EXHIBIT 10d1
SEVERANCE AND RETIREMENT AGREEMENT
AGREEMENT dated as of February 24, 1997 between AMERICAN BRANDS, INC., a
Delaware corporation (the "Company"), and XXXXXX X. XXXX (the "Executive"),
W I T N E S S E T H :
WHEREAS, the Company and the Executive entered into a Severance Agreement
dated as of March 1, 1988, as amended (the "Severance Agreement"), in order to
provide severance benefits in the event of termination of employment of the
Executive under certain circumstances; and
WHEREAS, the Company and the Executive entered into an agreement dated as
of January 1, 1995 (the "Retirement Agreement"), in order to provide certain
supplemental retirement benefits as an added inducement to the Executive to
remain in the employ of the Company; and
WHEREAS, the Company and the Executive desire to combine the Severance
Agreement and the Retirement Agreement, as set forth 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
Agreement, the parties hereto do hereby agree as follows:
Section 1. Severance Benefits.
(a) If and only if during the term of this 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, the Executive shall be
entitled to the severance benefits as provided in this Section 1. The Executive
shall not be entitled to any benefits as provided in this Section 1 in the event
his employment with the Company is terminated by the Company for Disability or
Cause or by the Executive other than for Good Reason.
(b) If the Executive is entitled to severance benefits, then the Company
shall pay to the Executive as severance pay in a lump sum on the fifth day
following the Termination Date the following amounts:
(i) the unpaid portion of his full base salary through the
Termination Date at the rate in effect on the date hereof plus any
increases therein subsequent thereto;
(ii) in lieu of any further salary payments, incentive
compensation awards or defined contribution plan allocations to the
Executive for periods subsequent to the Termination Date, an amount
equal to the product of (A) the sum of (1) his annual base salary at
the rate in effect on the date hereof plus any increases therein
subsequent thereto, plus (2) the greater of the amount awarded to him
under the Incentive Compensation Plans for 1987 and the amount awarded
to him under the Incentive Compensation Plans for the calendar year
immediately preceding the year in which the Termination Date occurs,
but not less than the amount the Executive would have received if the
Executive had received the same percentage of the total amount
available for allotment as he received for 1987, plus (3) the greater
of the amount that was allocated to the Executive's account under the
Defined Contribution Plan, including the Company 401(k) matching
contribution thereto, the profit-sharing provisions of the Supplemental
Plan, including the Company matching award related to the supplemental
tax deferred amounts therein, and any other defined contribution plan
of the Company or an affiliate thereof for 1987 and the amount that
would have been required to be so allocated to him for the year
immediately preceding the year in which the Termination Date occurs,
multiplied by (B) the lesser of the number three and the number of
years (and fraction thereof) from the Termination Date to the
Executive's Normal Retirement Date; and
(iii) all legal fees and expenses incurred by the Executive as
a result of such termination (including, but not limited to, all such
fees and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement).
(c) If the Executive is entitled to severance benefits, the Company shall
maintain in full force and effect, for the Executive's continued benefit for a
three-year period (or, if shorter, the period until his Normal Retirement Date)
after the Termination Date, all employee life, health, accident, disability,
medical and other employee welfare benefit plans, programs or arrangements in
which he was participating immediately prior to the date hereof plus all
improvements therein subsequent thereto, provided that his continued
participation is possible under the terms and provisions of such plans, programs
and arrangements. In the event that the Executive's participation in any such
plan, program or arrangement is barred, the Company shall arrange to provide him
with benefits substantially similar to those which he would have been entitled
to receive under such plan, program or arrangement if he had remained a
participant for such additional three-year period (or, if shorter, such
additional period until his Normal Retirement Date) after the Termination Date.
(d) If the Executive is entitled to severance benefits, the Executive shall
be entitled to the following as incentive compensation through the Termination
Date:
(i) the unpaid portion of the amount awarded to him as
incentive compensation under the Incentive Compensation Plans for the
calendar year immediately preceding the year in which the Termination
Date occurs, payable at the time awards thereunder are normally paid;
and
(ii) incentive compensation under the Incentive Compensation
Plans for the calendar year in which the Termination Date occurs,
payable at the time awards thereunder are normally paid, in an amount
equal to the amount the Executive would have received thereunder for
such period if he had been allocated a percentage of the total amount
available for allotment equal to the same percentage of the total
amount available for allotment as he was allocated for 1987 or, if
higher, the percentage for the calendar year immediately preceding the
year in which the Termination Date occurs or in which the Termination
Date occurs, whichever is higher; provided that if the Termination Date
occurs in 1997, the amount that the Executive would have received for
the full year 1997 if the Executive had been awarded the same
percentage of the total amount available for allotment as awarded to
him for 1996 shall be $823,953. The incentive compensation provided by
this Section 1(d) shall be prorated for the portion of the year through
the Termination Date.
