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Exhibit 4.2
KRAFT FOODS TIP PLAN
(Second Amendment and Restatement
Effective As of May 12, 1997)
Mayer, Brown & Platt
Chicago
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I, Jill Youman, Secretary of the Management Committee for Employee
Benefits ("MCEB"), hereby certify that I have approved the form of the document
attached hereto and that such document is a full, true and complete copy of the
Kraft Foods TIP Plan, as amended through the date hereof. I hereby further
certify that Supplement C to the Kraft Foods TIP Plan was adopted by unanimous
written consent of MCEB dated August 27, 2001.
Dated this 24th day of September, 2001.
/s/ Jill Youman
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Secretary as Aforesaid
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TABLE OF CONTENTS
Page
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INDEX OF DEFINED TERMS.................................................................. iv
SECTION 1 General.................................................................. 1
History, Purpose and Effective Date...................................... 1
Related Companies and Employers.......................................... 1
Plan Administration, Trust and Fiduciary Responsibility.................. 1
Plan Year................................................................ 2
Accounting Dates......................................................... 2
Applicable Laws.......................................................... 2
Gender and Number........................................................ 2
Notices.................................................................. 2
Form of Election and Signature........................................... 2
Evidence................................................................. 3
Action by Employers...................................................... 3
Plan Supplements......................................................... 3
Defined Terms............................................................ 3
Compliance With USERRA................................................... 3
SECTION 2 Participation in Plan.................................................... 3
Eligibility for Participation............................................ 3
Commencement of Participation............................................ 4
Inactive Participation................................................... 4
Plan Not Contract of Employment.......................................... 4
SECTION 3 Service.................................................................. 4
Years of Service......................................................... 4
Hour of Service.......................................................... 5
One Year Break in Service................................................ 6
Service With Philip Morris Affiliates and Predecessor Employers.......... 7
Qualified Military Service............................................... 7
SECTION 4 Before-Tax, After-Tax and Rollover Contributions......................... 7
Before-Tax Contributions................................................. 7
After-Tax Contributions.................................................. 7
Total Before-Tax and After-Tax Contributions............................. 7
Payment of Before-Tax and After-Tax Contributions........................ 7
Modification, Discontinuance and Resumption of Before-Tax or After-Tax
Contributions............................................................ 8
Eligible Compensation.................................................... 8
Limitation on Compensation Taken Into Account For Any Plan Year.......... 8
Rollover Contributions................................................... 8
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SECTION 5 Matching Contributions................................................... 9
Matching Contributions................................................... 9
Limitations on Amount of Employer Contributions.......................... 9
Payment of Employer Contributions........................................ 9
SECTION 6 Investment of the Trust Fund............................................. 9
Investment Funds and Loan Account........................................ 9
Loan Account and Investment Fund Accounting.............................. 9
Investment Fund Elections................................................ 9
Transfers Between Investment Funds....................................... 10
SECTION 7 Plan Accounting.......................................................... 10
Participants' Accounts................................................... 10
Allocation of Fund Earnings and Changes in Value......................... 11
Allocation and Crediting of Contributions................................ 11
Correction of Error...................................................... 11
Statement of Plan Interest............................................... 12
SECTION 8 Limitations on Compensation, Contributions and Allocations............... 12
Reduction of Contribution Rates.......................................... 12
Compensation for Limitation/Testing Purposes............................. 12
Limitations on Annual Additions.......................................... 12
Excess Annual Additions.................................................. 13
Combined Plan Limitation................................................. 13
Annual Dollar Limitation................................................. 14
Section 401(k)(3) Testing................................................ 14
Correction Under Section 401(k) Test..................................... 15
Highly Compensated....................................................... 16
Forfeiture of "Orphaned" Matching Contributions.......................... 16
SECTION 9 Vesting Service, Vesting and Termination Dates........................... 16
Determination of Vesting Service and Vested Interest..................... 16
Accelerated Vesting...................................................... 17
Termination Date......................................................... 17
Distribution of Before-Tax Account Only Upon Separation From Service..... 17
SECTION 10 Loans and Withdrawals of Contributions While Employed.................... 18
Loans to Participants.................................................... 18
Hardship Withdrawals..................................................... 20
Determination of Hardship................................................ 20
Age 59 1/2 Withdrawals................................................... 22
Withdrawals From 3/31/97 After-Tax and Matching Account Balances......... 22
Form of Withdrawals...................................................... 22
SECTION 11 Distributions............................................................ 22
Distributions to Participants After Termination of Employment............ 22
Distributions to Beneficiaries........................................... 24
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Special Rules Governing Annuity Elections................................ 25
Forfeitures and Restorations of Non-Vested Contributions................. 26
Limits on Commencement and Duration of Distributions..................... 27
Beneficiary Designations................................................. 28
Form of Payment.......................................................... 29
Facility of Payment...................................................... 29
Interests Not Transferable............................................... 29
Absence of Guaranty...................................................... 30
Missing Participants or Beneficiaries.................................... 30
Direct Rollover Option................................................... 30
Distributions on Account of Permanent and Total Disability............... 30
SECTION 12 No Reversion to Employers................................................ 30
SECTION 13 Administration........................................................... 31
Committee Membership and Authority....................................... 31
Allocation and Delegation of Committee Responsibilities and Powers....... 32
Uniform Rules............................................................ 32
Information to be Furnished to Committee................................. 32
Committee's Decision Final............................................... 32
Exercise of Committees' Duties........................................... 32
Remuneration and Expenses................................................ 33
Indemnification of the Committees........................................ 33
Resignation or Removal of Committee Member............................... 33
Appointment of Successor Committee Members............................... 33
SECTION 14 Amendment and Termination................................................ 33
Amendment................................................................ 33
Termination.............................................................. 34
Merger and Consolidation of the Plan, Transfer of Plan Assets............ 34
