AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the “Agreement”) made and entered into as of
the 19th day of December 2008, by and between Lorillard, Inc. (the “Company”), a
Delaware corporation with its principal office at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxxx, XX 00000, and
Xxxxxx X. Xxxxxxxx (“Xxxxxxxx”), with his principal office at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxxx, XX
00000.
WITNESSETH:
WHEREAS, Xxxxxxxx has been Chief Executive Officer and President of the Lorillard Tobacco
Company (“Lorillard Tobacco”), a wholly-owned subsidiary of the Company, since January 1, 1999,
having served ably as President and Chief Operating Officer and in other executive positions prior
thereto;
WHEREAS, Xxxxxxxx has served as Chairman, President and Chief Executive Officer of the Company
since January 22, 2008;
WHEREAS, Lorillard Tobacco and Xxxxxxxx entered into an Employment Agreement (as amended and
restated effective February 1, 2008) as further amended on May 5, 2008 by letter agreement
(together, the “Prior Agreement”);
WHEREAS, Xxxxxxxx’x leadership and expertise have been, and will be in the future, major
factors in the successful operation of the Company in the difficult and rapidly changing
environment in which the Company finds itself;
WHEREAS, the Company deems it to be critical and in its best interests to retain the
experience, ability and management skills of Xxxxxxxx, and to enter into this Agreement, and
Xxxxxxxx desires to enter into this Agreement;
WHEREAS, Lorillard Tobacco desires to assign its rights and obligations under the Prior
Agreement to the Company, the Company desires to assume and be solely responsible for all such
obligations under the Prior Agreement, and Xxxxxxxx agrees to such assignment and assumption;
WHEREAS, the Compensation Committee (“Committee”) of the Board of Directors of the Company
reviewed the compensation arrangements set forth in the Prior Agreement with Xxxxxxxx and the
parties amended the Prior Agreement, through the execution of an Amended and Restated Employment
Agreement as of November 4, 2008 (the “Amended Agreement”);
WHEREAS, the parties determined that certain amendments to the Amended Agreement were
necessary to make the calculation of the Supplemental Retirement Benefit (as defined herein)
consistent with the terms of the Benefit Equalization Plan (as defined herein); and
WHEREAS, the parties intend that this Agreement shall supersede and replace the Amended
Agreement and become effective as of January 1, 2009 (the “Effective Date”) and that the terms and
conditions of the Prior Agreement shall remain in full force and effect through December 31, 2008.
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth in this
Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, as of
the Effective Date the parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ Xxxxxxxx and Xxxxxxxx agrees to be
employed by the Company, as Chief Executive Officer and President, on the terms and conditions
hereinafter set forth. Xxxxxxxx also shall serve as Chairman and a member of the Board of Directors
(the “Board”) of the Company.
2. TERM. Unless sooner terminated pursuant to the provisions for termination
hereinafter set forth, the employment of Xxxxxxxx hereunder shall extend from the date hereof
through December 31, 2010.
3. DUTIES. Xxxxxxxx will devote his full time, attention and energies to the business
of the Company in his capacities as Chief Executive Officer and President and as Chairman and
member of the Board, and shall faithfully and diligently discharge his duties and responsibilities
under this Agreement, using his best efforts to implement the policies and decisions established by
the Board, provided, however, that nothing set forth in this Paragraph 3 shall be
construed as preventing Xxxxxxxx from performing services on behalf of charitable, public service
or community organizations, as long as the same are not inconsistent with his obligations under
this Agreement. Furthermore, nothing herein contained shall restrict or prevent Xxxxxxxx from
personally, for his own account or for the account of his immediate family, trading in stocks,
bonds, securities, real estate or other forms of investment so long as such investment activities
do not interfere with Xxxxxxxx’x attention to or performance of his duties and responsibilities
under this Agreement and such investment activities are performed in accordance with applicable
law.
4. COMPENSATION:
(a) Base Salary. As of the Effective Date, Xxxxxxxx’x annual base salary, payable in
accordance with the Company’s prevailing payroll practices, shall be $1,200,000 (“Base Salary”).
From time to time throughout the term of this Agreement, said Base Salary may be increased by the
Committee and all references to Base Salary herein shall mean such Base Salary as so increased.
(b) Annual Bonus. For fiscal years 2009 and 2010, Xxxxxxxx’x annual cash bonus
compensation shall be set at a target level of not less than $2,500,000 (the “Annual Bonus”) for
each such fiscal year. The Annual Bonus will be administered by the Committee and will be based
upon the achievement of performance goals established by the Committee pursuant to the Lorillard,
Inc. 2008 Incentive Compensation Plan, adopted as of May 5, 2008 (the “Plan”), as the Plan may be
amended, or any successor plan. Such Annual Bonus, if any, shall be paid not later than March 15
immediately following the close of the prior fiscal year performance period and the Committee’s
determination regarding achievement of the performance goals. It is the intention of the parties
that such Annual Bonus shall constitute “performance based compensation” pursuant to Section 162(m)
of the Internal Revenue Code of 1986, as amended. Such Annual Bonus shall be subject to the terms
and conditions of the Plan.
