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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
AGREEMENT made this [ ] day of [ ], 1996, between UST INC., a
Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxxxxxx (the
"Executive").
The Executive is presently employed by the Company [or a subsidiary
thereof] as [ ].
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 [ ] 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 [ ], unless further extended or 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 will
not be extended. Subject to the provisions of 29 CFR Section 631(c), 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 and shall have such responsibilities and authority 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.
This salary may be increased from time to time in accordance with normal
business practices of the Company and, if so increased, shall not
thereafter during the term of this Agreement 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 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
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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
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
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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 in clause (i), (ii) or (iii) hereof, 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, or (C) 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 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
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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 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.
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(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.
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.
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(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 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 Section 10
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 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
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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, the Company shall pay all additional benefits to which the
Executive would have been entitled under the Company's Officers'
Supplemental Retirement Plan (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 16 hereof shall not exceed, in the aggregate, the sum of
$50,000; and
(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
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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 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. The Executive agrees that he will not engage in any
Competitive Activity during any period with respect to which he is entitled to
severance pay pursuant to Section 9(d)(ii) hereof or to employee welfare
benefits pursuant to Section 9(d)(iii) hereof; 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 (which consent shall not be unreasonably withheld),
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, as now or
hereafter designated by the Board; provided, however, that no
9
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 or methods of manufacture of any
Competitive Operation of such enterprise.
11. 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
executes and delivers the agreement provided for in this Section 11 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.
12. 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:
---------------------------------
---------------------------------
---------------------------------
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.
10
13. 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.
14. 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.
15. 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.
16. 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 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 Section 10 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.
17. 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; and any 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.
11
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
UST INC.
Attest:
By: Name:
-------------------------------------- ------------------------------------
By: Title:
-------------------------------------- ------------------------------------
EXECUTIVE
-------------------------------------- ------------------------------------
12
ANNEX I
UST INC.
EMPLOYEE SECRECY AGREEMENT
THIS AGREEMENT, entered into this [ ] day of [ ], 1996,
by and between UST Inc., a corporation existing under the laws of Delaware and
having its principal offices in Greenwich, Connecticut (hereinafter referred to
as "UST"), and Xxxxxx X. Xxxxxxxxxx, residing at [
] (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, UST (which for the purposes of this Agreement shall include its
subsidiaries and affiliates) has developed and uses commercially valuable
technical and non-technical information (hereinafter "Proprietary Information")
and, to guard the legitimate interest of UST, it is necessary to protect the
Proprietary Information either by patents or by holding it secret or
confidential or to copyright such Proprietary Information as may be sought to be
copyrighted; and
WHEREAS, the aforesaid Proprietary Information is vital to the success of
UST's business, provides UST with commercial advantage vis-a-vis its competitors
and Employee through his employment may become acquainted therewith and may
contribute thereto either through inventions, discoveries, improvements or
otherwise; and
WHEREAS, the disclosure of that Proprietary Information such as
confidential or secret information could be very harmful to UST's business and
its employees, in turn, could suffer loss;
NOW, THEREFORE, in consideration of past and present employment and in
confirmation of the terms and conditions of said employment it is agreed as
follows:
1. All ideas, methods, formulae, inventions, improvements and
developments directly or indirectly relating to aging, curing, flavoring,
manufacturing, processing and/or packaging of tobacco products and those
directly or indirectly relating to other products and fields of activity of
Employee's employment (whether patentable or unpatentable) made, conceived
or developed by Employee alone or jointly with one or more others during
the term of Employee's employment (whether at the request or suggestion of
UST or otherwise and during the regular hours of work or otherwise) and
within one (1) year thereafter (hereinafter called "Improvements") shall be
the property of UST, and Employee shall disclose each of the same promptly
and in such manner as requested by UST, including by delivery to UST of all
papers, drawings, models, data and any other material relating to the
Improvements. Unless and except if a specific waiver has been granted for
any copyright or a renewal of such copyright or any derivative work
thereof, such Improvements shall also include copyrightable works which are
hereby acknowledged to be works "made-forhire", and shall include for the
benefit of UST all derivative, underlying, secondary, or similar rights
derived from such copyright.
2. Employee shall keep such records as UST considers desirable in
connection with the conception, disclosure and utilization of the
Improvements and shall execute all proper documents to insure that UST
shall have the full benefit, enjoyment, ownership, and title to
Improvements, including without limitations, patent disclosures,
disclosures of Proprietary information, patent applications and
assignments, trademark rights, copyrights, etc. In the event UST is unable,
for any reason whatsoever, to secure Employee's signature to any lawful and
necessary documents required for the purpose stated above, Employee hereby
irrevocably designates and appoints UST, and its duly authorized officers
and agents, as his agent(s) and attorney(s)-in-fact to act for and on
behalf of Employee, to execute and file any such documents and to do all
other lawfully permitted acts to further the prosecution and issuance of
any governmental grant such as letters patent, copyrights, author's
certificates, etc., thereof with the same legal force and effect as if
actually executed by Employee.
