EXHIBIT 10m1
[Letterhead of Fortune Brands, Inc.]
September 1, 2000
Re: Compensation Agreement
Dear _____________:
This letter will evidence the agreement of Fortune Brands, Inc. (the
"Company") to make the payments and provide the benefits hereafter described in
the event of a termination of your employment following a change in control of
the Company. The Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing its best
interests and those of its stockholders. In this connection, the Company
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control may exist and that, in the event action is
taken to bring about a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and its stockholders.
Accordingly, the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of senior
members of the Company's management, including yourself, to their assigned
duties without distraction in the face of the potentially disruptive
circumstances arising from the possibility of a change in control.
The Company must, of course, remain free to effect changes in
management and terminate employment. However, in order to induce you to join
and remain in the
2 September 1, 2000
employ of the Company, this letter agreement sets forth the severance benefits
which the Company agrees will be provided to you in the event your employment
with the Company is terminated subsequent to a Change in Control (as defined
below) under the circumstances described below. You shall also be entitled to
any Gross-Up Payment provided by the last section hereof with respect to the
exercise of stock options, performance awards, limited rights and other awards
under the Company's Long-Term Incentive Plan and any successor plans whether or
not your employment is terminated. For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred if (i) any person (as that term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect on February 28, 2000) is or becomes
the beneficial owner (as that term is used in Section 13(d) of the Exchange
Act, and the rules and regulations promulgated thereunder, as in effect on
February 28, 2000) of 20% or more of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors ("Voting Securities") of the Company, excluding, however, the
following: (A) any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company, (B)
any acquisition by the Company, (C) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or entity controlled
by the Company, or (D) any acquisition pursuant to a transaction that complies
with clauses (A), (B) and (C) of clause (iii) below, (ii) more than 50% of the
members of the Board of Directors of the Company shall not be Continuing
Directors (which term, as used herein, means the directors of the Company (A)
who were members of the Board of Directors of the Company on February 28, 2000
or (B) who subsequently became directors of the Company and who were elected or
designated to be candidates for election as nominees of the Board of Directors,
or whose election or nomination for election by the Company's stockholders was
otherwise approved, by a vote of a majority of the Continuing Directors then on
the Board of Directors but shall not include, in any event, any individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14(a)-11 of
Regulation 14A promulgated under
3 September 1, 2000
the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors), (iii)
the Company shall be merged or consolidated with, or, in any transaction or
series of transactions, substantially all of the business or assets of the
Company shall be sold or otherwise acquired by, another corporation or entity
unless, as a result thereof, (A) the stockholders of the Company immediately
prior thereto shall beneficially own, directly or indirectly, at least 60% of
the combined Voting Securities of the surviving, resulting or transferee
corporation or entity (including, without limitation, a corporation that as a
result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) ("Newco")
immediately thereafter in substantially the same proportions as their ownership
immediately prior to such corporate transaction, (B) no person beneficially
owns (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act,
and the rules and regulations promulgated thereunder (as in effect on February
28, 2000)), directly or indirectly, 20% or more of the combined Voting
Securities of Newco immediately after such corporate transaction except to the
extent that such ownership of the Company existed prior to such corporate
transaction and (C) more than 50% of the members of the Board of Directors of
Newco shall be Continuing Directors or (iv) the stockholders of the Company
approve a complete liquidation or dissolution of the Company.
1. Termination Following Change in Control. If and only if a Change
in Control of the Company shall have occurred and if at the time of the Change
in Control you shall be an officer of the Company, you shall be entitled to the
benefits provided in Section 2 hereof upon the subsequent termination of your
employment after such Change in Control, unless such termination is as a result
of your death or by the Company for Disability or Cause or by you other than
for Good Reason, as set forth below.
(a) Disability. Termination of employment by the Company for
Disability hereunder shall be deemed to have occurred only if, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from your duties with the Company on a full-time basis
4 September 1, 2000
for 180 consecutive days and, within 30 days after Notice of Termination (as
hereinafter defined) is given to you by the Company, you shall not have
returned to the full-time performance of your duties.
