Exhibit 10.2
Agreement with Michael E. Szymanczyk
May 15, 2002
Michael E. Szymanczyk
Chairman
Philip Morris Incorporated
120 Park Avenue
New York, NY 10017
Dear Mike:
This letter agreement sets forth the terms of certain enhanced
retirement arrangements that will be provided to you by Philip Morris
Incorporated (the "Company") if you satisfy the applicable terms and conditions
set forth in this letter.
1. Pension Benefits.
a. In General. If you continue in employment with the Company,
the parent corporation of the Company, or any subsidiary of such parent
(collectively, the "Affiliated Group") until you attain the age of 55 on January
3, 2004, or if, prior to such date, you suffer a Termination Event (as
hereinafter defined), then the Company will at any subsequent retirement date
or, in the case of a Termination Event, at your termination of employment (a)
credit you with an additional five years of service for all purposes in
calculating your benefits under the defined benefit portion of the Philip Morris
Benefit Equalization Plan (the "DB BEP") and (b) calculate your benefits under
the DB BEP as of your retirement or termination date without any actuarial
reduction for early commencement. To the extent that you continue in employment
with the Affiliated Group after attaining age 55, you will also be credited for
all purposes under the DB BEP with two years of service, rather than one, for
each year of service that would otherwise have been credited for continued
employment after attaining age 55 and before attaining age 60. The enhanced
benefits payable under this paragraph (that is, those benefits exceeding those
provided for under the regular terms of the DB BEP) will be paid pursuant to the
Supplemental Management Employees' Retirement Plan of Philip Morris Companies
Inc., in which the Company is a Participating Company, and will be subject to
the provisions of your Employee Grantor Trust Enrollment Agreement dated January
15, 1996, or any successor agreement.
b. Termination Event. For purposes of this letter agreement,
"Termination Event" means an involuntary termination of your employment with the
Affiliated Group without "Cause" (as defined in the Employment Agreement dated
November 1, 1997, between Philip Morris Companies Inc. and you, or in the most
recent of any successor employment agreements between you and any member of the
Affiliated Group that defines "Cause" (the relevant agreement being referred to
herein as the "Employment Agreement")), whether or not such termination occurs
during the "Employment Period" as defined in the Employment Agreement. Thus, by
way of illustration, if your employment with the Affiliated Group were
terminated without Cause prior to a Change of Control (as defined in
Exhibit 10.2
Michael E. Szymanczyk
May 15, 2002
Page 2
the Employment Agreement) such occurrence would constitute a Termination Event
hereunder notwithstanding that you might not be entitled to severance pursuant
to the Employment Agreement.
c. Enhancement Upon Death or Disability. If during your
continued employment with the Affiliated Group you die or become disabled prior
to attaining age 55, you or your spouse would be entitled to receive a Philip
Morris pension benefit enhancement based on adding five years to your actual
service as of your date of death or disability. During such continued
employment: (1) if you become disabled prior to age 55, you will be entitled to
receive an immediate Philip Morris and Kraft Foods 100% Joint and Survivor
pension benefit without reduction for early commencement; (2) if you die prior
to age 55, your spouse will be entitled to receive commencing as of the date you
would have attained age 55 the survivor portion of a Philip Morris and Kraft
Foods 100% Joint and Survivor pension benefit without reduction for early
commencement; and (3) should you die on or after attaining age 55 and prior to
retirement, your spouse would be entitled to receive the survivor portion of an
immediate Philip Morris and Kraft Foods 100% Joint and Survivor pension benefit
without reduction for early commencement. The enhanced benefits would be payable
pursuant to the Supplemental Management Employees Retirement Plan of Philip
Morris Companies Inc., and offset by (i) benefits payable from the Philip Morris
Salaried Employees' Retirement Plan, the Philip Morris Benefit Equalization
Plan, the Kraft Foods, Inc. Retirement Plan, and the Kraft Foods, Inc.
Supplemental Benefits Plan I and II and (ii) the amounts determined under your
Employee Grantor Trust Enrollment Agreement referred to in paragraph 1.a above.
2. Post-retirement Health Benefits. If you continue in employment with
the Affiliated Group until you attain the age of 57 on January 3, 2006, or if
you suffer a Termination Event prior to such date, the Company will make
arrangements (which may include making payments on your behalf on a basis that
holds you harmless for taxes on such payments) ensuring that the cost to you and
your eligible dependents of any post-retirement health benefits provided by the
Company are no greater than the contributions required of Company employees who
retire with 25 years of service.
3. Restricted Stock. If you continue in employment with the Affiliated
Group until you attain the age of 57 on January 3, 2006 but thereafter retire
before June 23, 2008, the Company will recommend that the Compensation Committee
of the Board of Directors of Philip Morris Companies Inc. (the "Compensation
Committee") exercise its discretion to vest your 61,000 shares of restricted
common stock of Philip Morris Companies Inc. that would otherwise vest if you
continued employment until June 23, 2008. The decision whether to follow the
Company's recommendation is within the discretion of that Committee; however, to
the extent that the Compensation Committee does not follow such recommendation,
the Company shall promptly pay you, in exchange for such restricted shares, an
amount in cash equal to the product of the then fair market value of a share of
common stock of Philip Morris Companies Inc. multiplied by the number of such
61,000 restricted shares that the Compensation Committee has not elected to
vest.
