EXHIBIT 10
SETTLEMENT AGREEMENT AND RELEASE
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AGREEMENT, made and entered into as of June 17, 1994 by and between
Philip Morris Companies Inc., a corporation organized under the laws of Virginia
("PM"), and Michael A. Miles (the "Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Executive has been employed as Chairman of the Board and
Chief Executive Officer of PM;
WHEREAS, PM and the Executive desire to arrange for the termination of
the Executive's employment; and
WHEREAS, PM on behalf of itself and its subsidiaries and affiliates
(collectively, the "Company") desires to enter into a settlement agreement and
release (this "Agreement"), setting forth the Executive's entitlements as well
as his obligations;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and for other good and valuable consideration, the
parties hereto agree as follows:
1. Resignations and Termination of Employment.
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The Executive shall resign as Chairman of the Board and Chief
Executive Officer of PM and from all other positions held with the Company and
from any corporate
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committee or board of directors of the Company as of the date requested by the
Board of Directors of PM, but in no event later than July 31, 1994. In any
event, the Executive shall continue to be employed by the Company through July
31, 1994 and the Company shall pay base salary to the Executive through such
date. In addition, the Company shall reimburse the Executive for any reasonable
out-of-pocket business expenses incurred by him on or before July 31, 1994 in
connection with his employment, upon submission by him of appropriate
documentation for such expenses in accordance with the Company's customary
practices and policies.
2. Payments to the Executive.
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(a) On or before July 31, 1994, the Company shall pay the
Executive the following amounts, in each case in a lump sum in cash:
(i) $2,000,000 representing two years' salary;
(ii) $900,000 representing his annual incentive award
for 1994 based on a corporate rating of 120 and a personal
performance rating of 4;
(iii) $1,622,500 representing a pro rata amount (as if
employed through the end of 1994) of his 1993-1995 long-term
performance award based on target amount;
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(iv) $260,000 representing two years' deferred profit
sharing based on 13 percent of salary;
(v) $83,400 representing one month's vacation for 1994;
(vi) an amount equal to the excess of (a) the actuarial
equivalent of the benefit (utilizing actuarial assumptions (the
"Actuarial Assumptions") no less favorable to the Executive than
those in effect under the Philip Morris Benefit Equalization Plan
and Philip Morris Supplemental Management Employees' Retirement
Plan (together, the "SERP") as of the date hereof) under the
Philip Morris Salaried Employees' Retirement Plan (the
"Retirement Plan") and the SERP which the Executive would receive
if the Executive's employment continued for all purposes for
sixty (60) months after the date of his termination of
employment, assuming for this purpose that all accrued benefits
are fully vested and assuming that the Executive's final average
compensation for purposes of determining his benefits is
$1,700,000, over (b) the actuarial equivalent of the Executive's
actual benefit (paid or payable), under
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the Retirement Plan as of the date of termination of his
employment utilizing the Actuarial Assumptions;
(vii) an amount equal to the Executive's Deferred
Profit-Sharing account balance, credited with contributions and
earnings through July 31, 1994, in the Philip Morris Benefit
Equalization Plan;
(viii) an amount equal to the excess of (a) the
actuarial equivalent of the benefit (utilizing actuarial
assumptions (the "Kraft Actuarial Assumptions") no less favorable
to the Executive than those in effect under the Kraft, Inc.
Retirement Plan as of the date hereof except that for the
purposes of the Kraft Actuarial Assumptions the discount rate
shall be the discount rate provided in the SERP referred to in
clause (vi) above) under the Kraft, Inc. Retirement Plan and the
Kraft, Inc. Supplemental Retirement Plan, which the Executive
would receive if he were age 60 on the date of termination of his
employment, assuming for this purpose that all accrued benefits
are fully vested and assuming that the Executive's final average
compensation for the purposes of determining his benefits is
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$1,700,000, over (b) the actuarial equivalent of the Executive's
actual benefit (paid or payable), if any, under the Kraft, Inc.
Retirement Plan as of the date of termination of his employment
utilizing the Kraft Actuarial Assumptions; and
(ix) an amount equal to the Executive's non-qualified
account balance, credited with contributions and earnings through
July 31, 1994, in the Kraft General Foods Thrift Plan.
