Payment of Benefits Following Termination

Severance Agreement

Amendment to Severance Agreement

Change in Control Agreement

Amendment to Change in Control Agreement

 

EX-10.23 5 d270277dex1023.htm AGREEMENT FOR THE PAYMENT OF BENEFITS FOLLOWING TERMINATION OF EMPLOYMENT

Exhibit 10.23

FORM OF

AGREEMENT FOR THE PAYMENT OF BENEFITS

FOLLOWING TERMINATION OF EMPLOYMENT

AGREEMENT dated as of October 4, 2011 (the “Effective Date”) between Beam Inc., a Delaware corporation (the “Company”), and                              (the “Executive”),

W I T N E S S E T H:

WHEREAS, the Executive is employed by the Company; and

WHEREAS, the Company and the Executive desire to enter into this Agreement to set forth the benefits to be provided to the Executive in the event that his or her employment terminates under the circumstances described herein.

NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows:

 

 

1.

Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

 

 

(a)

Cause. “Cause” shall mean:

(i) the Executive’s willful and continuous failure to substantially perform his or her material duties (other than a failure due to a Disability);

(ii) the commission of any activities constituting a violation or breach under any federal, state or local law or regulation applicable to the activities of the Company, as determined in the reasonable judgment of the Company;

(iii) fraud, breach of fiduciary duty, dishonesty, misappropriation or other actions that cause significant damage to the property or business of the Company;

(iv) repeated absences from work such that the Executive is unable to perform his or her employment or other duties in all material respects, other than due to Disability;

(v) admission or conviction of, or plea of nolo contendere, to any felony that, in the reasonable judgment of the Company, adversely affects the Company’s reputation or the Executive’s ability to carry out the obligations of his or her employment or services;

(vi) loss of any license or registration that is necessary for the Executive to perform his or her duties for the Company;

 


(vii) failure to cooperate with the Company in any internal investigation or administrative, regulatory or judicial proceeding, as determined in the reasonable judgment of the Company;

(viii) any act or omission in violation or disregard of the Company’s policies, including but not limited to the Company’s harassment and discrimination policies and Standards of Conduct then in effect, in such a manner as to cause significant loss, damage or injury to the Company’s property, reputation or employees;

provided, however, that no act or failure to act on the Executive’s part shall be considered “willful” unless it is done, or omitted to be done, by him or her in bad faith or without reasonable belief that his or her action or omission was in the best interests of the Company. Any act or failure to act (A) based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company, (B) implementing in good faith the advice of counsel for the Company or (C) that meets the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the By-laws of the Company or the laws of the state of its incorporation or the directors’ and officers’ liability insurance of the Company, in each case as in effect at the time Cause would otherwise arise, shall be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of the Company.

(bChange in Control. A “Change in Control” shall be deemed to have occurred if, prior to the Executive’s Termination Date:

(i) any person (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as in effect on the date of this Agreement) (1) is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder, as in effect on the date of this Agreement) of 50% or more of the total fair market value or total voting power of the Company (“Voting Securities”) or (2) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person) ownership of the stock of the Company possessing 30% or more of the Voting Securities, excluding, in each case, however, the following: (A) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company; (B) any acquisition by the Company; (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company; (D) the acquisition of additional stock or voting power by a person considered to own more than 50% of the total fair market value or Voting Securities in the case of clause (1) of this clause (i) or by a person considered to own more than 30% of the Voting Securities in the case of clause (2) of this clause (i) or (E) any acquisition pursuant to a transaction that complies with clauses (A), (B) and (C) of clause (iii) below;

(ii) more than 50% of the members of the Board of Directors of the Company (the “Board”) shall, during a 12-month period, cease to be Continuing

 

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Directors (which term, as used herein, means the directors of the Company: (A) who were members of the Board on the date hereof; or (B) who subsequently became directors of the Company and who were elected or designated to be candidates for election as nominees of the Board, or whose election or nomination for election by the Company’s stockholders was otherwise approved, by a vote of a majority of the Continuing Directors then on the Board but shall not include, in any event, any individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14(a)-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board); or

(iii) the Company shall be merged or consolidated with, or, in any transaction or series of transactions, substantially all of the business or assets of the Company shall be sold or otherwise acquired by, another corporation or entity unless, as a result thereof: (A) the stockholders of the Company immediately prior thereto shall beneficially own, directly or indirectly, at least 60% of the combined Voting Securities of the surviving, resulting or transferee corporation or entity (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the assets of the Company , either directly or through one or more subsidiaries) (“Newco”) immediately thereafter in substantially the same proportions as their ownership immediately prior to such corporate transaction; (B) no person beneficially owns (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, and the rules and regulations promulgated thereunder (as in effect on the date hereof)), directly or indirectly, 30% or more of the combined Voting Securities of Newco immediately after such corporate transaction except to the extent that such ownership of the Company existed prior to such corporate transaction, and (C) more than 50% of the members of the Board of Directors of Newco shall be Continuing Directors.

(cChange in Control Benefit. “Change in Control Benefit” shall refer to any special or enhanced benefits described in Section 3 below to which the Executive may become entitled if his or her employment terminates for one of the reasons listed in Section 2(a) within the 24-month period following a Change in Control.

(d) Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e) Disability. “Disability” shall mean a physical or mental illness that results in the Executive’s absence from the full-time performance of his or her duties for 180 consecutive calendar days and within 30 days after the Notice of Termination is given to the Executive by the Company, the Executive shall not have returned to full-time performance of his or her duties.

(f) Good Reason. Termination of employment by the Executive for Good Reason shall be deemed to have occurred only if the Executive terminates his or her employment and provides a Notice of Termination to the Company prior to such date for any of the following reasons:

 

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(i) a material change in the Executive’s duties, responsibilities and status, or, in the event of a Change in Control, a material change in Executive’s reporting responsibilities, titles or offices as in effect at the time of a Change in Control;

(ii) a material reduction in the Executive’s then current base salary;

(iii) material reduction in the value of the benefits provided to the Executive (other than those plans or improvements that have expired in accordance with their original terms); provided that Good Reason shall not exist to the extent such benefits are similarly reduced or eliminated with respect to similarly situated senior executives of the Company;

(iv) after a Change in Control, the target bonus awarded by the Company’s Compensation and Stock Option Committee to Executive under the Annual Executive Incentive Compensation Plan of the Company (“Incentive Plan”) subsequent to a Change in Control is materially less than such amount last awarded to Executive prior to a Change in Control;

(v) after a Change in Control, the sum of the Executive’s base salary and amount paid to him or her as incentive compensation under the Incentive Plan for the calendar year in which the Change in Control occurs or any subsequent year is materially less than the sum of the Executive’s base salary and the amount awarded (whether or not fully paid) to him or her as incentive compensation under the Incentive Plan for the calendar year prior to the Change in Control or any subsequent calendar year in which the sum of such amounts was materially greater;

(vi) the relocation of the offices at which Executive is employed to a location more than 35 miles away or the Company requiring Executive to be based anywhere other than at a Company office within 35 miles of the offices at which the Executive is employed, except for required travel on Company business to an extent substantially consistent with Executive’s position;

(vii) any failure of the Company to comply with and satisfy Section 8;

(viii) any purported termination of the Executive’s employment by the Company which does not comply with Section 1(g) below. For the avoidance of doubt, such purported termination shall not be effective, but shall constitute Good Reason entitling the Executive to terminate his or her employment in accordance with this Section 1(f);

provided, further, that the Executive must provide written notice to the Company of the existence of Good Reason no later than 90 days after its initial existence, the Company shall have a period of 30 days following its receipt of such written notice during which it may remedy in all material respects the Good Reason condition identified in such written notice, and the Executive must terminate employment no later than two (2) years following the initial existence of the Good Reason condition identified in such written notice.

 

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(g) Notice of Termination. “Notice of Termination” shall mean a written notice sent by the Executive or the Company to the other party, describing the reasons for the termination of the Executive’s employment and including specific reference to the provision(s) of this Agreement at issue. Such Notice of Termination must be provided by the party seeking to terminate the Executive’s employment within 90 days of the existence of either Cause or Good Reason, as applicable, and the party receiving the Notice of Termination shall be given 30 days to remedy such situation (to the extent applicable).

(h) Termination Date. “Termination Date” shall mean:

(i) in the case of Disability, 30 days after Notice of Termination is given, provided that the Executive shall not have returned to the performance of his or her duties on a full-time basis during such 30-day period;

(ii) in the case of Cause, the date on which Notice of Termination is given;

(iii) in the case of Good Reason, 30 days after the Notice of Termination is given, provided that the Company has not either remedied the conditions giving rise to Good Reason or waived its right to do so; and

(iv) in the event that employment is terminated for any other reason, the date on which the Executive ceases to perform his or her duties for the Company;

provided, however, that, if within 30 days after any Notice of Termination is given, the receiving party notifies the other party that a dispute exists concerning the reasons for such termination of employment, the Termination Date shall be the date finally determined, either by written agreement of the parties or by a final judgment, order or decree of court of competent jurisdiction (the time for appeal having expired and no appeal having been perfected), to be the date that the Executive’s employment terminated; provided further, however, that if such dispute is resolved in favor of the Company, the Termination Date shall be the date determined under clauses (i) through (iv) of this Section 1(h).

2. Entitlement to Benefits. The Executive shall be entitled to the benefits described in Section 3 below if:

(a) the Executive’s employment is terminated either by the Company for reasons other than Disability or Cause or by the Executive for Good Reason; provided, however, that, in order for the Executive to be eligible for any Change in Control Benefits, such termination of employment must occur within 24 months after a Change in Control of the Company;

(b) the Executive’s Termination Date occurs while this Agreement is in effect; and

 

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(c) a Notice of Termination is provided in a timely manner (as described in Section 1(g)) prior to the Executive’s Termination Date by the Company (in the case of termination other than for Disability or Cause) or the Executive (in the case of termination for Good Reason).

Executive’s employment shall be deemed to have terminated for Cause if, after the Executive’s Termination Date, facts and circumstances are discovered that would have justified a termination for Cause. In such event, the Company shall immediately cease any and all payments and benefits being paid or provided to the Executive under Section 3 and the Executive shall repay to the Company within thirty (30) days all amounts previously paid to him or her pursuant to Section 3.

Nothing in this Agreement is intended to create or imply a promise or contract of employment for a specified term and either Executive or the Company may terminate the employment relationship at any time, with or without Cause or Good Reason, and with or without notice; provided, however, that the Executive shall not be entitled to any benefits under this Agreement in the event his or her employment is terminated by the Company for Disability or Cause, by the Executive other than for Good Reason or following the Executive’s death or the expiration of this Agreement. This Agreement shall have no effect on any obligations that the Company may have to the Executive if his or her employment terminates under circumstances not described herein.

3. Benefits Upon Termination of Employment. Notwithstanding the provisions of Section 2 above, in order to receive the benefits described in paragraphs (b), (c), (d) and (e) below, the Executive must timely deliver and not revoke an executed release of legal claims against the Company and its affiliates within the timelines set forth therein.

