EXHIBIT 10b3
AMENDMENT TO SEVERANCE AGREEMENT
This AMENDMENT dated as of August 1, 1998 to the Severance Agreement
(the "Agreement") dated as of October 1, 1990, as amended, between AMERICAN
BRANDS, INC., a Delaware corporation (the "Company") and XXXXXX X. XXXXXXXXXX
(the "Executive"),
W I T N E S S E T H :
WHEREAS, the Company (now known as Fortune Brands, Inc.) and the
Executive entered into the Agreement in order to provide severance benefits in
the event of termination of the Executive's employment; and
WHEREAS, the Company and the Executive desire to amend the Agreement
in order to provide severance benefits in the event that the Executive
terminates employment for Good Reason (as defined herein);
NOW, THEREFORE, in consideration of the premises and to further assure
the retention of the Executive in the employ of the Company after the date of
this Amendment to Severance Agreement, the parties hereto do hereby agree as
follows:
1. Section 1(a) of the Agreement is hereby amended in its entirety as
follows:
"(a) Entitlement to Benefits. If and only if during the term of
the Agreement the Executive's employment with the Company is
terminated by the Company other than for Disability or Cause or by the
Executive for Good Reason (as defined in this Section 1), the
Executive shall be entitled to benefits as provided in Section 2. The
Executive shall not be entitled to any benefits hereunder in the event
his employment with the Company is terminated as a result of his
death, by the Company for Disability or Cause or by the Executive
other than for Good Reason."
2. Section 1(d) of the Agreement is hereby amended by changing the
first sentence thereof as follows:
"Any termination by the Company for Disability or Cause shall be
communicated by Notice of Termination to the Executive and any
termination by the Executive for Good Reason shall be communicated by
Notice of Termination to the Company."
3. Section 1(e) of the Agreement is hereby amended in its entirety as
follows:
"(e) Termination Date. As used herein, 'Termination Date' shall
mean (i) if employment is terminated by the Company for Disability, 30
days after Notice of Termination is given (provided that the Executive
shall not have returned to the performance of his duties on a
full-time basis during such 30-day period), (ii) if employment is
terminated by the Company for Cause, the date on which a Notice of
Termination is given, (iii) if employment is terminated for Good
Reason, the date specified in the Notice of Termination, and (iv) if
employment is terminated for any other reason, the date on which the
Executive ceases to perform his duties for the Company; provided,
however, that if within 30 days after any Notice of Termination is
given the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the
Termination Date shall be the date on which the dispute is finally
determined, either by written agreement of the parties or by a final
judgment, order or decree of court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been
perfected); provided, further, however, that if the dispute is
resolved in favor of the Company, the Termination Date shall not be so
extended but shall be the date determined under clauses (i) through
(iv) of this Section 1(e)."
4. Section 1(f) is hereby added to the Agreement as follows:
"(f) Good Reason. Termination of employment by the Executive for
Good Reason shall be deemed to have occurred only if the Executive
terminates his employment and provides a Notice of Termination to the
Company prior to such date for any of the following reasons:
(i) a reduction by the Company in the Executive's base
salary as in effect on August 1, 1998 plus all increases therein
subsequent thereto;
(ii) the failure of the Company substantially to maintain
and to continue the Executive's participation in the Company's
benefit plans as in effect on August 1, 1998 and with all
improvements therein subsequent thereto (other than those plans
or improvements that have expired thereafter in accordance with
their original terms), or the taking of any action which would
materially reduce the Executive's benefits under any of such
plans or deprive the Executive of any material fringe benefit
enjoyed by him on August 1, 1998 or subsequently. For the
purposes hereof such benefit plans shall include, but not be
limited to, the Incentive Compensation Plans, the Pension Plans,
the Defined Contribution Plan and the Company's Long-Term
Incentive Plan;
(iii) the sum of the Executive's base salary and the amount
paid to the Executive as incentive compensation under the
Incentive Compensation Plans for any calendar year during the
term hereof is less than 90% of the sum of the Executive's base
salary and the amount paid to the Executive under the Incentive
Compensation Plans for 1997 or any subsequent year during the
term hereof for which the sum of such amounts was greater;
provided, however, that this paragraph shall not be applicable if
the cause of the reduction of the sum of the Executive's base
salary and incentive compensation is a failure of the Company to
meet performance goals under the Incentive Compensation Plans;
(iv) the failure of the Company to provide the Executive
during each calendar year with a number of paid vacation days at
least equal to the number of paid vacation days to which he was
entitled at the date hereof plus any increases therein subsequent
thereto;
(v) any purported termination of the Executive's employment
by the Company which is not effected pursuant to a Notice of
Termination, and for purposes of this Agreement, no such
purported termination shall be effective; or
(vi) any failure of the Company to comply with and satisfy
Section 3;
provided, however, that termination of employment by the Executive
under clauses (i), (ii) and (iii) above shall not be deemed to have
occurred for Good Reason if the reason for the compensation reduction
or failure of benefit plan coverage thereunder is due to a change in
the individual elements of aggregate compensation, which change is
applicable to officers of the Company generally, without a material
reduction in aggregate compensation."
