EXHIBIT 10.4
Performance Units
Three-Year Vest
X.X. XXXXXXXX TOBACCO HOLDINGS, INC.
1999 LONG TERM INCENTIVE PLAN
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PERFORMANCE UNIT AGREEMENT
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DATE OF GRANT: JULY 26, 2002
W I T N E S S E T H:
1. Grant. Pursuant to the provisions of the 1999 Long Term
Incentive Plan (collectively, the "Plan"), X.X. Xxxxxxxx Tobacco Holdings, Inc.
(the "Company") on the above date has granted to
[FIRSTNAME] [LASTNAME] (THE "GRANTEE"),
subject to the terms and conditions which follow and the terms and conditions
of the Plan, a target of
[NUMBER] PERFORMANCE UNITS.
A copy of the Plan is attached and made a part of this Agreement with the same
effect as if set forth in the Agreement itself. The initial grant value of each
Performance Unit shall be $1.00 (the "Initial Grant Value"). All capitalized
terms used in this Agreement shall have the meaning set forth in the Plan,
unless the context requires a different meaning.
2. Vesting. (a) The Performance Units shall have a three-year
performance period, consisting of the Company's fiscal years 2002, 2003 and
2004 (the "Performance Period"), at the end of which the Performance Units will
be valued and paid, if they vest, or cancelled, if they do not vest. For the
Performance Units to vest, the Company must pay to its stockholders a dividend
of at least $0.95 per share in each fiscal quarter during the period commencing
on the Date of Grant and ending on December 31, 2004 (the "Threshold
Requirement"), unless the Company's Board of Directors specifically approves
the noncancellation of the Performance Units upon the declaration of a
quarterly dividend of less than $0.95 per share. In the event the Company fails
to pay its stockholders a dividend of at least $0.95 per share in any fiscal
quarter during the period from the Date of Grant and ending on December 31,
2004, and the Company's Board of Directors does not approve the noncancellation
of the Performance Units, the Performance Units shall be cancelled.
(b) Notwithstanding anything in Section 2(a) to the contrary, in the
event of (i) the Grantee's death, (ii) the Grantee's Permanent Disability (as
defined in the Company's Long Term Disability Plan), (iii) the Grantee's
retirement under a retirement plan of the
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Company or a subsidiary of the Company, or (iv) the Grantee's involuntary
Termination of Employment without Cause (as such terms are defined in Section 5
of this Agreement), the number of Performance Units which shall vest, if not
previously cancelled due to the Company's failure to meet the Threshold
Requirement, shall be equal to product of (x) the original number of
Performance Units granted to the Grantee under this Agreement and (y) a
fraction, the numerator of which shall be the number of whole or partial months
between January 1, 2002 and the date of the Grantee's Termination of
Employment, and the denominator of which shall be 36. Such prorated award shall
be paid as soon as practicable following the close of the Company's books at
the end of the Performance Period, and each Performance Unit shall have a
Payment Value as defined in Section 3 of this Agreement.
(c) Notwithstanding anything in Section 2(a) to the contrary, in the
event of a Change of Control (as defined in the Plan), the number of
Performance Units which shall vest, if not previously cancelled due to the
Company's failure to meet the Threshold Requirement, shall be equal to the
product of (i) the original number of Performance Units granted to the Grantee
under this Agreement and (ii) a fraction, the numerator of which shall be the
number of whole or partial months in the Performance Period before the date of
the Change of Control, and the denominator of which shall be 36. Such prorated
award shall be paid as soon as practicable after the Change of Control. The
value of each Performance Unit shall be equal to the greater of (x) the Initial
Grant Value or (y) the Initial Grant Value multiplied by the average of the
total weighted AIAP (as defined in Section 3 of this Agreement) scores for the
financial and market share components of the AIAP for each of the years 2002,
2003 and 2004 completed prior to the Change of Control.
(d) Upon the Grantee's voluntary Termination of Employment or
Termination of Employment for Cause (as such terms are defined in Section 5 of
this Agreement) prior to the end of a Performance Period, all of the Grantee's
Performance Units shall be cancelled, except to the extent that at the time of
Termination of Employment, the Grantee has an employment or termination
agreement with the Company or one of its subsidiaries which includes
non-cancellation of some or all of the Performance Units.