(c) Equity Award. Xxxxxxxx shall be eligible to participate in such annual and
long-term equity awards in accordance with the terms of the Plan, as administered by the Committee,
provided to the Company’s senior executives and shall be awarded such equity awards with an
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expected value as of the date of grant, as estimated by the Committee, of not less than
$4,000,000 (“Equity Award”) for each Plan year there is such an award. Such Equity Award shall be
subject to the terms and conditions of the Plan.
5. OTHER BENEFITS.
(a) Employee Benefits. The Company will provide Xxxxxxxx during the term of this
Agreement with other employee benefits in the aggregate not less favorable than those then being
received generally by other executive employees of the Company.
(b) Supplemental Retirement Benefit. In addition to the retirement benefits Xxxxxxxx
is otherwise entitled to receive, Xxxxxxxx shall receive a Supplemental Retirement Benefit (the
“Supplemental Retirement Benefit”) payable under Section 1.2 of the Lorillard Tobacco Company
Benefit Equalization Plan (the “Benefit Equalization Plan”) as follows:
i. Amount. The Supplemental Retirement Benefit shall be an amount determined as if
it were a retirement allowance in accordance with Section 4.01(b)(2) of the Retirement Plan for
Employees of Lorillard Tobacco Company (the “Retirement Plan”) as in effect on January 1, 2005,
based upon the following Credited Service and Compensation, as such terms are used in the
Retirement Plan:
| (A) | Credited Service shall be fixed at 30 years minus the amount of
Credited Service for Xxxxxxxx under the Retirement Plan. |
||
| (B) | Compensation shall mean $2,200,000. |
ii. Vesting. The Supplemental Retirement Benefit shall be deemed earned and payable
only in the event that Xxxxxxxx serves as an executive officer of the Company through December
31, 2009, unless such employment is earlier terminated due to his death or Disability (as
defined below) or is earlier terminated by the Company without cause pursuant to Paragraph 7, in
which case the Supplemental Retirement Benefit shall be deemed earned and payable commencing on
such termination.
“Disability” means a period of medically determined physical or mental impairment that is
expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months during which Xxxxxxxx qualifies for income replacement benefits under the
Company’s long-term disability plan for at least three (3) months; or, if Xxxxxxxx does not
participate in such a plan, a period of disability during which Xxxxxxxx is unable to engage in
any substantial gainful activity by reason of any medically determined physical or mental
impairment which can be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months.
iii. Payment. Subject to Xxxxxxxxx 00, Xxxxxxxx, or his beneficiary, shall receive
the Supplemental Retirement Benefit in a lump sum on a date selected by the Company (but in no
event earlier than ninety (90) days or later than one hundred twenty (120) days) following the
earliest to occur of the following (all terms used herein shall have the meanings ascribed to
such terms under Code Section 409A and any Treasury Regulations or other guidance issued
thereunder): (i) Xxxxxxxx’x separation from service or (ii) Xxxxxxxx’x death. The amount of the
lump sum payment of the Supplemental Retirement Benefit shall be determined using the method for
computing lump sums in effect under Section 3.5(d) of the
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Benefit Equalization Plan.
iv. Unfunded Benefit. The Company shall make no provision for the funding of the
Supplemental Retirement Benefit. In the event the Company shall decide to establish an accrual
or reserve on its books against the future expense of the Supplemental Retirement Benefit, such
reserve shall not under any circumstances be deemed security for the payment of the Supplemental
Retirement Benefit but, at all times, shall remain general assets of the Company, subject to
claims of the Company’s creditors. The Company shall have no obligation to insure or otherwise
secure the Supplemental Retirement Benefit which may be payable hereunder. The Supplemental
Retirement Benefit shall not be deemed compensation for the purpose of any employee benefit plan
in which Xxxxxxxx may participate including, without limitation, the Retirement Plan and the
Benefit Equalization Plan.
(c) Benefit Equalization Plan. For all purposes of determining the Supplemental
Benefit under Section 1.12 of the Benefit Equalization Plan, total compensation shall mean
$2,200,000.
6. TERMINATION BY COMPANY FOR CAUSE. At any time during the term of this Agreement,
the Company shall have the right, upon giving Xxxxxxxx not less than thirty (30) days advance
written notice, to terminate the employment of Xxxxxxxx if:
(a) Xxxxxxxx commits any malfeasance in office or other similar violation of his duties and
responsibilities under the terms of this Agreement;
(b) Xxxxxxxx violates express instructions or specific policy of the Board materially
affecting the business of the Company, of which violation the Board has given Xxxxxxxx not less
than thirty (30) days advance written notice; or
(c) Xxxxxxxx commits any unlawful act which, in the reasonable judgment of the Board, xxxxx
the reputation of the Company or otherwise causes significant injury to the Company.
