EXHIBIT 10
Philip Morris Companies Inc.
1992 Compensation Plan For Non-Employee Directors
(as amended, and in effect, June 25, 1997)
SECTION 1. Purposes; Definitions.
The purposes of the Plan are (i) to assist the Company in promoting a greater
identity of interest between the Company's non-employee directors and its
shareholders; and (ii) to assist the Company in attracting and retaining
non-employee directors by affording Participants an opportunity to share in the
future successes of the Company. In addition, in accordance with Revenue Ruling
71-419, 1971-2 C.B. 220, the Plan is intended to afford any or all non-employee
directors of the Company the option to defer the receipt of all or part of their
Compensation until such future date as they may elect pursuant to the terms and
conditions of the Plan.
For purposes of the Plan, the following terms are defined as set forth below:
a. "Account" means an unfunded deferred compensation account established by
the Company pursuant to the Deferred Fee Program, consisting of one or
more Subaccounts established in accordance with Section 3.2.2.
b. "Allocation Date" means any date on which an amount representing all or a
part of a Participant's Compensation is to be credited to his or her
Account pursuant to an effective deferral election. The Allocation Date
for the Retainer Fee shall be the first day of each calendar quarter and
for Meeting Fees shall be the first day of the month following the
meeting.
c. "Beneficiary" means any person or entity designated as such in a current
Election Form. If there is no valid designation or if no designated
Beneficiary survives the Participant, the Beneficiary is the Participant's
estate.
d. "Board" means the Board of Directors of the Company.
e. "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
f. "Common Stock" means the common stock, $0.331/3 par value, of the Company.
g. "Company" means Philip Morris Companies Inc., a corporation organized
under the laws of the Commonwealth of Virginia, or any successor
corporation.
h. "Compensation" means the sum of the Retainer Fee and the Meeting Fees
payable by the Company to each Participant but
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shall not include any additional amount paid to a chairman of a committee
for additional services.
i. "Date of Grant" means May 1 of each year (beginning May 1, 1992 and ending
May 1, 2001) on which dates shares of Common Stock will be awarded in
accordance with Section 4.
j. "Deferred Amount" means the amount (determined as a percentage of the
Retainer Fee and the Meeting Fees) subject to a current deferral election.
k. "Deferred Fee Program" means the provisions of the Plan that permit
Participants to defer all or part of their Compensation.
l. "Disability" means permanent and total disability as determined under
procedures established by the Board for purposes of the Plan.
m. "Distribution Date" means the date designated by a Participant in
accordance with Sections 3.4.1 and 3.4.2 for the commencement of payment
of amounts credited to his or her Account.
n. "Election Date" means the date an Election Form is received by the
Secretary of the Company.
o. "Election Form" means a valid Deferred Fee Program Initial Election Form
or Modified Election Form properly completed and signed.
p. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations thereunder.
q. "Exchange Act" means the Securities Exchange Act of 1934, as from time to
time amended.
r. "Extraordinary Distribution Request Date" means the date an Extraordinary
Distribution Request Form is received by the Secretary of the Company.
s. "Extraordinary Distribution Request Form" means the Deferred Fee Program
Extraordinary Distribution Request Form properly completed and executed by
a Participant or Beneficiary who wishes to request an extraordinary
distribution of amounts credited to his or her Account in accordance with
Section 3.4.3.
t. "Fair Market Value" means, as of any given date, the mean of the highest
and lowest reported sales prices of the Common Stock as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on The New York Stock Exchange.
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u. "Fund" means any one of the investment vehicles in which the trust fund
established under the trust agreement, as amended from time to time,
entered into by the Company in connection with the Profit-Sharing Plan, is
invested.
v. "Meeting Fees" means the portion of a Participant's Compensation that is
based upon his or her attendance at Board meetings and meetings of
committees of the Board.
w. "Participant" means a member of the Board who satisfies the requirements
of Section 2 and a Director Emeritus. For purposes of the Deferred Fee
Program only, a Participant shall also include a person who was, but is no
longer, a member of the Board as long as an Account is being maintained
for his or her benefit.
aa. "Plan" means the Philip Morris Companies Inc. 1992 Compensation Plan for
Non-Employee Directors.
