Exhibit 10.40

 

TODHUNTER INTERNATIONAL, INC.

222 Lakeview Avenue, Suite 1500

West Palm Beach, FL 33401

 

ENDORSEMENT SPLIT-DOLLAR AGREEMENT

 

THIS ENDORSEMENT SPLIT-DOLLAR AGREEMENT (this “Agreement”) is entered into this
20th day of February 2004, by and between Todhunter International, Inc., a
Delaware corporation (the “Corporation”) and Ezra Shashoua (the “Executive”).

 

WITNESSETH:

 

WHEREAS, the Executive is employed by the Corporation; and

 

WHEREAS, the Corporation recognizes the valuable services performed by the
Executive and wishes to encourage his continued employment; and

 

WHEREAS, the Corporation is desirous of providing protection for the
beneficiaries of Executive in the event of his untimely death; and

 

WHEREAS, The Corporation has applied for, and is the owner of Life Insurance
Policy Number 10034390 (the “Policy”) in the specified face amount of $1,000,000
from the Lincoln National Life Insurance Company (the “Insurer”); and

 

WHEREAS, it is understood and agreed that this Agreement is to be considered
effective as of the date on which the Policy was issued by the Insurer or the
date of execution of this Agreement whichever is later.

 

NOW THEREFORE, in consideration of the premises and of the mutual promises
herein contained, the parties hereto agree as follows:

 

1.             Ownership Rights In The Policy.

 

A.            The Corporation shall have all of the ownership rights, options
and privileges permitted by the Policy except those expressly granted to the
Executive by the terms of this Agreement.

 

B.            The Corporation has the right to borrow or to pledge the cash
surrender value of the Policy to the extent of its interest specified in
Paragraph 1.C., and as permitted by the terms of the Policy. The Corporation’s
interest in the cash surrender value of the Policy at any time during the
Executive’s lifetime, or at death, shall be adjusted to reflect any indebtedness
on or secured by the Policy which is attributable to borrowing by or on behalf
of the Corporation (including any interest due on such indebtedness).

 

C.            The Corporation shall have the right to designate itself as
beneficiary of the Policy, to the extent of the difference between the total
death benefit paid under the life insurance contract and the amount designated
in Paragraph 1.D., below, provided such amount is reduced by any indebtedness
(on or secured by the Policy) which is attributable to borrowing by or on behalf
of the Corporation (including any interest due on such indebtedness) and/or any
withdrawals by or on behalf of the Corporation.

 

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D.            The Corporation hereby endorses to the Executive policy death
benefits in the amount of $1,000,000 which shall be payable to the Executive’s
estate if the Executive dies while this Agreement is in force.  The Corporation
and the Executive’s estate may select a settlement option as provided in the
Policy at the time of distribution.

 

E.             The Corporation may not take any action with respect to the
Policy that will impair any right or interest of the Executive in the Policy.

 

2.             Premium Payments.  On or before the due date of each Policy
premium, or within the grace period provided therein, the Corporation shall pay
the full amount to the Insurer.

 

3.             Division of Death Proceeds of Policy.  In the event that the
Executive shall die while this Agreement is in force, the Corporation shall be
entitled to receive from the Policy proceeds an amount equal to the
Corporation’s interest in the Policy, as determined under Paragraph 1.C. of this
Agreement. The portion of the Policy proceeds which is in excess of the amount
paid to the Corporation shall be paid to the Executive’s estate in accordance
with the terms of the Policy and Paragraph 1.D. of this Agreement.

 

4.             Waiver of Premium.  Upon the unanimous agreement of the
Corporation and the Executive, the Corporation shall apply to the Insurer for a
supplemental agreement providing for the waiver of policy premiums in the event
of the Executive’s disability. The Corporation shall pay any additional premium
attributable to such an agreement.

 

5.             Choice of Dividend Options.  To the extent the Insurer declares
dividends on the Policy, the Corporation shall have the right to choose the
option or combination of options it desires from among those offered by the
Insurer. The Corporation shall notify the Insurer of its choice.

