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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT made as of the fourteenth (14th) day of December, 2000, between
UST INC., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxx (the
"Executive").
The Executive is presently employed by the Company as Executive Vice
President and General Counsel.
The Board of Directors of the Company (the "Board") recognizes that the
Executive's contribution to the growth and success of the Company during the
past fourteen years has been substantial. The Board desires to provide for the
continued employment of the Executive and to make certain changes in the
Executive's employment arrangements with the Company which the Board has
determined will reinforce and encourage the continued attention and dedication
to the Company of the Executive as a member of the Company's management, in the
best interest of the Company and its shareholders. The Executive is willing to
commit himself to continue to serve the Company, on the terms and conditions
herein provided.
In order to effect the foregoing, the Company and the Executive wish to
enter into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby agrees to continue to serve the
Company, on the terms and conditions set forth herein.
2. Term. The term of this Agreement (the "Term") shall commence on
the date hereof and end on January 1, 2004, the third anniversary of the
date hereof, unless sooner terminated as hereinafter provided. On the first
anniversary of the date hereof, and on each successive anniversary of the
date hereof, the Term shall be automatically extended one (1) additional
year unless, prior to such anniversary, the Company shall have delivered to
the Executive or the Executive shall have delivered to the Company written
notice that the Term hereunder shall not be extended. In no event, however,
shall the Term extend beyond the end of the calendar month in which the
Executive's 65th birthday occurs.
3. Position and Duties. The Executive shall serve as Executive Vice
President of the Company, with primary responsibility for the management of
the Company's research and development department, and as General Counsel
of the Company, with primary responsibility for the management of the
Company's legal department as its chief legal officer. The Executive shall
have such additional responsibilities and authority as are consistent with
his position and as may from time to time be assigned to the Executive by
the Board or the Chief Executive Officer. The Executive shall devote
substantially all his working time and efforts to the business and affairs
of the Company.
4. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the principal
executive offices of the Company in Greenwich, Connecticut, except for
required travel on the Company's business to an extent substantially
consistent with present business travel obligations.
5. Compensation and Related Matters.
(a) Salary. During the period of the Executive's employment
hereunder, the Company shall pay to the Executive a salary at an annual
rate not less than the rate in effect as of the date hereof or such
higher rate as may from time to time be determined by the Board, such
salary to be payable in accordance with the Company's then regular
payroll practice. Such salary shall be increased from time to time in
accordance with the normal business practices of the Company applicable
to its officers and, if so increased, shall not thereafter during the
Term be decreased. Compensation of the Executive by salary payments
shall not be deemed exclusive and shall not prevent the Executive from
participating in any other compensation or benefit plan of the Company.
The salary payments (including any increased salary payments) hereunder
shall not in any way limit or reduce any other obligation of the Company
hereunder, and no other compensation, benefit or payment hereunder
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shall in any way limit or reduce the obligation of the Company to pay
the Executive's salary hereunder.
(b) Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including all expenses of travel and
living expenses while away from home on business or at the request of
and in the service of the Company, provided that such expenses are
incurred and accounted for in accordance with the policies and
procedures established by the Company.
(c) Other Benefits. The Executive shall be eligible, while
performing services hereunder, to participate in or to receive benefits
under any employee benefit plan or arrangement made available by the
Company to its executives and key management employees, subject to and
on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements; provided, however, that
this provision shall not apply to the Company's Incentive Compensation
Plan ("ICP"). Nothing paid to the Executive under any plan or
arrangement presently in effect or made available in the future shall be
deemed to be in lieu of the salary payable to the Executive pursuant to
subsection (a) of this Section.
(d) Vacations. The Executive shall be entitled to the number of
vacation days in each calendar year, and to compensation in respect of
earned but unused vacation days, determined in accordance with the
Company's vacation policy. The Executive shall also be entitled to all
paid holidays given by the Company to its executives.
(e) Services Furnished. The Company shall furnish the Executive
with office space, secretarial support and such other facilities and
services as shall be suitable to the Executive's position and adequate
for the performance of his duties as set forth in Section 3 hereof.
