards of Just Marketing, Inc. and Effective Brands and is a senior advisor to Boston Consulting Group. He was formerly a director of Logitech International S.A. from June 2007 to September 2010. Mr. Malcolm holds a bachelor’s degree in marketing and a Masters of Business Administration degree in marketing, both from the University of Southern California.
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		JAMES M. MEAD, age 67, has been a Hershey director since April 2011. He is a member of the Audit Committee. Mr. Nevels was elected the non-executive Chairman of the Board of Directors of The Hershey Company effective February 16, 2009. Mr. NevelsMead is a director and non-executive president of Hershey Trust Company and a member of the board of managers of Milton Hershey School. He is one of three representatives of the Milton Hershey School Trust serving on our Board. In addition to bringing to our Board the perspectives of the Milton Hershey School Trust, Mr. Mead brings extensive business and leadership experience. He is founder and President of JM Mead, LLC, Camp Hill, Pennsylvania, an economic advisory firm serving the health care industry. He has held that position since July 2004. He also has been a partner in Radius Ventures, LLC, New York, New York, a venture capital firm focused on leading-edge health and life sciences companies, since June 2005 and serves on the board of directors of several privately held health care and health care technology firms. He also serves as Vice Chairman of the Board of Capital BlueCross, Harrisburg, Pennsylvania, a full-service managed care and health insurance provider, after having served that firm for 20 years as its President and Chief Executive Officer from 1984 to 2004. Mr. Mead was a member of the board of directors of the Federal Reserve Bank of Philadelphia from 1991 to 1996 and served as its Chairman from 1994 until 1996. He is actively involved in other professional and community board activities, including as board member and treasurer of the North American branch of the International Life Sciences Institute, Washington, D.C. He has experience in finance, marketing, insurance, information technology and risk management, in addition to having experience as a chief executive officer, and qualifies as an audit committee financial expert. Mr. Mead holds a bachelor’s degree in economics and a Masters of Arts degree from The Pennsylvania State University.
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		JAMES E. NEVELS, age 61, has been a Hershey director since November 2007 and the Chairman of the Board of Directors since February 2009. He also chairs the Executive Committee and is a member of the Audit Committee and the Governance Committee. Mr. Nevels is a director of Hershey Trust Company and the board of managers of Milton Hershey School. He is one of three representatives of the Milton Hershey School Trust currently serving on our Board. In addition to bringing to our Board the perspectives of the Milton Hershey School Trust, Mr. Nevels has extensive finance and leadership experience.experience and qualifies as an audit committee financial expert. He is Chairman of The Swarthmore Group, Philadelphia, Pennsylvania, a minority-owned investment-advisory firm, which he founded in 1991. In 2004, he was appointed by the President of the United States to a three-year term on the Advisory Committeeadvisory committee to the Pension Benefit Guaranty Corporation, where he served a three-year term.as Chairman from 2005 to 2007. In 2001, he was appointed by the Governor of Pennsylvania as Chairman of the Philadelphia School Reform Commission overseeing the turnaround of the Philadelphia School System, at that time the eighthseventh largest school district in the United States. Recently, he was appointed by the Federal Reserve BoardHe has been a member of Governors to a two-year term on the board of directors of the Federal Reserve Bank of Philadelphia beginningsince January 1, 2010.2010, and in January 2012 was appointed Deputy Chairman of the board. Mr. Nevels has beenwas formerly a director of Tasty Baking Company sincefrom May 2005.2005 to May 2011. He holds a bachelor’s degree,cum laude and Phi Beta Kappa, in political science and philosophy from Bucknell University, a Masters of Business Administration degree from the Wharton School of the University of Pennsylvania and a Juris Doctor degree from University of Pennsylvania Law School.
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		ANTHONY J. PALMER, age 53, has been a Hershey director since April 2011. He is a member of the Compensation and Executive Organization Committee and the Finance and Risk Management Committee. He has been nominated for election by the holders of Common Stock voting separately as a class. Mr. Palmer is President of Global Brands and Innovation of Kimberly-Clark Corporation, Dallas, Texas, a manufacturer and marketer of various personal care and health care products worldwide. He has held that position since April 2012. He was Senior Vice President and Chief Marketing Officer of Kimberly-Clark Corporation from October 2006 to March 2012. From June 2002 to September 2006, he worked at the Kellogg Company, Battle Creek, Michigan, and was a member of the Worldwide Leadership Team of Kellogg Company from February 2003. From June 2002 to February 2003, he served as Kellogg’s Vice President of Business Development and Innovation. From February 2003 to August 2004, he was President of Kellogg’s Natural, Frozen and Warehouse Club division, and from August 2004 to September 2006 he was Managing Director of Kellogg’s United Kingdom and Ireland businesses. Prior to June 2002, he held various positions of significant responsibility in the consumer products field, including marketing and general management positions with the Minute Maid division of the Coca-Cola Company USA and as region director for Coca-Cola in Austral-Asia. He has experience in the areas of consumer packaged goods, fast moving consumer packaged goods, international business, marketing and human resources. He holds a bachelor’s degree in business marketing from Monash University in Melbourne, Australia, and a Masters of Business Administration degree, with distinction, from the International Management Institute, Geneva, Switzerland.
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		THOMAS J. RIDGE, age 64,67, has been a Hershey director since November 2007 and is a member of the Finance and Risk Management Committee and the Governance Committee. Mr. Ridge is President and Chief Executive Officer of Ridge Global, LLC, Washington, D.C., a global strategic consulting company. He has held that position since July 2006. Additionally, in April 2010, Mr. Ridge became a partner in Ridge Policy Group, Harrisburg, Pennsylvania and Washington, D.C., a bi-partisan, full-service government affairs and issue management group. From April 2005 to July 2006, he was President and Chief Executive Officer of Thomas Ridge LLC. From October 2001 to February 2005, Mr. Ridge was Secretary of the U.S. Department of Homeland Security. Prior to his service as Secretary of Homeland Security, he was Governor of Pennsylvania from 1995 to 2001. Mr. Ridge’s background and experience have prepared him well for membership on our Board. As President and Chief Executive Officer of Ridge Global, he leads a team of international experts that helps businesses and governments address issues such as risk management, global trade security, technology integration and crisis management. As a partner in Ridge Policy Group, he provides strategic advice to clients to assist them in navigating the complexities of state and local government and raising awareness of their products and services that are relevant to government markets. As twice-elected Governor of Pennsylvania, he earned a reputation for high standards and results and championed issues such as health care and the environment. As Secretary of the Department of Homeland Security, he formed a new agency from 22 agencies employing more than 180,000 employees. Mr. Ridge has been a director of Exelon Corporation since May 2005, a director of VonageFS Investment Corporation since August 2005November 2011 and a director of BrightpointLifeLock, Inc. since September 2009.March 2010. He previously served as a director of Brightpoint, Inc., Geospatial Holdings, Inc., Vonage Holdings Corp. and The Home Depot, Inc. from May 2005 to May 2007. Mr. Ridge holds a bachelor’s degree,cum laude, from Harvard University and a Juris Doctor degree from The Dickinson School of Law.Law of The Pennsylvania State University.
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		DAVID L. SHEDLARZ, age 61,64, has been a Hershey director since August 2008. He chairs the AuditFinance and Risk Management Committee and is a member of the Compensation and Executive Organization Committee the Finance and Risk Management Committee and the Executive Committee. He has been nominated for election by the holders of the Common Stock voting separately as a class. Mr. Shedlarz retired in December 2007 as Vice Chairman of Pfizer Inc., New York, New York, a pharmaceutical, consumer and animal products health company. He held that position from July 2005. From January 1999 to July 2005, he was Pfizer’s Executive Vice President and Chief Financial Officer. Mr. Shedlarz spent the majority of his professional career with Pfizer, Inc.Pfizer. At the time of his retirement in 2007, Mr. Shedlarz was responsible for operations including the animal health business, finance, accounting, strategic planning, business development, global sourcing, manufacturing, information systems and human resources. During his time at Pfizer, Mr. Shedlarz also gained extensive experience in international business. He qualifies as an audit committee financial expert. Mr. Shedlarz has been a director of Pitney Bowes, Inc. since May 2001 and a member of the Teachers Insurance and Annuity Association Board of Trustees since March 2007. Mr. Shedlarz holds a bachelor’s degree in economics and mathematics from Oakland/Michigan State University and a Masters of Business Administration degree in finance and accounting from the New York University, Leonard N. Stern School of Business.
____________________
		DAVID J. WEST, age 46, has been a Hershey director since October 2007 and was elected President and Chief Executive Officer of The Hershey Company, effective December 1, 2007. From October to November 2007, he was President of the Company; from January until October 2007, he was Executive Vice President, Chief Operating Officer; from January 2005 to January 2007, he was Senior Vice President, Chief Financial Officer and he continued to hold the position of Chief Financial Officer until July 2007 when his successor to that position was elected. He was Senior Vice President, Chief Customer Officer from June 2004 to January 2005 and was Senior Vice President, Sales from December 2002 to June 2004. As our President and Chief Executive Officer, Mr. West has a thorough and comprehensive knowledge of all aspects of the Company’s business. During his time at Hershey, Mr. West has held leadership roles in many key areas of the business. He has extensive experience in finance, sales and marketing and has the benefit of having served as both a Chief Executive Officer and Chief Financial Officer of the Company. Prior to joining Hershey, Mr. West served as Senior Vice President, Chief Financial Officer, Nabisco Biscuit and Snacks Group, with responsibility for leading the financial function of Kraft Foods’ biscuits, confections and snacks businesses. Mr. West has been a director of Tasty Baking Company since December 2003. He holds a bachelor’s degree,cum laude, in business administration from Bucknell University.
____________________

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How many votes will be required to elect a nominee to the Board?

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For nominees to be elected by the holders of the Common Stock and Class B Common Stock voting together:  The nominees receiving the greatest number of votes of the Common Stock and Class B Common Stock, in descending order, will be elected to the positions to be filled.

For nominees to be elected by the holders of the Common Stock voting separately as a class:  The nominees receiving the greatest number of votes of the Common Stock, in descending order, will be elected to the positions to be filled.

		LEROY S. ZIMMERMAN, age 75, has been a Hershey director since November 2007 and is a member of the Governance Committee and the Executive Committee. Mr. Zimmerman is Chairman of the Board of Hershey Trust Company and the board of managers of Milton Hershey School. He is one of three representatives of the Milton Hershey School Trust serving on our Board. In addition to bringing to our Board the perspectives of the Milton Hershey School Trust, Mr. Zimmerman brings extensive experience as a lawyer in the private practice of law and as the first-elected Attorney General of the Commonwealth of Pennsylvania. He is Senior Counsel, Eckert Seamans Cherin & Mellott, LLC, Pittsburgh, Pennsylvania, a regional full service law firm. He has held that position since January 2002. He has substantial trial and appellate court litigation experience in major complex cases and has significant government relations and regulatory law experience. Mr. Zimmerman was a director of Select Medical Corporation from October 1998 to February 2005. He holds a bachelor’s degree from Villanova University and a Juris Doctor degree from The Dickinson School of Law.

What is the Board’s recommendation for voting on Proposal No. 1?

 

The Board of Directors unanimously recommends that stockholders   voteFOR the nominees listed above.

 

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AUDIT COMMITTEE REPORT

To Our Stockholders:

Our role as the Audit Committee of the Board of Directors is to prepare this report and to assist the Board in its oversight of:

 

The integrity of the Company’s financial statements;

 

The Company’s compliance with legal and regulatory requirements;

 

The independent auditors’ qualifications and independence; and

 

The performance of the independent auditors and the Company’s internal audit function.

Our Committee operates under a written charter that was last amended and restated by the Board on February 23, 2010.December 4, 2012. The charter may be viewed on the Company’s website at www.hersheys.comwww.thehersheycompany.com in the Investor RelationsInvestors section.

Our duties as a Committee include overseeing the Company’s management, internal auditors and independent auditors in their performance of the following functions, for which they are responsible:

Management

 

Preparing the Company’s financial statements;

 

Establishing effective financial reporting systems and internal controls and procedures; and

 

Reporting on the effectiveness of the Company’s internal control over financial reporting.

Internal Audit Department

 

Independently assessing management’s system of internal controls and procedures; and

 

Reporting on the effectiveness of that system.

Independent Auditors

 

Auditing the Company’s financial statements;

 

Expressing an opinion about the financial statements’ conformity with U.S. generally accepted accounting principles; and

 

Annually auditing the effectiveness of the Company’s internal control over financial reporting.

We meet periodically with management, the internal auditors and independent auditors, independently and collectively, to discuss the quality of the Company’s financial reporting process and the adequacy and effectiveness of the Company’s internal controls. Prior to the Company filing its Annual Report on Form 10-K for the year ended December 31, 2009,2012, with the SEC, we also:

 

Reviewed and discussed the audited financial statements with management and the independent auditors;

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•

Discussed with the independent auditors the matters required to be discussed by Statementthe statement on Auditing Standards No. 61, as amended (AICPA,Communication with Audit CommitteesProfessional Standards,Vol. 1. AU Section 380), as currentlyadopted by the Public Company Accounting Oversight Board in effect;Rule 3200T;

 

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Received the written disclosures and the letter from the independent auditors in accordance with applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit Committee concerning independence; and

 

Discussed with the independent auditors their independence from the Company.

We are not employees of the Company and are not performing the functions of auditors or accountants. We are not responsible as a Committee or individually to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards. In carrying out our duties as Audit Committee members, we have relied on the information provided to us by management and the independent auditors. Consequently, we do not assure that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with U.S. generally accepted accounting principles or that the Company’s auditors are in fact “independent.”

Based on the reports and discussions described in this report, and subject to the limitations on our role and responsibilities as a Committee referred to above and in our charter, we recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009,2012, filed with the SEC on February 19, 2010.22, 2013.

Submitted by the Audit Committee of the Company’s Board of Directors:

David L. Shedlarz, Chair

Robert F. Cavanaugh

Charles A. Davis, Chair

Pamela M. Arway

James M. Mead

James E. Nevels

 

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INFORMATION ABOUT OUR INDEPENDENT AUDITORS

Who are the Company’s current independent auditors?

KPMG LLP, an independent registered public accounting firm, has audited the Company’s financial statements since May 10, 2002.

What were KPMG LLP’s fees for professional services to the Company in fiscal years 20082011 and 2009?2012?

KPMG LLP’s fees were as follows:

 

For the Fiscal Year Ended December 31,		2009			2008
For the Fiscal Years Ended December 31,								2012				2011
Audit Fees		$	2,692,000		$	2,572,000		$	3,848,590			$	3,080,000
Audit-Related Fees(1)			2,022,865			230,217			1,307,391				275,838
Tax Fees(2)			39,065			63,558			212,400				64,137
All Other Fees(3)			—			—			219,331				40,125
Total Fees		$	4,753,930		$	2,865,775		$	5,587,712			$	3,460,100

 

 

 

(1)

Fees associated primarily with the following services:services related to due diligence for potential business acquisitions, auditing of employee benefit plans and regulatory reporting.

In 2009, regulatory reporting and due diligence associated with a potential business acquisition and auditing of employee benefit plans.

In 2008, auditing of employee benefit plans and securities offering procedures.

 

(2)

Fees pertaining primarily to assistance with the preparation of tax returns, tax audits and customs assistance for the Company’s foreign subsidiaries.

(3)

In fiscal 2011, KPMG LLP acquired the business of a consulting firm that was providing services to the Company prior to the acquisition. The fees are associated with professional services rendered in connection with the Company’s global shared services organization.

What is the Audit Committee’s policy regarding pre-approval of audit and non-audit services performed by the Company’s independent auditors?

The Audit Committee pre-approves all audit and non-audit services performed by KPMG LLP. The Committee is authorized by its charter to delegate to one or more of its members the authority to pre-approve any audit or non-audit services, provided that the approval is presented to the Audit Committee at its next scheduled meeting.

The Audit Committee pre-approved all services provided by KPMG LLP in 2009.2012.

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PROPOSAL NO. 2 – APPOINTMENT OF INDEPENDENT AUDITORS

What is the Board proposing?

The Board is proposing that youstockholders ratify the Audit Committee’s appointment of KPMG LLP as the Company’s independent auditors for 2010.2013. The Audit Committee and the Board consider KPMG LLP to be well-qualified for that role.

Is stockholder ratification necessary or required?

The Audit Committee is not required to obtain stockholder ratification of its appointment of KPMG LLP. However, the Audit Committee recommended to the Board that stockholders be given the opportunity to vote on KPMG LLP’s appointment at the annual meeting.

What will happen if the appointment of KPMG LLP is not ratified by the stockholders?

If stockholders do not ratify the appointment of KPMG LLP as the Company’s independent auditors for 2010,2013, the Audit Committee will reconsider its appointment.

How many votes will be required for ratification?

KPMG LLP’s appointment as the Company’s independent auditors for 20102013 will be considered ratified if a majority of the holdersvotes of recordthe shares of the Common Stock and Class B Common Stock present (in person or by proxy)and entitled to vote at the annual meeting are cast more votes for the proposal than against the proposal.

Will representatives of KPMG LLP attend the annual meeting?

Representatives of KPMG LLP will attend the annual meeting, will have the opportunity to make a statement, if they so desire, and will respond to questions.

What is the Board’s recommendation for voting on Proposal No. 2?

 

The Board of Directors unanimously recommends that stockholders   voteFOR Proposal No. 2.

 

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OWNERSHIP OF THE COMPANY’S SECURITIES

When are shares “beneficially owned”?

Shares are beneficially owned when a person has voting or investment power over the shares or the right to acquire voting or investment power within 60 days. Voting power is the power to vote the shares. Investment power is the power to direct the sale or other disposition of the shares.

What information is presented in the following table?

This table shows the number of Company shares beneficially owned by:

 

Stockholders who we believe owned more than 5% of our outstanding Common Stock or Class B Common Stock, as of the dates indicated;March 4, 2013; and

 

Our directors, the executive officers named in the Summary Compensation Table on page 6260 (we refer to these officers as “named executive officers”), and all directors, named executive officers and other executive officers as a group, as of March 8, 2010.4, 2013.

Unless we have indicated otherwise in a footnote, the individuals and entities listed in the table have sole voting and investment power over the shares listed.

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Holder				Common Stock(1)			Exercisable Stock Options(2)			Percent of  Common Stock(3)				Class B Common Stock				Percent of Class B Common Stock(4)
Milton Hershey School Trust(5) Founders Hall Hershey, PA 17033				12,513,321			—			7.5				60,612,012				99.8
Hershey Trust Company(5) 100 Mansion Road Hershey, PA 17033
Hershey Trust Company(6)				702,426			—			**				—				—
BlackRock, Inc.(7) 40 East 52nd Street New York, NY 10022				10,701,122			—			6.4				—				—
Capital World Investors(8) 333 South Hope Street, 55th Floor Los Angeles, CA 90071				8,847,500			—			5.3				—				—
T. Rowe Price Associates, Inc.(9) 100 East Pratt Street Baltimore, MD 21202				12,205,457			—			7.3				—				—
Humberto P. Alfonso				13,448			76,040			**				—				—
Pamela M. Arway*(10)				200			—			**				—				—
John P. Bilbrey				16,092			161,892			**				—				—
Robert F. Cavanaugh*				1,000			—			**				—				—
Charles A. Davis*				5,413			—			**				—				—
James E. Nevels*				7,933			—			**				—				—
Terence L. O’Day				—			18,826			**				—				—
Thomas J. Ridge*				—			—			**				—				—
David L. Shedlarz*				2,898			—			**				—				—
Burton H. Snyder				28,818			138,720			**				—				—
David J. West*				68,406			474,930			**				—				—
LeRoy S. Zimmerman*				—			—			**				—				—
All directors and executive officers as a group (19 persons)				205,325			1,370,398			**				—				—

Holder						Common  Stock(1)				Exercisable  Stock Options(2)				Percent of  Common Stock(3)				Class B  Common  Stock				Percent  of  Class B  Common   Stock(4)
Hershey Trust Company and the Milton Hershey School Trust(5) 100 Mansion Road Hershey, PA 17033   Milton Hershey School(5) Founders Hall Hershey, PA 17033							12,513,621				—				7.7				60,612,012				99.9
Hershey Trust Company(6)							389,000				—				**				—				—
Humberto P. Alfonso							44,654				240,341				**				—				—
Pamela M. Arway*							5,206				—				**				—				—
John P. Bilbrey*							54,944				120,631				**				—				—
Michele G. Buck							160				68,265				**				—				—
Robert F. Cavanaugh*							1,000				—				**				—				—
Charles A. Davis*							13,184				—				**				—				—
Robert M. Malcolm*							1,142				—				**				—				—
James M. Mead*							700				—				**				—				—
James E. Nevels*							19,857				—				**				—				—
Terence L. O’Day							—				62,906				**				—				—
Anthony J. Palmer*							5,381				—				**				—				—
Thomas J. Ridge*							—				—				**				—				—
David L. Shedlarz*							11,129				—				**				—				—
Leslie M. Turner							—				—				**				—				—
All directors, named executive officers and other executive officers as a group (17 persons)							180,149				610,141				**				—				—

 

 

 

*	Current director or nomineeDirector

 

**	Less than 1%

 

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(1)

Amounts listed for named executive officers and other executive officers include, if applicable, shares of Common Stock allocated by the Company to the officer’s account in The Hershey Company 401(k) Plan under section 401(k) of the Internal Revenue Code.Plan. Amounts listed also include the following restricted stock units, or RSUs, that will vest and be paid to the following holders within 60 days of March 8, 2010 and for which the holder has requested immediate payment:4, 2013:

 

RSUs held by directors:

 

Pamela M. Arway			499
Charles A. Davis		883	499
Robert M. Malcolm			499
James E. Nevels		883	499
Anthony J. Palmer			499
David L. Shedlarz		883	499

571 RSUs held by executive officers who are not named executive officers.

Amounts listed also include shares for which certain of the directors nominees for director and named executive officers share voting and/or investment power with one or more other persons as follows: Mr. Alfonso, 13,353Ms. Arway, 4,707 shares owned jointly with his spouse; Ms. Arway, 200 shares owned jointly with her spouse; Mr. Bilbrey, 15,802 shares owned jointly with his spouse; Mr. Cavanaugh, 1,000 shares owned jointly with his spouse; Mr. Malcolm, 643 shares owned jointly with his spouse; Mr. Nevels, 5,67516,192 shares owned jointly with his spouse and 1,3743,166 shares owned jointly with another individual; and Mr. West, 67,508Palmer, 4,882 shares held in a revocable trust for the benefit of family members for which Mr. West is trustee.owned jointly with his spouse.

 

(2)	This column reflects stock options that were exercisable by the named executive officers and the executive officers as a group on March 8, 2010, as well as the following4, 2013. No executive officer holds stock options that will become exercisable within 60 days of March 8, 2010:4, 2013.

Stock options held by the named executive officers:

David J. West		14,062
Humberto P. Alfonso		3,700
John P. Bilbrey		6,187
Burton H. Snyder		5,637

34,180 stock options held, in the aggregate, by six executive officers who are not named executive officers.

 

(3)	Based upon 166,182,457162,966,507 shares of Common Stock outstanding on March 8, 2010, unless indicated otherwise in a footnote.4, 2013.

 

(4)	Based upon 60,708,90860,628,737 shares of Class B Common Stock outstanding on March 8, 2010.4, 2013.

 

(5)

Reflects stockholdings as of March 8, 2010.4, 2013. The Milton Hershey School Trust has the right at any time to convert its Class B Common Stock shares into Common Stock shares on a share-for-share basis. If on March 8, 2010,4, 2013, the Milton Hershey School Trust converted all of its Class B Common Stock shares to Common Stock, Hershey Trust Company, in its capacity as trustee for the Milton Hershey School Trust would own beneficially 73,125,33373,125,633 shares of our Common Stock (12,513,321(12,513,621 Common Stock shares plus 60,612,012 converted Class B Common Stock shares), or 32.2%32.7% of the 226,794,469223,578,519 shares of Common Stock outstanding following the conversion (calculated as 166,182,457162,966,507 Common Stock shares outstanding prior to the conversion plus 60,612,012 converted Class B Common Stock shares). For more information about the Milton Hershey School Trust, Hershey Trust Company, Milton Hershey School and the ownership and voting of these securities, please turn to pagepages 40 and 41.

 

(6)	Reflects stockholdings as of March 8, 2010.4, 2013. Please turn to pagepages 40 and 41 for more information about shares of Common Stock held by Hershey Trust Company in its capacity as institutional fiduciary for estates and trusts unrelated to the Milton Hershey School Trust and as investments.

(7)

Information regarding BlackRock, Inc. and its beneficial holdings was obtained from a Schedule 13G filed with the SEC on January 29, 2010. The filing indicated that, as of December 31, 2009, BlackRock, Inc. had sole voting and investment power over 10,701,122 shares of Common Stock. The filing indicated that BlackRock, Inc. is a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) and that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, our Common Stock.

(8)

Information regarding Capital World Investors and its beneficial holdings was obtained from a Schedule 13G/A filed with the SEC on February 11, 2010. The filing indicated that, as of December 31, 2009, Capital World Investors had sole voting power over 26,500 shares, and sole investment power over 8,847,500 shares, of Common Stock. Capital World Investors disclaimed beneficial ownership over these shares on the basis that it is a beneficial holder solely because its affiliate, Capital Research and Management Company, acts as an investment advisor and manages equity assets for various investment companies.

(9)	Information regarding T. Rowe Price Associates, Inc. and its beneficial holdings was obtained from a Schedule 13G/A filed with the SEC on February 12, 2010. The filing indicated that, as of December 31, 2009, T. Rowe Price Associates, Inc. had

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sole voting power over 2,856,735 shares, and sole investment power over 12,205,457 shares, of Common Stock. The filing indicated that these securities are owned by various individual and institutional investors for which T. Rowe Price Associates, Inc. serves as investment advisor with power to direct investments and/or sole power to vote the securities.

(10)	Ms. Arway is standing for election as a director for the first time at the 2010 annual meeting.

Do the directors and named executive officers listed in the beneficial ownership table above hold additional Company securities not reflected in that table?

Our directors and named executive officers hold certain Company securities not reflected in the beneficial ownership table above. We are not permitted to show these securities in the beneficial ownership table because they will not convert, or cannot be converted, to actual shares of Common Stock over which the holder will have voting or investment power within 60 days of our March 8, 20104, 2013, record date. These securities include:

 

Certain unvested RSUs or deferred common stock units held by our directors and named executive officers; and

 

Certain unvested stock options held by our named executive officers.

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We have added the table below to show these holdings by our directors and named executive officers as of March 8, 2010.4, 2013. You can find additional information about RSUs and deferred common stock units held by directors in the Director Compensation section beginning on page 23. You also can find additional information about stock options, RSUs and deferred common stock units held by the named executive officers in the Executive Compensation section beginning on page 43.42.

 

Holder		Shares Underlying Common Stock Units Not Beneficially Owned(1)				Shares Underlying Stock Options Not Beneficially Owned				Shares Underlying  RSUs and   Common Stock Units Not Beneficially Owned					Shares Underlying   Stock Options Not Beneficially Owned
Humberto P. Alfonso		12,506				175,500						2,250					133,234
Pamela M. Arway*		—				—						1,274					—
John P. Bilbrey		32,721				219,908
John P. Bilbrey*												71,741					496,602
Michele G. Buck												77,437					116,209
Robert F. Cavanaugh*		25,358				—						33,970					—
Charles A. Davis*		2,449				—						1,274					—
Robert M. Malcolm*												1,274					—
James M. Mead*												3,740					—
James E. Nevels*		2,449				—						1,274					—
Terence L. O’Day		—				123,809						39,070					117,709
Anthony J. Palmer*												1,274					—
Thomas J. Ridge*		12,417				—						25,036					—
David L. Shedlarz*		2,449				—						1,274					—
Burton H. Snyder		5,000				133,935
David J. West*		—				658,000
LeRoy S. Zimmerman*		12,639				—
Leslie M. Turner												28,000					53,505

 

 

 

*	Current director or nomineeDirector

(1)	Common stock units not beneficially owned include the following:

Unvested restricted stock units, or RSUs, granted on or before March 8, 2010 to the named executive officers under the Incentive Plan;

Unvested RSUs granted on or before March 8, 2010 to our directors under the Directors’ Compensation Plan or the Incentive Plan;

Common stock units deferred by the named executive officers under the Company’s Deferred Compensation Plan; and

Common stock units deferred by the directors under the Directors’ Compensation Plan.

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What is the Milton Hershey School Trust?

In 1909, Milton S. and Catherine S. Hershey established a trust (the “Milton Hershey School Trust”) having as its sole beneficiary Milton Hershey School, a non-profit school for the full-time care and education of disadvantaged children located in Hershey, Pennsylvania. Hershey Trust Company, a state-chartered trust company, is trustee for the benefit of Milton Hershey School. Throughout this proxy statement, as the context permits, we refer to Hershey Trust Company, in its capacity as trustee for the benefit of Milton Hershey School, as the “Milton Hershey School Trust.”

What is the relationship of the Milton Hershey School Trust and Hershey Trust Company to The Hershey Company?

The Milton Hershey School Trust is our controlling stockholder. It will have the right to cast 7.5%7.7% of all of the votes entitled to be cast on matters requiring the vote of the Common Stock voting separately and 80%80.4% of all of the votes entitled to be cast on matters requiring the vote of the Common Stock and Class B Common Stock voting together. The board of directors of Hershey Trust Company, as trustee for the benefit of Milton Hershey School, with the approval of the board of managers (governing body) of Milton Hershey School, decides how funds held by the Milton Hershey School Trust will be invested. The board of directors of Hershey Trust Company, as trustee for the benefit of Milton Hershey School, generally decides how shares of The Hershey Company held by the Milton Hershey School Trust will be voted.

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As of the record date, Hershey Trust Company also held 313,426 shares of our Common Stock in its capacity as institutional fiduciary for 102 estates and trusts unrelated to the Milton Hershey School Trust. Hershey Trust Company also held 389,000 shares of our Common Stock as investments on that date.investments. The board of directors or management of Hershey Trust Company decides how these shares will be invested and voted.

In all, Hershey Trust Company, as trustee for the benefit of Milton Hershey School Trust, as fiduciary for the individual estates and trusts noted above, and as direct owner of investment shares, will be entitled to vote 13,215,74712,902,621 shares of our Common Stock and 60,612,012 shares of our Class B Common Stock at the annual meeting. Stated in terms of voting power, Hershey Trust Company will have the right to cast 8%7.9% of all of the votes entitled to be cast on matters requiring the vote of the Common Stock voting separately and 80%80.5% of all of the votes entitled to be cast on matters requiring the vote of the Common Stock and Class B Common Stock voting together at the annual meeting.

Our certificate of incorporation contains the following important provisions regarding Class B Common Stock and the Milton Hershey School Trust’s ownership of that stock:

 

All holders of Class B Common Stock, including the Milton Hershey School Trust, may convert any of their Class B Common Stock shares into shares of our Common Stock at any time on a share-for-share basis.

 

All shares of Class B Common Stock will automatically be converted to shares of Common Stock on a share-for-share basis if the Milton Hershey School Trust, or any successor trustee, or Milton Hershey School, as appropriate, ceases to hold more than 50% of the total Class B Common Stock shares outstanding and at least 15% of the total Common Stock and Class B Common Stock shares outstanding.

 

We must obtain the approval of the Milton Hershey School Trust, or any successor trustee, or Milton Hershey School, as appropriate, before we issue any Common Stock or take any other action that would deprive the Milton Hershey School Trust, or any successor trustee or Milton Hershey School, as appropriate, of the ability to cast a majority of the votes on any matter where the Class B Common Stock is entitled to vote, either separately as a class or together with any other class.

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What is the governance structure of Milton Hershey School and Hershey Trust Company?

