Exhibit 10(15)
March 18, 2002
Mr. John J. O'Connor
6 Stonefalls Court
Ryebrook, NY 10573
Dear John:
This letter will confirm our understanding concerning your participation in
the Amerada Hess Corporation Pension Restoration Plan (the "PRP") and the
deferred compensation you will receive in connection with your employment by
Amerada Hess Corporation (the "Corporation") on October 15, 2001.
The Compensation and Management Development Committee of the Corporation's
Board of Directors has determined that you will receive Prior Service (as
defined in Section 4.1 of the PRP) for thirty-three (33) years of related
experience acquired prior to the date of your employment by the Corporation for
the purpose of determining PRP benefits provided, however, that the five-year
service requirements for vesting and pre-retirement death benefits under the PRP
shall be based on actual service with the Corporation, and the ten-year service
requirements for early and disability retirement under the PRP will not include
your Prior Service until you have reached five years of service with the
Corporation. However, you shall be deemed to be completely vested in your PRP
benefits described herein on and as of the date of a Change in Control (as
defined in the Change in Control Termination Benefits Agreement dated March 6,
2002, between you and the Corporation) regardless of your actual vesting service
credit under the PRP as of such date.
In general, PRP benefits are calculated as a life annuity based on the
formula of the Corporation's Employees' Pension Plan (the "Pension Plan") as
though your Prior Service counted under that plan, and there were no legal
limits on qualified plan benefits or annual compensation. The resulting amount
is reduced as necessary to account for any payment before age 65 or in any form
other than a life annuity based on the actuarial factors used to determine
Pension Plan benefits. Then the amount is reduced by subtracting any benefits
payable from the Pension Plan. Finally, the PRP amount is reduced by:
"... the monthly benefit actually payable to or on behalf of the Member
under the qualified and nonqualified pension plans of any prior employers
derived from periods of employment with such employers for which credit for
Prior Service was granted, or such amounts as would be payable from
investments made with the proceeds of lump sum payments received by the
Member from such other plans in a manner determined by the Committee at the
time credit for such Prior Service is granted ...."
Mr. John J. O'Connor
March 18, 2002
Page 2
You have advised us that you have received or are entitled to receive the
following payments representing your accrued pension benefits under the
qualified and non-qualified pension plans of your previous employers:
Mobil $274,793.26 paid in a lump sum from a non-qualified plan on April
30, 1996, plus interest for the month of April, making the
effective date of the amount March 31, 1996;
$6,865.41 per month as a life annuity from a qualified plan
commencing on November 1, 2007, or an actuarially reduced life
annuity commencing earlier at your option (the "Mobil Pension");
BHP $750,482.44 paid in a lump sum from non-qualified plan in August
1997, converted from Australian dollar payment of A$1,014,165.46
at exchange rate of US$.74 per A$1.00; no qualified plan benefit
due;
Texaco $134,747 paid in a lump sum on March 1, 2002 from a qualified
plan (the "Texaco Pension");
$255,568 payable over 10 years starting March 1, under Supplement
#1 of the non-qualified plan; and
$247,914 (valued as of December 31, 2001) payable 10 years
starting January 1, 2012 under Supplement #3 of the non-qualified
plan.
The amounts shown for Texaco Supplements #1 and #3 are the values of
ten-year streams of payments.
We have estimated your incremental combined tax rate for all relevant dates
as 45% (federal and state income tax, and Medicare portion of FICA), and as a
result, the net available amount of the non-qualified plan distributions shown
above will be reduced by 45%, resulting in a lesser amount available to you for
investment (the "Tax-adjusted Mobil Benefit," the "Tax-adjusted BHP Benefit,"
the "Tax-adjusted Texaco Benefit #1," and the "Tax-adjusted Texaco Benefit #3,"
respectively) as shown below.
Tax-adjusted Mobil Benefit $151,136.29
Tax-adjusted BHP Benefit $412,765.34
Tax-adjusted Texaco Benefit #1 $140,562.40
Tax-adjusted Texaco Benefit #3 $136,352.70
Mr. John J. O'Connor
March 18, 2002
Page 3
Based on this information, your PRP benefit will be calculated as described
below.
1. Annual benefits payable to you monthly pursuant to the
Corporation's PRP upon your retirement under the Pension Plan will
be the amount described in paragraph A below, less the sum of
paragraphs B, C, D, E, F, G and H below.
A. The life annuity amount calculated under the PRP, subject to any
reduction for early payment specified by the Corporation's
Employees' Pension Plan (the "Pension Plan").
B. The annual benefit actually payable to you as a life annuity
under the Pension Plan based on your Credited Service, determined
without regard to the Prior Service granted under the PRP.
C. A life annuity determined by the Pension Plan actuaries to be the
actuarial equivalent of the Mobil Pension determined at the time
of your retirement, taking into account any Mobil Pension
payments already made at that time.
D. A life annuity determined by the Pension Plan actuaries to be the
actuarial equivalent of the projected value of the Texaco
Pension, assuming that it was invested on March 1, 2002 at an
annual rate of interest 1% greater than the average annual rate
of one-year U.S. Treasury bills in effect during the 12 months
ending on December 31 of each prior year rounded up to the next
one-quarter percent, compounded annually from March 1, 2002,
until the date of your retirement, based on the mortality rates
used under the Pension Plan to determine actuarial equivalent
values at the time of retirement, and the interest rate which
would be used by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of a lump sum
distribution on plan termination as of January 1 of the calendar
year in which your retirement occurs.