6. Offices. The Executive agrees to serve without additional compensation,
if elected or appointed thereto, as a director of the Company and any of its
subsidiaries and in one or more executive offices of any of the Company's
subsidiaries, provided that the Executive is indemnified for serving in any and
all such capacities on a basis no less favorable than is currently provided by
Article VIII of the Company's By-Laws. The Executive further agrees that, upon
the termination of the Executive's employment for any reason, he will resign
from the Board and the board of directors of any subsidiary of the Company and
any directorship held by reason of his employment with the Company or any of its
subsidiaries, effective as of the Date of Termination (as defined in Section
8(f) hereof).
7. Improvements; Confidential Information. Annex I hereto, as from time to
time amended, is a form of Employee Secrecy Agreement between the Executive and
the Company, concerning the treatment of Improvements and Confidential
Proprietary Information (as defined therein) and related matters. The Executive
agrees to comply with all terms of said Employee Secrecy Agreement.
8. Termination. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) Death. The Executive's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Executive's incapacity due
to physical or mental illness, the Executive shall have been absent from
his duties hereunder on a full-time basis for the entire period of six
consecutive months, and within thirty (30) days after written notice of
termination is given (which may occur before or after the end of such
six-month period) shall not have returned to the performance of his
duties hereunder on a full-time basis, the Company may terminate the
Executive's employment hereunder.
(c) Cause. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, "Cause" shall mean
(i) the willful and continued failure by the Executive to substantially
perform his duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness), which
failure is not cured within ten (10) business days after demand for
substantial performance is delivered by the Company that specifically
identifies the manner in which the Company believes the Executive has
not substantially
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performed his duties; (ii) the willful engaging by the Executive in
misconduct which is materially injurious to the Company, monetarily or
otherwise (including, but not limited to, conduct that constitutes
Competitive Activity, as defined in Section 10 hereof); or (iii) the
commission of an act that constitutes a material breach of this
Agreement, including without limitation the willful violation by the
Executive of the provisions of the Employee Secrecy Agreement in the
form of Annex I hereto; provided, however, that upon the occurrence of
any of the events constituting a Change in Control (as defined in
Section 8(d)(iii) hereof), the foregoing definition of Cause shall cease
to apply, and the Company shall have "Cause" to terminate the
Executive's employment hereunder only if the Executive commits an act or
acts of dishonesty constituting a felony under the laws of the United
States, any State thereof or any applicable foreign country and
resulting or intended to result directly or indirectly in gain or
personal enrichment at the expense of the Company. For purposes of this
subsection, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Company. Notwithstanding the foregoing, if
the Executive's employment is terminated on or following a Change in
Control, the Executive shall not be deemed to have been terminated for
Cause without (1) reasonable notice to the Executive setting forth the
reasons for the Company's intention to terminate for Cause, (2) an
opportunity for the Executive, together with his counsel, to be heard
before the Chief Executive Officer of the Company or his specifically
designated representative, and (3) delivery to the Executive of a Notice
of Termination, as defined in subsection (e) hereof, from the Chief
Executive Officer of the Company or his specifically designated
representative finding that in the good faith opinion of such executive
or representative the Executive was guilty of conduct set forth above,
and specifying the particulars thereof in detail.
(d) Termination by the Executive. (i) The Executive may terminate
his employment hereunder (A) for Good Reason or (B) if his health should
become impaired to an extent that makes his continued performance of his
duties hereunder hazardous to his physical or mental health or his life,
provided that the Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided,
further, that, at the Company's request, the Executive shall submit to
an examination by a doctor selected by the Company and such doctor shall
have concurred in the conclusion of the Executive's doctor.