The payments under this Section 1(d) shall be reduced by the amount actually
paid to the Executive under the Incentive Compensation Plans for the calendar
year in which the Termination Date occurs.
(e) If the Company shall terminate the Executive's employment other than
for Disability or Cause or if the Executive shall terminate his employment for
Good Reason and a dispute exists concerning the termination as set forth in
Section 7(n), the Company shall continue to pay the Executive's full base salary
through the date the dispute is finally resolved as provided in Section 7(n).
Section 2. Retirement Benefits. Upon the retirement of the Executive, the
Company shall pay to or on behalf of the Executive, monthly beginning on the
date payments commence under the Supplemental Plan 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 the
Executive would have been entitled under the terms of the Pension Plans
(without regard to any termination or amendment made subsequent to the
date hereof which adversely affects in any manner the computation of
the Executive's benefits) determined as if Average Actual Earnings
under the Supplemental Plan were determined based on the three
consecutive Plan Years of Qualifying Employment that provide the
highest aggregate of Actual Earnings, divided by three, instead of
five,
and where
(ii) equals the sum of the aggregate monthly amounts of
pension payments (determined as a straight life annuity) which the
Executive is paid under the terms of the Pension Plans.
Section 3. Retirement Benefits in the Event of Termination of Employment
Prior to Normal Retirement Date by Reason of Death or Disability, by the Company
other than for Cause or by the Executive for Good Reason. If the Executive's
employment is terminated by death or disability, or if the Company shall
terminate the Executive's employment other than for Cause, or if the Executive
shall terminate his employment for Good Reason, then in addition to the
retirement benefits to which the Executive is entitled under the Pension Plans,
the Company shall pay to or on behalf of the Executive, monthly beginning at the
date payments commence under the Supplemental Plan 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 the
Executive would have been entitled under the terms of the Pension Plans
(without regard to any termination or amendment made subsequent to the
date hereof which adversely affects in any manner the computation of
the Executive's benefits) determined as if (x) Average Actual Earnings
under the Supplemental Plan were determined based on the three
consecutive Plan Years of Qualifying Employment that provide the
highest aggregate of Actual Earnings, divided by three, instead of five
and (y) the Executive had accumulated an additional period of Service
thereunder (subsequent to his Termination Date) to his Normal
Retirement Date at his rate of Actual Earnings in effect on the date
hereof 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) which the
Executive is paid under the terms of the Pension Plans.
For purposes of clause (i) there shall be considered as part of the Executive's
Actual Earnings for the period from the Termination Date to his Normal
Retirement Date for purposes of determining his highest consecutive calendar
three-year average rate of Actual Earnings the sum of (x) the Executive's annual
base salary at the rate in effect on the date hereof plus any increases
subsequent thereto plus (y) the amount awarded to the Executive under the
Incentive Compensation Plans for the year immediately prior to the Termination
Date or, if higher, for the year in which the Termination Date occurs (whether
or not paid) but not less than the amount the Executive would have received for
such year if the Executive had been awarded the same percentage of the total
amount available for allotment for such year as the percentage awarded to him
for the last year prior to the Termination Date for which an award was actually
paid; provided that if the Termination Date occurs in 1997, the amount that the
Executive would have received for 1997 if the Executive had been awarded the
same percentage of the total amount available for allotment as awarded to him
for 1996 shall be $823,953. The supplemental pension benefits determined under
Sections 2 and 3 of this Agreement shall be payable by the Company to the
Executive and his contingent annuitant, if any, or as a spouse's benefit to the
Executive's spouse if the Executive dies prior to commencement of benefits, in
the same manner and for the same period as his pension benefits under the
Supplemental Plan and shall be adjusted actuarially as set forth in the
Retirement Plan to reflect payment in a form other than a straight life annuity.