Distribution on Termination and Partial Termination...................... 34
Notice of Amendment, Termination or Partial Termination.................. 34
SECTION 15 Change of Control Provisions............................................. 35
Application.............................................................. 35
Definition of Change of Control.......................................... 35
Contribution Requirement................................................. 36
Vesting.................................................................. 37
Enforcement Rights; Amendment Restrictions............................... 37
Construction............................................................. 37
SUPPLEMENT A California Vegetable Concentrates Division A-1
SUPPLEMENT B Naperville Hourly Employees B-1
SUPPLEMENT C Kraft Foods Inc. Common Stock C-1
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INDEX OF DEFINED TERMS
1.9 - Access System
1.5 - Accounting Date
7.1 - Accounts
7.1(c) - After-Tax Account
4.2 - After-Tax Contribution
8.3 - Annual Additions
7.1(b) - Before-Tax Account
4.1 - Before-Tax Contribution
11.6 - Beneficiary
15.2(c) - Business Combination
15.2 - Change of Control
1.1 - Code
1.2 - Committee
1.3 - Committees
6.1 - Common Stock
1.1 - Company
8.2 - Compensation
15.5(b) - Control Date
15.3 - Control Period
8.7 - Deferral Percentage
11.1(c) - Distribution Date
1.1 - Effective Date
4.6 - Eligible Compensation
1.2 - Employer
1.3 - ERISA
8.8 - Excess Contributions
10.3 - Hardship
8.9 - Highly Compensated
8.7 - Highly Compensated Group
Deferral Percentage
3.2 - Hour of Service
15.2(b) - Incumbent Board
1.3 - Investment Committee
6.1 - Investment Funds
11.3(a) - Joint and Survivor Annuity
6.1 - Loan Account
7.1(a) - Matching Account
5.1 - Matching Contribution
3.3 - Maternity or Paternity Absence
8.7 - Non-highly Compensated Group
Deferral Percentage
3.3 - One Year Break in Service
15.2(a) - Outstanding Parent Common Stock
15.2(a) - Outstanding Parent Voting Securities
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2.1 - Participant
6.1 - Philip Morris Stock Fund
1.9 - PIN
1.1 - Plan
1.4 - Plan Year
3.4 - Predecessor Employer
1.2 - Related Company
11.5(b) - Required Beginning Date
7.1(d) - Rollover Account
4.8 - Rollover Contribution
8.3 - Section 415 Affiliate
11.6 - Spouse
3.4 - Subsidiary
9.3 - Termination Date
1.3 - Trust
1.3 - Trust Agreement
1.3 - Trustee
3.1, 9.1 - Year of Service
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KRAFT FOODS TIP PLAN
(Second Amendment and Restatement
Effective As of May 12, 1997)
SECTION 1
General
1.1 History, Purpose and Effective Date. Kraft Foods, Inc., a Delaware
corporation (the "Company"), maintains the Kraft Foods TIP Plan (the "Plan"),
formerly known as the General Foods Employee Thrift-Investment Plan, to
encourage eligible employees to save a portion of their earnings on a regular
basis and to accumulate capital for their future economic security. The Plan was
amended and restated effective May 12, 1997. The following provisions constitute
a second amendment, restatement and continuation of the Plan as in effect
immediately prior to May 12, 1997, the "Effective Date" of the Plan as set forth
herein. To the extent that any provision of the Plan as set forth herein
specifically provides for an effective date other than May 12, 1997, such
provision will constitute an amendment of the Plan as in effect on such date
and, if such special effective date is later than the general Effective Date,
the applicable provision of the Plan as in effect immediately prior to the
Effective Date will continue to govern until such special effective date. The
Plan is intended to qualify as a profit sharing plan under section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and is further intended
to include a qualified cash or deferred arrangement under section 401(k) of the
Code.
1.2 Related Companies and Employers. The term "Related Company" means
any corporation or trade or business during any period during which it is, along
with the Company, a member of a controlled group of corporations or a controlled
group of trades or businesses, as described in sections 414(b) and 414(c),
respectively, of the Code. The Company and each Related Company which adopts the
Plan with the consent of the Management Committee for Employee Benefits (the
"Committee") are referred to below collectively as the "Employers" and
individually as an "Employer".
1.3 Plan Administration, Trust and Fiduciary Responsibility. The
authority to control and manage the non-investment operations of the Plan is
vested in the Committee, as more fully described in subsection 13.1. Except as
otherwise expressly provided herein, the Committee shall have the rights, duties
and obligations of an "administrator" as that term is defined in section
3(16)(A) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and of a "plan administrator" as that term is defined in section
414(g) of the Code. With respect to the Plan's funding and the investment of its
assets, the Corporate Employee Plans Investment Committee of Philip Morris
Companies Inc. (the "Investment Committee") has the authority and responsibility
to appoint or select trustees, custodians, investment managers and insurance
companies to handle Plan assets and to allocate assets to each of them, to
determine the advisability of establishing or modifying the description of any
Investment Fund (as defined in subsection 6.1) made available under the Plan, to
establish investment guidelines, proxy voting policies and securities trading
procedures, and to monitor the investment
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performance of the fiduciaries responsible for the investment of Plan assets.
The Committee and the Investment Committee are collectively referred to as the
"Committees". The Company and the Committees shall be "named fiduciaries", as
described in section 402 of ERISA, with respect to their authority under the
Plan. All assets of the Plan will be held, managed and controlled by one or more
trustees (the "Trustee") acting under a "Trust" established pursuant to a "Trust
Agreement" which forms a part of the Plan. As of the Effective Date, the assets
of the Plan are held under the Kraft General Foods Master Defined Contribution
Trust established pursuant to the Master Savings Plan Trust Agreement by and
between the Corporate Employee Plans Investment Committee of Philip Morris
Companies Inc., Philip Morris Companies Inc. and Bankers Trust Company, Trustee,
dated as of April 1, 1992, as the same may be amended from time to time.
1.4 Plan Year. The term "Plan Year" means the twelve-consecutive-month
period beginning on each January 1 and ending on the following December 31.
1.5 Accounting Dates. The term "Accounting Date" means each business day
as determined by the Committee in its sole discretion.
1.6 Applicable Laws. The Plan shall be construed and administered in
accordance with the internal laws of the State of Illinois to the extent that
such laws are not preempted by the laws of the United States of America.
1.7 Gender and Number. Where the context permits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
1.8 Notices. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee (or its delegate), in care of
the Company, at its principal executive offices. Any notice required under the
Plan may be waived by the person entitled to notice.
1.9 Form of Election and Signature. Unless otherwise specified herein,
any election or consent permitted or required to be made or given by any
Participant or other person entitled to benefits under the Plan, and any
permitted modification or revocation thereof, shall be made in writing or shall
be given by means of such telephone voice response system as the Committee may
designate from time to time as the vehicle(s) for executing regular transactions
under the Plan (referred to generally herein as the "Access System"). Each
Participant shall have a personal identification number or "PIN" for purposes of
executing transactions through the Access System and shall be required to
complete a signature authorization form, and entry by a Participant of his PIN
shall constitute his valid signature for purposes of any transaction the
Committee determines should be executed by means of the Access System, including
but not limited to enrolling in the Plan, electing contribution rates, making
investment choices, executing loan documents, and consenting to a withdrawal or
distribution. Any election made through the Access System shall be considered
submitted to the Committee on the date it is electronically transmitted.
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1.10 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
1.11 Action by Employers. Any action required or permitted to be taken by
any Employer which is a corporation shall be by resolution of its Board of
Directors or a duly authorized committee thereof, or by a duly authorized
officer of the Employer. Any action required or permitted to be taken by any
Employer which is a partnership shall be by a general partner of such
partnership or by a duly authorized officer thereof.