(a) Accrued Pay. The Company shall pay the Executive any base salary or vacation accrued but unpaid through his or her Termination Date.

(b) Severance Pay. The Company shall pay severance benefits to the Executive equal to the product of one and one-half (1.5) times the sum of the following amounts, subject to any applicable limitations in Sections 3(f) and 3(g) below:

(i) his or her annual base salary as in effect on the Effective Date, or, if applicable, the date of a Change in Control, plus

(ii) his or her target annual bonus under the Incentive Plan in effect in the calendar year in which the Termination Date occurs, plus

(iii) the amount that would have been required to be allocated to the Executive’s account (assuming that he elected the maximum employee contribution) for the year immediately preceding the year in which the Termination Date occurs under the Company’s 401(k) retirement plan, including the Company 401(k) matching contribution, and the profit-sharing provisions of the Company’s Supplemental Plan (the “Supplemental Plan”);

 

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Such severance amounts described above shall be paid to the Executive in regular installments through the Company’s normal payroll process and on the Company’s normal payroll dates commencing within 90 days following his or her Termination Date; provided, however, that if such 90-day period begins in a first taxable year and ends in a second taxable year, such severance amounts shall commence no earlier than the first payroll date of the second taxable year.

Notwithstanding anything to the contrary in this Section 3(b), for purposes of calculating a Change in Control Benefit, the multiplier in Section 3(b) above shall be changed to two (2) and the severance benefit shall be paid to the Executive in a single lump sum payment within 30 days following the Executive’s Termination Date; provided, however, that if such 30-day period begins in a first taxable year and ends in a second taxable year, such lump sum payment shall be paid to the Executive in the second taxable year.

(c) Continued Benefits Coverage. The Company shall maintain for the Executive’s benefit all employee life, health, accident, and medical plan coverage(s) that Executive was receiving immediately prior to his or her Termination Date, provided that his or her continued participation is allowed under the terms of such plans. The Company shall maintain such coverage(s) following the Executive’s Termination Date for 18 months, or, if the Executive is entitled to a Change in Control Benefit, two (2) years. With respect to any continued health coverage (medical, dental and vision), the Executive shall be required to pay the applicable active employee rate of coverage for similar coverage, and such coverage shall run concurrent with coverage required to be provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). If the Company continues to provide the continued health coverage described in this Section 3(c) after the applicable period of COBRA coverage would have otherwise expired, the Executive may be taxed on the value of such coverage. No other welfare or fringe benefits shall be provided except as specifically provided in this Section 3(c).

(d) Incentive Compensation. The following amounts shall become payable to the Executive following his or her Termination Date, as of the date that annual incentive awards are normally paid by the Company:

(i) any unpaid amounts awarded to the Executive as incentive compensation under the Incentive Plan for the calendar year immediately preceding the year in which the Termination Date occurs; and

(ii) an amount equal to the award the Executive would have received under the Incentive Plan based upon actual Company performance for the calendar year in which the Termination Date occurs, prorated for the portion of the calendar year during which the Executive was employed.

(e) Unvested Retirement Savings Benefits. If the Executive is entitled to a Change in Control Benefit, the Company shall pay to the Executive as additional severance pay in a lump sum an amount, if any, equal to the nonvested portion of his or her account balances under the Company’s 401(k) retirement plan and the defined contribution plan of any affiliate of the Company in which there is maintained for him or her an account balance which is not fully

 

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vested. Such payment shall be paid to the Executive in a lump sum payment within 30 days following the Executive’s Termination Date; provided, however, that if such 30-day period begins in a first taxable year and ends in a second taxable year, such lump sum payment shall be paid to the Executive in the second taxable year.

(f) Tax Withholding. The Company may withhold from any benefits payable under this Agreement any applicable federal, state, city or other taxes as required by law.

(g) Time of Payment for Specified Employees. Notwithstanding any provision of this Section 3 to the contrary, if the Executive is a “specified employee” of the Company (as defined in Section 409A of the Code), amounts that would otherwise have been paid to or on behalf of the Executive under the foregoing provisions of this Section 3 (but excluding amounts described in paragraphs 3(a) and 3(c) above) during the six-month period immediately following the Termination Date shall be paid on the first regular payroll date immediately following the six-month anniversary of the Termination Date.

(h) No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 3 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 3 be reduced by any compensation earned by the Executive as the result of employment by another employer after the Termination Date or by any other compensation.

(iNo Other Severance Benefits. 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 the Company, its affiliates or any of their predecessors, including but not limited to any severance pay program or other documents covering salaried or executive employees generally maintained by the Company, any of its affiliates or subsidiaries. To the extent severance payments or benefits are required under any applicable local law or otherwise, benefits payable under this Agreement shall be reduced to the extent of any such severance payments or benefits (including, but not limited to, any laws requiring payment in lieu of notice upon the Executive’s termination of employment).

4. Certain Reductions Due to Section 280G. Notwithstanding any provision of this Agreement to the contrary, in the event it shall be (or is subsequently) determined that any payment, distribution or acceleration of vesting by the Company to or for the benefit of the Executive (whether pursuant to the terms of this Agreement or otherwise (any such payment, distribution or acceleration of vesting being referred to as a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Change in Control Benefit payable to the Executive under this Agreement shall be reduced (or appropriately adjusted) to an amount that is one dollar less than the smallest amount that would give rise to the Excise Tax (the “Reduced Amount”) if such Reduced Amount would be greater than the net after-tax proceeds (taking into account both the Excise Tax and any interest or penalties payable with respect to the Excise Tax) of the unreduced Change in Control Benefit payable to the Executive. If the Change in Control Benefit is required to be reduced pursuant to this Section 4, there shall be no discretion in the ordering of the Payments payable under this Agreement so

 

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reduced, and such reductions shall be applied in the order which results in the best economic benefit to Executive; and to the extent such ordering of reductions is economically equivalent, such Payments shall be reduced on a pro rata basis.

5. Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Code and shall be interpreted and construed consistently with such intent. The payments to the Executive pursuant to this Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for this purpose each payment shall constitute a “separately identified” amount within the meaning of Treasury Regulation §1.409A-2(b)(2). Notwithstanding anything in this Agreement to the contrary, in the event that any amounts payable (or benefits provided) under this Agreement are subject to the provisions of Section 409A of the Code, to the extent determined necessary, the parties agree to amend this Agreement in the least restrictive manner necessary to avoid imposition of any additional tax or income recognition on the Executive under Section 409A of the Code, the final Treasury Regulations and other Internal Revenue Service guidance thereunder (“409A Penalties”); provided, that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement. In addition, to the extent necessary to comply with Section 409A of the Code, references to termination of employment (and similar phrases) in this Agreement shall be interpreted in a manner that is consistent with the term “separation from service” under Section 409A(a)(2)(A)(i) of the Code and final Treasury Regulations and other Internal Revenue Service guidance thereunder.

 

 

6.

Restrictive Covenants.

(a) Confidential Information. The Executive acknowledges that he or she will have access to highly confidential information of the Company and its affiliates, including, but not limited to: financial information, supply and service information, marketing information, personnel data, customer lists, business and financial plans and strategies, and product costs, sources and pricing. The Company and the Executive consider it imperative that all such information (“Confidential Trade Secrets”) be held in complete confidence and trust. Accordingly, the Executive agrees that, notwithstanding any other provision of this Agreement to the contrary, during and following the Executive’s Termination Date with the Company, regardless of the reasons that such employment might end, the Executive will:

(i) hold all Confidential Trade Secrets in confidence and not discuss, communicate, disclose or transmit to others, or make any unauthorized copy of or use the Confidential Trade Secrets in any capacity, position or business unrelated to the Company;

(ii) use the Confidential Trade Secrets only in furtherance of proper Company employment related business reasons; and

(iii) take all reasonable action that the Company deems necessary and appropriate to prevent unauthorized use or disclosure of or to protect the Confidential Trade Secrets.

 

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Notwithstanding the foregoing, it is understood and agreed that the Executive’s obligations under this Section 6(a) do not extend to any knowledge or information which is or may become available to the public or to competitors other than by disclosure by the Executive in breach of this Agreement nor to any information the Executive may learn or develop independent of the Confidential Trade Secrets, nor to disclosure compelled by judicial or administrative proceeding after the Executive diligently tries to avoid each disclosure and affords the Company the opportunity to obtain assurance that compelled disclosures will receive confidential treatment.

(b) Loyalty; Non-Solicitation. The Executive further acknowledges that the loyalty and dedicated service of the Company’s and its affiliates’ employees is critical to the Company’s business. Accordingly, the Executive agrees that during and for a period of twelve (12) months after the Executive’s Termination Date, regardless of the reasons for the termination of employment, he or she will not, without the prior written consent of the Company, induce or attempt to induce any employee or agency representative of the Company or any of its affiliates to leave the employment or representation of the Company or of any affiliate. The Executive also agrees that during and after his or her employment, he will not take any action, or make any statements, that discredit or disparage the Company or its affiliates, or its or their officers, directors, employees or products. The Company agrees that it will not take any action or make any statements during and after Executive’s employment that discredit or disparage the Executive. The two preceding sentences shall not apply to statements made in papers filed in good faith with a court of law in connection with a lawsuit between the Executive and the Company or any of its affiliates.

(c) Non-Competition. The Executive acknowledges that the Company and its affiliates have invested time and money in establishing or planning to establish one or more aspects of its business in major Beam markets, including but not limited to the United States, Australia/Southeast Asia/India/Brazil, Canada, Mexico and Europe/Middle East/Africa (the “Competitive Markets”). Therefore, the Executive agrees that during his or her employment by the Company and for a period of 12 months after the Executive’s Termination Date, the Executive will not:

(i) directly or indirectly, individually engage in nor be competitively employed or retained by, or render any competing services for, or be financially interested in, any firm or corporation engaged in any business in the Competitive Markets which competes with any business in which the Company or any of its affiliates was engaged during the two-year period preceding the Executive’s Termination Date, including, but not limited to any business in which, during such two-year period, the Executive was involved in the Company’s or any affiliate’s planning to enter such business. Notwithstanding the foregoing, this restriction shall not apply to:

(A) the purchase by the Executive of stock not to exceed 5% of the outstanding shares of capital stock or any corporation whose securities are listed on any national securities exchange; or

(B) the employment of the Executive by a non-competitive subsidiary or non-competitive affiliated entity of a competitor of the Company upon the Company’s written consent, which consent shall not be unreasonably withheld.

 

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(ii) solicit business from nor directly or indirectly cause others to solicit business that competes with the Company’s line of products from any entities which have been customers of the Company during the Executive’s employment or which were targeted as potential customers during the twelve (12) months preceding the Executive’s Termination Date;

provided, however, that the provisions of this Section 6(c) shall not apply if the Executive’s Termination Date occurs after a Change in Control.