bb. "Profit-Sharing Plan" means the Philip Morris Deferred Profit-Sharing
Plan, effective as of January 1, 1956, as amended from time to time.
cc. "Retainer Fee" means the portion of a Participant's Compensation that is
fixed and paid without regard to his or her attendance at meetings, but
shall not include amounts credited to a Participant's account under the
Philip Morris Companies Inc. Stock Unit Plan for Non-Employee Directors.
dd. "Retired Participant" means a person who is not a Participant who had
amounts credited to his or her account under the Former Plan as of April
1, 1992.
ee. "Subaccount" means one of the bookkeeping accounts established within each
Participant's Account in accordance with Section 3.2.2.
ff. "Transfer Election Date" means the date set forth on a Transfer Form.
gg. "Transfer Form" means a valid Deferred Fee Program Transfer Election Form
completed and signed by a Participant or Beneficiary.
hh. "Trustee" means the trustee administering the Fund.
SECTION 2. Eligibility.
Each member of the Board who is not a full-time employee of the Company (or any
corporation in which the Company owns, directly or indirectly, stock possessing
at least (50%) of the total combined voting power of all classes of stock
entitled to vote in the
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election of directors in such corporation) shall be eligible to receive an award
in accordance with Section 4. In addition, each Participant shall be eligible to
participate in the Deferred Fee Program.
SECTION 3. Deferred Fee Program.
3.1 Participation.
3.1.1 Deferral Elections.
A Participant may make a deferral election with respect to all or a
part of his or her Compensation to be earned and payable thereafter by
completing and executing an Election Form and submitting it to the Secretary of
the Company. Any deferral election relating to Retainer Fees shall be in
integral multiples of twenty-five percent (25%) of the Retainer Fee. Any
deferral elections relating to Meeting Fees shall be one hundred percent (100%)
of each Meeting Fee.
In accordance with the terms of the Plan, the Participant shall
indicate on the Election Form:
a. the percentage of the Retainer Fee that he or she wishes to
defer and whether Meeting Fees are to be deferred;
b. the Distribution Date;
c. whether distributions are to be in a lump sum, in installments
or a combination thereof;
d. the Participant's Beneficiary or Beneficiaries; and
e. the Subaccounts to which the Deferred Amount is to be
allocated.
A deferral election shall become effective with respect to a
Participant's Retainer Fee accruing on and after the first day of the calendar
quarter (and payable on the first day of the second calendar quarter) following
the Election Date. A deferral election shall become effective with respect to a
Participant's Meeting Fees accruing on and after the first day of the calendar
month following the Election Date. A deferral election shall remain in effect
with respect to all future Compensation until a new deferral election made by
the Participant in accordance with Section 3.1.2 or Section 3.1.3 becomes
effective.
3.1.2 Change of Deferral Election.
A Participant may change his or her deferral election with respect
to Compensation to be earned and payable thereafter by completing and executing
a Modified Election Form and
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submitting it to the Secretary of the Company. A change to increase the amount
of future Compensation to be deferred shall become effective with respect to a
Participant's Retainer Fee accruing on and after the first day of the calendar
quarter (and payable on the first day of the second calendar quarter) following
the Election Date. A change to defer Meeting Fees shall become effective with
respect to a Participant's Meeting Fees accruing on and after the first day of
the calendar month following the Election Date. Subject to Section 3.1.3, a
change to decrease the amount of future Compensation to be deferred shall become
effective with respect to Compensation accruing on and after the later of (i)
January 1 (and, with respect to Retainer Fees, payable on April 1) of the year
following the Election Date or (ii) the first day of the second calendar quarter
(and, with respect to Retainer Fees, payable on the first day of the third
calendar quarter) following the Election Date.
3.1.3 Cessation of Deferrals.
A Participant may cease to defer future Compensation in the Deferred
Fee Program by completing and executing a Modified Election Form, and submitting
it to the Secretary of the Company. An election by a Participant to cease
deferrals in the Deferred Fee Program shall become effective with respect to
Compensation accruing on or after the later of (i) January 1 (and, with respect
to Retainer Fees, payable on April 1) of the year following the Election Date or
(ii) the first day of the second calendar quarter (and, with respect to Retainer
Fees, payable on the first day of the third calendar quarter) following the
Election Date.