1.12 Plan Supplements. The provisions of the Plan as applied to any
Employer or any group of employees of any Employer may be modified or
supplemented from time to time by the Committee by the adoption of one or more
Supplements. Each Supplement shall form a part of the Plan as of the
Supplement's effective date. In the event of any inconsistency between a
Supplement and the Plan document, the terms of the Supplement shall govern.
1.13 Defined Terms. Terms used frequently with the same meaning are
defined throughout the Plan in boldface. The Index of Defined Terms contains an
alphabetical listing of all such terms and the subsections in which they are
defined.
1.14 Compliance With USERRA. Notwithstanding any provisions of the Plan
to the contrary, contributions and benefits with respect to qualified military
service will be provided in accordance with section 414(u) of the Code.
SECTION 2
Participation in Plan
2.1 Eligibility for Participation. Participation in the Plan is entirely
voluntary. An eligible employee who elects to participate (a "Participant")
shall commence participation on the date determined under subsection 2.2.
Subject to the conditions and limitations of the Plan, each individual who was a
Participant in the Plan immediately prior to the Effective Date will continue as
such on and after that date, and each other employee of an Employer who was not
a Participant immediately prior to the Effective Date will be eligible to
participate in the Plan upon meeting the following eligibility requirements:
(a) he has completed one Year of Service (as defined in subsection 3.1);
(b) contributions are not being made on his behalf to another defined
contribution plan intended to be qualified under section 401(a) of
the Code that is sponsored by an Employer or a Related Company;
(c) he is a member of a collective bargaining unit as to which
retirement benefits have been the subject of good faith bargaining,
and the Plan has been extended to the collective bargaining unit
under a currently effective collective bargaining agreement; and
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(d) he does not perform services for an Employer under a contract,
agreement or arrangement that purports to treat him as either an
independent contractor or the employee of a leasing organization,
agency, vendor or any other third-party, even if he is subsequently
determined (by judicial action or otherwise) to have instead been a
common law employee of such Employer.
Notwithstanding the foregoing provisions of this subsection 2.1, if an
individual is employed or reemployed by an Employer on or after the date on
which he first completes one Year of Service, he shall be eligible to become a
Participant in the Plan on the first day on which he meets the requirements of
paragraphs (b) and (c) of this subsection 2.1.
2.2 Commencement of Participation. Each employee eligible to participate
in the Plan is required to make an election to participate prior to his
commencement of participation in the Plan. Employees who first satisfy the
Plan's eligibility requirements on any day during the calendar month of April
1997 may elect to commence participation in the Plan effective as of April 1,
1997. Any eligible employee who does not properly elect to commence
participation in the Plan effective on or before April 1, 1997, under the
enrollment procedures established by the Committee, may not later elect to
commence participation in the Plan until May 12, 1997 or any day thereafter.
Employees who first satisfy the Plan's eligibility requirements on or after May
1, 1997, and prior to May 12, 1997, may elect to commence participation in the
Plan on May 12, 1997 or any day thereafter. Effective May 12, 1997, an employee
may elect to commence participation in the Plan on the first day following the
date he has satisfied the eligibility requirements set forth in subsection 2.1,
and if an eligible employee does not properly elect to commence participation on
such date, he may commence his participation on any day thereafter.
2.3 Inactive Participation. If an individual ceases to meet the
eligibility requirements of subsection 2.1, such individual shall be considered
an inactive Participant in the Plan as long as any amount is credited to his
Account under the Plan, and:
(a) no contributions shall be made by or for him under Section 4 or
Section 5;
(b) he may not make a withdrawal under Section 10 after he ceases to be
an employee of an Employer or a Related Company.
2.4 Plan Not Contract of Employment. The Plan does not constitute a
contract of employment, and participation in the Plan will not give any employee
or Participant the right to be retained in the employ of any Employer nor any
right or claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
SECTION 3
Service
3.1 Years of Service. For purposes of Section 2, an employee's "Years of
Service" means:
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(a) With respect to any full-time employee, the aggregate of all time
periods commencing on the employee's first day of employment or
reemployment and ending on the day he commences a One Year Break in
Service (as defined in subsection 3.3). An employee's first day of
employment or reemployment is the first day for which he is credited
with an Hour of Service (as defined in subsection 3.2).
(b) With respect to any part-time or seasonal employee, each Computation
Period (as defined in the next sentence) during which he completes
at least 1,000 Hours of Service. A "Computation Period" is the
initial 12-consecutive-month period commencing on the date an
employee is first credited with an Hour of Service, and each Plan
Year commencing with the first Plan Year which begins on or after
the date he is first credited with an Hour of Service. An individual
who completes at least 1,000 Hours of Service during his first
Computation Period will be eligible to begin participating in the
Plan on the day following the end of such Computation Period; an
individual who first completes 1,000 Hours of Service in a
subsequent Computation Period will be eligible to begin
participating in the Plan on the day following the day in which he
worked his 1,000th Hour of Service.
For purposes of this Section 3, a "full-time employee" is an employee who is
regularly scheduled to work at least 1,000 hours in a calendar year, and a
"part-time or seasonal employee" is an employee who is scheduled to work for
fewer than 1,000 hours in a calendar year.
3.2 Hour of Service. The term "Hour of Service" means, with respect to
any employee, each hour for which he is paid or entitled to payment for the
performance of duties for an Employer or a Related Company or for which back
pay, irrespective of mitigation of damages, has been awarded to the employee or
agreed to by an Employer or a Related Company, subject to the following:
(a) An employee or Participant shall be credited with the number of
regularly scheduled working hours included in the time period on the
basis of which payment to the Employee is calculated (or, if the
number of such hours is not determinable, 8 Hours of Service per day
(to a maximum of 40 Hours of Service per week)) for any period
during which he performs no duties for an Employer or a Related
Company (irrespective of whether the employment relationship has
terminated) by reason of a vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or leave
of absence but for which he is directly or indirectly paid or
entitled to payment by an Employer or a Related Company. Payments
considered for purposes of the foregoing sentence shall include
payments unrelated to the length of the period during which no
duties are performed but shall not include payments made solely as
reimbursement for medically related expenses or solely for the
purpose of complying with applicable workmen's compensation,
unemployment compensation or disability insurance laws.
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(b) Hours of Service shall be calculated and credited pursuant to
Department of Labor Regulation section 2530.200b-2, which is
incorporated herein by reference.
