Exhibit 10.2
June 23, 2006
Daniel W. Butler
U.S. Smokeless Tobacco Company
100 West Putnam Avenue
Greenwich, CT 06830
Dear Dan:
          U.S. Smokeless Tobacco Company (the “Company”), a wholly owned
subsidiary of UST Inc. (“UST”), is pleased to provide you with this letter
agreement (the “Agreement”). The Board of Directors of UST (the “Board of
Directors” or the “Board”) considers it essential to the best interests of the
Company and the interests of UST’s stockholders to foster the continuous
employment of key management personnel. In addition, the Board recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control of UST may exist, and that the uncertainty and questions which may
arise among Company management as a result of the foregoing may cause the
departure or distraction of Company management personnel to the detriment of the
Company and of UST and its stockholders.
          In order to induce you to remain in the employ of the Company, the
Company and UST agree that you shall receive the severance benefits set forth in
this Agreement in the event your employment with the Company is terminated under
the circumstances described below either prior to or subsequent to a “Change in
Control” (as defined in Section 2).

1.   Term of Agreement. This Agreement shall commence on the date hereof 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 Good
Reason as defined herein, this Agreement shall continue in effect for a period
of not less than thirty (30) days. You acknowledge and agree that the
non-renewal of the term of this Agreement shall not be considered a termination
of employment hereunder for any purpose, including entitlement to severance
payments or any other benefits provided for herein.

 

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2.   Change in Control. For purposes of this Agreement, a “Change in Control”
shall be a change in control of UST and shall be deemed to have occurred if:

(A) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than
(1) UST or any of its subsidiaries, (2) any “person” who on the date hereof is a
director or officer of UST, (3) any trustee or other fiduciary holding
securities under an employee benefit plan of UST, (4) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (5) any
corporation owned, directly or indirectly, by the stockholders of UST in
substantially the same proportions as their ownership of stock of UST (a
“Person”), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act (a “Beneficial Owner”)), directly or indirectly, of securities
of UST (not including in the securities beneficially owned by such Person any
securities acquired directly from UST or its affiliates) representing 20% or
more of the combined voting power of UST’s then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection with a
transaction described in clause (C)(1) below; or
(B) the following individuals cease for any reason to constitute a majority of
the number of directors of UST then serving: individuals who, on the date
hereof, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of UST) whose appointment or election by the Board
or nomination for election by UST’s stockholders was approved or recommended by
a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or recommended; or
(C) there is consummated a merger or consolidation of UST or any direct or
indirect subsidiary of UST with any other corporation, other than (1) a merger
or consolidation which would result in the voting securities of UST outstanding
immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination with the ownership
of any trustee or other fiduciary holding securities under an employee benefit
plan of UST or any subsidiary of UST, more than 50% of the combined voting power
of the securities of UST or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (2) a merger or
consolidation effected to implement a recapitalization of UST (or similar
transaction) in which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of UST (not including in the securities Beneficially
Owned by such Person any securities acquired directly from UST or its
subsidiaries) representing 20% or more of the combined voting power of UST’s
then outstanding securities; or

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(D) the stockholders of UST approve a plan of complete liquidation or
dissolution of UST or there is consummated an agreement for the sale or
disposition by UST of all or substantially all of UST’s assets, other than a
sale or disposition by UST of all or substantially all of UST’s assets to an
entity, more than 50% of the combined voting power of the voting securities of
which are owned by stockholders of UST in substantially the same proportions as
their ownership of UST immediately prior to such sale.