In the event that the Corporate Employee Benefits Committee (or successor
thereto) of the Company directs that the Executive's benefits under the
Supplemental Plan are to be paid as a single sum, such Committee may also direct
that an actuarially equivalent single sum payment be made of the retirement
benefits payable under this Agreement. In the event the Company segregates
assets which are intended to be a source for payment of benefits under this
Agreement and the benefits are determined to be taxable to the Executive prior
to actual receipt thereof, a single sum payment shall be made to the Executive
in an amount sufficient to pay such taxes and any interest and penalties
notwithstanding that the Executive may not then have terminated employment,
which payment for taxes shall then be used as an offset to the benefits
thereafter payable pursuant to this Agreement which shall also be paid in an
actuarially equivalent single sum payment promptly upon termination of
employment. Actuarial equivalence of a single sum payment in cash shall be
determined using 120% of the applicable monthly immediate annuity purchase
interest rate which would be used by the Pension Benefit Guaranty Corporation
for the purposes of determining the present value of a single sum distribution
on plan termination and the mortality table used at the time under the
Retirement Plan for funding purposes.
Section 4. Relocation Program. The Executive shall at any time be entitled
to dispose of his principal residence through the Third Party Home Purchase
feature of the Company's Relocation Program. The purchase price to be paid to
the Executive thereunder shall be the appraised value of the residence. If the
residence is subsequently sold for less than its appraised value, the Executive
shall reimburse the Company for one-half of any amount in excess of $50,000 less
than its appraised value.
Section 5. Notice of Termination; No Mitigation; No Derogation.
(a) Any termination by the Company for Disability or Cause or by the
Executive for Good Reason shall be communicated by Notice of Termination to the
other party hereto.
(b) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by the Executive as the result of employment by another
employer after the Termination Date or by any other compensation.
(c) Subject to Section 6, this Agreement and the obligations of the Company
hereunder shall not be in derogation of any other obligations of the Company not
set forth herein to pay any compensation or to pay or provide any benefit to the
Executive.
Section 6. Other Compensation and Benefits. Notwithstanding any other
provision of this Agreement, (a) any amount otherwise payable to the Executive
pursuant to the agreement dated October 27, 1987 between the Company and the
Executive, as amended, shall be reduced by the amount of any payments made by
the Company to the Executive under Sections 1 and 3 of this Agreement, and (b)
any benefits to which the Executive is entitled under the Company's severance
pay program covering salaried employees generally shall be reduced by benefits
paid under Section 1(b)(ii)(A)(i) and (B) of this Agreement.
Section 7. Definitions. The following words shall have the following
meanings in this Agreement:
(a) Actual Earnings. Actual Earnings shall have the same meaning
as set forth in the Retirement Plan on the date hereof or any
amendment thereto which has the effect of increasing Actual Earnings.
(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 the Executive's
part constituting a felony and intended to result directly or
indirectly in substantial gain or personal enrichment to him at the
expense of the Company, or (B) the Executive's willful and continued
failure substantially to perform his duties and responsibilities
(other than any such failure resulting from his incapacity due to
physical or mental illness) after a demand for substantial performance
is delivered to the Executive by the Board of Directors of the Company
which specifically identifies the manner in which such Board believes
that the Executive has not substantially performed his duties and the
Executive is given a reasonable time after such demand substantially
to perform his duties, and (ii) there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters of the members of the Board of
Directors of the Company at a meeting thereof called and held for the
purpose (after reasonable notice to the Executive and an opportunity
for him, together with his counsel, to be heard before such Board),
finding that in the good faith opinion of the Board of Directors of
the Company the Executive was guilty of conduct set forth above in
clause (i)(A) or (i)(B) of this paragraph and specifying the
particulars thereof in detail. The Executive's 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 (x)
was done or omitted to be done (1) as a result of bad judgment or
negligence on his part, or (2) without intent of gaining therefrom
directly or indirectly a profit to which the Executive was not legally
entitled or (3) as a result of his good faith belief that such act or
failure to act was in or was not opposed to the interests of the
Company, or (y) is an act or failure to act in respect of which the
Executive meets the applicable standard of conduct prescribed for
indemnification or reimbursement of payment of expenses under the
By-laws of the Company or the laws of the state of its incorporation
or the directors' or officers' liability insurance of the Company, in
each case as in effect at the time of such act or failure to act.
(c) Defined Contribution Plan. Defined Contribution Plan means
the Defined Contribution Plan of American Brands, Inc. and
Participating Operating Companies.
(d) Disability. Termination of employment by the Company for
Disability shall be deemed to have occurred only if, as a result of
the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from his duties with the Company on a
full-time basis for 180 consecutive days and, within 30 days after
Notice of Termination is given to the Executive by the Company, the
Executive shall not have returned to the full-time performance of his
duties.