(b) Cause. Termination of employment by the Company for Cause
shall be deemed to have occurred only if (i) termination shall have been the
result of (A) an act or acts of dishonesty on your part constituting a felony
and intended to result directly or indirectly in substantial gain or personal
enrichment to you at the expense of the Company, or (B) your willful and
continued failure substantially to perform your duties as an officer of the
Company as such duties exist at the time of a Change in Control (other than any
such failure resulting from your incapacity due to physical or mental illness),
after a demand for substantial performance is delivered to you by the Board of
Directors which specifically identifies the manner in which the Board believes
that you have not substantially performed your duties and you are given a
reasonable time after such demand substantially to perform your duties, and
(ii) there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire
membership of the Board of Directors at a meeting of the Board called and held
for the purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clause (i)(A) or (i)(B) of this sentence and specifying the particulars thereof
in detail. Your employment shall in no event be considered to have been
terminated by the Company for Cause if the act or failure to act upon which
such termination is based (i) was done or omitted to be done (A) as a result of
bad judgment or negligence on your part, or (B) without intent of gaining
therefrom directly or indirectly a profit to which you were not legally
entitled or (C) as a result of your good faith belief that such act or failure
to act was not opposed to the interests of the Company, or (ii) is an act or
failure to act in respect of which you meet the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under
the By-laws of the Company or the laws of the state of its incorporation or the
directors' and officers'
5 September 1, 2000
liability insurance of the Company, in each case as in effect at the time of
such act or failure to act.
(c) Good Reason. Termination of employment by you for Good Reason
shall be deemed to have occurred only if you terminate your employment for any
of the following reasons:
(i) without your express written consent, the assignment to you of
any duties inconsistent with your positions, duties, responsibilities and
status with the Company at the time of a Change in Control, or a change in
your reporting responsibilities, titles or offices as in effect at the
time of a Change in Control, or any removal of you from, or any failure to
re-elect you to, any of such positions, except in connection with the
termination of your employment as a result of your death or by the Company
for Disability or Cause or by you other than for Good Reason;
(ii) a reduction by the Company in your base salary as in effect at
the time of a Change in Control plus all increases therein subsequent
thereto;
(iii) the failure of the Company substantially to maintain and to
continue your participation in the Company's benefit plans as in effect at
the time of a Change in Control 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 your benefits under any of
such plans or deprive you of any material fringe benefit enjoyed by you at
the time of a Change in Control. For the purposes hereof such benefit
plans shall include, but not be limited to, the provisions for incentive
compensation under the Annual Executive Incentive Compensation Plan of the
Company and the Company's Retirement Plan, Supplemental Plan (as defined
in Section 2(d)) (including the supplemental profit-sharing and
supplemental tax deferred and related Company
6 September 1, 2000
matching award provisions thereof), Retirement Savings Plan (as defined in
Section 2(e)) (including the tax deferred and related Company matching
contributions thereof) and Long-Term Incentive Plan;
(iv) the target bonus awarded by the Compensation and Stock Option
Committee of the Company to you under the Annual Executive Incentive
Compensation Plan of the Company subsequent to a Change in Control is less
than such amount last awarded to you prior to a Change in Control ($ if a
Change in Control occurs prior to your first award under the Annual
Executive Incentive Compensation Plan of the Company);
(v) the sum of your base salary and amount paid to you as incentive
compensation under the Annual Executive Incentive Compensation Plan of the
Company for the calendar year in which the Change in Control occurs or any
subsequent year is less than the sum of your base salary and the amount
awarded (whether or not fully paid) to you as incentive compensation under
the Annual Executive Incentive Compensation Plan of the Company for the
calendar year prior to the Change in Control or any subsequent calendar
year in which the sum of such amounts was greater (your incentive
compensation for this purpose shall be deemed to be $ prior to the first
payment of incentive compensation to you under the Annual Executive
Incentive Compensation Plan of the Company);
(vi) the relocation of the offices at which you are employed to a
location more than 35 miles from their location at the time of a Change in
Control or the Company's requiring you to be based anywhere other than at
such offices, except for required travel on the Company's business to an
extent substantially consistent with your business travel obligations at
the time of a Change in Control;
(vii) the failure of the Company to provide you with a number of
paid vacation days at least equal to the number of paid vacation days to
which you were entitled at the time of a Change in Control plus any
increases therein subsequent thereto;
(viii) any purported termination of your employment which is not
effected pursuant to a
7 September 1, 2000
Notice of Termination satisfying the requirements of subsection (d) of
this Section 1 (and, if applicable, subsection (b) of this Section 1), and
for purposes of this Agreement, no such purported termination shall be
effective; or
(ix) your good faith determination that due to a Change in Control
you are not able effectively to discharge your duties.
(d) Notice of Termination. Any termination by the Company pursuant
to subsections (a) or (b) of this Section 1 or by you pursuant to subsection
(c) of this Section 1 shall be communicated by Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice in writing which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of your employment under the provision so indicated.
(e) Termination Date. "Termination Date" shall mean (i) if
employment is terminated because of your death, the date of your death, (ii) if
employment is terminated for Disability, 30 days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a full-time basis during such 30-day period), (iii) if employment is
terminated for Good Reason, the date specified in the Notice of Termination,
and (iv) if employment is terminated for Cause or any other reason, the date on
which a Notice of Termination is given; 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 subsection 1(e).
8 September 1, 2000
2. Compensation Upon Termination.
(a) If your employment is terminated as a result of your death or
for Disability or Cause subsequent to a Change in Control, the Company shall
have no obligation to pay any compensation to you under this Agreement, but
this Agreement shall have no effect on any other obligation the Company may
have to pay you compensation to which you may otherwise be entitled.
(b) If the Company shall terminate your employment other than for
Disability or Cause or if you shall terminate your employment for Good Reason
subsequent to a Change in Control, then the Company shall pay to you as
severance pay in a lump sum on the fifth day following the Termination Date the
following amounts:
(i) your full base salary and your accrued but unpaid vacation pay
through the Termination Date at the rate in effect at the time of a Change
in Control plus any increases therein subsequent thereto; and
(ii) in lieu of any further salary payments, annual incentive
compensation awards or defined contribution plan allocations to you for
periods subsequent to the Termination Date, an amount equal to the product
of (A) the sum of (1) your annual base salary at the rate in effect at the
time of a Change in Control plus any increases therein subsequent thereto,
plus (2) the greatest of $_____, the amount that was paid to you under the
Annual Executive Incentive Compensation Plan of the Company (as in effect
at the time of a Change in Control) for the year immediately preceding the
year in which the Change in Control occurs (but, for any such immediately
preceding year as to which the award has not been determined and paid at
the time of the Change in Control, not less than the amount that you would
have received if you had been paid the same amount as for the last year
prior to the Change in Control for which an award was actually paid) and
the amount paid to you under such Annual Executive Incentive Compensation
Plan for the year immediately preceding the year in which a Notice of
Termination is given, plus (3) the greater of the amount that was
allocated to your account from contributions
9 September 1, 2000
made by the Company under the Retirement Savings Plan (as defined in
Section 2(e)) (including the Company 401(k) matching contribution
thereunder) and the supplemental profit-sharing provisions (including the
Company matching award related to the supplemental tax deferred amounts
therein) of the Supplemental Plan (as defined in Section 2(d)), each as in
effect at the time of a Change in Control, for the year immediately
preceding the year in which the Change in Control occurs and that amount
that would have been required to be so allocated to you (assuming that you
elected the maximum employee contribution) under each such plan for the
year immediately preceding the year in which a Notice of Termination is
given, multiplied by (B) the number three.
In the event the Notice of Termination is given prior to your first full year's
allocation under the Retirement Savings Plan, the amount in (ii)(A)(3) above
shall be $ __________.
(c) If the Company shall terminate your employment other than for
Disability or Cause or if you shall terminate your employment for Good Reason
subsequent to a Change in Control, the Company shall maintain in full force and
effect, for your continued benefit for a three year period after the
Termination Date, all employee life, health, accident, disability, medical and
other employee welfare benefit plans, programs or arrangements in which you
were participating immediately prior to the date of the Change in Control plus
all improvements therein subsequent thereto, provided that your continued
participation is possible under the terms and provisions of such plans,
programs, and arrangements. In the event that your participation in any such
plan, program or arrangement is barred, the Company shall arrange to provide
you with benefits substantially similar to those which you would have been
entitled to receive under such plan, program or arrangement if you had remained
a participant for such additional three year period. At the end of the period
of coverage, you shall have the option to have assigned to you at no cost and
with no apportionment of prepaid premiums any assignable insurance policy owned
by the Company which relates specifically to you. In the event a Change in
Control occurs prior to your eligibility to
10 September 1, 2000
participate in any such plan, you shall be deemed for purposes of this
paragraph to be participating in those plans that cover Senior Vice Presidents
of this Company generally.
(d) If the Company shall terminate your employment other than for
Disability or Cause or if you shall terminate your employment for Good Reason
subsequent to a Change in Control, then in addition to the retirement benefits
to which you are entitled under the Retirement Plan for Employees and Former
Employees of Fortune Brands, Inc. (the "Qualified Plan"), if any, the
Supplemental Plan of Fortune Brands, Inc. (the "Supplemental Plan"), and any
other defined benefit pension plan maintained by the Company or any affiliate,
and any other program, practice or arrangement of the Company or any affiliate
to provide you with a defined pension benefit after termination of employment,
and any successor plans thereto (all such plans being collectively referred to
herein as the "Pension Plans"), the Company shall pay you monthly beginning at
the earliest date payments commence under the Pension Plans an amount equal to
the excess of (i) over (ii) below where
(i) equals the sum of the aggregate monthly amounts of pension
payments (determined as a straight life annuity) to which you would have
been entitled under the terms of each of the Pension Plans in which you
were an active participant at the date of a Change in Control (without
regard to any amendment made subsequent to a Change in Control which
adversely affects in any manner the computation of your benefits)
determined as if you were fully vested thereunder and had accumulated
three additional years of Service thereunder (subsequent to your
Termination Date) at your rate of Actual Earnings in effect on the date of
a Change in Control plus any increases subsequent thereto,
and where
(ii) equals the sum of the aggregate monthly amounts of pension
payments (determined as a straight life annuity) to which you are entitled
under the terms of each of the Pension Plans in
11 September 1, 2000
which you were an active participant at the date of a Change in Control.
For purposes of clause (i), the term "Actual Earnings" as used with reference
to any of such Pension Plans shall include amounts paid to you pursuant to
subsections (b)(ii)(A)(1) and (2) and (b)(ii)(B) of this Section 2 and such
amounts shall be deemed to represent three years of Actual Earnings for
purposes of determining your highest consecutive five year average rate of
Actual Earnings. The supplemental pension benefits determined under this
subsection 2(d) shall be payable by the Company to you and your contingent
annuitant, if any, in the same manner and as long as your pension benefits
under the Supplemental Plan and shall be adjusted actuarially to reflect
payment in a form other than a straight life annuity. Benefits hereunder which
commence prior to age 60 shall be reduced to reflect early commencement to the
extent, if any, provided in the Qualified Plan. All defined terms used in this
subsection 2(d) shall have the same meaning as in the Qualified Plan, unless
otherwise defined herein or otherwise required by the context.
(e) If the Company shall terminate your employment other than for
Disability or Cause or if you shall terminate your employment for Good Reason
subsequent to a Change in Control, the Company shall pay to you as additional
severance pay in a lump sum on the fifth day following the Termination Date an
amount, if any, equal to the nonvested portion of your account balances under
the Fortune Brands Retirement Savings Plan (the "Retirement Savings Plan").
(f) If the Company shall terminate your employment other than for
Disability or Cause or if you shall terminate your employment for Good Reason
subsequent to a Change in Control and a dispute exists concerning the
termination as set forth in subsection (e) of Section 1, the Company shall
continue to pay your full base salary through the date the dispute is finally
resolved as provided in subsection (e) of Section 1.