(d) Remedies. The Executive recognizes and agrees:

(i) that the covenants and restrictions in paragraphs (a), (b) and (c) of this Section 6 are reasonable and valid and all defenses to the strict enforcement of such sections by the Company are waived by the Executive to the full extent permitted by law. In the event, however, that a court of competent jurisdiction should determine in any case that the enforcement of any provision contained in such paragraphs would not be reasonable, it is intended that enforcement of a provision which is determined by such court to be reasonable shall be given effect; and

(ii) that a breach of the covenants and restrictions in paragraphs (a), (b) or (c) of this Section 6 would result in irreparable harm to the Company which could not be compensated by money damages alone. Accordingly, the Executive agrees that should there be a breach of any or all of these provisions or a threatened breach, the Company shall be entitled to cease paying amounts under Section 3 and to offset any amounts it owes to Executive against any damage that it has suffered as a result of the breach of any of the covenants and restrictions in paragraphs (a), (b) or (c) of this Section 6 and, in addition to its other remedies, to an order enjoining any such breach or threatened breach without bond. In addition, the Executive agrees that, in the event he or she breaches any of the covenants or restrictions of paragraphs (a), (b) or (c) of this Section 6, he will promptly repay to the Company upon demand any amounts paid to him or her pursuant to Section 3. The Executive further agrees that if the Company prevails in any action to enforce these provisions, he or she will reimburse the Company for its attorney fees and costs incurred in pursuing such action.

The Company agrees that it will seek enforcement of paragraphs (a), (b) and (c) of this Section 6 only in a good faith, reasonable manner and will not seek to enforce such sections solely for malicious and punitive reasons.

7. Disputes. In the event that the Executive prevails in any action to obtain or enforce any rights under this Agreement, the Company shall pay the cost of legal fees and expenses incurred by Executive in such action, which payment shall be made directly to the provider of services within the time period required by Section 409A of the Code; provided,

 

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however that the Executive shall be required to deliver and not revoke an executed release of claims in the form attached hereto as Exhibit A (as such release may be updated from time to time to reflect legal requirements). If a dispute arises concerning the Executive’s entitlement to benefits under this Agreement following a Change in Control, the Company shall continue to pay Executive’s full base salary through the date finally determined to be his or her Termination Date.

8. Successors; Binding Agreement.

(a) The Company shall require any successor to all or substantially all of its business or assets (whether direct or indirect, by purchase, merger, consolidation or otherwise), and any parent company thereof, to expressly assume and agree to perform the Company’s obligations under this Agreement.

(b) This Agreement shall not be assignable by the Executive except by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive and his or her personal or legal representatives and successors in interest.

9. Term. Unless otherwise earlier terminated in writing by both parties, this Agreement shall be effective for the three (3) year period commencing on the Effective Date. At the close of such three (3) year period and on each subsequent third anniversary of the Effective Date, the Agreement shall automatically renew for an additional three (3) year period unless either party hereto shall notify the other party in writing of its intent not to renew the Agreement no less than thirty (30) days prior to the expiration of the pending term; provided, however, that if within six (6) months following the non-renewal of the Agreement by the Company, the Company executes a definitive agreement which would lead to a Change in Control, then notwithstanding any other term or provision of this Agreement, this Agreement shall be deemed not to have been terminated and will be effective in accordance with its terms through and including the date of such Change in Control (or the date on which such definitive agreement is terminated, if earlier); and provided further, that if a Change in Control occurs during the term of this Agreement, the Agreement shall remain in effect for no less than 24 months following such Change in Control. Notwithstanding the termination or expiration of this Agreement, the Restrictive Covenants provisions of Section 6 hereof shall remain in full force and effect as provided above.

10. Notice. Any notice, demand or other communication required or permitted under this Agreement shall be effective only if it is in writing and delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Company:

Beam Inc.

510 Lake Cook Road

Deerfield, Illinois 60015

Attention:    General Counsel

 

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If to the Executive:

At the address most recently on file with the Company

or to such other address as either party may designate by written notice to the other and shall be deemed to have been given as of the date so personally delivered or mailed.

11. Miscellaneous.

(a) This Agreement cannot be modified or any term or condition waived in whole or in part except by a writing signed by the party against whom enforcement of the modification or waiver is sought.

(b) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

(c) No waiver by either party at any time of any breach of this Agreement by the other party shall be deemed a waiver of such provisions or conditions at any prior or subsequent time.

(d) The headings in this Agreement are included for convenience and shall not affect the meaning or interpretation of this Agreement.

(e) The invalidity or unenforceability of one or more provisions of this Agreement shall not affect the enforceability any other provision of this Agreement.

(f) This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and such counterparts will together constitute one Agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and attested to and the Executive has set his or her hand as of the date first above written.

 

BEAM INC.

By:

 

 

Name:

 

 

Its:

 

 

 

ATTEST:

 

 

 

EXECUTIVE

 

 

 

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Exhibit 10.3

SEVERANCE AGREEMENT

AGREEMENT dated as of September 19, 2007 between FORTUNE BRANDS, INC., a Delaware corporation (the “Company”), and Bruce A. Carbonari (the “Executive”),

WITNESSETH:

WHEREAS, the Executive is currently employed by the Company and has throughout his period of employment rendered valuable service to the Company; and

WHEREAS, the Executive desires to continue in full-time employment with the Company, but desires to be provided with the assurance of receiving certain severance benefits in the event the Company were to take certain actions resulting in the termination of his employment; and

WHEREAS, in order for the Company to continue to have the benefit of the Executive’s knowledge and experience as a full-time employee of the Company, the Company desires to provide him with the assurance of receiving severance benefits to be a vital element in protecting and enhancing the best interests of the Company and its stockholders; and

WHEREAS, the Company and the Executive desire to enter into this Agreement to set forth the terms and conditions of such severance benefits; and

WHEREAS, simultaneously with the execution of this Agreement, Executive and the Company are entering into a Change of Control Agreement (the “Change of Control Agreement”);

NOW, THEREFORE, in consideration of the premises and of the mutual agreements hereinafter contained, the parties agree as follows:

1. Termination of Employment.

(a) Entitlement to Benefits. If and only if during the term of this Agreement the Executive’s employment with the Company is terminated by the Company other than for Disability or Cause or by the Executive for Good Reason (as defined in this Section 1), the Executive shall be entitled to benefits as provided in Section 2. The Executive shall not be entitled to any benefits under this Agreement in the event his employment with the Company is terminated as a result of his death, by the Company for Disability or Cause or by the Executive other than for Good Reason.

(b) Disability. Termination of employment by the Company for Disability hereunder shall be deemed to have occurred only if, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have been absent from his duties with the Company on a full-time basis for 180 consecutive days and, within 30 days after Notice of Termination (as defined in Section 1(d)) is given to the Executive by the Company, the Executive shall not have returned to the full-time performance of his duties.


(c) Cause. Termination of employment by the Company shall be deemed to be for Cause only if (i) termination shall have been the result of (A) an act or acts of dishonesty on the Executive’s part that results in Executive being indicted for a felony, or (B) the Executive’s willful and continued failure substantially to perform his duties and responsibilities as an officer of the Company (other than any such failure resulting from his incapacity due to physical or mental illness) after a demand for substantial performance is delivered to the Executive by the Board of Directors of the Company which specifically identifies the manner in which such Board believes that the Executive has not substantially performed his duties and the Executive is given a reasonable time after such demand substantially to perform his duties, and (ii) there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds ( 2/3) of the members of the Board of Directors of the Company at a meeting called and held for the purpose (after reasonable notice to the Executive and an opportunity for him, together with his counsel, to be heard before such Board), finding that in the good faith opinion of the Board of Directors of the Company that the Executive was guilty of conduct set forth above in clause (i)(A) or (i)(B) of this Section 1(c) and specifying the particulars thereof in detail. The Executive’s employment shall in no event be considered to have been terminated by the Company for Cause if the act or failure to act upon which such termination is based (x) was done or omitted to be done (1) as a result of bad judgment or negligence on his part, or (2) as a result of his good faith belief that such act or failure to act was in or was not opposed to the interests of the Company, or (y) is an act or failure to act in respect of which the Executive meets the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the By-laws of the Company or the laws of the state of its incorporation or the directors’ and officers’ liability insurance of the Company, in each case as in effect at the time of such act or failure to act.

(d) Notice of Termination. Any termination by the Company for Disability or Cause shall be communicated by Notice of Termination to the Executive and any termination by the Executive for Good Reason shall be communicated by Notice of Termination to the Company. For purposes of this Agreement, a “Notice of Termination” shall mean a notice in writing which indicates the specific termination provision in this Agreement relied upon and sets 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.

(e) Termination Date. “Termination Date” shall mean (i) if employment is terminated by the Company for Disability, 30 days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such 30-day period), (ii) if employment is terminated by the Company for Cause, the date on which a Notice of Termination is given, (iii) if employment is terminated for Good Reason, the date specified in the Notice of Termination, and (iv) if employment is terminated for any other reason, the date on which the Executive ceases to perform his duties for the Company; provided, however, that, if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Termination Date shall be the date finally determined to be the Termination Date, either by written agreement of the parties or by a final judgment, order or decree of court of competent jurisdiction (the time for appeal having expired and no appeal having been perfected); provided further, however, that if the dispute is resolved in favor of the Company, the Termination Date shall be the date determined under clauses (i) through (iv) of this Section 1(e).

 

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(f) Good Reason. Termination of employment by the Executive for Good Reason shall be deemed to have occurred only if the Executive terminates his employment and provides a Notice of Termination to the Company prior to such date for any of the following reasons:

(i) without Executive’s express written consent, a material change in the duties assigned to Executive, except in connection with the termination of his employment as a result of Executive’s death or by the Company for Disability or Cause or by Executive other than for Good Reason;

(ii) a reduction by the Company in the Executive’s then current base salary;

(iii) failure by the Company to substantially maintain Executive’s participation in the Company’s benefit plans; provided that the Company may eliminate Executive’s participation in such plans if participation ceases for similarly situated senior executives and further provided that the Company may make adjustments to Executive’s level of benefits under such plans. Such benefit plans shall include, but not be limited to, the provisions for incentive compensation under the Annual Executive Incentive Compensation Plan of the Company and the Company’s Retirement Plan, Supplemental Plan (as defined in Section 2(b)(iii)) (including the supplemental profit-sharing of the Supplemental Plan), the Fortune Brands Retirement Savings Plan (including the tax deferred and related Company matching contributions) and the Long-Term Incentive Plan;

(iv) the relocation of the Company’s principal executive offices to a location more than 35 miles from it location on the date of this Agreement or the Company requiring the Executive to relocate to any office other than the Company’s principal executive offices, except for required travel on the Company’s business;

(v) any reduction in the number of vacation days provided to the Executive, unless such reduction is applicable to officers of the Company generally;

(vi) any failure of the Company to comply with and satisfy Section 7;

(vii) any purported termination of the Executive’s employment by the Company which is not effected pursuant to a Notice of Termination, and for purposes of this Agreement, no such purported termination shall be effective;

provided, however, that termination of employment by the Executive under clauses (ii) or (iii) above shall not be deemed to have occurred for Good Reason if the reason for the compensation reduction or failure of benefit plan coverage thereunder is due to a change in the individual elements of aggregate compensation, which change is applicable to officers of the Company generally, without a material reduction in aggregate compensation; provided, further, that the Executive must provide written notice to the Company of the existence of Good Reason no later

 

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than 90 days after its initial existence, the Company shall have a period of 30 days following its receipt of such written notice during which it may remedy in all material respects the Good Reason condition identified in such written notice, and the Executive must terminate employment with the Company no later than 2 years following the initial existence of the Good Reason condition identified in such written notice.

2. Compensation Upon Termination.

(a) If the Executive’s employment is terminated by the Company for Disability or Cause or by the Executive for other than Good Reason, the Company shall have no obligation to pay any compensation to the Executive under this Agreement in respect of periods beginning on and after the Termination Date, but this Agreement shall have no effect on any other obligation the Company may have to pay the Executive compensation to which he may otherwise be entitled.

(b) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, then the Company shall pay to the Executive as severance pay ratably (or as otherwise provided under subsection (g) below) over the 12-month period commencing on the Executive’s Termination Date (provided that Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements) an amount equal to the product of three (3) (or, if lesser, the fraction of year(s) from the Termination Date to the Executive’s Normal Retirement Date (as defined in the Fortune Brands Pension Plan)) times the sum of:

(i) his annual base salary at the rate in effect on the date hereof plus any increases therein subsequent thereto, plus

(ii) his target annual bonus under the Annual Executive Incentive Compensation Plan in effect in the calendar year in which the Termination Date occurs, plus

(iii) the amount that would have been required to be allocated to the Executive’s account (assuming that he elected the maximum employee contribution) for the year immediately preceding the year in which the Termination Date occurs under the Fortune Brands Retirement Savings Plan, including the Company 401(k) matching contribution, and the profit-sharing provisions of the Supplemental Plan of Fortune Brands, Inc. (the “Supplemental Plan”).

(c) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), the Company shall maintain in full force and effect, for the Executive’s continued benefit for a three (3) year period (or, if shorter, the period until his Normal Retirement Date) after the Termination Date, all employee life, health, accident, disability, medical and other employee welfare benefit plans, programs or arrangements in which he was participating immediately prior

 

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to the Termination Date, provided that his continued participation is possible under the terms and provisions of such plans, programs and arrangements. In the event that the Executive’s participation in any such plan, program or arrangement is barred (or the provision of health or medical benefits would result in taxable income to Executive for coverage beyond the maximum applicable continuation coverage period under the Consolidated Omnibus Budget Reconciliation Act of 1985), the Company shall arrange to provide him with benefits (or cash equivalent thereof) substantially similar to those which he would have been entitled to receive under such plan, program or arrangement if he had remained a participant for such additional three (3) year period (or, if shorter, such additional period until his Normal Retirement Date) after the Termination Date.

(d) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), then in addition to the retirement benefits to which the Executive is entitled under the Retirement Plan, the Supplemental Plan and any other defined benefit pension plan maintained by the Company or any affiliate, and any other program, practice or arrangement of the Company or any affiliate to provide the Executive with a defined pension benefit after termination of employment, and any successor plans thereto (all such plans being collectively referred to herein as the “Pension Plans”), the Company shall pay the Executive monthly beginning at the earliest date that payments commence under any of the Pension Plans an amount equal to the excess of (i) over (ii) below where:

(i) equals the sum of the aggregate monthly amounts of pension payments (determined as a straight life annuity) to which the Executive would have been entitled under the terms of each of the Pension Plans in which he was an active participant as of the Termination Date determined as if he were fully vested thereunder and had accumulated three (3) additional years (or, if less, the fraction of a year from the Termination Date to the Executive’s Normal Retirement Date) of Service thereunder (subsequent to his Termination Date) at his rate of Compensation in effect on the Termination Date, and where;

(ii) equals the sum of the aggregate monthly amounts of pension payments (determined as a straight life annuity) to which the Executive is entitled under the terms of each of the Pension Plans in which he was an active participant at the date hereof or subsequently.

For purposes of clause (i), the amounts payable pursuant to Sections 2(b)(i) and (ii) shall be considered as part of the Executive’s Compensation and such amounts shall be deemed to represent three (3) years (or, if less, the fraction of a year from the Termination Date to the Executive’s Normal Retirement Date) of Compensation for purposes of determining his highest consecutive five year average rate of Compensation. The supplemental pension benefits determined under this Section 2(d) shall be payable by the Company to the Executive and his contingent annuitant, if any, or to the Executive’s surviving spouse as a spouse’s benefit if the Executive dies prior to commencement of benefits under this Agreement, in the same manner and for as long as his pension benefits under the Supplemental Plan and shall be adjusted

 

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actuarially to reflect payment in a form other than a straight life annuity. Benefits which commence prior to the age at which benefits may be paid without actuarial reduction for early payment under the Retirement Plan shall be actuarially reduced to reflect early commencement to the extent, if any, provided in the Retirement Plan as if the Executive’s Termination Date were an Early Retirement Date. In the event that an employee grantor trust (“Grantor Trust”) has been established among the Company, the Executive and a Trustee, the Company shall provide the additional pension benefits payable under this Section 2(d) in the same manner as Supplemental Plan benefits are provided after termination of employment to executives with Grantor Trusts and shall be calculated using the same assumptions as used to provide Supplemental Plan benefits. All capitalized terms used in this Section 2(d) shall have the same meaning as in the Retirement Plan as in effect on the date hereof, unless otherwise defined herein or otherwise required by the context.

(e) If the Company terminates the Executive’s employment other than for Disability or Cause, or the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), the Company shall pay to the Executive as additional severance pay in a lump sum on the eighth day (or such other day as required under Code Section 409A) following the date the Executive delivers an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements) following the Termination Date an amount, if any, equal to the nonvested portion of his account balances under the Fortune Brands Retirement Savings Plan and the defined contribution plan of any affiliate of the Company in which there is maintained for him an account balance which is not fully vested.

(f) If the Company terminates the Executive’s employment other than for Disability or Cause, or the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), the Executive shall be entitled to the following as incentive compensation through the Termination Date:

(i) the unpaid portion of the amount awarded to him as incentive compensation under the Annual Executive Incentive Compensation Plan for the calendar year immediately preceding the year in which the Termination Date occurs, payable at the time annual incentive awards are normally paid; and

(ii) incentive compensation under the Annual Executive Incentive Compensation Plan for the calendar year in which the Termination Date occurs, payable at the time annual incentive awards for that year are normally paid, in an amount equal the Executive’s target percentage prorated for the portion of the year through the Termination Date.

(g) If the Executive is a “specified employee” of the Company (as defined in Treasury Regulation Section 1.409A-1(i)) and if amounts payable under this Section 2 are on account of an “involuntary separation from service” (as defined in Treasury Regulation Section

 

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1.409A-1(m)), the Executive shall receive payments during the six (6)-month period immediately following the Termination Date equal to the lesser of (x) the amount payable under this Section 2 or (y) two times the compensation limit in effect under Code Section 401(a)(17) for the calendar year in which the Termination Date occurs (with any amounts that otherwise would have been payable under this Section 2 during such six (6)-month period being paid on the first regular payroll date following the six (6)-month anniversary of the Termination Date). If the Company reasonably determines that such termination is not an “involuntary separation from service” (as defined in Treasury Regulation Section 1.409A-1(m)), amounts that would otherwise have been paid during the six (6)-month period immediately following the Termination Date shall be paid on the first regular payroll date immediately following the six (6)-month anniversary of the Termination Date.

(h) If the Company terminates Executive’s employment other than for Disability or Cause or if the Executive terminates his employment for Good Reason subsequent to a Change in Control and a dispute exists concerning the termination as set forth in subsection (e) of Section 1, the Company shall continue to pay Executive’s full base salary through the date finally determined to be the Termination Date as provided in subsection (e) of Section 1.

(i) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 2 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 2 be reduced by any compensation earned by the Executive as the result of employment by another employer after the Termination Date or by any other compensation.

(j) Subject to Section 2(k), this Agreement and the obligations of the Company under it shall not be in derogation of any other obligations of the Company not set forth herein to pay any compensation or to pay or provide any benefit to the Executive.

(k) Notwithstanding any other provision of this Agreement, (a) any amount otherwise payable to the Executive pursuant to the Change in Control Agreement shall be reduced by the amount of any payments made by the Company to the Executive under this Section 2, and (b) any benefits to which the Executive is entitled under the Company’s severance pay program covering salaried or executive employees generally shall be reduced by benefits paid under Section 2(b)(i) and (ii) of this Agreement. This Agreement supersedes any prior Severance Agreement with the Executive.

3. Confidential Information.

(a) The Executive acknowledges that given his high level position with the Company, he has had and will have access to highly confidential information of the Company and its affiliates, including, but not limited to, financial information, supply and service information, marketing information, personnel data, customer lists, business and financial plans and strategies, and product costs, sources and pricing. The Company and the Executive consider their relation to be one of high confidence with respect to all such information (“Confidential Trade Secrets”). Accordingly, the Executive agrees that during and for a period of twelve (12) months after the termination of his employment with the Company, regardless of the reasons that such employment might end, the Executive will:

(i) Hold all Confidential Trade Secrets in confidence and not discuss, communicate, disclose or transmit to others, or make any unauthorized copy of or use the Confidential Trade Secrets in any capacity, position or business unrelated to the Company;

 

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(ii) Use the Confidential Trade Secrets only in furtherance of proper Company employment related business reasons; and

(iii) Take all reasonable action that the Company deems necessary and appropriate to prevent unauthorized use or disclosure of or to protect the Company’s interests in the Confidential Trade Secrets.

(b) It is understood and agreed that the Executive’s obligations under Section 3(a) do not extend to any knowledge or information which is or may become available to the public or to competitors otherwise than by disclosure by the Executive in breach of this Agreement nor to disclosure compelled by judicial or administrative proceeding after the Executive diligently tries to avoid each disclosure and affords the Company the opportunity to obtain assurance that compelled disclosures will receive confidential treatment.

4. Loyalty. The Executive further acknowledges that the loyalty and dedicated service of the Company’s and its affiliates’ employees is critical to the Company’s business. Accordingly, the Executive agrees that during and after his employment by the Company, regardless of the reasons the employment might end, he will not, without the prior written consent of the Company, induce or attempt to induce any employee or agency representative of the Company or any of its affiliates to leave the employment or representation of the Company or of any affiliate. The Executive also agrees that during and after his employment, he will not take any action, or make any statements, that discredit or disparage the Company or its affiliates, or its or their officers, directors, employees or products. The Company agrees that it will not take any action or make any statements during and after Executive’s employment that discredit or disparage the Executive. The two preceding sentences shall not apply to statements made in papers filed in good faith with a court of law in connection with a lawsuit between the Executive and the Company.

5. Non-Competition.

(a) The Executive acknowledges that the Company and its affiliates have invested time and money in establishing or planning to establish one or more aspects of its business throughout the United States, Canada, Asia, Mexico and Europe. Therefore, the Executive agrees that during his employment by the Company and for a period of twelve (12) months after the termination of his employment, the Executive will not, directly or indirectly, individually engage in nor be competitively employed or retained by, or render any competing services for, or be financially interested in, any firm or corporation engaged in any business in the United States, Canada, Asia, Mexico or Europe which is directly competitive with any significant business in which the Company or any of its affiliates was engaged during the two-year period preceding the date the Executive’s employment terminates, including, but not limited to any significant business in which, during such two-year period, the Executive was involved in the Company’s or any affiliate’s planning to enter such business.

 

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(b) The restriction in Section 5(a) shall not apply to:

(i) The purchase by the Executive of stock not to exceed 5% of the outstanding shares of capital stock or any corporation whose securities are listed on any national securities exchange; or

(ii) The employment of the Executive by a non-competitive subsidiary or non-competitive affiliated entity of a competitor of the Company or any affiliate upon written consent of the Company, which consent shall not be unreasonably withheld.

(c) The Executive also agrees that for a period of twelve (12) months after the termination of his employment with the Company he will not solicit business from nor directly or indirectly cause others to solicit business that competes with the Company’s or any affiliate’s line of products from any entities which have been customers of the Company during the Executive’s employment or which were targeted as potential customers during Executive’s employment.

6. Remedies. The Executive recognizes and agrees:

(a) That the covenants and restrictions in Sections 3, 4 and 5 of this Agreement are reasonable and valid and all defenses to the strict enforcement of such sections by the Company are waived by the Executive to the full extent permitted by law. In the event, however, that a court of competent jurisdiction should determine in any case that the enforcement of any provision contained in such paragraphs would not be reasonable, it is intended that enforcement of a provision which is determined by such court to be reasonable shall be given effect; and

(b) That a breach of the covenants and restrictions in Sections 3, 4 and 5 of this Agreement would result in irreparable harm to the Company which could not be compensated by money damages alone. Accordingly, the Executive agrees that should there be a breach of any or all of these provisions or a threatened breach, the Company shall be entitled to cease paying amounts under Section 2 and to offset any amounts it owes to Executive against any damage that it has suffered as a result of the breach of any of the covenants and restrictions in Sections 3, 4 and 5 and, in addition to its other remedies, to an order enjoining any such breach or threatened breach without bond. In addition, the Executive agrees that, in the event he breaches any of the covenants or restrictions in Section 3, 4 or 5 of this Agreement, he will promptly repay to the Company upon demand of the Company any amounts paid to him pursuant to Section 2. The Executive further agrees that if the Company prevails in any action to enforce these provisions, he will reimburse the Company for its attorney fees and costs incurred in pursuing such action.

The Company agrees that it will seek enforcement of Sections 3, 4 and 5 of this Agreement only in a good faith, reasonable manner and will not seek to enforce such sections solely for malicious and punitive reasons.

 

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7. Successors; Binding Agreement.

(a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, and any parent company thereof, by agreement or agreements in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement, and in the case of any such parent company expressly to guarantee and agree to cause the performance of this Agreement, in the same manner and to the same extent as the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as defined in the first sentence of this Agreement and any successor to all or substantially all its business or assets or which otherwise becomes bound by all the terms and provisions of this Agreement, whether by the terms hereof, by operation of law or otherwise.

(b) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive and his personal or legal representatives and successors in interest under this Agreement.

8. Term. This Agreement shall continue in full force and effect until the third anniversary of the date that notice of termination of this Agreement is given by the Company to the Executive or by the Executive to the Company.

9. Notice. Any notice, demand or other communication required or permitted under this Agreement shall be effective only if it is in writing and delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company: Fortune Brands, Inc.

520 Lake Cook Road

Deerfield, IL 60015

Attention: Secretary

If to the Executive:

At the address most recently on file with the Company

or to such other address as either party may designate by notice to the other and shall be deemed to have been given as of the date so personally delivered or mailed.

10. Miscellaneous. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. This Agreement cannot be modified or any term or condition waived in whole or in part except by a writing signed by the party against whom enforcement of the modification or waiver is sought. No waiver by either party at any time of any breach of this Agreement by the other party, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of

 

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similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The headings in this Agreement are included for convenience of reference only and shall not in any way affect the meaning or interpretation of this Agreement.

11. Separability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

12. Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts will together constitute but one Agreement.

13. Withholding of Taxes. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

14. Section 409A. Notwithstanding anything in the foregoing to the contrary, in the event that any amounts payable (or benefits provided) under this Agreement are subject to the provisions of Section 409A of the Code, to the extent determined necessary, the parties agree to amend this Agreement in the least restrictive manner necessary to avoid imposition of any additional tax or income recognition on Executive under Section 409A of the Code and any final Treasury Regulations and Internal Revenue Service guidance thereunder. In addition, to the extent necessary to comply with Code Section 409A, references to termination of employment (and similar phrases) in this Agreement shall be interpreted in a manner that is consistent with the term “separation from service” under Code Section 409A(a)(2)(A)(i) and final Treasury Regulations and other Internal Revenue Service guidance thereunder.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and attested to and the Executive has set his hand as of the date first above written.

 

 

 

 

 

 

 

 

 

 

 

 

FORTUNE BRANDS, INC.

 

 

 

 

 

 

 

 

By:

 

/s/ Elizabeth R. Lane

 

 

 

 

Name:

 

Elizabeth R. Lane

 

 

 

 

Its:

 

Vice President – Compensation and Benefits

 

 

 

 

ATTEST:

 

 

 

 

 

 

 

 

 

 

/s/ Mark A. Roche

 

 

 

 

 

 

Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Bruce A. Carbonari

 

 

 

 

 

 

Bruce A. Carbonari

 

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X-10.43 4 dex1043.htm FORM OF AMENDMENT TO SEVERANCE AGREEMENTS

 

Exhibit 10.43

Form of

Amendment to Severance Agreement

WHEREAS, Fortune Brands, Inc. (the “Company”) and                     (“Executive”) entered into a Severance Agreement on September 19, 2007 (the “Agreement”); and

WHEREAS, the Company and Executive desire to amend the Agreement to comply with the requirements of Sections 409A and 162(m) of the Internal Revenue Code and to make certain technical corrections;

NOW, THEREFORE, the parties agree that the Agreement shall be modified as follows, effective January 1, 2009:

1. By substituting the following for that portion of Section 2(b) of the Agreement that precedes paragraph (i) thereof:

(b) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, then the Company shall pay to the Executive as severance pay ratably (or as otherwise provided under subsection (g) or (k) below) over the 12-month period commencing on the Executive’s Termination Date (provided that Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements) an amount equal to the product of [three (3) for Mr. Carbonari; two (2) for Messrs. Omtvedt, Roche, Klein and Hausberg] (or, if lesser, the fraction of year(s) from the Termination Date to the Executive’s Normal Retirement Date (as defined in the Fortune Brands Pension Plan) (the “Retirement Plan”)) times the sum of:

2. By substituting the following for Section 2(c) of the Agreement:

(c) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), the Company shall maintain in full force and effect, for the Executive’s continued benefit for a [three (3) for Mr. Carbonari; two (2) for Messrs. Omtvedt, Roche, Klein and Hausberg] year period (or, if shorter, the period until his Normal Retirement Date) after the Termination Date, all employee life, health, accident, disability, and medical plan coverage in which he was participating immediately prior to the Termination Date, provided that his continued participation is possible under the terms and provisions of such plans. With respect to health coverage (medical, dental and vision), Executive shall be required to pay the applicable active employee rate of coverage for similar coverage, and such coverage shall run concurrent with coverage

 

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required to be provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). If health coverage is required to be provided under this Section 2(c) beyond the end of the applicable COBRA period, Executive may be taxed on the value of the Company-provided premium. No other welfare or fringe benefits shall be provided except as specifically provided in this Section.

3. By substituting the following for that portion of Section 2(d) of the Agreement that precedes paragraph (i) thereof:

(d) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), then in addition to the retirement benefits to which the Executive is entitled under the Retirement Plan, the pension provisions of the Supplemental Plan and any other defined benefit pension plan maintained by the Company or any affiliate, and any other program, practice or arrangement of the Company or any affiliate to provide the Executive with a defined pension benefit after termination of employment, and any successor plans thereto (all such plans being collectively referred to herein as the “Pension Plans”), the Company shall pay the Executive, at the same time that pension benefits are paid under the Supplemental Plan, an amount equal to the excess of (i) over (ii) below where:

4. By substituting the following for Section 2(e) of the Agreement:

(e) If the Company terminates the Executive’s employment other than for Disability or Cause, or the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), the Company shall pay to the Executive as additional severance pay in a lump sum on the eighth day (or such other day as required under Code Section 409A) following the Executive’s Termination Date an amount, if any, equal to the nonvested portion of his account balances under the Fortune Brands Retirement Savings Plan and the defined contribution plan of any affiliate of the Company in which there is maintained for him an account balance which is not fully vested.

5. By substituting the following for Section 2(f)(ii) of the Agreement:

(ii) incentive compensation under the Annual Executive Incentive Compensation Plan for the calendar year in which the Termination Date occurs, payable at the time annual incentive awards for that year are normally paid (but subject to Section 2(g)), based on actual performance of the Company.

 

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6. By substituting the following for Section 2(g) of the Agreement:

(g) If the Executive is a “specified employee” of the Company (as defined in the Supplemental Plan), amounts that would otherwise have been paid to the Executive under the foregoing provisions of this Section 2 (except paragraph (c)) during the six (6)-month period immediately following the Termination Date shall be paid on the first regular payroll date immediately following the six (6)-month anniversary of the Termination Date.

7. By substituting the following for Section 2(h) of the Agreement:

(h) If the Company terminates Executive’s employment other than for Disability or Cause or if the Executive terminates his employment for Good Reason and a dispute exists concerning the termination as set forth in subsection (e) of Section 1, the Company shall continue to pay Executive’s full base salary through the date finally determined to be the Termination Date as provided in subsection (e) of Section 1.

8. By substituting the following for Section 2(k) of the Agreement:

(k) Notwithstanding any other provision of this Agreement,

(i) if the Executive is entitled to severance pay benefits both under this Agreement and under the Change in Control Agreement, severance pay benefits shall be paid under this Agreement as follows:

(A) if the Executive’s Termination Date occurs within two (2) years following the change in control, the severance pay benefit determined under Section 2(b) shall be paid in a lump sum on the first regular payroll date immediately following the six (6)-month anniversary of the Termination Date; and

(B) if the Executive’s Termination Date occurs more than two (2) years following the change in control, the severance pay benefit determined under this Agreement shall be paid as specified in Sections 2(b) and (g); and

(ii) no benefits shall be provided to the Executive under the Company’s severance pay program covering salaried or executive employees.

This Agreement supersedes any prior severance agreement with the Executive.

 

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IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by a duly authorized officer and attested to and the Executive has set his hand as of December     , 2008.

 

FORTUNE BRANDS, INC.

By:                                                                                                  

Name:                                                                                            

Its:                                                                                                   

ATTEST:

 

 

 

 

 

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FORM OF CHANGE IN CONTROL AGREEMENT

Exhibit 10.1

 

Top of Document

FORM OF

CHANGE IN CONTROL AGREEMENT

AGREEMENT dated as of                      between FORTUNE BRANDS, INC., a Delaware corporation (the “Company”), and                      (the “Executive”),

W I T N E S S E T H:

WHEREAS, the Executive is currently employed by the Company and has throughout his period of employment rendered valuable service to the Company;

WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that, in the event action is taken to bring about a change in control, uncertainty and questions may arise among management that could result in the distraction or departure of management personnel to the detriment of the Company and its stockholders; and

WHEREAS, the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of senior members of the Company’s management to their assigned duties without distraction in the face of the potentially disruptive circumstances arising from the possibility of a change in control; and

WHEREAS, the Executive desires to continue in full-time employment with the Company, but desires to be provided with the assurance of receiving certain severance benefits in the event the Company were to take certain actions resulting in the termination of his employment following a change in control; and

WHEREAS, the Company and the Executive desire to enter into this Agreement to set forth the terms and conditions of such severance benefits;

NOW, THEREFORE, in consideration of the premises and of the mutual agreements hereinafter contained, the parties agree as follows:

1. Termination Following Change in Control.

(a) Entitlement to Benefits. If and only if a Change in Control (as defined in this Section 1) of the Company occurs and if subsequent to such Change in Control and during the term of this Agreement the Executive’s employment with the Company is terminated by the Company other than for Disability or Cause or by the Executive for Good Reason (as defined in this Section 1), the Executive shall be entitled to benefits as provided in Section 2. The Executive shall not be entitled to any benefits under this Agreement in the event his employment with the Company is terminated as a result of his death, by the Company for Disability or Cause or by the Executive other than for Good Reason.

(b) Change in Control. For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if (i) any person (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange


Act”) as in effect on the date of this Agreement) is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder, as in effect on the date of this Agreement) of 20% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (“Voting Securities”) of the Company, excluding, however, the following: (A) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or entity controlled by the Company, or (D) any acquisition pursuant to a transaction that complies with clauses (A), (B) and (C) of clause (iii) below, (ii) more than 50% of the members of the Board of Directors of the Company shall not be Continuing Directors (which term, as used herein, means the directors of the Company (A) who were members of the Board of Directors of the Company on the date hereof or (B) who subsequently became directors of the Company and who were elected or designated to be candidates for election as nominees of the Board of Directors, or whose election or nomination for election by the Company’s stockholders was otherwise approved, by a vote of a majority of the Continuing Directors then on the Board of Directors but shall not include, in any event, any individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14(a)-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors), (iii) the Company shall be merged or consolidated with, or, in any transaction or series of transactions, substantially all of the business or assets of the Company shall be sold or otherwise acquired by, another corporation or entity unless, as a result thereof, (A) the stockholders of the Company immediately prior thereto shall beneficially own, directly or indirectly, at least 60% of the combined Voting Securities of the surviving, resulting or transferee corporation or entity (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (“Newco”) immediately thereafter in substantially the same proportions as their ownership immediately prior to such corporate transaction, (B) no person beneficially owns (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, and the rules and regulations promulgated thereunder (as in effect on the date hereof), directly or indirectly, 20% or more of the combined Voting Securities of Newco immediately after such corporate transaction except to the extent that such ownership of the Company existed prior to such corporate transaction and (C) more than 50% of the members of the Board of Directors of Newco shall be Continuing Directors or (iv) the stockholders of the Company approve a complete liquidation or dissolution of the Company.

(c) Disability. Termination of employment by the Company for Disability hereunder shall be deemed to have occurred only if, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have been absent from his duties with the Company on a full-time basis for 180 consecutive days and, within 30 days after Notice of Termination (as defined in Section 1(d)) is given to the Executive by the Company, the Executive shall not have returned to the full-time performance of his duties.

(d) Cause. Termination of employment by the Company shall be deemed to be for Cause only if (i) termination shall have been the result of (A) an act or acts of dishonesty

 

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on the Executive’s part that results in Executive being indicted for a felony, or (B) the Executive’s willful and continued failure substantially to perform his duties and responsibilities as an officer of the Company (other than any such failure resulting from his incapacity due to physical or mental illness) after a demand for substantial performance is delivered to the Executive by the Board of Directors of the Company which specifically identifies the manner in which such Board believes that the Executive has not substantially performed his duties and the Executive is given a reasonable time after such demand substantially to perform his duties, and (ii) there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the members of the Board of Directors of the Company at a meeting called and held for the purpose (after reasonable notice to the Executive and an opportunity for him, together with his counsel, to be heard before such Board), finding that in the good faith opinion of the Board of Directors of the Company that the Executive was guilty of conduct set forth above in clause (i)(A) or (i)(B) of this Section 1(d) and specifying the particulars thereof in detail. The Executive’s employment shall in no event be considered to have been terminated by the Company for Cause if the act or failure to act upon which such termination is based (x) was done or omitted to be done (1) as a result of bad judgment or negligence on his part, or (2) as a result of his good faith belief that such act or failure to act was in or was not opposed to the interests of the Company, or (y) is an act or failure to act in respect of which the Executive meets the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the By-laws of the Company or the laws of the state of its incorporation or the directors’ and officers’ liability insurance of the Company, in each case as in effect at the time of such act or failure to act.

(e) Notice of Termination. Any termination by the Company for Disability or Cause shall be communicated by Notice of Termination to the Executive and any termination by the Executive for Good Reason shall be communicated by Notice of Termination to the Company. For purposes of this Agreement, a “Notice of Termination” shall mean a notice in writing which indicates the specific termination provision in this Agreement relied upon and sets 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.

(f) Termination Date. As used herein, “Termination Date” shall mean (i) if employment is terminated by the Company for Disability, 30 days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such 30-day period), (ii) if employment is terminated by the Company for Cause, the date on which a Notice of Termination is given, (iii) if employment is terminated for Good Reason, the date specified in the Notice of Termination, and (iv) if employment is terminated for any other reason, the date on which the Executive ceases to perform his duties for the Company; provided, however, that, if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Termination Date shall be the date finally determined to be the Termination Date, either by written agreement of the parties or by a final judgment, order or decree of court of competent jurisdiction (the time for appeal having expired and no appeal having been perfected); provided further, however, that if the dispute is resolved in favor of the Company, the Termination Date shall be the date determined under clauses (i) through (iv) of this Section 1(f) .

 

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(g) Good Reason. Termination of employment by the Executive for Good Reason shall be deemed to have occurred only if the Executive terminates his employment and provides a Notice of Termination to the Company prior to such date for any of the following reasons:

(i) without Executive’s express written consent, the assignment to Executive of any duties inconsistent with his positions, duties, responsibilities and status with the Company at the time of a Change in Control, or a change in Executive’s reporting responsibilities, titles or offices as in effect at the time of a Change in Control, or any removal of him from, or any failure to re-elect Executive to, any of such positions, except in connection with the termination of his employment as a result of Executive’s death or by the Company for Disability or Cause or by Executive other than for Good Reason;

(ii) a reduction by the Company in Executive’s then current base salary;

(iii) the failure of the Company substantially to maintain and to continue Executive’s participation in the Company’s benefit plans as in effect at the time of a Change in Control and with all subsequent improvements (other than those plans or improvements that have expired in accordance with their original terms), or the taking of any action which would materially reduce Executive’s benefits under any of such plans or deprive him of any material fringe benefit enjoyed by Executive at the time of a Change in Control. Such benefit plans shall include, but not be limited to, the provisions for incentive compensation under the Annual Executive Incentive Compensation Plan of the Company and the Company’s Retirement Plan, Supplemental Plan (as defined in Section 2(b)(i)) (including the supplemental profit-sharing of the Supplemental Plan), the Fortune Brands Retirement Savings Plan (including the tax deferred and related Company matching contributions) and Long-Term Incentive Plan;

(iv) the target bonus awarded by the Compensation and Stock Option Committee of the Company to Executive under the Annual Executive Incentive Compensation Plan of the Company subsequent to a Change in Control is less than such amount last awarded to Executive prior to a Change in Control;

(v) the sum of the Executive’s base salary and amount paid to him as incentive compensation under the Annual Executive Incentive Compensation Plan of the Company for the calendar year in which the Change in Control occurs or any subsequent year is less than the sum of the Executive’s base salary and the amount awarded (whether or not fully paid) to him as incentive compensation under the Annual Executive Incentive Compensation Plan of the Company for the for the calendar year prior to the Change in Control or any subsequent calendar year in which the sum of such amounts was greater;

(vi) the relocation of the offices at which Executive is employed to a location more than 35 miles from his location at the time of a Change in Control or the Company requiring Executive to be based anywhere other than at such offices, except for required travel on the Company’s business to an extent substantially consistent with Executive’s business travel obligations at the time of a Change in Control;

 

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(vii) the failure of the Company to provide Executive with a number of paid vacation days at least equal to the number of paid vacation days to which Executive is entitled at the time of Change in Control;

(viii) any purported termination of Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subsection (e) of this Section 1 (and, if applicable, subsection (d) of this Section 1), and for purposes of this Agreement, no such purported termination shall be effective; or

(ix) Executive’s good faith determination that due to a Change in Control he is not able effectively to discharge his duties.

2. Compensation Upon Termination.

(a) If the Executive’s employment is terminated by the Company for Disability or Cause or by the Executive for other than Good Reason, the Company shall have no obligation to pay any compensation to the Executive under this Agreement in respect of periods beginning on and after the Termination Date, but this Agreement shall have no effect on any other obligation the Company may have to pay the Executive compensation to which he may otherwise be entitled.

(b) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, then in addition to the Company paying the Executive his base salary and accrued but unpaid vacation pay through the Termination Date, the Company shall pay to the Executive as severance pay in a lump sum on the eighth day following the date the Executive delivers (and does not revoke) an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements) an amount equal to

(i) the product of 2.99 times the sum of:

(A) his annual base salary at the rate in effect on the date of Change in Control, plus

(B) his target annual bonus under the Annual Executive Incentive Compensation Plan in effect in the calendar year in which the Termination Date occurs, plus

(C) the amount that would have been required to be allocated to the Executive’s account (assuming that he elected the maximum employee contribution) for the year immediately preceding the year in which the Termination Date occurs under the Fortune Brands Retirement Savings Plan, including the Company 401(k) matching contribution, and the profit-sharing provisions of the Supplemental Plan of Fortune Brands, Inc. (the “Supplemental Plan”); and

 

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(ii) legal fees and expense incurred by Executive in order to obtain or enforce any right or benefit provided by this Agreement.

In the event the Termination Date occurs within less than three years prior to the Executive’s Normal Retirement Date (as defined in the Retirement Plan), the multiplier “2.99” in subsection (b)(i) of this Section 2 shall be changed so that it shall equal the number of whole years and fraction thereof or fraction of a year that will elapse between the Termination Date and Normal Retirement Date.