3.3 One Year Break in Service. Except with respect to an employee whose
absence from employment constitutes a Maternity or Paternity Absence, an
approved leave of absence, qualified military service, or compensable physical
disability incurred during employment service, the term "One Year Break in
Service" means the 12-consecutive-month period commencing on the earlier of
(a) the day an employee's employment with the Employers and Related
Companies is terminated for any reason, or
(b) in the event an employee remains absent from service with the
Employers and Related Companies for any reason other than a quit,
retirement, discharge or death, the first anniversary of the first
day of such period of absence, if he is not paid or entitled to
payment for the performance of duties for an Employer or a Related
Company during that 12-consecutive-month period. An employee or
Participant who is absent on an approved leave of absence for a
period shorter than 12 months will commence a One Year Break in
Service on the date of his scheduled return to work if he does not
in fact return to work at the expiration of such leave. An employee
or Participant who is absent on an approved leave of absence for a
period of 12 months or more will commence a One Year Break in
Service on the first anniversary of the first day of such leave if
he does not return to work at the scheduled expiration of such
leave. An individual who is absent because of service in the U.S.
Armed Forces will begin a One Year Break in Service on the 91st day
following his discharge from military service, if he does not return
to work within 90 days of such discharge. With respect to an
individual whose absence from employment constitutes a Maternity or
Paternity Absence, a One Year Break in Service will commence on the
second anniversary of the first day of such absence, and the period
between the first and second anniversaries of the first day of a
Maternity or Paternity Absence shall not constitute a Year of
Service. The term "Maternity or Paternity Absence" means an
employee's or Participant's absence from active employment with an
Employer or Related Company by reason of the employee's pregnancy,
the birth of a child of the employee, the placement of a child with
the employee in connection with the employee's adoption of such
child, or for purposes of caring for such child immediately after
its birth or placement. The Committee may require the employee or
Participant to furnish such information as it considers necessary to
establish that such individual's absence was a Maternity or
Paternity Absence. With respect to an individual whose absence from
employment is on account of a compensable physical disability
incurred during employment service, each year of such absence shall
not constitute a One Year Break in Service if such individual
recommences employment service within 30 days after the termination
of the period for which statutory compensation for such disability
was payable, or if such individual attains age 65 while on paid
disability leave.
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3.4 Service With Philip Morris Affiliates and Predecessor Employers. For
purposes of Section 3 and subsection 9.1, service with a Subsidiary or a
Predecessor Employer shall be counted in the same manner as if such entity were
a Related Company. A "Subsidiary" is any corporation in which Philip Morris
Companies Inc. owns (directly or indirectly) more than 50% of the outstanding
voting stock. "Predecessor Employer" means a corporation or business which has
been merged into or consolidated with, or all or substantially all of its assets
acquired by, a Related Company or a Subsidiary.
3.5 Qualified Military Service. Notwithstanding any provision of this
Plan to the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with section 414(u) of
the Code.
SECTION 4
Before-Tax, After-Tax and Rollover Contributions
4.1 Before-Tax Contributions. Subject to the limitations set forth in
subsections 4.3 and 4.7 and Section 8 and such additional rules as the Committee
may establish on a uniform and nondiscriminatory basis, for any payroll period a
Participant may elect to have his salary or wages from his Employer reduced by a
whole percentage, and a corresponding amount contributed on his behalf to the
Plan by his Employer as a "Before-Tax Contribution." Such amount shall not be
less than 1 percent nor more than 10 percent of his Eligible Compensation (as
defined in subsection 4.6), but shall be limited to 6% with respect to Eligible
Compensation in excess of $15,000. Any election made pursuant to this subsection
4.1 shall be effective as soon as practicable after the Participant has made his
election in accordance with applicable Access System procedures.
4.2 After-Tax Contributions. Subject to the limitations set forth in
subsections 4.3 and 4.7 and Section 8 and such additional rules as the Committee
may establish on a uniform and nondiscriminatory basis, for any payroll period a
Participant may elect to make "After-Tax Contributions" to the Plan through
payroll deduction in a whole percentage that is not less than 1 percent nor more
than 10 percent of his Eligible Compensation (as defined in subsection 4.6), but
shall be limited to 6% with respect to Eligible Compensation in excess of
$15,000. Any election made pursuant to this subsection 4.2 shall be effective as
soon as practicable after the Participant has made his election in accordance
with applicable Access System procedures.
4.3 Total Before-Tax and After-Tax Contributions. Notwithstanding the
foregoing provisions of this Section 4, Before-Tax Contributions made on behalf
of a Participant pursuant to subsection 4.1 and After-Tax Contributions made by
such Participant pursuant to subsection 4.2 may not together exceed the maximum
amount permitted under either such subsection.
4.4 Payment of Before-Tax and After-Tax Contributions. Before-Tax
Contributions and After-Tax Contributions shall be made through periodic payroll
deductions and shall be paid to the Trustee by the Employer on the earliest date
on which such contributions can reasonably be segregated from the Employer's
general assets, but not later than the 15th business day of the month following
the month in which such amounts would otherwise have been payable to the
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Participant. For Participants on a semi-monthly payroll, deductions shall be
made from each payroll payment and for Participants on a weekly payroll,
deductions shall be made 48 times during the Plan Year, but not more than 4
times during any calendar month.
4.5 Modification, Discontinuance and Resumption of Before-Tax or
After-Tax Contributions. Subject to such rules and restrictions as the Committee
may establish on a uniform and nondiscriminatory basis, a Participant may adjust
his Before-Tax and/or After-Tax Contributions prospectively by entering into the
Access System, prior to the time such change is to be effective, an election to
make any of the changes listed below:
(a) Change his Before-Tax and/or After-Tax Contribution rates within the
limits specified above.
(b) Discontinue making Before-Tax and/or After-Tax Contributions.
(c) Resume making Before-Tax and/or After-Tax Contributions.
4.6 Eligible Compensation. A Participant's "Eligible Compensation" for
any Plan Year shall mean his annual base wage or salary rate of pay as in effect
on September 30 of the preceding Plan Year, plus any amounts contributed by an
Employer pursuant to a salary reduction agreement and which is not includable in
gross income under section 125, 402(e)(3), 402(h) or 403(b) of the Code, but it
shall not include shift differentials, overtime or other premium pay, or bonus,
incentive or other extra compensation.
4.7 Limitation on Compensation Taken Into Account For Any Plan Year.
Notwithstanding any other provision of the Plan to the contrary, the amount of
Eligible Compensation that may be taken into account under the Plan for any Plan
Year for purposes of applying the limitations of this Section 4 and Section 5
shall not exceed the maximum amount permitted for the Plan Year under section
401(a)(17) of the Code.
4.8 Rollover Contributions. A Participant or an employee who meets the
eligibility requirements of subsection 2.1 (without regard to paragraph (a)
thereof) may make a Rollover Contribution (as defined below) to the Plan,
subject to the determination of the Committee that such rollover satisfies the
requirements of this subsection 4.8. Before approving a rollover, the Committee
may request from the Participant or employee any documents or opinion of counsel
which the Committee, in its discretion, deems necessary. The term "Rollover
Contribution" means a rollover contribution of all or part of a distribution
which, under applicable provisions of the Code, is permitted to be rolled over
to a qualified plan. In no event shall a Participant or employee be permitted to
make a rollover contribution of any amounts previously contributed to another
plan by the Participant on an after-tax basis. If an employee who is not
otherwise a Participant makes a Rollover Contribution to the Plan, he shall be
treated as a Participant only with respect to his Rollover Account (defined in
subsection 7.1) until he has met all of the requirements for Plan participation
set forth in subsections 2.1 and 2.2.