 

6.             Termination of Agreement.

 

A.            This Agreement shall be cancelled and shall terminate upon the
termination of the Executive’s employment with the Corporation for any reason
other than the Executive’s disability as defined in Paragraph 3 of the Salary
Continuation Plan Agreement between the Corporation and the Executive dated
February 20, 2004 (the “Salary Continuation Plan Agreement”).   Upon such
termination, the Executive shall have a 60-day option to pay the Corporation an
amount equal to the Corporation’s interest in the Policy under Paragraph 1.C. in
return for the Corporation’s release of any claim to the policy. If, within the
60-day period following the cancellation of this Agreement, the Executive fails
to exercise said option, then the Executive shall be deemed to have relinquished
all rights in the Policy and the Corporation will be free to surrender or take
any other action with respect to the Policy as it may desire. If the Executive
fails to pay the Corporation within the 60-day option period, the Executive
agrees upon request of the Corporation to execute any and all instruments that
may be required to transfer all right, title, and interest in the Policy to the
Corporation.

 

B.            Notwithstanding Paragraph 6.A., in the event the Executive dies
during his employment with the Corporation, this Agreement shall be cancelled
and shall terminate upon the payment of the death proceeds of the Policy to the
Executive’s estate in accordance with Paragraph 1.D. and Paragraph 3 of this
Agreement.

 

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7.             Termination of this Agreement in Connection with a Change in
Control.

 

A.            Notwithstanding anything in this Agreement to the contrary, unless
the Executive is terminated “for cause,” as defined in Paragraph 10.C. of this
Agreement, the Corporation may not terminate this Agreement without the consent
of the Executive during the period beginning nine (9) months before a Change in
Control (as defined below); provided however, this Agreement shall be cancelled
and shall terminate once the Executive become entitled to receive payment of the
retirement benefit in accordance with Paragraph 1 of the Salary Continuation
Plan Agreement.

 

B.            For the purpose of this Agreement, a “Change of Control” shall
mean any of the following events:

 

(i)            The acquisition by any person, entity or “group” required to file
a Schedule 13D or Schedule 14D-1 promulgated under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) (excluding, for this purpose, any of
the following that acquires beneficial ownership of voting securities of the
Corporation, including shares acquired pursuant to the exercise of options or
warrants, or conversion of preferred stock outstanding as of the date hereof:
(a) CL Financial, Ltd., Angostura Ltd., or any of their affiliates; (b) the
Corporation, its affiliates or subsidiaries; (c) V&S Vin & Spirit AB, its
affiliates or subsidiaries, solely in connection with a transaction with the
Corporation, its affiliates or subsidiaries approved by the Board of Directors;
or (d) any employee benefit plan of the Corporation, or its affiliates or
subsidiaries), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of over 40% (in one or more transactions, in
the aggregate) of either the then outstanding shares of common stock or the
combined voting power of the Corporation’s then outstanding voting securities
entitled to vote generally in the election of directors; or

 

(ii)           An election or appointment to the Board of Directors by virtue of
which the individuals who immediately prior thereto constituted the Board of
Directors (the “Incumbent Board”) no longer constitute at least a majority of
the Board of Directors (other than an election or appointment of a director or
directors precipitated by CL Financial, Ltd., Angostura Ltd., V&S Vin & Spirit
AB, or any of their affiliates, or by the Board of Directors if at that time at
least a majority are individuals who are directors on the date hereof), provided
that any person who becomes a director subsequent to the date hereof whose
election, or nomination for election by the Corporation’s stockholders, was
approved by a vote of at least a majority of the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of Employer, as such terms are used in Rule 14a-1
promulgated under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or

 

(iii)          Approval by the stockholders of the Corporation of: (a) a
reorganization, merger or consolidation by reason of which persons who were the
stockholders of the Corporation immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than fifty percent
(50%) of the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company’s then outstanding
voting securities; or (b) a liquidation or dissolution of the Corporation or the
sale of all or substantially all of the assets of the Corporation, whether such
assets are held directly or indirectly (excluding the currently proposed joint
ventures with affiliates of CL Financial, Ltd. and/or V&S Vin & Spirit AB, if
such transactions constitute a sale of substantially all of the assets of
Employer).

 

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C.            The definition of “for cause” termination shall be the same as set
forth in the employment agreement between the Executive and the Corporation in
effect as of the date of this Agreement.  In the event there is no employment
agreement between the Executive and the Corporation on the date of this
Agreement, “cause” for termination shall mean that (a) the Executive is
convicted of a felony which, in the sole determination of the Board of
Directors, would have a material adverse effect on the Executive’s ability to
perform his duties hereunder or on the business or reputation of the
Corporation; (b) the Executive has exhibited gross misconduct resulting in
material harm to the Corporation, its business or reputation; (c) the Executive
has willfully misappropriated the Corporation’s assets or has otherwise
willfully defrauded the Corporation, including without limitation by fraud,
theft, embezzlement, or breach of a fiduciary duty involving personal profit. 
For purposes of this paragraph, no act or failure to act on the Executive’s part
shall be considered “willful” unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interests of the Corporation.

