EXHIBIT 10.2
July 10, 2002
Xx. Xxxxxxx X. Xxxxxxxx
P. O. Box 000
000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Dear Xxx:
Upon notification by X. X. Xxxxxxxx Tobacco Holdings, Inc., your employer, that
your active employment is coming to an end, this letter constitutes the entire
agreement by and among X. X. XXXXXXXX TOBACCO HOLDINGS, INC., X. X. XXXXXXXX
TOBACCO COMPANY (collectively the "Company"), its successors, affiliates and/or
assigns, and you regarding the termination of your employment relationship with
the Company and is in full and final satisfaction of all the Company's
obligations to you under your Amended Letter Agreement dated March 17, 1994,
including all applicable amendments (the "Letter Agreement") and your enhanced
special severance letter dated March 12, 2002. No benefits or payments other
than those expressly provided herein shall be paid or payable. Except as
otherwise defined herein, capitalized terms herein shall be defined as in the
Letter Agreement. Except as otherwise specifically provided herein, the benefits
provided herein and the payments made and to be made hereunder through your
Separation Date are to be provided or made without regard as to whether or not
you become employed by another employer unaffiliated with the Company and
without regard to your death or Permanent Disability. The severance-related
compensation and/or benefits as described in this letter, represent the
Company's entire severance obligation to you and are in lieu of any such
compensation and/or benefits to which you would otherwise have been entitled
under the Company's Salary and Benefit Continuation Program (the "SBC"). If
there is any conflict or ambiguity with any prior agreement or program, the
provisions of this Agreement will control.
Please read the rest of this letter carefully. Then sign the copy of this Letter
of Agreement where indicated on the last page and return it to Xxxxx Xxxx or me.
1. a. You will continue as a regular full-time employee through
July 19, 2002. If you voluntarily quit or are terminated by the
Company for violation of Company rules, policies, guides or
standards of conduct before that date, you will not receive the
benefits described below.
b. The date of your termination from active employment is July 19,
2002 (your "Termination Date"). Your Compensation Continuance
commences July 20, 2002,
Xxxxxxx X. Xxxxxxxx
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and continues through July 31, 2005, which will be your official
"Separation Date" for Company records. "Compensation Continuance"
is a paid leave of absence and is calculated as follows:
Current Annual Rate of Base Salary $416,000
AIAP at Target (75% of Base Salary) $312,000
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Total Cash Compensation $728,000
Total Annual Compensation paid for 3 years $728,000 per year
Based on the foregoing, Compensation Continuance will be paid
monthly at the rate of $60,666.67 for the period of Compensation
Continuance and will be subject to deductions for income tax
withholding, FICA, employee benefit plan contributions and other
authorized deductions.
c. Compensation Continuance is provided in order to preserve the
Company's access to you although you will be relieved of all your
normal duties and responsibilities. You agree that you will
personally provide reasonable assistance and cooperation in
locating or obtaining information concerning the Company (past or
present) about which you are knowledgeable.
d. You acknowledge that as of June 19, 2002, your active
employment with the Company will end irrevocably and will not be
resumed again at any time in the future except upon mutual
agreement of the parties hereto.
e. During Compensation Continuance, if you become employed by an
employer not affiliated with the Company, Compensation
Continuance will continue. You will continue to be eligible to
participate in the Company's Capital Investment Plan. However,
other benefits under the Employee Benefits Programs shall be
appropriately terminated, coordinated, or offset to the extent
provided for by the other employer.
2. If you die during Compensation Continuance, any Compensation
Continuance amounts that would have been paid to you had you lived
until your Separation Date will be paid in a lump sum to your estate.
3. As of your Termination Date, no further vacation will accrue.
Unused 2002 vacation plus vacation for 2003, accrued in 2002, will be
paid in a lump sum at the end of Compensation Continuance and is not
includable for any benefit plan calculations.
4. During Compensation Continuance, you may continue to participate
in the employee benefit programs in which you participated as of your
Termination Date except as otherwise provided in this Letter of
Agreement or by the terms of the individual program. You may
participate as though you were an active employee, subject to the
continuation of applicable
Xxxxxxx X. Xxxxxxxx
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payroll deductions. Such participation will be subject to the terms,
provisions and conditions of such programs, including the Company's
right to amend, modify or terminate the programs. Employee Benefit
Programs do not include the Annual Incentive Award Plan ("AIAP") or
the Long-Term Incentive Plan ("LTIP"), the disposition of which is
detailed in other provisions of this Agreement.
