[DATE]

1.

Term of Agreement.  This Agreement shall commence on the Original Effective Date  and end on the third anniversary of such date; provided, however, that if a Change in Control, as defined in Section 2, shall have occurred during the term of this Agreement, this Agreement shall continue in effect for a period of not less than twenty-four (24) months beyond the month in which such Change in Control occurred.  Prior to a Change in Control, in no event shall the term of this Agreement extend beyond the date on which you cease to be an officer of the Company, UST or a subsidiary thereof, whether or not you continue to be an employee of the Company, UST or a subsidiary thereof; provided, however, if you cease to be an officer of the Company, UST or any subsidiary thereof for

3.

Termination of Employment.

 

(a)

General.  You shall be entitled to the benefits provided in Section 4 upon the termination of your employment during the term of this Agreement prior to a Change in Control.  If any of the events described in Section 2 constituting a Change in Control shall have occurred, you shall be entitled to the benefits provided in Section 5 upon the coincident or subsequent termination of your employment during the term of this Agreement or, as provided in Section 5, upon the Change in Control.  In the event your employment with the Company is terminated for any reason prior to a Change in Control and subsequently a Change in Control shall have occurred, you shall not be entitled to the benefits provided in Section 5, unless such termination occurs within thirty (30) days prior to a Change in

 

(i)

You will be deemed to have a “General Disability” if, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months, and within thirty (30) days after written notice of termination is given you shall not have returned to the full time performance of your duties.

 

(ii)

You will be deemed to have a “409A Disability” if (A) you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (B) you are, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering Company employees; or (C) you are determined to be totally disabled by the Social Security Administration.

 

(c)

Cause. The Company may terminate your employment hereunder for Cause.  For purposes of this Agreement, "Cause" shall mean (i) the willful and continuous  failure by you to substantially perform your duties hereunder (other than any such failure resulting from your incapacity due to physical or mental illness), which failure is not cured within thirty (30) business days after demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes you have willfully and continuously not substantially performed your duties; (ii) the willful engaging by you in misconduct which is materially injurious to the Company, monetarily or otherwise (including, but not limited to, your violation of the Company's Code of Corporate Responsibility); or (iii) the commission of an act or omission that

 

Good Reason Prior to a Change in Control.

 

(i)

A diminution in title or status as an officer;

 

(ii)

Other than a Company-wide reduction, a reduction in your total target compensation as in effect on the date hereof or as the same may be increased from time to time; provided, however, in no event shall a reduction in your actual bonus under UST’s Incentive Compensation Plan that is based on performance against pre-established criteria be considered a reduction in your target bonus;

 

(iii)

The relocation (except for required travel on the Company’s business to an extent reasonably consistent with either your present business travel obligations or changes in the Company’s business) of your principal place of employment to a location more than fifty (50) miles from the Company’s principal executive offices in Woodinville, Washington or any other metropolitan area to which the Company’s principal executive offices are relocated, it being understood that a relocation of the Company’s principal executive offices that applies to all or substantially all personnel and not to you alone shall not constitute Good Reason hereunder; or

 

(iv)

Any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (f) hereof (and, if applicable, the

 

 

requirements of Subsection (c) hereof); for purposes of this Agreement, no such purported termination shall be effective.  Your right to terminate your employment pursuant to this Subsection (d) shall not be affected by your incapacity due to physical or mental illness.  Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder; provided that the Company’s reassignment of your duties and responsibilities during a period of your incapacity due to physical or mental illness shall not under any circumstance constitute Good Reason hereunder.

 

(A)

The assignment to you of any duties inconsistent with the position in the Company that you held immediately prior to the Change in Control, or a significant adverse alteration in the nature or status of your responsibilities, including your reporting responsibilities, from those in effect immediately prior to such change; provided, however, that no such alteration in your reporting responsibilities alone shall be considered Good Reason hereunder prior to the date which is six (6) months following the date of the Change in Control;

 

(B)

A reduction by the Company in your annual base salary or target bonus as in effect on the date hereof or as the same may be increased from time to time; provided, however, in no event shall a reduction in your actual bonus under UST’s Incentive Compensation Plan that is based on performance against pre-established criteria be considered a reduction in your target bonus;

 

(C)

The relocation of your principal place of employment to a location more than fifty (50) miles from the Woodinville, Washington metropolitan area (or, if different, the metropolitan area in which the Company’s principal executive offices are located immediately prior to the Change in Control) except for required travel on the Company’s business to an extent substantially consistent with your present business travel obligations;

 

(D)

The failure by the Company to pay to you any portion of your current compensation except pursuant to an across-the-board compensation deferral similarly affecting all officers of the Company and all officers of any person whose actions resulted in a Change in Control or any person affiliated with the Company or such person, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program

 

(F)

The failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the  life insurance, medical, health and accident, or disability plans in which you are participating at the time of the Change in Control, the taking of any action by the Company or UST which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the Change in Control, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control;

 

(G)

The failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 9 hereof; or

 

(H)

Any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (f) hereof (and, if applicable, the requirements of Subsection (c) hereof); for purposes of this Agreement, no such purported termination shall be effective.  Your right to terminate your employment pursuant to this Subsection (d) shall not be affected by your incapacity due to physical or mental illness.  Your continued employment shall not constitute consent

 

 

to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

 

(e)

Employment by Affiliates.  For purposes of this Agreement, in no event shall a termination of your employment with the Company be deemed to occur as a result of your transfer to, or employment by, UST or any of its affiliates during the term of this Agreement.

 

(f)

Notice of Termination.  Any purported termination of your employment by the Company or by you shall be communicated by written "Notice of Termination" to the other party hereto in accordance with this Section 3(f).  "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.

 

(g)

 

(i)

"Date of Termination" shall mean (A) if your employment is terminated for General Disability or 409A Disability, thirty (30) days after Notice of Termination is given (but not before the end of the twelve (12) month period specified in Subsection (b) above, and not if you have returned to the full-time performance of your duties for a period that breaks the period of continuous disability in accordance with Subsection (b) above), and (B) if your employment is terminated pursuant to Subsection (c) or (d) hereof or for any other reason (other than General Disability or 409A Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection (c) hereof shall not be less than thirty (30) days, unless a shorter time is provided by the Company prior to the occurrence of a Change in Control, and in the case of a termination pursuant to Subsection (d) hereof shall not be less than fifteen (15) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). Notwithstanding the foregoing, following the occurrence of a Change in Control, if you reasonably believe in good faith the Company is not providing you with a benefit or payment to which you are entitled under the terms of this Agreement, you may notify the Company, within forty-five (45) days after the Date of Termination or, if any such payment or benefit is due after such 45-day period, within 45 days following such payment date, that a dispute exists concerning the termination and/or the amount of such payment or benefit.  In this event, the Company shall act within fifteen (15) days to restore fully the disputed benefits and payments (so that all benefits and payments are provided as of

 

(h)

Release/Resignations.  As a condition and in consideration of the benefits provided under Section 4(c) and Section 5 of this Agreement, you agree and covenant (i) to execute a general release, in the form attached hereto as Annex I (the "Release"), of any and all claims you may have or may believe you have against UST and/or its affiliates and their officers, directors, employees, agents or representatives and any of their successors and/or assigns; (ii) not to seek any recovery against UST and/or its affiliates and their officers, directors, employees, agents or representatives and any of their successors and/or assigns for any cause or reason related to or arising from your employment with the Company, UST or any of  their affiliates or the termination thereof, other than a failure or refusal of the Company to pay you (x) the benefits described in Section 4(c) of Section 5 hereof, and (y) the benefits to which you are entitled subsequent to your termination of employment pursuant to the terms of one or more of the employee benefit plans maintained by the Company or UST; and (iii) to cooperate fully with the Company, UST and their affiliates concerning reasonable requests for information about the business of the Company, UST or any of their affiliates or your involvement and participation therein, including, but not limited to, with respect to the defense or prosecution of any claims or actions in existence now or in the future as more particularly described in the Release.  The covenant set forth in clause (ii) of this Section 3(h) includes, without limitation, seeking any recovery against the Company, UST, any of their affiliates or their officers, directors, employees, agents or representatives and any of their successors and/or assigns in any forum, including without limitation any court, administrative agency or otherwise.  In the event of your termination of employment under any of the circumstances described in Section 3, you further agree to resign all offices or directorships that you

 

 

may hold with the Company, UST and any of their affiliates, as the case may be, in a form acceptable to the Company.

4.