3.1.4 Beneficiary Election Modification.
A Participant shall be permitted at any time to modify his or her
Beneficiary election, effective as of the Election Date, by completing and
executing a Modified Election Form and submitting it to the Secretary of the
Company.
3.2 Investments.
3.2.1 Accounts.
The Company shall establish an Account for each Participant and for
each Beneficiary to whom installment distributions are being made. On each
Allocation Date, the Company shall allocate to each Participant's Account an
amount equal to his or her Deferred Amount.
3.2.2 Subaccounts.
The Company shall establish within each Account one or more
Subaccounts, which shall be credited with earnings and charged with losses, if
any, on the same basis as the corresponding Fund, as the same may change from
time to time,
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under the Profit-Sharing Plan; as of the date hereof, the Subaccounts are,
respectively:
Subaccount A - a bookkeeping account whose value shall be based on a
theoretical investment in the U.S. Obligations Fund of the
Profit-Sharing Plan.
Subaccount B - a bookkeeping account whose value shall be based on a
theoretical investment in the Equity Index Fund of the
Profit-Sharing Plan.
Subaccount C - a bookkeeping account whose value shall be based on a
theoretical investment in the Interest Income Fund of the
Profit-Sharing Plan.
Subaccount D - a bookkeeping account whose value shall be based on a
theoretical investment in the Philip Morris Stock Fund of the
Profit-Sharing Plan.
Subaccount E - effective January 1, 1996, a bookkeeping account
whose value shall be based on a theoretical investment in the
Balanced Fund of the Profit-Sharing Plan.
Subaccount F - effective January 1, 1996, a bookkeeping account
whose value shall be based on a theoretical investment in the
International Equity Fund of the Profit-Sharing Plan.
Subaccount G - effective January 1, 1996 a bookkeeping account whose
value shall be based on a theoretical investment in the Growth
Equity Fund of the Profit-Sharing Plan.
To the extent additional funds are provided under the Profit-Sharing Plan, the
Senior Vice President - Human Resources and Administration of the Company is
authorized to establish corresponding Subaccounts under the Plan.
Subject to the provisions of Sections 3.2.3 and 3.2.4, on each
Allocation Date, each Participant's Subaccounts shall be credited with an amount
equal to the Deferred Amount designated by the Participant for allocation to
such Subaccounts. Each Subaccount shall be credited with earnings and charged
with losses as if the amounts allocated thereto had been invested in the
corresponding Fund.
The value of any Subaccount at any relevant time shall be determined
as if all amounts credited thereto had been invested in the corresponding Fund.
3.2.3 Investment Directions.
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In connection with his or her initial deferral election, each
Participant shall make an investment direction on his or her Initial Election
Form with respect to the portion of such Participant's Deferred Amount that is
to be allocated to a Subaccount. Any apportionment of Deferred Amounts (and of
increases or decreases in Deferred Amounts) among the Subaccounts shall be in
integral multiples of one percent (1%). An investment direction shall become
effective with respect to any Subaccount on the first day of the calendar month
following the Election Date. All investment directions shall be irrevocable and
shall remain in effect with respect to all future Deferred Amounts until a new
irrevocable investment direction made by the Participant in accordance with
Section 3.2.4 becomes effective.
3.2.4 New Investment Directions.
A Participant may make a new investment direction with respect to
his or her Deferred Amount only by completing and executing a Modified Election
Form and submitting it to the Secretary of the Company. A new investment
direction shall become effective with respect to any Subaccount, on the first
day of the calendar month following the Election Date.
3.2.5 Investment Transfers.
A Participant or a Beneficiary (after the death of the Participant
may transfer to one or more different Subaccounts all or a part (not less than
one percent (1%)) of the amounts credited to a Subaccount by completing and
executing a Transfer Form and submitting it to the Secretary of the Company;
provided however that no Transfer Form may be submitted by a Participant who is
subject to Section 16 of the Exchange Act, if a Transfer Form requesting an
opposite way transfer had been submitted by such Participant within the
preceding six months. Any transfer of amounts among Subaccounts shall become
effective on the first day of the calendar month following the Transfer Election
Date.