(c) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, the Company shall maintain in full force and effect, for the Executive’s continued benefit for a three (3) year period (or, if shorter, the period until his Normal Retirement Date) after the Termination Date, all employee life, health, accident, disability, medical and other employee welfare benefit plans, programs or arrangements in which he was participating immediately prior to the Termination Date, provided that his continued participation is possible under the terms and provisions of such plans, programs and arrangements. In the event that the Executive’s participation in any such plan, program or arrangement is barred (or the provision of health or medical benefits would result in taxable income to Executive for coverage beyond the maximum applicable continuation coverage period under the Consolidated Omnibus Budget Reconciliation Act of 1985), the Company shall arrange to provide him with benefits (or cash equivalent thereof) substantially similar to those which he would have been entitled to receive under such plan, program or arrangement if he had remained a participant for such additional three (3) year period (or, if shorter, such additional period until his Normal Retirement Date) after the Termination Date.

(d) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, then in addition to the retirement benefits to which the Executive is entitled under the Retirement Plan, the Supplemental Plan and any other defined benefit pension plan maintained by the Company or any affiliate, and any other program, practice or arrangement of the Company or any affiliate to provide the Executive with a defined pension benefit after termination of employment, and any successor plans thereto (all such plans being collectively referred to herein as the “Pension Plans”), the Company shall pay the Executive monthly beginning at the earliest date that payments commence under any of the Pension Plans an amount equal to the excess of (i) over (ii) below where

(i) equals the sum of the aggregate monthly amounts of pension payments (determined as a straight life annuity) to which the Executive would have been entitled under the terms of each of the Pension Plans in which he was an active participant as of the Termination Date determined as if he were fully vested thereunder and had accumulated three (3) additional years (or, if less, the fraction of a year from the Termination Date to the Executive’s Normal Retirement Date) of age and Service thereunder (subsequent to his Termination Date) at his rate of Compensation in effect on the date of a Change in Control plus any increases subsequent thereto, and where

 

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(ii) equals the sum of the aggregate monthly amounts of pension payments (determined as a straight life annuity) to which the Executive is entitled under the terms of each of the Pension Plans in which he was an active participant at the date of the Change in Control.

For purposes of clause (i), the amounts payable pursuant to Sections 2(b)(i)(A) and (B) shall be considered as part of the Executive’s Compensation and such amounts shall be deemed to represent three (3) years (or, if less, the fraction of a year from the Termination Date to the Executive’s Normal Retirement Date) of Compensation for purposes of determining his highest consecutive five year average rate of Compensation. The supplemental pension benefits determined under this Section 2(d) shall be payable by the Company to the Executive and his contingent annuitant, if any, or to the Executive’s surviving spouse as a spouse’s benefit if the Executive dies prior to commencement of benefits under this Agreement, in the same manner and for as long as his pension benefits under the Supplemental Plan and shall be adjusted actuarially to reflect payment in a form other than a straight life annuity. Benefits which commence prior to the age at which benefits may be paid without actuarial reduction for early payment under the Retirement Plan shall be actuarially reduced to reflect early commencement to the extent, if any, provided in the Retirement Plan as if the Executive’s Termination Date were an Early Retirement Date. In the event that an employee grantor trust (“Grantor Trust”) has been established among the Company, the Executive and a Trustee, the Company shall provide the additional pension benefits payable under this Section 2(d) in the same manner as Supplemental Plan benefits are provided after termination of employment to executives with Grantor Trusts and shall be calculated using the same assumptions as used to provide Supplemental Plan benefits. All capitalized terms used in this Section 2(d) have the same meaning as in the Retirement Plan as in effect on the date of this Agreement, unless otherwise defined herein or otherwise required by the context.

(e) If the Company terminates the Executive’s employment other than for Disability or Cause, or the Executive terminates his employment for Good Reason, the Company shall pay to the Executive as additional severance pay in a lump sum on the eighth day following the date the Executive delivers an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements) following the Termination Date an amount, if any, equal to the nonvested portion of his account balances under the Fortune Brands Retirement Savings Plan and the defined contribution plan of any affiliate of the Company in which there is maintained for him an account balance which is not fully vested.

(f) If the Company terminates the Executive’s employment other than for Disability or Cause, or the Executive terminates his employment for Good Reason, the Executive shall be entitled to the following as incentive compensation through the Termination Date:

(i) the unpaid portion of the amount awarded to him as incentive compensation under the Annual Executive Incentive Compensation Plan for the calendar year immediately preceding the year in which the Termination Date occurs, payable at the time annual incentive awards are normally paid; and

 

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(ii) incentive compensation under the Annual Executive Incentive Compensation Plan for the calendar year in which the Termination Date occurs, payable at the time annual incentive awards are normally paid, in an amount equal the Executive’s target percentage prorated for the portion of the year through the Termination Date.

(g) If the Company terminates Executive’s employment other than for Disability or Cause or if the Executive terminates his employment for Good Reason subsequent to a Change in Control and a dispute exists concerning the termination as set forth in subsection (f) of Section 1, the Company shall continue to pay Executive’s full base salary through the date the dispute is resolved.

(h) If the Executive is a “specified employee” of the Company (as defined in Treasury Regulation Section 1.409A – 1(i)) and if amounts payable under this Section 2 are not on account of an “involuntary separation from service” (as defined in Treasury Regulation Section 1.409A – 1(m)), amounts that would otherwise have been paid during the six (6)-month period immediately following the Termination Date shall be paid on the first regular payroll date immediately following the six (6)-month anniversary of the Termination Date.

(i) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 2 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 2 be reduced by any compensation earned by the Executive as the result of employment by another employer after the Termination Date or by any other compensation.

(j) Subject to Section 2(k), this Agreement and the obligations of the Company under it shall not be in derogation of any other obligations of the Company not set forth herein to pay any compensation or to pay or provide any benefit to the Executive.

(k) Any benefits to which the Executive is entitled under the Company’s severance pay program covering salaried or executive employees generally shall be reduced by benefits paid under Section 2(b)(i) (A) and (B). Any benefits to which the Executive is entitled under Section 2 shall be reduced by the amount of any benefits provided or payments made to him pursuant to the Severance Agreement dated as of                      between the Executive and the Company. This Agreement supersedes any prior change in control agreement with the Executive.

3. Successors; Binding Agreement.

(a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, and any parent company thereof, by agreement or agreements in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement, and in the case of any such parent company expressly to guarantee and agree to cause the performance of this Agreement, in the same manner and to the same extent as the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as defined in the first sentence of this

 

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Agreement and any successor to all or substantially all its business or assets or which otherwise becomes bound by all the terms and provisions of this Agreement, whether by the terms hereof, by operation of law or otherwise.

(b) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive and his personal or legal representatives and successors in interest under this Agreement.

4. Term. This Agreement may be terminated by the Company as of a date set forth in a notice to Executive given at any time at least six months prior to the execution of a definitive agreement which would lead to a Change in Control, provided that if a Change in Control occurs within such six month period subsequent to the delivery of the notice of termination of this Agreement by the Company, then this Agreement shall continue in effect in accordance with its terms notwithstanding such notice. This Agreement shall terminate on the third anniversary of any Change in Control unless a Notice of Termination shall have been given prior thereto and provided further that, notwithstanding anything to the contrary in this Agreement, the provisions of this Agreement shall also continue in effect notwithstanding such notice if the notice is given at the instance or suggestion of a third party following commencement of discussions with the Company that ultimately result in a Change in Control.

5. Notice. Any notice, demand or other communication required or permitted under this Agreement shall be effective only if it is in writing and delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:

Fortune Brands, Inc.

520 Lake Cook Road

Deerfield, Illinois 60015

Attention: Secretary

If to the Executive:

At the address most recently on file with the Company

or to such other address as either party may designate by notice to the other and shall be deemed to have been given as of the date so personally delivered or mailed.

6. Miscellaneous. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. This Agreement cannot be modified or any term or condition waived in whole or in part except by a writing signed by the party against whom enforcement of the modification or waiver is sought. No waiver by either party at any time of any breach of this Agreement by the other party, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The headings in this Agreement are included for convenience of reference only and shall not in any way affect the meaning or interpretation of this Agreement.

 

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7. Separability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

8. Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts will together constitute but one Agreement.

9. Withholding of Taxes. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

10. Excise Taxes. In the event that Executive becomes entitled to payments under Section 2 of this Agreement, or as a result of the exercise, or acceleration of the exercisability, of stock options or performance awards, or the exercise of limited rights or other awards under the Company’s Long-Term Incentive Plan or any successor plan, or any other payments or benefits received or treated as having been received by Executive in connection with a change in the ownership or effective control of the Company or in the ownership of a substantial portion of its assets within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”) (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in such a change or any person affiliated with the Company or such person) (“the Agreement Payments”), if any of the Agreement Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code, the Company shall pay to Executive, if his employment has terminated, on the eighth day following the date the Executive delivers (and does not revoke) an executed release of claims in the form attached to this Agreement as Exhibit A (as such release is updated from time to time to reflect legal requirements) (or if Executive’s employment has not terminated, on the fifth day following the receipt of the Agreement Payment) an additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive after deduction of any Excise Tax on the Agreement Payments and any federal, state and local income tax and Excise Tax upon the payment provided for by this Section 10, shall be equal to the Agreement Payments. For purposes of determining whether payments or benefits of the types referred to in the preceding sentence are Agreement Payments and whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any such payments or benefits received or to be received by Executive shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and 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 tax counsel selected by one of the “Big 4” independent registered public accounting firms and acceptable to Executive such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (ii) the amount of the Agreement Payments which shall be treated as subject to the Excise Tax shall be equal to

 

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the lesser of (A) the total amount of the Agreement Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i), above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by one of the “Big 4” independent registered public accounting firms in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. Notwithstanding the foregoing provisions of this Section 10, if it shall be determined that Executive is entitled to the Gross-Up Payment, but that the value of the Agreement Payments does not exceed 330% of the base amount (as defined in Section 280G(d)(3) of the Code), then, subject to the following sentence, no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the value of the Agreement Payments, in the aggregate, equals one dollar less than 300% of the base amount. The reduction described in the preceding sentence shall apply only if the value of the reduction is equal to or less than 30% of the Executive’s base salary as of the Change in Control; otherwise there shall be no reduction and the Executive will be entitled to the Gross-Up Payment. The reduction of the amounts payable under this Agreement, if applicable, shall be made in such a manner as to maximize the value of all Agreement Payments actually made to Executive. 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 taxes at the highest marginal rate of taxation in the state and locality of Executive’s residence on the Termination Date, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. The Gross-Up Payment required in respect of Agreement Payments other than under Section 2 of this Agreement shall be payable whether or not Executive’s employment terminates. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of Executive’s termination of employment, 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 and state and local income tax imposed on the Gross-Up Payment being repaid by him if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax and any interest or penalties in respect thereof is determined to exceed the amount taken into account hereunder (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 or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.