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 unless such termination is (i) because of your death or
Disability, (ii) by the Company for Cause, or (iii) by you for any reason other
than Good Reason as defined in Section 3(d)(i) through ((iii)). 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 unless such termination is (x) because of your death or Disability,
(y) by the Company for Cause, or (z) by you for any reason other than Good
Reason as defined in Section 3(d)(A) through (H). 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 Control and such termination is by you for
Good Reason or the Company without Cause in anticipation or contemplation of
such Change in Control.     (b)   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, your employment
may be terminated for “Disability.”     (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

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      Code of Corporate Responsibility); or (iii) the commission of an act or
omission that constitutes a material breach of this Agreement (including, but
not limited to, the violation of your obligations under Sections 6, 7 or 8
hereof). For purposes of this subsection, no act, or failure to act, on your
part shall be considered “willful” unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action or omission was
legal, compliant with the Company’s Code of Corporate Responsibility and in the
best interest of the Company.     (d)   Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, “Good
Reason” shall mean, without your express written consent, (1) the occurrence
prior to a Change in Control of any of the circumstances set forth in paragraphs
(i) through (iv) below and (2) the occurrence on a Change in Control, in
contemplation or anticipation of a Change in Control provided such termination
occurs within thirty (30) days prior to the Change in Control, or following a
Change in Control of any of the circumstances set forth in paragraphs (A)
through (H) below, unless, in any case, such circumstances are fully corrected
prior to the Date of Termination specified in Notice of Termination, as defined
in Sections 3(f) and 3(g), respectively, given in respect thereof.         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 Greenwich, Connecticut 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

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      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.

Good Reason on or Following a Change in Control.

  (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 Greenwich, Connecticut 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 of the Company, within seven (7) days of the date such
compensation is due;

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  (E)   The failure by the Company or UST to continue in effect any compensation
plan in which you participate immediately prior to the Change in Control which
is material to your total compensation, including but not limited to the UST
Inc. Retirement Income Plan for Salaried Employees, UST Inc. Employees’ Savings
Plan, UST Inc. Officers’ Supplemental Retirement Plan, UST Inc. Incentive
Compensation Plan and the 2005 UST Inc. Long-Term Incentive Plan, or any
substitute plans adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue your
participation therein (or in a substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants, as existed at
the time of the Change in Control;     (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

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      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)   Date of Termination, Etc. “Date of
Termination” shall mean (a) if your employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the full-time performance of your duties during such thirty
(30) day period), and (b) if your employment is terminated pursuant to
Subsection (c) or (d) hereof or for any other reason (other than 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 of 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, within fifteen (15) days after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as determined without regard to this
provision), the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); and provided, further, that the Date
of Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Pending the resolution of any such
dispute following the occurrence of a Change in Control, the Company will
continue to pay you your full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited to, base salary) and
continue to include you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Notwithstanding the preceding sentence, to the extent necessary
to avoid a violation of section 409A(a)(2)(B) of the Internal Revenue Code of
1986, as amended (the

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      “Code”), as reasonably determined by the Company, payment of such
compensation and provision of such compensation, benefit and insurance plan
coverage will be delayed until the date that is six months after the date of
your separation from service (within the meaning of section 409A of the Code);
provided, however, that the lump sum value of amounts which are delayed as a
result of section 409(A) of the Code shall be paid as soon as practicable
thereafter. Amounts paid during the pendency of a dispute under this Subsection
are in addition to all other amounts due under this Agreement, and shall not be
offset against or reduce any other amounts due under this Agreement and shall
not be reduced by any compensation earned by you as the result of employment by
another employer.     (h)   Release/Resignations. As a condition and in
consideration of the benefits provided under Section 4(b) 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(b) 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:

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  (a)   If your employment is terminated by the Company for Cause or by you for
any reason or because of your death or Disability, the Company shall pay you
your full base salary 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)   If your employment is terminated by the Company other
than for Cause, 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, at the time that annual bonuses in respect of such fiscal year
are regularly paid by the Company (but not later than 2-1/2 months after the end
of such fiscal year, or as soon as practicable thereafter), 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 (but payments shall be delayed until the date
that is six (6) months after your separation from service, within the meaning of
Code section 409A, to the extent the Company reasonably determines such delay is
necessary to avoid a violation of Code section 409A(a)(2)(B)); provided,
however, that the lump sum value of amounts which are delayed as a result of
section 409(A) of the Code shall be paid as soon as practicable thereafter;    
(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