All of the outstanding shares of Hershey Trust Company are owned by itself, as trustee for the benefit of Milton Hershey School Trust.School. The members of the board of managers of Milton Hershey School are appointed by and from the board of directors of Hershey Trust Company. There are eightnine members of the board of directors of Hershey Trust Company. There are eightnine members of the board of managers of Milton Hershey School. Robert F. Cavanaugh, James M. Mead and James E. Nevels, and LeRoy S. Zimmerman, each currently a director of our Company, are members of the board of directors of Hershey Trust Company and board of managers of Milton Hershey School. Directors of Hershey Trust Company and members of the Milton Hershey School board of managers individually are not considered to be beneficial owners of the shares of Hershey Common Stock and Class B Common Stock held by Hershey Trust Company, as trustee for the benefit of Milton Hershey School Trust.School.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This section discusses the principles underlying our policies and provides information and analysis ofanalyzes the decisions we made concerning the compensation of Hershey’s executive officers. This informationIt also describes the process for determining executive compensation and considerations on whichthe factors considered in determining the amount of compensation is awarded to and earned by our named executive officers.

The named executive officers are: J. P. Bilbrey, our Chief Executive Officer, or CEO; H. P. Alfonso, our Chief Financial Officer, or CFO; and provides perspective onM. G. Buck, T. L. O’Day and L. M. Turner, who were the tables and narrative that follow.three highest paid of our other executive officers during 2012.

What material factors orhighlights and events affected the executive compensation process and decision-making regarding 20092012 named executive officer compensation? What was theactions were taken in response to those factorshighlights and events?

During 2009 we continued

Following our brand-building initiatives from 2008 and the transformation of our operations and organization that began in 2007. We made significant progress in implementing our consumer-driven demand model, significantly increased levels of investment in advertising and promoting our brands and strengthened Hershey's leadership position in the marketplace. We also successfully rolled out our “One Hershey Incentive Program” and its focus on unifying employees globally with respect to Company-widestrong 2011 financial performance, and Hershey Values. All of these efforts resulted in strong financial performance.

During 2008, the Compensation and Executive Organization Committee of our Board, whichFebruary 2012 we refer to in this section as the Committee, engaged Mercer (US) Inc., or Mercer, to serve as compensation consultant to the Committee and to work with management with respect to our executive and Board compensation programs. Throughout the latter half of 2008, with the assistance of Mercer, the Committee and management reviewed our executive compensation programs, including the design of our annual incentive program and equity award programs in light of market trends, our updated strategic focus and outlook, and the peer groups usedannounced higher performance expectations for benchmarking compensation and performance. In early 2009, we launched redesigned performance management and compensation programs to ensure alignment of our executives and all employees with our Company’s strategic goals and values.2012:

 

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Full-year 2012 net sales to increase 5% to 7% over 2011; and

In January 2009, we announced projected 2009 performance that would reflect net sales growth in a range of 2% to 3%.

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2012 “adjusted earnings per share-diluted” to increase 9% to 11% (we define “adjusted earnings per share-diluted” as diluted earnings per share of our Common Stock, excluding adjustments as described beginning on page 19 of the 2012 Annual Report to Stockholders that accompanies this proxy statement).

We also announcedincorporated our expectation that 2009 “adjusted earnings per share-diluted,” which we define as diluted earnings per share of our Common Stock excluding adjustments as described beginning on page 19 of the 2009 Annual Report to Stockholders that accompanies this proxy statement, would increase from 2008, but the amount of increase would be below our long-term objective for growth of 6% to 8%. We used these expectations in establishinginto the performance goals set for our 2012 annual incentive program, for 2009, the One Hershey Incentive Program, or OHIP. Growth in adjusted earnings per share-diluted also was included as a performance goal in the long-term incentive program.

Our positive sales and contingent targetearnings momentum continued throughout 2012. We benefited from core brand growth, new product introductions, pricing gains and acquisitions. Our investments in brand building, marketing, advertising and supply chain management contributed to our success in what was otherwise a challenging economic environment. Overall, we achieved:

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Net sales growth of 9.3%; and

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Adjusted earnings per share-diluted of $3.24, an increase of 14.5% over 2011.

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As a result, our executive officers earned above-target annual cash incentive awards under the OHIP for 2012.

Our stockholders have been rewarded as a result of our success. Total shareholder return, or TSR, was 19.6% during 2012, reflecting:

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A 16.9% increase in our stock price during 2012; and

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A dividend yield of 2.2%, which included two increases of over 10% each to our dividend during 2012.

Our TSR of 117.8% for the three years ended in 2012 was at the top of our financial peer group, almost 30 percentage points higher than any other company in our financial peer group and more than triple that of the Standard & Poor’s 500 Index.

This TSR performance, together with the financial performance we generated during 2010, 2011 and 2012, merited substantially above-target payouts of performance stock unit, or PSU, awards made in February 2009. We also incorporated an ability for the Committee to exercise discretion to reduce or increase year-end funding levels for the One Hershey Incentive Program to enable the Committee to assess the quality of results and adjust the final awards based on the Committee’s evaluation of how difficult it was, given unexpected events, to achieve the actual financial results.three-year performance period ended in 2012.

 

During 2009, we experienced strong core brand growth and increased performance in the retail channels due to our focus on brand-building and our marketing and advertising investments. We also secured productivity gains from our global supply chain transformation program and execution of our operating plan. Excluding the impact of acquisitions, this success translated into net sales growth of 3%, adjusted earnings per

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share-diluted of $2.16 and over $750 million of operating cash flow. This performance was well above the targets we established at the beginning of the year. As a result, above-target annual bonuses under the One Hershey Incentive Program were earned by our CEO and all other executive officers for 2009.

Despite above-target results for 2009, due to the significant shortfall in results in 2007, no PSU payments were made to any ofIn July 2012, Ms. Turner joined our senior executives under our long-term incentive program for the 2007-2009 performance cycle. However, the combination of our 2008management team as Senior Vice President, General Counsel and 2009 performance did result inSecretary. We granted a payment for PSUs awarded under the special two-year 2008-2009 performance cycle.

As part of its on-going review of the Company’s compensation programs, the Committee evaluated the Company’s programs which provide benefits for executive officerssign-on bonus and employees in the event of severance or a change in control. As a result of this review, the Committee approved modificationsstock awards to our severanceMs. Turner as an inducement to join Hershey and change in control benefits.to replace awards she forfeited upon leaving her prior employer.

Additional information and analysis regarding these events and actions is provided in the series of questions and answers below.

Who is responsible for our decision-making concerning executive compensation?

The Committee has primary responsibility for decision-making concerning executive compensation. Our CEO’s compensation is approved by the independent members of the Board of Directors based on recommendations of the Committee.

What are the objectives of the Company’sour executive compensation program?

We seek to create a strong alignment between Hershey’sthe interests of our executive officers and its stockholders. We use our stockholders by designing compensation programs to support the Company’sthat help achieve our business strategies, which aim to build stockholder value over the long term. We do this by:

 

Considering industry-specificindustry and broader market practices to establish pay levels that attract, retain and motivate executive talent;

 

TyingCultivating a significant portionhigh performance culture by linking the compensation of our named executive officers directly to Company financial and stock performance, in general, variable compensation to overall Company performance;represented between 65% and 84% of our named executive officers’ target total direct compensation;

 

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Setting challenging individual goals for executives that supportdirectly link each executive’s compensation to the Company’s overall goals and strategies, and linking the executives’ compensation to those measures;strategic goals;

 

Using our Common Stock for long-term incentive compensation to tieensure that a significant amount of the executive officers’ total compensation toearned fluctuates with the long-term market value of our Common Stock; and

 

Requiring substantial stock ownership by all executives.

These actions are described in the discussion that follows.

What is the Company’s executive compensation program designed todo we reward?

We engage our executive officers and employees by creating a high performance culture that recognizes both Company and individual performance. We reward results. We link a

A significant amount of our executive officers’ pay to achievement ofdepends upon achieving our financial goals. We use stock options, PSUs and restricted stock units,If performance falls below our goals, incentive pay will be lower than target or RSUs, for long-term compensation.not paid at all. If we achieve strong financial performance relative to our goals, and our stock price appreciates, our executives will earn significant rewards.rewards from long-term incentives tied to our Common Stock. If our stock price lags, compensation realized under these equity programs will be lowerreduced or eliminated. If our annual financial performance falls below our annual target goals, our executives do not receive awards at target and may not receive any award at all.

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We also reward individual performance and expect our executives to demonstrate the Hershey Values. Achievement of individual performance objectives is considered in the determination of base salary and annual incentive compensation. Based on management’s recommendation, we incorporated a values modifier in the One Hershey Incentive Program to reinforce the expectation that our executive officers and salaried employees globally, consistently demonstrate the Hershey Values. The Company values upon which all employees, including our executive officers, are evaluated support our mission of “Bringing sweet moments of Hershey happiness to the world every day.” One Hershey Incentive Program award payments are decreased by 10% for executive officers reporting to Mr. West who do not demonstrate the Hershey Values. We believe our redesignedOur performance management and compensation programs bettereffectively align all of our employeesemployee performance with respect to Company performance and encourage a results-oriented culture, which brings increased value to our stockholders.

What was the result of the “say-on-pay” vote at our 2012 annual meeting of stockholders? What was our response?

At our annual meeting of stockholders in May 2012, our stockholders overwhelmingly approved our “say-on-pay” resolution with more than 95% of the votes cast by the holders of Common Stock and Class B Common Stock approving the 2011 executive compensation described in our 2012 proxy statement. Our approach to executive compensation in 2012 is substantially the same as the approach stockholders approved in 2011. In keeping with the preference expressed by our stockholders at the 2011 annual meeting of stockholders, our Board has committed to having an annual “say-on-pay” vote (as described beginning on page 83).

Who is responsible for making executive compensation decisions?

The Compensation and Executive Organization Committee of our Board of Directors, or the Committee, has primary responsibility for making executive compensation decisions. Our CEO’s compensation is approved by the independent members of the Board of Directors based on the recommendations of the Committee.

What process does the Committee follow to implement the executive compensation program? How does the Committee use benchmarking in its decision-making?

The Committee operates under a charter approved by the Board of Directors and carries out the responsibilities outlined on pages 17 through 18. The Committee receives studies, reports and other information19 of the proxy statement. Information from itsMercer (US) Inc., or Mercer, the Committee’s independent executive compensation consultant,

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input from our CEO and input(except for matters regarding his own pay) and assistance from our Chief People Officer andinternal compensation specialists is used by the staff of the Company’s Global Total Rewards Department. The Committee uses this information in makingto make decisions and conductingconduct its annual review of the Company’s executive compensation program.

For 2009,The Committee works with a rolling agenda. Its heaviest workload occurs during the first quarter of the year, as decisions are made with respect to annual and long-term incentives earned for the prior year’s performance and it finalizes the design, target-setting and compensation levels for the current year’s base salaries and incentive programs. The Committee also reviews and approves this Compensation Discussion and Analysis. During the second and third quarters, the Committee reviews materials relating to peer group composition, tally sheets, competitive pay analysis and other information that forms the foundation for future decisions. The Committee uses the third and fourth quarters to finalize decisions relating to the peer group and plan design for use in the upcoming year.

Does the Committee use benchmarking in its decision-making? What peer group is used?

The Committee’s annual compensation review for 2012 included an analysis of survey data compiled by Mercer, comparing the Company’s levels of executive compensation levels against a peer group of 41publicly-held consumer products companies and general industry companies in Mercer’s compensation database that we call the Consumer ProductsCompensation Peer Group.

Companies in the Compensation Peer Group peer group, or CPG peer group. Weused to benchmark executive and director pay levels for 2012 were:

Brown-Forman Corporation		Hormel Foods Corporation
Campbell Soup Company		Kellogg Company
ConAgra Foods, Inc.		McCormick & Company, Incorporated
Constellation Brands, Inc.		Molson Coors Brewing Company
Dean Foods Company		Ralcorp Holdings, Inc.
Dr Pepper Snapple Group, Inc.		Sara Lee Corporation
Energizer Holdings, Inc.		The Clorox Company
General Mills, Inc.		The J. M. Smucker Company
H. J. Heinz Company

The Compensation Peer Group companies were selected by the Committee following a review by Mercer of publicly held companies offering products/services similar to ours, with revenue and market capitalization within a reasonable range of our revenue and market capitalization. The 2012 Compensation Peer Group was composed of companies with annual revenues ranging from $3.3 billion to $14.8 billion and market capitalization ranging from $2.2 billion to $24.0 billion (as measured in the second quarter of 2011). When compared to this Compensation Peer Group, Hershey’s annual revenues and market capitalization of $5.7 billion and $12.8 billion, as measured in the second quarter of 2011, were at the 50^th and 83^rd percentiles, respectively. All of the companies in our 2012 Compensation Peer Group were included in our 2011 Compensation Peer Group. Two companies included in 2011, Flowers Foods, Inc. and Del Monte Foods Company, were removed for 2012 based on Mercer’s review and recommendation. Mercer recommended removal of Flowers Foods, Inc. because its revenue fell below the desired range. Del Monte Foods Company was removed because it ceased being a public company during 2011.

Mercer’s benchmarking of senior executive compensation is based primarily on the Compensation Peer Group. Data from the Compensation Peer Group is supplemented by composite data from consumer products companies ranging in size from $3 billion to $15 billion in approximate annual sales. This information is included in three national surveys conducted by Hewitt, Mercer and

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Towers Watson. The use this broadof the survey data because itcomposite provides us with broader, industry-specific information regarding competitive pay levels at consumer products companies not only for our executive officers but also for employees throughoutother officers within the organization. We use this information to assess, or benchmark, our compensation levels to those offered by other companies. A list of these companies appears on the following page. At $5.1 billion for 2008, the Company’s revenues were slightly below the median revenues of the CPG peer group of $5.3 billion. Therefore, Mercer utilized regression analysis to adjust the CPG peer group compensation data for this difference.

In addition to the size-adjusted CPG peer group survey data, Mercer also provided the Committee with an analysis of the financial performance and compensation data for 14 food, beverage and consumer products companies. We refer to this smaller group as our “financial peer group.” We use this group primarily for assessing our Company’s financial performance against the food, beverage and consumer products industry. These companies also represent a more focused set of companies with which we compete for executive talent. Companies in the 2009 financial peer group had a median revenue of $9 billion.

To increase the effectiveness of the financial peer group as a reference for measuring the Company’s financial results, Mercer recommended, and the Committee agreed, to change the financial peer group for 2009 by adding consumer product companies with revenues similar in amount to the Company (Del Monte Foods Company, Dr Pepper Snapple Group, Inc., Hormel Foods Company, The J. M. Smucker Company, McCormick & Company, Incorporated and Molson Coors Brewing Company), while removing companies substantially larger than the Company (The Coca-Cola Company, PepsiCo, Inc. and The Procter & Gamble Company), those being acquired (Anheuser-Busch Companies, Inc. and Wm. Wrigley Jr. Company), and companies that do not produce or manufacture food or beverage products (Colgate-Palmolive Company and The Clorox Company).

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Since the companies in the financial peer group are generally larger than Hershey in terms of revenue, the compensation data for this group are used as secondary reference points for purposes of assessing Hershey’s compensation levels for our executive officers. We do not size-adjust the data because we use the data to assess the actual compensation levels available at the financial peer group companies.Company.

Mercer provided the Committee and Company with a report summarizing executive compensation levels at the size-adjusted 25^th, 50^th and 75^th percentilepercentiles of the CPG peer groupCompensation Peer Group and of the financial peer group. We compared the target compensation we setsurvey composite data for positions comparable to those held by each of our executive officers against these “benchmarks.”officers. The Committee also received an analysis from Mercer comparing the target total cash compensation (base salary plus target annual incentive) and target total direct compensation (base salary plus target annual incentive plus value of long-term incentives) for each of the executive officers against these benchmarks. For retention and competitive considerations, the Company targets each executive officer’s target total cash compensation and target total direct compensation levels to fall withinat the range of the size-adjusted 50^th and 75^th percentile of the CPG peer groupCompensation Peer Group data foror survey composite data applicable to his or her position. The Committee’s final determinations with respect to base salary, target annual incentive compensation and target long-term incentive compensation reflect consideration of the Company’s and the executive officer’s performance, internal comparisons and other factors. The amountAs a result of these factors, the target total cash compensation and target total direct compensation of our named executive officer receives depends upon actual Companyofficers in 2012 generally fell between the 25^th and individual performance.65^th percentiles.

Companies included in the 2009 CPG peer group are as follows:

Anheuser-Busch Companies, Inc.		International Dairy Queen, Inc.		S. C. Johnson & Son, Inc.
Arby’s Restaurant Group, Inc.		Interstate Bakeries Corporation		Sara Lee Corporation
Bob Evans Farms, Inc.		Jack in the Box Inc.		Smithfield Foods, Inc.
Burger King Holdings, Inc.		Kellogg Company		The Coca-Cola Company
California Pizza Kitchen, Inc.		Kimberly-Clark Corporation		The Estée Lauder Companies Inc.
Chiquita Brands International, Inc.		Land O’Lakes, Inc.		The Schwan Food Company
Colgate-Palmolive Company		Mars North America		Tyson Foods, Inc.
ConAgra Foods, Inc.		McDonald’s Corporation		Unilever United States, Inc.
Darden Restaurants, Inc.		Nestlé USA, Inc.		Welch Foods Inc.
Del Monte Foods Company		Pernod Ricard USA, LLC		Wells’ Dairy, Inc.
Dunkin’ Brands, Inc.		Ralcorp Holdings, Inc.		Wendy’s International, Inc.
Energizer Holdings, Inc.		Reckitt Benckiser, Inc.		Wm. Wrigley Jr. Company
Farmland Foods, Inc.		Reynolds American Inc.		Yum! Brands, Inc.
H.J. Heinz Company		Rich Products Corporation

Companies included in the 2009 financial peer group are as follows:

Cadbury plc		General Mills, Inc.		McCormick & Company, Incorporated
Campbell Soup Company		H.J. Heinz Company		Molson Coors Brewing Company
Dean Foods Company		Hormel Foods Corporation		Sara Lee Corporation
Del Monte Foods Company		Kellogg Company		The J. M. Smucker Company
Dr Pepper Snapple Group, Inc.		Kraft Foods Inc.

What other information does the Committee consider when making executive compensation decisions?

In addition to surveythe benchmark and other data relating to the competitive landscape data, the Committee also receives and considers compensation-related“tally sheet” information (as described below) relating to the CEO and each member of the senior leadershipexecutive team. Much of this information is reflected on pages 6260 through 8382 of this proxy statement.

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During 2009,2012, the Committee received detailed tally sheets prepared by management and reviewed by Mercer. Each tally sheet captures comprehensive compensation, benefits and stock ownership data for each member of the senior executive team, including the CEO. The tally sheets provide the Committee with a complete picture of each executive’s current and projected compensation and the amount of each element of compensation or other benefit the executive would receive in the event of voluntary or involuntary termination, retirement, disability or death. The Committee considers this information, as well as the benchmark information, when making compensation decisions.

Do costs and tax rules play a role?

An important factor in the Committee’s deliberations is the anticipated cost of the various components of executive compensation. Accounting treatment is also taken into consideration in the design and implementation of the annual and long-term incentive programs.

Section 162(m) of the Internal Revenue Code, (Code)or IRC, limits the Company’s ability to deduct certain compensation in excess of $1 million paid to our CEO or to other named executive officers. This limitation does not apply to our CFO, to compensation paid after termination of employment or to compensation that qualifies as “performance-based” under applicable regulations as “performance-based.”Internal Revenue Service regulations. The Committee has considered the effect of section 162(m) of the IRC on the Company’s executive compensation program. It is the Committee’s opinion that, in administering the “performance-based”incentive compensation components of the Company’s executive compensation program, (the annual incentive program, stock options and PSUs described below), it will attempt to satisfy the requirements for deductibility under section 162(m). of the IRC. However, the Committee is authorized to exercise discretion in structuring incentive compensation awards and in determining payments in relation to levels of achievement of performance goals and

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believes that the total compensation program for executive officers should be managed in accordance with the objectives outlined in the Company’s compensation philosophy and in the best overall interests of the Company’s stockholders. Accordingly, some compensation paid by the Company may exceednot be deductible because such compensation exceeds the limitations, or does not meet the “performance-based” or other requirements, for deductibility under section 162(m). of the IRC.

Section 409A of the Code prescribesIRC specifies certain rules and limitations uponregarding the operation of our deferred incentiveDeferred Compensation Plan and other compensation plans.retirement programs. Failure to comply with these rules could subject participants in those plans and programs to additional income tax and interest penalties. During 2008, we updatedWe believe our plans and programs to the extent we believed necessary for compliancecomply with section 409A based on rules and interpretations relating to section 409A as published through the end of the year.

What role does the Committee have with respect to incentive programs and the compensation of employees beyond the executive officers?

The Committee reviews and approves the design of various incentive programs maintained throughout the Company and total incentive awards, if any, paid out under those programs. In some instances, the incentive programs are extensions of the annual or long-term incentive programs in which the executive officers participate. All salaried employees globally participate in the One Hershey Incentive Program and hourly employees in our manufacturing facilities participate in a Manufacturing Incentive Program or Quality Retention Program. For 2009, in keeping with our “One Hershey” focus each of these incentive programs included performance metrics tied to Company-wide financial performance. These programs also placed significant emphasis on customer, production, quality and safety measures.

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IRC.

What are the individual components of the executive compensation program and why does the Company choose to pay them?use these components of pay? What percentage of the named executive officers’ target compensation is dependent on performance?

Our core executive compensation program includes three key components: baseelements as summarized in the following table.

Element		Purpose		Percent of Named Executive Officers’ Target Total Direct Compensation (%)
Base salary		•    Foundation of overall pay package •    Attract and retain executives with proven skills and leadership abilities that will enable us to be successful		16 to 33
One Hershey Incentive Program (Annual Cash Bonus)		•    Variable compensation tied to achievement of short-term (annual) financial goals •    Reward executives for successful execution of strategic priorities		19 to 21
Long-Term Incentive Awards (PSUs and Stock Options)		•    Performance-oriented pay that rewards long-term financial performance and stockholder value creation •    Longer-term vesting and payment provisions balance compensation opportunity and risk and encourage sustained performance and retention		47 to 64

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The following charts illustrate the target total direct compensation of our CEO and benefits, an annual cash incentive program and a long-term incentive program consisting of stock-based awards. The total compensation package provided by the Company (including pension benefits, supplemental retirement benefits and other benefits) is considered by the Committee when determining each component of anour named executive officer’s compensation.officers.

Base salary and related benefits are the foundation of the overall pay package. We set base salaries and establish benefit programs primarily to attract and retain executives with proven skills and leadership abilities that will enable us to be successful. Annual and long-term incentives – variable or “at-risk” pay – play an important role in motivating executive performance and in aligning executive pay opportunities with the interests of stockholders. The variable or at-risk elements are designed to reward the achievement of both short- and long-term goals. The long-term incentives link a significant portion of each executive officer’s total compensation directly to long-term Company performance versus internal objectives, to individual performance evaluations, and to relative total stockholder return. At the executive officer level, at-risk pay often will represent 60% to 80% of the executive’s total target compensation.

How are base salaries determined?

We set theThe initial base salary for a new executive officer based upon an evaluation ofreflects his or her responsibilities and experience, as well as upon the salaries paid by other companies for comparable executive talent and consideration of the base salary necessary to recruit the individual to Hershey. We apply aA similar approach is applied when adjusting an executive’s base salary in response to reflect a promotion or significant change in job responsibilities.

Salary reviews for incumbent officers are generally conducted annually at the beginning of eachthe year. TheEach executive officer’s base salary is benchmarked againstcompared to the range of the 5025^th to 75^th percentilepercentiles of the base salary level for the comparable position at the companies in our size-adjusted CPG peer group.Compensation Peer Group and the survey composite. Base salaries are targeted at the median, or 50^th percentile. Base salary adjustments, if any, are made after considering peer group comparisons, Company performance against financial goals, and individual executive performance as evaluated by the Committee and independent members of the Board in the case of our CEO, or by the CEO in the case of other members of the leadership team. If an executive officer has responsibility for a particular business unit, the business unit’s financial results also will be strongly considered.

Each executive officer’s base salary has been targeted to be atOn the 50^th percentile levelbasis of his or her counterpartsthe foregoing considerations, the Committee, and all independent directors in the size-adjusted CPG peer group. In anticipationcase of increases in our cost structure caused by continuing volatility in commodities and the uncertainties in the broader global economy in 2009, Mr. West and the executives reporting directly to him, collectively recommended to the Committee that they be given no merit increasesCEO, approved base salaries for 2009. The Committee concurred with this recommendation and approved no base salary increase for Messrs. Alfonso, Bilbrey, O’Day and Snyder for 2009. The adjustment made to Mr. Bilbrey’s base salary in mid-2008 resulted in a difference in his annual base salary for 2008 versus 2009,2012 as reportedfollows:

Name		2012 Base  Salary					% Increase from 2011
J. P. Bilbrey			$	1,091,800			3.0%
H. P. Alfonso				600,000			4.3%
M. G. Buck				505,000			4.1%
T. L. O’Day				515,000			4.8%
L. M. Turner				475,000			—(1)

(1)	Ms. Turner joined the Company in July 2012.

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See Column (c) of the Summary Compensation Table beginning on page 62. Based upon the recommendation of the Committee, the independent directors of the Board approved continuing Mr. West’s 2009 base salary at the same level as 2008. See Column (c) of the Summary Compensation Table60 for information regarding the base salary earned by each of our named executive officers during 2009.

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2012.

How is the Company’s annual incentive program designed? How are target annual incentive amounts and required performance goals established?

Our executive officers, as well as all other salaried employees globally, are eligible to receive an annual cash incentive award under the annual incentive program, which we refer to as the One Hershey Incentive Program, or OHIP, of theour stockholder-approved Equity and Incentive Compensation Plan, which we refer to in this section as the EICP or Incentive Plan.

Our philosophy in setting One Hershey Incentive Program objectives is to link,The OHIP links, where appropriate, the executive’s payout opportunity directly to measures he or she can affect most directly. OurFor 2012, our CEO and all executive officers reporting directly to him (including the named executive officers) havehad common financial objectives tied to total Company performance consistent with their responsibility to manage the entire Company. Total Company and not specific business units. The Committee emphasizes a limited number of goals to better focus actions on identified, strategic business objectives. Performanceperformance targets are established in the context of our announced expectations for financial performance, prior year results and market conditions. LittleNominal or no incentive compensation is payablepaid for missing targets andwhile an appropriate and competitive degree of upside is included to motivate and reward above-target performance.

In 2009,2012, participating executive officers were eligible to earn individual One Hershey Incentive ProgramOHIP awards, expressed as a percentage of base salary, based oncontingent upon attainment of Company and except for Mr. West, individual performance objectives. The percentages for meetingIf target performance levels were 70% for Mr. Alfonso, 75% for Mr. Bilbrey, 60% for Messrs. O’Day and Snyder, and 100% for Mr. West. are achieved, each of the named executive officers would be eligible to receive an annual incentive award based on the following target percentages:

Name				2012 Target One Hershey Incentive  Program Percentage     (% of Base Salary)
J. P. Bilbrey				120%
H. P. Alfonso				75%
M. G. Buck				75%
T. L. O’Day				65%
L. M. Turner				60%

In determining the target percentage for each of the executive officers, the Committee compared the level of target total target cash compensation (base salary and target One Hershey Incentive Program percentage)OHIP award) to the benchmark range of the size-adjusted 50^th to 75^thmedian percentile level offor his or her counterparts in the CPG peer group.Compensation Peer Group, the survey composite or a blend of the two. For each of the named executive officers, the target total cash compensation generally fell between the 25^th and 65^th percentiles of target total cash compensation for comparable positions.

The final award earned under the One Hershey Incentive ProgramOHIP by participating executive officers with the exception of Mr. West, is determined by multiplying the executive officer’s base salary, the applicable target percentage, and performance scores ranging from 0% to 200% based on Company performance and individual performance against the established performance goals.individual objectives, which are called Strategic Bonus Goals, or SBGs. The Company performance goals are established at the beginning of each year by the Committee. Individual performance goalsSBGs also are also established at that time. If performance scores exceed the objectives, an individual executive officer mightmay receive more than his or her target percentage and, ifpercentage. If scores are below target, the executive’s One Hershey Incentive ProgramOHIP payout will be below his or her target percentage, subject to no award if performance is below threshold levels.

In establishing the 2009 One Hershey Incentive Program, the Committee approved changes to the design of the annual incentive program for For executive officers with the exception of Mr. West. Under the One Hershey Incentive Program, a portion of each executive officer’s incentive award payment is based upon achievement of individual Strategic Bonus Goals in addition to the achievement of Company financial metrics. For executive officers,2012, the weighting of Company financial performance metrics accountsaccounted for 75%65% of their target award under the program. The remaining 25%35% of the target award was based upon individual performance toward achievement of up to five Strategic Bonus Goals. SBGs.

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The Committee recommended and the independent directors approved no changes to the structure of Mr. West’s 2009 annual incentive target award. The Committee determined Mr. West’s annual incentive should continue to be based entirely upon the achievement65%/35% weighting of Company financial results. Underperformance and individual performance reflected a change from the One Hershey Incentive Program,75%/25% split used in prior years. The Committee raised the funds allocated for paymentSBG weighting to increase focus upon execution of the component of the annual incentive program awards for 2009 for all employees excluding Mr. West, based upon the Company’s financial performance metrics were subject to increase or decrease up to 30% based upon the Committee’s discretion. The Committee

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retained the flexibility to reduce or increase One Hershey Incentive Program funding levels based on the quality of results achieved and adjust final awards based on the Committee’s evaluation of how difficult it was, given unexpected events, to achieve the actual financial results. Based upon the recommendation of the Committee, the independent directors of the Board provided that funds allocated for payment of Mr. West’s bonus could be increased or decreased up to 30% based upon the discretion of the independent directors of the Board. The maximum performance score for our executive officers without adjustment to the Company financial performance score for 2009 was 200%. The maximum performance scoring for the executive officers (other than Mr. West) and for Mr. West in the event the Committee or independent members of the Board made a maximum adjustment to the Company financial performance score was 245% and 260% respectively.

The Committee also approved the inclusion of a values modifier in the One Hershey Incentive Program award calculations for executive officers, excluding Mr. West. One Hershey Incentive Program award payments for 2009, if any, were subject to a 10% reduction for any executive officer judged to need to improve upon his or her adherence to the Hershey Values. In 2009, all of the executives reporting to Mr. West, including all of the named executive officers, demonstrated the Hershey Values. Therefore, no reduction for the values modifier was made to the 2009 One Hershey Incentive Program awards for any of the executives reporting to Mr. West.top strategic priorities.

What were the performance targets under the 2009 One Hershey Incentive Program?2012 OHIP? Were they achieved? What were the final One Hershey Incentive Program awardsOHIP payouts for 2009?2012?

The Committee determined that the financial performance metrics for our executive officers’ One Hershey Incentive ProgramOHIP awards should be consistent withreflected our “pay for performance”results-oriented, pay-for-performance compensation philosophy. The corporateCompany performance objectives for 2009 One Hershey Incentive Programthe 2012 OHIP participants were centered aroundon the following targets: adjusted

Consolidated net sales of $6.543 billion, a 7.6% increase from 2011;

Adjusted earnings per share-diluted of $1.94 (weighted 40%), consolidated net sales$3.10, a 9.5% increase from 2011; and

Operating cash flow of $5.24 billion (weighted 40%) and$885 million, a level representing achievement of 101.6% of the strong operating cash flow of $587 million (weighted 20%). The targets were based on the Company’s 2009 business plan and goals, which called for adjusted earnings per share-diluted of $1.88 to $2.00 and net sales growth of 2% to 3%. Operating cash flow replaced free cash flow as a metric. Free cash flow is defined as cash from operations, excluding cash flows associated with derivative instruments, less capital expenditures and dividends.generated in 2011. Operating cash flow is defined as the average of cash from operations less pension contributions and commodities hedging transactions, measured in five 12-month periods ending on December 31, 2008, April 5, 2009, July 5, 2009, October 4, 2009the last day of fiscal year 2011 and December 31, 2009. The Committee made the change to reinforce continued emphasis on working capital improvementeach quarter of fiscal year 2012.