E. A life annuity determined by the Pension Plan actuaries to be the
actuarial equivalent of the projected value of the Tax-adjusted
Mobil Benefit, assuming such benefit had been invested on March
31, 1996 at an annual rate of interest 1% greater than the
average annual rate of one-year U.S. Treasury bills in effect
during the 12 months ending on December 31 of each prior year
rounded up to the next one-quarter percent, compounded annually
from March 31, 1996, until the date of your retirement
(grossed up to reflect the fact that no income taxes will be
Mr. John J. O'Connor
March 18, 2002
Page 4
payable on the portion of the annuity derived from the initial
after-tax amount), based on the mortality rates used under the
Pension Plan to determine actuarial equivalent values at the time
of retirement, and the interest rate which would be used by the
Pension Benefit Guaranty Corporation for purposes of determining
the present value of a lump sum distribution on plan termination
as of January 1 of the calendar year in which your retirement
occurs.
F. A life annuity determined by the Pension Plan actuaries to be the
actuarial equivalent of the projected value of the Tax-adjusted
BHP Benefit, assuming such benefit had been invested on August
31, 1997 at an annual rate of interest 1% greater than the
average annual rate of one-year U.S. Treasury bills in effect
during the 12 months ending on December 31 of each prior year
rounded up to the next one-quarter percent, compounded annually
from August 31, 1997, until the date of your retirement (grossed
up to reflect the fact that no income taxes will be payable on
the portion of the annuity derived from the initial after-tax
amount), based on the mortality rates used under the Pension Plan
to determine actuarial equivalent values at the time of
retirement, and the interest rate which would be used by the
Pension Benefit Guaranty Corporation for purposes of determining
the present value of a lump sum distribution on plan termination
as of January 1 of the calendar year in which your retirement
occurs.
G. A life annuity determined by the Pension Plan actuaries to be the
actuarial equivalent of the projected value of the Tax-adjusted
Texaco Benefit #1, assuming that it is invested on March 1, 2002
at an annual rate of interest 1% greater than the average annual
rate of one-year U.S. Treasury bills in effect during the 12
months ending on December 31 of each prior year rounded up to the
next one-quarter percent, compounded annually from March 1, 2002,
until the date of your retirement (grossed up to reflect the fact
that no income taxes will be payable on the portion of the
annuity derived from the initial after-tax amount), based on the
mortality rates used under the Pension Plan to determine
actuarial equivalent values at the time of retirement, and the
interest rate which would be used by the Pension Benefit Guaranty
Corporation for purposes of determining the present value of a
lump sum distribution on plan termination as of January 1 of the
calendar year in which your retirement occurs.
Mr. John J. O'Connor
March 18, 2002
Page 5
H. A life annuity determined by the Pension Plan actuaries to be the
actuarial equivalent of the projected value of the Tax-adjusted
Texaco Benefit #3, assuming that it was invested on November 1,
2001 at an annual rate of interest 1% greater than the average
annual rate of one-year U.S. Treasury bills in effect during the
12 months ending on December 31 of each prior year rounded up to
the next one-quarter percent, compounded annually from November
1, 2001, until the date of your retirement (grossed up to reflect
the fact that no income taxes will be payable on the portion of
the annuity derived from the initial after-tax amount), based on
the mortality rates used under the Pension Plan to determine
actuarial equivalent values at the time of retirement, and the
interest rate which would be used by the Pension Benefit Guaranty
Corporation for purposes of determining the present value of a
lump sum distribution on plan termination as of January 1 of the
calendar year in which your retirement occurs.
2. If you should die while employed by the Corporation under
circumstances in which a pre-retirement Qualified Joint and Survivor
Annuity would be payable to your surviving spouse under the Pension
Plan, benefits will be paid to your survivor under the PRP
calculated as described in Paragraph 1 above as of the date of your
death. Such benefit will be paid to your surviving spouse at the
same time and in the same manner as the survivor benefit under the
Pension Plan, and shall be subject to the same actuarial adjustments
as those that apply to a benefit payable under the Pension Plan.
3. If your employment with the Corporation should terminate after you
have five years of service with the Corporation, but before you are
eligible to retire under the Pension Plan, benefits will be
calculated as described in Paragraph 1 above as of the date your
employment terminates. The amount being paid by the Corporation
under this Paragraph will be reduced by any amount subsequently paid
under the terms of the Pension Plan, actuarially adjusted to match
the form of payments made under this Paragraph. Such reduction shall
be made at the time Pension Plan payments commence.
All benefits will be actuarially adjusted to reflect any form of payment
other than an annuity for your lifetime only, in accordance with the terms of
the Pension Plan.
Nothing contained in the Pension Plan, PRP or this letter shall be
construed as a contract of employment or as changing the normal terms of the
employment relationship.
Mr. John J. O'Connor
March 18, 2002
Page 6
To qualify for the deferred compensation payments described above, you must
sign and return the enclosed copy of this letter by May 17, 2002. If you do not
sign and return the letter by then, the deferred compensation payments will not
be made available to you in the future.
The deferred compensation plan described above is unfunded for tax purposes
and for purposes of Title I of the Employee Retirement Income Security Act of
1974. You would have the status of a general unsecured creditor of the
Corporation with respect to plan payments. The plan constitutes a mere promise
to make benefit payments in the future. Your rights with respect to any such
payments would not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment or garnishment by your
creditors or the creditors of your beneficiaries.
Please indicate your acceptance of and agreement to the foregoing by
signing the enclosed copy of this letter in the space provided below and
returning it to me.
Yours truly,
AMERADA HESS CORPORATION
/s/ John B. Hess
By: John B. Hess
Accepted and Agreed to by:
/s/ John J. O'Connor March 18, 2002
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John J. O'Connor Date