Unless otherwise specified by the Company in its sole discretion,
changes in the Employee Benefit Programs after the date of this letter
will not apply to you, unless otherwise required by law. New benefit
programs that replace or supersede current programs will apply to you
if the Company chooses not to continue to make the current programs
available to employees on Compensation Continuance.
The following is a summary of benefit continuation:
Your participation in the X. X. Xxxxxxxx Holdings, Inc., Welfare
Benefit and Insurance Plans ("Welfare Plan") and Flexible Perquisite
Program, except for the Short- and Long-Term Disability Plans, will
continue until the end of Compensation Continuance, provided you make
any required Plan contributions in the manner specified by the
Company. If, as a result of the foregoing sentence you are carried
into a new Welfare Plan year, you will be required to reenroll in the
same manner as active employees. Should you become employed by an
employer not affiliated with the Company, health care coverage
provided by your new employer will be coordinated with health care
benefits provided by the Company.
Your participation in the group medical, dental and life insurance
plans in which you now participate will continue during Compensation
Continuance subject to the terms, provisions and conditions of such
plans, including the Company's right to amend, modify or terminate the
Plans. As an employee eligible for retirement under a
Company-sponsored retirement plan following the end of your
Compensation Continuance, you are eligible for medical, dental and
life insurance benefits during retirement, subject to the terms,
provisions and conditions of such plans, including the Company's right
to amend, modify or terminate the Plans. Details of these benefits
will be provided prior to your retirement date.
During Compensation Continuance, you will continue to accrue service
and benefits under all Company-sponsored retirement plans in which you
currently participate. For benefits based on an Average Final
Compensation calculation, your compensation will be deemed to be full
pay (i.e., annual rate of base salary and AIAP) for the period of
Compensation Continuance.
During Compensation Continuance, you may continue to make
contributions to the X. X. Xxxxxxxx Capital Investment Plan, and you
retain all other rights under the Plan, including the right to
transfer investments between funds, change your contribution amount,
and to request withdrawals. However, no loan applications will be
approved during Compensation
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Page 4
Continuance. Following your Separation Date, you may elect to have
your account balance distributed to you in accordance with the terms
of the Plan.
Since you will be at least age 55 with 10 or more years of retirement
service as of your Separation Date, you will be entitled to an Early
Retirement benefit under the Company's retirement plan commencing the
first day of the month following the end of your Compensation
Continuance. In accordance with your March 12, 2002, enhanced special
severance letter, for the purposes of calculating total retirement
benefits, including vesting for purposes of retiree health
contributions, you will be deemed to have 30 years of credited and
eligibility service upon your retirement from the Company. Prior to
your Separation Date, you will be given appropriate retirement
application forms and other retirement materials.
5. You will continue to be eligible to receive the benefits of the
Flexible Perquisite Program during Compensation Continuance. At the
end of Compensation Continuance, you may purchase the Company car
under the terms of the Flexible Perquisite Program.
6. You will be paid an award under the Annual Incentive Award Plan
for your months of active employment during the 2002 plan year based
on the target award for the plan year and adjusted for actual
financial performance of the Company. This award will be paid to you
at the same time as other Plan participants, cannot be deferred, and
is the last AIAP award to be made to you. Payment of any such award
will be subject to appropriate taxes and a CIP contribution, if
applicable. In addition, as a participant in AIAP, you will be paid
your target AIAP over the period of Compensation Continuance as set
forth in Paragraph 1 above. This was determined by dividing your AIAP
target amount by the number of pay periods in a year and including
such amount in the subtotal in determining each Compensation
Continuance payment. Thus, there will be no lump sum AIAP award
payment for the period of Compensation Continuance.
7. Prior to your Termination Date, you are expected to submit expense
reports for all outstanding travel, entertainment and other business
expenses. If any expense report(s) reflect any amounts owing to the
Company, such expense will be deducted from Compensation Continuance
payments as necessary. In addition, prior to your last day of active
employment, you must return all Company equipment such as cellular
telephones or personal computers, or the value of such equipment, as
determined by the Company, shall be deducted from the calculation of
your Compensation Continuance.