Severance Compensation Prior to a Change in Control.  Prior to a Change in Control, you shall be entitled to the following benefits, provided that such termination occurs during the term of this Agreement:

 

(a)

If your employment is terminated by the Company for Cause or by you for any reason other than Good Reason, or if your employment terminates because of your death, the Company shall pay you your full base salary in accordance with the Company’s standard payroll practices through the Date of Termination at the rate in effect at the time Notice of Termination is given, and provide you with all other normal post-termination amounts (if any) to which you are entitled under the terms and conditions of any compensation or benefit plan maintained by  the Company or UST in which you participated as of the Date of Termination at the time such payments are due, and the Company shall have no further obligations to you under this Agreement.

 

(b)

During any period that you fail to perform your full-time duties with the Company as a result of:

 

(i)

a period of 409A Disability, you shall continue to receive your base salary in accordance with the Company’s standard payroll practices at the rate in effect at the commencement of any such period, together with any compensation payable to you under the Company’s short-term and long-term disability plans for salaried employees during such period and any benefit coverages customarily provided to disabled salaried employees, until your employment is terminated pursuant to Section 3(b) hereof; or

 

(ii)

a period of General Disability, you shall receive any compensation payable to you under the Company’s short-term and long-term disability plans for salaried employees during such period, as well as any benefit coverages customarily provided to disabled salaried employees, until your employment is terminated pursuant to Section 3(b) hereof.

 

(c)

If your employment is terminated by the Company (other than for Cause, General Disability, 409A Disability or death) or by you for Good Reason as defined in Section 3(d)(i) through (iv), then you shall be entitled to the benefits provided below, subject to your execution of a release described

 

 

in Section 3(h) and provided that such release becomes effective and has not been revoked in accordance with the terms thereof:

 

(i)

the Company shall pay to you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, no later than the fifth day following the Date of Termination; and shall provide you with all other normal post-termination amounts (if any) to which you are entitled under the terms and conditions of any compensation or benefit plan of the Company, at the time such payments are due;

 

(ii)

to the extent that an annual bonus has not been paid to you in respect of any  fiscal year, the Company shall pay to you, in the immediately following fiscal year at the time that annual bonuses in respect of such initial fiscal year are regularly paid by the Company (but not later than 2-½ months after the end of such initial fiscal year), the product of (x) the actual annual bonus that you would have been entitled to under the UST Inc. Incentive Compensation Plan had you remained employed through the regular payment date and (y) a fraction, the numerator of which is the number of days that have elapsed in each such fiscal year through the Date of Termination, and the denominator of which is 365;

 

(iii)

in lieu of any further salary and bonus payments to you for periods subsequent to the Date of Termination, the Company shall pay to you, in 24 equal monthly installments, a severance payment equal to the product of (1) the sum of (A) your annual salary rate in effect immediately prior to the Date of Termination, and (B) an amount equal to seventy-five percent (75%) of the target annual bonus in effect as of the Date of Termination, and (2) the number two (2); these installments shall begin to be paid upon your Severance Start Date (in accordance with the Company’s standard payroll practices for severance pay), except in the event you are a “specified employee” on your Severance Start Date, as determined by the Company in accordance with rules established by the Company in writing in advance of the “specified employee identification date” that relates to your Severance Start Date or, if later, by December 31, 2008, such payments shall be delayed until the date that is six (6) months after your Severance Start Date, with the lump sum value of all payments that are so delayed paid on the date that is six (6) months after your Severance Start Date (if you die after your Severance Start Date but before payment of all twenty-four (24) installments, any remaining installments will be paid to your estate as a lump sum and without regard to any six-month delay that otherwise applies to specified employees).  For

 

(v)

the Company shall provide you with group health insurance coverage in accordance with Section 5(d) below.  Benefits otherwise receivable pursuant to this paragraph (v) shall be reduced to the extent comparable benefits are actually received by you from another employer during the twenty-four (24) month period following your termination, and any such benefits actually received by you from such employer shall be reported to the Company;

 

(vi)

through the Date of Termination, you shall continue to accrue benefits under the UST Inc. Officers’ Supplemental Retirement Plan (“SOP”), UST Inc. Retirement Income Plan for Salaried Employees, UST Inc. Benefit Restoration Plan and the UST Inc. Excess Retirement Benefit Plan (together, the “Retirement Plans”) as in effect on the date hereof, notwithstanding any subsequent amendment thereto; provided, however, that in no event shall you accrue benefits under such Retirement Plans beyond the first anniversary of your last day of active employment.  In addition, regardless of your age and years of service as of the Date of Termination, you shall be deemed to be a Participant as such term is defined in the SOP; provided, however, that the benefits payable to you under the SOP will be determined based upon your actual age and service on your Date of Termination.  Any benefits due under the SOP or any other retirement plans (including any offset for payments under qualified plans) shall be payable in accordance with the terms of the SOP and any other retirement plans and will become payable at the time and in the form permitted under the SOP and any other retirement plans, as may be amended from time

 

(d)

Except as provided in Section 4(c)(iv) or Section 5(d) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise.

5.

Severance Compensation on, in Anticipation or Contemplation of or Following a Change in Control.  On or following a Change in Control, and in the event of a termination by you for Good Reason or by the Company without Cause that is made in anticipation or contemplation of and occurs within thirty (30) days prior to a Change in Control, you shall be entitled to the following benefits during a period of Disability, or upon termination of your employment, as the case may be, provided that such period or termination occurs during the term of this Agreement, or as otherwise provided below in subsection (e)(A) or (B) of this Section 5:

 

(a)

During any period that you fail to perform your full-time duties with the Company as a result of:

 

(i)

a period of 409A Disability, you shall continue to receive your base salary in accordance with the Company’s standard payroll practices at the rate in effect at the commencement of any such period, together with any compensation payable to you under the

 

(b)

If your employment is terminated by reason of your death or by the Company for Cause or by you other than for Good Reason as defined in Section 3(d)(A) through (H), the Company shall pay you your full base salary in accordance with the Company’s standard payroll practices through the Date of Termination at the rate in effect at the time Notice of Termination is given, and provide you with all other normal post-termination amounts (if any) to which you are entitled under the terms and conditions of any compensation or benefit plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement.

 

(c)

If your employment is terminated by you for Good Reason as defined in Section 3(d)(A) through (H), or by the Company other than for Cause, General Disability, 409A Disability or death, then, you shall be entitled to the benefits provided below, subject to your execution of a release described in Section 3(h) and provided that such release becomes effective and has not been revoked in accordance with the terms thereof:

 

(i)

the Company shall pay to you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, no later than the fifth day following the Date of Termination; and provide you with all other normal post-termination amounts (if any) to which you are entitled under the terms and conditions of any compensation or benefit plan of the Company at the time such payments are due;

 

(ii)

to the extent that an annual bonus has not been paid to you in respect of any  fiscal year, the Company shall pay to you, in the immediately following fiscal year at the time that annual bonuses in respect of such initial fiscal year are regularly paid by the

 

 

(including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement.  To the extent that any such reimbursement does not qualify for exclusion from Federal income taxation, the Company will make the reimbursement only if (A) the corresponding expense is incurred by you during your lifetime (or by your estate on your behalf after your death and within ten years of such termination), and (B) the request for reimbursement is submitted no later than two months prior to the last day of the calendar year following the calendar year in which the expense was incurred so that the Company can make the reimbursement on or before the last day of the calendar year following the calendar year in which the expense was incurred.  The amount of expenses eligible for such reimbursement during a calendar year will not affect the amount of expenses eligible for such reimbursement in another calendar year, and the right to such reimbursement is not subject to liquidation or exchange for another benefit from the Company. The Company shall also promptly reimburse you for all legal fees and expenses incurred by you in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefits provided hereunder); each such  reimbursement shall be paid no later than the end of the calendar year next following the calendar year in which you or the Company remit to the Internal Revenue Service the taxes that are the subject of the audit or proceeding or, where as a result of the audit or proceeding no taxes are due or are remitted but other reimbursable expenses have been incurred, the end of the calendar year following the calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the proceeding. For purposes of the foregoing, in the event you are a “specified employee” on your Severance Start Date (as determined by the Company in accordance with rules established by the Company in writing in advance of the “specified employee identification date” that relates to your Severance Start Date or, if later, by December 31, 2008), and to the extent that any portion of the reimbursements described above in this paragraph (iv) relate to expenses that were triggered by your “separation from service” within the meaning of section 409A(a)(2)(A)(i) of the Code and such reimbursements constitute a “deferral of compensation” within the meaning of section 409A of the Code, such reimbursements shall be paid no earlier than the date that is six (6) months after your Severance Start Date (if you die after your Severance Start Date but before such reimbursements have been made, such reimbursements will be paid to your estate in a lump

 

(vi)

Notwithstanding any subsequent amendment to the SOP, you shall be entitled to the benefits and treatment applicable to SOP accrued benefits in the event of a Change in Control in accordance with the terms of the SOP as in effect immediately preceding a Change in Control.

 

(d)

For a twenty-four (24) month period after the termination referenced in Section 4(c) or Section 5(c), the Company shall arrange to provide you with group health coverage substantially similar to that which you were receiving immediately prior to the Notice of Termination.

 

(i)

If such coverage is provided under a self-insured medical reimbursement plan maintained by the Company (within the meaning of section 105(h) of the Code):

 

(A)

there will be no charge to you for such coverage for any month that falls within the first six months following your Severance Start Date;

 

(B)

the charge to you for each remaining month of coverage will equal the Company’s monthly COBRA charge for such coverage, and you will be required to pay such monthly charge in accordance with the Company’s standard COBRA premium payment requirements; and

 

(C)

on the date that is six months following your Severance Start Date the Company will pay you a lump sum in cash equal to the product of (I) the Company’s monthly COBRA charge on the payment date for family coverage under the

 

Company’s group health plan, and (II) the difference between (a) the number twenty-four (24), and (b) the number of months of coverage provided under clause (A) above.

 

(ii)

If such coverage is provided under a fully-insured medical reimbursement plan (within the meaning of section 105(h) of the Code), there will be no charge to you for such coverage.

 

(e)

If any of the Total Payments (as defined below) will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Code, the Company shall pay to you an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments.  The Gross-Up Payment will be paid to you or remitted by the Company to the appropriate tax authorities in a lump sum no later than the fifth day following the applicable date. For this purpose, the applicable date shall be – (A) in the case of that portion of the Total Payments that is payable upon a Change in Control, that is payable without the occurrence of your termination of employment and that is exempt from section 409A of the Code, the date of a Change in Control but not before January 1, 2009; (B) in the case of that portion of the Total Payments that is payable upon or as result of a Change in Control, that is payable without the occurrence of your termination of employment and that is subject to section 409A of the Code, the date you remit the specified taxes to the appropriate tax authorities (or, if the specified taxes are remitted by the Company, the date the taxes are due) but not before January 1, 2009; (C) in the case of that portion of the Total Payment that is payable upon your termination of employment and that is exempt from section 409A of the Code, your Date of Termination; and (D) in the case of that portion of the Total Payments that is payable upon your Severance Start Date and that is subject to section 409A of the Code, your Severance Start Date. However, notwithstanding provision (D) immediately above, in the event you are a “specified employee” on your Severance Start Date (as determined by the Company in accordance with rules established by the Company in writing in advance of the “specified employee identification date” that relates to your Severance Start Date or, if later, by December 31, 2008), and to the extent that any portion of the Gross-Up Payment relates to Total Payments that were triggered by your “separation from service” within the meaning of section 409A(a)(2)(A)(i) of the Code, payment of such portion of the Gross-Up Payment which constitutes a “deferral of compensation” within the meaning of section 409A of the Code and is not deemed to be payable upon another permissible payment date under section 409A of the Code shall be delayed until the date that is six (6) months after your Severance Start Date (if you die after your

 

 

 

 

(i)

first, for purposes of Section 5(d)(i)(A), there will be a charge to you for each month of coverage, applied on a month-to-month basis as necessary to cause the aggregate Parachute Value of the Total Payments to equal the Safe Harbor Amount, in an amount equal to the Company's monthly COBRA charge for such coverage, and you will be required to pay such monthly charge in accordance with the Company's standard COBRA premium payment requirements;

 

(ii)

second, for purposes of Section 5(c)(v), there will be a charge to you for each month of coverage, applied on a dollar-for-dollar basis as necessary to cause the aggregate Parachute Value of the Total Payments to equal the Safe Harbor Amount, in an amount equal to the premium paid by the Company for such coverage, and you will be required to pay such monthly charge to the Company at the same time as the Company is required to make payment of such premium to the insurance carrier; and

 

(iii)

third, the amount payable under Section 5(c)(ii), the amount payable under Section 5(c)(iii), any additional SOP accrued benefit provided under Section 5(c)(vi), and the amount payable under Section 5(d)(i)(C) shall each be reduced, on a pro rata basis (based on the dollar amounts payable under Section 5(c)(ii), Section 5(c)(iii) and Section 5(d)(1)(C) and the amount of the additional SOP accrued benefit determined under Section 5(c)(vi) as of your Severance Start Date), as necessary to cause the aggregate Parachute Value of the Total Payments to equal the Safe Harbor Amount;