(b) If the Executive dies prior to payment of any of the amounts
set forth in Section 2(a), the Executive's estate or his designated beneficiary
will be paid such amount promptly. For purposes of this Agreement, "promptly"
shall mean within 20 days following the relevant event or date.
(c) The Executive shall have no duty to seek other employment or
to become self-employed and there shall be no offset against amounts due the
Executive or obligation to repay any such amounts on account of any remuneration
attributable to any subsequent employment or self-employment.
3. Restricted Stock and Stock Options.
----------------------------------
The termination of the Executive's employment pursuant to this
Agreement shall be deemed to constitute an approved and consented to early
retirement under the Philip Morris 1992 Incentive Compensation and Stock Option
Plan (the
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"1992 Plan") and all other applicable plans. As a result, all shares of
restricted stock held by the Executive shall vest as of the date of such
termination and all stock options held by the Executive shall continue to become
exercisable as provided therein and shall continue to be exercisable (i) in the
case of options granted under the Philip Morris 1987 Long Term Incentive Plan,
until July 31, 1997 and (ii) in the case of options granted under the 1992 Plan,
for the balance of their original terms.
4. Other Employee Benefits.
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(a) Qualified Retirement Benefits. The Executive's rights under
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the qualified retirement plans, including both pension and thrift plans, of PM
and Kraft General Foods, Inc. ("Kraft") shall be determined in accordance with
the terms and provisions of those plans.
(b) Welfare Benefits. Effective July 31, 1994, the Executive
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shall be deemed to have retired pursuant to the terms of the Philip Morris
Salaried Employees' Retirement Plan as an approved and consented to early
retirement and the Executive (and his eligible dependents) shall be entitled to
retiree health, dental and life insurance coverage on the same terms as other
salaried employees similarly situated. Notwithstanding the foregoing, the
Executive shall be entitled to retiree health, dental and life insurance
coverage no less favorable than the benefits described in the letter agreement
between PM and the
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Executive dated March 8, 1989 and the letter to the Executive from Kraft dated
July 11, 1991, attached to and made a part of this Agreement as Exhibits A and
B, respectively, assuming that the 60 months of additional credited service
referred to in Section 2(a)(vi) shall be deemed applicable for this purpose.
During the period the Executive continues to be employed by the Company, he
shall continue to participate in all the welfare benefit plans and programs in
which he presently participates.
5. Reimbursement of Expenses; Perquisites.
--------------------------------------
(a) The Company shall pay the Executive $100,000 no later than
July 31, 1994, as a car allowance of $50,000 per year for two years.
(b) The Executive shall be promptly reimbursed for the expenses
of financial counseling for the years 1994 through 1996 by an advisor of his
choice in an amount up to $15,000 for each calendar year. In the event any
financial counseling expenses have been paid or reimbursed for 1994 prior to
July 31, 1994, they shall be offset against the maximum 1994 allowance of
$15,000.
(c) In connection with the Executive's obligation to furnish
cooperation pursuant to Section 9, Kraft shall either (i) provide the Executive
with an office in Kraft's headquarters in Northfield, Illinois comparable to his
present office, together with suitable office furniture, equipment and supplies,
and a secretary with skills
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comparable to those of his current secretary, for the period August 1, 1994
through July 31, 1996 or, alternatively at Kraft's option, (ii) provide the
Executive with such an office, furniture, equipment and supplies and secretary
at a location in the Chicago, Illinois area selected by the Executive. For this
purpose, there shall be a monthly budget for leasehold and operating expenses of
at least $4,500 and for a secretary of at least $8,300 and a capital budget for
furniture and equipment of at least $75,000. The budgeted amounts shall be made
available as requested by the Executive.
(d) In connection with the Executive's relocation of his
household and family from their present location to the Chicago, Illinois area,
the Executive shall be treated on the same basis as a transferred executive
under the Company's Executive Relocation Assistance policy as in effect on the
date hereof. In any event, the Company shall promptly reimburse the Executive
for the reasonable expenses he incurs in such relocation, including, without
limitation, all expenses associated with selling his New York City residence.