(e) Good Reason. Termination of employment by the Executive for
Good Reason shall be deemed to have occurred only if the Executive
terminates his employment for any of the following reasons:
(i) without the Executive's express written consent,
any material reduction in the aggregate duties,
responsibilities and authority assigned to him as of the date
hereof, or the assignment to him of any duties,
responsibilities or authority inconsistent with the duties,
responsibilities and authority assigned to him as of the date
hereof, or a change in his reporting responsibilities, titles,
offices or other positions as in effect on the date hereof, or
any removal of the Executive from, or any failure to re-elect
the Executive to, any of such positions, except in connection
with the termination of his employment as a result of his
death or by the Company for Disability or Cause or by the
Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's
base salary as in effect on the date hereof plus all increases
therein subsequent thereto;
(iii) 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 the date hereof 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 the date hereof 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;
(iv) 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 1993 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;
(v) the relocation of the Company's principal
executive offices to a location more than 35 miles from their
location on the date hereof or the Company's requiring the
Executive to be based anywhere other than the Company's
principal executive offices, except for required travel on the
Company's business to an extent substantially consistent with
his business travel obligations on the date hereof;
(vi) 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;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination, and for purposes of this Agreement, no such
purported termination shall be effective; or
(viii) any failure of the Company to comply with and
satisfy Section 8.
(f) Incentive Compensation Plans. Incentive Compensation Plans
means the incentive compensation provisions of Article XII of the
By-laws of the Company, the Fortune Brands, Inc. Annual Executive
Incentive Compensation Plan and any other plans and arrangements of
the Company and its affiliates.
(g) Normal Retirement Date. Normal Retirement Date means the last
day of the month in which the Executive attains age 65.
(h) Notice of Termination. Notice of Termination means 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 the Executive's employment under the provision so indicated.
(i) Pension Plans. Pension Plans means the Retirement Plan,
the Supplemental Plan and any other program, practice or arrangement
(other than this Agreement) of the Company or any present or former
affiliate thereof to provide the Executive with a defined pension
benefit after termination of employment and in effect on the date
hereof or hereafter adopted.
(j) Qualifying Employment. Qualifying Employment has the meaning
set forth in the Retirement Plan on the date hereof.
(k) Relocation Program. Relocation Program means the Relocation
Program for Executives of American Brands, Inc.
(l) Retirement Plan. Retirement Plan means the Retirement Plan
for Employees and Former Employees of American Brands, Inc.
(m) Service. Service has the meaning set forth in the Retirement
Plan on the date hereof.
(n) Supplemental Plan. Supplemental Plan means the Supplemental
Plan of American Brands, Inc.
(o) Termination Date. Termination Date means (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 for Good Reason,
the date specified in the Notice of Termination, (iii) if employment
is terminated by the Company for Cause, the date on which a Notice of
Termination is given and (iv) if employment is terminated for any
other reason, the date on which the Executive ceases to perform his
duties as an officer of 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 7(o).
Section 8. 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 of the
business or assets of the Company, and any parent company thereof, by agreement
or agreements in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement, and in the case of any such parent
company expressly to guarantee and agree to cause the performance of 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. 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 is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive and, in the
event of his death, his spouse or contingent annuitant, if any, and his personal
or legal representatives.
Section 9. Funding. The Company may, but shall not be obligated to, set
aside any funds to fulfill its obligations under Section 3 of this Agreement.
Benefits under Section 3 of this Agreement may also be funded in accordance with
the terms of the employee grantor trust arrangement set forth in the Trust
Agreement made as of November 1, 1993 among the Executive, the Company and The
Chase Manhattan Bank (National Association) or the Segregated Account referred
to in such Trust Agreement.
Section 10. 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 as follows:
If to the Company:
American Brands, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Secretary
If to the Executive:
Xxxxxx X. Xxxx
0 Xxxxxxxxxxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
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.
Section 11. Miscellaneous. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. 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 beach 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 headings in this Agreement are included for convenience of
reference only and shall not in any way affect the meaning or interpretation of
this Agreement.
Section 12. 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.
Section 13. 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.
Section 14. 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.
Section 15. Prior Agreements. Effective as of the date first written above,
this Agreement shall replace and supersede each of the Severance Agreement and
the Retirement Agreement, and each of the Severance Agreement and the Retirement
Agreement shall be deemed null and void and shall have no further force or
effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officer thereunto duly authorized and its seal to be hereunto affixed and
attested and the Executive has hereunto set his hand as of the day of 24th day
of March, 1997.
[Seal] AMERICAN BRANDS, INC.
Attest: By Xxxxxx X. Xxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxx
Senior Vice President and
Xxxxx X. Xxxxxxx, Xx. Chief Administrative Officer
-------------------------
Secretary
Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx
