HARRISBURG, Penn. (Reuters) - The Pennsylvania Attorney General's office on Friday unveiled the terms of a reform agreement with the charitable trust that controls Hershey Co (HSY.N) that includes a 10-year term limit for trustees and limits on their compensation to $110,000.
The trust has been in the spotlight since Hershey rejected a $23 billion cash-and-stock offer for the candy maker by Mondelez International Inc (MDLZ.O), the maker of Oreo cookies and Cadbury chocolate, last month.
The agreement, which comes after an investigation of several months by the Attorney General's office over the trust's governance, compensation and expenses, could offer the clarity needed for Mondelez to make a new bid to acquire Hershey.
The Attorney General's office had accused the trust of breaking the terms of a 2013 reform agreement. Created by Hershey Co founder Milton Hershey and his wife Catherine over a century ago, the trust runs a school for underprivileged children in Hershey, Pennsylvania.
"All the efforts that led to this agreement were made to ensure that the vision of Milton and Catherine Hershey remains intact," Attorney General Kathleen Kane said in a statement.
Kane also said that making a recommendation on the sale of Hershey would be outside the authority of her office, and that it is up to the company's board to decide on such a matter.
The new reform agreement with the Attorney General's office, as first reported by Reuters last week, requires three trustees, Joseph Senser, Robert Cavanaugh and James Nevels, to step down by the end of the year.
Senser and Cavanaugh have been trustees since 2001, while Nevels has been a trustee since 2007.
Hershey Trust Chairwoman Velma Redmond, who joined the trust in 2003, will step down by the end of 2017, along with James Mead, a trustee since 2007.
Cavanaugh, Senser and Mead are also on the board of Hershey Co.
The Hershey Trust may continue to elect trust board members to serve on the board of Hershey Co, though no more than three individuals are allowed to be on both boards at the same time. Neither the president of Hershey school nor the CEO of Hershey Trust is allowed to be on the board of Hershey Co.
The trust board, which now has nine members, should use their "best effort" to have thirteen members, according to the agreement. The trust should seek to hire directors with training and experience that includes childhood education and financial management, the agreement states.
The Pennsylvania Attorney General's office will be given a 30-day window to review new board members and must be notified of any relationship to incumbent board members.
Trustee compensation will be capped at $110,000. Trust board members who serve on other Hershey company boards, Hershey Co and Hershey Entertainment and Resorts, will have their salary capped at $80,000. Additional compensation for board chairs is capped at $30,000, and additional compensation for committee chairs is capped at $10,000.
The agreement was filed on Friday in the Orphan's Court Division of the Dauphin County Court.
The new deal with the Attorney General's office follows a period of internal dissent and turmoil at the trust. Trustee Joan Steel resigned earlier this month, following the departures of Richard Zilmer, John Fry and Stephanie Bell-Rose over the past year.
The Attorney General's office, the trust's sole overseer, had threatened legal action to remove trustees unless a settlement over its governance was reached by the end of July.
Reporting by David DeKok in Harrisburg, Pennsylvania; Additional reporting by Lauren Hirsch in New York and Lisa Baertlein in Los Angeles; Editing by Phil Berlowitz and Jonathan Oatis