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8. The estimated value of your other compensation is summarized as
follows:
AT RETIREMENT (ASSUMES
COMPENSATION CURRENT VALUE 8/1/2005 RETIREMENT DATE)
------------ ------------- ------------------------
a. 1998 PARS TOB - 26,800 Vested - Will be automatically paid 2/03 if there
$0 Value is a value
b. 1999 PARS TOB - 34,000 Vested If not exercised before, will be automatically
Floor Value - $172,822 paid 2/03
c. RJR Stock Options
4/27/95 Surrender/Reissue 12,833 @ $26.0960 Expires 4/27/10
4/27/95 Premium Grant 7,759 @ $28.7039 Expires 4/27/10
3/05/96 1996 LTIP 7,762 @ $33.7058 Expires 3/05/06
d. 1998 RJR Restricted Stock 2,383 Shares (rounded up) Prorate 2,666.67 X 53.61/60; vest 7/19/02
(last day of active employment)
e. 1999 Tandem Agreement 70,000 Options @ $32.4375 50% of 140,000 vest on 6/15/02; expire 6/15/09
16,590 Options @ $32.4375 140,000 X 37.11/60 = 86,590 - 70,000; expire 6/15/09
Cancel 35,000 Restricted Stock
Note: If restricted stock has more value at time of
retirement, 100% of stock options would be cancelled
and restricted stock would be prorated.
f. 2000 Grant 25,332 Shares Restricted Stock Prorate 30,798 X 29.61/36; vest 7/19/02
(last day of active employment)
688,725 PUPs Prorate 810,000 X 30.61/36; scored and paid 2/03
(Automatically Paid)
g. 2001 Grant 6,366 Shares Restricted Stock Prorate 13,012 X 17.61/36; vest 7/19/02
(last day of active employment)
418,725 PUPs Prorate 810,000 X 18.61/36; scored and paid 2/04
(Automatically Paid)
9. If you are an active participant in the Tuition Refund Plan on
your Termination Date and all of the requirements of the Plan are
fulfilled, you will continue to be eligible for tuition aid
reimbursement during Compensation Continuance for courses completed
during Compensation Continuance.
10. If otherwise eligible, you may continue to participate or newly
enroll in the MedSave Retiree Savings Plan during Compensation
Continuance. Upon your Separation Date, no further contributions will
be permitted; however, your account(s) including any applicable
Company match will be maintained with continued interest growth.
Distribution of your account(s) will be processed in accordance with
program rules for active employees.
11. You shall be covered by the same liability and indemnification
programs afforded to other officers for acts that occurred while you
were an officer of the Company and/or its affiliates.
Xxxxxxx X. Xxxxxxxx
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12. You shall maintain the terms and conditions of this Agreement in
confidence. In addition, you will not without prior written consent of
the Company, use, divulge, disclose or make accessible to any other
person, firm, partnership or corporation or other entity any
confidential information pertaining to the businesses of X.X. Xxxxxxxx
Holdings, Inc., X. X. Xxxxxxxx Tobacco Company or any of their
affiliates, except (i) while employed by the Company in the business
of and for the benefit of the Company or (ii) when required to do so
by a court of competent jurisdiction by any governmental agency having
supervisory authority over the business of the Company, or by any
administrative body or legislative body (including a committee
thereof) with jurisdiction to order you to divulge, disclose or make
accessible such information. For purposes of this Agreement,
"Confidential Information" shall mean non-public information
concerning X.X. Xxxxxxxx Holdings, Inc., X. X. Xxxxxxxx Tobacco
Company or any of their affiliate companies' data, strategic business
plans, product development data (or other proprietary product data),
customer lists, marketing plans and other proprietary information,
except for specific items which have become publicly available
information (other than such items which you know have become publicly
available through a breach of fiduciary duty or any confidentiality
agreement.)
a. You will personally provide reasonable assistance and
cooperation to the Company in activities related to the
prosecution or defense of any pending or future lawsuits or
claims involving the Company.
b. You will promptly notify the Company if you receive any
requests from anyone other than an employee or agent of the
Company for information regarding the Company which could
reasonably be construed as being proprietary, non-public or
confidential or if you become aware of any potential claim or
proposed litigation against the Company.