3. Employee anticipates that among the Proprietary Information he
will receive will be certain confidential or trade secret information which
directly or indirectly relates to the business of UST, and
13
which he understands includes (i) the Improvements and the details of the
construction and operation of machines and the processes followed by UST in
the aging, curing, flavoring, processing, manufacturing and/or packaging of
UST products, (ii) the volumes of the various products manufactured or sold
by UST, and the relationships between the various products from the
standpoint of the dollar volumes of such sales, (iii) the gross and net
profits of UST products, and the sources of materials which are used to
produce such products including the quantities and dollar values of such
materials purchased by UST, (iv) the blending and other procedures involved
in the blending and other procedures involved in producing the products
manufactured or sold by UST, and (v) the sales and marketing plans and
programs of or for UST including advertising, promotions, distribution,
credit terms and customer information; and he will not at any time, whether
during said employment or thereafter, directly or indirectly, disclose this
Proprietary Information to others, except in the course of said employment,
and then he shall not act contrary to specific instructions from UST.
4. Employee, upon termination of employment, shall promptly deliver
to UST all drawings, blueprints, manuals, letters, notes, reports, and all
other materials relating to Proprietary Information in his possession or
under his control, without retaining any copies thereof.
5. If any Proprietary Information is required to be disclosed by a
governmental request or in a judicial process, anyone served with such
request shall promptly notify UST without first disclosing any such
Proprietary Information. The obligation to notify UST assures UST that it
may obtain sufficient counsel or seek a protective order or an order by the
court placing such information under seal or designating such information
"Proprietary Information" or "Trade Secret Information" or any such
designation employed by the various state or federal statutes. Such
obligation survives the termination of employment.
6. The compensation regularly and periodically paid Employee in the
course of said employment by UST includes a component payment, in full, for
his obligations hereunder. It is understood that UST shall pay all expenses
incident to obtaining copyrights or patents or trademarks on the
Improvements and to the execution and recording of assignments and other
documents incident to security title thereto in UST.
7. It is understood that information presently in the public domain
or which comes into the public domain without any breach of this Agreement
by Employee shall not be Proprietary Information, but the fact that UST
utilizes any such information shall be Proprietary Information.
8. It is further understood that UST may conduct a yearly audit of
its Proprietary Information and each employee understands that such audit
is to assure that its Proprietary Information is being maintained as
prescribed by the procedures established by UST.
9. As any data storage and/or retrieval system such as electronic
data storage and retrieval system, laser image or image storage and/or
retrieval system and the like may accumulate and/or provide access to
enormous amounts of very valuable information including Proprietary
Information, and further as such information may be dispersed throughout
such data storage systems, and still further as such information may be
manipulated to provide significant Proprietary Information retrieved from a
combination of these stored data, all such data storage systems and
information retrieval from same must be considered to be based on and to
contain Proprietary Information. Unless such use and/or manipulation of
such information in a data storage system is authorized, all such access to
and/or manipulation of such information is considered to be unauthorized.
Any violation of access and/or manipulation of such information in a data
storage system including making a copy, in whatever form, of this
information, on premises of UST or off premises of UST, is a basis for
dismissal unless good cause is shown why such use and/or copying was
believed to be authorized.
10. In the event Employee's employment with UST will cease, the
Employee agrees to an exit interview conducted by UST which may cover,
among other items, any inquiry about Proprietary Information which belongs
to UST and/or is considered by UST as belonging to it.
11. The terms of this Agreement shall survive the termination of
Employee's employment by UST and shall be binding upon the Employee's
heirs, successors and legal representatives.
14
12. It is also understood that if Employee were to be employed by a
competitor that Employee may be asked to sign an agreement whereby Employee
will be required to reiterate and reaffirm the above terms and give a
positive assurance that up to termination Employee has abided by the terms
of this Agreement and during the employment with the competitor Employee
will scrupulously observe and abide by the terms of this Agreement.
13. It is also understood that the term "Proprietary Confidential
Information" includes any and all information of or relating to UST not
otherwise publicly available including, without limitation, any such
information developed by management or UST's agents or representatives
pertaining to proposals or similar studies or analyses with respect to any
actions of any manner whatsoever which may be taken in the event of an
actual or attempted acquisition or change of control of UST.
UST Inc.
By:
------------------------------------
I have read and understand the above and I hereby agree that its conditions
set forth are fair and shall abide by them. I also agree to the issuance of a
consent judgment and injunction upon violation of this Agreement which will
enjoin me from future violation.
--------------------------------------
Employee
Bi-yearly Audit of Proprietary Information:
AUTHORIZED
SIGNATURE EMPLOYEE'S
DATE PLACE OF EMPLOYER SIGNATURE
---- --------------------------- --------------------------- ---------------------------
19 --------------------------- --------------------------- ---------------------------
19 --------------------------- --------------------------- ---------------------------
15
ANNEX II
UST INC.
RELEASE AGREEMENT
THIS RELEASE, entered into this [ ] day of [ ] 1996 by Xxxxxx X.
Xxxxxxxxxx, 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 [ ], 199[ ], 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 [ ],
199[ ], 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.
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