(ii) For purposes of this Agreement, "Good Reason" shall mean (A) a
Change in Control (as defined below), (B) a failure by the Company to
comply with any material provision of this Agreement which has not been
cured within ten (10) business days after notice of such noncompliance
has been given by the Executive to the Company, (C) the assignment to
the Executive of any duties inconsistent with the Executive's position
and status as Executive Vice President and General Counsel of the
Company, or any diminution in the nature or status of the Executive's
responsibilities from those in effect on the date hereof (other than any
such alteration primarily attributable to the fact that the Company may
no longer be a public company), (D) any reduction by the Company in the
Executive's cash compensation from the level in effect on the date
hereof or as the same may be increased from time to time, or (E) any
purported termination of the Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements
of subsection (f) hereof (and for purposes of this Agreement no such
purported termination shall be effective).
(iii) For purposes of this Agreement, a change in control of the
Company ("Change in Control") shall be deemed to have occurred if
(A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than (1) the Company or any of its
subsidiaries, (2) any "person" who on the date hereof is a director
or officer of the Company, (3) any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, (4) an
underwriter temporarily holding securities pursuant to an offering of
such securities, or (5) any corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company (a
"Person"), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange
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Act (a "Beneficial Owner")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company or its
affiliates) representing 20% or more of the combined voting power of
the Company's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction
described in clause (C)(1) below; or
(B) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board
or nomination for election by the Company's stockholders was approved
or recommended by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved or recommended; or
(C) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (1) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
any subsidiary of the Company, at least 80% of the combined voting
power of the securities of the Company or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which
no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly
from the Company or its subsidiaries) representing 20% or more of the
combined voting power of the Company's then outstanding securities;
or
(D) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 80% of the combined voting
power of the voting securities of which are owned by stockholders of
the Company in substantially the same proportions as their ownership
of the Company immediately prior to such sale.
(e)(i) Termination by Mutual Consent. Unless a Change in Control
shall have previously occurred, the Company may also terminate the
Executive's employment at any time, without Cause, if, in its sole
discretion, the Chief Executive Officer determines that such termination
is in the best interests of the Company. The Executive acknowledges and
agrees that, upon such a determination by the Chief Executive Officer,
he shall be deemed to have resigned (without Good Reason) from the
Company effective as of the date set forth in the Notice of Termination
("Termination by Mutual Consent") and shall be entitled only to the
benefits payable pursuant to Section 9(c) hereof; provided, however,
that if the Executive complies with the provisions of this Section 8(e),
then in consideration therefor, he shall be entitled to the benefits
provided in Section 9(d) hereof upon execution of the Subsequent
Agreement (as defined in Section 9(d) hereof).
(ii) In consideration of the benefits provided under Section 9(d)
hereof, the Executive agrees and covenants (A) to execute a general
release, in the form attached hereto as Annex II (the "Release"), of any
and all claims the Executive may have or may believe he has against the
Company and/or its officers, directors, employees, agents and
representatives; and (B) not to seek any recovery against the Company or
its officers, directors, employees, agents or representatives for any
cause or reason related to or arising from his employment with the
Company or the termination
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thereof pursuant to this Section 8(e), other than a failure or refusal
of the Company to pay the Executive (x) the benefits described in
Section 9(d) hereof, as specified in the Subsequent Agreement (as
defined in Section 9(d)(ii) hereof), and (y) the benefits to which he is
entitled subsequent to his termination of employment pursuant to the
terms of one or more of the Company's employee benefit plans. The
covenant set forth in clause (B) of this Section 8(e)(ii) includes,
without limitation, seeking any recovery against the Company or its
officers, directors, employees, agents or representatives in any forum,
including without limitation any court, administrative agency or
otherwise. A Termination by Mutual Consent shall not be subject to the
dispute resolution procedures set forth in Section 16 of this Agreement.