(g) You shall not be required to mitigate the amount of any payment
provided for in this Section 2 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 2 be
12 September 1, 2000
reduced by any compensation earned by you as the result of employment by
another employer after the Termination Date or by any other compensation.
(h) In the event the Termination Date occurs within less than three
years prior to your Normal Retirement Date (as defined in the Qualified Plan),
the multiplier "three" in subsection (b)(ii)(B) of this Section 2 and the three
year period referred to in subsections (c) and (d) of this Section 2 shall be
changed so that they shall each equal the number of whole years and fraction
thereof or fraction of a year that will elapse between the Termination Date and
Normal Retirement Date.
(i) Any benefits to which you are entitled under any Company
severance pay program covering salaried employees shall be reduced by benefits
paid under Section 2(b)(ii). Any benefits to which you are entitled under
Section 2 shall be reduced by the amount of any payments made to you pursuant
to the Severance Agreement dated as of January 1, 2000 between you and the
Company.
(j) If the Company shall terminate your employment other than for
Disability or Cause or if you shall terminate your employment for Good Reason
subsequent to a Change in Control, the Company shall pay to you as incentive
compensation for the period through the Termination Date:
(i) the unpaid portion of the amount awarded to you as
incentive compensation under the Company's Annual Executive
Incentive Compensation Plan for the calendar year immediately
preceding the year in which the Termination Date occurs (but,
for any such immediately preceding year as to which the award
has not been determined and paid, not less than the amount that
you would have received if you had been awarded the same amount
paid to you for the most recent year for which an award was
actually paid) in a lump sum on the fifth day following the
Termination Date; and
(ii) incentive compensation under the Company's Annual
Executive Incentive
13 September 1, 2000
Compensation Plan (as in effect at the time of a Change in
Control) for the calendar year in which the Termination Date
occurs, in an amount equal to the amount you would have received
thereunder if you had been awarded an amount for the year in
which your Termination Date occurs equal to the amount paid to
you for the year immediately preceding the year in which the
Change in Control occurs (but, for any such immediately
preceding year as to which the award has not been determined and
paid, not less than the amount that you would have received if
you had been paid the same amount for the year immediately
preceding the year in which the Change in Control occurs as the
amount awarded to you for the last year prior to the Change in
Control for which an award was actually paid) or, if greater,
the amount awarded to you for the year immediately preceding the
year in which a Notice of Termination is given, with such
incentive compensation amount prorated for the portion of the
year through the Termination Date and paid at the time awards
thereunder are paid under the terms of such Annual Executive
Incentive Compensation Plan as in effect immediately prior to
the Change in Control. In the event the Notice of Termination
is given prior to your first full year's award under the Annual
Executive Incentive Compensation Plan, the incentive
compensation amount in this clause (ii) shall be $________,
which amount shall then be subject to proration as set forth in
the immediately preceding sentence.
The payments under this Section 2(j)(ii) shall be reduced by the amount
actually paid to you under the Annual Executive Incentive Compensation Plan for
the calendar year in which the Termination Date occurs.
3. Successors; Binding Agreement.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all
14 September 1, 2000
of the business or assets of the Company, by agreement in form and substance
satisfactory to you, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent as the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled to
hereunder if you had given Notice of Termination for Good Reason as of the day
immediately before such succession became effective and had specified that day
in the Notice of Termination. As used in this Agreement, "Company" shall mean
the Company as defined in the first sentence of this Agreement and any
successor to all or substantially all its business or assets or which otherwise
becomes bound by all the terms and provisions of this Agreement, whether by the
terms hereof, by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives and successors in interest
under this Agreement.
4. Termination. This Agreement may be terminated by the Company as
of a date set forth in a notice to you given at any time at least six months
prior to a Change in Control, provided that if a Change in Control occurs
within such six month period subsequent to the delivery of the notice of
termination of this Agreement by the Company, then this Agreement shall
continue in effect in accordance with its terms notwithstanding such notice.
This Agreement shall terminate on the third anniversary of any Change in
Control unless a Notice of Termination shall have been given prior thereto and
provided further that, notwithstanding anything to the contrary in this
Agreement, the provisions of this Agreement shall also continue in effect
notwithstanding such notice or your ceasing to have at the time of a Change in
Control the status as an officer of the Company required by Section 1 hereof
(whether by change of title, termination of employment or otherwise) if the
notice is given or you cease to have such status at the instance or suggestion
of a third party following commencement of discussions
15 September 1, 2000
with the Company that ultimately result in a Change in Control.
5. Notice. Any notice, demand or other communication required or
permitted under this Agreement shall be effective only if it is in writing and
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth on
the first page of this Agreement, provided that all notices to the Company
shall be directed to the Secretary of the Company, or to such other address as
either party may designate by notice to the other and shall be deemed to have
been given as of the date so personally delivered or mailed.
6. Miscellaneous. This Agreement constitutes the entire
understanding of the parties relating to the subject matter hereof and
supersedes all prior agreements, understandings and representations, whether
oral or written, relating to the subject matter hereof. This Agreement cannot
be modified or any term or condition waived in whole or in part except by a
writing signed by the party against whom enforcement of the modification or
waiver is sought. No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
7. Separability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, and
such counterparts will together constitute but one Agreement.
9. Withholding of Taxes. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes
as shall be required pursuant to any law or governmental regulation or ruling.
16 September 1, 2000
10. Non-assignability. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder, except as
provided in Section 3 hereof. Without limiting the foregoing, your right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
your will or by the laws of descent or distribution, and in the event of any
attempted assignment or transfer contrary to this Section 10 the Company shall
have no liability to pay any amount so attempted to be assigned or transferred.
11. Excise Taxes. In the event that you become entitled to
payments under Section 2 of this Agreement, or as a result of the exercise, or
acceleration of the exercisability, of stock options or performance awards, or
the exercise of limited rights or other awards under the Company's Long-Term
Incentive Plan or any successor plan, or any other payments or benefits
received or treated as having been received by you in connection with a change
in the ownership or effective control of the Company or in the ownership of a
substantial portion of its assets within the meaning of Section 280G(b)(2)(A)
of the Internal Revenue Code of 1986, as amended (the "Code") (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any person whose actions result in such a change or any person
affiliated with the Company or such person) ("the Agreement Payments"), if any
of the Agreement Payments will be subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Code, the Company shall pay to you on the fifth day
following the Termination Date (or if your employment has not terminated, on
the fifth day following the receipt of the Agreement Payment) an additional
amount (the "Gross-Up Payment") such that the net amount retained by you after
deduction of any Excise Tax on the Agreement Payments and any federal, state
and local income tax and Excise Tax upon the payment provided for by this
Section 11, shall be equal to the Agreement Payments. For purposes of
determining whether payments or benefits of the types referred to in the
preceding sentence are Agreement Payments and whether any of the Agreement
Payments will be subject to the Excise Tax and the amount of such
17 September 1, 2000
Excise Tax, (i) any such payments or benefits received or to be received by you
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by PricewaterhouseCoopers
LLP and acceptable to you such other payments or benefits (in whole or in part)
do not constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Agreement
Payments which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Agreement Payments or (B) the amount
of excess parachute payments within the meaning of Section 280G(b)(1) of the
Code (after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by
PricewaterhouseCoopers LLP in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of your residence
on the Termination Date, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. The
Gross-Up Payment required in respect of Agreement Payments other than under
Section 2 of this Agreement shall be payable whether or not your employment
terminates. In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of your
termination of employment, you shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal and state and local
income tax imposed on the Gross-Up Payment being repaid by you if such
repayment results in a reduction in Excise Tax and/or a federal and
18 September 1, 2000
state and local income tax deduction) plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax and any interest or penalties in respect thereof is
determined to exceed the amount taken into account hereunder (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional
gross-up payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
If this letter correctly sets forth our agreement on the subject
matter hereof, please sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
FORTUNE BRANDS, INC.
By________________________________
Xxxx X. Xxxxxxx
Vice President-Human Resources
Agree to this ______ day of
_____________, 2000.
_____________________________