Any such termination as shall occur pursuant to any section of this Paragraph 6 shall be
deemed to be a termination “for cause.” Upon any such termination “for cause,” all obligations of
the Company to Xxxxxxxx hereunder shall terminate.
7. TERMINATION BY COMPANY WITHOUT CAUSE.
(a) The Company may at any time terminate Xxxxxxxx’x employment without cause for any reason
it deems appropriate or for no reason by giving Xxxxxxxx not less than thirty (30) days advance
written notice. Upon any such termination by the Company for reasons other than “for cause,” all
obligations hereunder of the Company will terminate, except as provided in Paragraph 7(b) below and
except with respect to any retirement or other employee benefits to which Xxxxxxxx may otherwise be
entitled.
(b) Subject to Paragraph 20, any termination of this Agreement by the Company without cause
pursuant to Paragraph 7(a) above shall not, however, affect the Company’s obligation to continue
the Base Salary and Annual Bonus payments pursuant to Paragraphs 4(a) and 4(b) for the remainder of
the employment term described in Paragraph 2. Furthermore, in the event of the termination of
Xxxxxxxx without cause, Xxxxxxxx shall have no duty to mitigate his damages, and the Company shall
have no right of offset with regard to any compensation Xxxxxxxx may earn subsequent to such
termination.
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8. TERMINATION BY REASON OF DEATH. In the event Xxxxxxxx dies during the term of this
Agreement, in addition to the proceeds of any life insurance or other Company employee benefits to
which his widow may be entitled, the Company shall pay to Xxxxxxxx’x widow, if she survives, the
prorated Base Salary in effect at the time of his death for a period of six (6) months after his
death.
9. TERMINATION BY XXXXXXXX. At any time during the term of this Agreement, Xxxxxxxx
may terminate his employment voluntarily for any reason or for no reason upon giving the Company
not less than thirty (30) days advance written notice. Upon any such voluntary termination, all
obligations of the Company to Xxxxxxxx hereunder shall terminate, except that in the event that
Xxxxxxxx retires on a Retirement Date (as set forth in the Retirement Plan) immediately following
such termination on or after December 31, 2009, the provisions of Paragraph 5(b) shall remain in
effect to the extent applicable.
10. CONFIDENTIALITY. After termination of Xxxxxxxx’x employment for any reason,
Xxxxxxxx shall hold in confidence all confidential and/or proprietary information, knowledge,
know-how, trade secrets, and similar matters and property of the Company, and shall not directly or
indirectly disclose or make use of any such confidential information.
11. NON-COMPETITION. Xxxxxxxx covenants and agrees that for a period of three (3)
years after the termination of his employment, for whatever reason, he will not, without the
written consent of the Company, directly or indirectly, engage in or be involved in any way with a
“competitive business.” “Competitive business,” as used in this Agreement, includes any business or
activity, wherever conducted in the Continental United States, which is engaged in the manufacture,
sale and distribution of cigarettes intended for sale and use in the domestic United States
cigarette market.
12. NON-SOLICITATION. Xxxxxxxx agrees that for a period of three (3) years following
the termination of his employment under this Agreement for any reason whatsoever, he will not,
directly or indirectly: (i) employ, hire or cause to be employed or hired any person who is
employed by the Company or any of its subsidiaries as an executive or key managerial employee on
the termination date of such employment or was so employed within one (1) year prior to
termination; or (ii) cause, invite, solicit, entice or induce any such person to terminate his
employment with the Company or any of its subsidiaries.
13. REASONABLENESS OF SCOPE AND DURATION. The parties hereto agree that the covenants
and agreements set forth in Paragraphs 11 and 12 are reasonable in their time, territory and scope,
and they intend that they be enforced, and no party shall raise any objection to the reasonableness
of the time, territory or scope of any such covenants in any proceeding to enforce such covenants.
14. REMEDIES. It is agreed that the remedies at law for any breach of this Agreement
on the part of Xxxxxxxx would be inadequate and that in the event of any such breach the Company
shall be entitled to seek to enjoin the same in the Superior Court of Guilford County, North
Carolina, or such other court which may have competent jurisdiction over the matter in dispute.