We achieved above-target performance in net sales and cash required for capital investments in 2009, including those associated with its global supply chain transformation program.

Excluding the impact of acquisitions that were not included in the performance goals established at the start of 2009 for the One Hershey Incentive Program, our financial performance during 2009 was $2.16 adjusted earnings per share-diluted consolidated net salesand achieved 94% of $5.29 billion andtarget for operating cash flow of $756.3 million. This resulted in a combined Companyflow. Our financial performance score of 167.98% againstduring 2012 and the established performance goals. Based on these results, the Committee recommended to the independent directors as a group that Mr. West’s 2009 One Hershey Incentive Program award be approved at $2,267,730, reflecting a full 30% Companyresulting financial performance adjustment in recognition of Mr. West’s leadership in the achievement of earnings and cash flow well above maximum expectations, while devoting significant time and effort examining and evaluating potential merger and acquisition transactions. The independent directors approved the Committee’s recommendation.scores were as follows:

 

Metric		2012 Target ($)				2012 Actual ($)				Target   Award  (%)				Performance Score (%)
Net Sales			6.543 billion				6.644 billion				50.00				72.47
Adjusted Earnings per Share-Diluted			3.10				3.24				40.00				76.75
Operating Cash Flow			885 million				829 million				10.00				0.00
Total One Hershey Incentive Program Company Score											100.00				149.22

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TheFor 2012, 65% of the OHIP award underfor each of the One Hershey Incentive Program for the other named executive officers was based 75% on the Company performance score with theof 149.22%. The remainder of the OHIP award was determined by individual performance ratings based on attainmentachievement of individual Strategic Bonus GoalsSBGs and adherence to our Company values. In 2012, all of the Hershey Values. In February 2009,named executive officers demonstrated our Company values and no reductions were made for the values modifier.

The individual Strategic Bonus GoalsSBGs and weightings were approved by Mr. West for each of the named executive officers other than Ms. Turner were established in February 2012 based on the officer’s strategic objectives for 2009. each officer tied to our top priorities for the year. Ms. Turner’s SBGs were established shortly after she joined the Company in July 2012.

Following the close of 2009,2012, the Committee provided the independent directors with an assessment and scoring of Mr. WestBilbrey’s performance, and Mr. Bilbrey provided the Committee with his assessment and scoring of each named executive officer’s performance relative to these performance goalsgoals. Each of our named executive officers produced successful or top-tier achievement against his or her 2012 SBGs, meriting scores above 100%.

The SBGs for Mr. Bilbrey centered on growth in our North American business coupled with expansion in focus geographies, talent and leadership initiatives, succession planning and insights-driven performance. Based upon our overall strong financial results and execution

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evidenced by solid performance in North America, growth in key geographies and portfolio expansion, strategic leadership in development of our talent and organizational structure, and the officer’s demonstrationsuccess of our insights-driven performance strategy, the Committee recommended to the independent directors, and the independent directors agreed, that Mr. Bilbrey earned an individual performance score of 200%.

The SBGs for Mr. Alfonso, our Executive Vice President, Chief Financial Officer and Chief Administrative Officer, included integration of our new general ledger and financial analysis database to support financial reporting and decision-making, a leadership role in the analysis and structuring of financing and acquisition-related initiatives, and talent development. Based upon successful integration of the Hershey Values.ledger and financial analysis database, his leadership relating to enhancing our capabilities with respect to acquisitions and contributions to the execution of acquisition transactions and integration, Mr. Bilbrey recommended, and the Committee agreed, that Mr. Alfonso earned an individual performance score of 145%.

For Mr. Alfonso,Ms. Buck, our Senior Vice President, Chief FinancialGrowth Officer, the individual performance goals focusedSBGs centered on enhancing financial forecastingexpansion in global focus markets, expansion of our consumer-centric portfolio in key geographies and planning, implementing certain financial process improvements, safeguardingtalent development. Based upon successful redesign of our global research and development, or R&D, organization, including the Company’s credit rating, improving cost reduction processeslaunch of our new R&D center in China, and enterprise risk management. Based onthe development of talent to implement our strategic initiatives, Mr. Alfonso’s effortBilbrey recommended, and achievement in the areas of cash management, enterprise risk management and financial process improvements, he was awardedCommittee agreed, that Ms. Buck earned an individual performance score of 130%145%. Based on the 75% weighting of the Company financial score and the 25% weighting of his individual performance score, the Committee approved a 2009 One Hershey Incentive Program award for Mr. Alfonso of 158% of his One Hershey Incentive Program target.

For Mr. Bilbrey, our Senior Vice President, President Hershey North America, the individual performance goals centered on delivery of the 2009 North American financial plan, achievement of pricing levels, focus on strategic growth brands, optimizing direct marketing expense and leveraging organization capabilities. Based on Mr. Bilbrey’s effort and achievement in the areas of sales growth, price conversion and strategic brand development, he was awarded an individual performance score of 160%. Based on the 75% weighting of the Company financial score and the 25% weighting of his individual performance score, the Committee approved a 2009 One Hershey Incentive Program awardThe SBGs for Mr. Bilbrey of 166% of his One Hershey Incentive Program target.

For Mr. O’Day, our Senior Vice President, Global Operations, the individual performance goals centered on improving the supply chain network, consistent product quality and safety throughout the global network, delivery of global product plan, enhancing effectiveness of global operationsProject Next Century objectives and personnel management. Based on Mr. O’Day’s effort and achievement in the areas of customer service, completionoptimization of the global supply chain transformation programoperations network. Based on the achievement of our Project Next Century objectives and process improvements, he was awardedthe resulting positive impact on our financial results for 2012, and the expansion of our global operations network, Mr. Bilbrey recommended, and the Committee agreed, that Mr. O’Day earned an individual performance score of 150%170%. Based on the 75% weighting of the Company financial score and the 25% weighting of his individual performance score, the Committee approved a 2009 One Hershey Incentive Program award for Mr. O’Day of 163% of his One Hershey Incentive Program target.

For Mr. Snyder, ourMs. Turner, who joined us as Senior Vice President, General Counsel and Secretary in July 2012, the individual performance goalsSBGs centered on legal support for strategic initiatives, litigation risk management, electronic discovery, riskcorporate governance, talent management and special projects.development of a robust global ethics and compliance program. Based upon progress achieved on projects initiated during her short tenure with the Company, Mr. Snyder’s effortBilbrey recommended, and achievement in the areas of legal support of the Company’s strategic business initiatives and his work in 2009 on Board-designated special projects, he was awardedCommittee agreed, that Ms. Turner earned an individual performance score of 140%115%.

Based on the 75% weighting ofupon a 65% weight for the Company financial score of 149.22% of target and the 25% weighting of hisa 35% weight for their individual performance score,scores, our named executive officers earned the Committee approved a 2009 One Hershey Incentive Program award for Mr. Snyder of 161% of his One Hershey Incentive Program target.following 2012 OHIP awards:

2012 One Hershey Incentive Program Awards
Name		Award Target (%)		Award Target ($)		Company Financial Performance Score (65% Weighting) (%)		Individual Performance Score (35% Weighting) (%)		Combined Percent of Target Earned (%)		2012 OHIP Award ($)
J. P. Bilbrey		120		1,310,160		149.22		200		166.99		2,187,876
H. P. Alfonso		75		450,000		149.22		145		147.74		664,843
M. G. Buck		75		378,750		149.22		145		147.74		559,577
T. L. O’Day		65		334,750		149.22		170		156.49		523,860
L. M. Turner		60		137,019		149.22		115		137.24		188,049

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See Column (g) of the Summary Compensation Table for information relating to the amount of One Hershey Incentive ProgramOHIP payments made to the named executive officers.

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In addition to a payment under the OHIP, Ms. Turner also received a sign-on bonus in the amount of $50,000 at the time she joined us in July 2012 and a bonus of $100,000 at the time her OHIP payment was made. These bonus payments were made to induce Ms. Turner to join us and to make up for compensation Ms. Turner forfeited as a result of leaving her prior employer. These payments are reflected in Column (d) of the Summary Compensation Table.

What are the elements of the long-term incentive program?

To date, we have usedWe use awards of PSUs, stock options and RSUs to provide long-term incentive compensation.compensation that aligns the interests of our executives with our stockholders. These awards are made under the long-term incentive program of the Incentive Plan. The Committee customarily awards the long-term incentive awards,grants, including stock options, to executive officers and various other management and professional employees in February of each year, two to three weeks afterfollowing the release of fourth quarter and full-yearannual financial results.

The Committee, and the independent directors in the case of our CEO, determines the amountvalue of long-term incentive awards made to an executive officer by comparing the executive’s target total direct compensation (the sum of base salary, target One Hershey Incentive ProgramOHIP award and the value of the long-term incentive award) to the 50^th to 75^thpercentile level of target total direct compensation of his or her counterparts in the size-adjusted CPG peer group. Compensation Peer Group and survey composite data. The target award percentages approved in February 2012 (and July 2012 for Ms. Turner), expressed as a percentage of base salary, were:

Name				Target Long-Term Incentive Award  Percentage     (% of Salary)
J. P. Bilbrey				400
H. P. Alfonso				210
M. G. Buck				190
T. L. O’Day				170
L. M. Turner				140

In determining the value of the long-term incentive awards, the Committee values PSUs using the average of the daily closing prices of the Company’s Common Stock in the December preceding the start of the performance cycle. The Committee values RSUs using the fair market valueclosing price of our Common Stock aton the timeNew York Stock Exchange on the date of the award and values stock options using the value of the stock options at the date of grant as determined for financial reporting purposes (the Black-Scholes value). Overall, after taking into account the long-term incentive awards made in 2009,2012, the target total direct compensation of our named executive officers was generally between the 5030^th and 7560^th percentilepercentiles of total direct compensation of executives employed byfor the size-adjusted CPG peer groupcomparable positions in similar positions.the Compensation Peer Group and survey composite data.

How were theare PSU awards vesting in 2009 structured? What performance goals wereare used? What were the results at year-end 2009?2012?

PSUs are granted to those executive officers and other senior officersexecutives in a position to affect the Company’s long-term results. PSUs have been awarded annually and, with the exception of the special 2008-2009 performance cycle described below, are earned based upon the Company’s performance over a three-year cycle. Each year begins a new three-year cycle.

At the start of each three-year cycle, a contingent target number of PSUs is established for each executive. This target is expressed as a percentage of the executive’s

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annual base salary and determined as part of a total compensation package based on size-adjusted CPG peer groupthe applicable Compensation Peer Group and survey composite benchmarks. The PSU award generally represents approximately one-half of the recipient’s long-term incentive portioncompensation target award. Dividends are not paid on PSU awards during the three-year performance cycle.

The performance objectives for the 2010-2012 performance cycle awarded in 2010 were based upon the following metrics:

Three-year relative TSR versus the Financial Peer Group (described below);

Three-year compound annual growth in adjusted earnings per share-diluted measured against an internal target; and

Annual (as opposed to three-year) growth in adjusted earnings per share-diluted measured against an internal target for each year of the three-year performance cycle.

The Committee selected these metrics to measure performance against internal targets aligned with our stockholders’ interests and investment returns offered by our peer companies. Based on input from Mercer, the Committee selected 14 food, beverage and consumer products companies with a median revenue of $7.9 billion, for use in assessing our Company’s 2010-2012 TSR against the food and beverage industry. We refer to these companies as our Financial Peer Group. The Financial Peer Group is a high-performing group of companies with whom we compete for investors in the food and beverage industry.

Companies included in the 14-member 2010 Financial Peer Group were:

Cadbury plc		Hormel Foods Corporation
Campbell Soup Company		Kellogg Company
Dean Foods Company		Kraft Foods Inc.
Del Monte Foods Company		McCormick & Company, Incorporated
Dr Pepper Snapple Group, Inc.		Molson Coors Brewing Company
General Mills, Inc.		Sara Lee Corporation
H. J. Heinz Company		The J. M. Smucker Company

Due to the acquisition of Cadbury plc by Kraft Foods Inc. in 2010, the privatization of the Del Monte Foods Company in 2011, and the spin-offs by Kraft Foods Inc. and Sara Lee Corporation during 2012, the Committee removed these companies from the Financial Peer Group for the purpose of measuring three-year relative TSR for the 2010-2012 performance cycle and, to the extent applicable, the 2011-2013 and 2012-2014 performance cycles.

The Committee approves the annual adjusted earnings per share-diluted target for each year of the three-year performance cycle at the beginning of the performance year. The annual component allows the Committee to establish performance targets that year’sreflect current business conditions, thus strengthening the link between pay and performance for each year of the three-year cycle. Payment of any amounts earned, including amounts based on the annual performance goals, will be made in shares of our Common Stock at the conclusion of the three-year performance cycle. The maximum award for any participant in a performance cycle is 250% of the contingent target total direct compensation package.award.

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Targets for the 2010-2012 performance cycle and the Company’s TSR and financial performance during the 2010-2012 performance cycle were as follows:

2010-2012 PSU Performance Cycle
Metric		Target (Increase vs. Prior Year Actual Performance)				Actual Performance (Increase vs. Prior Year)				Target Award (%)				Performance Score (%)
Total Shareholder Return (TSR)			50th Percentile				100th Percentile				50.00				125.00
Three-year Compound Annual Growth Rate (CAGR) in Adjusted Earnings per Share-Diluted			7.0% CAGR				14.3% CAGR				12.50				31.25
2010 Adjusted Earnings per Share-Diluted			$2.34 (7.8% increase)				$2.55 (17.5% increase)				12.50				31.25
2011 Adjusted Earnings per Share-Diluted			$2.76 (8.2% increase)				$2.82 (10.6% increase)	(1)			12.50				15.00
2012 Adjusted Earnings per Share-Diluted			$3.10 (9.5% increase)	(1)			$3.24 (14.5% increase)	(1)			12.50				23.99
Total											100.00				226.49

(1)

In 2012, the Company began excluding non-service related pension costs from the calculation of adjusted earnings per share-diluted. We believe that by excluding non-service related pension costs we are providing investors with a better understanding of the underlying profitability of our ongoing business. For 2011, the adjusted earnings per share-diluted excluding the non-service related pension costs was $2.83. For 2012, the target and actual adjusted earnings per share-diluted excluding the non-service related pension costs was $3.10 and $3.24, representing an increase over the comparable value in 2011 of 9.5% and 14.5%, respectively.

At the endconclusion of each three-year cycle,and annual performance period, the Committee reviews whether the Company haslevel of performance achieved the established performance objectives to determineand the percentage, if any, of the applicable portion of the target number of PSUs earned, which may range from 0% to 250% of target depending upon performance.earned. In determining whetherthe final performance objectives have been achieved, specificcycle score, negative adjustments may be made by the Committee to the Company’s performance score to take into account extraordinary or unusual items occurring during the cycle.period. No adjustments were made in determining the 226.49% performance score or the number of PSUs earned by our named executive officers for the 2010-2012 performance cycle described above.

The performance objectives for the three-year 2007-20092011-2013 performance cycle and 2012-2014 performance cycle were based upon two equally-weightedthe following metrics:

 

(1)•

The Company’s three-year compound annual growth in adjusted earnings per share-diluted measured against an internal

Three-year relative TSR versus the Financial Peer Group with target based on a long-term financial goal of 9% to 11% annual growth; andrequiring 50th percentile performance;

 

(2)

The Company’s total stockholder return, or TSR, over the three-year period measured against the TSR for the financial peer group.

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Due to the 2007 financial results, the Company’s performance during the 2007-2009 performance cycle resulted in a compound annual decline in adjusted earnings per share-diluted (excluding the impact of acquisitions) of 3.1%, significantly below the target growth rate of 8.7%. Three-year relative Company TSR was at the 18.6 percentile, placing the Company below the threshold level (35^th percentile of our peer companies) required to earn an award for the 2007-2009 performance cycle. As a result, management recommended and the Committee concurred that no payment with respect to the 2007-2009 performance cycle would be made to Mr. West or any of our other executive officers.

In February 2008, the Committee approved additional contingent target PSU awards with a two-year 2008-2009 performance cycle for all active executives participating in the 2007-2009 performance cycle with the exception of Mr. West. The Committee recommended and the independent directors approved a contingent target PSU award for the 2008-2009 performance cycle for Mr. West on the same basis as other executives participating in this performance cycle. The special awards were made to aid in retention of these executive officers as the potential retention value of the 2007-2009 PSUs was diminished in light of the Company’s 2007 financial performance. The 2008-2009 performance cycle PSU awards were based on achieving two-year compound annual growth in adjusted earnings per share-diluted in line with the upper end of the expected adjusted earnings per share-diluted range of $1.85 to $1.90 for 2008, coupled with improvement in 2009. The maximum payout from the cycle was 150% of target. Based upon compound annual growth in adjusted earnings per share-diluted (excluding the impact of acquisitions) of 1.9% during the two-year performance period, 150% of target PSUs were earned and paid to the executives in February 2010. To prevent possible duplication, any PSUs earned under the original 2007-2009 performance cycle would have reduced the total PSUs earned for the 2008-2009 performance cycle.

As a condition to receiving the additional contingent target PSU award for the 2008-2009 performance cycle, the executive officers were required to sign an Executive Confidentiality and Restrictive Covenant Agreement, or ECRCA. The terms of the ECRCA prohibit the executive from disclosing the Company’s confidential information, competing with the Company in specific categories for a period of 12 months following termination of the executive’s employment, recruiting or soliciting the Company’s employees, or disparaging the Company’s reputation in any way. All executive officers were required to sign a new ECRCA at the start of 2009 as a condition to receiving future equity awards from the Company. New executive officers are required to sign the ECRCA as a condition of employment. The ECRCA supersedes the Long-Term Incentive Program Participation Agreement previously signed by each executive upon appointment or election. Mr. West was not required to sign the ECRCA because he is bound by non-disclosure, non-competition, non-solicitation and non-disparagement provisions under his employment agreement.

See Columns (f) through (h) of the Grants of Plan-Based Awards table on page 66, Columns (i) and (j) of the Outstanding Equity Awards table on page 68 and Columns (d) and (e) of the Option Exercises and Stock Vested table on page 70 for more information about PSUs awarded to the named executive officers.

How were the contingent target PSU grants for the 2009-2011 performance cycle designed? What performance targets were set?

In February 2009, the Committee established a modified design for the 2009-2011 performance cycle based upon Mercer’s recommendations. Awards for the 2009-2011 performance cycle are based upon the following metrics: three-year relative TSR versus the financial peer group (50% of the target award); three-year compound annual growth in adjusted earnings per share-diluted

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measured against an internal target (12.5%consistent with our long-term financial goal of the target award); and6% to 8% annual growth;

Annual (as opposed to three-year) growth in adjusted earnings per share-diluted measured against an internal target for each year of the three-year performance cycle (12.5%with target performance consistent with our growth expectations at the start of the target award per year). year; and

For the 2012–2014 performance cycle, three-year compound annual growth in organic net sales outside the United States and Canada, measured against an internal target.

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The metrics approved by the Committee for TSR provide target-level awards for achieving performance at the median (50^th percentile)relative weighting of the financial peer group. Targetsperformance metrics is set forth in the table below.

2011-2013 and 2012-2014 PSU Performance Cycles
		Weighting
Metric		2011-2013 (%)				2012-2014 (%)
Total Shareholder Return (TSR)			50.00				50.00
Three-year Compound Annual Growth Rate (CAGR) in Adjusted Earnings per Share-Diluted			12.50				15.00
Annual Adjusted Earnings per Share-Diluted for each year			12 1/2 / year				6 2/3 / year
Three-year Compound Annual Growth Rate (CAGR) in Organic Net Sales outside the United States and Canada			—				15.00
Total			100.00				100.00

The Committee introduced organic net sales growth outside of the United States and Canada as a performance metric for the 2012-2014 performance cycle in recognition of our compound three-year and 2009 annualstrategic initiatives emphasizing the contributions that international sales growth rate incan make to our long-term success.

The actual Company results for 2012 of $3.24 of adjusted earnings per share-diluted reflected our publicly-announced financial expectations of growth below our long-term goals of 6% to 8%. Excluding the impact of acquisitions, actual Company results for 2009 of $2.16 adjusted earnings per share-diluteda 14.5% increase from 2011 and exceeded the 2012 target setof $3.10. As a result, 23.99% of the final award was earned for 2009 adjusted earnings per share-diluted. Payment, if any,this metric in the 2011-2013 performance cycle. As a result of the difference in weighting, 12.80% of the final award was earned for awardsthis metric in the 2012-2014 performance cycle. These PSUs will be made in sharespaid at the end of each of the Company’s Common Stock atapplicable three-year performance cycles to participating executives who are entitled to payouts under the conclusionterms of the three-year performance cycle. The Committee will approve the targets for the annual adjusted earnings per share-diluted metrics for the second and third years in the performance cycle at the beginning of those years. The Committee believes the annual setting of targets for a portion of the performance cycle provides a stronger link between performance and payout in that the Committee can set performance targets for a portion of the award that reflects current business conditions at the start of each year. The maximum award for any participant in the 2009-2011 performance cycle is 250% of the contingent target award.

On February 16, 2009, the Committee approved contingent target awards of PSUs under the Incentive Plan for the 2009-2011 performance cycle for the executive officers with the exception of Mr. West. On February 17, 2009, the independent directors as a group approved the Committee’s recommendation for a contingent target award of PSUs for the 2009-2011 performance cycle for Mr. West consistent with the targets recommended by the Committee, as described above.program.

See Column (e) of the Summary Compensation Table on page 60, Columns (f) through (h) of the Grants of Plan-Based Awards table on page 64, Columns (i) and (j) of the Outstanding Equity Awards table on page 66 and Columns (d) and (e) of the Option Exercises and Stock Vested table on page 68 for more information relating to the value of PSU awards madeabout PSUs awarded to the named executive officers during 2009.officers.

How are stock options used within the Company’s long-term incentive program? What process is followed in the granting of stock options?

AnotherStock options are an important element of our long-term incentive compensation program is stock options. Stock options are designedenabling us to align the interests of executives with those of stockholders. StockIn general, stock options generally are awarded annually to the Company’s senior executive group as well as to other key managerial and professional employees. Stock options entitle the holder to purchase a fixed number of shares of Common Stock at a set price during a specified period of time. The right to exercise the options is subject to a vesting schedule. Because stock options vest over time, and only have value if the valueprice of our Common Stock increases, they encourage efforts to enhance long-term stockholder value.

The Committee sets guidelines for the numbervalue of stock options to be awarded based on the target total direct compensation package established in relation to the competitive compensation data. In 2009,2012, the target number of stock options awarded to oureach executive officersofficer was determined by multiplying the executive’s base paysalary by the “market-competitive optionone-half of his or her target level,”long-term incentive award percentage divided by the Black-Scholes value. The “market-competitive option target level” for each executive officer position is targeted to be one-half of the recipient’s long-term incentive compensation target award. The value of aneach option is determined usingon the grant date. The Black-Scholes option-pricing model asis described in Note 17 ofto the Consolidated Financial Statements contained in the 20092012 Annual Report to Stockholders that accompanies this proxy statement. The actual number of options awarded may vary from the target level based on an executive’s individual performance evaluation.

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Stock options awarded in 20092012 vest in equal increments over four years and have a ten-year term. As required by the stockholder-approved Incentive Plan, approved by the stockholders at the 2007 annual meeting of

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stockholders, the options awarded in 2009 have an exercise price equal to the closing market price of the Common Stock on the New York Stock Exchange on the date of the award.

Stock options are awarded annually under the Incentive Plan to all eligible recipients; however, the Committee may elect not to award stock optionsTo ensure flexibility in a given year. In addition, in order to have flexibility to provide equityproviding awards asfor recruitment, retention, performance recognition or in conjunction with a promotion, awards, the Committee is authorized under the Incentive Plan to establish a stock option pool, an RSU pool and a separate CEO discretionary equity pool (described below) for use by our CEO for such purposes. The pools are available for use for approximately 12 months from the date established and thecreated. The Committee determines whether to establish any or all of these three pools annually. Options and RSUs remaining in any pool at the end of the period do not carry over to any poolpools established by the Committee for a subsequent period.

In February 2009, the Committee authorized the CEO to award up to 600,000 stock options and up to 100,000 RSUs from the stock option and RSU pools during the year. The Committee also authorized a CEO discretionary equity pool for recruitment or retention purposes up to an aggregate value to the recipients (as measured at the time of grant) of $2 million in addition to the stock option and RSU pools. Recipients of awards from the CEO discretionary equity pool were permitted to select a mix of options and/or RSUs equaling the value of the award. The value of option awards made from the pools is determined using the value determined for financial reporting purposes (the Black-Scholes value). The CEO may not make discretionary awards from any pool to the Company’s executive officers. Stock option and RSU awards from the CEO pools as well as awards from the CEO discretionary equity pool are made one time per monthmonthly according to an annually pre-determined schedule and theschedule. The exercise price for the options is based on the closing price of our Common Stock on the date of the award. Individual awards in any month may not exceed 12,000 stock options or 7,500 RSUs without further approval by the Chair of the Committee.

See Column (f) of the Summary Compensation Table, Columns (j) through (l) of the Grants of Plan-Based Awards table, Columns (b) through (f) of the Outstanding Equity Awards table and Columns (b) and (c) of the Option Exercises and Stock Vested table for more information on stock options awarded to the named executive officers.

How are RSUs used within the long-term incentive program?

The Committee awards RSUs to executive officers and other senior executives from time to time as special incentives. RSUs also are awarded by the Committee to replace compensation forfeited by newly-hired executive officers and key managersby the CEO to employees other than executive officers from the RSU pool described above. In 2012, the Committee did not make any RSU awards to any of the Company upon leaving aexecutive officers, except for Ms. Turner. Ms. Turner received an award of 28,000 RSUs at the time she was hired by Hershey. The RSU award was made to replace compensation forfeited when she left her prior employer to join Hershey. In addition,the Company. The award will vest in 2009 the Committee used a mix of RSUs25% increments over four years and stock options in making annual long-term incentive awards to eligible employees below the senior leadership level. Each RSU awarded under the Incentive Plan represents a value equal to that of a share of Common Stock. Generally RSUs vest if the award recipient remains in the Company’s employment for a prescribed period of time.

At the time of award, the Committee determines if an RSU award is payable upon vesting in shares of Common Stock, net of applicable taxes, or if the recipient may electsubject to receive payment for vested RSUs in cash or in shares of Common Stock, net of applicable taxes. The value for financial reporting purposes of an RSU payable in shares is based upon the closing price of the Common Stock on the New York Stock Exchange on the grant date. The value for financial reporting purposes of an RSU payable in cash or shares is adjusted based upon the closing price of the Common Stock on the New York Stock Exchange at the end of each fiscal quarter.

During 2009, the Committee approved a special award of 2,500 RSUs for Mr. Bilbrey in recognition of his leadership of the North American business unit. The award will vest in equal proportions over the next four years.

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As described in the discussion of stock options, the Committee is authorized under the Incentive Plan to allocate a pool of RSUs for our CEO to use as recruitment, retention, performance recognition or promotion awards. The Committee determines whether to establish an RSU pool annually. The Committee authorized a pool of up to 100,000 RSUs for 2009. In addition, RSUs may also be awarded from the CEO discretionary equity pool established for recruitment or retention purposes. The CEO may not make discretionary awards from any of the pools to the Company’s executive officers. RSUs remaining in the pool at the end of the period do not carry over to any pool established by the Committee for a subsequent period.continued employment.

What retirement benefits are provided to the executive officers?

ExecutiveBased on their date of hire, executive officers participate in the same defined benefit pension and defined contribution 401(k) plans as do other salaried employees of the Company. Because the Internal Revenue Code rulesIRC regulations do not permit the Company to use base salary and other compensation paid above certain limitations in determininglimits to determine the benefits earned by the executive officers under tax-qualified plans, theplans. The Company maintains a defined benefit Supplemental Executive Retirement Plan, or DB SERP, a defined contribution Supplemental Executive Retirement Plan, or DC SERP, a defined benefit Compensation Limit Replacement Plan, or CLRP, and a Deferred Compensation Plan to provide these and additional benefits.benefits that are comparable to those offered by our competitors. Under the provisions of the Deferred Compensation Plan, our named executive officers may elect to defer payments from the DB SERP, DC SERP, CLRP, the OHIP, and PSU and RSU awards, but not stock options.

The DB SERP was closed to new participants in 2006. No new participants have been or will be added to the DB SERP. Executive officers and Senior Vice Presidents reporting to the CEO not eligible for the DB SERP are considered by the Committee for participation in the DC SERP. In comparison, the DC SERP typically yields a lower benefit than the DB SERP upon retirement. Executive officers eligible for the Company’s qualified defined benefit pension plan who are not

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eligible for the DB SERP participate in the CLRP. The Company believes that the DB SERP, DC SERP, CLRP and Deferred Compensation Plan help, in the aggregate, to attract and retain executive talent, as similar plans are often components of the executive compensation programs within our financial peer group.Compensation Peer Group. The DC SERP was established as part of our Deferred Compensation Plan and is not a separate plan.

See the Pension Benefits table and accompanying narrative beginning on page 7169 and the Non-Qualified Deferred Compensation table and accompanying narrative beginning on page 7370 for more information regarding the DB SERP, DC SERP, CLRP and other retirement benefits.

What role do executive perquisites play in the total compensation package for the executive officers?

Executive perquisites are kept by the Committee to a minimal level relative to an executive’sexecutive officer’s total compensation and do not play a significant role in our executive compensation.compensation program. See the footnotes to Column (i) of the Summary Compensation Table for information regarding the perquisites received by our named executive officers.

In addition, ourOur CEO and the other named executive officers are eligible to participate in our Gift Matching Program on the same basis as other employees, retirees or their spouses. Through the Gift Matching Program, we match contributions made to one or more accredited colleges or universities on a dollar-for-dollar basis up to a maximum aggregate contribution of $5,000 per employee annually. These matching contributions are not considered compensation and are not included in Column (i) of the Summary Compensation Table.

Has the Company implemented provisions designed to protect the Company, such as conditioning compensation on restrictive covenants?

Beginning in 2008, the Company initiated a program requiring executive officers to enter into an Executive Confidentiality and Restrictive Covenant Agreement, or ECRCA, as a condition of receiving PSUs and other long-term incentive awards or, for new executive officers, as a condition of their employment. The terms of the ECRCA prohibit the executive from disclosing the Company’s confidential information, competing with the Company in specific categories for a period of 12 months following termination of the executive’s employment, recruiting or soliciting the Company’s employees, or disparaging the Company’s reputation in any way. Failure to comply with the provisions of the ECRCA may result in cancellation of the unvested portion of PSU and RSU awards, cancellation of any unexercised stock options and a requirement for repayment of amounts received from equity awards during the officer’s last year of employment, as well as any amounts received from the DB SERP or DC SERP.

Has the Company entered into any employment agreements with or does the Company provide severance or change in control agreements withplans for its executive officers?

We have not entered into employment agreements with any named executive officer, other thanexcept for Mr. West.Bilbrey, our CEO.

WeDuring 2012, we entered into an employment agreement with Mr. West upon his promotion to President and CEO in 2007.Bilbrey. The Committee and independent members of the Board determined that doing so was appropriate in light of the fact thatsince we had entered into an employment agreement with Mr. West’sBilbrey’s predecessor, and believed we would have been required to enter into an employment

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agreement with any individual recruited to become our CEO from another company. We determined

All of the termsnamed executive officers participate in our Executive Benefits Protection Plan (Group 3A), or EBPP 3A. The EBPP 3A is intended to help us attract and retain qualified

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management employees and maintain a stable work environment in the event of Mr. West’s employment agreement by reference to the benchmarking we had done with respect to Mr. West’s predecessor.