(f) Date of Termination; Notice of Termination. Any termination of
the Executive's employment by the Company or by the Executive (other
than termination pursuant to subsection (a) hereof) shall be
communicated by written Notice of Termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and, except in the event that the Executive's
employment is terminated pursuant to Section 8(e) hereof, shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his
death, (ii) if the Executive's employment is terminated for Disability
pursuant to subsection (b) hereof, thirty (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 thirty (30)-day period), (iii) if the Executive's employment is
terminated for Cause pursuant to subsection (c) hereof, the date
specified in the Notice of Termination, which date, in the event that
the occurrence of the Executive's act or failure to act constituting
Cause is discovered by the Company subsequent to such occurrence,
whether subsequent to the termination of the Executive's employment or
not, may be earlier than the date on which the Notice of Termination is
given but not earlier than the date of such occurrence, and (iv) if the
Executive's employment is terminated for any other reason, the later of
the date on which a Notice of Termination is given or the date set forth
in such notice; provided, however, that, unless the termination of the
Executive's employment is a Termination by Mutual Consent pursuant to
Section 8(e) hereof, if within thirty (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 Date of Termination shall be the date on which the
dispute is finally determined (but in no event later than the date on
which the Term ends), either by mutual written agreement of the parties,
by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected); provided,
however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good
faith and the Executive pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the foregoing provisions of this
Section 8(f), no compensation shall be paid to an Executive whose
employment is terminated pursuant to Section 8(e) hereof, except as set
forth in the Subsequent Agreement.
(g) Compensation During Dispute. If a purported termination occurs
during the Term and the Date of Termination is extended in accordance
with subsection (f) of this Section 8, the Company shall continue to pay
the Executive the full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, salary)
and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given, until such extended Date of
Termination; provided, however, that unless such purported termination
occurs on or after a Change in Control, such plans shall not include the
ICP. Amounts paid under this Section 8(g) are in addition to all other
amounts due under this Agreement (other than those due under Section 5
hereof) and shall not be offset against or reduce any other amounts due
under this Agreement.
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9. Compensation During Disability or Upon Termination.
(a) Disability. During any period that the Executive fails to
perform his duties hereunder as a result of incapacity due to physical
or mental illness ("disability period"), the Executive shall continue to
receive his full salary at the rate then in effect for such period until
his employment is terminated pursuant to Section 8(b) hereof, provided
that payments so made to the Executive during the first 180 days of the
disability period shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of any such payment
under disability benefit plans of the Company or under the Social
Security disability insurance program, and which amounts were not
previously applied to reduce any such payment. If the Executive shall
terminate his employment under clause (B) of Section 8(d)(i) hereof, the
Company shall pay the Executive his full salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given.
(b) Death. If the Executive's employment is terminated by his
death, the Company shall (i) pay to the Executive's spouse, or if he
leaves no spouse, to his estate, commencing on the next succeeding
payroll day (as determined in accordance with the Company's then regular
payroll practice) and, thereafter, on each succeeding payroll day until
a total of six payments has been made, an amount on each payment date
equal to the periodic salary payment payable to the Executive pursuant
to Section 5(a) hereof at the time of his death; and (ii) provide to the
Executive's surviving spouse and dependent children group medical
benefits, for the period to coincide with the payment period described
in clause (i) of this Section 9(b), on a basis not less favorable than
that to which they were entitled immediately prior to the Executive's
death.
(c) Cause; Resignation. If the Executive's employment shall be
terminated for Cause or if the Executive shall resign or be deemed to
have resigned, the Company shall pay the Executive his full salary
through the Date of Termination at the rate in effect at the time Notice
of Termination is given and the Company shall have no further
obligations to the Executive under this Agreement; provided, however,
that if, subsequent to the Executive's termination of employment with
the Company other than for Cause, the Company discovers facts that, had
such facts been known to the Company at the time of their occurrence,
would have enabled the Company to terminate the Executive's employment
for Cause, the Executive shall be entitled to no future benefits
hereunder and agrees to repay (including without limitation by means of
offset against any amount owed to the Executive) to the Company all
amounts and benefits in excess of those to which he would have been
entitled had the Company terminated his employment for Cause on the Date
of Termination. The Executive further agrees that if, subsequent to the
Executive's termination of employment with the Company for any reason,
he violates the Employee Secrecy Agreement or Sections 10 or 11 hereof,
he shall be entitled to no further amounts hereunder and shall repay
(including without limitation by means of offset against any amount owed
to the Executive) to the Company all amounts and benefits in excess of
those to which he would have been entitled had the Company terminated
his employment for Cause on the first date on which such violation
occurs.