3.3 [Intentionally Omitted]
3.4 Distributions.
3.4.1 Distribution Elections.
Each Participant shall designate on his or her Election Form one of
the following dates as a Distribution Date with respect to amounts credited to
his or her Account thereafter:
a. the first day of the calendar month following the date of the
Participant's death;
b. the first day of the calendar month following the date of the
Participant's Disability;
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c. the first day of the calendar month following the date of
termination of the Participant's service as a member of the
Board;
d. the first day of a calendar month specified by the Participant
which is at least six months after the Election Date; or
e. the earliest to occur of a, b, c or d.
A Distribution Date election shall become effective on the Election
Date.
A Participant may request on his or her Election Form that
distributions from his or her Account be made in (i) a lump sum, (ii) no more
than one-hundred eighty (180) monthly, sixty (60) quarterly or fifteen (15)
annual installments or (iii) a combination of (i) and (ii). Each installment
shall be determined by dividing the Account balance by the number of remaining
installments. If a Participant receives a distribution from a Subaccount on an
installment basis, amounts remaining in such Subaccount before payment shall
continue to accrue earnings and incur losses in accordance with the terms of
Section 3.2.2. Except as stated in the next paragraph, all distributions shall
be made to the Participant.
If the Distribution Date is the first day of the month following the
Participant's death or a fixed date which in fact occurs after the Participant's
death or if at the time of death the Participant was receiving distributions in
installments, the balance remaining in the Participant's Account shall be
payable to his or her Beneficiaries as set forth on the Participant's current
Election Form or Forms. Upon the death of a Beneficiary who is receiving
distributions in installments, the balance remaining in the Account of the
Beneficiary shall be payable to his or her estate without interest.
All distributions to Beneficiaries shall be in a lump sum, without
interest, except when the Distribution Date is the first day of the month
following the Participant's death and the current Election Form or Forms specify
installment payments.
All distributions shall be paid in cash and, except as provided in
Section 3.4.3, shall be deemed to have been made from each Subaccount pro rata.
3.4.2 Modified Distribution Elections.
A Participant may modify his or her election as to Distribution Date
and distribution form with respect to Compensation to be earned and payable
thereafter by completing and executing a modified Election Form and submitting
it to the Secretary of the Company. No more than one such modification shall be
permitted. Any modified Distribution Date or
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distribution form election shall become effective on the Election Date.
3.4.3 Extraordinary Distributions.
Notwithstanding the foregoing, a Participant or Beneficiary (after
the death of the Participant) may request an extraordinary distribution of all
or part of the amount credited to his or her Account because of hardship. A
distribution shall be deemed to be "because of hardship" if such distribution is
necessary to alleviate or satisfy an immediate and heavy financial need of the
Participant.
A request for an extraordinary distribution shall be made by
completing and executing an Extraordinary Distribution Request Form and
submitting it to the Secretary of the Company. All extraordinary distributions
shall be subject to approval by the Board.
The Extraordinary Distribution Request Form shall indicate:
a. the amount to be distributed from the Account;
b. the Subaccount(s) from which the distribution is to be made;
and
c. the "hardship" requiring the distribution.
The amount of any extraordinary distribution shall not exceed the
amount determined by the Board to be required to meet the immediate financial
need of the applicant.
An extraordinary distribution shall be made with respect to amounts
credited to each Subaccount on the first day of the calendar month next
following approval of the extraordinary distribution request by the Board.
SECTION 4. Share Distribution.
4.1 Awards.
Each Participant who is not a Director Emeritus and who was not on January 1,
1990 a full-time employee of the Company or any corporation in which the Company
owned, directly or indirectly, stock possessing at least (50%) of the total
outstanding voting power of all classes of stock entitled to vote in the
election of directors of such corporation shall be awarded on each Date of Grant
that number of full shares of Common Stock equal to the lesser of (i) twelve
hundred (1,200) or (ii) that number having an aggregate Fair Market Value on
such Date of Grant nearest to but not exceeding one hundred percent (100%) of
the Retainer Fee payable for the twelve-month period ending on the preceding
April
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30 (exclusive of the value of the Common Stock received by such Participant
pursuant to the Plan).