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      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) (but payments shall be delayed until
the date that is six (6) months after your separation from service, within the
meaning of Code section 409A, to the extent the Company reasonably determines
such delay is necessary to avoid a violation of Code section 409A(a)(2)(B));
provided, however, that the lump sum value of amounts which are delayed as a
result of section 409(A) of the Code shall be paid as soon as practicable
thereafter;     (iv)   for a twenty-four (24) month period following the Date of
Termination, the Company shall arrange to provide you with life insurance
benefits substantially similar to those which you were receiving immediately
prior to the Notice of Termination at a cost and level of benefits which are
substantially similar to those you were receiving prior to the Date of
Termination. Benefits otherwise receivable by you pursuant to this paragraph
(iv) shall be reduced to the extent comparable coverage is actually provided to
you by another employer during the twenty-four (24) month period following your
termination, and any such coverage actually provided to you by such employer
shall be reported to the Company;     (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; and     (vi)   UST shall extend to you the same indemnification
arrangements as are generally provided to other similarly situated officers to
the extent authorized by applicable law and in accordance with Article VIII of
UST’s By-Laws.

  (c)   Except as provided in Section 4(b)(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.

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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:

  (a)   During any period that you fail to perform your full-time duties with
the Company as a result of a period of Disability, you shall continue to receive
your base salary at the rate in effect at the commencement of any such period,
together with all compensation payable to you under the Long-Term Disability
Plan for Salaried Employees or other plan during such period, until your
employment is terminated pursuant to Section 3(b) hereof. Thereafter your
benefits shall be determined under the Company’s retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.     (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
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, 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, at the time that annual bonuses in respect of such fiscal year
are regularly

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      paid by the Company (but not later than 2-1/2 months after the end of such
fiscal year, or as soon as practicable thereafter), the product of (x) an amount
equal to the target annual bonus in effect immediately preceding the Date of
Termination or, if greater, such target in effect immediately prior to the
Change in Control, and (y) a fraction, the numerator of which is the number of
days that have elapsed in the fiscal year in which the Date of Termination
occurs through the Date of Termination, and the denominator of which is 365 (but
payments shall be delayed until the date that is six (6) months after your
separation from service, within the meaning of Code section 409(A), to the
extent the Company reasonably determines such delay is necessary to avoid a
violation of Code section 409(A)(a)(2)(B));     (iii)   in lieu of any further
salary and bonus payments to you for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to you, no later than the
fifth day following the Date of Termination (or, to the extent necessary to
avoid a violation of section 409A(a)(2)(B) of the Code, as reasonably determined
by the Company, on the date that is six months after the date of your separation
from service, within the meaning of section 409A of the Code), a lump-sum
payment equal to the product of (1) the sum of (A) your annual salary rate in
effect as of the Date of Termination or, if greater, such rate in effect
immediately prior to the Change in Control, and (B) an amount equal to 100% of
the target annual bonus in effect as of the Date of Termination or, if greater,
such target in effect immediately prior to the Change in Control, and (2) the
number two (2);     (iv)   the Company also shall reimburse you for all legal
fees and expenses incurred by you as a result of such termination (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 or in connection with any tax audit or proceeding to the extent
attributable to the application of Code section 4999 to any payment or benefits
provided hereunder), but only to the extent that the reimbursement –
(1) qualifies for exclusion from income as a working condition fringe benefit
pursuant to section 132 of the Code, (2) is otherwise exempt from coverage under
section 409A of the Code, or (3) may be paid without violating section 409A of
the Code. If more than one of (1) through (3) in the prior sentence applies,
they shall be applied in the manner that permits the maximum reimbursement; and
    (v)   for a twenty-four (24) month period after such termination, the
Company shall arrange to provide you with life insurance benefits

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      substantially similar to those which you were receiving immediately prior
to the Notice of Termination (as well as the group health coverage described in
Section 5(d) below), at a cost and level of benefits which are substantially
similar to those you were receiving prior to the Date of Termination.. Benefits
otherwise receivable by you pursuant to this paragraph (v) shall be reduced to
the extent comparable coverage is actually provided to you by another employer
during the twenty-four (24) month period following your termination, and any
such coverage actually provided to you by such employer shall be reported to the
Company.