 

[In the event that application of the above ordering rules results in the imposition upon you of an excise tax or penalty interest under section 409A of the Code, the Company will pay you an additional payment (the “409A Gross-Up Payment”) in an amount equal to such excise tax and penalty interest plus all income and employment taxes on such excise tax and penalty interest, including, if the 409A Gross-Up Payment is a Total Payment, payment of any Gross-Up Payment on this payment.  For this purpose, all income taxes will be assumed to apply to you at the highest marginal rate in effect on the date the 409A Gross-Up Payment is made.  The 409A Gross-Up Payment shall be paid no later than the end of the calendar year next following the calendar year in which you remit the corresponding excise tax and penalty interest to the Internal Revenue Service.]

 

(f)

For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all payments or benefits received or to be received by you in connection with a Change in Control or the termination of your employment (whether payable pursuant to the terms of this Agreement or of any other plan, arrangement or agreement with the Company, UST or any of their affiliates or successors, any person whose actions result in a Change in Control or any person affiliated (or which, as a result of the completion of the transactions causing a Change in Control, will become affiliated) with the Company or UST or such person within the meaning of section 1504 of the Code (such payments or benefits, excluding the Gross-Up Payments, being hereinafter referred to as the "Total Payments")) shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax counsel selected by the independent auditors of the Company (as of the date immediately prior to the Change in Control) and reasonably acceptable to you, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code; (ii) all "excess parachute payments" (within the meaning of section 280G(b)(1) of the Code) shall be treated as subject to the Excise Tax, unless in the opinion of such tax counsel such excess parachute payments

6.

Noncompetition.  You agree that you will not engage in any Competitive Activity during the one-year period following your termination of employment with the Company for any reason (or, where you receive payments pursuant to Section 4(c) or Section 5(c) hereof, then during the two-year period following your termination of employment with the Company).  For purposes of this Section, "Competitive Activity" shall mean activity, without the written consent of an authorized officer of UST, consisting of your participation in the management of, or acting as a consultant for or employee of, any business operation of any enterprise if such operation (a "Competitive Operation") is then in substantial and direct competition with any business operation of the Company, UST and/or any of their affiliates, any place in the world, as now or hereafter designated by the Board; provided, however, that no business operation may be designated as a business operation that is in substantial competition with UST and/or any of its

8.

Non-Solicitation.  You agree that you shall not solicit any person who is a customer of the businesses conducted by the Company or its affiliates, or any business in which you have been engaged on behalf of the Company or its affiliates at any time during the Term of this Agreement and for a two (2) year period thereafter on behalf of an employer affiliated with you or any business described in Section 6; or induce or attempt to persuade any employee of the Company, UST or any of  their affiliates to terminate his employment relationship in order to enter into employment with an employer affiliated with you or any business described in Section 6.

9.

 

(a)

The Company and UST shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or

10.

Notice.  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

11.

Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without regard to its conflicts of law principles.  All references to

13.

Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

14.

Arbitration.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in New York, New York, in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with the Agreement.

15.

Code Section 409A.  It is intended, and this Agreement will be so construed, that any amounts payable under this Agreement and the Company’s and your exercise of authority or discretion hereunder shall comply with the provisions of section 409A of the Code and the treasury regulations relating thereto so as not to subject you to the payment of interest and tax penalty which may be imposed under section 409A of the Code.  In furtherance of this intent, to the extent that any regulations or other guidance issued under section 409A of the Code would result in you being subject to the payment of such interest or tax penalty, the Company and you agree to amend this Agreement prior to January 1, 2009 in order to bring this Agreement into compliance with section 409A of the Code in a manner which has the least adverse effect on you.

16.

Entire Agreement.  This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; including, without limitation, the Letter Agreement between you, the Company and UST, dated January 1, 1991, the Existing Agreement, and any addendums, amendments or modifications thereof; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled.  Notwithstanding the foregoing, nothing contained herein shall be deemed to be a termination or cancellation of your right to

 

indemnification by UST as an officer pursuant to: (a) applicable state law, with all exclusions and exceptions provided by such law to remain in full force and effect; (b) any indemnification agreement entered into between you and UST which shall remain in full force and effect; (c) any applicable director and officer insurance arrangements; and (d) in accordance with Article VIII of UST’s By-Laws.