In addition, in the event that the Executive in his discretion determines to
sell his New York City residence at 19 East 72nd Street, he shall use his
reasonable best efforts to obtain the then fair market value and if the gross
sales price is less than $4,100,000, the Company shall, promptly following
written notice from the Executive setting
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forth such gross sales price, pay the Executive an amount equal to the
difference between $4,100,000 and such gross sales price.
(e) The Company shall promptly reimburse the Executive for
membership fees and dues incurred by him at one country club for a period of two
years following the termination of the Executive's employment.
(f) The Company shall promptly reimburse the Executive for legal
fees and other expenses reasonably incurred by him in connection with this
Agreement.
6. Confidentiality.
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The Executive shall not disclose to anyone any confidential
information of the Company, except (i) in the course of carrying out his duties
under this Agreement, (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order him to divulge, disclose or make
accessible such information and (iii) when such information becomes generally
known to the public through no fault of the Executive. For the purpose of this
Section 6, (a) "confidential information" shall mean all trade secrets or
proprietary information concerning the business of the Company relating to its
products, product development, customers, suppliers, finances, and business
plans and strategies and (b) information "generally known to
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the public" shall include information known or available generally within the
trades or industries of the Company.
7. Announcement.
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The announcement of the Executive's termination shall be
substantially in the form attached to this Agreement as Exhibit C and the
Executive and the Company agree not to make any statements inconsistent with
such announcement.
8. Releases.
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(a) The Executive voluntarily and knowingly releases the Company
and its officers, directors, employees and agents from any and all claims,
actions and causes of action he has or may have arising on or before the date of
this Agreement, whether known or unknown, including, without limitation, those
arising under the Age Discrimination in Employment Act of 1967, as amended, and
other federal, state or local human and civil rights or labor laws, relating to
his employment by, or termination of employment with the Company, except that
the Executive does not release (a) his right to have the Company perform its
obligations under this Agreement, including, without limitation, his right to
indemnification pursuant to Section 10 or to any compensation or benefit
pursuant to any plan or program that is part of the subject matter of this
Agreement, including, without limitation, any qualified retirement plan, or (b)
any right he may have to obtain contribution in the event of the entry of
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judgment against him as a result of any act or failure to act for which both the
Executive and the Company are jointly responsible.
(b) The Company voluntarily and knowingly releases the Executive
from any and all claims, actions and causes of action it has or may have arising
on or before the date of this Agreement, whether known or unknown, except that
the Company does not release its right to have the Executive perform his
obligations under this Agreement.
9. Cooperation in Litigation.
-------------------------
The Executive shall cooperate and generally make himself available
to give testimony and assistance in connection with any litigation or
arbitration proceeding or investigation involving the Company and arising out of
activities of the Company for which he has had responsibility. The Company shall
reimburse the Executive for, or advance to the Executive, all reasonable out-of-
pocket travel and other expenses incurred by the Executive in connection with
the Executive's testimony, cooperation and assistance under this Section 9,
including reasonable fees and disbursements for independent counsel for the
Executive, if the Executive reasonably determines that the litigation,
arbitration, proceeding or investigation is of a nature which requires that he
have independent representation. Such expenses shall be reimbursed or advanced
promptly after the Executive's submission to the Company of statements in such
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reasonable detail as the Company may require. The Executive shall not be
obligated to make more than 20 days in any calendar year available for the
purpose of furnishing cooperation pursuant to this Section 9. In any event, any
request for such cooperation shall take into account (i) the significance of the
matters at issue in the litigation, arbitration, proceeding or investigation and
(ii) the Executive's other personal and business commitments. The Executive
shall be entitled to a fee of $2,500 per day (or a pro rata fee for a portion of
a day) for furnishing such cooperation, such fee to be paid promptly following
the Executive's submission of a statement therefor.