Mr. West’s employment agreement has been amended twice. In February 2008, the Board approved an amendment to Mr. West’s employment agreement to reduce the lump-sumactivity that could potentially result in a change in control. The severance amount payable to him if his employment with the Company is terminated as a result ofprotection provided under EBPP 3A upon a change in control from three timesis “double trigger” as the sum of annual base salary and annual incentive pay to two times the sum of annual base salary and annual incentive pay. In December 2008, the Board approved an additional amendment to Mr. West’s employment agreement to conform its terms to the requirements of Code section 409A.

We provide an Executive Benefits Protection Plan, or EBPP, for the named executive officers. The terms of the plan generally provide that a covered executive, whose employment with the Company terminates in qualifying circumstances within two years after a change in control of the Company, is entitled to certain severance payments and benefits. The EBPP 3A also provides severance benefits in the event of involuntary termination without Cause unrelated to a change in control. The EBPP was amendedcontrol, or voluntary termination for Good Reason within two years after election of a new CEO. Cause and Good Reason are defined in February 2008 to reduce the severance benefit in a manner comparable to the amendment to Mr. West’s employment agreement. The EBPP was further amended in 2009 as part of Company-wide changes to our severance programs that included the addition of pro rata vesting of long-term incentive awards and lump sum settlement of severance benefits upon qualifying termination of employment, along with reductions in certain severance benefits. In addition, the EBPP was also3A.

We amended and restated the EBPP 3A in 2011 to limitremove the applicability of thegolden parachute excise tax gross-up feature to only those circumstances where the total payments potentially subject to thefeature. We did not provide an excise tax exceed by more than 10%gross-up to Mr. Bilbrey under his employment agreement. As a result, no executive officer or other employee of the level at which theCompany is entitled to receive an excise tax payments are required. The EBPP is intended to help us attract and retain qualified management employees and maintain a stable work environment in connection with a change in control.gross-up.

See the discussion beginning on page 7673 for information regarding Mr. West’s employment agreementthe EBPP 3A and potential payments that would be due to him and the otherour named executive officers under that plan in the event of termination of employment or a change in control.

Have any further changes been made to the CPG or financial peer groups during 2009 or since the end of 2009 which impact the Committee’s decision-making? Why were these changes made?

As described on pages 45 and 46, the Committee relies upon Mercer to provide benchmarking for senior executives and utilizes consumer products companies that are part of Mercer’s proprietary database as the basis for the primary peer group (the CPG peer group). The participants in the survey that Mercer uses to generate the database vary over time, with some companies choosing to participate every two to three years, rather than every year. As a result, the composition of Mercer’s database changes each year. Due to changes in survey participants, Mercer recommended and the Committee approved changes to the CPG peer group to be used in connection with compensation decisions made for 2010. The CPG peer group for 2010 will have the 40 companies listed below, one fewer than the group used for 2009. Of the 40 companies, 28 were included in the 2009 CPG peer group. The 40 companies in the group have a median revenue of $6 billion. The Committee believes the CPG peer group continues to contain organizations that have comparable business characteristics to the Company in that the peer group focuses on food and beverage companies which are the Company’s key talent and business competitors.

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Companies included in the 2010 CPG peer group are as follows:

ACH Food Companies, Inc.		H.J. Heinz Company		Reckitt Benckiser, Inc.
Bacardi U.S.A., Inc.		Kellogg Company		Reynolds American, Inc.
Bob Evans Farms, Inc.		Keystone Foods LLC		Rich Products Corporation
Brown-Forman Corporation		Kimberly-Clark Corporation		Riviana Foods Inc.
California Pizza Kitchen, Inc.		Lance, Inc.		Sara Lee Corporation
Chiquita Brands International, Inc.		Land O’Lakes, Inc.		The Coca-Cola Company
Colgate-Palmolive Company		Mars North America		The Dannon Company, Inc.
ConAgra Foods, Inc.		McDonald’s Corporation		The Estée Lauder Companies Inc.
Darden Restaurants, Inc.		MillerCoors LLC		The Schwan Food Company
Dean Foods Company		Molson Coors Brewing Company		Unilever United States, Inc.
Del Monte Foods Company		Nestlé USA, Inc.		Wells’ Dairy, Inc.
Dole Food Company, Inc.		Ocean Spray Cranberries, Inc.		Wendy’s/Arby’s Group, Inc.
Dunkin’ Brands, Inc.		Ralcorp Holdings, Inc.		Wm. Wrigley Jr. Company
Farmland Foods, Inc.

As discussed above, based on changes in participants in the survey that Mercer uses to generate their proprietary database and the consolidation of reporting by two of the companies in the 2009 database (Wendy’s International, Inc. and Arby’s Restaurant Group, Inc.) a total of 40 companies are included in the 2010 CPG peer group. The 12 companies added to the 2009 CPG peer group are as follows:

ACH Food Companies, Inc.		Lance, Inc.
Bacardi U.S.A., Inc.		MillerCoors LLC
Brown-Forman Corporation		Molson Coors Brewing Company
Dean Foods Company		Ocean Spray Cranberries, Inc.
Dole Food Company, Inc.		Riviana Foods Inc.
Keystone Foods LLC		The Dannon Company, Inc.
The 12 companies deleted from the 2009 CPG peer group are as follows:
Anheuser-Busch Companies, Inc.		Pernod Ricard USA, LLC
Burger King Holdings, Inc.		S. C. Johnson & Son, Inc.
Energizer Holdings, Inc.		Smithfield Foods, Inc.
International Dairy Queen, Inc.		Tyson Foods, Inc.
Interstate Bakeries Corporation		Welch Foods, Inc.
Jack in the Box Inc.		Yum! Brands, Inc.

Based upon the acquisition of Cadbury plc by Kraft Foods Inc., the Committee removed Cadbury plc from the financial peer group for the purpose of measuring three-year relative TSR for the 2010-2012 performance cycle PSU awards. Data from Cadbury plc was included in the financial performance and compensation data provided by Mercer for the financial peer group that was used by the Committee as a secondary reference point in assessing 2010 compensation levels for Hershey’s executive officers.

Have there been any other actions with respect to executive compensation since the end of 2009?

Based upon the recommendation of the Committee, the independent directors of the Board approved a 3% increase to Mr. West’s base salary and an increase in his annual incentive award target from 100% to 120% of base salary. The Committee approved increases in base salary averaging 4% for all of theDo we require our executive officers reporting to Mr. West, and an increase in the annual and long-term incentive award targets for Messrs. Bilbrey and O’Day. These changes move

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Mr. Bilbrey’s and Mr. O’Day’s incentive targets to a level comparable with those paid at peer companies and tie a more significant amount of their total compensation to the Company’s long-term results.

Based upon the actions described above, base salaries and annual and long-term incentive targets (each as a percentage of base salary) for our named executive officers are as follows:

Name		2010 Base Salary ($)				2010 One Hershey Incentive Program Target (%)				2010 Long-Term Incentive Award Target (%)
D. J. West		1,030,000				120				300
H. P. Alfonso		515,000				70				190
J. P. Bilbrey		600,000				80				200
T. L. O’Day		468,000				65				165
B. H. Snyder		500,000				60				135

The Committee also approved metrics for the 2010 One Hershey Incentive Program. The financial performance metrics and weighting for the 2010 One Hershey Incentive Program are 40% based on consolidated net sales, 40% based on adjusted earnings per share-diluted and 20% based on operating cash flow. Operating cash flow is defined as the average of cash from operations less pension contributions and commodities hedging transactions, measured in five 12-month periods ending on December 31, 2009, April 4, 2010, July 4, 2010, October 3, 2010 and December 31, 2010. The One Hershey Incentive Program targets for 2010 are centered around the Company’s publicly-announced financial expectations for 2010: net sales growth of 3% to 5%, adjusted earnings per share-diluted that will be in line with our long-term objective of 6% to 8%, and operating cash flow generated by performance consistent with these expectations.

The Committee approved a design for the One Hershey Incentive Program for 2010 consistent with 2009. For executive officers other than Mr. West, the weighting ofhold Company financial performance metrics will account for 75% of their target award under the One Hershey Incentive Program. The remaining 25% of the target award will be based upon individual performance. The Committee recommended and the independent directors approved no changes to the structure of Mr. West’s 2010 short-term incentive target award, believing that it should continue to be based entirely upon achievement of Company financial results. The Committee approved continued inclusion of a values modifier in the One Hershey Incentive Program award calculations for executive officers, excluding Mr. West. One Hershey Incentive Program award payments for 2010, if any, will be decreased by 10% for executive officers reporting to Mr. West who do not demonstrate the Hershey Values.

As it did in 2009, the Committee has retained discretion to increase or decrease by up to 30% the funds allocated for payment of the component of 2010 short-term incentive program awards for all employees excluding Mr. West, that are based upon the Company’s financial performance metrics. Based upon the recommendation of the Committee, the independent directors of the Board agreed that at the end of 2010, funds allocated for payment of Mr. West’s bonus could be increased or decreased up to 30% based upon the discretion of the independent directors of the Board based on progress in achievement of strategic priorities.

In February 2010, the Committee approved contingent target awards of PSUs under the Incentive Plan for the 2010-2012 performance cycle for the executive officers with the exception of Mr. West. In February 2010, the independent directors as a group approved the Committee’s recommendation for a contingent target award of PSUs for the 2010-2012 performance cycle for Mr. West of 55,650 PSUs, which exceeds the target level of 150% and is equal to approximately 194% of his 2010 base salary. The contingent target PSU awards for Mr. West and all of the

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executive officers represent approximately 50% of the value of their long-term incentive grant. Metrics approved by the Committee for the 2010-2012 performance cycle are consistent with those of the 2009-2011 performance cycle: three-year relative TSR versus the financial peer group (50% of the target award); three-year compound annual growth in adjusted earnings per share-diluted measured against an internal target (12.5% of the target award); and annual growth in adjusted earnings per share-diluted measured against an internal target for each year of the three-year performance cycle (12.5% of the target award per year). The metrics approved by the Committee for TSR provide target-level awards for achieving performance at the median of the financial peer group. Targets for our three-year and 2010 annual growth rate in adjusted earnings per share-diluted are in line with our publicly-announced financial expectations. Payment, if any, for awards will be made in shares of the Company’s Common Stock at the conclusion of the three-year performance cycle. The Committee will approve the targets for the adjusted earnings per share-diluted metrics at the beginning of each of the three years in the performance cycle. The annual setting of targets for a portion of the performance cycle award payment provides a stronger link between performance and payout in that the Committee can set performance targets for a portion of the award that reflect current business conditions at the start of each year. The maximum award for any participant in the 2010-2012 performance cycle is 250% of the contingent target award.

In February 2010, the Committee approved stock option awards for the executive officers other than Mr. West representing approximately 50% of their individual long-term incentive targets. In February 2010, the independent directors as a group approved the Committee’s recommendation for a 2010 stock option award for Mr. West with a value, using the Black-Scholes option-pricing model, of $2 million which exceeds the target level of 150% and is approximately 194% of his 2010 base salary.

In what other ways do we align the interests of executive officers with the interests of stockholders?stock?

The Company believes that requiring executive officers to hold significant amounts of our Common Stock strengthens the alignment of the executive officers with the interest of stockholders and promotes achievement of long-term business objectives. We have hadOur executive stock ownership requirementspolicy has been in place for well overmore than 20 years. The ownershipOwnership requirements were most recently modifiedupdated in 2008 based uponto better align with external market comparisons provided by Mercer.

ElectedExecutives with stock ownership requirements have five years from their initial election to their position to accumulate and appointed officers are required to accumulatehold the minimum number of shares to meet their stock ownership level within five years of their initial election or appointment to their position.required. For purposes of this requirement, “shares” include shares of our Common Stock that are owned by the officer,executive, unvested time-based RSUs, PSUs earned for the annual segments of open performance cycles, as well as vested RSUs and PSUs that have been deferred by the officerexecutive as common stock units under our Deferred Compensation Plan. It is anticipated that executives will hold a significant number of the shares earned from PSU and RSU awards and the exercise of stock options to satisfy their obligations. Currently, minimum stockholding requirements for executive officers and appointed officersother executives range from one to five times base salary, as described in the table below. The dollar value of shares which must be acquired and held equals a multiple of the individual executive’s base salary. The number of shares to be held isStockholding requirements are updated whenever a change in base salary occurs.

 

Position		Stock Ownership  Level
CEO		5 times base salary
COO		4 times base salary
CFO and other Executive Officers reporting directly to the CEOSenior Vice Presidents		3 times base salary
Other Executive Officers and Appointed Vice President Officersexecutives subject to stockholding requirements		1 times base salary

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Failure to reach the minimum within the five-year period results in a notification letter to the executive, with a copy to the CEO, and a requirement that future stock option exercises and PSU payments be settled by retaining at least 50% of the shares of Common Stock received until the minimum ownership level is reached.attained. The Committee receives an annual summary of each individual officer’sexecutive’s ownership status to monitor compliance.

As of March 8, 2010,4, 2013, the record date for the annual meeting, all of the value of Common Stock owned by Mr. West totaled approximately 2.7 times his base salary. He is required to accumulate shares equal to five times his base salary by October 2, 2012.named executive officers exceeded their ownership requirements.

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Compensation Committee Report

To Our Stockholders:

We have reviewed and discussed with management the Compensation Discussion and Analysis, beginning on page 43.42. Based on that review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Submitted by the Compensation and Executive Organization Committee of the Board of Directors:

Robert F. Cavanaugh, Chair

James E. NevelsPamela M. Arway

Robert M. Malcolm

Anthony J. Palmer

David L. Shedlarz

The independent members of the Board of Directors who are not members of the Compensation and Executive Organization Committee join in the Compensation Committee Report with respect to the approval of Mr. West’sBilbrey’s compensation.

Charles A. Davis

James M. Mead

James E. Nevels

Thomas J. Ridge

LeRoy S. Zimmerman

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Summary Compensation Table

The following table and accompanying footnotes provide information regarding compensation earned, held by, or paid to, individuals holding the positions of Chief (Principal) Executive Officer and Chief (Principal) Financial Officer during 2012 and the three most highly compensated of our other executive officers. In 2009, the five executive officers shown below were the most highly compensated of our executive officers using the methodology for determining “total compensation” provided by the SEC. We refer to these five executive officers as our named executive officers. Mr. O’DayThe following table provides information with respect to 2012, 2011 and 2010 compensation, if reported in our prior years’ proxy statements. Ms. Turner joined the Company during 2012 and Ms. Buck was not a named executive officer in the Company’s 2009 or 20082010 proxy statements;statement; therefore, information on his 2008 or 2007Ms. Turner’s 2011 and 2010 compensation and Ms. Buck’s 2010 compensation is not included.required to be included in the table.

Summary Compensation Table

 

Name and Principal Position		Year			Salary(1) ($)			Bonus(2) ($)				Stock Awards(3) ($)			Option Awards(4) ($)			Non- Equity Incentive Plan Compen- sation(5) ($)			Change in Pension Value and Non-Qualified Deferred Compensation Earnings(6) ($)		All Other Compen- sation(7) ($)		Total ($)
(a)		(b)			(c)			(d)				(e)			(f)			(g)			(h)		(i)		(j)
D. J. West President and Chief Executive Officer(8)		2009 2008 2007			1,000,000 1,000,000 737,165			— — —				1,500,427 2,502,599 2,508,186			1,500,022 1,500,028 1,103,560			2,267,730 1,128,400 —			1,613,252    574,406    161,112		122,598   86,966       72,318(9)		8,004,029 6,792,399 4,582,341
H. P. Alfonso Senior Vice President, Chief Financial Officer(8)		2009 2008 2007			500,000 500,000 448,180			— — —				476,689 762,003 854,395			475,006 255,781 357,138			576,032 394,560 34,195			24,069      13,319        5,516		161,840   97,274   82,975		2,213,636 2,022,937 1,782,399
J. P. Bilbrey Senior Vice President, President Hershey North America		2009 2008 2007			550,000 517,366 404,598			— — —				555,119 1,252,586 405,479			514,274 444,137 320,513			711,022 411,432 36,718			723,957    344,852    202,354		54,422   34,997   34,238		3,108,794 3,005,370 1,403,900
T. L. O’Day Senior Vice President, Global Operations		2009			450,000			—				337,728			337,504			458,387			—		100,626		1,684,245
B. H. Snyder Senior Vice President, General Counsel and Secretary		2009 2008 2007			485,000 485,000 435,000			— — —				330,692 958,979 569,114			357,469 357,461 292,023			486,484 327,713 —			454,397    353,883    302,911		38,142   32,818   21,490		2,152,184 2,515,854 1,620,538

Name and Principal Position		Year				Salary(1) ($)				Bonus(2) ($)				Stock Awards(3) ($)				Option Awards(4) ($)				Non- Equity Incentive Plan Compen- sation(5) ($)				Change in Pension Value and Non-Qualified Deferred Compensation Earnings(6) ($)				All Other Compen- sation(7) ($)				Total ($)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)
J. P. Bilbrey     President and     CEO			2012 2011 2010				1,095,999 945,538 625,577				— — —				2,817,355 3,760,073 600,699				2,183,606 1,742,167 720,013				2,187,876 1,541,698 993,192				3,839,163 2,455,275 1,204,919				165,651 182,122 70,407				12,289,650 10,626,873 4,214,807
H. P. Alfonso     Executive Vice     President,     CFO and Chief     Administrative     Officer			2012 2011 2010				602,308 544,021 515,000				— — —				798,084 716,683 490,991				630,010 504,017 489,265				664,843 557,340 662,042				51,897      44,517      34,318				204,310 216,134 196,377				2,951,452 2,582,712 2,387,993
M. G. Buck     Senior Vice     President,     Chief Growth Officer			2012 2011				506,942 466,552				— —				591,344 488,220				575,728 412,676				559,577 420,125				762,787    729,351				51,878 55,752				3,048,256 2,572,676
T. L. O’Day     Senior Vice     President,     Global     Operations			2012 2011 2010				516,981 491,400 468,000				— — —				574,359 579,423 388,476				525,342 501,231 460,537				523,860 468,247 565,896				— — —				205,849 222,709 195,590				2,346,391 2,263,010 2,078,499
L. M. Turner     Senior Vice     President,     General Counsel     and Secretary			2012				230,192				150,000				2,415,066				332,538				188,049				—				80,407				3,396,252

 

 

(1)

Column (c) reflects annual base salary earned, on an accrual basis, for the years indicated and includes Internal Revenue Code, Sectionor IRC, section 125 deductions pursuant to The Hershey Company Program of Flexible Benefits Plan and amounts deferred by the named executive officers in accordance with the provisions of ourThe Hershey Company 401(k) Plan.Plan, or 401(k).

 

(2)

As indicated inWith the exception of Ms. Turner, Column (d), indicates that no discretionary bonuses were paid to anythe named executive officer for 2009.officers. Ms. Turner, who joined the Company in July 2012, received a $150,000 cash award as a sign-on award and to replace awards forfeited at her prior employer.

 

(3)

Column (e) includes the dollaraggregate grant date fair value of contingent target PSU awards at theirfor the 2012-2014 performance cycle and, with the exception of Ms. Turner, for the 2012 adjusted earnings per share-diluted component of the 2011-2013 and 2010-2012 performance cycles. With the exception of Ms. Turner, Column (e) reflects the grant date fair value. value of the PSUs awarded to each named executive officer in February 2012. The amount listed in Column (e) for Ms. Turner includes contingent target units for the 2012-2014 performance cycle granted in July 2012 upon her hire.

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The number and grant date fair value of the PSUs awarded each named executive officer forare shown on the 2009-2011 performance cycle appearGrants of Plan-Based Awards table in Columns (g) and (l) of the Grants of Plan-Based Awards table.

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. Assuming the highest level of performance is achieved for each of the PSU awards included in Column (e), the value of the awards at grant date for each of the named executive officers would be as follows:

 

Name		Year				Maximum Value at Grant Date ($)				Year		Maximum Value at Grant Date ($)
D. J. West		2009				3,751,068
J. P. Bilbrey										2012			6,560,267
		2008				5,254,277				2011			7,377,919
		2007				3,752,565				2010			1,501,748
H. P. Alfonso		2009				1,191,723				2012			1,855,291
		2008				1,619,503				2011			1,468,555
		2007				1,070,363				2010			1,227,476
J. P. Bilbrey		2009				1,169,735
M. G. Buck										2012			1,372,127
										2011			1,000,119
T. L. O’Day										2012			1,338,904
		2008				1,421,618				2011			1,181,117
		2007				1,013,696				2010			971,190
T. L. O’Day		2009				844,320
B. H. Snyder		2009				826,730
		2008				1,190,261
		2007				906,660
L. M. Turner										2012			878,697

 

Column (e) also includes the grant date fair value of RSU awards granted into the years indicated.named executive officer. The unvested portion of these RSU awards is included in the amounts presented in Columns (g) and (h) of the Outstanding Equity Awards table on page 68.table. The number of shares acquired and value received by the named executive officers with respect to RSU awards that vested in 20092012 is included in Columns (d) and (e) of the Option Exercises and Stock Vested table on page 70.table.

The assumptions used to determine the grant date fair value of awards listed in Column (e) are set forth in Note 17 to the Company’s Consolidated Financial Statements included in our 2012 Annual Report to Stockholders that accompanies this proxy statement.

 

(4)

Column (f) presents the grant date fair value of stock options awarded the executive for the years indicated and does not reflect the value of shares actually received or which may be received in the future with respect to such stock options. The assumptions we made to determine the value of these awards are set forth in Note 17 to the Company’s Consolidated Financial Statements included in our 20092012 Annual Report to Stockholders that accompanies this proxy statement. The number and grant date fair value of stock options awarded to each named executive officer during 20092012 appears in Columns (j) and (l) of the Grants of Plan-Based Awards table.

As indicated on the Option Exercises and Stock Vested table, none of the named executive officers received cash or stock from the exercise of any option awards in 2009.

 

(5)

As discussed in the Compensation Discussion and Analysis and as shown in Column (g), the Committee determined that payments would be awarded under our annual incentive program, which we refer to as the One Hershey Incentive Program, or OHIP, to the named executive officers for 2009.2012. Awards under the One Hershey Incentive ProgramOHIP for 2012 are based on pay receivedbase salary paid in a calendar year. For Messrs. Alfonso and Bilbrey, Column (g) includes the amount of annual incentive program payments made to executives for business unit performance in 2007.2012.

 

(6)

Column (h) reflects the aggregate change in the actuarial present value of the named executive officer’s pensionretirement benefit under the Company’s tax-qualified pension plan, the Compensation Limit Replacement Plan, or CLRP, and the Defined Benefit Supplemental Executive Retirement Plan, or DB SERP, fromSERP. The change in value calculation uses the same interest and mortality rate assumptions as the 2012 audited financial statements and measures the change in value between the pension plan measurement date used in preparing the 20082011 and 2012 audited financial statements to the pension plan measurement date used in preparing the 2009 audited financial statements, determined using the interest ratestatements.

Mr. Alfonso, Mr. O’Day and mortality rate assumptions consistent with those used in our 2009 audited financial statements. Messrs. Alfonso and O’Day do notMs. Turner participate in the DB SERP, as they participate in theDefined Contribution Supplemental Executive Retirement Plan, or DC SERP, a plan authorizedrather than the DB SERP. The DC SERP is established under the Company’s Deferred Compensation Plan. DC SERP contributions for Messrs.Mr. Alfonso, Mr. O’Day and O’DayMs. Turner are included in Column (i) as listed in Notefootnote 7 below.

 

The named executive officers also participate in our non-qualified, non-funded Deferred Compensation Plan under which deferred amounts deferred are credited with “earnings”notional earnings based on the performance of one or more third-party investment options available to all participants in our 401(k) Plan.. No portion of the “earnings”notional earnings credited during 20092012 was “above market” or “preferential.” Consequently, no Deferred Compensation Plan earnings are included in amounts reported in Column (h) above. See the Pension Benefits table on page 73 and the Non-Qualified Deferred Compensation table on page 75tables for more information on the benefits payable under the qualified pension plan, DB SERP, CLRP and Deferred Compensation Plan to the named executive officers.

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(7)	All other compensation includes 401(k) matching contributions, perquisites and other amounts as described below. Benefits based upon a percent of base salary are computed as a percent of pay received in a calendar year.

 

Name		Year				Amount ($)				Description
D. J. WestP. Bilbrey		2009	2012			86,484 14,858 11,025  8,750	107,257 37,126 11,250 8,400 818 800	800      681		Supplemental 401(k) match Personal useSecurity services (See footnote 8) 401(k) match Company-paid financial counseling Supplemental retirement contribution Reimbursement of Company aircraftpersonal tax return preparation fee
			2011				83,305 76,218 11,025 10,010 800 764			Security services (See footnote 8) Supplemental 401(k) match 401(k) match Company-paid financial counseling Reimbursement of personal tax return preparation fee Supplemental retirement contribution
		2008	2010			35,461 30,978 10,350	49,122 11,025 8,750 800 710	800      627		Supplemental 401(k) match (See footnote 9) Personal use of Company aircraft 401(k) match Company-paid financial counseling Reimbursement of personal tax return preparation fee Supplemental retirement contribution
		2007		30,223 22,556   9,148   9,018      800      573		Personal use of Company aircraft Supplemental 401(k) match 401(k) match (See footnote 9) Company-paid financial counseling Reimbursement of personal tax return preparation fee Supplemental retirement contribution
H. P. Alfonso		2009	2012				144,667 40,830 11,250 7,563			114,224  DC SERP contribution 30,096Supplemental 401(k) match 11,025401(k) match   5,695Company-paid financial counseling
			2011				150,758 43,248 11,025 10,303 800			DC SERP contribution Supplemental 401(k) match 401(k) match Company-paid financial counseling Reimbursement of personal tax return preparation fee
		2008	2010		66,702 13,663 10,350   5,759		136,386 38,074 11,025 10,092 800			DC SERP contribution Supplemental 401(k) match 401(k) match Company-paid financial counseling Reimbursement of personal tax return preparation fee
		2007		55,853 10,125   9,982   6,928        87M. G. Buck		DC SERP contribution 401(k) match Supplemental 401(k) match Company-paid financial counseling Company-paid relocation expenses
J. P. Bilbrey 2012		2009		33,191 11,025	30,381 11,250 8,750 800 697	800      656		Supplemental 401(k) match 401(k) match Company-paid financial counseling Reimbursement of personal tax return preparation fee Supplemental retirement contribution
		2008	2011		14,495 10,350	8,750	32,339 11,025 10,945 800 643	800      602		Supplemental 401(k) match 401(k) match Company-paid financial counseling Reimbursement of personal tax return preparation fee Supplemental retirement contribution
		2007		10,125

  8,832

  7,979

  5,954

     800

     548

401(k) match

Company-paid financial counseling

Supplemental 401(k) match

Personal use of Company aircraft

Reimbursement of personal tax return preparation fee

Supplemental retirement contribution

 

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Name		Year				Amount ($)				Description
T. L. O’Day		2009	2012		58,413 11,025 10,004   7,350   6,710   6,669      455		122,906 32,996 21,997 11,250 8,400 7,500 800			DC SERP contribution 401(k) match Supplemental 401(k) match Core Retirement Contribution (See footnote 10) Company-paid financial counseling Supplemental Core Retirement Contribution (See footnote 10)9) 401(k) match Company-paid financial counseling Core Retirement Contribution (See footnote 9) Reimbursement of personal tax return preparation fee
			2011				132,162 36,553 24,369 11,025 10,825 7,350 425			DC SERP contribution Supplemental 401(k) match Supplemental Core Retirement Contribution (See footnote 9) 401(k) match Company-paid financial counseling Core Retirement Contribution (See footnote 9) Reimbursement of personal tax return preparation fee
			2010				115,807 30,666 20,444 11,025 9,890 7,350 408			DC SERP contribution Supplemental 401(k) match Supplemental Core Retirement Contribution (See footnote 9) 401(k) match Company-paid financial counseling Core Retirement Contribution (See footnote 9) Reimbursement of personal tax return preparation fee
B. H. SnyderL. M. Turner		2009		26,387 11,025      730		Supplemental 401(k) match 401(k) match Company-paid financial counseling
		20082012				28,546 20,145 15,000 9,865 6,851			11,423DC SERP contribution 11,045 10,350		Supplemental 401(k) matchRelocation expenses and related taxes (See footnote 10) Company-paid financial counseling 401(k) match
		2007Core Retirement Contribution (See footnote 9)		10,125   9,450   1,915		401(k) match Supplemental 401(k) match Company-paid financial counseling

Amounts shown for personal use of the Company aircraft were computed on the basis of the incremental expense incurred by the Company for the flights.

 

(8)

From time to time the Company provides security services for Mr. West was Senior Vice President, Chief Financial OfficerBilbrey when he was elected Executive Vice President, Chief Operating Officer on January 24, 2007.the Company determines that conditions warrant such services for the safety and protection of Mr. West continued to holdBilbrey and his family. Under applicable SEC rules, these services are considered “other compensation” and the position of Chief Financial Officer through July 15, 2007. He was elected President on October 2, 2007 and President and Chief Executive Officer on December 1, 2007. Mr. Alfonso was elected Chief Financial Officer on July 16, 2007.amount reported is the Company’s incremental cost for such services in 2012.

 

(9)

In addition to Supplemental 401(k) match attributable to 2008, the 2008 Supplemental 401(k) match amount for Mr. West includes a Company contribution made in April 2008 to reflect 2007 Company match that was forfeited as a result of the 401(k) Plan non-discrimination testing. Based on Internal Revenue Service (IRS) limits, Mr. West’s 2007 401(k) match was reduced by the forfeited amount valued as of December 31, 2007.

(10)

As are all new hires since January 1, 2007, Mr. O’Day isand Ms. Turner are eligible to receive a contribution to histheir 401(k) Plan account equal to 3% of base salary and OHIP up to the maximum amount permitted by the Internal Revenue Service, or IRS. We call this contribution the Core Retirement Contribution. For 2009, heThey also receivedare eligible to receive a Supplemental Core Retirement Contribution of 3% of base salary in excess ofequal to the amount by which the Core Retirement Contribution exceeds the IRS limit.

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(10)	Ms. Turner joined Hershey in July 2012. Company relocation benefits provided for Ms. Turner included $13,087 for automobile transportation, temporary living assistance and a miscellaneous allowance and $7,058 for reimbursement of certain taxes related to her relocation.

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Grants of Plan-Based Awards

The following table and explanatory footnotes provide information with regard to the potential cash award that might have been earned during 20092012 under the One Hershey Incentive Program,OHIP, and with respect to each PSU, stock option and RSU awarded to each named executive officer during 2009.2012. The amounts that were earned under the One Hershey Incentive ProgramOHIP during 20092012 by the named executive officers are set forth in Column (g) of the Summary Compensation Table.

Grants of Plan-Based Awards

20092012

 

Name		Grant Date(1)			Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2)									Estimated Possible Payouts Under Equity Incentive Plan Awards(3)									All Other Stock Awards: Number of Shares of Stock or Units(4) (#)				All Other Option Awards: Number of Securities Under- lying Options(5) (#)				Exercise or Base Price of Option Awards(6) ($/Sh)				Grant Date Fair Value of Stock and Option Awards(7) ($)		Grant Date(1)				Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2)												Estimated Possible Payouts Under Equity Incentive Plan Awards(3)												All Other Stock Awards: Number of Shares of Stock or Units(4) (#)				All Other Option Awards: Number of Securities Under- lying Options(5) (#)				Exercise or Base Price of Option Awards(6) ($/Sh)				Grant Date Fair Value of Stock and Option Awards(7) ($)
					Thres- hold ($)			Target ($)			Maxi- mum ($)			Thres- hold (#)			Target (#)			Maxi- mum (#)																Thres- hold ($)						Target ($)				Maxi- mum ($)				Thres- hold (#)				Target (#)				Maxi- mum (#)
(a)		(b)			(c)			(d)			(e)			(f)			(g)			(h)			(i)				(j)				(k)				(l)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)				(k)				(l)
D. J. West		02/17/2009			29,077			1,038,462			2,700,000			1,066			42,650			106,625			—				282,490				34.89				3,000,449
J. P. Bilbrey																																						02/21/2012				4,127				1,310,160				2,620,320				359				43,245				108,113				—				207,370				60.68				5,000,961
H. P. Alfonso		02/16/2009			818			363,462			890,481			339			13,550			33,875			—				—				—				476,689			02/21/2012				1,418				450,000				900,000				102				12,230				30,575				—				59,830				60.68				1,428,094
		02/17/2009			—			—			—			—			—			—			—				89,455				34.89				475,006
J. P. Bilbrey		02/16/2009			964			428,365			1,049,495			333			13,300			33,250			—				—				—				467,894
		02/17/2009			—			—			—			—			—			—			2,500				96,850				34.89				601,499
M. G. Buck																																						02/21/2012				1,193				378,750				757,500				75				9,045				22,613				—				54,675				60.68				1,167,072
T. L. O’Day		02/16/2009			631			280,385			686,942			240			9,600			24,000			—				—				—				337,728			02/21/2012				1,054				334,750				669,500				73				8,826				22,065				—				49,890				60.68				1,099,701
		02/17/2009			—			—			—			—			—			—			—				63,560				34.89				337,504
B. H. Snyder		02/16/2009			680			302,192			740,371			235			9,400			23,500			—				—				—				330,692
		02/17/2009			—			—			—			—			—			—			—				67,320				34.89				357,469
L. M. Turner																																						07/09/2012				432				137,019				274,038				40				4,852				12,130				28,000				28,015				72.44				2,747,604

 

 

(1)	All awards presented were made in accordance with the Company’s stockholder-approved Incentive Plan. Dates listed in Column (b) represent the Grant Date for PSUs reflected in Columns (f), (g) and (h), RSUs listed in Column (i), and the stock options listed in Column (j).

 

(2)

TheExcept for Ms. Turner, the amounts shown in Columns (c), (d) and (e) represent the threshold, target and maximum potential amounts that might have been payable based on the One Hershey Incentive ProgramOHIP targets including the possible 30% adjustment to financial scores, approved for the named executive officers in February 2009,2012. For Ms. Turner, the amounts shown in Columns (c), (d) and (e) represent the threshold, target and maximum potential amounts that might have been payable based on paythe OHIP target approved in July 2012 upon her hire. All the amounts shown in Columns (c), (d) and (e) are based upon base salary received in 2009.2012.

 

The threshold amount is the amount that would have been payable had the minimum score been achieved. Target is the amount payable had the business and individual performance scores been 100% on all metrics. The maximum amount reflects the highest amount payable for maximum scoring on all metrics.

 

(3)	The number of units presented in Columns (f), (g) and (h) represents PSUs for the 2009-20112012-2014 performance cycle. cycle and,with the exception of Ms. Turner, for the 2012 adjusted earnings per share-diluted component of the 2011-2013 and the 2010-2012 performance cycles.

Each PSU represents the value of one share of our Common Stock. The number of PSUs earned for the 2009-20112012-2014 performance cycle will depend upon achievement against the following metrics: three-year relative TSR versus the financial peer group (50% of the target award); three-year

Three-year relative TSR versus the financial peer group (50% of the target award);

Three-year compound annual growth in adjusted earnings per share-diluted measured against an internal target (12.5% of the target award); and annual growth in organic net sales outside the U.S. and Canada (15% of the target award);

Three-year compound annual growth in adjusted earnings per share-diluted measured against an internal target (15% of the target award); and

•

Annual growth in adjusted earnings per share-diluted measured against an internal target for each year of the three-year performance cycle (12.5%(6 2/3% of the target award per year).

Payment, if any, for awards will be made in shares of the Company’s Common Stock at the conclusion of the three-year performance cycle. The Committee will approve the targets for the annual adjusted earnings per share-diluted metrics at the beginning of each of the three years in the performance cycle. The minimum award as shown in Column (f) is the number of shares payable for achievement of the threshold level of performance on one of the metrics and the maximum award as shown in Column (h) is the number of shares payable atfor achievement of the maximum level of performance on all metrics.

 

More information regarding PSUs and the 20092012 awards can be found in the Compensation Discussion and Analysis and the Outstanding Equity Awards table.

 

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(4)

Column (i) includes RSU awards granted in 2009 as discussed beginning on page 55With the exception of Ms. Turner, none of the Compensation Discussion and Analysis.named executive officers received other stock awards in 2012. Ms. Turner, who joined the Company in July 2012, received RSUs to replace compensation forfeited at her prior employer.

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(5)

The number of options awarded to each named executive officer on February 17, 200921, 2012, was calculatedtargeted as one-half of the executive’s long-term incentive target percentage times his 2009or her 2012 base salary divided by the Black-Scholes value of $5.31$10.53 for each option. The Black-Scholes value is based on the $34.89$60.68 exercise price for these options determined as the closing price of the Company’s Common Stock on the award date, February 17, 2009.21, 2012. The actual number of options awarded varied from the target level based on the executive’s performance evaluation for 2012. The options awarded to Ms. Turner on July 9, 2012, had an exercise price per share of $72.44 and a Black-Scholes value of $11.87 for each option.

 

All options awarded by the Company have a ten-year term subject to earlier expiration in the event of termination of employment, and vest in 25% increments over four years. Unvested options are forfeited if the executive terminates his or her employment, unless the termination is due to the executive’s death, disability or retirement, in which case (i) options granted prior to April 28, 2011, continue to vest and are exercisable for five years subject to accelerationfollowing termination, and (ii) options granted on or after April 28, 2011, vest immediately and are exercisable for three or five years following termination (depending on the terms and conditions of the grant). Options granted in the year of retirement are prorated based upon the number of full calendar months worked in that year. In the event of a change in control, ofoptions granted prior to April 28, 2011, automatically vest upon the Companychange in control and continuedoptions granted on or after April 28, 2011, automatically vest unless a qualifying replacement award remains outstanding after the change in control, in which case options will vest in accordance with the original vesting schedule. Within the two-year period following a change in control, options will vest immediately if the executive’s employment is terminated without Cause or the executive resigns for Good Reason, both as defined in the event of retirement, death or disability.

EBPP 3A. No option may be exercised later than the option expiration date. More information regarding stock options and the 2009 award2012 awards can be found in the Compensation Discussion and Analysis and the Outstanding Equity Awards table below.

 

(6)	This column presents the exercise price for each option award based upon the closing price of the Company’s Common Stock on the New York Stock Exchange on the award date shown in Column (b).

 

(7)

Column (l) presents the aggregate grant date fair value of the target number of PSUs reported in Column (g), the grant date fair value of RSU awards reported in Column (i) and the stock options reported in Column (j), as determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. The assumptions used in determining these amounts are set forth in Note 17 to the Company’s Consolidated Financial Statements included in our 20092012 Annual Report to Stockholders that accompanies this proxy statement.

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Outstanding Equity Awards

The following table providesand explanatory footnotes provide information regarding unexercised stock options and unvested stock awards held by our named executive officers as of December 31, 2009.2012. All values in the table are based on a market value for our Common Stock of $35.79,$72.22, the closing price of our Common Stock on December 31, 2009,2012, the last trading day of 2009,2012, as reported by the New York Stock Exchange.

Outstanding Equity Awards

As of December 31, 20092012

 

																																						Option Awards(1)																		Stock Awards
Name		Option Awards(1)																				Stock Awards																Number of Securities Underlying Unexercised Options(2) (#) Exercisable				Number of Securities Underlying Unexercised Options(3) (#) Unexercisable				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)				Option   Expiration   Date				Number of Shares or Units of Stock That Have Not Vested(4) (#)				Market Value of Shares or Units of Stock That Have Not Vested(5) ($)				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(6) (#)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That  Have Not Vested(7) ($)
		Number of Securities Underlying Unexercised Options(2) (#) Exercisable				Number of Securities Underlying Unexercised Options(3) (#) Unexercisable				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested(4) (#)				Market Value of Shares or Units of Stock That Have Not Vested(5) ($)				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(6) (#)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(7) ($)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)				(b)				(c)				(d)		(e)				(f)				(g)				(h)				(i)				(j)
D. J. West		— 60,485 18,700 28,126 21,788 39,200 6,000 54,100 64,100 25,000 5,000				282,490 181,455 18,700 28,124 7,262 — — — — — —				— — — — — — — — — — —				34.890 35.870 45.780 54.680 52.300 61.700 55.540 37.755 32.250 34.655 29.515				02/16/2019 02/12/2018 10/01/2017 04/22/2017 02/15/2016 02/14/2015 12/31/2014 02/01/2014 02/02/2013 01/21/2012 05/20/2011				— — — — — — — — — — —				— — — — — — — — — — —				106,625 95,250 — — — — — — — — —				3,816,109 3,408,998 — — — — — — — — —
J. P. Bilbrey																																							— 17,818 25,327 — — 24,750 19,700 15,750				207,370 53,457 75,983 52,633 24,213 — — —			— — — — — — — —			60.68 55.48 51.42 39.26 34.89 54.68 52.30 61.70				02/20/2022 05/17/2021 02/21/2021 02/22/2020 02/16/2019 04/22/2017 02/15/2016 02/14/2015				625 — — — — — — —				48,519 — — — — — — —				91,500 91,375 — — — — — —				6,608,130  6,599,103  —  —  —  —  —  —
Total		322,499				518,031				—				—				—				—				—				201,875				7,225,107					103,345				413,656			—			—				—				625				48,519				182,875				13,207,233
H. P. Alfonso		— 10,313 7,850 7,400 14,100				89,455 30,942 7,850 7,400 4,700				— — — — —				34.890 35.870 46.640 54.680 55.560				02/16/2019 02/12/2018 08/05/2017 04/22/2017 07/16/2016				3,135 — — — —				122,645 — — — —				33,875 30,250 — — —				1,212,386 1,082,648 — — —					— 12,663 35,765 67,091 41,255				59,830 37,992 35,765 22,364 —			— — — — —			60.68 51.42 39.26 34.89 35.87				02/20/2022 02/21/2021 02/22/2020 02/16/2019 02/12/2018				— — — — —				— — — — —				26,500 26,750 — — —				1,913,830  1,931,885  —  —  —
																																							15,700				—			—			46.64				08/05/2017				—				—				—				—
Total		39,663				140,347				—				—				—				3,135				122,645				64,125				2,295,034					172,474				155,951			—			—				—				—				—				53,250				3,845,715
J. P. Bilbrey		— 17,908 12,376 14,775 15,750 24,600 23,250				96,850 53,727 12,374 4,925 — — —				— — — — — — —				34.890 35.870 54.680 52.300 61.700 37.755 38.850				02/16/2019 02/12/2018 04/22/2017 02/15/2016 02/14/2015 02/01/2014 11/30/2013				13,750 — — — — — —				515,169 — — — — — —				33,250 25,750 — — — — —				1,190,018 921,593 — — — — —
M. G. Buck																																							— — — — 20,900 16,900				54,675 31,107 24,288 15,184 — —			— — — — — —			60.68 51.42 39.26 34.89 54.68 61.00				02/20/2022 02/21/2021 02/22/2020 02/16/2019 04/22/2017 04/18/2015				— — — — — —				— — — — — —				20,125 18,250 — — — —				1,453,428  1,318,015  —  —  —  —
Total		108,659				167,876				—				—				—				13,750				515,169				59,000				2,111,611					37,800				125,254			—			—				—				—				—				38,375				2,771,443
T. L. O’Day		— 2,936				63,560 8,809				— —				34.890 35.230				02/16/2019 12/01/2018				— —				— —				24,000 21,500				858,960 769,485					—				49,890			—			60.68				02/20/2022				—				—				18,375				1,327,042
																																							12,593				37,782			—			51.42				02/21/2021				—				—				22,125				1,597,868
																																							33,665				33,665			—			39.26				02/22/2020				—				—				—				—
																																							1,478				15,890			—			34.89				02/16/2019				—				—				—				—
																																							2,937				—			—			35.23				12/01/2018				—				—				—				—
Total		2,936				72,369				—				—				—				—				—				45,500				1,628,445					50,673				137,227			—			—				—				—				—				40,500				2,924,910
B. H. Snyder		— 14,413 11,276 17,813 20,500 31,900				67,320 43,242 11,274 5,937 — —				— — — — — —				34.890 35.870 54.680 52.300 61.700 37.755				02/16/2019 02/12/2018 04/22/2017 02/15/2016 02/14/2015 02/01/2014				5,000 — — — — —				187,875 — — — — —				23,500 21,000 — — — —				841,065 751,590 — — — —
L. M. Turner																																							—				28,015			—			72.44				07/09/2022				28,000				2,044,560				14,000				1,011,080
Total		95,902				127,773				—				—				—				5,000				187,875				44,500				1,592,655					—				28,015			—			—				—				28,000				2,044,560				14,000				1,011,080

 

 

 

(1)	Columns (b) through (f) present information about stock options awarded to each named executive officer under the Incentive Plan. Each option award vests as toin increments of 25% of the shares on each of the first four anniversaries of the grant date,

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subject to earlier vesting in the event of a change in control for awards granted prior to April 28, 2011. Awards granted on or after April 28, 2011, will vest earlier if a qualifying replacement award is not outstanding after the change in control. Generally, upon termination of employment, vested options must be exercised and unvested options are cancelled, except in the case of retirement, death or disability in which case the options (i) continue to vest as scheduled and(in the case of awards granted prior to April 28, 2011) or (ii) vest immediately (in the case of awards granted on or after April 28, 2011). Participants whose

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employment terminates due to retirement, death or disability may be exercisedexercise vested options for up to three or five years (based on the terms and conditions of the grant) after termination of employment. Options granted in the year of retirement are prorated based upon the number of full calendar months worked in that year. If termination occurs within two years after a change in control for any reason other than for Cause or by the executive without Good Reason, as definedany replacement awards relating to options granted on or after April 28, 2011, will vest in the Executive Benefits Protection Plan, vested optionsfull and may be exercised for one year after termination. If an executive officer is under age 55 (and for options granted on or after April 28, 2011, has completed less than five years of service), and his or her employment is terminated for reasons other than for Cause or forby the executive without Good Reason, the executive will be eligible to exercise all vested stock options and a prorated portion of his or her unvested stock options held on the date of separation from service for a period of 120 days following separation. No option may be exercised after its expiration date.

 

(2)	Options listed in Column (b) are vested and may be exercised by the executive at any time subject to the terms of the stock option.

 

(3)

Options listed in Column (c) havewere not vested as of December 31, 2009.2012. The following table provides information with respect to the dates on which these options are scheduled to vest, subject to continued employment (or retirement, death or disability), prorating in the event of severance, and topossible acceleration in the event of a change in control.

 

Grant Date		Future Vesting Dates		Number of Options Vesting
				D. J. West		H. P. Alfonso		J. P. Bilbrey		T. L. O’Day		B. H. Snyder
02/17/2009		02/17/2010 02/17/2011 02/17/2012 02/17/2013		70,622   70,623   70,622   70,623		22,363 22,364 22,364 22,364		24,212   24,213   24,212   24,213		15,890 15,890 15,890 15,890		16,830   16,830   16,830   16,830
12/02/2008		12/02/2010		—		—		—		2,936		—
		12/02/2011		—		—		—		2,936		—
		12/02/2012		—		—		—		2,937		—
02/13/2008		02/13/2010 02/13/2011 02/13/2012		60,485   60,485   60,485		10,314 10,314 10,314		17,909   17,909   17,909		—         —         —		14,414   14,414   14,414
10/02/2007		10/02/2010 10/02/2011		9,350     9,350		—         —		—           —		—         —		—           —
08/06/2007		08/06/2010 08/06/2011		—           —		3,925   3,925		—           —		—         —		—           —
04/23/2007		04/23/2010 04/23/2011		14,062   14,062		3,700   3,700		6,187     6,187		—         —		5,637     5,637
07/17/2006		07/17/2010		—		4,700		—		—		—
02/16/2006		02/16/2010		7,262		—		4,925		—		5,937
Total per Executive				518,031		140,347		167,876		72,369		127,773

Grant Date		Future             Vesting              Dates		Number of Options Vesting
				J. P. Bilbrey				H. P. Alfonso				M. G. Buck				T. L. O’Day				L. M. Turner
07/09/2012		07/09/2013			—				—				—				—				7,003
		07/09/2014			—				—				—				—				7,004
		07/09/2015			—				—				—				—				7,004
		07/09/2016			—				—				—				—				7,004
02/21/2012		02/21/2013			51,842				14,957				13,668				12,472				—
		02/21/2014			51,843				14,958				13,669				12,473				—
		02/21/2015			51,842				14,957				13,669				12,472				—
		02/21/2016			51,843				14,958				13,669				12,473				—
05/18/2011		05/18/2013			17,819				—				—				—				—
		05/18/2014			17,819				—				—				—				—
		05/18/2015			17,819				—				—				—				—
02/22/2011		02/22/2013			25,328				12,664				10,369				12,594				—
		02/22/2014			25,327				12,664				10,369				12,594				—
		02/22/2015			25,328				12,664				10,369				12,594				—
02/23/2010		02/23/2013			26,316				17,882				12,144				16,832				—
		02/23/2014			26,317				17,883				12,144				16,833				—
02/17/2009		02/17/2013			24,213				22,364				15,184				15,890				—
Total per Executive					413,656				155,951				125,254				137,227				28,015

 

(4)	Column (g) for Mr. Alfonso includes 3,135 unvested RSUs awarded Mr. Alfonso in 2007 and 2006. These RSUs will vest as follows: 2,635 units on May 1, 2010 and 500 units on September 1, 2010.

Column (g) for Mr. Bilbrey includes 13,750625 unvested RSUs awarded Mr. Bilbrey from a grant in 2009 and 2008. These RSUs will vest as follows: increments of2009. The 625 units vested on March 17, 2010, February 17, 2011, February 17, 2012 and February 17, 2013; and increments of 3,750 units on June 3, 2010, June 3, 2011, and June 3, 2012.

2013. For Ms. Turner, Column (g) for Mr. Snyder includes 5,00028,000 unvested RSUs awarded Mr. SnyderMs. Turner in 2008.2012. These RSUs will vest in increments of 7,000 units on December 31, 2010.August 9, 2013, July 9, 2014, July 9, 2015, and July 9, 2016.

 

(5)

Column (h) contains the value of the RSUs reported in Column (g) using athe $72.22 closing price per share of our Common Stock of $35.79, the closing price of our Common Stock on the New York Stock Exchange on December 31, 2009, the last trading day of 2009.2012. Column (h) also includes accrued dividend equivalents through December 31, 20092012, on the RSUs included in Column (g). Accrued dividendsdividend equivalents will be paid in cash upon vesting.

 

(6)

For each named executive officer, the first number in Column (i) is the maximum number of PSUs awardedpotentially payable for the 2009-20112012-2014 performance cycle. Thecycle that vests on December 31, 2014. With the exception of Ms. Turner, the second number in Column (i) is the maximum number of PSUs awardedpotentially payable for the 2008-20102011-2013 performance cycle.cycle that vests on December 31, 2013. Based on progress to date against goals, amounts presented in Column (i) for the 2009-2011both performance cycle are at maximum, which is 250% of target, and amounts presented in Column (i) for the 2008-2010 performance cyclecycles are at maximum, which is 250% of target. The actual number of PSUs earned, if any, will be determined at the end of each performance cycle and may be lessfewer than the amountnumber reflected in Column (i).

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(7)	Column (j) contains the value of PSUs reported in Column (i) using the $72.22 closing price per share of our Common Stock of $35.79, the closing price of our Common Stock on the New York Stock Exchange on December 31, 2009, the last trading day of 2009.2012.

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Option Exercises and Stock Vested

The following table and explanatory footnotes provide information with regard to amounts paid to or receivedearned by our named executive officers during 20092012 as a result of the exercise of stock options or the vesting of stock awards.

Option Exercises and Stock Vested

20092012

 

Name		Option Awards(1)				Stock Awards(2)
		Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
(a)		(b)		(c)		(d)		(e)
D. J. West		—		—		38,175		1,366,283
H. P. Alfonso		— —		— —		10,875      6,058(3)		389,216    243,793
J. P. Bilbrey		— —		— —		10,350      5,000(4)		370,427    195,738
T. L. O’Day		—		—		—		—
B. H. Snyder		— —		— —		9,225      5,000(5)		330,163    187,875

Name		Option Awards(1)				Stock Awards(2)
		Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
(a)		(b)		(c)		(d)		(e)
J. P. Bilbrey		143,904		4,373,602		84,877		6,129,817
						4,375(3)		307,501
H. P. Alfonso		33,600		396,873		30,916		2,232,754
M. G. Buck		64,149		1,211,859		20,951(4)		1,513,081
T. L. O’Day		45,000		1,520,631		24,461		1,766,573
L. M. Turner		—		—		—		—

 

 

 

(1)

None of the named executive officers exercised stock options in 2009. Therefore noThe values are shown in Column (b), represent the number of stock options exercised by the named executive officerofficers during 2009, or2012, and Column (c), represents the market value at the time of exercise of the shares purchased less the exercise price paid.

 

(2)

As results were belowThe values shown in Column (d) include the financial targets set atnumber of PSUs earned from the beginning of the 2007-2009 PSU2010-2012 performance cycle that ended on December 31, 2009, no payments were made to any executives for2012, as determined by the 2007-2009 performance cycle. Consequently, no awards are includedCommittee, or, in Column (d) with respect to PSU awards for the 2007-2009 performance cycle.case of Mr. Bilbrey, determined by the independent members of our Board. The results of the 2008-2009 PSU2010-2012 performance cycle that ended on December 31, 20092012, exceeded the financial targets and are reflectedestablished at maximum award levelthe start of the performance cycle. The awards included in Column (d), 150% reflect payment at 226.49% of target. PerMs. Buck elected to defer payment of her award as described below. Messrs. Bilbrey, Alfonso, and O’Day received payment in Common Stock for their award in February 2013. In accordance with the terms of the 2008-2009 performance cycle award, any PSUs earned for the 2007-2009 performance cycle would have reduced the total PSUs earned for the 2008-2009 performance cycle. Since no units were earned for the 2007-2009 performance cycle, no reduction of the 2008-2009 performance cycle units was made.

Column (d) includes the number of PSUs from the 2008-2009 cycle that ended on December 31, 2009 that was determined by the Committee, or by the independent members of our Board in the case of Mr. West, to be earned. These PSUs were paid in February 2010. In accordance with the PSU award, each PSU represents one share of our Common Stock valued in Column (e) at $35.79,$72.22, the closing price of our Common Stock on the New York Stock Exchange on December 31, 2009, the last trading day of 2009.2012.

 

For Mr. Bilbrey, Column (d) also includes the number of RSUs that vested in 20092012 as a result of prior year awards. These awards are described in more detail in the following footnotes.

 

(3)

On May 1, 2009, 2,558February 17, 2012, 625 RSUs awarded to Mr. AlfonsoBilbrey in 20072009 vested. Mr. AlfonsoBilbrey elected to defer 100% of this award. On the vesting date of these RSUs, Mr. AlfonsoBilbrey received a cash payment of $6,018,$2,406, which was equivalent to dividends that would have been earned on these RSUs had he held Common Stock instead of RSUs during the vesting period. Mr. AlfonsoBilbrey utilized the net cash received in lieu of dividends on the RSUs designated for deferralafter taxes to meet tax obligations on the deferred portion of his award, resulting in deferral of all 2,558 shares.

On July 17, 2009, 3,000 RSUs awarded to Mr. Alfonso in 2006 vested. Mr. Alfonso elected to defer 75% of this award payment and receive immediate payment in shares of the Company’s Common Stock for the remaining 25%. On the

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vesting date of these RSUs, Mr. Alfonso received a cash payment of $10,380, equivalent to dividends that would have been earned on these RSUs had he held Common Stock instead of RSUs during the vesting period. Mr. Alfonso utilized the net cash received in lieu of dividends on the RSUs designated for deferral to meet tax obligations on the deferred portion of his award, resulting in deferral of 2,250625 shares. Based on Mr. Alfonso’sBilbrey’s deferral election, these 2,250625 RSUs will be paid as shares of Common Stock, net of applicable taxes, in 2013. Mr. Alfonso utilizedupon his separation from service from the remaining net cash received in lieuCompany, subject to the requirements of dividends on the RSUs designated for deferral along with the net cash received in lieu of dividends on the RSUs designated for immediate payment in shares and liquidated 75 RSUs to meet tax obligations on the portion designated for immediate payment, resulting in his receipt of 675 sharessection 409A of the Company’s Common Stock. IRC.

 

On September 1, 2009, 500 RSUs awarded to Mr. Alfonso in 2006 vested. Mr. Alfonso elected to defer 75% of this award payment and receive immediate payment in shares of the Company’s Common Stock for the remaining 25%. On the vesting date of these RSUs, Mr. Alfonso received a cash payment of $1,744, equivalent to dividends that would have been earned on these RSUs had he held Common Stock instead of RSUs during the vesting period. Mr. Alfonso utilized the net cash received in lieu of dividends on the RSUs designated for deferral to meet tax obligations on the deferred portion of his award, resulting in deferral of 375 shares. Based on Mr. Alfonso’s deferral election, these 375 RSUs will be paid as shares of Common Stock, net of applicable taxes in 2011. Mr. Alfonso utilized the remaining net cash received in lieu of dividends on the RSUs designated for deferral along with the net cash received in lieu of dividends on the RSUs designated for immediate payment in shares and liquidated 14 RSUs to meet tax obligations on the portion designated for immediate payment, resulting in his receipt of 111 shares of the Company’s Common Stock.

The value of the RSUs paid to or deferred by Mr. Alfonso was based on the closing price of the Company’s Common Stock on the trading day prescribed by the Incentive Plan. Required tax withholdings were deducted from all payments. Column (e) reflects the value of the 6,058 shares realized by Mr. Alfonso as the result of vesting of RSUs in 2009 and the cash equivalent of dividends payable on the RSUs vesting in 2009.

(4)

On JulyJune 3, 2009,2012, 3,750 RSUs awarded to Mr. Bilbrey in 2008 vested. Mr. Bilbrey elected to receive immediate payment in shares of the Company’s Common Stock. In addition, Mr. Bilbrey received a cash paymentpayments of $4,463,$19,519, which were equivalent to dividends that would have been earned on these RSUs had he held Common Stock instead of RSUs during the vesting period. Mr. Bilbrey utilized the net cash received in lieu of dividends on the RSUs and liquidated 1,0861,545 RSUs to meet tax obligations, resulting in his receipt of 2,6642,205 shares of the Company’s Common Stock.

On August 8, 2009, 1,250 RSUs awarded to Mr. Bilbrey in 2005 vested. Mr. Bilbrey elected to receive payment for his RSUs in cash and received a gross payment of $48,925. On the vesting date of these RSUs, Mr. Bilbrey also received a cash payment of $5,550, equivalent to dividends that would have been earned on the RSUs had he held Common Stock instead of RSUs during the vesting period. Required tax withholdings were deducted from both payments.

 

The value of the RSUs paid to or deferred by Mr. Bilbrey was based on the closing price of the Company’s Common Stock on the trading day prescribed by the Incentive Plan.respective vesting dates. Required tax withholdings were deducted from all payments. Column (e) reflects the value of the 5,0004,375 shares realized by Mr. Bilbrey as the result of vesting of RSUs in 2009 and the cash equivalent of dividends payable on the RSUs vesting in 2009.2012.

 

(5)(4)

On December 31, 2009, 5,000 RSUs awarded to Mr. Snyder in 2008 vested. Mr. SnyderMs. Buck elected to receive immediate paymentdefer 100% of the shares payable to her from the 2010-2012 PSU cycle. The gross number of shares payable to her, 20,951, was reduced by required tax withholdings, resulting in deferral of 20,236 common stock units. Based on her election, these 20,236 common stock units will be paid as shares of the Company’s Common Stock. In addition, Mr. Snyder received a cash payment of $8,925, equivalent to dividends that would have been earned on these RSUs had he held Common Stock, insteadnet of RSUs duringapplicable taxes, upon her separation from service from the vesting period. Mr. Snyder utilizedCompany, subject to the net cash received in lieurequirements of dividends on the RSUs and liquidated 1,409 RSUs to meet tax obligations, resulting in his receipt of 3,591 sharessection 409A of the Company’s Common Stock. Column (e) reflects the market value of the 5,000 shares on the vesting date and the cash equivalent of dividends paid on the vesting date.IRC.

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Pension Benefits

Each of the named executive officers, with the exception of Mr. O’Day and Ms. Turner, is a participant in our tax-qualified defined benefit pension plan and is fully vested in his or her benefit under that plan. Messrs. West,Mr. Bilbrey and Snyder, wereMs. Buck are eligible to participate in our non-qualified defined benefit Supplemental Executive Retirement Plan, or DB SERP. With the exception of Mr. West, whose eligibility for a DB SERP benefit is described below, noNo benefit is payable under the DB SERP if the executive officer terminates employment prior to age 55 or if he or she does not have five years of service with the Company. As of December 31, 2009,2012, Mr. SnyderBilbrey had attained age 55 with five years of service.

The combination of the tax-qualified and DB SERP plans waswere designed to provide a benefit onupon retirement at or after reaching age 60 based on a joint and survivor annuity equal to 55% of final

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average compensation for an executive officer with 15 or more years of service (reduced pro rata for each year of service under 15). Effective January 1, 2007, the benefit payable under the DB SERP to an executive officer who was age 50 or over as of January 1, 2007, was reduced by 10%, and the benefit payable to an executive officer who had not attained age 50 as of January 1, 2007, was reduced by 20%. The benefitsbenefit payable to Messrs.Mr. Bilbrey and Snyder werewas reduced by 10% and the benefit payable to Mr. WestMs. Buck was reduced by 20%.

Final average compensation is calculated as the sum of (i) the average of the highest three calendar years of base salary paid over the last five years of employment with the Company and (ii) the average of the highest three annual incentive program awards for the last five years of employment with the Company, whether receivedpaid or deferred. The benefit accrued under the DB SERP is payable upon retirement inas a lump sum, a life annuity with 50% benefit continuation to the participant’s surviving spouse, or payment may be deferred in accordance with the provisions of the Company’s Deferred Compensation Plan. The lump sum is equal to the actuarial present value of the joint and survivor pension earned, reduced by the lump sum value of the benefits to be paid under the tax-qualified defined benefit pension plan and the value of the executive’s Social Security benefits. If the executive officer terminates employment after age 55 but before age 60, the benefit is reduced for early retirement at a rate of 5% per year for the period until the executive would have turned 60.

Our employment agreement with Mr. West contains special provisions relating to the vesting of his benefit under the DB SERP. Under the employment agreement, Mr. West was fully vested in his accrued DB SERP benefit as of January 2, 2008. If Mr. West terminates employment prior to age 60, the benefit payable upon termination is reduced for early retirement at a rate of 5% per year for the period between termination and attainment of age 60.

The CLRP provides eligible participants the defined benefit he or she would have earned under our tax-qualified defined benefit pension plan were it not for the legal limitation on compensation used to determine benefits. An executive officer who is a participant in the DB SERP is not eligible to participate in the CLRP, unless he or she (i) ceases to be designated by the Committee as eligible to participate in the DB SERP prior to his or her termination of employment with the Company or (ii) has his or her employment involuntarily terminated by the Company other than for Cause. Such executive officer would thenCause prior to vesting in the DB SERP. Executive officers meeting these criteria become eligible to participate in the CLRP and to receive a benefit for all years in which he or shethey would have been a participant of the CLRP but for his or her designationhad they not been designated by the Committee to be eligible to participate infor the DB SERP.

Executive officers who are eligible for both the DC SERP (described under Non-Qualified Deferred Compensation below) and the tax-qualified defined benefit pension plan receive an additional credit under the CLRP equal to 3% of eligible earnings less the IRS annual limitation on compensation. Mr. Alfonso is the only named executive officer eligible for the CLRP. Upon separation, benefits under the CLRP are payable in a single lump sum or may be deferred into the Deferred Compensation Plan. A participant is eligible for his or her CLRP benefit upon separation from service (subject to the provisions of section 409A)409A of the IRC) after five years of service or attaining age 55 (unless the participant is terminated for Cause). Payment is also made to the estate of a participant who dies prior to separation from service. Participants who become disabled are 100% vested in their benefit and continue to accrue additional benefits for up to two additional years.

 

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The following table and explanatory footnotes provide information regarding the present value of benefits accrued under the tax-qualified defined benefit pension plan, as applicable, and the DB SERP or CLRP for each named executive officer as of December 31, 2009.2012. The amounts shown for the DB SERP reflect the reduction for the present value of the benefits under the tax-qualified defined benefit pension plan and Social Security benefits.

Pension Benefits

20092012

 

Name		Plan Name		Number of Years Credited Service (#)		Present Value of Accumulated Benefit(1) ($)		Payments During Last Fiscal Year ($)		Plan Name		Number of Years   Credited   Service (#)				Present Value of   Accumulated   Benefit(1) ($)				Payments During   Last Fiscal   Year ($)
(a)		(b)		(c)		(d)		(e)		(b)		(c)				(d)				(e)
D. J. West		Tax-Qualified Defined Benefit Pension Plan		9		129,959		—
J. P. Bilbrey										Tax-Qualified Defined Benefit Pension Plan			9				120,189			—
		DB SERP		9		3,136,977		—		DB SERP			9				9,016,244			—
H. P. Alfonso		Tax-Qualified Defined Benefit Pension Plan		3		18,033		—		Tax-Qualified Defined Benefit Pension Plan			6				49,275			—
		CLRP		3		24,871		—		CLRP			6				124,361			—
J. P. Bilbrey		Tax-Qualified Defined Benefit Pension Plan		6		62,573		—
M. G. Buck										Tax-Qualified Defined Benefit Pension Plan			8				84,082			—
		DB SERP		6		1,574,503		—		DB SERP			8				2,536,397			—
T. L. O’Day		—		—		—		—		—			—				—			—
B. H. Snyder		Tax-Qualified Defined Benefit Pension Plan		27		449,834		—
		DB SERP		27		5,831,854		—
L. M. Turner										—			—				—			—

 

 

 

(1)

These amounts have been calculated using interest rate, mortality and other assumptions consistent with those used for financial reporting purposes as set forth in Note 14 to the Company’s Consolidated Financial Statements included in our 20092012 Annual Report to Stockholders which accompanies this proxy statement. The actual payments would differ due to plan assumptions. The estimated vested DB SERP benefit as of December 31, 20092012, for Mr. WestBilbrey was $2,621,211 and for Mr. Snyder was $5,883,667.$8,829,004. The amounts are based on final average compensation of each namedeligible executive officer under the terms of the DB SERP as of December 31, 2009:2012.

 

Name		Final Average Compensation ($)
D. J. WestP. Bilbrey		1,612,710		1,969,609
H. P. Alfonso		N/A		—
J. P. BilbreyM. G. Buck		855,607		918,799
T. L. O’Day		N/A		—
B. H. SnyderL. M. Turner		852,392		—

Non-Qualified Deferred Compensation

Our named executive officers are eligible to participate in The Hershey Company Deferred Compensation Plan. The Deferred Compensation Plan is a non-qualified, non-funded plan that permits participants to defer receipt of compensation that would otherwise payablebe paid to them.them currently. The Deferred

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Compensation Plan is intended to secure the goodwill and loyalty of participants by enabling them to defer compensation when the participants deem it to be beneficial to do so and by providing a vehicle for the Company to provide, on a non-qualified basis, contributions whichthat could

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not be made on the participants’ behalf to the tax-qualified 401(k) Plan.. The Company credits the Deferred Compensation Plan with a specified percentage of compensation for executive officers participating in the non-qualified DC SERP.

Our named executive officers may elect to defer payments to be received as a result offrom the DB SERP, DC SERP, CLRP, and the One Hershey Incentive Program,OHIP as well as PSU and RSU awards, but not stock options. Amounts deferred are fully vested and are credited to the participant’sindividual’s account under the Deferred Compensation Plan. Amounts deferred are fully vested and will be paid at a future date orParticipants elect to receive payment at termination of employment as the participant may elect.or some other future date. DB SERP and CLRP payments designated for deferral into the Deferred Compensation Plan are not credited as earned but are credited in full upon the participant’s retirement.

Payments are distributed in a lump sum or in annual installments offor up to 15 years. All amounts are payable in a lump sum following a change in control. All elections and payments under the Deferred Compensation Plan are subject to compliance with section 409A of the IRC which may limit elections and require a delay in payment of benefits in certain circumstances.

While deferred, amounts are credited with “earnings”notional earnings as if they were invested asby the participant elects in one or more investment options available underoffered by the Deferred Compensation Plan. The investment options under the Deferred Compensation Plan consist of investment in sharesa deferred common stock unit account that we value according to the performance of our Common Stock (for awards paid in stock) or in mutual funds or other investments available to participants in our 401(k) Plan.(for awards paid in cash). The participants’ accounts under the Deferred Compensation Plan will beare adjusted daily, up or down, depending upon performance of the investment options elected.

Effective January 1, 2007, we began crediting the deferred compensation accounts of all employees, including the named executive officers, with the amount of employer matching contributions that exceed the limits established by the IRS for contribution to the 401(k) Plan.. These amounts are credited in the first quarter of the year after they are earned. As shown in the Notesfootnotes to the Summary Compensation Table beginning on page 62,60, these amounts are designated as “Supplemental 401(k) match” and are included as “All Other Compensation” in the year earned. These amounts also are also included in Column (c) of the Non-Qualified Deferred Compensation table in the year earned. With the exceptionAll of Mr. O’Day, the named executive officers are fully vested in the Supplemental 401(k) match credits presented and will be paid at a future date or at termination of employment, as elected by the officer.

Effective January 1, 2007, we began crediting the deferred compensation accounts of all employees hired on or after January 1, 2007, including eligible named executive officers, with the amount of core retirement contributions that exceed the limits established by the IRS for contribution to the 401(k) Plan.. These amounts are credited in the first quarter of the year after they are earned. As shown in the Notesfootnotes to the Summary Compensation Table, these amounts are designated as “Supplemental Core Retirement Contribution” and are included as “All Other Compensation” in the year earned. These amounts also are also included in Column (c) of the Non-Qualified Deferred Compensation table in the year earned. Mr. O’Day iswas the only named executive officer eligible for the Supplemental Core Retirement Contribution credit. Mr. O’Day will vest in thea Supplemental Core Retirement Contribution credit onfor 2012. He is fully vested in this benefit and will receive payment for this benefit at termination of employment subject to the third anniversaryprovisions of his employment.section 409A of the IRC.

Messrs.Mr. Alfonso, Mr. O’Day and O’DayMs. Turner are eligible to participate in our DC SERP, a part of the Deferred Compensation Plan. The DC SERP provides annual allocations to the Deferred Compensation

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Plan equal to a percentage of compensation determined by the Committee in its sole discretion. In order to receive the annual DC SERP allocation, an executive officer must (i) defer in the 401(k) Plan the maximum amount allowed by the Company or IRS and (ii) be employed

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on the last day of the plan year unless he or she terminates employment while at least age 55, retires, dies or becomes disabled. After completing five years of service with the Company, an executive officer is vested in 10% increments based on his or her age. An executive age 46 with five years of service is 10% vested and an executive age 55 with five years of service is 100% vested. Mr. Alfonso’s, and Mr. O’Day’s and Ms. Turner’s annual DC SERP allocation is equal to 12.5% of base salary and One Hershey Incentive ProgramOHIP award for the calendar year, whether paid or deferred. Mr. Alfonso is 100% vested in his DC SERP benefit. Mr. O’Day and Ms. Turner are not vested in any portion of their DC SERP benefit.

The following table sets forthand explanatory footnotes provide information relating to the activity in the Deferred Compensation Plan accounts of the named executive officers during 20092012 and the aggregate balance of the accounts as of December 31, 2009.2012.

Non-Qualified Deferred Compensation

20092012

 

Name		Executive Contributions in Last Fiscal Year(1) ($)				Registrant Contributions in Last Fiscal Year(2) ($)				Aggregate Earnings in Last Fiscal Year(3) ($)				Aggregate Withdrawals/ Distributions(4) ($)				Aggregate Balance at Last Fiscal Year-End(5) ($)				Executive Contributions in Last Fiscal Year(1) ($)				Registrant Contributions in Last Fiscal Year(2) ($)							Aggregate Earnings in Last Fiscal Year(3) ($)							Aggregate Withdrawals/ Distributions(4) ($)							Aggregate Balance at Last Fiscal Year-End(5) ($)
(a)		(b)				(c)				(d)				(e)				(f)				(b)				(c)							(d)							(e)							(f)
D. J. West		—				86,484				28,058				—				165,795
J. P. Bilbrey																						1,559,953				107,257							912,115							—							5,725,755
H. P. Alfonso		192,075				144,320				73,884				—				809,318				—				185,498							198,164							23,557							1,703,952
J. P. Bilbrey		—				33,191				55,644				—				795,414
M. G. Buck																						1,052,798				30,381							711,348							—							4,460,413
T. L. O’Day		—				75,086				1,419				—				79,750				1,096,730				177,899							528,480							—							3,577,668
B. H. Snyder		—				26,387				9,324				—				53,718
L. M. Turner																						—				28,546							—							—							28,546

 

 

 

(1)

Column (b) reflects amounts that otherwise would have been received by Mr. AlfonsoBilbrey, Ms. Buck and Mr. O’Day during 20092012 as payment of PSU and RSU awards but which were deferred under the Deferred Compensation Plan. Mr. Bilbrey deferred both PSU and RSU awards. Ms. Buck and Mr. O’Day deferred their PSU award.

The amount deferred by Mr. Alfonso, $192,075, represents the deferred portion of his 2007 RSU award that vested on May 1, 2009, and 2006 RSU awards that vested July 17, 2009 and September 1, 2009. Mr. Alfonso utilized the net cash received in lieu of dividends on the RSUs designated for deferral to meet the tax obligations on these three deferred awards. The value of Mr. Alfonso’s 2007 RSU award is included in the amount listed for 2007 in Column (e) of the Summary Compensation Table of this proxy statement. The value of his 2006 RSU award is not listed in the Summary Compensation Table of this proxy statement.

Of the $1,559,953 deferred by Mr. Bilbrey, $38,038 represents the net amount after required taxes were deducted from Mr. Bilbrey’s 2009 RSU award that vested on February 17, 2012. Mr. Bilbrey utilized the net cash received in lieu of dividends on the RSUs to meet the tax obligations on the deferred award. The remaining $1,521,915 represents the net amount after required taxes were deducted from Mr. Bilbrey’s 2009-2011 PSU award that vested December 31, 2011. The value of these awards is not listed in the Summary Compensation Table of this proxy statement.

The $1,052,798 deferred by Ms. Buck represents the net amount after required taxes were deducted from Ms. Buck’s 2009-2011 PSU award that vested December 31, 2011. The value of this award is not included in the Summary Compensation Table of this proxy statement.

The $1,096,730 deferred by Mr. O’Day represents the net amount after required taxes were deducted from Mr. O’Day’s 2009-2011 PSU award that vested December 31, 2011. The value of this award is not included in the Summary Compensation Table of this proxy statement.

 

(2)

For Mr. Alfonso, Mr. O’Day and Ms. Turner, Column (c) reflects the DC SERP contribution earned in 2012. With the exception of Ms. Turner, this column also reflects the Deferred Compensation Plan Supplemental Core Retirement Contribution and Supplemental 401(k) match contributions earned by each of the named executive officerofficers in 2009.2012. For Messrs. Alfonso andMr. O’Day, this column also reflectsColumn (c) includes the DC SERP contributionSupplemental Core Retirement Contribution earned in 2009.2012. These amounts are included in Column (i) of the Summary Compensation Table of this proxy statement.

 

(3)	Column (d) reflects the amount of adjustment made to each named executive officer’s account during 20092012 to reflect the performance of the investment options chosen by the officer. Amounts reported in Column (d) were not required to be reported as compensation in our Summary Compensation Table.

 

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(4)	Column (e) reflects payments and withdrawals made for each named officer.payment to Mr. Alfonso of 375 previously deferred RSUs from a 2006 award plus earnings.

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(5)

Column (f) reflects the aggregate balance credited to each named executive officer as of December 31, 2009,2012, including the 20092012 amounts reflected in Columns (b), (c) and (d). The following table indicates the portion of the Column (f) balance that reflects amounts disclosed in a Summary Compensation Table included in proxy statements for years prior to 2009.2012.

 

Name		Amount Reported in Previous Years ($)
D. J. WestP. Bilbrey		58,0171,037,789
H. P. Alfonso		494,891   905,957
J. P. BilbreyM. G. Buck		210,740   375,671
T. L. O’Day		—772,815
B. H. SnyderL. M. Turner		20,873—

Potential Payments Upon Termination or Change in Control

We have entered into an employment agreement with Mr. West and maintain plans covering our executive officers that will require us to provide incremental compensation in the event of involuntary termination of employment or a change in control. We describe these obligations below.

Overview

We enteredOn August 7, 2012, the independent members of our Board of Directors, based on a recommendation from the Committee, authorized our entering into an employment agreement with Mr. West at the time of his promotion to the position ofBilbrey, our President in October 2007.and CEO. The agreement has a term of three years and renews daily. Theemployment agreement provides for Mr. West’sBilbrey’s continued employment as our President and effective December 1, 2007 as President and Chief Executive OfficerCEO and contains provisions relatingas a member of the Board of Directors. The employment agreement does not have a specified term; Mr. Bilbrey’s employment is on an at-will basis. In the event Mr. Bilbrey’s employment is terminated by the Company without Cause or he resigns for Good Reason (in each case as defined in the employment agreement), Mr. Bilbrey will be entitled to certain severance benefits. In the event of his responsibilities, compensation, confidentiality,termination after a change in control, Mr. Bilbrey will be eligible to receive benefits under the EBPP 3A. He is not entitled to an excise tax gross-up. The employment agreement subjects Mr. Bilbrey to certain non-competition and non-solicitation commitmentscovenants under the ECRCA (as described below) and agreements,to compensation recovery (clawback) to the extent required by applicable law and payments, if any, to be made to him upon termination of employment. Mr. West and ourregulations.

Our other named executive officers also participate in the Executive Benefits Protection Plan (Group 3A), or EBPP amended as of October 9, 2009.3A. The EBPP 3A is intended to help us attract and retain qualified executive employees and maintain a stable work environment by making a provision for the protection of covered executives in connection with a change in control of Hershey or termination of employment under certain circumstances.

Each of our named executive officers was required to sign an Executive Confidentiality and Restrictive Covenant Agreement, or ECRCA, as a condition to receiving long-term incentive compensation awards such as stock options and PSUs. The ECRCA obligates the executive officer to not disclose or misuse our confidential and proprietary information or, for a period of 12 months following termination, carry on any activities that compete with our business.

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Termination of employment and a change in control also impact PSUs, RSUs and stock option awards we have made, as well as benefits payable under our employee benefit plans.

The following narrative takes each termination of employment situation – voluntary resignation, discharge for Cause, death, disability, retirement, discharge without Cause, and resignation for Good Reason – and a change in control of the Company, and describes the additional amounts, if any, that the Company would pay or provide to Messrs. West,Bilbrey, Alfonso, Bilbrey,and O’Day, Ms. Buck and Snyder,Ms. Turner, or their beneficiaries as a result. The narrative below and the amounts shown reflect certain assumptions we have made in accordance with SEC rules. These assumptions areWe have assumed that the termination of employment or change in control occurred on December 31, 20092012 and that the value of a share of our Common Stock on that day was $35.79,$72.22, the closing price on the New York Stock Exchange on December 31, 2009, the last trading day of 2009.

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2012.

In addition, in keeping with SEC rules, the following narrative and amounts do not include payments and benefits which are not enhanced by the termination of employment or change in control. These payments and benefits include:

 

Benefits accrued under the Company’s broad-based, tax-qualified 401(k) Plan and tax-qualified defined benefit pension plan;

 

Accrued vacation pay, health plan continuation and other similar amounts payable when employment terminates under programs generally applicable to the Company’s salaried employees generally;employees;

 

Supplemental 401(k) match provided to the named executive officers on the same basis as all other employees eligible for Supplemental 401(k) match;

 

Vested benefits accrued under the DB SERP and account balances held under the Deferred Compensation Plan as described above beginning on pages 7169 and 73;70; and

 

Stock options which have vested and become exercisable prior to thetermination of employment termination or change in control.

The payments and benefits described in the five bullet points above are referred to in the following discussion as the executive officer’s “vested benefits.”

Voluntary Resignation

We are not obligated to pay amounts over and above vested benefits to a named executive officer who voluntarily resigns. Vested stock options may not be exercised after the named executive officer’s resignation date unless the officer is age 55 or older and, in certain instances, has met minimum service requirements as described in Treatment of Stock Options upon Retirement, Death or Disability below. Mr. West’s vested benefits include his DB SERP benefit per the terms of his employment agreement.

Discharge for Cause

If we terminate a named executive officer’s employment for Cause, we are not obligated to pay the officer any amounts over and above the vested benefits. The named executive officer’s right to exercise vested options expires upon discharge for Cause, and amounts otherwise payable under the DB SERP are subject to forfeiture at the Company’s discretion. In general, a discharge will be for Cause if the executive has intentionally failed to perform his or her duties or engaged in illegal or gross misconduct that harms the Company. Mr. West’s vested benefits include his DB SERP benefit perEffective in February 2011, the termsEBPP 3A was amended to provide that engaging in illegal conduct, gross negligence or willful misconduct, material dishonesty or violation of his employment agreement.Company policies, or bad faith actions not in the best interests of the Company will be grounds for discharge for Cause.

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Death or Disability

If an executive officer dies and has not met the vesting requirements to be eligible to receive a benefit from the DB SERP, no benefits are paid. Messrs. West and Snyder wereMr. Bilbrey is fully vested in theirhis DB SERP benefits as of December 31, 2009.2012.

A maximum monthly long-term disability benefit of $35,000 iswould be provided for Mr. WestBilbrey and $25,000 for all other named executive officers in the event of long-term disability. Long-term disability benefits are payable until age 65. Long-term disability benefits are offset by other benefits such as Social Security. The maximum amount of the monthly long-term disability payments from all sources, assuming long-term disability on December 31, 2009,2012, is set forth in the tables below. The additional lump sum DB SERP amount that would be payable for Messrs. WestMr. Bilbrey and BilbreyMs. Buck at age 65, attributable to vesting and benefit service credited during the disability period for the DB SERP, if the executive’s disability started on December 31, 2009,2012, is shown on the table below.

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Mr. Alfonso participates in the CLRP which provides two additional years of credit after approval for long-term disability benefits. Mr. O’Day isand Ms. Turner are eligible for the Supplemental Core Retirement Contribution and would receive up to two additional years of Supplemental Core Retirement Contribution credit after approval for long-term disability benefits. Messrs.benefits payable up to age 65. Mr. Alfonso, Mr. O’Day and O’DayMs. Turner participate in the DC SERP which provides up to two additional years of credit after approval for long-term disability benefits.benefits payable up to age 65. Those amounts are listed in the table below:

 

Name		Long-Term Disability Benefit															Long-Term Disability Benefit
		Maximum Monthly Amount ($)				Years and Months to Age 65 (#)				Total of Payments to Age 65 ($)				Lump Sum DB SERP/ DC SERP Benefit ($)			Maximum Monthly Amount ($)				Years and Months to Age 65  (#)						Total of Payments to Age 65 ($)				Lump Sum     DB SERP/     DC SERP      Benefit     ($)
D. J. West		35,000				18 years 3 months				7,665,000				4,746,061	(1)
J. P. Bilbrey																	35,000					8 years 7 months					3,605,000					7,723,036	(1)
H. P. Alfonso		25,000				12 years 6 months				3,750,000				567,252	(2)		25,000					9 years 6 months					2,850,000					352,449	(2)
J. P. Bilbrey		25,000				11 years 7 months				3,475,000				4,101,229	(1)
M. G. Buck																	25,000					13 years 9 months					4,125,000					5,714,691	(1)
T. L. O’Day		25,000				4 years 6 months				1,350,000				288,251	(2)		25,000					1 year 6 months					450,000					685,560	(3)
B. H. Snyder		25,000				2 years 11 months				875,000				—	(3)
L. M. Turner																	25,000					9 years 10 months					2,950,000					241,496	(4)

 

 

 

(1)	Reflects additional lump sum amount of DB SERP benefit payable at age 65 attributable to vesting and benefit service credited during the disability period.

 

(2)	Reflects vestingtwo additional years of CLRP and DC SERP credit.

(3)	Reflects one and other non-vested retirement benefitsone-half additional years of Supplemental Core Retirement Contribution and DC SERP credit and full vesting upon disability.

 

(3)(4)

Mr. Snyder has exceeded the DBReflects two additional years of Supplemental Core Retirement Contribution and DC SERP agecredit and service requirements and would receive no incremental amount if he became disabled.full vesting upon disability.

Treatment of Stock Options upon Retirement, Death or Disability

The Incentive Plan provides that allIn the event of retirement, death or disability, vested stock options remain exercisable for a period of three or five years following termination duebut not later than the option expiration date. The exercise period is based upon the terms and conditions of the individual grant. For awards granted prior to April 28, 2011, retirement was defined as separation after attainment of age 55. For awards granted on or after April 28, 2011, retirement is defined as separation after attainment of age 55 death or disability, but not beyond the original termwith at least five years of the option. service.

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Options awarded prior to April 28, 2011, that are not vested at the time of retirement, death or disability will continue to vest throughoutover the five-year periodfive years following retirement, death or disability according totermination in accordance with the original vesting schedule established aton the grant date. Options granted on or after April 28, 2011, that are not vested at the time of retirement, death or disability will vest in full and the options will remain exercisable for three or five years following termination. Options granted in the year of retirement are prorated based upon the number of full calendar months worked in that year.

The following table provides the number of unvested stock options as of December 31, 20092012, that would have become vested and remained exercisable during the three-year or five-year periodperiods following death or disability, or retirement, if applicable, on December 31, 2009,2012, and the value of those options based on the excess of the fair market value of our Common Stock on December 31, 20092012, over the option exercise price. Messrs. O’DayMr. Bilbrey and SnyderMr. Alfonso were considered retirement eligible based on the provisions of all option awards on December 31, 2009.2012.

 

Name		Stock Options						Stock Options
		Number(1) (#)			Value(2) ($)			Number(1) (#)				Value(2) ($)
D. J. West		518,031			254,241
J. P. Bilbrey									413,656				7,507,021
H. P. Alfonso		140,347			80,509				155,951				3,494,334
J. P. Bilbrey		167,876			87,165
M. G. Buck									125,254				2,645,326
T. L. O’Day		72,369			62,137				137,227				3,064,368
B. H. Snyder		127,773			60,588
L. M. Turner									28,015				—

 

 

 

(1)	Total number of unvested options as of December 31, 2009.2012.

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(2)

Difference between $35.79$72.22, the closing price for our Common Stock on December 31, 20092012, and the exercise price for each option. Options, once vested, may be exercised at any time during the three or five years (based upon the provisions of the grant) after employment termination due to retirement after age 55 (and at least five years of service for options granted on or after April 28, 2011), death or disability, but not later than the option expiration date.

Mr. O’Day is considered retirement eligible for unvested stock options granted prior to April 28, 2011, but is not considered retirement eligible for awards granted on or after April 28, 2011, as he does not have five years of service. The amount shown for Mr. O’Day includes 49,890 stock options valued at $575,731 which he would forfeit upon voluntary separation. Ms. Turner is not considered retirement eligible for any of her unvested options because she does not have five years of service. Ms. Turner would forfeit 28,015 stock options upon voluntary separation. These options were granted at a higher price than the closing price of our Common Stock on December 31, 2012, and therefore had no value on December 31, 2012.

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Treatment of RSUs upon Retirement, Death or Disability

Upon retirement any RSUs held by our named executive officers that are not vested are forfeited.

A prorated portion of any unvested RSU award vestsRSUs granted prior to April 28, 2011, will vest upon death or disability. The prorated number of RSUs is based upon the number of full and partial calendar months from the grant date to the date of death or disability divided by the full and partial calendar months from the grant date to the end of the restriction period, multiplied by the number of RSUs originally granted. Unvested RSUs granted on or after April 28, 2011, will vest in full upon death or disability. The following table summarizes the unvested RSU awards that would have vested on December 31, 20092012, if the executive’s employment terminated that day due to death or disability.

 

Name		Restricted Stock Units								Restricted Stock Units
		Number(1) (#)				Value(2)     ($)				Number(1) (#)				Value(2) ($)
D. J. West		—				—
J. P. Bilbrey											605				43,693
H. P. Alfonso		2,763				98,888					—				—
J. P. Bilbrey		7,517				269,033
M. G. Buck											—				—
T. L. O’Day		—				—					—				—
B. H. Snyder		3,064				109,661
L. M. Turner											28,000				2,022,160

 

 

 

(1)	Prorated number of unvested RSUs as of December 31, 2009.2012, for Mr. Bilbrey. Ms. Turner’s RSUs were granted in July 2012 and are not subject to reduction upon death or disability.

 

(2)	Value of shares based on $35.79$72.22, the closing price for our Common Stock on December 31, 2009.2012.

Discharge Not for Cause; Resignation for Good Reason

OurUnder Mr. Bilbrey’s employment agreement with Mr. West obligatesand the CompanyEBPP 3A, as applicable, we have agreed to pay severance benefits if we terminate his employment for reasons other than for Cause or if Mr. West resigns for Good Reason. Mr. West will have Good Reason to resign if there is a material breach of the employment agreement by the Company, including a failure to maintain Mr. West in his current positions, adversely changing his authority or responsibilities, failing to pay or provide agreed-upon compensation and benefits, or giving notice to stop the daily renewal of the term of the employment agreement. Mr. West must give the Company notice and an opportunity to cure the breach before resigning for Good Reason. The severance benefits payable to Mr. West are a lump sum equal to a pro rata One Hershey Incentive Program award for the year of termination based on actual Company results plus two times his annual base salary and target One Hershey Incentive Program award for the year of termination, and continuation of health and other benefits for five years, subject to reduction for benefits received from a subsequent employer. In addition, any unvested stock options held by Mr. West will remain outstanding and continue to vest during the two-year period following termination of employment.

With respect to the named executive officers other than Mr. West, under the EBPP, we have agreed to two times base salary paid in a lump sum if we terminate the executive officer’s active employment without Cause. In addition, underCause (one and one-half times base salary if the executive became a participant in EBPP we3A after February 22, 2011). We have agreed to provide a pro rata payment ofto Mr. Bilbrey as additional severance payments an amount equal to two times his target award under the One Hershey Incentive Program award for the year in which termination occurs. We have also agreedOHIP, and to provide, pursuant to the EBPP,other named executive officers, additional severance payments in the amount whichthat the executive officer would have been eligible to receive under the One Hershey

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Incentive ProgramOHIP for a period of two years (18 months for participants first covered by EBPP 3A after February 22, 2011) following termination. Under Mr. Bilbrey’s employment agreement and EBPP 3A, the executive would be entitled to receive a pro rata payment of the OHIP award, if any, earned for the year in which termination occurs. These benefits also are also payable if the executive officer resigns from active employment for Good Reason. Good Reason will arise under Mr. Bilbrey’s employment agreement in the event of a diminution of his title, duties, responsibilities, a material breach of the employment agreement by the Company, any adverse amendment to the DB SERP or EBPP 3A affecting Mr. Bilbrey or his removal or failure to be reelected to the Board. Good Reason arises under the EBPP 3A if we appoint a new Chief Executive Officer, and during the first two years of his or her tenure, the executive officer’s position, authority, duties or responsibilities are diminished or base salary is reduced. If Mr. Bilbrey’s or an executive officer’s employment is terminated for reasons other than for Cause or if the executive officer terminates for Good Reason, the Company will continue the executive’s welfare benefits excluding disability coverage and excluding coverage under all tax-qualified retirement plans, for a period of two years. For executives first covered by EBPP 3A after February 22, 2011, welfare benefit coverage will

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continue for 18 months. Ms. Turner is the only named executive officer first covered by EBPP 3A after February 22, 2011. Coverage for disability and participation in all tax-qualified retirement plans will not be continued.

If an executive officer is under age 55 and his or her employment is terminated for reasons other than for Cause, or if the executive officer terminates for Good Reason, the executive will be eligible to exercise all vested stock options and a prorated portion of his or her unvested stock options held on the date of separation from service for a period of 120 days following separation. If the executive officer is age 55 or older (with five or more years of service with respect to stock options granted on or after April 28, 2011) and his or her employment is terminated for reasons other than for Cause, or if the executive terminates for Good Reason, the executive will be entitled to exercise (provided any vesting requirement has been satisfied as of the date of exercise) any outstanding stock options until the earlier of three or five years (based on the provisions of the individual grant) from the date of termination or the expiration of the options. In addition, if an executive officer’s employment is terminated for reasons other than for Cause, or if the executive officer terminates for Good Reason, the executive will receive payment for a prorated portion of any unvested RSUs held on the date of separation from service.

The following table summarizes the amount of severance benefitsincremental amounts that would behave been payable to the named executive officer had his or her employment terminated on December 31, 2009,2012, under circumstances entitling the officer to severance benefits as described above:above.

 

Name		Two Years Salary ($)		Two Years One Hershey  Incentive Program  at Target ($)		Value of Benefits Continuation(1) ($)		Total ($)		Salary         ($)		One Hershey     Incentive Program     at Target ($)		Value of Benefits     Continuation(1) ($)		Total         ($)
D. J. West		2,000,000		2,000,000		59,283(2)		4,059,283
J. P. Bilbrey										2,183,600		2,620,320		22,612		4,826,532
H. P. Alfonso		1,000,000		700,000		8,501		1,708,501		1,200,000		900,000		32,972		2,132,972
J. P. Bilbrey		1,100,000		825,000		23,877		1,948,877
M. G. Buck										1,010,000		757,500		31,356		1,798,856
T. L. O’Day		900,000		540,000		7,263		1,447,263		1,030,000		669,500		29,230		1,728,730
B. H. Snyder		970,000		582,000		7,263		1,559,263
L. M. Turner(2)										712,500		427,500		7,655		1,147,655

 

 

 

(1)	Reflects amount ofprojected medical, dental, vision and visionlife insurance continuation premiums paid by the Company during the two years following termination for each executive except Mr. West.Ms. Turner.

 

(2)

Mr. West’s employment agreement providesMs. Turner began participation in the EBPP 3A in July 2012. Benefits shown in the table above reflect a severance payment for 1.5 years of salary and an OHIP target payment for the same period. Value of Benefits Continuation includes projected medical, dental, vision and life insurance continuation of medical and dental coveragepremiums paid by the Company for a period of five1.5 years following discharge not for Cause or resignation for Good Reason. The amount shown above includes that cost and the value of vision coverage for a period of two years.termination.

Information with respect to stock options and RSUs held by each executive officer as of December 31, 20092012, appears in the Outstanding Equity Awards table.

Change in Control

Special provisions apply if a change in control occurs. In general, a change in control will occur if the Milton Hershey School Trust no longer owns voting control of the Company and another person or group acquires 25%30% or more of the combined voting power of our voting stock,stock; there is an unwelcome change in a majority of the members of our Board,Board; or, if after our stockholders approveconsummation of a merger or similar business transaction or a sale of substantially all of our assets, the Milton Hershey School Trust does not own voting control of the merged or acquiring company.