(d) Termination by the Company other than for Disability or Cause,
by the Executive for Good Reason or by Mutual Consent. If (A) the
Company shall terminate the Executive's employment other than pursuant
to Section 8(b) or 8(c) hereof (it being understood that a purported
termination pursuant to Section 8(b) or 8(c) hereof which is disputed
and finally determined not to have been proper shall be a termination by
the Company other than pursuant to Section 8(b) or 8(c) hereof), (B) the
Executive shall terminate his employment for Good Reason or (C) the
Executive's employment terminates by Mutual Consent and the Executive is
in compliance with the provisions of Section 8(e) hereof, then
(i) the Company shall pay the Executive his full salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given;
(ii) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay
as severance pay to the Executive an amount equal to the product of
(A) the sum of (1) the Executive's annual salary rate in effect as of
the Date of Termination and (2) the highest annual amount payable to
the Executive under the
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ICP with respect to any of the three calendar years immediately
preceding the Date of Termination, and (B) the number three; such
payment to be made (X) if resulting from a termination on or
following a Change of Control, in a lump sum on or before the fifth
day following the Date of Termination, or (Y) if resulting under any
other circumstances, in substantially equal periodic installments in
accordance with the Company's then regular payroll practice,
commencing with the month following the month in which the Date of
Termination occurs and continuing for the number of consecutive
periodic payment dates (including the first such date as aforesaid)
equal to the product obtained by multiplying the number three by 24
(if the Company's then regular payroll practice is semimonthly
payroll dates), 26 (if the Company's then regular payroll practice is
biweekly payroll dates) or such other number as is appropriate to
reflect the Company's then regular payroll practice; provided,
however, that any such payment resulting from a Termination by Mutual
Consent shall not be due unless and until the parties hereto have
agreed in writing ("Subsequent Agreement") to each and every specific
dollar amount and specific in-kind benefit due under this Agreement
and the Company's employee benefit plans (other than tax-qualified
employee benefit plans), at which time payment shall include all
amounts payable commencing with the month following the month in
which the Date of Termination occurs.
(iii) subject (if applicable) to execution of the Subsequent
Agreement, the Company shall maintain in full force and effect, for
the continued benefit of the Executive for three years (including
partial years) (the "Continuation Period"), all life insurance and
health and medical coverage plans, disability plans, and survivor
income plans in which the Executive was entitled to participate
immediately prior to the Date of Termination provided that the
Executive's continued participation is possible under the general
terms and provisions of such plans and programs. In the event that
the Executive's participation in any such plan or program is barred,
the Company shall arrange to provide the Executive with benefits
substantially similar to those which the Executive would otherwise
have been entitled to receive under such plans and programs from
which his continued participation is barred. Benefits otherwise
receivable by the Executive pursuant to this Section 9(d)(iii) shall
be reduced to the extent comparable benefits are actually received by
or made available to the Executive without cost during the
Continuation Period (and any such benefits actually received by or
made available to the Executive shall be reported to the Company by
the Executive);
(iv) subject (if applicable) to execution of the Subsequent
Agreement, (A) with respect to the Company's Officers' Supplemental
Retirement Plan (the "SOP"), the Executive shall be deemed to have
attained the minimum age required thereunder such that the Executive
shall be eligible to become a Participant in the SOP and eligible to
accrue benefits thereunder and (B) the Company shall pay all
additional benefits to which the Executive would have been entitled
under the SOP and any other supplemental retirement income plan or
arrangement of the Company had his employment continued for three
years at the rate of compensation specified herein, such additional
benefits to be paid in such form as the benefits to which the
Executive is entitled in accordance with the terms of the SOP or
other supplemental retirement income plan or arrangement (the "SOP
Benefits") are paid; notwithstanding anything to the contrary
contained in the SOP or such other supplemental retirement income
plan or arrangement, Executive agrees that, unless a Change in
Control shall have occurred on or prior to the Date of Termination,
the Benefits and the additional benefits payable under this Section
9(d)(iv) shall not commence prior to the end of the Continuation
Period (as defined in clause (iii) above);
(v) except in the event of Termination by Mutual Consent
pursuant to Section 8(e) hereof, the Company shall pay all legal fees
and expenses incurred by the Executive as a result of his termination
of employment; provided, however, that, unless a Change of Control
shall have occurred on or prior to the Date of Termination, the legal
fees and expenses to which an Executive is entitled pursuant to this
paragraph (v) and Section 17 hereof shall not exceed, in the
aggregate, the sum of $50,000; and
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(vi) the Executive agrees that, notwithstanding any contrary
provision in the applicable benefit plan, he shall have no right to
receive any payments (A) pursuant to the SOP or any other
supplemental retirement plan prior to the end of the period during
which or with respect to which the Executive is entitled to payment
under subsection (ii) of this Section 9(d), or (B) under the ICP in
respect of the year in which the Executive ceases providing services
to the Company.