10. Indemnification.
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(a) The Company agrees that if the Executive is presently a
party, is made a party or is threatened to be made a party, to any action, suit
or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, officer or
employee of the Company or is or was a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether or not the
basis of such Proceeding is the Executive's alleged action in an official
capacity while serving as such director, officer, employee or agent, the
Executive shall be indemnified and held harmless by the Company to the
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fullest extent legally permitted or authorized by the Company's articles of
incorporation or bylaws or resolutions of the Company's Board of Directors or,
if greater, by the laws of the State of Virginia, against all cost, expense,
liability and loss (including, without limitation, attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive after he
has ceased to be a director, officer, employee or agent of the Company or other
entity and shall inure to the benefit of the Executive's heirs, executors and
administrators. The Company shall advance to the Executive all reasonable costs
and expenses incurred by him in connection with a proceeding within 20 days
after receipt by the Company of a written request for such advance. Such
request shall include an undertaking by the Executive to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 10(a) that indemnification of
the Executive is proper because he has met the applicable standard of conduct,
nor a determination by the
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Company (including its board of directors, independent legal counsel or
stockholders) that the Executive has not met such applicable standard of
conduct, shall create a presumption that the Executive has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain directors' and
officers' liability insurance covering the Executive no less favorable than the
coverage the Company provides for its directors and officers.
11. Additional Payments.
-------------------
In the event that the aggregate of all payments or benefits made
or provided to the Executive under this Agreement and under all other plans and
programs of the Company (the "Aggregate Payment") is determined to constitute a
Parachute Payment, as such term is defined in Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall pay to the
Executive, prior to the time any excise tax imposed by Section 4999 of the Code
("Excise Tax") is payable with respect to such Aggregate Payment, an additional
amount which, after the imposition of all income and excise taxes thereon,
including any interest and penalties, is equal to the Excise Tax on the
Aggregate Payment.
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12. Opportunity for Review by Counsel and Period to Revoke Agreement.
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The Executive acknowledges that he has been advised to consult
with an attorney before executing this Agreement and that he has been provided
with a period of 21 days to consider this Agreement. Until the close of business
on June 25, 1994, the Executive may revoke this Agreement by notice to the
Company pursuant to Section 14. This Agreement shall not become effective until
June 25, 1994.
13. Rights Relating to Employment and Termination.
---------------------------------------------
This Agreement integrates and embodies all understandings and
agreements among the Executive and the Company in connection with the
Executive's employment and termination of employment with the Company. Except
as provided in this Agreement or in the plans and programs that are part of the
subject matter of this Agreement, the Executive shall not be entitled to any
payments or other benefits on account of the termination of his employment with
the Company.
14. Notice.
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Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally or when sent by registered or certified mail, postage prepaid, return
receipt requested, duly addressed to the party concerned at the
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address indicated below or to such changed address as such party may
subsequently give notice of:
If to the Company: Philip Morris Companies Inc.
120 Park Avenue
New York, NY 10017
Attention: Corporate Secretary
If to the Executive: Michael A. Miles
c/o Philip Morris Companies Inc.
120 Park Avenue
New York, NY 10017
15. Resolution of Disputes.
----------------------
Any disputes arising under or in connection with this Agreement
shall be resolved by arbitration, to be held in Chicago, Illinois in accordance
with the rules and procedures of the American Arbitration Association. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Costs of the arbitration, including, without limitation,
reasonable attorneys' fees of both parties, shall be borne by the Company.
Pending the resolution of any arbitration or court proceeding, the Company shall
continue payment of all amounts due the Executive under this Agreement and all
benefits to which the Executive is entitled at the time the dispute arises.
16. Amendment or Waiver.
-------------------
No provision in this Agreement may be amended unless such
amendment is agreed to in writing, signed by the
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Executive and by an authorized officer of the Company. No waiver by either
party hereto of any breach by the other party of any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar provision or condition at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or
an authorized officer of the Company, as the case may be.
17. Severability.
------------
In the event that any provision of this Agreement shall be held to
be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law.
18. Beneficiaries/References.
------------------------
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death by
giving the Company written notice thereof. In the event of the Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to the Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
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19. Headings.
--------
The headings of sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning of
construction of any provision of this Agreement.
20. Counterparts.
------------
This Agreement may be executed in one or more counterparts.