11. Section 409A. Notwithstanding anything in the foregoing to the contrary, in the event that any amounts payable (or benefits provided) under this Agreement are subject to the provisions of Section 409A of the Code, to the extent determined necessary, the parties agree to amend this Agreement in the least restrictive manner necessary to avoid imposition of any additional tax or income recognition on Executive under Section 409A of the Code, the final Treasury Regulations and other Internal Revenue Service guidance thereunder. In addition, to the extent necessary to comply with Code Section 409A, references to termination of employment (and similar phrases) in this Agreement shall be interpreted in a manner that is consistent with the term “separation from service” under Code Section 409A(a) (2) (A) (i) and final Treasury Regulations and other Internal Revenue Service guidance thereunder.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and attested to and the Executive has set his hand as of the date first above written.

 

 

 

 

 

FORTUNE BRANDS, INC.

 

 

By:

 

 

 

 

Name:

 

 

 

 

Its:

 

 

ATTEST:

 

 

 

 

 

 

 

Secretary

 

 

 

 

 

 

 

 

Executive

 

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Top of Document

EX-10.36 3 dex1036.htm FORM OF AMENDMENT TO CHANGE IN CONTROL AGREEMENT

 

Exhibit 10.36

Form of

Amendment to Change in Control Agreement

WHEREAS, Fortune Brands, Inc. (the “Company”) and                     (“Executive”) entered into a Change in Control Agreement on September 19, 2007 (the “Agreement”); and

WHEREAS, the Company and Executive desire to amend the Agreement to comply with the requirements of Sections 409A and 162(m) of the Internal Revenue Code and to make certain technical corrections;

NOW, THEREFORE, the parties agree that the Agreement shall be modified as follows, effective January 1, 2009:

1. By substituting the following for Section 1(g)(iii) of the Agreement:

(iii) the failure of the Company substantially to maintain and to continue Executive’s participation in the Company’s benefit plans as in effect at the time of a Change in Control and with all subsequent improvements (other than those plans or improvements that have expired in accordance with their original terms), or the taking of any action which would materially reduce Executive’s benefits under any of such plans or deprive him of any material fringe benefit enjoyed by Executive at the time of a Change in Control. Such benefit plans shall include, but not be limited to, the provisions for incentive compensation under the Annual Executive Incentive Compensation Plan of the Company, the Fortune Brands Pension Plan (the “Retirement Plan”), the Fortune Brands, Inc. Supplemental Plan (the “Supplemental Plan”) (including the supplemental profit-sharing feature of the Supplemental Plan), the Fortune Brands Retirement Savings Plan (including tax deferred and related Company matching contributions) and the Long-Term Incentive Plan;

2. By substituting the following for Section 2(b) of the Agreement:

(b) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), then in addition to the Company paying the Executive his base salary and accrued but unpaid vacation pay through the Termination Date:

(i) the Company shall pay to the Executive as severance pay in a lump sum on the eighth day following the Executive’s Termination Date, subject to the provisions of paragraphs 2(h) and (k), an amount equal to the product of 2.99 times the sum of:

(A) his annual base salary at the rate in effect on the date of Change in Control, plus

 

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(B) his target annual bonus under the Annual Executive Incentive Compensation Plan in effect in the calendar year in which the Termination Date occurs, plus

(C) the amount that would have been required to be allocated to the Executive’s account (assuming that he elected the maximum employee contribution) for the year immediately preceding the year in which the Termination Date occurs under the Fortune Brands Retirement Savings Plan, including the Company 401(k) matching contribution, and the profit-sharing provisions of the Supplemental Plan; and

(ii) the Company shall pay the cost of legal fees and expense incurred by Executive in order to obtain or enforce any right or benefit provided by this Agreement, which payment shall be made directly to the provider of services, provided that such expenses shall be paid within the time period required by Section 409A.

In the event the Termination Date occurs within less than three years prior to the Executive's Normal Retirement Date (as defined in the Retirement Plan), the multiplier “2.99” in subsection (b)(i) of this Section 2 shall be changed so that it shall equal the number of whole years and fraction thereof or fraction of a year that will elapse between the Termination Date and Normal Retirement Date.

3. By substituting the following for Section 2(c) of the Agreement:

(c) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, the Company shall maintain in full force and effect, for the Executive’s continued benefit for a three (3) year period (or, if shorter, the period until his Normal Retirement Date) after the Termination Date, all employee life, health, accident, disability, and medical plan coverage in which he was participating immediately prior to the Termination Date, provided that his continued participation is possible under the terms and provisions of such plans. With respect to health coverage (medical, dental and vision), Executive shall be required to pay the applicable active employee rate of coverage for similar coverage, and such coverage shall run concurrent with coverage required to be provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). After the period of COBRA coverage, Executive may be taxed on the value of the Company-provided coverage. No other welfare or fringe benefits shall be provided except as specifically provided in this Section.

 

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4. By substituting the following for that portion of Section 2(d) of the Agreement that precedes paragraph (i) thereof:

(d) If the Company terminates the Executive’s employment other than for Disability or Cause, or if the Executive terminates his employment for Good Reason, then in addition to the retirement benefits to which the Executive is entitled under the Retirement Plan, the pension provisions of the Supplemental Plan and any other defined benefit pension plan maintained by the Company or any affiliate, and any other program, practice or arrangement of the Company or any affiliate to provide the Executive with a defined pension benefit after termination of employment, and any successor plans thereto (all such plans being collectively referred to herein as the “Pension Plans”), the Company shall pay the Executive, at the same time that pension benefits are paid under the Supplemental Plan, an amount equal to the excess of (i) over (ii) below where:

5. By substituting the following for Section 2(e) of the Agreement:

(e) If the Company terminates the Executive’s employment other than for Disability or Cause, or the Executive terminates his employment for Good Reason, and if Executive has delivered and has not revoked an executed release of claims in the form attached hereto as Exhibit A (as such release is updated from time to time to reflect legal requirements), the Company shall pay to the Executive as additional severance pay in a lump sum on the eighth day following the Executive’s Termination Date (subject to Section 2(h)) an amount, if any, equal to the nonvested portion of his account balances under the Fortune Brands Retirement Savings Plan and the defined contribution plan of any affiliate of the Company in which there is maintained for him an account balance which is not fully vested.

6. By substituting the following for Section 2(h) of the Agreement:

(h) If the Executive is a “specified employee” of the Company (as defined in the Supplemental Plan), amounts that would otherwise have been paid to or on behalf of the Executive under the foregoing provisions of this Section 2 and Section 10 (but excluding amounts described in paragraph 2(b)(ii) and paragraph 2(c) above) during the six (6)-month period immediately following the Termination Date shall be paid on the first regular payroll date immediately following the six (6)-month anniversary of the Termination Date.

7. By substituting the following for Section 2(k) of the Agreement:

(k) No benefits shall be provided to the Executive under the Company’s severance pay program covering salaried or executive employees generally. Moreover, benefits determined under Section 2(b)(i) shall be offset by benefits payable to the

 

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Executive pursuant to the Severance Agreement between the Executive and the Company dated as of September 19, 2007 and as subsequently amended (the “Severance Agreement”). When computing this offset, the multiplier determined pursuant to Section 2(b) of this Agreement shall be reduced by the corresponding multiplier applied under the Severance Agreement (but not below zero), with the “net” multiplier used to determine the lump sum severance pay benefit to be provided pursuant to Section 2(b) of this Agreement. This Agreement supersedes any prior change in control agreement with the Executive.

8. By substituting the following for Section 10 of the Agreement:

10. Excise Taxes. In the event that Executive becomes entitled to payments under Section 2 of this Agreement, or as a result of the exercise, or acceleration of the exercisability, of stock options or performance awards, or the exercise of limited rights or other awards under the Company’s Long-Term Incentive Plan or any successor plan, or any other payments or benefits received or treated as having been received by Executive in connection with a change in the ownership or effective control of the Company or in the ownership of a substantial portion of its assets within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”) (whether pursuant to the terms of this Agreement, the Severance Agreement, or any other plan, arrangement or agreement with the Company, any person whose actions result in such a change or any person affiliated with the Company or such person) (“the Agreement Payments”), if any of the Agreement Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code, the Company shall pay to Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive after deduction of any Excise Tax on the Agreement Payments and any federal, state and local income tax and Excise Tax upon the payment provided for by this Section 10, shall be equal to the Agreement Payments. If Executive’s employment has terminated, such Gross-Up Payment shall be made on the eighth day following Executive’s termination; provided that any portion of the Gross-Up Payment that relates to Agreement Payments made pursuant to Section 2 of this Agreement or severance pay benefits under the Severance Agreement may not be made earlier than the date specified in Section 2(h), if applicable; and further provided that Executive has delivered (and has not revoked) an executed release of claims in the form attached to this Agreement as Exhibit A (as such release is updated from time to time to reflect legal requirements). If Executive’s employment has not terminated, the Gross-up Payment shall be made on the fifth day following Executive’s receipt of the Agreement Payment. For purposes of determining whether payments or benefits of the types referred to above are Agreement Payments and whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any such payments or benefits received or to be received by Executive shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and 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 tax counsel selected by one of the “Big 4” independent registered public accounting firms and acceptable to Executive such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in

 

4


whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (ii) the amount of the Agreement Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Agreement Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i), above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by one of the “Big 4” independent registered public accounting firms in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. Notwithstanding the foregoing provisions of this Section 10, if it shall be determined that Executive is entitled to the Gross-Up Payment, but that the value of the Agreement Payments does not exceed 330% of the base amount (as defined in Section 280G(d)(3) of the Code), then, subject to the following sentence, no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the value of the Agreement Payments, in the aggregate, equals one dollar less than 300% of the base amount. The reduction described in the preceding sentence shall apply only if the value of the reduction is equal to or less than 30% of the Executive’s base salary as of the Change in Control; otherwise there shall be no reduction and the Executive will be entitled to the Gross-Up Payment. To the extent applicable, the reduction in Agreement Payments contemplated by this Section shall be implemented by reducing the Agreement Payments in the following order: (I) the additional pension benefit payable pursuant to Section 2(d), (II) the additional benefit payable pursuant to Section 2(e), (III) Gross-Up Payments determined under this Section 10, (IV) cash severance benefits payable pursuant to Section 2(b), and (V) cash severance benefits payable pursuant to the Severance Agreement. 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 taxes at the highest marginal rate of taxation in the state and locality of Executive’s residence on the Termination Date, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. The Gross-Up Payment required in respect of Agreement Payments other than under Section 2 of this Agreement and severance pay provided under the Severance Agreement shall be payable whether or not Executive’s employment terminates. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of Executive’s termination of employment, 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 and state and local income tax imposed on the Gross-Up Payment being repaid by him if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax and any interest or penalties in respect thereof is determined to exceed the amount taken into account hereunder (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 or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.

 

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IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by a duly authorized officer and attested to and the Executive has set his hand as of December     , 2008.

 

FORTUNE BRANDS, INC.

 

By:                                                                                                  

Name:                                                                                            

Its:                                                                                                   

 

ATTEST:

 

 

 

 

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E