(e) Gross-Up Payment. Whether or not the Executive becomes
entitled to the payment provided under subsection (d) hereof, if any of
the Total Payments (as hereinafter defined) will be subject to the tax
(the "Excise Tax") imposed by section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), the Company shall pay to the
Executive, no later than the fifth day following the Date of Termination
(or such other date as is hereinafter described), an additional amount
(the "Gross-Up Payment") such that the net amount retained by him, after
deduction of any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total Payments. For purposes of
determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all payments or
benefits received or to be received by the Executive in connection with
a Change in Control or the termination of the Executive's employment
(whether payable pursuant to the terms of this Agreement or of any other
plan, arrangement or agreement with the Company, its successors, any
person whose actions result in a change in control or any person
affiliated (or which, as a result of the completion of the transactions
causing a Change in Control, will become affiliated) with the Company or
such person within the meaning of section 1504 of the Code (such
payments or benefits, excluding the Gross-Up Payments, being hereinafter
referred to as the "Total Payments")) shall be treated as "parachute
payments" (within the meaning of section 280G(b)(2) of the Code) unless,
in the opinion of tax counsel selected by the independent auditors of
the Company (as of the date immediately prior to the Change in Control)
and reasonably acceptable to the Executive, such payments or benefits
(in whole or in part) do not constitute parachute payments, including by
reason of section 280G(b)(4)(A) of the Code, (ii) 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 such
tax counsel such excess parachute payments represent reasonable
compensation for services actually rendered (within the meaning of
section 280G(b)(4)(B) of the Code) in excess of the "base amount"
(within the meaning of section 280G(b)(3) of the Code), or are not
otherwise subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors 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, the Executive 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 and employment taxes at the highest
marginal rate of taxation in the state and locality of the residence of
the Executive on the Date of Termination (or such other date as is
hereinafter described), net of the maximum reduction in federal income
taxes that could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the Date of
Termination (or such other date as is hereinafter described), the
Executive 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, state and
local income and employment taxes imposed on the Gross-Up Payment being
repaid by the Executive if such repayment results in a reduction in
Excise Tax or a federal, state and local income and employment taxes
deduction) plus interest on the amount of such repayment at 120% of the
applicable federal rate (as defined in section 1274(d) of the Code). In
the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of the employment
of the Executive, or at such other time as is hereinafter described
(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
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excess (plus any interest payable with respect to such excess) at the
time that the amount of such excess is finally determined. If an
Executive who remains in the employ of the Company becomes entitled to
the payment provided for by this paragraph, such payment shall be made
no later than the later of (x) the fifth day following the date on which
the Executive notifies the Company that he is subject to the Excise Tax
and (y) ten days prior to the date on which the Excise Tax is initially
due.
(f) Mitigation; Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 9 by
seeking other employment or otherwise. In addition, the amount of any
payment or benefit provided for in this Agreement (other than Section
9(d)(iii) hereof) shall not be reduced by any compensation earned by the
Executive as the result of employment by another employer or by
retirement benefit, and, except as provided in Section (9)(c) hereof,
shall not be reduced by offset against any amount claimed to be owed by
the Executive to the Company, or otherwise.