5. Section 2(a) of the Agreement is hereby amended in its entirety as
follows:
"(a) If the Executive's employment is terminated by the Company
for Disability or Cause or by the Executive other than for Good
Reason, the Company shall have no obligation to pay any compensation
to the Executive under this Agreement in respect of periods beginning
on or after the Termination Date, but this Agreement shall have no
effect on any other obligation the Company may have to pay the
Executive compensation to which he may otherwise be entitled."
6. Section 2(b) of the Agreement is hereby amended by adding "or the
Executive terminates his employment for Good Reason," after the words
"Disability or Cause," in the first sentence thereof.
7. Section 2(c) of the Agreement is hereby amended by adding "or the
Executive terminates his employment for Good Reason," after the words
"Disability or Cause," in the first sentence thereof.
8. Section 2(d) of the Agreement is hereby amended by adding "or the
Executive terminates his employment for Good Reason," after the words
"Disability or Cause," in the first sentence thereof and to delete the following
sentence therefrom:
"Benefits hereunder which commence prior to age 60 shall be
actuarially reduced to reflect early commencement to the extent, if
any, provided in the Retirement Plan as if the Executive's Termination
Date were an Early Retirement Date."
9. Section 2(e) of the Agreement is hereby amended by adding "or the
Executive terminates his employment for Good Reason," after the words
"Disability or Cause," therein.
10. Section 2(f) of the Agreement is hereby amended by adding "or the
Executive terminates his employment for Good Reason," after the words
"Disability or Cause," in the first sentence thereof as well as to add "and
reduced by the amount actually paid for such calendar year under the Incentive
Compensation Plans" at the end of clause (ii) thereof.
11. Section 2(g) of the Agreement is hereby amended by adding "or the
Executive terminates his employment for Good Reason" after the words "Disability
or Cause" therein.
12. Section 2(k) is hereby added to the Agreement as follows:
"(l) In addition to any other benefits which may be payable to
the Executive under the Pension Plans and Section 2(d) hereof, if the
Executive's employment with the Company is terminated by the Company
other than for Disability or Cause, or by the Executive for Good
Reason, and the Termination Date occurs before the Executive attains
Early Retirement Date (as defined in the Retirement Plan), the Company
shall pay to the Executive a supplemental pension benefit in an amount
equal to the difference between (i) the benefits payable from the
Pension Plans and Section 2(d) hereof and (ii) 65% of the Executive's
accrued benefit under the Pension Plans and Section 2(d) hereof,
provided that the Executive's full accrued benefit under the Pension
Plans and Section 2(d) hereof shall be paid without reduction for
early payment if the Executive has completed at least 30 years of
Qualifying Employment (as defined in the Retirement Plan) at the date
of the Executive's termination of employment with entitlement to a
benefit hereunder.
This additional pension benefit shall be payable outside the
Pension Plans and shall commence on the first day of the month
following the Executive's termination of employment with the Company
even though pension benefits may not yet then be payable under the
Pension Plans and Section 2(d) hereof. The benefit payable under this
Section 2(k) shall be paid to the Executive in the form of a 100%
joint and survivor annuity with the Executive's spouse as contingent
annuitant if the Executive is married at the date of commencement of
payments hereunder in which event the benefit shall be further reduced
for the joint and survivor annuity coverage to the same extent as
provided in the Supplemental Plan; provided that if the Executive is
not married at the date the enhanced pension benefits commence
hereunder, the enhanced pension benefits under this Section 2(k) shall
be paid as an annuity for the Executive's life only. At the time that
benefits commence under the Supplemental Plan, the monthly benefits
payable hereunder shall then be actuarially adjusted to the form of
benefit payable under the Supplemental Plan and shall be paid in the
same form as the benefit payable under the Supplemental Plan, with
survivorship benefits hereunder then payable after the Executive's
death to the same contingent annuitant to whom benefits are payable
under the Supplemental Plan, if any, that survives the Executive.
In the event that an employee grantor trust ("Grantor Trust") has
been established among the Company, the Executive and a trustee, the
Company may provide the additional pension benefits payable pursuant
to Section 2(d) and Section 2(k) through the Grantor Trust (or, at the
Executive's request, the Segregated Account referred to in the Grantor
Trust) as soon as practicable after the termination of employment of
the Executive using the same actuarial basis and methodology as for
other Supplemental Plan benefits which are provided through the
Grantor Trust and assuming that the underlying monthly pension
benefits which are valued for Grantor Trust funding purposes are
payable in the form of an annuity for the life of the Executive only
and commencing immediately upon termination of employment but with the
early payment reduction calculated as if the Executive had terminated
employment at age 55."
13. All references to "American Brands, Inc." in the Agreement be and
they are hereby changed to references to "Fortune Brands, Inc."
IN WITNESS WHEREOF, the Company has caused this Amendment to Severance
Agreement to be signed by its officer thereunto duly authorized and its seal to
be hereunder affixed and attested and the Executive has hereunto set his hand as
of the date first written above.
FORTUNE BRANDS, INC.
(Corporate Seal) By Xxxxxxx X. Xxxxxxx, XX
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ATTEST: Xxxxxxx X. Xxxxxxx, XX
Executive Vice President -
Strategic and Legal Affairs
Xxxxx X. Xxxxxxx, Xx. Xxxxxx X. Xxxxxxxxxx
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Secretary XXXXXX X. XXXXXXXXXX