3. Valuation of Performance Units. At the end of the Performance
Period, if the Threshold Requirement is met or otherwise waived by the
Company's Board of Directors, the value of each Performance Unit shall be
determined by multiplying the Initial Grant Value by the average of the total
weighted Annual Incentive Award Plan ("AIAP") scores for the financial and
market share components of the AIAP for each of 2002, 2003 and 2004 (the
"Payment Value").
4. Payment. (a) Payment of Performance Units shall be made only
in cash. Except with respect to a Change of Control as described in Section
2(c) of this Agreement, or except under such other circumstances as the
Compensation Committee of the Company's Board of Directors (the "Compensation
Committee") deems appropriate, no payment shall be made to the Grantee prior to
the end of the Performance Period. Except with respect to a Change of Control
as described in Section 2(c) of this Agreement, payment of Performance Units
shall be made in the amount of the Payment Value as soon as practicable
following the close of the Company books at the end of the Performance Period.
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(b) In the event of the death of a Grantee, any payment to which such
Grantee is entitled under the Plan shall be made to the beneficiary designated
by the Grantee to receive the proceeds of any noncontributory group life
insurance coverage provided for the Grantee by the Company or a subsidiary of
the Company ("Group Life Insurance Coverage"). If the Grantee has not
designated such beneficiary, or desires to designate a different beneficiary,
the Grantee may file with the Company a written designation of a beneficiary
under the Plan, which designation may be changed or revoked only by the
Grantee, in writing. If no designation of beneficiary has been made by a
Grantee under the Group Life Insurance Coverage or filed with the Company under
the Plan, distribution upon such Xxxxxxx's death shall be made in accordance
with the provisions of the Group Life Insurance Coverage. If a Grantee is no
longer an employee of the Company at the time of death, no longer has any Group
Life Insurance Coverage and has not filed a designation of beneficiary with the
Company under the Plan, distribution upon such Xxxxxxx's death shall be made to
the Grantee's estate.
5. Termination of Employment. (a) For purposes of this Agreement,
the term "Termination of Employment" shall mean termination from active
employment with the Company or a subsidiary of the Company; it does not man the
termination of pay and benefits at the end of a period of salary continuation
(or other form of severance pay or pay in lieu of salary).
(b) For purposes of this Agreement, if the Grantee has an employment
or severance agreement, employment shall be deemed to have been terminated for
"Cause" only as such term is defined in the employment or severance agreement.
For purposes of this Agreement, if the Grantee does not have an employment or
severance agreement that defines the term "Cause," the Grantee's employment
shall be deemed to have been terminated for "Cause" if the Termination of
Employment results from the Grantee's: (i) criminal conduct; (ii) deliberate
and continual refusal to perform employment duties on substantially a full time
basis; (iii) deliberate and continual refusal to act in accordance with any
specific lawful instructions of an authorized officer or employee more senior
than the Grantee; or (iv) deliberate misconduct which could be materially
damaging to the Company or any of its business operations without a reasonable
good faith belief by the Grantee that such conduct was in the best interests of
the Company. A Termination of Employment shall not be deemed for Cause
hereunder unless the senior human resources executive of the Company shall
confirm that any such Termination of Employment is for Cause. Any voluntary
Termination of Employment by the Grantee in anticipation of an involuntary
Termination of Employment for Cause shall be deemed to be a Termination of
Employment for Cause.
6. Transferability. Other than as specifically provided in this
Agreement with regard to the death of the Grantee, this Agreement and any
benefit provided or accruing hereunder shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
change; and any attempt to do so shall be void. No such benefit shall, prior to
receipt thereof by the Grantee, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Grantee.
7. No Right to Employment. Neither the execution and delivery of
this
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Agreement nor the granting of the Performance Units evidenced by this Agreement
shall constitute any agreement or understanding, express or implied, on the
part of the Company or its subsidiaries to employ the Grantee for any specific
period or in any specific capacity or shall prevent the Company or its
subsidiaries from terminating the Grantee's employment at any time with or
without Cause.