c. You will refrain from providing any information related to
any claim or potential litigation against the Company to any
non-Company representatives without either the Company's written
permission or being required to provide information pursuant to
legal process.
d. If required by law to provide sworn testimony regarding any
Company-related matter, you will consult with and have
Company-designated legal counsel present for such testimony. The
Company will be responsible for the costs of such designated
counsel and you will bear no cost for it.
e. If you are required by law to provide sworn testimony
regarding any Company-related matter and if you require legal
counsel to represent and protect your interest (in addition to
the Company-designated legal counsel provided for under
subparagraph D herein), the Company will reimburse you for any
legal expenses (including, but not limited to, the costs of any
attorney reasonably acceptable to you and the Company, which
acceptance by the Company shall not be unreasonably withheld) and
other out-of-pocket expenses you may incur in relation to such
testimony.
Xxxxxxx X. Xxxxxxxx
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f. You will cooperate with the Company's attorneys to assist
their efforts, especially on matters you have been privy to,
holding all privileged attorney-client matters in strictest
confidence unless ordered to do otherwise by a court of competent
jurisdiction or a committee of the Congress of the United States
or of a state legislature. You understand that you will be
reimbursed for travel, food, lodging or similar out-of-pocket
expenses incurred at the Company's request in discharging any of
your obligations under this Agreement.
g. Nothing in sentences a-f of the above paragraph is intended
to apply to governmental or judicial investigations, including
but not limited to an investigation by any agency or department
of the federal or state government, any hearing before a
committee of the Congress of the United States or of a state
legislature, any investigation or proceeding by or of a special
prosecutor, or any proceeding brought before a grand jury;
provided, however, the Company will reimburse you for legal
expenses including, but not limited to, the cost of any attorney
reasonably acceptable to the Company and other out-of-pocket
expenses if you are compelled to appear in a governmental or
judicial investigation.
13. Except as otherwise stated herein, no benefits (other than those
provided by a Tax-qualified Plan or Trust) or promise hereunder shall
be secured by any specific assets of the Company. The payments under
this Agreement shall not be assigned by you or anticipated in any way
and any such attempted assignment will be void.
14. You agree not to apply for unemployment insurance attributable to
your period of Compensation Continuance.
15. IN CONSIDERATION OF THE COMPENSATION AND BENEFITS SET FORTH IN
THIS AGREEMENT, YOU VOLUNTARILY, KNOWINGLY AND WILLINGLY RELEASE AND
FOREVER DISCHARGE THE COMPANY, ITS PARENTS, SUBSIDIARIES AND
AFFILIATES, TOGETHER WITH THEIR RESPECTIVE OFFICERS, DIRECTORS,
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 YOU OR YOUR 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 TO THE TIME YOU SIGN THIS AGREEMENT. YOU FURTHER
AGREE THAT YOU WILL NOT SEEK OR BE ENTITLED TO ANY AWARD OF EQUITABLE
OR MONETARY RELIEF IN ANY PROCEEDING OF ANY NATURE BROUGHT ON YOUR
BEHALF ARISING OUT OF ANY OF THE MATTERS RELEASED BY THIS PARAGRAPH.
THIS RELEASE INCLUDES, BUT IS NOT LIMITED TO ANY RIGHTS OR CLAIMS
RELATING IN ANY WAY TO YOUR EMPLOYMENT RELATIONSHIP WITH THE COMPANY,
OR THE TERMINATION THEREOF, OR UNDER ANY STATUTE, INCLUDING THE 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.
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16. By signing this Agreement, you represent that you have not
commenced any proceeding against the Company in any forum
(administrative or judicial) concerning your employment or the
termination thereof. You further acknowledge that you were given
sufficient notice under the Worker Adjustment and Retraining
Notification Act (the "WARN Act") and that the termination of your
employment does not give rise to any claim or right to notice, or pay
or benefits in lieu of notice under the WARN Act. In the event any
WARN act issue does exist or arises in the future, you agree and
acknowledge that the payments and benefits set forth in this Agreement
shall be applied to any pay or benefits in lieu of notice required by
the WARN Act, provided that any such offset shall not impair or affect
the validity of any provision of this Agreement, including the release
set forth in paragraph 15.