21. Binding Agreement; Assignment.
-----------------------------
This Agreement is binding upon the parties hereto and their
respective successors, heirs and assigns. No rights or obligations under this
Agreement may be assigned or transferred by the Executive except that the
Executive's rights to compensation and benefits hereunder shall, in the event of
death, pass to his estate, or to his designated beneficiary, and may be
transferred by will or operation of law. No rights or obligations of the Company
under this Agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant to a merger
or consolidation in which the Company is not the continuing entity, or the sale
or liquidation of all or substantially all of the assets of the Company,
provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
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this Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it shall take whatever action it legally can in order to
cause such assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. Notwithstanding the foregoing,
in the event of a spin-off, split-up or other similar restructuring of the
Company involving the transfer of a substantial amount of the Company's assets
to an entity that, following the completion of such transaction, is not
controlled directly or indirectly by the Company, the Company shall, prior to
the completion of such transaction, cause such entity to unconditionally
guarantee the Company's liabilities and obligations under this Agreement.
22. Survivorship.
------------
The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
IN WITNESS WHEREOF, the Executive and the Company
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have caused this Agreement to be executed as of the day and year first above
written.
Philip Morris Companies Inc.
By: /s/ John S. Reed
----------------------
/s/ Michael A. Miles
--------------------------
Michael A. Miles
Exhibit A
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March 8, 1989
Mr. Michael A. Miles
1350 Lake Road
Lake Forest, IL 60045
Dear Mike:
On behalf of Philip Morris Companies Inc., I would like to thank you for your
efforts in connection with the integration of the management of our food
operations. Your continued participation in this integration is essential to
enable us to build an effective food operations management team that will assure
future growth and continued success. The purpose of this letter is to confirm
our recent understandings regarding your Deferred Incentive Payment.
In recognition of your importance to management of the food operations, we have
agreed that you will be paid a Deferred Incentive Payment designed to provide
you with a special incentive to remain with us during the integration of Kraft
and General Foods. Your Deferred Incentive Payment award will be computed and
paid to you at the time and in the form described in Appendix A.
If your employment terminates for any reason (including death), you will be
entitled, subject to the following provisions, to the amount of any Deferred
Incentive Payment, including any interest, dividends and appreciation thereon,
and also entitled to any unpaid compensation. Generally, any payment to which
you are entitled on termination of employment will be paid to you within 30 days
of your date of termination. However, if you retire or otherwise voluntarily
terminate employment prior to February 15, 1991, your Deferred Incentive Payment
will be paid in accordance with Appendix A. If your employment is terminated
prior to February 15, 1991, for any reason you will not be entitled to other
payments under any severance plan or policy.
Although our discussions have focused on your employment during the next two
years, we recognize the need to provide a level of continuing financial
assurance after the expiration of the
two-year business integration period. In the event your employment is
involuntarily terminated without cause after February 15, 1991, you will receive
an amount equal to the greater of (1) the sum of your annual base salary at the
rate in effect at payment (excluding amounts attributable to the Deferred
Incentive Payment) which you received for the most recent calendar year for
which the computation of such award has been made at the time of your
termination of employment, or (2) the amount to which you would be entitled
under the terms of the normal severance plans or policies of Philip Morris
Companies Inc. or its subsidiaries then applicable to you.
Whenever your employment terminates, you and your family will be covered by
lifetime medical, dental and life insurance benefits on terms at least as
favorable as those currently available to other peer executives retiring from
service with Kraft, Inc., but not less favorable than those available to you and
your family, in the aggregate, under the medical, dental and life insurance
plans of Kraft, Inc. as of December 1, 1988 (for this purpose the Kraft, Inc.
life insurance plan for active employees shall be applicable until age 65 and
thereafter the Kraft, Inc. life insurance plan for retired employees shall be
applicable). If you are reemployed and are eligible to receive any medical or
dental benefits under your new employer's plan, the medical and dental plans of
Philip Morris Companies Inc. or its subsidiaries will only provide secondary
coverage to you and your family during such applicable period of eligibility
under the new employer's plans.