 

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Our employment agreement with Mr. West provides that he is entitled to the benefits of theThe EBPP if a change in control occurs. The EBPP3A provides the vesting and payment of the following benefits upon a change in control to each of the named executive officers:

 

A One Hershey Incentive ProgramAn OHIP payment for the year of the change in control at the greater of target or the estimated payment based on actual performance to the date of the change in control;

 

A cash payment equalFor awards granted prior to theApril 28, 2011, full vesting for any PSU awardawards for the performance cycle ending in the year of the change in control atcontrol. The cash payment will be based upon the greater of target or actual performance through the date of the change in control, with each PSU valued at the highest closing price for our Common Stock during the 60 days prior to the change in control;

 

To the extent not vested,For awards granted prior to April 28, 2011, full vesting of benefits accrued under the DB SERP and the Deferred Compensation Plan;

To the extent not vested, full vesting of benefits under the tax-qualified defined benefit pension plan and the 401(k) Plan; and

Full vesting of outstanding PSU awards that are in the second year of the performance cycle at the time of the change in control and proratingprorated vesting of outstanding PSU awards that are in the first year of the performance cycle at the time of the change in control.control;

To the extent not vested, full vesting of benefits accrued under the DB SERP and the Deferred Compensation Plan; and

To the extent not vested, full vesting of benefits under the tax-qualified defined benefit pension plan and the 401(k).

Our Incentive Plan provides for full vesting of all outstanding stock options and RSUs (including accrued cash credits equivalent to dividends that would have been earned had the executive held Common Stock instead of RSUs) granted prior to April 28, 2011, upon a change in control.

The vesting and payment provisions applicable to PSUs, stock options and RSUs described above in the event of a change in control will not automatically apply to awards made on or after April 28, 2011. Under our Incentive Plan, if such awards are continued as a qualifying replacement award after the change in control, then no accelerated vesting or payment will occur because of the change in control. In the event of termination of employment within two years following the change in control for any reason other than termination for Cause or resignation without Good Reason, the replacement award will vest and become payable as described above.

The following table and explanatory footnotes provide information with respect to the incremental amounts that would have vested and become payable on December 31, 20092012, if a change in control occurred on that date:date and any awards made on or after April 28, 2011, were continued as qualifying replacement awards.

 

Name		One Hershey Incentive Program Related Payment(1) ($)				PSU Related Payments(2) ($)				DB SERP/ DC SERP Benefits(3) ($)				Vesting of Stock Options(4) ($)				Vesting of Restricted Stock Units(5) ($)				Total ($)		One Hershey Incentive Program Related Payment(1) ($)		PSU Related Payments(2) ($)				Vesting of Stock Options(3) ($)				Vesting of Restricted Stock Units(4) ($)				DB SERP/ DC SERP Benefits(5) ($)				Total(6) ($)
D. J. West		1,000,000				3,025,971				—				254,241				—				4,280,212
J. P. Bilbrey																								—			523,650				4,219,101				48,519				—				4,791,270
H. P. Alfonso		350,000				923,745				300,473				80,509				122,645				1,777,372		—			332,401				2,803,896				—				—				3,136,297
J. P. Bilbrey		412,500				838,921				2,586,000				87,165				515,169				4,439,755
M. G. Buck																								—			577,906				2,014,377				—				3,857,279				6,449,562
T. L. O’Day		270,000				422,322				101,684				62,137				—				856,143		—			272,244				2,488,638				—				468,205				3,229,087
B. H. Snyder		291,000				691,490				—				60,588				187,875				1,230,953
L. M. Turner																								—			—				—				—				45,466				45,466

 

 

 

(1)	Amounts reflect 2009 target award since termination is presumed to occur on the last dayThe amount of the year.OHIP award earned for 2012 was greater than target. Therefore no incremental amount attributable to that program would have been payable upon a change in control.

 

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(2)

Amounts reflect vesting of PSUs for the 2007-2009 performance cycle at 100% target and a value per PSU of $38.71, the highest closing price for our Common Stock during the last 60 days of 2009, vesting at target of the PSUs for the cycle ending December 31, 2010 and one-third of the PSUs for the cycle ending December 31,awarded prior to April 28, 2011, with a value per PSU of $35.79, the closing price of our Common Stock on the New York Stock Exchange on December 31, 2009, the last trading day of 2009. No payment is included for the 2008-2009 performance cycle PSUs as units awarded for that cycle do not vest upon a change in control.follows:

For the performance cycle ended December 31, 2012, at the greater of target or actual performance as of December 31, 2012, and the difference between a value per PSU of $74.64, the highest closing price for our Common Stock during the last 60 days of 2012, and a value per PSU of $72.22, the closing price of our Common Stock on the New York Stock Exchange on December 31, 2012; and

For the performance cycle ending December 31, 2013, at target performance as of December 31, 2012, with a value per PSU of $72.22, the closing price of our Common Stock on the New York Stock Exchange on December 31, 2012.

 

(3)

Totals reflect full vesting of DB SERP and more favorable early retirement discount factors as provided under the EBPP. Messrs. West and Snyder are fully vested in their DB SERP benefit so no additional benefit is applicable. For Mr. Alfonso, the amount includes the vesting of his CLRP, DC SERP and other non-vested retirement benefits. For Mr. O’Day, the amount includes the vesting of his DC SERP and other non-vested retirement benefits.

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(4)

Reflects the value of unvested options that would vest upon a change in control based on the excess, if any, of the market value of our Common Stock of $35.79$72.22 on December 31, 20092012, over the exercise price for the options. Information regarding unvested options as of December 31, 20092012, can be found in the Outstanding Equity Awards table.

 

(5)(4)

Reflects the value of unvested RSUs and the accrued cash credits that would vest upon a change in control based on the market value of our Common Stock of $35.79$72.22 on December 31, 2009, as well as the2012. The accrued cash credits are equivalent to dividends that would have been earned had the executive held Common Stock instead of RSUs. Information regarding unvested RSUs as of December 31, 20092012, can be found in the Outstanding Equity Awards table.

(5)

Totals reflect full vesting of DB SERP and more favorable early retirement discount factors as provided under the EBPP 3A. Mr. Bilbrey is fully vested in his DB SERP benefit so no additional benefit is applicable. Mr. Alfonso is fully vested in his DC SERP benefit so no additional benefit is applicable. For Mr. O’Day, the amount includes the vesting of his DC SERP benefit. For Ms. Buck, the amount includes the vesting of her DB SERP benefit. For Ms. Turner, the amount includes the vesting of her DC SERP and other non-vested retirement benefits.

(6)	For any given executive, the total payments made in the event of termination after a change in control would be reduced to the “safe harbor” limit under IRC section 280G if such reduction would result in a greater after-tax benefit for the executive.

Discharge Not for Cause or Resignation for Good Reason after Change in Control

If the named executive officer’s employment is terminated by the Company without Cause or by the executive for Good Reason within two years after a change in control, we pay severance benefits to assist the executive in transitioning to new employment. Good Reason for this purpose means diminution of the executive’s position, authority, duties or responsibilities; a reduction in base salary; the requirement that the executive engage in substantially greater business travel; failure to pay current compensation or to continue in effect short- and long-term compensation and employee and retirement benefits; or the failure to fund a grantor trust to support payment of amounts under the EBPP.EBPP 3A. The severance benefits under the EBPP 3A for termination after a change in control in 2009as of December 31, 2012, consist of:

 

•

A lump sum cash payment equal to two (or, if less, the number of full and fractional years from the date of termination to the executive’s 65th birthday, but not less than one) times times:

-

the executive’s base salarysalary; and

-

the highest annual incentive program payment paid or payable during the three years preceding the year of the change in control (but not less than the annual incentive program target for the year of the change in control);

For replacement awards relating to awards granted on or after April 28, 2011, full vesting for any PSU awards for the performance cycle ending in the year of the change in control. The cash payment will be based upon the greater of target or actual performance through the date of the change in control, with each PSU valued at the highest closing price for our Common Stock during the 60 days prior to the change in control;

For replacement awards relating to awards granted on or after April 28, 2011, full vesting of outstanding PSU awards at target that are in the second year of the performance cycle at the time of the change in control and prorated vesting of outstanding PSU awards at target that are in the first year of the performance cycle at the time of the change in control;

 

Continuation of medical and other benefits for 24 months (or, if less, the number of months until the executive attains age 65, but not less than 12 months), or payment of the value of such benefits if continuation is not permitted under the terms of the applicable plan;

 

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Outplacement services up to $35,000 and reimbursement for financial counseling and tax preparation services;services for two years;

 

For participants in the DB SERP an enhanced benefit reflecting an additional two years’years of credit; and

 

For participants in the DC SERP an enhanced benefit reflecting a cash payment equal to the applicable percentage rate multiplied by his or her annual base salary and last annual incentive pay calculated as if such amounts were paid during the years in the executive’s severance period.

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The EBPP also provides for a gross-up payment should the executive be subject to the excise tax on golden parachutes due to the receipt of severance benefits or as a result of the payment or vesting of stock options upon the change in control. In 2009February 2011, we amended the EBPP 3A to limit the applicability ofeliminate the excise tax gross-up featurefor all participants.

Our Incentive Plan provides for full vesting of all unvested replacement awards relating to instances whereoutstanding stock options and RSUs (including accrued cash credits equivalent to dividends that would have been earned had the total payments potentially subject to the excise tax exceed by more than 10% the level at which the excise tax payments are required.executive held Common Stock instead of RSUs) granted on or after April 28, 2011, for a termination after a change in control. The table below summarizes the severance payments the tax gross-up payment and all other amounts that would have vested and become payable if a change in control occurred and the executive’sexecutive officer’s employment terminated on December 31, 2009.2012.

 

Name				Lump Sum Cash Severance Payment ($)				Value of Medical and Other Benefits Continuation(1) ($)				Value of Financial Planning and Outplacement(2) ($)				Value of Enhanced DB SERP/ DC SERP and 401(k) Benefit(3) ($)				Gross-up Payment for Excise Taxes(4) ($)				Total ($)		Lump Sum  Cash Severance Payment ($)						PSU Related  Payments(1)  ($)						Vesting of Stock  Options(2)  ($)						Vesting of  Restricted  Stock Units(3) ($)						Value of Medical and Other Benefits  Continuation(4)  ($)						Value of Financial Planning and Outplace- ment(5) ($)						Value of  Enhanced  DB SERP/ DC SERP and 401(k) Benefit(6) ($)						Total(7) ($)
D. J. West				4,256,800				62,919(5)				54,100				1,903,186				4,221,057				10,498,062
J. P. Bilbrey																											6,559,352						566,374	(8)					3,287,920						—						22,612						66,600						6,155,771						16,658,629
H. P. Alfonso				1,789,120				10,433				48,118				357,824				1,563,772				3,769,267			2,529,687						0	(9)					690,438						—						32,972						66,600						462,936						3,782,633
J. P. Bilbrey				1,925,000				27,500				54,100				1,612,084				3,370,718				6,989,402
M. G. Buck																											2,129,153						193,790						630,950						—						31,356						66,600						1,685,684						4,737,533
T. L. O’Day				1,440,000				12,936				35,000				288,000				1,030,058				2,805,994			1,556,490						176,939						575,731						—						20,820						66,600						283,174						2,679,754
B. H. Snyder				1,625,426				14,701				57,090				73,144				—				1,770,361
L. M. Turner																											1,520,000						134,811						—						2,044,560						10,414						66,600						228,000						4,004,385

 

 

 

(1)	Amounts reflect vesting of PSUs awarded on or after April 28, 2011, as follows:

For the performance cycle ending December 31, 2013, at target performance as of December 31, 2012, with the value per PSU of $72.22, the closing price of our Common Stock on the New York Stock Exchange on December 31, 2012; and

For the performance cycle ending December 31, 2014, one-third of the contingent target units awarded, at target performance as of December 31, 2012, with the value per PSU of $72.22, the closing price of our Common Stock on the New York Stock Exchange on December 31, 2012.

(2)

Reflects amountthe value of unvested options that would vest upon the executive’s employment termination following a change in control based on the excess, if any, of the value of our Common Stock of $72.22 on December 31, 2012, over the exercise price for the options. Information regarding unvested options as of December 31, 2012, can be found in the Outstanding Equity Awards table.

(3)

Reflects the value of unvested RSUs that would vest upon the executive’s employment termination following a change in control based on the value of our Common Stock of $72.22 on December 31, 2012, as well as the accrued cash credits equivalent to dividends that would have been earned had the executive held Common Stock instead of RSUs. Information regarding unvested RSUs as of December 31, 2012, can be found in the Outstanding Equity Awards table.

(4)

Reflects projected health and welfare benefit continuation premiumpremiums paid by the Company over a two-year24 month period and one-year Company obligation for(or, if less, the executive’s Flexible Spending Account contribution.number of months until the executive attains age 65 but not less than 12 months).

 

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(2)(5)

Value of maximum payment for financial planning and tax preparation continuation for two years following termination of employment plus outplacement services of $35,000.

 

(3)(6)

For Messrs. West,Mr. Bilbrey and Snyder,Ms. Buck, this value reflects the amount of enhanced DB SERP and lump sum amount of employer 401(k) and supplemental 401(k) matching amounts over a two-year period. For Mr. Alfonso, the value reflects the lump sum amount of DC SERP, CLRP, and employer 401(k) and supplemental 401(k) matching amounts over a two-year period. For Mr. O’Day, the value reflects the amount of DC SERP, Core Retirement Contribution, Supplemental Core Retirement Contribution, and employer 401(k) and supplemental 401(k) matching amounts that would have been paid had he remained an employee until age 65. For Ms. Turner, the value reflects the lump sum amount of DC SERP, Core Retirement Contribution, Supplemental Core Retirement Contribution, and employer 401(k) and supplemental 401(k) matching amounts over a two-year period.

 

(4)(7)

Gross-up payment for excise taxes for all namedFor any given executive officers was determined usingthe total payments made in the event of termination after a transaction price of $35.79 and an individual tax rate of 40.58% for Messrs. West, Alfonso and O’Day, 41.18% for Mr. Bilbrey and 41.58% for Mr. Snyder. This payment was determined assuming all executives were involuntarily terminated on December 31, 2009; deemed tochange in control would be “disqualified individuals”; and subjectreduced to the golden parachute rules“safe harbor” limit under IRC section 280G ofif such reduction would result in a greater after-tax benefit for the Internal Revenue Code.executive.

 

(5)(8)

For Mr. West’s employment agreement provides for continuation of medical and dental coverage for a period of five years following termination due to change in control. The amount shown above includes that cost andBilbrey, the value reflects the incremental payment of life insurance and vision coveragea portion of the 2011-2013 PSUs awarded in recognition of his promotion to CEO in May 2011. As of December 31, 2012, Mr. Bilbrey, as a retiree, would receive no incremental benefit for a period of two years.PSUs awarded during 2012.

(9)	As of December 31, 2012, Mr. Alfonso, as a retiree, would receive no incremental benefit for PSU awards made after April 28, 2011.

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PROPOSAL NO. 3 — NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

What am I voting on?

You are being asked to vote on a proposal commonly known as a “say-on-pay” proposal, which gives you the opportunity to approve or not approve, on a non-binding advisory basis, our executive officer compensation program, policies and practices through the following resolution:

“RESOLVED, that the stockholders of The Hershey Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as described in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosure set forth, pursuant to Item 402 of Regulation S-K, in the Company’s proxy statement for the 2013 annual meeting of stockholders.”

What factors should I consider in voting on this proposal?

We urge you to consider the various factors regarding our executive compensation program, policies and practices as detailed in the Compensation Discussion and Analysis, beginning on page 42.

As discussed at length in the Compensation Discussion and Analysis, we believe that our executive compensation program is competitive and governed by pay-for-performance principles. We emphasize compensation opportunities that reward results. Our stock ownership requirements and use of stock-based incentives reinforce the alignment of the interests of our executives with those of our long-term stockholders. In doing so, our executive compensation program supports our strategic objectives and mission.

Why is this proposal being submitted to the stockholders?

This “say-on-pay” proposal is being submitted to you to obtain the advisory vote of the stockholders in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, section 14A of the Securities Exchange Act of 1934, as amended, and the SEC’s rules. The Dodd-Frank Act requires that public companies give their stockholders the opportunity to cast advisory votes relating to executive compensation at the first annual meeting of stockholders held after January 21, 2011, and no less frequently than once every three years thereafter. At the 2011 annual meeting, the Board of Directors recommended, and our stockholders approved, holding a “say-on-pay” vote every year. Accordingly, we will hold a “say-on-pay” vote annually until the 2017 annual meeting, when stockholders will be asked to vote again on how frequently we should hold the “say-on-pay” vote.

Is this vote binding on the Board of Directors?

Because your vote is advisory, it will not be binding upon the Board of Directors. However, as noted in the Compensation Discussion and Analysis, our Board of Directors (including our Compensation and Executive Organization Committee) will take into account the outcome of the vote when considering future decisions affecting executive compensation as it deems appropriate.

How many votes will be required for approval of Proposal No. 3?

Approval of Proposal No. 3, the advisory, non-binding “say-on-pay” proposal, requires that a majority of the votes of the shares of Common Stock and Class B Common Stock present and entitled to vote on the proposal are cast in favor of the proposal.

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How does the Board of Directors recommend that I vote?

The Board of Directors unanimously recommends that stockholders

voteFOR Proposal No. 3, the advisory resolution approving the

compensation of the Company’s named executive officers as

described in this proxy statement.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

What is section 16(a) of the Securities Exchange Act of 1934?

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons owningany person who is the beneficial owner of more than 10% of our outstanding Common Stock or Class B Common Stock to file reports with the SEC showing their ownership and changes in ownership of Hershey securities. Based solely on our examination of these reports and on written representations provided to us, it is our opinion that all reports for 2009 have been2012 were timely filed, withexcept for a Form 4 filed by Humberto P. Alfonso on March 12, 2012 reporting the exceptionwithholding of one report, involvingshares to cover tax liability on a payout of deferred RSUs and a Form 4 filed by Mr. Alfonso on May 3, 2012 reporting the purchasedisposition of 100 shares of Common Stock by James E. Nevels, that was inadvertently filed afterheld under the due date.

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Company’s 401(k) Plan.

CERTAIN TRANSACTIONS AND RELATIONSHIPS

What is being disclosed in this section?

SEC regulations require that we disclose any transaction, or series of similar transactions, since the beginning of 2009,2012, or any contemplatedcurrently proposed transactions, in which the Company was or is to be a participant, in which the amount involved exceeds $120,000 and in which any of the following persons had or will have a direct or indirect material interest:

 

Our directors or nominees for director;

 

Our executive officers;

 

Persons owning more than 5% of any class of our outstanding voting securities; or

 

The immediate family members of any of the persons identified in the preceding three bullets.

The SEC refers to these types of transactions asrelated person transactions and to the persons listed in the bullets asrelated persons. The SEC is concerned about related person transactions because such transactions, if not properly monitored, may present risks of conflicts of interest or the appearance of conflicts of interest.

Does the Company have a policy to review, approve or ratify related person transactions?

Our Board has adopted a Related Person Transaction Policy that governs the review, approval or ratification of related person transactions. The Related Person Transaction Policy may be viewed on our corporatethe Company’s website, www.hersheys.com,www.thehersheycompany.com, in the Investor RelationsInvestors section.

Under our policy, each related person transaction, and any significant amendment or modification to a related person transaction, must be reviewed and approved or ratified by a committee of our

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Board composed solely of independent directors who have no interest in the transaction. We refer to each such committee as a Reviewing Committee. The policy also permits the disinterested members of the full Board to act as a Reviewing Committee.

The Board has designated the Governance Committee as the Reviewing Committee primarily responsible for the administration of the Related Person Transaction Policy. In addition, the Board has designated special Reviewing Committees to oversee certain transactions involving the Company and Hershey Trust Company, the Milton Hershey School Trust and companies owned by the Milton Hershey School Trust. To learn more about these special Reviewing Committees, please seeTrust, which we describe in further detail in the answer to the fourth question in this section below. Finally, the policy provides that the Compensation and Executive Organization Committee will review and approve, or review and recommend to the Board for approval, any employment relationship or transaction involving an executive officer of the Company and any related compensation.

When reviewing, approving or ratifying a related person transaction, the Reviewing Committee will examine several things, including the approximate dollar value of the transaction and all material facts about the related person’s interest in, or relationship to, the transaction. If the related person transaction involves an outside director or nominee for director, the Reviewing Committee also may also consider whether the transaction would compromise the director’s status as an “independent director,” “outside director” or “non-employee director” under our Corporate Governance Guidelines and rules and regulations of the New York Stock Exchange, the Internal Revenue Code or the Securities Exchange Act of 1934, as amended.

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Was the Company a participant in any related person transactions in 2009,2012, or does the Company currently contemplate being a participant in any related person transactions in 2010,2013, involving ourits directors, executive officers or their immediate family members?

We were not a participant in any related person transactions in 2009,2012, and do not currently contemplate being a participant in any related person transactions in 2010,2013, involving our directors, executive officers or their immediate family members.

Was the Company a participant in any related person transactions in 2009,2012, or does the Company currently contemplate being a participant in any related person transactions in 2010,2013, involving a stockholder owning more than 5% of any class of the Company’s voting securities?

We engage in certain transactions with Milton Hershey School, the Milton Hershey School Trust and companies owned by the Milton Hershey School Trust. As discussed in the next question, many of these transactions are immaterial, ordinary course transactions and are not considered related person transactions. However, from time to time we alsomay engage in certain related person transactions with the Milton Hershey School Trust and its affiliates.

Our Board has directed that a special Reviewing Committee composed of the directors elected by the holders of the Common Stock voting separately as a class and having no affiliation with the Milton Hershey School Trust or its affiliates review and make recommendations to the Board regarding these transactions. However, the Board also has also directed that, if there are no directors on the Board who were elected by the holders of our Common Stock voting separately, such transactions will be reviewed by the independent members of the Executive Committee who have no affiliation with the Milton Hershey School Trust or its affiliates. In addition to the process outlined above, the Board has authorized the independent directors having no affiliation with the Milton Hershey School Trust or its affiliates to designate another special Reviewing Committee to review these transactions.

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We were not a participant in any related person transactions in 2009,2012, and do not currently contemplate being a participant in any related person transactions in 2010,2013, involving the Milton Hershey School Trust, its affiliates or any other stockholder owning more than 5% of any class of the Company’s voting securities.

Did the Company engage in other transactions with the Milton Hershey School Trust or its affiliates during 2009?2012?

During 2009,2012, we engaged in transactions in the ordinary course of our business with Milton Hershey School, the Milton Hershey School Trust, and companies owned by the Milton Hershey School Trust. These transactions involved the sale or purchase of goods and services. The transactions were primarily with Hershey Entertainment & Resorts Company, a company that is wholly-owned by the Milton Hershey School Trust. All sales and purchases were made on terms and at prices we believe were generally available in the marketplace and were in amounts that arewere not material to us or to the Milton Hershey School Trust. Therefore, they are not related person transactions and dodid not have to be approved under our Related Person Transaction Policy. However, because of our relationship with the Milton Hershey School Trust, we have elected to disclose the aggregate amounts of these transactions for your information. In this regard:

 

Our total sales to these entities in 20092012 were approximately $1,412,000.$1.6 million; and

 

Our total purchases from these entities in 20092012 were approximately $2,779,000.$2.7 million.

We do not expect that the types of transactions or the amount of payments will change materially in 2010.

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The year 2009 marked the 100-year anniversary of Milton Hershey School. We participated in the celebration of the anniversary in several ways. We provided a special on-pack message on all standard and king-size HERSHEY’S Milk Chocolate and HERSHEY’S Milk Chocolate with Almonds bars thanking consumers for supporting Milton Hershey School through the purchase of our products. We also partnered with the celebrity, Queen Latifah, to help tell the story of Milton Hershey School and how the School has helped children in need for the past 100 years. Queen Latifah conducted a national media tour to share the School’s story with consumers and to thank them for supporting the School through the purchase of our products. We also worked with our media agency to place on two independent television channels a documentary film about the School that the School developed at its sole cost and conducted public relations events to promote the premiere of the documentary. Our total expenditures in support of the anniversary were approximately $2,500,000 in 2009. During 2010, we expect to incur additional promotional costs associated with the anniversary of approximately $5,000,000. The story of Milton Hershey and his legacy reflects positively on our products and provides for us a unique promotional opportunity. Accordingly, we view expenditures related to the School’s 100-year anniversary as ordinary promotional expenses and not transactions subject to approval under our Related Person Transaction policy.2013.

We made a $200,000 contribution in 2009 to the M. S. Hershey Foundation in 2012 to support The Hershey Story, The Museum on Chocolate Avenue, a new facility recently constructed by the Foundation in Hershey, Pennsylvania, to honor the life and legacy of our founder, Milton S. Hershey. We also made a $200,000 contribution to support The Hershey Story in 2010 and may consider additional contributionsTo date, we have contributed $1 million to the Foundation to support The Hershey Story in subsequent years based upon business conditions existing at that time.Story. The Foundation was established by Mr. Hershey in 1935 to provide educational and cultural benefits for the residents of Hershey.Derry Township, Pennsylvania, where the community of Hershey is located. The Foundation operates separatelyis separate from the Milton Hershey School Trust; however, it is governed by a board of managers appointed by Hershey Trust Company, as trustee for the trust established by Mr. Hershey to benefit the Foundation, from the membership of the board of directors of Hershey Trust Company. LeRoy S. Zimmerman,James M. Mead, an independent member of our Board of Directors and an independent member of the board of directors of Hershey Trust Company and the board of managers of Milton Hershey School, also is also a member of the board of managers of the Foundation. Mr. Zimmerman receivesMead received no compensation for his service on the board of managers of the Foundation.

Finally,The Company leases to Hershey Entertainment & Resorts Company a portion of a building owned and occupied by the Company in 2009, weHershey, Pennsylvania. The leased fromarea consists of approximately 22,500 square feet of storage space in the Milton Hershey School Trustbuilding that is not being utilized currently by the Company. The lease was first entered into on January 1, 2011, and had a 14.5 acre parcel of land containing an 80,000 square foot distribution facility. The initial term of theone year. The lease expires in June 2010. We have the rightpermits Hershey Entertainment & Resorts Company to extendrenew the lease for threesubsequent one-year terms and, if space is available, to request an increase in the area occupied. Hershey Entertainment & Resorts Company elected to renew the lease for additional one-year terms; however, we have notified the Milton Hershey School Trust that we do not intend to continue the lease beyond the initial term. Rent during calendar year 2009 was $240,000, or $20,000 per month, plus operating costs, maintenance and property taxes. Rent fromterms beginning January 1 2010 through June 30, 2010 will be $120,000, or $20,000 per month, plus operating costs, maintenanceof 2012 and property taxes. Total rent for2013 with no changes to the entire period of our occupancy (including rent of $5,000 for a partial month’s occupancy in December 2008) will be $365,000, plus operating costs, maintenance and property taxes.occupied area. The lease was entered intois on terms we believe wereare generally available in the marketplace and wasis not material to us or Hershey Entertainment & Resorts Company. Rent during each calendar year of the Milton Hershey School Trust.lease was $90,000, which included a pro rata allocation of utilities, insurance, maintenance and other operating costs.

 

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INFORMATION ABOUT THE 20112014 ANNUAL MEETING

When is the 20112014 annual meeting of stockholders?

Our 20112014 annual meeting of stockholders will be held on April 28, 2011.29, 2014.

What is the deadline to submit a proposal for inclusion in the proxy materials for the 20112014 annual meeting?

To be eligible for inclusion in the proxy materials for the 20112014 annual meeting, a stockholder proposal must be received by our Corporate Secretary by the close of business on November 23, 2010.19, 2013, and comply in all respects with applicable rules of the SEC. Stockholder proposals should be addressed to The Hershey Company, Attn: Corporate Secretary, 100 Crystal A Drive, Hershey, Pennsylvania 17033-0810.

What procedure should I follow if I intend to present a proposal or nominate a director from the floor at the 20112014 annual meeting?

A stockholder may present a proposal not included in our 20112014 proxy materials from the floor of the 20112014 annual meeting only if our Corporate Secretary receives notice of the proposal, along with additional information required by our by-laws, during the time period beginning at the close of business on December 31, 2013, and ending at the close of business on January 5, 2011 and ending on February 4, 2011.30, 2014. Notice should be addressed to The Hershey Company, Attn: Corporate Secretary, 100 Crystal A Drive, Hershey, Pennsylvania 17033-0810.

The notice must contain the following additional information:

 

The stockholder’s name and address;

 

The stockholder’s shareholdings;

 

A brief description of the proposal;

 

A brief description of any financial or other interest the stockholder has in the proposal; and

 

Any additional information that the SEC would require if the proposal were presented in a proxy statement.

A stockholder may nominate a director from the floor of the 20112014 annual meeting only if our Corporate Secretary receives notice of the nomination, along with additional information required by our by-laws, during the time period beginning at the close of business on December 31, 2013, and ending at the close of business on January 5, 2011 and ending on February 4, 2011.30, 2014. The notice must contain the following additional information:

 

The stockholder’s name and address;

 

A representation that the stockholder is a holder of record of any class of our equity securities;

 

A representation that the stockholder intends to make the nomination in person or by proxy at the meeting;

 

A description of any arrangement the stockholder has with the individual the stockholder plans to nominate and the reason for making the nomination;

 

The nominee’s name, address and biographical information;

 

The written consent of the nominee to serve as a director if elected; and

 

Any additional information regarding the nominee that the SEC would require if the nomination were included in a proxy statement regardless of whether the nomination may be included in such proxy statement.

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Any stockholder holding 25% or more of the votes entitled to be cast at the annual meeting is not required to comply with these pre-notification requirements.