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SECTION 5
Matching Contributions
5.1 Matching Contributions. Subject to the conditions and limitations of
subsection 4.7 and Section 8, for each payroll period during a Plan Year an
Employer shall contribute to the Plan on behalf of each Participant employed by
such Employer an amount equal to 45 percent of the Before-Tax and After-Tax
Contributions made by and on behalf of the Participant. Any contribution made
pursuant to this subsection 5.1 shall be referred to hereinafter as a "Matching
Contribution".
5.2 Limitations on Amount of Employer Contributions. In no event shall
the sum of any Before-Tax Contributions and Matching Contributions made by an
Employer for any Plan Year exceed the limitations imposed by section 404 of the
Code on the maximum amount deductible on account thereof by the Employer for
that year.
5.3 Payment of Employer Contributions. Matching Contributions under the
Plan for any Plan Year shall be paid to the Trustee, without interest, no later
than the time prescribed by law for filing the Employer's federal income tax
return, including any extensions thereof.
SECTION 6
Investment of the Trust Fund
6.1 Investment Funds and Loan Account. The Investment Committee shall
establish and cause the Trustee to maintain one or more "Investment Funds" for
the investment of Participants' Accounts, which may include an Investment Fund
(the "Philip Morris Stock Fund") which is intended to be invested primarily in
the common stock of Philip Morris Companies Inc. (the "Common Stock"). The
Investment Committee shall also cause the Trustee to maintain a "Loan Account"
to reflect any loans to Participants pursuant to subsection 10.1. The Investment
Committee in its discretion may add additional Investment Funds, may delete any
Investment Fund or may change the investment strategy of any Investment Fund
without prior notice to Participants.
6.2 Loan Account and Investment Fund Accounting. The Committee shall
maintain or cause to be maintained a separate subaccount for each Participant in
each of the Investment Funds and in the Loan Account to separately reflect his
interests in each such Fund or in the Loan Account and the portion thereof that
is attributable to each of his Accounts.
6.3 Investment Fund Elections. At the time that a Participant enrolls in
the Plan or makes a Rollover Contribution he may specify the percentage of
contributions subsequently credited to his Accounts that are to be invested in
each of the Investment Funds. Any such investment direction shall be deemed to
be a continuing direction until changed. During any period in which no such
direction has been given in accordance with rules established by the Investment
Committee, contributions credited to a Participant shall be invested in the
Investment Funds as determined by the Investment Committee. A Participant may
modify his investment direction prospectively by entering into the Access System
his election to do so prior to the
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effective time of the change in accordance with uniform rules established by the
Committee. Subject to uniform procedures established by the Committee, a
Participant may make one investment election with respect to future
contributions allocated to his Before-Tax, After-Tax and Rollover Accounts, and
a separate investment fund election with respect to future contributions
allocated to his Matching Account.
6.4 Transfers Between Investment Funds. Subject to uniform rules
established by the Committee, each Participant may prospectively elect to
re-allocate the investment of his Accounts among the Investment Funds then made
available to him. Any such election shall be made by entering it into the Access
System prior to the time it is to be effective in accordance with uniform rules
established by the Committee. One investment fund re-allocation election may be
made with respect to a Participant's Before-Tax, After-Tax and Rollover
Accounts, and a separate investment fund re-allocation election may be made with
respect to a Participant's Matching Account. Notwithstanding the foregoing, if a
Participant terminates employment before he is fully vested in his Accounts, and
forfeiture of the non-vested portion of his Accounts is delayed pending
distribution of the vested portion, such non-vested portion shall be invested in
accordance with rules established by the Committee to minimize the risk of loss,
and shall not be subject to the investment direction of the Participant.
SECTION 7
Plan Accounting
7.1 Participants' Accounts. The Committee shall maintain the following
"Accounts" in the name of each Participant:
(a) a "Matching Account," which shall reflect:
(i) Matching Contributions, if any, made on his behalf and the
income, losses, appreciation and depreciation attributable
thereto; and
(ii) any amounts transferred to the Plan from the General Foods
Employee Stock Ownership Plan (the ESOP) upon termination of
the ESOP in September 1988 and the income, losses,
appreciation and depreciation attributable thereto;
(b) a "Before-Tax Account," which shall reflect Before-Tax
Contributions, if any, made on his behalf and the income, losses,
appreciation and depreciation attributable thereto;
(c) an "After-Tax Account," which shall reflect After-Tax contributions,
if any, made by the Participant and the income, losses, appreciation
and depreciation attributable thereto; and
(d) a "Rollover Account," which shall reflect Rollover Contributions, if
any, made by him and the income, losses, appreciation and
depreciation attributable thereto.
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In addition, the Committee may maintain subaccounts within any of a
Participant's Accounts to reflect portions of the Account that are subject to
special withdrawal or distribution rights or are otherwise subject to special
rules. The Accounts and subaccounts provided for in this subsection 7.1 shall be
for accounting purposes only, and there shall be no segregation of assets within
the Investment Funds or the Loan Account among the separate Accounts. Reference
to the "balance" in a Participant's Accounts means the aggregate of the balances
in the subaccount maintained in the Investment Funds and Loan Account
attributable to those Accounts.
7.2 Allocation of Fund Earnings and Changes in Value. Subject to the
last sentence of this subsection, as of each Accounting Date, interest,
dividends and changes in value in each Investment Fund since the preceding
Account Date shall be allocated to each Participant's subaccount invested in
such Investment Fund by adjusting upward or downward the balance of his
subaccount invested in such Investment Fund in the ratio which the subaccount of
such Participant invested in such Investment Fund bears to the total of the
subaccount of all Participants invested in such Investment Fund as of such
Accounting Date, excluding therefrom, for purposes of this allocation only, all
Before-Tax, After-Tax, Matching and Rollover Contributions received since the
preceding Accounting Date, so that the total of the subaccount of all
Participants in each Investment Fund shall equal the total value of such fund
(exclusive of such contributions) in accordance with uniform procedures
consistently applied. Notwithstanding the fact that the Plan shall use a daily
valuation system, which generally means that Participants' Accounts will be
updated each Accounting Date to reflect activity for that day, such as new
contributions received by the Trustee, changes in Participants' investment
elections, and changes in the unit value of the Investments Funds, events may
occur that cause an interruption in the process affecting a single Participant
or a group of Participants. Neither the Employers, the Trustee nor the Plan
guarantee that any given transaction will be processed on the anticipated day.