  (d)   For a twenty-four (24) month period after the termination referenced in
Section 4(b) 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 section 409A(a)(2)(B) of the Code (the “Six-Month Delay”) applies to
you at the Date of Termination and such coverage is provided under a
self-insured medical reimbursement plan maintained by the Company or UST (within
the meaning of section 105(h) of the Code):

  (1)   there will be no charge to you for such coverage for any month that
falls within the first six months following the date of your separation from
service (within the meaning of section 409A of the Code), provided, however,
that no health expenses will be paid or reimbursed pursuant to such no-charge
coverage later than December 31 of the second calendar year following the
calendar year in which your separation from service (within the meaning of
section 409A of the Code) occurred;     (2)   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     (3)   on
the date that is six months following the date of your separation from service
(within the meaning of section 409A of the Code), 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

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      (b) the number of months of coverage provided under clause (1) above.

  (ii)   If the Six-Month Delay does not apply to you at the Date of Termination
and such coverage is provided under a self-insured medical reimbursement plan
maintained by the Company or UST (within the meaning of section 105(h) of the
Code):

  (1)   the charge to you for each month of such 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     (2)   on the Date of Termination, 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 number twenty-four (24).

  (iii)   Regardless of whether the Six-Month Delay applies to you at the Date
of Termination, 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 in a lump sum no later than the fifth day following the Date
of Termination or, to the extent necessary to avoid a violation of Code section
409A(a)(2)(B), as reasonably determined by the Company, on the date that is six
months after the date of your separation from service (within the meaning of
section 409A of the Code). Notwithstanding the foregoing provisions of this
Section 5(e), if it shall be determined that you are entitled to the Gross-Up
Payment, but that the Parachute Value (as defined below) of the Total Payments
does not equal or exceed 110% of the Safe Harbor Amount (as defined below), then
no Gross-Up Payment shall be made to you and the amounts payable to you under
this Agreement shall be reduced to the extent necessary to cause the Parachute
Value of the Total Payments, in the aggregate, to be equal to the Safe Harbor
Amount.

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  (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 represent
reasonable compensation for services actually rendered (within the meaning of
section 280G(b)(4)(B) of the Code) in excess of the “base amount” (within the
meaning of section 280G(b)(3) of the Code), or are not otherwise subject to the
Excise Tax; and (iii) the value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company’s independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the Code and
the regulations promulgated thereunder. For purposes of determining the amount
of the Gross-Up Payment, you 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 and employment
taxes at the highest marginal rate of taxation in your state and locality of
residence on the Date of Termination (or such other date as is hereinafter
described), net of the maximum reduction in federal income taxes that could be
obtained from deduction of such state and local taxes. For purposes of this
Agreement, (x) the term “Parachute Value” when applied to any payment shall mean
the present value as of the date of the Change in Control of the portion of such
payment that is treated as a “parachute payment” under section 280G(b)(2) of the
Code, as determined by tax counsel for purposes of determining whether and to
what extent the Excise Tax will apply to you and (y) the term “Safe Harbor
Amount” shall mean 2.99 times your “base amount”, within the meaning of section
280G(b)(3) of the Code.     (g)   In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the Date of Termination (or

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      such other date as is hereinafter described), you 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, state and local income and employment taxes imposed on the Gross-Up
Payment being repaid by you if such repayment results in a reduction in Excise
Tax or a federal, state and local income and employment taxes deduction) plus
interest on the amount of such repayment at 120% of the applicable federal rate
(as defined in section 1274(d) of the Code). In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of your employment, or at such other time as is hereinafter
described (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
payable with respect to such excess) within five (5) business days following the
time that the amount of such excess is finally determined. Notwithstanding the
preceding sentence, to the extent that payment of the amount provided for in the
preceding sentence would constitute a violation of Section 409A of the Code (as
determined by the tax counsel referenced in Section 5(f) or by another tax
counsel selected in accordance with the same procedure specified in
Section 5(f)), such amount shall not be paid.     (h)   Except as provided in
Section 5(c)(v) or Section 5(d) hereof, you shall not be required to mitigate
the amount of any payment provided for in this Section 5 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Section 5 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.