4. Termination Before Retirement Eligibility. If you should suffer a
Termination Event before attaining age 55, (a) you will be treated for purposes
of Annual Incentive Awards, Long-Term Incentive Awards, and stock awards other
than options in the same manner (generally, under current practice, the receipt
of a prorated award) as executives then retiring after attaining age 55; and (b)
you
Exhibit 10.2
Michael E. Szymanczyk
May 15, 2002
Page 3
will be treated, for purposes of any outstanding stock options awarded to you by
the Company or Philip Morris Companies Inc., as having terminated employment by
"Retirement."
5. Agreement Contingent on Non-competition. Subject to the last
sentence of this paragraph 5, all of the enhanced retirement and termination
arrangements described in paragraphs 1 through 4 above are contingent on your
agreement that you will not while employed by any member of the Affiliated Group
and for a period of 24 months thereafter (a) acquire an ownership interest
exceeding five percent in or (b) become employed by, enter into a consulting
arrangement with, or otherwise perform services for any company or business that
is in competition with any material business of any member of the Affiliated
Group to which you devoted substantive attention during your employment with the
Affiliated Group, except with the written permission of the Chief Executive
Officer of Philip Morris Companies Inc. You acknowledge that the enhanced
arrangements described in this agreement are sufficient consideration for this
non-competition agreement and that, in light of the positions you hold and have
held as an executive of members of the Affiliated Group, the constraint imposed
on your rending services to others is a reasonable one. You further agree that,
if reasonably requested to do so by the Company and as a condition for receiving
the benefits of paragraphs 1 through 4 of this agreement, you will upon your
termination of employment with the Affiliated Group enter into a non-competition
agreement that further defines the companies or businesses to which you may not
provide services during the 24-month period referred to in this paragraph and
that may provide for enforcement of your agreement not to compete by requiring
the return of any such benefits received, by injunctive relief, or by other
means. Notwithstanding the foregoing, the post-employment restrictions contained
in this paragraph 5 shall not apply following the occurrence of the "Effective
Date", as defined in the Employment Agreement.
6. Vacation. Effective upon your execution of this letter agreement,
you will become entitled to five weeks of paid vacation per calendar year during
each year of your continued employment with the Affiliated Group.
7. Miscellaneous.
a. Letter Agreement Interpretation and Amendment. This letter
agreement is governed by the laws of New York, without regard to any
jurisdiction's choice of law principles. The invalidity or unenforceability of
any provision or any portion of a provision of this letter agreement shall not
affect the validity or enforceability of any other provision or any other
portion of a provision of this letter agreement. This letter agreement may not
be amended or otherwise modified other than by a written agreement executed by
the parties to this letter agreement or their respective successors or legal
representatives.
b. Other Agreements. This agreement provides benefits and reflects
agreements that supplement any prior written agreements between you and members
of the Affiliated Group regarding the subject matter hereof and shall be
construed accordingly. Nothing herein is intended to affect any rights or claims
you may have to severance and similar benefits upon the termination of your
employment with the Affiliated Group, except that the benefits payable under
this letter agreement upon any Termination Event that occurs prior to the
occurrence of a Change of Control as defined in the Employment Agreement shall
be in lieu of any other severance or similar benefits, or to
Exhibit 10.2
Michael E. Szymanczyk
May 15, 2002
Page 4
suggest that the parties intend this letter agreement to embody all their
respective obligations in connection with any such termination.
c. Dispute Resolution. Any disputes arising under or in connection
with this letter agreement will be resolved by binding arbitration to be held in
New York City in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Each
party will pay its own costs of arbitration or litigation, including, without
limitation, its own attorneys' fees. Notwithstanding the preceding sentence,
reasonable costs of arbitration or litigation relating to a particular issue,
including, without limitation, your attorneys' fees, will be borne by the
Company if you prevail on that issue in a final determination by a tribunal of
competent jurisdiction, including binding arbitration under this paragraph.
d. Successors and Assignment. This letter agreement will be binding
on and inure to the benefit of you, the Company, and your and the Company's
respective heirs, executors, successors, and permitted assigns. If for any
reason the Company is unable to make payments or provide benefits that become
due under this letter agreement, Philip Morris Companies Inc. will promptly make
such payments or provide such benefits and, to the extent it does so, shall
become subrogated to your rights against the Company. This letter agreement may
not be assigned in whole or in part by either party without the written consent
of the other, except that the Company may assign this letter agreement, without
your consent, to any business entity into which or with which it may merge or to
which it may transfer substantially all of its assets, provided that the
assignee assumes the liabilities, obligations, and duties of the Company
contained in this letter agreement either contractually or as a matter of law.
If the terms of this letter agreement are acceptable to you, please
sign and date this letter as indicated below and return it to me.
Very truly yours,
/s/ KENNETH MURPHY
--------------------------------------
Kenneth Murphy
Senior Vice President, Human Resources
Philip Morris Incorporated
Exhibit 10.2
Michael E. Szymanczyk
May 15, 2002
Page 5
Accepted and agreed this 15th day
of May, 2002
/s/ MICHAEL E. SZYMANCZYK
- ---------------------------------
Michael E. Szymanczyk
Accepted and agreed this 15th day
of May, 2002
/s/ TIMOTHY A. SOMPOLSKI
- ---------------------------------
Timothy A. Sompolski
Senior Vice President, Human Resources
and Administration
Philip Morris Companies Inc.