The Investment Committee, in its discretion, may establish special rules for
valuing any Investment Fund invested primarily in stock of the Company or a
Related Company, to address the possibility of unusually high trading volume or
a temporary suspension of trading in such stock. Such rules may set forth the
circumstances under which transfers out of such Investment Fund will be valued
using either the closing price on the applicable day on the New York Stock
Exchange, a composite price listed in the Wall Street Journal, or a weighted
average selling price.
7.3 Allocation and Crediting of Contributions. Subject to the provisions
of Section 8, Before-Tax, After-Tax, Matching and Rollover Contributions made on
behalf of a Participant for any payroll period shall be credited to that
Participant's appropriate Accounts as of the Accounting Date coinciding with or
immediately following the last day of such payroll period. Notwithstanding the
foregoing, unless the Committee establishes uniform rules to the contrary,
contributions made to the Plan shall share in the gains and losses of the
Investment Funds only when actually made to the Trustee.
7.4 Correction of Error. In the event of an error in the adjustment of a
Participant's Accounts, the Committee, in its sole discretion, may correct such
error by either crediting or charging the adjustment required to make such
correction to or against income and expenses of the Trust for the Plan Year in
which the correction is made or the Employer may make an
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additional contribution to permit correction of the error. Except as provided in
this subsection 7.4, the Accounts of other Participants shall not be readjusted
on account of such error.
7.5 Statement of Plan Interest. As soon as practicable after the last
day of each Plan Year and at such other intervals as the Committee may
determine, the Committee shall provide each Participant with a statement
reflecting the balances of his Accounts. Each Participant is responsible for
reviewing his statement and any Participant who discovers an error shall bring
it to the attention of the Committee within 90 days of receipt of the statement.
If a Participant does not bring errors in his statement to the attention of the
Committee within 90 days of receipt of his statement, the Participant will be
deemed to have confirmed the accuracy of the statement.
SECTION 8
Limitations on Compensation, Contributions and Allocations
8.1 Reduction of Contribution Rates. To conform the operation of the
Plan to sections 401(a)(4), 401(k)(3), 402(g) and 415(c) of the Code, the
Committee may establish limits on the Before-Tax and After-Tax Contribution
rates that may be elected by Participants, may unilaterally modify or revoke any
Before-Tax or After-Tax Contribution election made by a Participant pursuant to
subsections 4.1 and 4.2, and may reduce the level of Matching Contributions
(even to zero) allocable to any Participant pursuant to subsection 5.l.
8.2 Compensation for Limitation/Testing Purposes. "COMPENSATION" for
purposes of this Section 8 shall mean:
(a) the Participant's wages, salary, commissions, bonuses and other
amounts received (in cash or kind) during the Plan Year from any
Employer or Related Company for personal services actually rendered
in the course of employment and includable in gross income,
including taxable fringe and welfare benefits, non-qualified stock
options taxable in the year of grant, amounts taxable under a
section 83(b) election and nondeductible moving expenses, but
excluding distributions from any deferred compensation plan
(qualified or non-qualified), amounts realized from the exercise of
(or disposition of stock acquired under) any non-qualified stock
option or other benefits given special tax treatment and lump sum
severance pay, all as defined in Treas. Reg. Section 1.415-2(d)(2),
plus,
(b) any amounts contributed on the Participant's behalf for the Plan
Year to a plan sponsored by an Employer or Related Company pursuant
to a salary reduction agreement which are not includable in gross
income under sections 125, 402(e)(3), 402(h) or 403(b) of the Code,
up to the maximum limit for that Plan Year under Code section 401(a)(17).
8.3 Limitations on Annual Additions. Notwithstanding any other
provisions of the Plan to the contrary, a Participant's Annual Additions (as
defined below) for any Plan Year shall not exceed an amount equal to the lesser
of:
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(a) $30,000; or
(b) 25 percent of the Participant's Compensation for that Plan Year,
determined without regard to clause (b) of subsection 8.2 for Plan
Years beginning prior to January 1, 1998, and calculated as if each
Section 415 Affiliate (defined below) were a Related Company,
reduced by any Annual Additions for the Participant for the Plan Year under any
other defined contribution plan of an Employer or a Related Company or Section
415 Affiliate, provided that, if any other such plan has a similar provision,
the reduction shall be pro rata. The term "Annual Additions" means, with respect
to any Participant for any Plan Year, the sum of all contributions allocated to
a Participant's Accounts under the Plan for such year, excluding any Before-Tax
Contributions that are distributed as excess deferrals in accordance with
subsection 8.6, but including any Before-Tax Contributions treated as excess
contributions under subsection 8.8. The term Annual Additions shall also
include, solely with respect to the dollar limit in (a) above, employer
contributions allocated for a Plan Year to any individual medical account (as
defined in section 415(l) of the Code) of a Participant and any amount allocated
for a Plan Year to the separate account of a Participant for payment of
post-retirement medical benefits under a funded welfare benefit plan (as
described in section 419A (d)(2) of the Code), which is maintained by an
Employer or a Related Company or Section 415 Affiliate. "Section 415 Affiliate"
means any entity that would be a Related Company if the ownership test of
section 414 of the Code was "more than 50%" rather than "at least 80%".
8.4 Excess Annual Additions. If, as a result of a reasonable error in
estimating a Participant's Compensation, a reasonable error in determining the
amount of Before-Tax Contributions that may be made with respect to a
Participant under the limits of section 415 of the Code or such other mitigating
circumstances as the Commissioner of Internal Revenue shall prescribe, the
Annual Additions for a Participant for a Plan Year exceed the limitations set
forth in subsection 8.3, the excess amounts shall be treated, as necessary, in
accordance with Treas. Reg. Section 1.415-6(b)(6)(ii), after any After-Tax
Contributions, and then any Before-Tax Contributions, and any income, losses,
appreciation or depreciation attributable to the foregoing, are first returned
to the Participant to reduce the excess amount.
8.5 Combined Plan Limitation. If a Participant also participates in any
defined benefit plan (as defined in section 415(k) of the Code) maintained by an
Employer or a Related Company or Section 415 Affiliate, the aggregate benefits
payable to, or on account of, the Participant under such plan together with this
Plan will be determined in a manner consistent with section 415(e) of the Code,
to the extent then applicable. The benefit provided for the Participant under
the defined benefit plan shall be adjusted to the extent necessary so that the
sum of the "defined benefit fraction" and the "defined contribution fraction"
(as such terms are defined in section 415(e) of the Code and applicable
regulations thereunder) calculated with regard to such Participant does not
exceed 1.0. For purposes of this subsection 8.5, all qualified defined benefit
plans (whether or not terminated) of the Employers, Related Companies and
Section 415 Affiliates shall be treated as one defined benefit plan. The
provisions of this subsection 8.5 shall not apply to Plan Years beginning after
December 31, 1999.