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(b) 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 UST and/or any of its
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
affiliates unless the profits, sales or assets attributable to such business
operation amount to at least ten percent (10%) of said business’ total profits,
sales or assets. Competitive

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    Activity shall not include (1) the mere ownership of up to five percent (5%)
of the outstanding securities in any enterprise; or (2) the participation in the
management of, or acting as a consultant for or employee of, any enterprise or
any business operation thereof, other than in connection with a Competitive
Operation of such enterprise, provided that you do not furnish advice with
respect to inventions, processes, customers, methods of distribution, methods of
manufacture, marketing or business strategy relating to any Competitive
Operation of such enterprise, or the formation of a Competitive Operation.   7.
  Confidentiality. You agree not to disclose, either while employed by the
Company or at any time thereafter, to any person not employed by the Company, or
not engaged to render services to the Company, except with the prior written
consent of an officer authorized to act in the matter by the Board, any
confidential information of the Company or its affiliates obtained by you while
in the employ of the Company, including, without limitation, information
relating to any of the Company’s or its affiliates’ inventions, processes,
formulae, plans, devices, compilations of information, methods of distribution,
customers, client relationships, marketing strategies or trade secrets;
provided, however, that this provision shall not preclude you from the use or
disclosure of information known generally to the public or of information not
considered confidential by persons engaged in the business conducted by the
Company or from disclosure required by law or court order and to your legal
counsel in connection herewith). The agreement herein made in this Section 7
shall be in addition to, and not in limitation or derogation of, any obligations
otherwise imposed by law upon you in respect of confidential information and
trade secrets of the Company or its affiliates.   8.   Non-Solicitation. You
agree that you shall not solicit any person who is a customer of the businesses
conducted by UST or its affiliates, or any business in which you have been
engaged on behalf of UST 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.  
Successors: Binding Agreement.

  (a)   The Company and UST shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or UST to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company and UST would be required to perform it if no
such succession had taken place. Failure of the Company and/or UST to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this

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      Agreement and shall entitle you to compensation from the Company in the
same amount and on the same terms to which you would be entitled hereunder if
you terminate your employment for Good Reason following a Change in Control,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.     (b)  
This Agreement shall inure to the benefit of and be enforceable by your personal
or legal representative, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
payments, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.

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 sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law. The obligations of the Company under
Sections 4 and 5 and your obligations under Sections 6, 7 and 8 shall survive
the expiration of the term of this Agreement.

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12.   Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.   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 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
Internal Revenue 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. In furtherance of this intent, to the extent that any
regulations or other guidance issued under Section 409A after the date of this
Agreement would result in you being subject to the payment of such interest or
tax penalty, the Company and you agree to amend this Agreement in order to bring
this Agreement into compliance with Section 409A.   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 March 22, 2005, 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.

     If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.

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        UST Inc. and U.S. Smokeless Tobacco Company    
 
       
By
  /s/  Richard A. Kohlberger    
 
       
 
  Name: Richard A. Kohlberger    
 
  Title:   Senior Vice President    
 
       
Agreed to this 23rd day of June, 2006
          /s/  Daniel W. Butler           Daniel W. Butler    

