Exhibit 10.3

NOTICE OF SPECIAL PERFORMANCE AWARD

July 27, 2009

 

PERSONAL AND CONFIDENTIAL

Bruce Carbonari

Chairman and Chief Executive Officer

Fortune Brands

520 Lake Cook Road

Deerfield, IL 60015

Dear Bruce:

We are pleased to inform you that you have been granted a special performance
award (the “Award”) by the Compensation and Stock Option Committee of the Board
of Directors under the Fortune Brands, Inc. 2007 Long-Term Incentive Plan (the
“Plan”).

 

  •  

The grant date for the Award is July 1, 2009.

  •  

The Performance Period for the Award is July 1, 2009 – June 30, 2011.

The Award is granted under and governed by the Plan and the enclosed July 2009
Performance Award Terms and Conditions (the “Terms”).

The Award is performance-based related to cumulative diluted earnings per share
of Company common stock (“EPS”). A diluted EPS goal for the first six months of
the Performance period was previously communicated to you.

For your information, attached to this notice are the following documents:
(1) the Terms and Conditions and (2) the Plan. You should review these documents
carefully in order to fully understand how the Award works and your rights as an
Award recipient.

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Please sign this notice below and return to Barb Brisinte. If you have any
questions about your award, please contact me or Barb Brisinte.

 

Sincerely yours,  

Elizabeth Lane

Vice President—Human Resources

I, Bruce Carbonari, have read this Notice and the attached copy of the
Performance Award Agreement Bruce A. Carbonari Terms and Conditions and I
thereby agree to the terms and conditions set forth.

 

         Bruce A. Carbonari     Dated

 

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JULY 2009

PERFORMANCE AWARD AGREEMENT

BRUCE A. CARBONARI

TERMS AND CONDITIONS

You have been granted a long-term performance award (the “Award”) by Fortune
Brands, Inc. (“Fortune”).

 

  •  

The grant date for the Award is July 1, 2009.

 

  •  

The Performance Period for the Award is July 1, 2009-June 30, 2011.

 

  •  

One-half of the Award shall vest and become payable as of August 1, 2010, and
the second half shall vest and become payable as of August 1, 2011.

 

  •  

The maximum value available under the Award is $2,000,000, subject to your
satisfaction of the terms and conditions described below.

 

  •  

The form of payment for the Award will be 50% cash, 50% shares of Fortune common
stock (“Shares”).

1. Maximum Value Available under the Award. Subject to the provisions of
paragraphs 4 through 11 below, the percentage (up to 100%) of the maximum value
available under the Award that becomes payable to you shall be determined as
follows:

(a) If the Earnings Per Share (as determined pursuant to paragraph 2) of Fortune
and its consolidated subsidiaries (the “Company”) for the period July 1, 2009
through December 31, 2009:

 

  (i) equals the Earnings Per Share goal described in the “Notice of Performance
Award” provided to you (the “EPS Goal”), then the maximum value of the Award
shall be available to be awarded to you as of the Vesting Dates that occur
during the Performance Period, subject to paragraph 1(b) below.

 

  (ii) is less than the EPS Goal, then no amounts shall be available to be paid
to you under the Award.

(b) Once amounts become available to be awarded to you under paragraph 1(a)
above, the Committee shall determine whether and to what extent you have
achieved the other established performance goals (the “Performance Goals”) in
the areas of market share, total shareholder return and operational goals
specific to each of the Company’s three (3) primary businesses. To the extent
that the Committee determines that the Performance Goals have been fully
satisfied, the maximum value available under the Award will be paid to you,
subject to paragraphs 5, 7 and 8.

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To the extent that the Committee determines that the Performance Goals have not
been fully satisfied, it may, in its sole discretion, determine to award less
than the maximum value available under the Award, including the determination to
award 0% of the available value.

Subject to the provisions of paragraphs 5 through 9, any cash or Shares payable
to you under this Award shall be paid by Fortune as soon as practicable after
each applicable Vesting Date, after the Committee certifies attainment of the
EPS Goal and makes a determination as to your achievement of the other
Performance Goals.

2. Determination of Cumulative Earnings Per Share. Earnings Per Share (as such
terms is commonly used to describe the financial performance of publicly-traded
corporations) shall be adjusted to eliminate non-recurring income or expense
items and significant items not considered in determining the initial
performance measures; such adjustments may include, but are not limited to,
restructuring and restructuring related charges; the impact of actual foreign
exchange rates varying from planned foreign exchange rates; significant share
repurchase activity; significant nonrecurring income tax credits or charges; and
the impact of significant acquisitions and divestitures of businesses.

3. Form of Payment. Any payments made under the Award will be made 50% in cash
and 50% in Shares, the exact number of Shares to be determined as of the date of
payment using the fair market value of Shares for such date (determined by
averaging the high and low prices of the stock on such date) and rounded to the
nearest whole share.

4. Transferability of Award. The Award is not be transferable by you otherwise
than by will or by the laws of descent and distribution.

5. Termination of Employment. Except as otherwise provided in paragraph 6 below,
if your employment by the Company terminates prior to July 31, 2010, you will
not be entitled to any payments under the Award, and if your employment by the
Company terminates after August 1, 2010 but prior to July 31, 2011, you will not
be entitled to any further payments under the Award beyond the amounts that vest
as of August 1, 2010. Except as otherwise provided under Section 8 below, this
Section 5 shall apply in the event of your termination of employment following a
Change in Control of the Company (as defined in the Plan).