By order of the Board of Directors,

 

Burton H. SnyderLeslie M. Turner

Senior Vice President,

General Counsel and Secretary

March 22, 201019, 2013

 

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APPENDIX A

THE HERSHEY COMPANY

CORPORATE GOVERNANCE GUIDELINES

THE HERSHEY COMPANY P.O. BOX 810 HERSHEY, PA 17033-0810		VOTE BY INTERNET - www.proxyvote.com   I. ROLE OF THE BOARD OF DIRECTORS Use the Internet to transmit your voting instructions until 11:59 p.m. EDT on April 29, 2013. Have your proxy and voting instruction card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.   The business of VOTE BY PHONE - (800) 690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. EDT on April 29, 2013. Have your proxy and voting instruction card in hand when you call and then follow the instructions from the telephone voting site. VOTE BY MAIL Mark, sign and date your proxy and voting instruction card and return it in the postage-paid envelope we have provided or return it to The Hershey Company, (the “Company”) is carried out by its employees under the direction and supervision of its Chief Executive Officer (“CEO”). The business shallc/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. 401(k) PLAN AND PR 401(k) PLAN PARTICIPANTS Your voting instructions must be managed under the directionreceived no later than 11:59 p.m. EDT on April 25, 2013. Use any of the board of directors (“Board”). In accordance with Delaware law, the role of the directors isvoting methods above to exercise their business judgment in the best interests of the Company. This role includes:submit your voting instructions. review of the Company’s performance, strategies and major decisions; oversight of the Company’s compliance with legal and regulatory requirements and the integrity of its financial statements; oversight of management, including review of the CEO’s performance and succession planning for key management roles; and oversight of compensation for the CEO, key executives and the Board, as well as oversight of compensation policies and programs for all employees. II. SELECTION AND COMPOSITION OF THE BOARD A.        Board Size As set forth in the By-Laws of the Company (“By-Laws”), the Board has the power to fix the number of directors by resolution. The Company’s Restated Certificate of Incorporation requires at least three directors. In fixing the number, the Board will be guided by the principle that a properly functioning Board is small enough to promote substantive discussions in which each member can actively participate, and large enough to offer diversity of background and expertise. The Board will consider whether it is of the appropriate size as part of its annual performance evaluation. B.        Board Membership Criteria In selecting directors, the Board generally seeks individuals with skills and backgrounds that will complement those of other directors and maximize the diversity and effectiveness of the Board as a whole. Directors should be of the highest integrity and well-respected in their fields, with superb judgment and the ability to learn the Company’s business and express informed, useful and constructive views. In reviewing the qualifications of prospective directors, the Board will consider such factors as it deems appropriate in light of these guidelines, which may include judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of the other Board members, and the extent to which any candidate would be a desirable addition to the Board and any committees of the Board. In general, the Board seeks individuals who are knowledgeable in fields including finance, international business, marketing, information technology, human resources and consumer products. All members of the Audit Committee must be financially literate and at least one member must have accounting or related financial management expertise and be an audit committee financial expert as defined in Item 407(d) of Regulation S-K of the Securities and Exchange Commission (“SEC”), or any successor provision. A-1 C.        Independence The Board shall be composed of a majority of independent directors. In addition, the Company’s Audit Committee, Compensation and Executive Organization Committee, Finance and Risk Management Committee, and Governance Committee shall consist solely of independent directors. At least annually, the directors shall determine which directors are independent. Rather than have one set of criteria for Board members as a whole and additional criteria for Audit Committee members, the Board will judge the independence of all directors based on the stringent standards applicable to Audit Committee members. No director will be considered independent unless the Board affirmatively determines that the director has no material relationship with the Company. Additionally, the independence of directors shall be determined based on the following criteria: 1.            A director who receives (or, in the last three years, received) direct compensation as an employee or any consulting, advisory or other compensatory fees from the Company, other than director or committee fees and pension or other forms of deferred compensation for prior service (provided that such compensation is not contingent in any way on continued service), is not independent. A director whose immediate family member, other than an adult child who does not share a home with the director, receives or in the past three years received such compensation or fees from the Company is not independent. The receipt of such compensation or fees in any single year that does not (or did not) exceed $120,000, by a director’s adult child who (i) does not share the director’s home and has not shared the director’s home within the last three years, and (ii) does not serve, and has not served within such period, as an elected or appointed officer of the Company, will be deemed an immaterial relationship that shall not preclude an independence determination for such director. 2.            A director who is (or, within the last three years, was) a partner, member, an officer such as a managing director occupying a comparable position or executive officer, of an entity to whom the company pays (or within the last three years paid) consulting, advisory or other compensatory fees for legal, consulting, investment banking or financial advisory services, is not independent. Payment of such fees to an entity where the director is a limited partner, non-managing member or a similar position where, in each case, the director has no active role in providing services to the Company, will be deemed an immaterial relationship that shall not preclude an independence determination for such director. 3.            A director who is a current partner or employee of a firm that is the Company’s internal or external auditor is not independent. A director whose immediate family member is a current partner of such a firm, or is a current employee of such a firm and personally works on the Company’s audit, is not independent. A director who was, or whose immediate family member was, within the last three years a partner or employee of such a firm and personally worked on the Company’s audit within that time is not independent. 4.            A director who is (or, within the last three years, was) employed, or whose immediate family member is (or, within the last three years, was) employed, as an executive officer of another company where any of the Company's present executives serves (or, within the last three years, served) on that company's compensation committee is not independent. A-2 5.            A director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes (or, within the last three years, made) payments to or receives (or, within the last three years, received) payments from the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues, is not independent. A director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes (or, within the last three years, made) payments to or receives (or, within the last three years, received) payments from the Company for property or services in an amount which, in any single fiscal year, is less than the greater of $1 million or 2% of such other company’s consolidated gross revenues has an immaterial relationship that shall not preclude an independence determination for such director. 6.            A director who is (or, within the last three years, was) an employee or a non-employee executive officer of the Company is not independent. 7.            A director who is an immediate family member of an individual who is (or, within the last three years, was) an executive officer of the Company, whether as an employee or non-employee, is not independent. 8.            A director who is an affiliated person of the Company, as defined under the rules of the SEC, is not independent; provided, however, if the director is an affiliated person solely because he or she sits on the board of directors of an affiliate of the Company, as defined under the rules of the SEC, then the director has an immaterial relationship with the Company that shall not preclude an independence determination for such director if he or she, except for being a director on each such board of directors, does not accept directly or indirectly any consulting, advisory, or other compensatory fee from either such entity, other than the receipt of only ordinary-course compensation for serving as a member of the board of directors, or any board committee of each such entity, and the director satisfies all other standards. 9.            A director who is, or whose immediate family member is, an officer or employee of a non-profit organization to which the Company has donated more than $100,000 in any year within the last three years is not independent. 10.            A director's participation in the Company's Charitable Awards Program or receipt of compensation and benefits for service as a director of the Company in accordance with Company policies and programs will be deemed an immaterial relationship with the Company that shall not preclude an independence determination for such director. For purposes of application of these criteria, (i) “immediate family” shall be defined as including all individuals who are considered immediate family of a director under the regulations implementing the Sarbanes-Oxley Act, as well as all individuals who are considered immediate family of a director under the NYSE listing standards, (ii) a director’s receipt of compensation for former service as an interim Chairman or CEO or other executive officer is considered an immaterial relationship that shall not preclude an independence determination for such director, and (iii) references to “Company” for purposes of determining independence, include any parent or subsidiary in a consolidated group with the Company. Directors shall notify the Chair of the Governance Committee and the Chairman and/or CEO prior to accepting a board position on any other organization, so that the effect, if any, of such position on the director’s independence may be evaluated. A-3 D.        Selection of Board Members Nomination of directors is the responsibility of the Governance Committee, all of whose members shall be independent directors. Recommendations may come from directors, shareholders or other sources. Recommendations may come from management, with the understanding that the Board is not required to consider candidates recommended by management. It is expected that all members of the Governance Committee will interview prospective candidates before their nominations are approved by the Committee. An offer to join the Board will be extended by the Chair of the Governance Committee or the Chairman of the Board if the Chairman is not also an officer or employee of the Company. E.        Tenure 1.            The Board has not established term limits, and, given the value added by experienced directors who can provide a historical perspective, term limits are not considered appropriate. New ideas and diversity of views are maintained by careful selection of directors when vacancies occur. In addition, the performance of individual directors and the Board as a whole are reviewed annually, prior to the nomination of directors for vote by stockholders at each Annual Meeting. 2.            When a director’s principal occupation or business or institutional affiliation changes materially from that at the time of his or her first election to the Board, the director will tender his or her resignation by directing a letter of resignation to the Chair of the Governance Committee, except that if the director is the Chair of such committee, he or she shall direct the resignation to the Chairman of the Board or to the Chair of the Compensation and Executive Organization Committee if the Chair of the Governance Committee also serves as the Chairman of the Board. The Board will determine whether to accept such resignation. Pending the Board’s final determination, such letter of resignation shall be deemed to be only preliminary consideration of resignation by the director, and not a final decision to resign, unless the director expresses a contrary intent in writing. 3.            Directors will not be nominated for reelection after their 72nd birthday. III. OPERATION OF THE BOARD A.        Chairman The Chairman of the Board presides at all meetings of stockholders of the Company and of the Board and sees that all orders, resolutions and policies adopted or established by the Board are carried into effect. The Chairman of the Board is elected by and from the members of the Board and may, but need not, be the Chief Executive Officer or another officer of the Company. B.        Board Meetings 1.            The Board will hold approximately six regular meetings per year, scheduled by resolution of the Board sufficiently far in advance to accommodate the schedules of the directors. Special meetings may be called at any time by the Chairman or a Vice Chairman of the Board (if any), or by the CEO, or by one-sixth (calculated to the nearest whole number) of the total number of directors constituting the Board, to address specific issues. A-4 2.            Agendas are established by the Chairman and sent in advance to the Board. Any director may submit agenda items for any meeting. A rolling agenda has been established, which includes a full annual review of the Company’s strategic plan, quarterly reviews of the Company’s financial performance, and committee reports and updates at each meeting on the business and other items of significance to the Company. Information relevant to agenda items shall be submitted to the Board in advance, and the agenda will be structured to allow appropriate time for discussion of important items. C.        Executive Sessions Executive sessions are sessions of non-management directors. Executive sessions are held at the conclusion of each regular Board meeting, and at such other times as the non-management directors may determine, without the CEO or any other member of Company management present, to review such matters as may be appropriate, including the report of the outside auditors, the criteria upon which the performance of the CEO and other senior managers is based, the performance of the CEO measured against such criteria and the compensation of the CEO. If at any time the Board includes any non-management directors who are not independent, such directors shall be excluded from one executive session each year. Executive sessions are chaired by the Chairman of the Board or, in the Chairman’s absence, a Vice Chairman of the Board (if any). If at any time the Chairman is also an officer of the Company, or if the Chairman is excluded from an executive session because he or she is a non-management director who is not independent, then the executive session shall be chaired by a Vice Chairman of the Board (if any) who meets the independence standards under these Guidelines. In the absence of an independent Vice Chairman, then executive sessions shall be chaired by an independent director assigned on a rotating basis. In addition, any director may call a special executive session to discuss a matter of significance to the Company and/or the Board. D.       Committees All major decisions are made by the Board; however, the Board has established committees to enable it to handle certain matters in more depth. The committees are (1) Audit, (2) Governance, (3) Compensation and Executive Organization, (4) Finance and Risk Management and (5) Executive (or any successor to any of the foregoing committees having duties and responsibilities similar to such committee). Members are expected to serve on committees, as recommended by the Governance Committee and approved by the Board. Committee members serve at the pleasure of the Board, for such period of time as the Board may determine, consistent with these governance guidelines. All directors serving on the Audit, Governance, Finance and Risk Management, and Compensation and Executive Organization committees must be independent, as determined by the Board in accordance with these governance guidelines and as required by applicable law and regulation. The Executive Committee is made up of the Chairman of the Board and the chair of each of the other committees along with one other director appointed by the Board. Any transaction not in the ordinary course of business by and among the Company and Hershey Trust Company, Hershey Entertainment & Resorts Company and/or Milton Hershey School, or any subsidiary, division or affiliate of any of the foregoing, shall be reviewed and approved in advance by a special committee composed of the directors elected by the holders of Common Stock voting separately as a class, which special committee will make its recommendation to the Board regarding such potential transaction. If at any time there are no directors serving on the Board who were elected by the holders of the Common Stock voting separately as a class, then the independent members of the Executive Committee will serve as the special committee, provided, that A-5 no director who is an officer or director of or is otherwise affiliated with any of the above-listed entities shall participate in the review or approval of any such transaction on behalf of the Company. The charter of each committee is published on the Company’s website and will be made available to any shareholder on request. Each committee chair shall report the highlights of the committee meeting to the full Board at the Board meeting following the committee meeting. The Chairman of the Board serves as chair of the Executive Committee. The chairs of the Audit Committee, the Governance Committee, the Finance and Risk Management Committee and the Compensation and Executive Organization Committee (the “Independent Committees”) are recommended by the Governance Committee and approved by the Board. Under normal circumstances, following four consecutive years as the Chair of an Independent Committee, a director shall not serve again on such committee for at least one year after standing down as the Chair thereof. A Chair of an Independent Committee may be permitted to continue to serve on such committee with Board approval if the Board determines that the former Chair uniquely fills a specific need of such Committee. The structure and functioning of the committees shall be part of the annual Board evaluation. E.        Director Participation in Board and Committee Meetings Each director is expected to participate actively in their respective committee meetings and in Board meetings. Directors are expected to attend all meetings and are expected to come prepared for a thorough discussion of agenda items. Directors are expected to attend the Company’s Annual Meeting of Stockholders. Participation by directors will be reviewed as part of the annual assessment of the Board and its committees. IV. ACCESS TO COMPANY PERSONNEL Directors have full and free access to the Company’s officers and employees. Division and function heads regularly make presentations to the Board and committees on subjects within their areas of responsibility. The CEO will invite other members of management to attend meetings or other Board functions as appropriate. Directors may initiate communication with any employee and/or invite any employee to any Board or committee meeting; however, they are expected to exercise judgment to protect the confidentiality of sensitive matters and to avoid disruption to the business, and they are expected to copy the CEO on written communications to company personnel under normal circumstances. V. ACCESS TO OUTSIDE ADVISORS The Board and each committee have the power to hire independent legal, financial or other advisors as they may deem necessary, without consulting or obtaining approval of Company management in advance. VI. TRAINING A.        Orientation Each new Board member shall undergo an orientation designed to educate the director about the Company and his/her obligations as a director. At a minimum, the orientation shall include meetings with several members of the Hershey Executive Team and the Governance and Compliance Officer, a tour of key facilities and review of reference A-6 materials regarding the Company and corporate governance, the Company’s strategic plan and the last annual report. B.        Ongoing Education The Company will pay reasonable expenses for each director to attend at least one relevant continuing education program each year. Directors are encouraged but not required to attend. In addition, the Company will keep directors informed of significant developments as appropriate. Each Board meeting shall include a report to directors on (1) significant business developments affecting the Company, (2) significant legal developments affecting the Company, and (3) if and as necessary, significant legal developments affecting the Board members’ obligations as directors. VII. OVERSIGHT OF MANAGEMENT A.        Review of CEO Performance and Compensation The independent directors, together with the Compensation and Executive Organization Committee, monitor the performance of the CEO. Annually they shall review the performance appraisal of the CEO performed by the Compensation and Executive Organization Committee and shall review and approve the CEO’s compensation recommended by such committee. B.        Review of Strategic Plan The Board shall review the Company’s strategic plan annually. All Board members are expected to participate in an active review. The CEO will invite to the review members of management with responsibility for key divisions and functions and any other personnel the CEO deems helpful, for purposes of providing information sufficient to facilitate a full and frank discussion. C.        Management Succession 1.            The Board shall review management succession plans annually. This shall include review by the Board of organization strength and management development and succession plans for each member of the Company’s executive team. The Board shall also maintain and review annually, or more often if appropriate, a succession plan for the CEO. 2.            If the President, CEO and/or Chairman of the Board is unable to perform for any reason, including death, incapacity, termination, or resignation before a replacement is elected, then: (1) if the Company is without a Chairman of the Board, the Vice Chairman of the Board, if any, shall serve as Chairman until a replacement is elected or, in the case of temporary incapacity, until the Board determines that the incapacity has ended, and in the absence of a Vice Chairman of the Board, the Chair of the Governance Committee or, in his or her absence, the Chair of the Compensation and Executive Organization Committee, shall serve in such capacity; (2) if the Company is without a President and CEO, the interim President and CEO shall be the officer of the Company approved by the Board, taking into consideration the annual recommendation of the CEO; (3) in the case of incapacity of the President, CEO and/or Chairman, the Board shall determine whether to search for a replacement; and (4) the Chair of the Compensation and Executive Organization Committee shall lead any search for a replacement. A-7 VIII. EVALUATION AND COMPENSATION OF THE BOARD A.        Annual Evaluations The directors shall evaluate the performance of the Board and its committees annually. Each director shall complete an evaluation for the Board as a whole and each of the committees on which he or she has served during the year. Evaluation results shall be reviewed by the Governance Committee, which shall present to the Board the results along with any recommendations for change that the committee deems appropriate. These governance guidelines and the committee charters shall be reviewed annually in conjunction with the annual evaluation. The Governance Committee shall also review the performance of Board members when they are considered for reelection and at any time upon request of a Board member. B.        Director Compensation and Benefits 1.            General. The Compensation and Executive Organization Committee shall review and make recommendations to the Board annually with respect to the form and amount of compensation and benefits. These will be established after due consideration of the responsibilities assumed and the compensation of directors at similarly situated companies. 2.            Stock Ownership. a.        The Board will not nominate any person to be elected a director at an Annual Meeting of Stockholders unless such person owns, as defined below, or agrees to purchase and own at least 200 shares of the Company’s Common Stock on or before the record date for such meeting. b.        The Board desires that each director own, as defined herein, shares of the Company’s Common Stock in an amount at least equal to the Stockholding Guidelines as of January 1 of each year following the fifth anniversary of the date the Board approves this policy in the case of current directors and as of January 1 of each year following the fifth anniversary of becoming a director in the case of a director first becoming a director subsequent to the date of such Board approval. For purposes of the requirements herein and in paragraph a. above, ownership of the Company’s Common Stock includes Common Stock equivalent shares such as common stock units deferred under the Company’s Directors’ Compensation Plan and restricted stock units granted quarterly under that plan or the Company’s Equity and Incentive Compensation Plan. c.        Stockholding Guidelines as of January 1 of any year means the number of shares of the Company’s Common Stock, as described in paragraph b. above, with a value, valued at the average closing price on the NYSE of the Common Stock on the first three trading days of the month of December of the preceding year, equal to three times the annual retainer under the Company’s Directors’ Compensation Plan for such year. IX. CODE OF CONDUCT Directors are held to the highest standards of integrity. The Company’s Code of Ethical Business Conduct applies to directors as well as officers and employees and covers areas including conflicts of interest, insider trading and compliance with laws and regulations. The Audit Committee has responsibility for oversight of the Company’s communication of, and compliance with, the Code of Ethical Business Conduct. A-8 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0 0 0 To withhold authority to vote, mark “For All Except” and write the nominee’s number or nominees’ numbers on the line below. M21614-Z51862 For Against Abstain 0 0 0 For All Withhold All For All Except VOTE BY INTERNET – www.proxyvote.com Use the Internet to transmit your voting instructions until 11:59 p.m. EDT on May 3, 2010. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE – (800) 690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. EDT on May 3, 2010. Have your proxy card in hand when you call and then follow the instructions from the telephone voting site. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to The Hershey Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. 401(k) PLAN AND PR 401(k) PLAN PARTICIPANTS Your voting instructions must be received no later than 11:59 p.m. EDT on April 29, 2010. Use any of the voting methods above to submit your voting instructions. THE HERSHEY COMPANY P.O. BOX 810 HERSHEY, PA 17033-0810 Vote On Directors The Board of Directors recommends a vote M53457-P33583-Z59604                         KEEP THIS PORTION FOR the following actions (as described in the accompanying Proxy Statement). 1. Nominees: 01) P. M. Arway, 02) R. F. Cavanaugh, 03) C. A. Davis, 04) J. E. Nevels, 05) T. J. Ridge, 06) D. L. Shedlarz, 07) D. J. West, 08) L. S. Zimmerman 2. Ratify Appointment of KPMG LLP as Independent Auditors for 2010. The proxies are authorized to vote, in their discretion, for a substitute should any nominee become unavailable for election and upon such other business as may properly come before the meeting. Vote On Proposal Please follow the instructions above to vote by Internet or telephone or mark, sign [exactly as name(s) appear(s) above] and date this card and mail promptly in the postage-paid, return envelope provided. Executors, administrators, trustees, attorneys, guardians, etc., should so indicate when signing. THE HERSHEY COMPANY YOUR RECORDS   M21615-Z51862DETACH AND RETURN THIS PORTION ONLY THE HERSHEY COMPANY STOCKHOLDER’S PROXY AND CONFIDENTIAL VOTING INSTRUCTION CARD The undersigned hereby appoints D. J. West and B. H. Snyder, and each of them, as Proxies, with full power of substitution, to attend the Annual Meeting of Stockholders to be held at 10:00 a.m. EDT, May 4, 2010, at GIANT Center, 550 West Hersheypark Drive, Hershey, Pennsylvania, or at any adjournment thereof (“Annual Meeting”), and to vote all of the undersigned’s shares of the Company’s Common Stock in the manner directed on the reverse side of this card. The shares represented by this proxy, when executed properly, will be voted in the manner directed. If direction is not given, this proxy will be voted FOR items 1 and 2 as set forth on the reverse side. SPECIAL INFORMATION for participants in The Hershey Company 401(k) Plan (“401(k) Plan”) and The Hershey Company Puerto Rico 401(k) Plan (“PR 401(k) Plan”): This proxy also provides voting instructions for shares held on the record date for the Annual Meeting by Vanguard Fiduciary Trust Company (“Vanguard”),* as trustee of the 401(k) Plan or as custodian appointed by Banco Popular de Puerto Rico, trustee of the PR 401(k) Plan, as applicable. If you are a participant in either plan, this paragraph (and not the paragraph above) applies with respect to voting these plan shares. By marking and returning this card, you will direct Vanguard (i) how to vote the shares of Common Stock allocated to your account in that plan and (ii) how to vote a portion of the shares of Common Stock allocated to the accounts of other participants in that plan who have not submitted voting instructions by the voting deadline. If Vanguard receives your properly marked and executed card on or before April 29, 2010, Vanguard will vote these shares in the manner directed by you. If direction is not given or is received after April 29, 2010, Vanguard will vote these shares in the 401(k) Plan or PR 401(k) Plan, as applicable, in the same proportion, respectively, as the final aggregate vote of the 401(k) Plan or PR 401(k) Plan participants who submitted timely votes on the matter. This proxy/voting instruction card is solicited on behalf of the Board of Directors pursuant to a separate Notice of Annual Meeting and Proxy Statement dated March 22, 2010, receipt of which is hereby acknowledged. The shares of Common Stock represented by this proxy shall be entitled to one vote for each such share held. Except with regard to voting separately as a class on the election of D. L. Shedlarz, shares of Common Stock will vote together with shares of Class B Common Stock without regard to class. THIS PROXY AND VOTING INSTRUCTION CARD IS CONTINUED ON VALID ONLY WHEN SIGNED AND DATED THE HERSHEY COMPANY For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR each of the following nominees: 1. Election of Directors: ¨ ¨ ¨ Nominees: 01)    P. M. Arway 06)    J. M. Mead 02)    J. P. Bilbrey 07)    J. E. Nevels 03)    R. F. Cavanaugh 08)    A. J. Palmer 04)    C. A. Davis 09)    T. J. Ridge 05)    R. M. Malcolm 10)    D. L. Shedlarz The Board of Directors recommends you vote FOR Proposals 2 and 3: For Against Abstain 2. Ratify the appointment of KPMG LLP as independent auditors for 2013. ¨ ¨ ¨ 3. Approve, on a non-binding advisory basis, a resolution approving executive compensation. ¨ ¨ ¨ The proxies are authorized to vote, in their discretion, for a substitute should any nominee become unavailable for election and upon such other business as may properly come before the meeting. NOTE:Please follow the instructions above to vote by Internet or telephone, or mark, sign (exactly as name(s) appear(s) above) and date this card and mail promptly in the postage-paid, return envelope provided. Executors, administrators, trustees, attorneys, guardians, etc., should so indicate when signing. Signature [PLEASE SIGN WITHIN BOX] Date         Signature (Joint Owners)                      Date                      Admission Ticket THE REVERSE SIDE.HERSHEY COMPANY *Vanguard Fiduciary Trust Company, in its capacity as trustee or custodian, has appointed Broadridge as agent2013 Annual Meeting of Stockholders Tuesday, April 30, 2013 10:00 a.m. EDT GIANT Center 550 West Hersheypark Drive Hershey, PA 17033 Presenting this Admission Ticket at HERSHEY’S CHOCOLATE WORLDvisitors center entitles you to tally the vote.25% off selected items from 9:00 a.m. until 5:00 p.m. EDT on April 30, 2013. Offer good on April 30, 2013, only. Important Notice Regarding the Availability of Proxy Materials for the 20102013 Annual Meeting of Stockholders to be held on May 4, 2010:April 30, 2013: The 20102013 Notice of Annual Meeting and Proxy Statement, 20092012 Annual Report to Stockholders and proxy card are available at www.proxyvote.com. Admission Ticket ÀFOLD AND DETACH HEREÀ ÀFOLD AND DETACH HEREÀ M53458-P33583-Z59604 THE HERSHEY COMPANY 2010 Annual Meeting of Stockholders Tuesday, May 4, 2010 10:00 a.m. EDT GIANT Center 550 West Hersheypark Drive Hershey, PA 17033 Presenting this Admission Ticket at HERSHEY’S CHOCOLATE WORLD visitors center entitles you to 25% off selected items from 9:00 a.m. until 6:00 p.m. EDT on May 4, 2010. Offer good on May 4, 2010 only. FOLD AND DETACH HERE FOLD AND DETACH HERE THE HERSHEY COMPANY   STOCKHOLDER’S PROXY AND VOTING INSTRUCTION CARD The undersigned hereby appoints J. P. Bilbrey and L. M. Turner, and each of them, as proxies, with full power of substitution, to attend The Hershey Company (the “Company”) Annual Meeting of Stockholders to be held at 10:00 a.m. EDT, April 30, 2013, at GIANT Center, 550 West Hersheypark Drive, Hershey, Pennsylvania, or at any adjournment thereof (“Annual Meeting”), and to vote all of the undersigned’s shares of the Company’s Common Stock in the manner directed on the reverse side of this card. The shares represented by this proxy, when executed properly, will be voted in the manner directed.If direction is not given but the card is signed, this proxy will be voted FOR the election of all nominees under Proposal 1, FOR Proposal 2, and FOR Proposal 3 as set forth on the reverse side, and in the discretion of the proxies with respect to such other business as may properly come before the meeting. SPECIAL INFORMATION for participants in The Hershey Company 401(k) Plan (“401(k) Plan”) and The Hershey Company Puerto Rico 401(k) Plan (“PR 401(k) Plan”): This proxy also provides voting instructions for shares held on the record date for the Annual Meeting by Vanguard Fiduciary Trust Company (“Vanguard”),* as trustee of the 401(k) Plan or as custodian appointed by Banco Popular de Puerto Rico, trustee of the PR 401(k) Plan, as applicable.If you are a participant in either plan, this paragraph (and not the paragraph above) applies with respect to voting these plan shares. By marking and returning this card, you will direct Vanguard (i) how to vote the shares of Common Stock allocated to your account in that plan and (ii) how to vote a portion of the shares of Common Stock allocated to the accounts of other participants in that plan who have not submitted voting instructions by the voting deadline. If Vanguard receives your properly marked and executed card on or before April 25, 2013, Vanguard will vote these shares in the manner directed by you.If direction is not given or is received after April 25, 2013, Vanguard will vote these shares in the 401(k) Plan or PR 401(k) Plan, as applicable, in the same proportion, respectively, as the final aggregate vote of the 401(k) Plan or PR 401(k) Plan participants who submitted timely votes on the matter. This proxy is solicited on behalf of the Board of Directors pursuant to a separate Notice of Annual Meeting and Proxy Statement dated March 19, 2013, receipt of which is hereby acknowledged. The shares of Common Stock represented by this proxy shall be entitled to one vote for each such share held. Except with regard to voting separately as a class on the election of R. M. Malcolm and A. J. Palmer, shares of Common Stock will vote together with shares of Class B Common Stock without regard to class. THIS PROXY AND VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE. *  Vanguard Fiduciary Trust Company, in its capacity as trustee or custodian, has appointed Broadridge as agent to tally the vote. THE HERSHEY COMPANY P.O. BOX 810 HERSHEY, PA 17033-0810 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions until 11:59 p.m. EDT on April 29, 2013. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - (800) 690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. EDT on April 29, 2013. Have your proxy card in hand when you call and then follow the instructions from the telephone voting site. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to The Hershey Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M53459-P33583-Z59604                    KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS THE HERSHEY COMPANY For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR each of the following nominees: 1. Election of Directors ¨ ¨ ¨ Nominees: 01)  P. M. Arway 06)    J. E. Nevels 02)  J. P. Bilbrey     07)    T. J. Ridge 03)  R. F. Cavanaugh 08)    D. L. Shedlarz 04)  C. A. Davis 05)  J. M. Mead For Against Abstain The Board of Directors recommends you vote FOR Proposals 2 and 3: 2. Ratify the appointment of KPMG LLP as independent auditors for 2013. ¨ ¨ ¨ 3. Approve, on a non-binding advisory basis, a resolution approving executive compensation. ¨ ¨ ¨ The proxies are authorized to vote, in their discretion, for a substitute should any nominee become unavailable for election and upon such other business as may properly come before the meeting. NOTE: Please follow the instructions above to vote by Internet or telephone, or mark, sign (exactly as name(s) appear(s) above) and date this card and mail promptly in the postage-paid, return envelope provided. Executors, administrators, trustees, attorneys, guardians, etc., should so indicate when signing. Signature [PLEASE SIGN WITHIN BOX] Date         Signature (Joint Owners)                      Date         DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:             Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) DateAdmission Ticket 0 0 0 To withhold authority to vote, mark “For All Except” and write the nominee’s number or nominees’ numbers on the line below. THE HERSHEY COMPANY P.O. BOX 8102013 Annual Meeting of Stockholders HERSHEY,Tuesday, April 30, 2013 10:00 a.m. EDT GIANT Center 550 West Hersheypark Drive Hershey, PA 17033-081017033 M21616-P89720Presenting this Admission Ticket at For Against AbstainHERSHEY’S CHOCOLATE WORLDvisitors center 0 0 0entitles you to 25% off selected items For All Withhold All For All Except VOTE BY INTERNET—www.proxyvote.com Use the Internet to transmit your voting instructionsfrom 9:00 a.m. until 11:59 5:00 p.m. EDT on May 3, 2010. Have your proxy card in hand when youApril 30, 2013. access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE—(800) 690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. EDTOffer good on May 3, 2010. Have your proxy card in hand when you call and then follow the instructions from the telephone voting site. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postagepaid envelope we have provided or return it to The Hershey Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. THE HERSHEY COMPANY Vote On Directors The Board of Directors recommends a vote FOR the following actions (as described in the accompanying Proxy Statement). 1. Nominees: 01) P. M. Arway, 02) R. F. Cavanaugh, 03) C. A. Davis, 04) J. E. Nevels, 05) T. J. Ridge, 06) D. J. West, 07) L. S. Zimmerman 2. Ratify Appointment of KPMG LLP as Independent Auditors for 2010. The proxies are authorized to vote, in their discretion, for a substitute should any nominee become unavailable for election and upon such other business as may properly come before the meeting. Vote On Proposal Please follow the instructions above to vote by Internet or telephone or mark, sign [exactly as name(s) appear(s) above] and date this card and mail promptly in the postage-paid, return envelope provided. Executors, administrators, trustees, attorneys, guardians, etc., should so indicate when signing. April 30, 2013, only.   M21617-P89720 Important Notice Regarding the Availability of Proxy Materials for the 20102013 Annual Meeting of Stockholders to be held on May 4, 2010:April 30, 2013: The 20102013 Notice of Annual Meeting and Proxy Statement, 20092012 Annual Report to Stockholders and proxy card are available at www.proxyvote.com. Admission Ticket ÀFOLD AND DETACH HEREÀ ÀFOLD AND DETACH HEREÀ M53460-P33583-Z59604 THE HERSHEY COMPANY 2010 THE HERSHEY COMPANY CLASS B COMMON STOCK This Proxy is Solicited on Behalf of the Board of Directors The undersigned, having received the Notice of Annual Meeting and Proxy Statement of The Hershey Company (the “Company”) dated March 19, 2013, appoints J. P. Bilbrey and L. M. Turner, and each of them, as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of the Company’s Class B Common Stock at the Annual Meeting of Stockholders to be held at 10:00 a.m. EDT, April 30, 2013, at GIANT Center, 550 West Hersheypark Drive, Hershey, Pennsylvania, or at any adjournment thereof. The shares represented by this proxy will be voted in the manner directed herein by the undersigned stockholder(s), who shall be entitled to cast ten votes for each such share held.If direction is not given but the card is signed, this proxy will be voted FOR the election of all nominees under Proposal 1, FOR Proposal 2, and FOR Proposal 3 as set forth on the reverse side, and in the discretion of the proxies with respect to such other business as may properly come before the meeting. This proxy is continued on the reverse side. Tuesday, May 4, 2010 10:00 a.m. EDT GIANT Center 550 West Hersheypark Drive Hershey, PA 17033 Presenting this Admission Ticket at HERSHEY’S CHOCOLATE WORLD visitors center entitles you to 25% off selected items from 9:00 a.m. until 6:00 p.m. EDT on May 4, 2010. Offer good on May 4, 2010 only. THE HERSHEY COMPANY CLASS B COMMON STOCK This Proxy is Solicited on Behalf of the Board of Directors The undersigned, having received the Notice of Annual Meeting and Proxy Statement dated March 22, 2010, appoints D. J. West and B. H. Snyder, and each of them, as Proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of the Company’s Class B Common Stock at the Annual Meeting of Stockholders to be held at 10:00 a.m. EDT, May 4, 2010, at GIANT Center, 550 West Hersheypark Drive, Hershey, Pennsylvania, or at any adjournment thereof. The shares of Class B Common Stock represented by this proxy will be voted in the manner directed herein by the undersigned stockholder(s), who shall be entitled to cast ten votes for each such share held. If direction is not given, this proxy will be voted FOR items 1 and 2 as set forth on the reverse side. This proxy is continued on the reverse side. FOLD AND DETACH HERE FOLD AND DETACH HERE