15. DISPUTE RESOLUTION. If any controversy or claim between the parties hereto arises
out of this Agreement, except as otherwise specifically provided in this Agreement or as mutually
agreed between the parties hereto, such disagreement or dispute shall be submitted to
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binding arbitration in Greensboro, North Carolina, under the Commercial Arbitration Rules of the
American Arbitration Association; provided, however, that if, pursuant to Paragraph 14 above, the
Company seeks the remedy of an injunction against Xxxxxxxx for breach of this Agreement, this
remedy shall be pursued in the Superior Court of Guilford County, North Carolina, or such other
Court which may have competent jurisdiction over the matter in dispute, and such proceeding and
issues shall not be subject to arbitration under this Paragraph 15.
16. SUCCESSORS AND ASSIGNS.
(a) Lorillard Tobacco hereby assigns its rights and obligations under the Prior Agreement to
the Company, and the Company assumes all of the rights and obligations under the Prior Agreement.
Xxxxxxxx acknowledges and consents to such assignment to and assumption by the Company.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
respective successors and assigns. The Company will require any successor to it (whether direct or
indirect, by stock or asset purchase, merger, consolidation or otherwise) or of all or
substantially all of its business or more than fifty percent (50%) of its assets, to expressly
assume and agree to perform this Agreement in the same manner and to the same extent the Company
would be required to perform this Agreement if no such succession had taken place.
17. ENTIRE AGREEMENT. This instrument contains the entire agreement of the parties
relating to the subject of employment; supersedes and replaces in its entirety any existing
employment agreement of Xxxxxxxx, including but not limited to the Amended Agreement upon execution
of the Agreement and the Prior Agreement as of the Effective Date; and may not be waived, changed,
modified, extended or discharged orally, except by agreement in writing signed by the party against
whom enforcement of any such waiver, change, modification, extension or discharge is sought. The
waiver or forbearance by the Company or by Xxxxxxxx of a breach of any provision of this Agreement
by the other party shall not operate or be construed as a waiver or forbearance of any subsequent
breach by that other party.
18. NOTICES. Any notice required or permitted to be given under this Agreement shall
be deemed properly given in writing and if mailed by registered or certified mail, postage prepaid
with return receipt requested, to the business address of the Company, to the attention of the Vice
President, General Counsel, and to the residence address of Xxxxxxxx, or to such other address as a
party is directed pursuant to written notice from the other party.
19. SEVERABILITY. If any provision of this Agreement is determined to be invalid or
unenforceable, such will not adversely affect the validity and enforceability of the remaining
provisions, and the invalid or unenforceable provision shall be deemed to have been deleted and
omitted from the Agreement.
20. CODE SECTION 409A. Certain provisions of this Agreement are intended to provide
for the deferral of compensation in accordance with Code Section 409A and Treasury Regulations and
published guidance issued pursuant thereto. Accordingly, this Agreement shall be construed in a
manner consistent with the requirements of Section 409A and may at any time be amended in the
manner and to the extent determined necessary or desirable by the Company to reflect or otherwise
facilitate compliance with such provisions with respect to amounts deferred on or after January 1,
2005. Notwithstanding any provisions of this Agreement to the contrary, no otherwise permissible
election or distribution shall be made or given effect under this Agreement that
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would result in income inclusion, interest and an excise tax under Section 409A. In the event of
any dispute between the Company and Xxxxxxxx regarding the interpretation of Section 409A, the
Company’s interpretation shall control in all cases for purposes of this Agreement.
If, at the time of Xxxxxxxx’x separation from service, Xxxxxxxx is deemed to be “specified
employee” of a public company as defined in Treasury Regulation Section 1.409A-1(i), deferred
compensation benefits to which Xxxxxxxx is entitled under any provision of this Agreement that are
payable on account of Xxxxxxxx’x separation from service shall not be paid until six (6) months
following Xxxxxxxx’x separation from service. Such amounts shall accrue interest at the rate
provided in Code Section 1274(b)(2)(B) and shall be paid to Xxxxxxxx on the first payroll date in
the seventh month following Xxxxxxxx’x separation from service or, if earlier, promptly following
Xxxxxxxx’x death.
21. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance
with the laws of the State of North Carolina without reference to the principles of conflict of
laws, except that a covenant of good faith and fair dealing shall apply with respect to all
obligations created under this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amended and Restated Employment
Agreement on this 19th day of December, 2008.
| LORILLARD, INC. | LORILLARD TOBACCO COMPANY | |||||
By:
|
/s/ Xxxxxx X. Xxxxxxxx | By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Xxxxxx X. Xxxxxxxx Senior Vice President, External Affairs, General Counsel and Secretary (pursuant to resolution of the Compensation Committee dated November 4, 2008) |
Xxxxxx X. Xxxxxxxx Senior Vice President, External Affairs, General Counsel and Secretary |
|||||
| Accepted and agreed: | ||||||
By:
|
/s/ Xxxxxx X. Xxxxxxxx | |||||
| Xxxxxx X. Xxxxxxxx | ||||||
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