6. Termination of Employment for Death or Disability. Subject to paragraphs 7
and 8 below, if the EPS Goal is satisfied but your employment by the Company
terminates prior to July 31, 2011 by reason of your death or disability, you
(or, in the event of your death, your beneficiary) will be eligible to receive a
percentage of the maximum value available under the Award, based upon the
Committee’s determination of whether and to what extent the Performance Goals
were satisfied prior to your termination of employment, taking into account any
payments already vested and received under the Award. The Committee will have
the sole and exclusive discretion to decide whether any amounts are payable
under the Award following your termination of employment as a result of death or
disability. The value of any amounts awarded to you (or your beneficiary) under
this paragraph 6 will be paid in accordance with paragraph 3 above.

 

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7. Termination of the Plan. If the EPS Goal is met but the Plan terminates prior
to July 31, 2011, you will be eligible to receive a percentage of the maximum
value available under the Award, based upon the Committee’s determination of
whether and to what extent the Performance Goals were satisfied prior to the
termination of the Plan, taking into account any payments already vested and
received under the Award. The Committee will have the sole and exclusive
discretion to decide whether any amounts are payable under the Award. The value
of any amounts awarded to you under this paragraph 7 will be paid in accordance
with paragraph 3 above.

8. Forfeiture of Award for Detrimental Activity. If you engage in “detrimental
activity” (as defined below) at any time (whether before or after the
termination of your employment), you will not be entitled to any payment under
the Award, and you will forfeit all rights with respect to the Award. For
purposes of this paragraph 8, “detrimental activity” means willful, reckless or
grossly negligent activity that is determined by the Committee to be detrimental
to or destructive of the business or property of the Company. Any such
determination of the Committee shall be final and binding for all purposes.
Notwithstanding the foregoing, no payment under the Plan shall be forfeited or
become not payable by virtue of this paragraph 8 on or after the date of a
Change in Control (as defined in the Plan).

9. Stock Exchange Listing; Fractional Shares. Fortune shall not be obligated to
deliver any Shares until they have been listed (or authorized for listing upon
official notice of issuance) upon each stock exchange upon which are listed
outstanding shares of the same class as that of the Shares subject to the Award
and until there has been compliance with such laws or regulations as Fortune may
deem applicable. Fortune agrees to use its best efforts to effect such listing
and compliance. No fractional Shares (or any cash payment in lieu thereof) will
be delivered, and the number of Shares to be delivered will be rounded up or
down to the nearest whole share.

10. Investment Representations. Prior to each issuance of Shares payable
hereunder, you shall make such representations as may be required that such
Shares are to be held for investment purposes and not with a view to or for
resale or distribution except in compliance with the Securities Act of 1933, as
amended (the “Securities Act”), and shall, if required by the Committee, give a
written undertaking to Fortune in form and substance satisfactory to the
Committee that you will not publicly offer or sell or otherwise distribute such
Shares other than (a) in the manner and to the extent permitted by Rule 144
promulgated by the Securities and Exchange Commission under the Securities Act,
(b) pursuant to any other exemption from the registration provisions of the
Securities Act or (c) pursuant to an effective registration statement under the
Securities Act.

11. Adjustments. (a) Adjustments (which may be increases or decreases) may be
made by the Committee in the EPS Goal to take into account changes in law and
accounting and tax rules and to make such adjustments as the Committee deems
necessary or

 

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appropriate to reflect the inclusion or exclusion of the impact of extraordinary
or unusual items, events or circumstances, including, without limitation,
acquisitions or divestitures by or other material changes in the Company,
provided that no adjustment shall be made which would result in an increase in
your compensation if your compensation is subject to the limitation on
deductibility under Section 162(m) of the Internal Revenue Code, as amended, or
any successor provision, for the year with respect to which the adjustment
occurs. The Committee also may adjust the EPS Goal and Performance Goals
applicable to the Award and thereby reduce the amount to be paid hereunder if
and to the extent that the Committee deems it appropriate, provided that no such
reduction shall be made on or after the date of a Change in Control (as defined
the Plan).

(b) The determination of the Committee as to the terms of any adjustment made
pursuant to this paragraph 11 shall be binding and conclusive upon all parties.

12. Accountants’ Letter. A letter shall be obtained from the independent
certified public accountants who have performed procedures to assist in
evaluating compliance with the calculation of Earning Per Share of the Company
for the Performance Period.

13. Stockholder Rights. Neither you nor any other person shall have any rights
of a stockholder as to Shares until such Shares shall have been recorded on
Fortune’s official stockholder records as having been issued or transferred.

14. Tax Withholding. Upon any payment to you hereunder, Federal income and other
tax withholding (and state and local income tax withholding, if applicable) may
be required by the Company in respect of taxes on income realized by you. The
Company may withhold such required amounts from your future paychecks or may
require that you deliver to the Company the amounts to be withheld. In addition,
upon any payment to you of Shares hereunder, you may pay any Federal income and
other tax withholding (and any state and local income tax withholding, if
applicable) by electing either to have the Company withhold a portion of the
Shares otherwise deliverable to you, or to deliver other Shares owned by you, in
either case having a fair market value (on the date that the amount of tax you
have elected to have withheld is to be determined) of the amount to be withheld,
provided that the election shall be irrevocable and shall be subject to such
rules as the Committee may adopt.

15. Governing Law. This agreement and the Award provided for hereunder shall be
governed by and construed in accordance with the laws of the State of Illinois.

 

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