 

8.             Amendment.  This Agreement may be amended at any time and from
time to time, by a written instrument signed by the Corporation and the
Executive.

 

9.             Binding Effect.  All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties and their respective administrators, personal representatives, legal
representatives, heirs, successors and permitted assigns, whether so expressed
or not.

 

10.          Notices.  Any notice, consent or demand required or permitted to be
given under the provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same.  If such notice, consent or
demand is mailed to a party hereto, it shall be sent by United States certified
mail, postage prepaid, addressed to such party’s last known address as shown on
the records of the Corporation. The date of such mailing shall be deemed the
date of notice, consent or demand.

 

11.          Insurer Not a Party to Agreement.  The Insurer shall not be deemed
a party to this Agreement. Payment or other performance of its contractual
obligations in accordance with the Policy provisions shall fully discharge the
Insurer from any and all liability.

 

12.          Named Fiduciary.  The Corporation is hereby designated the “Named
Fiduciary” as such term is defined in the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”).  As Named Fiduciary, the Corporation shall be
responsible for the management and administration of the terms of this
Agreement. The Corporation’s Board of Directors may delegate to others the
management and operating responsibilities of the plan including the employment
of advisors and may exercise any other powers necessary for the discharge of its
duties to the extent not in conflict with the provisions of ERISA.

 

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13.          Claim Procedure.

 

A.            If the Executive or his personal representative believes that he
is being denied a benefit to which he is entitled under this Agreement
(hereinafter referred to as a “Claimant”), such Claimant may file a written
request for such benefit with the Corporation setting forth his claim.  The
request must be addressed to the President of the Corporation at its then
principal place of business.

 

B.            The Corporation shall reply to the Claimant’s claim within ninety
(90) days of receiving the claim.  If the claim is denied in whole or in part,
the Corporation shall adopt a written opinion, using language calculated to be
understood by the Claimant, setting forth:

 

(i)            The specific reason or reasons for such denial;

 

(ii)           The specific reference to pertinent provisions of this Agreement
on which such denial is based;

 

(iii)          A description of any additional material or information necessary
for the Claimant to perfect his claim and an explanation why such material or
such information is necessary;

 

(iv)          Appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and

 

(v)           The time limits for requesting a review under subsection C. and
for review under subsection D. hereof.

 

C.            Within sixty (60) days after the receipt by the Claimant of the
written opinion described above, the Claimant may request in writing that the
Secretary of the Corporation review the determination of the Corporation. Such
request must be addressed to the Secretary of the Corporation, at its then
principal place of business. The Claimant or his duly authorized representative
may, but need not, review the pertinent documents and submit issues and comments
in writing for consideration by the Corporation. If the Claimant does not
request a review of the Corporation’s determination by the Secretary of the
Corporation within such sixty (60) day period, he shall be barred and estopped
from challenging the Corporation’s determination.

 

D.            Within sixty (60) days after the Secretary’s receipt of a request
for review, he will review the Corporation’s determination. After considering
all materials presented by the Claimant, the Secretary will render a written
opinion, written in a manner calculated to be understood by the Claimant,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of this Agreement on which the decision
is based. If special circumstances require that the sixty (60) day time period
be extended, the Secretary will so notify the Claimant and will render the
decision as soon as possible, but no later than one hundred twenty (120) days
after receipt of the request for review.

 

14.          Governing Law.  This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to principles of
conflicts of laws.

 

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15.          Jurisdiction and Venue.  The parties acknowledge that a substantial
portion of the negotiations, anticipated performance and execution of this
Agreement occurred or shall occur in Palm Beach County, Florida.  Any civil
action or legal proceeding arising out of or relating to this Agreement shall be
brought in the courts of record of the State of Florida in Palm Beach County or
the United States District Court, Southern District of Florida.  Each party
consents to the jurisdiction of such Florida court in any such civil action or
legal proceeding and waives any objection to the laying of venue of any such
civil action or legal proceeding in such Florida court.  Service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws, rules of
procedure or local rules.

 

IN WITNESS WHEREOF, the parties hereto have set their hands on the day and year
first hereinabove written.

 

TODHUNTER INTERNATIONAL, INC.

 

By:

/s/ Jay S. Maltby

, Chairman & CEO

 

EXECUTIVE

 

By:

/s/ Ezra Shashoua

, Executive Vice President and CFO

 

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