10. Noncompetition. Subject to the provisions of Section 11, below,
the Executive agrees that he will not engage in any Competitive Activity
during the five-year period following his termination of employment with
the Company for any reason; provided, however, that this provision shall
cease to apply upon the occurrence of any of the events constituting a
Change in Control. For purposes of this Section, "Competitive Activity"
shall mean activity, without the written consent of an authorized officer
of the Company, consisting of the Executive's participation in the
management of, or his acting as a consultant for or employee of, any
business operation of any enterprise if such operation (a "Competitive
Operation") is then in substantial and direct competition with a principal
business operation of the Company, for example, the tobacco industry,
anyplace in the world, as now or hereafter designated by the Board;
provided, however, that no business operation may be designated a principal
business operation of the Company unless the Company's profits, sales or
assets attributable to such business operation amount to at least 10
percent (10%) of the Company's total profits, sales or assets. Competitive
Activity shall not include (1) the mere ownership of up to five percent
(5%) of the outstanding securities in any enterprise; or (2) the
participation in the management of, or acting as a consultant for or
employee of, any enterprise or any business operation thereof, other than
in connection with a Competitive Operation of such enterprise, provided
that the Executive does not furnish advice with respect to inventions,
processes, customers, methods of distribution, methods of manufacture,
marketing or business strategy relating to any Competitive Operation of
such enterprise, or the formation of a Competitive Operation.
11. Conflicts of Interest. The Company acknowledges that the
restrictions set forth in Section 10 above shall not restrict the
Executive's right to practice law; provided, however, that the Executive
must do so in compliance with all applicable ethical obligations, including
without limitation ethical rules protecting the Company's confidences and
secrets and prohibiting conflicts of interest, common law fiduciary duties
and the Employee Secrecy Agreement, and provided further that nothing
contained herein shall be construed as a waiver by the Company of its
rights to enforce all such obligations and duties of the Executive and the
Employee Secrecy Agreement.
12. Successors; Binding Agreement.
(a) In addition to any obligations imposed by law upon any
successor to the Company, the Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
the Company, by agreement in form and substance satisfactory to the
Executive, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that 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
the Executive to compensation from the Company in the same amount and on
the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall
be deemed the Date of Termination. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which
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executes and delivers the agreement provided for in this Section 12 or
which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while
any amounts would still be payable to him hereunder if he had continued
to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there be no such designee, to
the Executive's estate.
13. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
00 Xxxxxx Xxxx Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
If to the Company:
UST Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attn: Corporate Secretary
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
14. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company's Chief
Executive Officer or such other officer as may be specifically designated
by the Board. 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. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the
State of Delaware without regard to its conflicts of law principles. All
references to sections of the Exchange Act or the Code shall be deemed also
to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding
to which the Executive has agreed. The obligations of the Company and the
Executive under this Agreement which by their nature may require either
partial or total performance after the expiration of the Term shall survive
such expiration.
15. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
17. Settlement of Disputes; Arbitration.
(a) All claims by the Executive for benefits under this Agreement
(other than in connection with a termination of the Executive's
employment pursuant to Section 8(e) hereof) shall be directed to and
determined by the Nominating and Compensation Committee of the Board
(the "Committee") and shall be in writing. Any denial by the Committee
of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for
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the denial and the specific provisions of this Agreement relied upon.
The Committee shall afford a reasonable opportunity to the Executive for
a review of the decision denying a claim and shall further allow the
Executive to appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the Executive's
claim has been denied.