4.2 Vesting of Shares.
The shares of Common Stock awarded pursuant to the Plan will be immediately
vested and nonforfeitable. Subject to the requirements of Section 4.5, the
shares awarded under the Plan may not be sold or transferred until six months
after the Date of Grant.
4.3 Shareholder Rights.
On each Date of Grant, a Participant shall have all the rights of a shareholder
with respect to shares of Common Stock awarded under the Plan on such date.
Accordingly, the Participant will be entitled to vote the shares and receive
dividends.
4.4 Shares Authorized.
Up to 600,000 shares of Common Stock may be awarded under the Plan. In the event
of any merger, share exchange, reorganization, consolidation, recapitalization,
stock dividend, stock split or other change in corporate structure affecting the
Common Stock, appropriate substitutions or adjustments shall be made to item (i)
of Section 4.1 and in the aggregate number and kind of shares reserved for
issuance under the Plan.
4.5 Regulatory Restrictions.
All certificates for shares of Common Stock or other securities delivered under
the Plan shall be subject to such stock transfer orders and other restrictions
as the Company may deem advisable under the rules, regulations and other
requirements of the Company, any stock exchange upon which the Common Stock is
then listed and any applicable Federal, state or foreign securities law, and the
Company may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
SECTION 5. General Provisions.
5.1 Unfunded Plan.
It is intended that the Plan constitute an "unfunded" plan for deferred
compensation. The Company may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan; provided, however,
that, unless the Company otherwise determines, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan. Any
liability of the Company to any person with respect to any grant under the Plan
shall be based solely upon any contractual obligations that may be created
pursuant to the Plan. No such obligation of the
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Company shall be deemed to be secured by any pledge of, or other encumbrance on,
any property of the Company.
5.2 Rules of Construction.
Headings are given to the sections of the Plan solely as a convenience to
facilitate reference. The reference to any statute, regulation, or other
provision of law shall be construed to refer to any amendment to or successor of
such provision of law.
5.3 Withholding.
No later than the date as of which an amount first becomes includible in the
gross income of the Participant for Federal income tax purposes with respect to
any participation under the Plan, the Participant shall pay to the Company, or
make arrangements satisfactory to the Company regarding the payment of, any
Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount.
5.4 Amendment.
The Plan may be amended by the Board, but no amendment shall be made that would
impair prior Common Stock awards or the rights of a Participant to his or her
Account without his or her consent. Notwithstanding the foregoing, Section 4.1
shall not be amended more than once every six months, unless such amendment is
required because of changes in the Code or ERISA. In addition, no amendment may
become effective until shareholder approval is obtained if the amendment (i)
except as expressly provided in the Plan, increases the aggregate number of
shares of Common Stock that may be awarded under the Plan, (ii) materially
increases the benefits accruing to Participants under the Plan or (iii) modifies
the eligibility requirements for participation in the Plan.
5.5 Duration of Plan.
No Common Stock awards will be made pursuant to Section 4 after May 1, 2001 or
at any time at which there are insufficient shares of Common Stock authorized
under the Plan for such awards. There shall be no time limitation with respect
to the Deferred Fee Program. The Board may terminate the Plan at any time, by
appropriate action. Upon termination of the Plan, amounts then credited to each
Account shall be paid in accordance with the Distribution Election then
governing such Account or as otherwise provided in Section 3.4.1.
5.6 Assignability.
No Participant or Beneficiary shall have the right to assign, pledge or
otherwise transfer any payments to which such Participant or Beneficiary may be
entitled under the Plan other than by will or by the laws of descent and
distribution or
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pursuant to a "qualified domestic relations order" (as defined by Title I of
ERISA).
5.7 Construction.
The Plan shall be construed and interpreted in accordance with Virginia law. The
Plan is intended to be construed so that participation in the Plan will be
exempt from Section 16(b) of the Exchange Act pursuant to regulations and
interpretations issued from time to time by the Securities and Exchange
Commission.
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