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21
8.6 Annual Dollar Limitation. In no event shall the Before-Tax
Contributions for a Participant under the Plan and any other elective deferrals
(as defined in section 402(g)(3) of the Code) under any other cash-or-deferred
arrangement maintained by an Employer or a Related Company for any taxable year
exceed $9,500 or such other amount as may be permitted under section 402(g) of
the Code. If during any taxable year a Participant is also a participant in any
other cash-or-deferred arrangement, and if his elective deferrals made under
such other arrangements together with his Before-Tax Contributions made under
the Plan exceed the maximum amount permitted for the Participant for that year
under section 402(g) of the Code, the Participant, not later than March 1
following the close of such taxable year, may request the Committee to direct
the Trustee to distribute all or a portion of such excess to him, with any gains
or losses allocable thereto for that Plan Year determined in accordance with any
reasonable method adopted by the Committee for that Plan Year that either (i)
conforms to the accounting provisions of Section 7 and is consistently applied
to the distribution of excess contributions under this subsection 8.6 and
subsection 8.8 to all affected Participants, or (ii) satisfies any alternative
method set forth in applicable Treasury regulations. Any such request shall be
in writing and shall include adequate proof of the existence of such excess, as
determined by the Committee in its sole discretion. If the Committee is so
notified, such excess amount shall be distributed to the Participant no later
than the April 15 following the close of the Participant's taxable year. In
addition, if the applicable limitation for a Plan Year happens to be exceeded
with respect to this Plan alone, or this Plan and another plan or plans of the
Employers and Related Companies, the Committee shall direct such excess
Before-Tax Contributions (with allocable gains or losses) to be distributed to
the Participant as soon as practicable after the Committee is notified of the
excess deferrals by the Company, an Employer or the Participant, or otherwise
discovers the error (but no later than the April 15 following the close of the
Participant's taxable year). Notwithstanding the foregoing provisions of this
subsection 8.6, the dollar amount of any distribution due hereunder shall be
reduced by the dollar amount of any Before-Tax Contributions previously
distributed to the same Participant pursuant to subsection 8.8, provided,
however, that for purposes of subsections 8.3 and 8.7, the correction under this
subsection 8.6 shall be deemed to have occurred before the correction under
subsection 8.8.
8.7 Section 401(k)(3) Testing. For any Plan Year beginning after
December 31, 1996, the amount by which the average of the Deferral Percentages
(as defined below) for the Plan Year for the group of eligible employees who are
Highly Compensated (the "Highly Compensated Group Deferral Percentage") exceeds
the average of the Deferral Percentages for the same Plan Year for the group of
eligible employees who are not Highly Compensated (the "Non-highly Compensated
Group Deferral Percentage"), shall be less than or equal to either (i) a factor
of 1.25 or (ii) both a factor of 2 and a difference of 2. The "Deferral
Percentage" for any eligible employee for a Plan Year shall be determined by
dividing his Before-Tax Contributions for that Plan Year by his Compensation for
that Plan Year, subject to the following special rules:
(a) any employee eligible to participate in the Plan at any time during
a Plan Year in accordance with subsection 2.1 (without regard to any
suspension imposed by any other provision hereunder) shall be
counted, whether or not any Before-Tax Contributions are made on his
behalf for the year;
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(b) the Deferral Percentage for any Highly Compensated Participant who
is eligible to participate in the Plan and who is also eligible to
make elective deferrals under one or more other arrangements
described in section 401(k) of the Code that are maintained by an
Employer or a Related Company for a plan year that ends with or
within the same calendar year as the Plan Year (other than a plan
subject to mandatory disaggregation under applicable Treasury
regulations) shall be determined as if all of such elective
deferrals were made on his behalf under the Plan;
(c) excess Before-Tax Contributions distributed to a Participant under
subsection 8.6 shall be counted in determining such Participant's
Deferral Percentage, except in the case of a distribution to a
non-Highly Compensated Participant required to comply with section
401(a)(30) of the Code; and
(d) all collective bargaining units shall be treated as a single
collective bargaining unit, and separate testing of each collective
bargaining unit shall not be required under this subsection 8.7.
Application of the provisions of this subsection 8.7 shall be made in accordance
with the requirements of section 401(k)(3) of the Code and applicable
regulations thereunder.
8.8 Correction Under Section 401(k) Test. In the event that the Highly
Compensated Group Deferral Percentage for any Plan Year does not initially
satisfy one of the tests referred to in subsection 8.7, the Committee shall
direct the Trustee to distribute the Excess Contributions (as defined below) for
such year, with any gains or losses allocable thereto for that Plan Year. The
"Excess Contributions" for any Plan Year shall mean the excess of the aggregate
amount of Before-Tax Contributions taken into account in computing the Deferral
Percentages of Highly Compensated Participants for such year over the maximum
amount of Before-Tax Contributions permitted under the test set forth in
subsection 8.7. Distribution of the Excess Contributions for a Plan Year shall
be made to Highly Compensated Participants on the basis of the amount of
contributions made on behalf of each such Participant for such year beginning
with those Highly Compensated Participants making the largest dollar amount of
contributions, in the manner required under section 401(k)(8)(B) of the Code.
The gain or loss allocable to Excess Contributions shall be determined in
accordance with any reasonable method adopted by the Committee for that Plan
Year that either (i) conforms to the accounting provisions of Section 7 and is
consistently applied to making corrective distributions under this subsection
8.8 and subsections 8.6, 8.10 and 8.11 to all affected Participants or (ii)
satisfies any alternative method set forth in applicable Treasury regulations.
The amounts to be distributed to any Participant pursuant to this subsection 8.8
shall be reduced by the amount of any Before-Tax Contributions distributed to
him for the taxable year ending with or within such Plan Year pursuant to
subsection 8.6. The Committee shall take such actions and cause any distribution
to be made no later than the close of the Plan Year following the Plan Year for
which the Excess Contributions were made.
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8.9 Highly Compensated. For years beginning after December 31, 1996, an
active employee (that is, an employee who performs services for the Employer or
any Related Company during the year in question) or Participant shall be "Highly
Compensated" for any Plan Year if:
(a) he was at any time during that Plan Year or the preceding Plan Year
a 5 percent owner of an Employer or a Related Company; or
(b) he received Compensation for the preceding Plan Year in excess of
$80,000 (indexed for cost-of-living adjustments under section 415(d)
of the Code).
A former employee (that is, any employee who separated from service, or was
deemed to have separated, prior to the year in question and who performs no
services for the Employers and Related Companies during the year) shall be
"Highly Compensated" if he was a Highly Compensated active employee for either
the separation year or any Plan Year ending on or after his 55th birthday.
Notwithstanding the foregoing provisions of this subsection 8.9, for any Plan
Year the Committee may use any alternative definition of highly compensated
permitted under section 414(q) of the Code and applicable regulations
thereunder.
