Exhibit 10.2
August 12, 2010
Mr. Martin L. Orlowsky
714 Green Valley Road
Greensboro, NC 27408
Dear Martin:
We understand that your retirement from Lorillard, Inc. (the “Company”) will be
effective December 31, 2010 upon the expiration of the Amended and Restated
Employment Agreement, by and between you and the Company and dated as of
December 19, 2008 (the “Employment Agreement”). This letter sets forth the terms
and conditions under which you will cease serving as the Company’s President and
Chief Executive Officer and will provide consulting services to the board of
directors of the Company (the “Board”), in order that the Company may continue
to benefit from your knowledge and extensive experience in the tobacco industry
and in the management and leadership of the Company and its businesses, products
and customers. For the avoidance of doubt, except for the change in your title
described herein, your Employment Agreement, including the compensation and
benefits thereunder, will continue in full force and effect through December 31,
2010.
1. Succession; Effect on Other Positions. Except as may otherwise be requested
by the Board, at the close of business on the date immediately preceding the
date of the commencement of a new President and Chief Executive Officer of the
Company (expected to be on or about September 13, 2010,) you will no longer hold
the title of President and Chief Executive Officer of the Company and will serve
the Company, in an executive capacity, as Chairman of the Board through
December 31, 2010. At the close of business on December 31, 2010, you will cease
serving as Chairman of the Board and as an employee of the Company in all
positions (“Retirement”). If, as of your Retirement, you are a member of the
Board or the board of directors of any of the Company’s subsidiaries, or hold
any other position with the Company or its subsidiaries, you will be deemed to
have resigned from all such positions as of the date of your Retirement. You
agree to execute such documents and take such other actions as the Company may
request to reflect such resignations.
2. Consulting Period. Your service as a consultant to the Board pursuant to this
letter will commence on January 1, 2011 (the “Effective Date”) and will
terminate on the second anniversary of the Effective Date, subject to your
continued compliance with this letter, including the Restrictive Covenants (as
defined in Section 6 below) (the “Consulting Period”).

 

 

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Mr. Martin L. Orlowsky
August 12, 2010
Page 2
3. Services; Time Commitment.
(a) Services. During the Consulting Period, you will serve as a consultant and
advisor to the Company and the Board and will provide services as may be
reasonably requested by the Board or the Chief Executive Officer from time to
time (the “Services”).
(b) Time Commitment. During the Consulting Period, you will (i) dedicate the
amount of your business time and attention which you deem reasonably necessary
to perform the Services, (ii) perform the Services at such locations as you
reasonably deem appropriate, (iii) use your reasonable best efforts to promote
the best interests of the Company, and (iv) perform the Services diligently and
consistently with the requirements set forth in this letter. Notwithstanding the
foregoing, it is the intent of the Board and you, and the Board and you agree to
use reasonable efforts to ensure, that the amount of your Services will not
exceed twenty percent of the average level of services that you performed
(whether as an employee or an independent contractor of the Company) over the
thirty-six-month period immediately preceding the Effective Date, consistent
with the intent that your Retirement with the Company (and its subsidiaries)
constitute a “separation from service” within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”).
4. Fees for Services and Related Matters.
(a) Fees for Services. During the Consulting Period, the Company will pay you an
annual consulting fee of $500,000 (the “Consulting Fee”), payable in arrears, in
equal monthly installments on the first day of each calendar month (or the
following business day).
(b) Continued Vesting of Outstanding Equity Awards. Except as provided below,
effective as of your Retirement, you will be treated as a terminated employee
and having incurred a “separation from service,” as defined under Section 409A
of the Code, for purposes of all of the employee benefit plans of the Company
and its subsidiaries. However, solely with respect to your unvested stock
appreciation rights, stock options and restricted stock awards (both time based
and performance based) that were granted under the Company’s equity plans and
are outstanding as of your Retirement, (i) each such stock appreciation right
and stock option will continue to vest in accordance with its applicable vesting
schedule as if you were an employee during the Consulting Period and thereafter
through the applicable vesting date, and (ii) each such restricted stock award
will continue to vest in accordance with its applicable vesting schedule as if
you were an employee during the Consulting Period and any unvested restricted
stock awards as of December 31, 2012 will vest immediately on such date. In the
case of each of clauses (i) and (ii) above, the vesting is subject to your
continued compliance with this letter during the Consulting Period, including
the Restrictive Covenants, and, in the case of stock options and stock
appreciation rights that vest after the end of the Consulting Period, continued
compliance with the Restrictive Covenants through the applicable vesting date.
Stock options and stock appreciation rights, whether vested as of the date of
your Retirement or due to the continued vesting provisions of this Section 4(b),
will continue to be exercisable by you until the expiration of the original full
term.