8. Change in Corporate Structure. In the event of any stock
split, spin-off, stock dividend, extraordinary cash dividend, stock combination
or reclassification, recapitalization or merger, Change of Control or similar
event, the Compensation Committee shall make an appropriate adjustment to the
level of dividends required under Section 2(a) of this Agreement, and such
other revisions to this Agreement as it deems are equitably required. Any
adjustment or revision made by the Compensation Committee shall be final and
binding on the Grantee, the Company and all other interested persons; provided;
however, that the Compensation Committee may not make any such adjustments or
revisions that are adverse to the Grantee without the Grantee's written
consent.
9. Application of Laws. The granting of Performance Units under
this Agreement shall be subject to all applicable laws, rules and regulations
and to such approvals of any governmental agencies as may be required.
10. Notices. Any notices required to be given hereunder to the
Company shall be addressed to The Secretary, X.X. Xxxxxxxx Tobacco Holdings,
Inc., Post Office Box 2866, Winston-Salem, NC 27102-2866, and any notice
required to be given hereunder to the Grantee shall be sent to the Grantee's
address as shown on the records of the Company.
11. Taxes. Any taxes required by federal, state or local laws to
be withheld by the Company in respect of the grant of Performance Units or
payment of the Payment Value hereunder shall be paid to the Company by the
Grantee by the time such taxes are required to be paid or deposited by the
Company. The Grantee hereby authorizes the necessary withholding by the Company
to satisfy such tax withholding obligations prior to delivery of the Payment
Value.
12. Administration and Interpretation. In consideration of the
grant of Performance Units hereunder, the Grantee specifically agrees that the
Compensation Committee shall have the exclusive power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation
and application of the Plan and Agreement as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretation
and determinations made by the Compensation Committee shall be final,
conclusive, and binding upon the Grantee, the Company and all other interested
persons. No member of the Compensation Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan or the Agreement. The Compensation Committee may delegate its
interpretive authority to an officer or officers of the Company.
13. Amendment. This Agreement is subject to the Plan, a copy of
which is attached. The Board of Directors may amend the Plan and the
Compensation Committee may amend this Agreement at any time and in any way,
except that any amendment of the Plan or this Agreement that would impair the
Grantee's rights under this Agreement may not be made without the Grantee's
written consent.
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14. Obligations of Grantee. (a) In consideration of the grant of
Performance Units hereunder, the Grantee, while both actively employed and in
the event of Grantee's Termination of Employment for any reason, specifically
agrees that within the term of this grant or within one year following the
payment of any amounts pursuant to the grant, if later: (i) the Grantee 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; (ii) the Grantee will promptly notify
the Company upon receipt of any requests from anyone other than an employee or
agent of the Company for information regarding the Company, or if the Grantee
becomes aware of any potential claim or proposed litigation against the
Company; (iii) the Grantee 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; (iv) the Grantee
will not disclose or misuse any confidential information or material concerning
the Company; and (v) the Grantee will not engage in any activity contrary or
harmful to the interests of the Company. In further consideration of the grant
of Performance Units hereunder, the Grantee specifically agrees that if
required by law to provide sworn testimony regarding any Company-related
matter: the Grantee 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); the Grantee will confine his testimony to items about
which the Grantee has knowledge rather than speculation, unless otherwise
directed by legal process; and the Grantee will cooperate with the Company's
attorneys to assist their efforts, especially on matters the Grantee has been
privy to, holding all privileged attorney-client matters in strictest
confidence.
(b) If the Company reasonably determines that the Grantee has
materially violated any of the Grantee's obligations under this Agreement, then
this Grant shall terminate, effective the date on which such violation began
(unless otherwise terminated sooner), and the Company may demand the return of
any amount paid to the Grantee hereunder and the Grantee hereby agrees to
return such amounts upon such demand. If after such demand the Grantee fails to
return such amounts, the Grantee acknowledges that the Company has the right to
deduct from any amounts the Company owes to the Grantee (including, but not
limited to, wages or other compensation), or to commence judicial proceedings
against the Grantee, to recover such amounts and any and all of its attorney's
fees and costs.
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15. GOVERNING LAW. THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN
THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT,
REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF
LAWS.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
the Grantee have executed this Agreement as of the Date of Grant first above
written.
X.X. XXXXXXXX TOBACCO HOLDINGS, INC.
By:
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Authorized Signatory
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Grantee
Xxxxxxx's Taxpayer Identification Number:
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Xxxxxxx's Home Address:
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