This letter is intended to summarize our previous understanding relating to your
employment with Philip Morris Companies Inc. and its subsidiaries. It replaces
any prior employment agreements you had with Kraft or Philip Morris Companies
Inc. or its subsidiaries, and any such agreements are to be of no effect.
However, nothing in this letter precludes you from participating in any
compensation plan, benefit plan or other executive benefit which is generally
available to similarly situated executives of Kraft Inc. or its successors and
which has not been expressly addressed by this letter. Nothing in this letter
replaces or otherwise changes the obligations of Philip Morris Companies Inc.
under its indemnification agreement with you dated December 16, 1988.
The payments referred to in this letter are obligations of your employer.
Philip Morris Companies Inc. will cause your employer to comply with the terms
of this letter and to assume its obligations and will also serve as a guarantor
with respect to the payments. In the event of any merger, reorganization or
similar event, Philip Morris Companies Inc. will cause any successor entity to
assume the obligations evidenced by this letter. In addition, if payment of any
of the amounts provided for in Appendix A subjects you to federal excise tax, on
those amounts or any other amounts you have received, you will receive
additional
2
payments sufficient to place you in the position that would have existed had no
such excise tax been payable.
If this letter accurately describes the matters set forth above, please sign the
enclosed copy of this letter and Appendix A which should be returned to us, and
will then constitute our entire agreement on this subject.
Sincerely,
PHILIP MORRIS COMPANIES INC.
By /s/ Richard L. Snyder
----------------------------
Richard L. Snyder
Senior Vice President, Human
Resources and Administration
Agreed to this 10 day of
----
March , 1989
- ---------------------
By /s/ Michael A. Miles
------------------------
Michael A. Miles
President & COO,
Kraft General Foods
- 3 -
APPENDIX A
DEFERRED INCENTIVE PAYMENT
--------------------------
On the terms and conditions set forth in the attached letter agreement and this
Appendix, your employer and Philip Morris Companies Inc. promise to make the
Deferred Incentive Payment as follows:
(a) A "shadow stock account" will be credited as of February 15, 1989,
with 27,257 shadow shares. Each shadow share will have a value equal
------
to that of one share of the common stock of Philip Morris Companies
Inc.
(b) When dividends are paid on the common stock, additional shadow shares
will be credited to the account in an amount determined by
multiplying the number of shadow shares by the dividend per share paid
on the common stock and dividing this product by the closing price of
the common stock on the New York Stock Exchange on the date the
dividend is paid.
(c) The number and value of shadow shares will be appropriately adjusted
in the event of any stock dividend, stock split, subdivision or
combination of shares, reclassification or conversion of stock in the
event of a merger or consolidation, or similar event with respect to
the common stock so that the aggregate value of shadow shares credited
will be at least as great immediately after as immediately before any
such event. In the event of any dissolution or liquidation of Philip
Morris Companies Inc., or if trading in the common stock on the New
York Stock Exchange ceases for five or more consecutive days during
which such Exchange is open for trading, then regardless of any other
provision of this Appendix you will receive an immediate cash payment
of an amount equal to the value of the shadow stock account computed
on the basis of the average closing prices for the common stock on the
New York Stock Exchange on the last five days on which such stock was
traded.
(d) The number of shadow shares shall also be adjusted in the following
circumstances:
(i) In the event on or before February 15, 1991, you die, become
disabled for six consecutive months, have your employment
involuntarily terminated, or take normal or employer approved
early retirement, the number of shadow shares credited to your
shadow stock account will be increased by the amount, if any,
necessary to bring the aggregate value of the shadow shares
credited, determined as of the date of any such event, to the
amount determined by crediting $2,725,623 with interest from
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December 6,
1988 to the date of such event at a rate equal to (A) the annual
rate on 12 months obligations of the United States Treasury on
February 15, 1989 for the portion of the period prior to February
15, 1990, and (B) the annual rate on such obligations on February
15, 1990 (applied to the balance of both principal and interest
on that date) for any portion of the period on or after February
15, 1990.