17. In consideration of the additional consideration referenced in
this Agreement, you covenant and agree that during the period of
Compensation Continuance (i) you will not directly or indirectly
(whether as owner, partner, consultant, employee, or otherwise) engage
in any of the "major" businesses in which X. X. Xxxxxxxx Tobacco
Holdings, Inc., X. X. Xxxxxxxx Tobacco Company or any of their
affiliates are engaged and (ii) you will not, on your own behalf or on
behalf of any person, firm or company, directly or indirectly, for a
period of 12 months following your termination, offer employment to
any person who was, at the time of your termination, employed by X. X.
Xxxxxxxx Tobacco Holdings, Inc., X. X. Xxxxxxxx Tobacco Company, or
any other affiliates.
18. "Major businesses" for this purpose are the major business
segments of X.X. Xxxxxxxx Tobacco Holdings, Inc., X. X. Xxxxxxxx
Tobacco Company or any of their affiliates dealing in the manufacture,
sale or marketing of tobacco and smoking products or products deemed
to be in competition with smoking products, including but not limited
to those developed, marketed or intended to be used as part of smoking
cessation programs, or as tobacco or smoking substitutes. You and the
Company agree that this covenant not to compete is a reasonable
covenant under the circumstances and further agree that if, in the
opinion of any court of competent jurisdiction, such restraint is not
reasonable in any respect, such court shall have the right, power and
authority to excise or modify such provision or provisions of this
covenant as to the court shall appear not reasonable and to enforce
the remainder of the covenant as so amended.
19. The Company advises you that you may wish to consult with an
attorney of your choosing prior to signing this Agreement. You
understand and agree that you have the right and have been given the
opportunity to review this Agreement, specifically the release in
paragraph 15, with an attorney of your choice should you so desire.
You have entered into this Agreement freely, knowingly and
voluntarily. After a Change of Control (as defined under the LTIP),
the Company shall pay to you as incurred all legal and accounting fees
and expenses incurred by you in seeking to obtain or enforce any right
or benefit provided by this Agreement or any other
compensation-related plan, agreement or arrangement of the Company
unless your claim is found by a tribunal of competent jurisdiction to
have been frivolous.
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20. You will be reimbursed for travel, food, lodging or similar
out-of-pocket expense incurred at the Company's request in discharging
any of your obligations under this Agreement. If the Company
reasonably determines that you have violated any of your obligations
under this Agreement, then the Company may, at its option, terminate
the Compensation Continuance and any other benefits hereunder; and the
Company may demand the return of all Compensation Continuance payments
already made and you hereby agree to return such payments upon such
demand. If after such demand you fail to return said payments, the
Company has the right to commence judicial proceedings against you to
recover any and all of its attorney's fees and costs. The Executive
Vice President - Human Resources or the designated representative
thereof shall have exclusive authority to interpret this Agreement.
The decision of the Executive Vice President - Human Resources with
respect to any question arising as to the amount, term, form, and time
of payment of benefits under this Agreement or any other matter
concerning this Agreement shall be final, conclusive and binding on
both you and the Company.
21. This Agreement may not be amended except in writing signed by you
and the Company, and no amendments or modifications are contemplated
at this time. This Agreement shall not be construed to provide any
rights to anyone other than you and the Company.
22. If you have any questions about this Agreement, contact Xxx X.
Xxxxxxxx or Xxxxxxx X. Xxxx in the Human Resources Department.
23. You have at least twenty-one (21) days to consider the terms of
this Agreement, although you may sign and return it sooner if you
wish. This Agreement may be revoked by you for a period of seven (7)
consecutive calendar days after you have signed and dated it, and
after such seven (7) days it becomes final.
24. This Agreement shall be construed, interpreted and governed in
accordance with the laws of the State of North Carolina and the United
States of America without reference to rules relating to conflicts of
law.
Please indicate your acceptance of the terms of this Agreement by signing this
letter and returning it to me.
Sincerely,
X. X. XXXXXXXX TOBACCO HOLDINGS, INC.
/s/ Xxx X. Xxxxxxxx
------------------------------
Xxx X. Xxxxxxxx
Executive Vice President
Human Resources
Understood and agreed:
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxxx
Date: 7/15/02
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