(b) Any further dispute or controversy arising under or in
connection with this Agreement (other than in connection with a
termination of the Executive's employment pursuant to Section 8(e)
hereof) shall be settled exclusively by arbitration, conducted before a
panel of three arbitrators in New York, New York, in accordance with the
rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that the Company shall be entitled to
seek a restraining order or injunction in any court of competent
jurisdiction to prevent any anticipated or continued violation of the
provisions of Sections 10 and 11 hereof or the Employee Secrecy
Agreement in the form of Annex I hereto, and the Executive hereby
consents that such restraining order or injunction may be granted
without the necessity of the Company's posting any bond. Subject to the
provisions of Section 9(d)(v) hereof, the expense of such arbitration
(including legal fees) shall be borne by the Company. Notwithstanding
any provision of this Agreement to the contrary, the Executive shall be
entitled to seek specific performance of the Executive's right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising in connection with a termination of the Executive's
employment hereunder on or following a Change in Control.
18. Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto, including,
without limitation, the letter agreement between the Executive and the
Company, dated January 1, 1991, concerning change in control severance; and
any such prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not set
forth expressly in this Agreement and the Employee Secrecy Agreement in the
form of Annex I hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
UST INC.
By:
--------------------------------------
Name:
Title:
EXECUTIVE
--------------------------------------
Attest:
By:
----------------------------------------------------
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ANNEX II
UST INC.
RELEASE AGREEMENT
THIS RELEASE, entered into this [ ] day of [ ] 2001 by Xxxxxxx X.
Xxxxxxx, residing at [ ] (hereinafter referred to as the
"Employee").
W I T N E S S E T H:
WHEREAS, the Employee and UST Inc., a corporation existing under the laws
of Delaware and having its principal offices in Greenwich, Connecticut
(hereinafter referred to as "UST"), entered into an employment agreement (the
"Employment Agreement") dated as of January 1, 2001, pursuant to Section
8(e)(ii) of which the Employee agreed and covenanted, upon a Termination by
Mutual Consent (as defined in the Employment Agreement), to execute a general
release of any and all claims he may have or may believe he has against UST
and/or its officers, directors, employees, agents and representatives; and
WHEREAS, the employment of the Employee was terminated as of
[ ], 2001, in a Termination by Mutual Consent;
NOW, THEREFORE, in consideration of the benefits to be provided to the
Employee pursuant to the Employment Agreement, it is agreed as follows:
1. The Employee voluntarily, knowingly and willingly releases and
forever discharges UST, its parents, subsidiaries and affiliates, together
with their respective officers, directors, partners, shareholders,
employees and agents, and each of their predecessors, successors and
assigns, from any and all charges, complaints, claims, promises,
agreements, controversies, causes of action and demands of any nature
whatsoever which against them the Employee or his executors,
administrators, successors or assigns ever had, now have or hereafter can,
shall or may have by reason of any matter, cause or thing whatsoever
arising prior to the time the Employee signs this agreement.
2. The release being provided by Employee in this agreement includes,
but is not limited to, any rights or claims relating in any way to the
Employee's employment relationship with UST, or the termination thereof, or
under any statute, including the federal Age Discrimination in Employment
Act, Title VII of the Civil Rights Act, the Americans with Disabilities
Act, or any other federal, state or local law or judicial decision.
3. By signing this agreement, the Employee represents that he has not
and will not in the future commence any action or proceeding arising out of
the matters released hereby, and that he will not seek or be entitled to
any award of legal or equitable relief in any action or proceeding that may
be commenced on his behalf.
4. The Employee acknowledges that UST has hereby advised him to
consult with an attorney of his choosing prior to signing this agreement.
The Employee represents that he has had the opportunity to review this
agreement and, specifically, the release in paragraph 1, with an attorney
of his choice. The Employee also agrees that he has entered into this
agreement freely and voluntarily.
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5. The Employee acknowledges that he has been given at least
twenty-one days to consider the terms of this agreement. Furthermore, once
he has signed this agreement, the Employee shall have seven additional days
from the date of signing this agreement to revoke his consent hereto. The
agreement will not become effective until seven days after the date the
Employee has signed it, which will be the effective date of this agreement.
IN WITNESS WHEREOF, the Employee has executed this agreement as of the date
first set forth above.
--------------------------------------
EMPLOYEE
---------------------------------------------------------
WITNESS