 

 

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Mr. Martin L. Orlowsky
August 12, 2010
Page 3
(c) Reimbursement of Expenses. The Company will, upon submission of appropriate
documentation and subject to the requirements of Section 7 hereof, reimburse you
for your reasonable business expenses, including, without limitation, airfares,
and telecommunication expenses, incurred by you during the Consulting Period in
connection with the performance of your duties hereunder in accordance with the
Company’s policies and procedures in effect from time to time with respect to
its vendors. You will bear all of your other expenses.
(d) Sole Consideration. Except as specifically provided herein, you will be
entitled to no compensation or benefits from the Company with respect to the
Services, will not be eligible to participate in any employee benefit plans of
the Company and its subsidiaries and will not be credited with service for
purposes of eligibility, vesting or benefit accrual under any employee benefit
plan of the Company or its subsidiaries.
(e) Clawback. You acknowledge and agree that all incentive compensation earned
or paid to you, including, without limitation, all equity awards earned and/or
granted to you prior to the date of your Retirement, are and will continue to be
subject to the terms and conditions of the Company’s clawback policy adopted by
the Board, as amended from time to time.
5. Independent Contractor Relationship.
(a) Status as an Independent Contractor. In providing your Services, you are
acting solely as an independent contractor, not as an employee, agent or joint
venturer of the Company, and, except with respect to your equity awards, you
will not be entitled to any benefits provided to employees of the Company or any
of its subsidiaries. The Company will not exercise general supervision or
control over the time, place or manner in which you provide the Services. You
acknowledge and agree that you are solely responsible for the payment of all
Federal, state, local and foreign taxes that are required by applicable laws or
regulations to be paid with respect to the Consulting Fee or other remuneration
payable hereunder other than the equity awards which will be subject to any
reporting and withholding as required by applicable law, and under no
circumstances whatsoever, including without limitation, for the purposes of the
Federal Insurance Contributions Act, the Social Security Act, the Federal
Unemployment Tax Act and Federal and state income tax withholding, will you be
deemed an employee of the Company. You will have no authority to sign any
document or extend any credit on behalf of the Company or to bind the Company in
any way.
(b) No Restrictions. You represent and warrant that you are able to enter into
this letter and that your ability to enter into this letter and to fully perform
the Services contemplated hereunder is not limited to or restricted by any
agreements or understandings between you and any other person or restricted or
prohibited by applicable law.

 

 

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Mr. Martin L. Orlowsky
August 12, 2010
Page 4
(c) Non-Exclusive Services. The Company acknowledges that you are not prohibited
by this letter from obtaining employment with or otherwise providing services to
another entity during the Consulting Period, provided that, (i) such other
employment or services do not interfere with your ability to perform the
Services under this letter and (ii) such other employment or services are not
prohibited by the Restrictive Covenants.
6. Restrictive Covenants.
(a) You agree that you are subject to the restrictive covenants as provided
under Sections 10 through 12 of your Employment Agreement (“Restrictive
Covenants”) which survive your Retirement and the expiration of your Employment
Agreement; provided, however, that you agree that the Restrictive Covenants
under Sections 11 and 12 of your Employment Agreement will apply for the
duration of the Consulting Period and for the three year period following the
end of the Consulting Period.
(b) In addition to the Restrictive Covenants, you acknowledge and agree that,
during the Consulting Period and at any time thereafter, you will hold in
confidence all confidential and/or proprietary information, knowledge, know-how,
trade secrets, and similar matters and property of the Company, and will not
directly or indirectly disclose or make use of any such confidential
information. In addition, you agree that upon your cessation of the Consulting
Period for any reason, you will provide to the Company all documents, papers,
files or other material in your possession and under your control that are
connected with or derived from your services to the Company under your
Employment Agreement or this letter.
(c) You agree that the restrictions provided in this Section 6, including the
Restrictive Covenants (as modified by Section 6(a) hereof), are reasonable in
their time, territory and scope, and acknowledge that the Company would be
irreparably injured by a violation of the terms of any such covenants. You agree
that the remedies at law for any breach of this letter by you would be
inadequate and that in the event of any such breach the Company will be entitled
to seek a preliminary injunction, temporary restraining order, or other
equivalent relief, restraining you from any actual or threatened breach of this
letter in any court which may have competent jurisdiction over the matter in
dispute.
7. Section 409A. This letter is intended to comply with the provisions of
Section 409A of the Code and the Treasury regulations relating thereto or an
exception to Section 409A of the Code. For purposes of compliance with
Section 409A of the Code, each payment of compensation under this letter will be
treated as a separate payment of compensation, and in no event may you, directly
or indirectly, designate the calendar year of any payment under this letter. All
reimbursements provided under this letter will be provided in accordance with
the requirements of Section 409A of the Code, including, that (a) the amount of
expenses eligible for reimbursement during one calendar year will not affect the
amount of expenses eligible for reimbursement in any other calendar year;
(b) the reimbursement of an eligible expense will be made no later than the last
day of the calendar year following the calendar year in which the expense is
incurred; and (c) the right to any reimbursement will not be subject to
liquidation or exchange for another benefit.

