EXHIBIT 10o3
GALLAHER LIMITED
Mr. P.M. Wilson, 15th March 1994
Weybridge.
Dear Mr. Wilson,
The Gallaher "M" and "S" Pension Schemes
----------------------------------------
The schedule to Gallaher Limited's letter of 20th September 1991 to you set
out the benefits under the above schemes which are applicable to you.
In consequence of the terms of your new service agreement dated 11th
February 1994, it is appropriate to change the said schedule and to
substitute therefor the schedule attached to this letter, which
substitution the Company hereby proposes.
Save as varied by the substitution of a new schedule thereto, the terms of
Gallaher Limited's letter of 20th September 1991 shall remain in full force
and effect.
Please confirm your agreement to the above proposal 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
-----------------------
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 15 March 1994
- --------------------------- ------------------
P.M. Wilson Date
REGISTERED OFFICE:
MEMBERS HILL. BROOKLANDS RD. WEYBRIDGE. SURREY. KT13 0QU
TEL: 0932 859777 FAX: 0932 849119 TELEX: 25505
Registered in England Number 1501573
THE GALLAHER 'M' & 'S' PENSION SCHEMES
----------------------------------------------------
Schedule to a letter dated fifteenth March 1994
of benefits applicable to
P M WILSON
----------------------------------------------------
1. INTRODUCTION
This schedule describes the principal benefits payable under the Gallaher
'M' ad 'S' Pension Schemes.
Standard benefits will be paid under the 'M' Scheme. 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 12 months of your employment
with the Company; and
(b) 70% of the sum of -
(i) 105% of basic salary for the last 12 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;
1
(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 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
2
Service which would have been completed had it continued to Normal
Retirement Date.
5. VOLUNTARY EARLY RETIREMENT
With the consent of the Company you may retire from the Company at any time
before Normal Retirement Date 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 105% of 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
3
the best 5 consecutive years out of the 10 year period
ending on the date of death)
(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 on or 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).
4
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
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.
If you die while your pension is being deferred, your widow will
immediately receive a pension of 50% of the value of your
deferred pension as at the date of your death.
(Note - your widow in this context refers to your wife as at the
date of you leaving the Company before Normal Retirement Date.
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).
(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. or if 20% or more of the common stock of
American Brands, Inc. shall come within the beneficial
ownership of one person or one concerted group of persons;
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
5
(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. 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 -
Age on ceasing to be
in Company's employment Percentage
----------------------- ----------
59 nil
58 nil
57 nil
56 5
55 10
54 15
53 20
52 24
(b) DEFERMENT OPTION
As an alternative to taking an immediate pension 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. 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.
(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.
6
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.
7