EXHIBIT 10o2
GALLAHER LIMITED
MEMBERS HILL BROOKLANDS ROAD
WEYBRIDGE SURREY KTI3 OQU
TELEPHONE: 0932-859777
FACSIMILE: 0932 859777 EXT. 2233 TELEX: 25505
Mr P M Wilson 20th September 1991
Weybridge
Dear Mr Wilson
THE GALLAHER "M" AND "S" PENSION SCHEMES (THE "PENSION SCHEMES")
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Your benefits were as set out in my letter to you of 31st October 1986 and
in the schedule to that letter, subject however to the amendments contained
in my letter of 22nd December 1987 (which related to the definitions of
"Pensionable Pay" and "Basic Annual Salary" and to the "S" scheme becoming
non-contributory) and my letter of 21st May 1990 (which related to the lump
sum death benefit).
This letter confirms that you are a member of the Pension Schemes and the
schedule hereto sets out the benefits under those schemes which are
applicable to you. This letter and its schedule are in substitution for
those referred to above dated 31st October 1986, 22nd December 1987 and
21st May 1990. Apart from consolidating the previous schedule and its
amendments, the new schedule is fuller and a comprehensive statement of
your Company pension benefits.
In consideration of your agreeing to the terms of this letter and the
schedule hereto and of your continued services to Gallaher Limited (and
notwithstanding anything in your employment contract with Gallaher Limited
or under either of the Pension Schemes to the contrary), Gallaher Limited
agrees and undertakes to and with you as follows:
(a) subject to (b) and (c) below, it shall be a term of your contract
of employment that benefits are and continue to be provided for
or in respect of you as set out in the schedule hereto on a non-
contributory basis;
(b) not to exercise and to procure that there is not exercised any
power or discretion under the Pension Schemes (or either of them)
so as to affect materially and adversely the benefits payable, or
prospectively or contingently payable, under the Pension Schemes
to or in respect of you unless the power or discretion is being
exercised either (i) with your prior consent in writing or (ii)
in order to comply with any applicable law, regulation or
requirement or (iii) to terminate the Pension Scheme (in which
event (c) below shall apply);
(c) in the event of either of the Pension Schemes being terminated,
to provide a replacement scheme on terms no less favourable to
you overall than those applicable to you under the Pension Scheme
immediately prior to its termination (and the provisions of this
letter shall apply to any such replacement scheme as if it were
one of the Pension Schemes).
Please confirm your agreement to the terms of this letter and the schedule
hereto by signing and returning to me the enclosed copy of this letter.
Yours sincerely
for and on behalf of
Gallaher Limited
B. Rudd
Secretary
I hereby agree to the terms of the above letter and the schedule thereto of
which this is a copy.
P.M. WILSON Date 23 SEPTEMBER 91
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P M Wilson
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THE GALLAHER 'M' & 'S' PENSION SCHEMES
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Schedule of benefits applicable to
P M WILSON
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1. INTRODUCTION
This schedule describes the principal benefits payable under the Gallaher
'M' and 'S' Pension Schemes.
Standard benefits will be paid under the 'M' Scheme. In addition, the lump
sum death in service benefit under the 'M' Scheme will be increased to the
level described under paragraph 8(a). The rest of your benefits will be
provided through the 'S' Scheme.
The benefits are subject to the Inland Revenue limits for approval of the
schemes under the Income and Corporation Taxes Act 1988.
2. DEFINITIONS
In this schedule -
"COMPANY" means Gallaher Limited;
"FINAL PENSIONABLE PAY" means the greater of -
(a) 105% of basic salary for the last l2 months of your employment
with the Company; and
(b) 70% of the sum of -
(i) 105% of basic salary for the last l2 months of your
employment with the Company; plus
(ii) any Incentive Payments received during that 12 month period
(or, if greater, the annual average of the Incentive
Payments received in the best 5 consecutive years out of
the 10 year period ending on the last day of your
employment with the Company);
less such sum (if any) as the Trustee decides is appropriate in light of
the state pension.
Notes
(i) the deduction in respect of the state pension is currently
(L)470;
(ii) the Company may vary the percentage in (a) and (b)(i) (currently
105%) from time to time but any reduction shall not operate so as
to make the amounts referred to in those paragraphs less than
they would have been had the reduction not been made and had your
basic salary continued at the rate in force immediately prior to
the reduction being made; and
(iii) if you continue in employment after Normal Retirement Date
paragraph 6 applies.
"GROUP SERVICE" means employment with the Company or any other member of
the Gallaher Group of Companies, which shall be deemed to have commenced on
6th October 1969.
"INCENTIVE PAYMENT" means on and after 1st July 1986 a payment by the
Company under the Gallaher Executive Incentive Plan and before 1st July
1986 a payment not made directly by the Company in respect of service for
the Company. In this connection -
(a) where the Incentive Payment received in any period of 12 months
is to be ascertained and more than one Incentive Payment is
received during that 12 month period, the Incentive Payment
received during that 12 month period shall be deemed to be the
amount which the Trustee, after consulting the Company, considers
to be equitable; and
(b) the amount of the last Incentive Payment received before the
earlier of Normal Retirement Date and your employment with the
Company ending shall be increased by the amount (if any) by which
that Incentive Payment falls short of the next following
Incentive Payment.
"'M' SCHEME" means the Gallaher 'M' Pension Scheme.
"NORMAL RETIREMENT DATE" means the first day of the month coinciding with
or otherwise next following your 60th birthday.
"RULES" means the rules as amended from time to time of either or both of
the 'M' Scheme and the 'S' Scheme, as the context requires.
"'S' SCHEME" means the Gallaher 'S' Pension Scheme.
"TRUSTEE" means the trustee of the 'S' Scheme.
3. RETIREMENT AT NORMAL RETIREMENT DATE
On retiring from the Company at Normal Retirement Date you will be entitled
to an annual pension equal to two-thirds of Final Pensionable Pay.
4. ILL-HEALTH RETIREMENT
If you are suffering from a permanent incapacity (and this is shown to the
Trustee's satisfaction), you may retire from the Company before Normal
Retirement Date with an annual pension equal to two-thirds of Final
Pensionable Pay multiplied by Group Service completed and divided by Group
Service which would have been completed had it continued to Normal
Retirement Date.
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5. VOLUNTARY EARLY RETIREMENT
With the consent of the Company you may retire from the Company at any time
on or after your 50th birthday and draw an immediate pension. Your pension
will be calculated in the same way as an ill-health early retirement
pension (see 4 above) but will then be reduced by such amount as the
Trustee on actuarial advice considers appropriate to allow for early
payment.
6. LATE RETIREMENT
You may only continue in Group Service after Normal Retirement Date if the
Company agrees. If you do so you will have the choice of whether to remain
in pensionable service or not. If you remain in pensionable service, your
pension will be based on your Final Pensionable Pay when you retire and you
will continue to be covered for death in service benefits (see 9 below).
If, however, you terminate your pensionable service your pension will be
based on your Final Pensionable Pay as at Normal Retirement Date and cover
for death in service benefits will cease. Payment of your pension will
then be deferred until you retire or you may start drawing your pension
and/or exercising the cash option before retirement at any time after
Normal Retirement Date. Your pension will be increased actuarially in
respect of any period of deferment.
7. OPTION ON RETIREMENT
On retirement you may exchange part of your pension for -
(a) a lump sum and/or
(b) a dependant's pension.
8. DEATH IN SERVICE BEFORE NORMAL RETIREMENT DATE
If you die while in the Company's service before Normal Retirement Date,
there will be payable -
(a) LUMP SUM
a lump sum equal to the greater of -
(i) four times the annual rate of basic salary at the date of
death; and
(ii) three times 70% of the sum of -
(A) 105% of the annual rate of basic salary at the date of
death; plus
(B) any Incentive Payments received during the 12 month
period ending on the date of death (or, if greater, the
annual average of the Incentive Payments received in
the best 5 consecutive years out of the 10 year period
ending on the date of death)
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(Note - the Company may vary the percentage in (ii)(A)
(currently, 105%) from time to time but any reduction shall not
operate so as to make the amount referred to in (ii)(A) less than
it would have been had the reduction not been made and had your
basic salary continued at the rate in force immediately prior to
the reduction being made).
(b) WIDOW'S AND CHILDREN'S PENSIONS
a widow's pension of one-third of Final Pensionable Pay plus
children's pensions in accordance with the Rules.
(Note - the widow's pension will be reduced if your widow is more
than 10 years younger than you and may be terminated if she
remarries before age 60).
9. DEATH IN SERVICE ON OR AFTER NORMAL RETIREMENT DATE
If you die before retiring but after Normal Retirement Date -
(a) if your pensionable service was continuing after Normal
Retirement Date (see 6 above) benefits will be payable under 8
above just as if you had died before Normal Retirement Date but
will be based on your applicable earnings level at death;
(b) if, however, your pensionable service had terminated, benefits
will be payable just as if you had retired immediately prior to
your death.
10. DEATH IN RETIREMENT
If you die after retiring there will be payable -
(a) if you die within 5 years from the date of retirement, a lump sum
equal to the value of the pension payments which would have been
made over the balance of that 5 year period had you survived; and
(b) a widow's pension equal to 50% of your pension at the date of
death plus children's pensions in accordance with the Rules.
(Note - if you are receiving a reduced pension on account of
having exercised the cash option, the widow's pension will be
based on the full pension which you would have been receiving had
you not exercised that option. The pension will be reduced if
your widow is more than 10 years younger than you. The widow's
pension will not be paid if you married after the earlier of the
date of retirement and Normal Retirement Date unless the Company
otherwise decides).
11. LEAVING SERVICE
(a) DEFERRED PENSION
On leaving the Company before Normal Retirement Date, you will be
entitled to a pension starting at Normal Retirement Date, equal
to two-thirds of Final Pensionable Pay multiplied by Group
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Service completed and divided by Group Service which would have
been completed had it continued to Normal Retirement Date.
The pension will be increased up to Normal Retirement Date in
accordance with statutory requirements.
(b) TRANSFER OPTION
Alternatively, if you leave the Company more than one year before
Normal Retirement Date you may transfer the cash equivalent of
the deferred pension to an approved scheme of your new employer
or to an appropriate personal pension scheme or a suitable
insurance policy.
12. WITHDRAWAL FROM SERVICE FOLLOWING A CHANGE OF CONTROL OF THE COMPANY
(a) PENSION ENTITLEMENT
If
(i) the Company ceases to be beneficially owned (directly or
indirectly) to the extent of at least 50% by American
Brands Inc; and
(ii) within three years from the event referred to at (i)
occurring either -
(A) your employment with the Company terminates for either of the
following reasons -
(1) termination by the Company (with or without notice or a
payment in lieu of notice) other than in circumstances
where the Company is entitled to terminate your employment
lawfully without notice and without payment in lieu of
notice; or
(2) termination by yourself (with or without notice) in
circumstances such that you are entitled to terminate your
employment without notice; or
(B) your ceasing to be employed by the Company on the undertaking of
the Company being transferred to another person;
you will be entitled to a pension payable from the day next following
the date upon which your employment with the Company ends if you have
then attained age 50 but otherwise from your 50th birthday. When your
pension starts it will be payable at an annual rate of two-thirds of
Final Pensionable Pay reduced by the applicable percentage ascertained
from the following table -
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AGE ON CEASING TO BE PERCENTAGE
IN COMPANY'S EMPLOYMENT
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59 nil
58 nil
57 nil
56 5
55 10
54 15
53 20
52 24
51 28
50 or under 31
It is intended that your pension will increase during any period of
deferment on a similar basis as applies to pensions payable from
normal pension age in accordance with Schedule 1A to the Social
Security Pensions Act 1975. Therefore, if your employment with the
company ends before your 50th birthday, the provisions for revaluation
contained in Schedule 1A to the Social Security Pensions Act 1975
shall apply as if your normal pension age was 50.
(b) DEFERMENT OPTION
As an alternative to taking an immediate pension or a pension
from age 50 (as the case may be) you may elect to defer payment
of your pension up to age 60. Your pension will be increased
actuarially in respect of any period of deferment after attaining
age 50. If you die while your pension is being deferred,
benefits will be payable in respect of you just as if you had
retired immediately prior to the date of your death and in the
event of your dying before attaining age 50 just as if you had
attained that age when you died except that no account shall be
taken of any revaluation of your pension after the date of your
actual death.
(c) TRANSFER OPTION
While your pension is being deferred as above you may transfer
the cash equivalent of the benefits payable to or in respect of
you to an approved scheme of your new employer or to an
appropriate personal pension scheme or a suitable insurance
policy.
13. PENSION INCREASES
Pensions in payment are reviewed by the Trustee at least once a year. Any
discretionary increases are subject to the approval of the Company. It is
guaranteed that the level of increase will not be less than 2% or the
percentage increase in the cost of living, whichever is less.
14. ADDITIONAL BENEFITS
Any benefits secured by voluntary contributions or by the surrender of
bonus or salary will be provided in addition to the benefits described
above.
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15. MISCELLANEOUS
Your employment is contracted-out of the State earnings related pension
scheme by reference to the 'M' Scheme.
You will not be required to contribute to either scheme. The Company
contributes at the rate recommended by the actuary. It may terminate its
contributions at any time.
The benefits described above are those payable before the exercise of any
option available under either the 'M' Scheme or the 'S' Scheme, such as
converting pension to cash. It is assumed that the benefits under the two
schemes will start at the same time and that a transfer is not made in
respect of the benefits under one of the schemes but not the other.
However, if this is not the case, the benefits under the 'S' Scheme will be
appropriately adjusted by the Trustee on actuarial advice.
You may not assign or charge your benefits in any way. They may be reduced
on account of any debt of yours to the Company arising from a criminal,
negligent or a fraudulent act or omission.
Either scheme may be varied at any time in accordance with the Rules. The
Company may also terminate either scheme.
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