 

 

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Mr. Martin L. Orlowsky
August 12, 2010
Page 5
8. Miscellaneous.
(a) Amendment. This letter may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) Successor. This letter is personal to you and without the prior written
consent of the Company will not be assignable by you. This letter and any rights
and benefits hereunder will inure to the benefit of and be enforceable by your
legal representatives, heirs or legatees. This letter and any rights and
benefits hereunder will inure to the benefit of and be binding upon the Company
and its successors and assigns. As used in this letter, “Company” will mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this letter by operation of
law, or otherwise.
(c) Headings. The headings in this letter are for convenience of reference only
and do not affect the interpretation of this letter.
(d) Notices. Any notice required or permitted to be given under this letter will
be deemed properly given in writing and if mailed by registered or certified,
postage prepaid with return receipt requested, to the business address of the
Company, to the attention of the Senior Vice President, Legal and External
Affairs, General Counsel and Secretary, and to your residence address, or to
such other address as a party is directed pursuant to written notice from the
other party.
(e) Severability. The invalidity or unenforceability of any provision of this
letter will not affect the validity or enforceability of any other provision of
this letter, and this letter will be construed as if such invalid or
unenforceable provision were omitted (but only to the extent that such provision
cannot be appropriately reformed or modified).
(f) Waiver of Breach. No waiver by any party hereto of a breach of any provision
of this letter by any other party, or of compliance with any condition or
provision of this letter to be performed by such other party, will operate or be
construed as a waiver of any subsequent breach by such other party of any
similar or dissimilar provisions and conditions at the same or any prior or
subsequent time. The failure of any party hereto to take any action by reason of
such breach will not deprive such party of the right to take action at any time
while such breach continues.
(g) Entire Agreement. Except as provided herein, from and after the Effective
Date, this letter will supersede any other agreement or understanding between
the parties with respect to the subject hereof, including but not limited to
your Employment Agreement. For the avoidance of doubt, this letter does not
supersede or otherwise affect Sections 10 through 15 of the Employment
Agreement, which survive your Retirement and will remain in effect in accordance
with the terms of the Employment Agreement, as amended by this letter, or the
rights with respect to the supplemental retirement benefits set forth in Section
5(b) of the Employment Agreement, which will be paid in accordance with the
terms of the Employment Agreement.

 

 

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Mr. Martin L. Orlowsky
August 12, 2010
Page 6
(h) Governing Law. This letter will be governed by, and construed under and in
accordance with, the internal laws of the State of North Carolina, without
reference to rules relating to conflicts of laws.
(i) Counterparts. This letter may be executed in separate counterparts, each of
which is deemed to be an original and all of which taken together constitute one
and the same agreement.
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Mr. Martin L. Orlowsky
August 12, 2010
Page 7
If this letter correctly sets forth our agreement, please return a signed copy
of this letter to the Company.

            Sincerely,

LORILLARD, INC.
      By:   /s/ Ronald S. Milstein         Ronald S. Milstein        Senior Vice
President, Legal and
External Affairs, General Counsel
and Secretary     

          Accepted and agreed to this 12th day
of August, 2010.
      /s/ Martin L. Orlowsky       Martin L. Orlowsky