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RELEASE AGREEMENT
     THIS RELEASE, entered into this [   ] day of [     ] by [Name], residing at
[     ] (hereinafter referred to as the “Employee”).
WITNESSETH:
     WHEREAS, the Employee, and UST Inc., a Delaware corporation (“UST”), having
its principal office in Greenwich, Connecticut, entered into a letter agreement
(the “Agreement”) dated as of                     , 2006, pursuant to Section
3(h) of which the Employee agreed and covenanted, to execute a general release
of any and all claims he may have or may believe he has against UST, its
affiliates and/or their respective officers, directors, employees, agents and
representatives; and
     WHEREAS, the employment of the Employee was terminated as of [ ];
     NOW, THEREFORE, in consideration of the benefits to be provided to the
Employee pursuant to the Agreement, it is agreed as follows:
1. The Employee voluntarily, knowingly and willingly releases and forever
discharges UST, its parents, subsidiaries and affiliates, together with their
respective past and present officers, directors, partners, shareholders,
employees and agents, and each of their predecessors, successors and assigns,
from any and all charges, complaints, claims, promises, agreements,
controversies, causes of action and demands of any nature whatsoever which
against them the Employee or his executors, administrators, successors or
assigns ever had, now have or hereafter can, shall or may have by reason of any
matter, cause or thing whatsoever arising prior to the time the Employee signs
this agreement.
2. The release being provided by Employee in this agreement includes, but is not
limited to, any rights or claims relating in any way to the Employee’s
employment relationship with UST, its parents, subsidiaries and affiliates, or
the termination thereof, or under any statute, including the federal Age
Discrimination in Employment Act, Title VII of the Civil Rights Act, the
Americans with Disabilities Act, or any other federal, state or local law or
judicial decision. Notwithstanding the foregoing, Employee does not hereby
release any rights in and to employee benefit plans maintained by UST pursuant
to the Employee Retirement Income Security Act (“ERISA”) in which Employee has a
vested interest as of the date of Employee’s signature on this Agreement.
Furthermore, nothing contained herein shall be deemed a waiver of Employee’s
right to indemnification by UST as a corporate officer/director 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 the Employee and UST; (c) any applicable director and
officer insurance arrangements; and (d) in accordance with Article VIII of UST’s
By-Laws.
3. By signing this release agreement, the Employee represents that he has not
and will not in the future commence any action or proceeding arising out of the
matters released hereby, and that he will not seek or be entitled to any award
of legal or equitable relief in any action or proceeding that may be commenced
on

 

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his behalf. This paragraph will not preclude Employee from filing an
administrative charge of discrimination, provided Employee does not seek any
relief for himself/herself in connection with such proceeding.
4. By signing this release agreement, the Employee agrees to cooperate fully
with UST and its affiliates concerning reasonable requests for information about
the business of UST or any of its affiliates or your involvement and
participation therein; the defense or prosecution of any claims or actions now
in existence or which may be brought in the future against or on behalf of UST
or any of its affiliates which relate to events or occurrences that transpired
while the Employee was employed by UST and its affiliates; and in connection
with any investigation or review by any federal, state or local regulatory,
quasi-regulatory or self-governing authority (including, without limitation, the
Securities and Exchange Commission) as any such investigation or review relates
to events or occurrences that transpired while the Employee was so employed. The
Employee’s full cooperation shall include, but not be limited to, being
available to meet and speak with officers or employees of UST or any of its
affiliates and/or their counsel at reasonable times and locations, executing
accurate and truthful documents and taking such other actions as may reasonably
be requested by UST or any of its affiliates and/or their counsel to effectuate
the foregoing. UST agrees to reimburse you for any reasonable, out-of-pocket
travel, hotel and meal expenses incurred in connection with the Employee’s
performance of obligations pursuant to this paragraph 5 for which the Employee
has obtained prior approval from UST.
5. The Employee acknowledges that UST has hereby advised him to consult with an
attorney prior to signing this release agreement. The Employee represents that
he has had the opportunity to review this agreement and, specifically, the
release in paragraph 1, with an attorney of his choice. The Employee also agrees
that he has entered into this agreement freely and voluntarily.
6. The Employee acknowledges that he has been given at least twenty-one days to
consider the terms of this release agreement. Furthermore, once he has signed
this release agreement, the Employee shall have seven additional days from the
date of signing this release agreement to revoke his consent hereto. The release
agreement will not become effective until seven days after the date the Employee
has signed it, which will be the effective date of this release agreement.
          IN WITNESS WHEREOF, the Employee has executed this release agreement
as of the date first set forth above.

         
 
       
 
       
 
  [Name]    
 
                 
WITNESS
       

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