(ii) If you continue your employment with Philip Morris Companies Inc.
or any of its subsidiaries until February 15, 1991, the number of
shadow shares credited to your shadow stock account shall be
increased in the amount, if any, necessary to bring the aggregate
value of the shadow shares credited to your account on February
15, 1991 to the amount determined by crediting the dollar amount
specified in (i) above with interest at the rates and in the
manner described therein to February 15, 1991.
For purposes of this Appendix, other than for purposes of the last sentence of
paragraph (c), the value of each shadow share will be the closing price of a
share of the common stock on the most recent New York Stock Exchange trading day
preceding the date of the determination of value.
(e) The amount of the Deferred Incentive Payment payable to you will be
determined by multiplying the number of shadow shares credited to you
on the most recent New York Stock Exchange trading day preceding
payment by the closing price of the common stock on such day. Such
amount shall be paid to you in cash, or at the discretion of Philip
Morris Companies Inc. in shares of common stock equal in number to
your shadow shares, at the time you select by initialing one of the
following alternative payment schedules:
The Deferred Incentive Payment will be paid within 30 days after
the earliest to occur of your death, disability for six
consecutive months, or other termination of employment; except in
the event of your voluntary termination of employment for reasons
other than normal or employer approved early retirement, the
Deferred Incentive Payment will be paid no earlier than February
15, 1991.
OR
The Deferred Incentive Payment will be paid within 30 days after
the earliest to occur of your death, disability for six
consecutive months, other termination of employment, or February
--------
16, 1991; except in the event of your voluntary termination of
--------
employment for reasons other than normal or employer
approved early retirement, the Deferred Incentive Payment will be
paid no earlier than February 15, 1991.
Your entitlement to the Deferred Incentive Payment does not constitute an
interest in specific assets of your employer or Philip Morris Companies Inc.
Your status with respect to such payment shall be that of an unsecured general
creditor.
The Deferred Incentive Payment may not be assigned or otherwise transferred by
you (other than by your will or by operation of law in the event of your death)
prior to the date you actually receive such payment or payments.
PHILIP MORRIS COMPANIES INC.
By /s/ Richard L. Snyder
----------------------------
Richard L. Snyder
Senior Vice President, Human
Resources and Administration
Agreed to this 10 day of
----
March , 1989
- -----------------------
By /s/ Michael A. Miles
-------------------------
Michael A. Miles
President & COO,
Kraft General Foods
Exhibit B
---------
July 11, 1991
Mr. Michael A. Miles
1350 Lake Road
Lake Forest, IL 60045
RE: Retirement, Thrift, Medical, Dental & Death Benefit Coverages
Dear Mike:
This will confirm our understanding of your coverages while employed at Philip
Morris and upon subsequent termination of employment or retirement under the
Retirement, Thrift, Medical, Dental & Death Benefit provisions of your Deferred
Incentive Payment Agreement, dated March 27, 1989, as amended effective November
1, 1989 (the "DIPA").
RETIREMENT BENEFITS
- -------------------
. Retirement Benefits
-------------------
- Payments due you for enhanced participation, under the terms
of the Kraft Retirement Plan, if any, were paid under the
terms and conditions of the (under non-qualified
arrangements), DIPA.
- While at Philip Morris, your Credited Service under The
Kraft General Foods Retirement Plan, is frozen but you will
continue to receive compensation credit for purposes of the
Final Average Pay Calculation under such Plan.
. Thrift
------
- While at Philip Morris your Kraft General Foods Thrift Plan
account will continue to receive gains and losses and you
can make quarterly investment elections.
- 2 -
WELFARE PLANS
- -------------
. Medical
-------
- Upon your termination of employment or retirement, coverage
will be for life for you, your spouse, and eligible
dependents under the terms of the Kraft Medical Plan in
effect on 12/1/88, or, if more favorable, under the terms of
the Philip Morris Retiree Medical Plan, if any.
- The coverage will be non-contributory but you will have
imputed income on the cost of the coverage.
- The Kraft Medical Plan will be integrated with Medicare when
you attain eligibility for Medicare coverage (generally age
65).
- While at Philip Morris, you will be covered by the active
employees Philip Morris Medical Plan.
. Dental
------
- Upon your termination of employment or retirement, coverage
will be for life for you, your spouse, and eligible
dependents, under the terms of the Kraft Dental Plan in
effect on December 1, 1988, or, if more favorable, under the
terms of the Philip Morris Retiree Dental Plan, if any.
- The Kraft Dental Plan coverage will be non-contributory but
you will have imputed income on the cost of the coverage.
- While at Philip Morris you will be covered by the active
employees Philip Morris Dental Plan.
. Life Insurance
--------------
- Upon your termination of employment or retirement, you will
be covered for $1,000,000 of Life Insurance until July 1,
2004, or, if more favorable at your election, under the
terms of the Philip Morris Retiree Life Plan, if any.
- 3 -
- After June 30, 2004, your Kraft General Foods Life Insurance
will be reduced as shown on the attached Death Benefit
Outline.
- The Kraft General Foods coverage will be non-contributory
but you will have imputed income on the cost of the
coverage.
- During your active employment at Philip Morris in New York,
the $1,000,000 will be offset by amounts payable under the
active employees Philip Morris Life Plan.
. Executive Death Benefit
-----------------------
- You will have a non-insured death benefit of $715,000 for
your entire lifetime; see attached Death Benefit Outline.
If you have any questions concerning these coverages, please let me know.
Respectfully,
J.D. Wert
JDW/dlp
Attachment
cc: D. Dressel
J. Tucker
T. Sompolski
P. Johnson
DEATH BENEFIT OUTLINE
MICHAEL A. MILES
----------------
DOB 06 - 22 - 39
------------
DOH 11 - 01 - 82
------------
LIFE PLANS
TIME ---------------- EXECUTIVE TOTAL
PERIOD BASIC(1) SUPP. DEATH(2) AMOUNT
- ------------------------- --------- ----- --------- ----------
UP TO 07/01/2004 1,000,000 $-0- $715,000 $1,715,000
07/01/2004 TO 6/30/2005 500,000 -0- 715,000 1,215,000
07/01/2005 TO 6/30/2006 250,000 -0- 715,000 965,000
07/01/2006 TO 6/30/2007 125,000 -0- 715,000 840,000
07/01/2007 & THEREAFTER 5,000 -0- 715,000 720,000
(1) Offset by any PM Life Benefit while actively employed
(2) Non-insured and payable upon death not offset
Exhibit C
---------
FOR IMMEDIATE RELEASE
- ---------------------
NEW YORK, June XX, 1994 -- The Board of Directors of Philip Morris
Companies today accepted with regret the resignation of Chairman and Chief
Executive Officer, Michael A. Miles. The Board elected Mr. X Chairman and Chief
Executive Officer to succeed Mr. Miles.
In submitting his resignation, Mr. Miles said, "Philip Morris
Companies Inc. is a great organization, and I have been proud to be part of it.
I leave with full confidence that the difficult decisions made over the past two
years will be proven right by our results in 1994 and beyond. Now, however,
with the resurgence of our U.S. tobacco business, and the continued strong
growth in international tobacco, it makes sense to again have a career tobacco
executive in the top job."
The resignation was accepted on behalf of the Board by the Chairman of
the Board's Compensation Committee, John Reed, Chairman of Citicorp. Speaking
for the Board, Mr. Reed said, "The decision was Mr. Miles'. Mike has done much
for Philip Morris since he joined the Philip Morris family of companies in 1988.
With the full support of the Board, he
2
has skillfully led the company through a very challenging period of time."
Mr. Reed continued, "We are fortunate to be able to turn to Mr. X who
has long demonstrated his skills in guiding our tobacco and food businesses
around the world for over XX years."
Mr. X, who was elected to the Board and appointed Vice Chairman for
Worldwide Tobacco last month, commented, "It is an honor to be selected to guide
this great company that I first joined in XXXX. I am grateful to be able to
step in when we are positioned so effectively around the world in all three
lines of our business: tobacco, food and beer. While there are significant
challenges ahead for us, I see great opportunities to grow all of our worldwide
businesses."
These changes will take effect immediately.
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