8.10 Forfeiture of "Orphaned" Matching Contributions. If Before-Tax
Contributions are returned to a Highly Compensated Participant to satisfy the
contribution limits of section 415(c) of the Code, the deferral limits of
section 402(g) of the Code or the nondiscrimination requirements of section
401(k)(3) of the Code, any Matching Contributions allocable thereto shall be
forfeited and used to reduce the amount of Employer contributions otherwise
required to be made to the Plan.
SECTION 9
Vesting Service, Vesting and Termination Dates
9.1 Determination of Vesting Service and Vested Interest. A Participant
at all times shall have a fully vested, nonforfeitable interest in his
Before-Tax Account, After-Tax Account and Rollover Account. A Participant shall
become vested in his Matching Account in accordance with the following schedule:
Completed Years of Service Percent Vested
-------------------------- --------------
Less than 2 0%
2 25%
3 50%
4 75%
5 100%
For purposes of this subsection 9.1, a Participant's "Years of Service" will be
computed in accordance with paragraph 3.1(a) and subsection 3.4 regardless of
whether he is a full-time employee or a part-time or seasonal employee, provided
that no part-time or seasonal employee shall have fewer Years of Service for
purposes of this subsection 9.1 as of December 31, 1997
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than he would have had under the method of computing vesting service applicable
to him under the terms of the Plan as in effect on May 11, 1997. Notwithstanding
the foregoing provisions of this subsection 9.1, if an employee or Participant
terminates employment with the Employers and Related Companies when he does not
have a vested right to any portion of his Matching Account under this subsection
9.1, and if the number of his consecutive One Year Breaks in Service equals or
exceeds the greater of five (5) or the aggregate number of his Years of Service
prior to the first such One Year Break in Service, then his Years of Service
prior to such break shall be disregarded and, if he is later employed or
reemployed by an Employer or a Related Company, he shall be considered a new
employee for purposes of this subsection 9.1.
9.2 Accelerated Vesting. Notwithstanding the foregoing provisions of
this Section 9, a Participant shall have a fully vested, nonforfeitable interest
in all his Accounts when he attains age 55, dies or becomes permanently and
totally disabled (as defined below) while employed by an Employer or a Related
Company. In addition, in the event of the Plan's termination (in accordance with
subsection 14.2) or partial termination (as determined under applicable law and
regulations), or the complete discontinuance of Employer contributions to the
Plan, each affected Participant shall be fully vested in all his Accounts. For
purposes of this subsection 9.2, a Participant will be considered "permanently
and totally disabled" if, on account of physical or mental disability, he no
longer is capable of performing any job or position with his employer for which
he is otherwise eligible or qualified, such disability continues for at least
six (6) months, and it is demonstrated to the satisfaction of the Committee that
such disability will be permanent and continuous for the remainder of his life.
The Committee in its discretion may also determine that the Accounts of
Participants affected by a divestiture, plant closing or termination of an
operation shall be fully vested, even though such event does not constitute a
partial termination.
9.3 Termination Date. If a Participant is terminated for any reason, his
"Termination Date" generally will be the last day for which he is paid wages or
salary for services performed for an Employer, unless he is terminated while on
an unpaid leave of absence, in which case his Termination Date will be the day
as of which he is notified of his termination or resigns (whichever is
applicable).
9.4 Distribution of Before-Tax Account Only Upon Separation From
Service. Notwithstanding any other provision of the Plan to the contrary, a
Participant may not commence distribution of the portion of his Account
attributable to his Before-Tax Contributions prior to the date he attains age
59-1/2, even though his employment with the Employers and Related Companies has
terminated and he is otherwise eligible for a distribution under Section 11,
unless or until he also has a "separation from service" within the meaning of
section 401(k)(2)(B) of the Code. The foregoing restriction shall not apply,
however, if the Participant's termination of employment occurs in connection
with the sale by an Employer or a Related Company to an unrelated corporation of
at least 85% of the assets of a trade or business or the disposition of its
interest in a subsidiary to an unrelated entity that meets the requirements for
distribution under applicable Treasury regulations.
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SECTION 10
Loans and Withdrawals of Contributions While Employed
10.1 Loans to Participants. The Committee, upon request by a Participant
who is an employee of an Employer or a Related Company (excluding any employee
on layoff or a leave of absence without pay) or who is a "party in interest"
with respect to the Plan (as such term is defined in section 3(14) of ERISA) may
authorize a loan to be made to the Participant from his vested interest in the
Trust Fund, subject to the following:
(a) The minimum loan amount is $1,000. No loan shall be made to a
Participant if, immediately after such loan, the sum of the
outstanding balances (including principal and interest) of all loans
made to him under this Plan and under any other qualified retirement
plans maintained by the Related Companies would exceed the lesser
of:
(i) $50,000, reduced by the excess, if any, of:
(A) the highest outstanding balance of all loans to the
Participant from the plans during the one-year period
ending on the day immediately before the date on which
the loan is made; over
(B) the outstanding balance of loans from the plans to the
Participant on the date on which such loan is made; or
(ii) the combined values of the Participant's After-Tax, Before-Tax
and Rollover Accounts;
and no loan shall be made to a Participant from the Plan in an
amount that would exceed one-half of the total vested balance of the
Participant's Accounts under the Plan as of the date the loan is
made. Notwithstanding the foregoing, if the amount described in
clause (ii) above declines because of investment losses between the
date the loan is requested and the Accounting Date as of which it is
made, the difference may be taken from the vested portion of his
Matching Account (so long as the loan does not exceed one-half of
the total vested balance of his Accounts).
(b) Each loan to a Participant shall be charged against the
Participant's Accounts in the order and manner determined by the
Committee, and shall be charged pro rata against each Investment
Fund in which such Accounts are invested.
(c) Each loan shall be evidenced by a written note providing for:
(i) a repayment period of 12 through 60 months, inclusive;
(ii) a reasonable rate of interest (as determined below);
(iii) substantially equal payments of principal and interest over
the term of the loan no less frequently than quarterly; and
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(iv) such other terms and conditions as the Committee shall
determine.
The interest rate shall provide the Plan with a return commensurate
with the interest rates charged by persons in the business of
lending money for loans which would be made under similar
circumstances and shall be a fixed rate for the life of the loan.
The interest rate which applies to a loan shall be the rate in
effect on the date that the loan application is made by the
Participant.
(d) A loan shall be the borrowing Participant's individual investment
within the Loan Account.
(e) Payments of principal and interest to the Trustee with respect to
any loan to a Participant:
(i) shall reduce the outstanding balance with respect to that
loan;
(ii) shall reduce the balance of the Loan Account holding the
promissory note reflecting that loan;
(iii) shall be credited to the Participant's Accounts in the reverse
order in which they were charged; and
(iv) shall be invested in the Investment Funds in accordance with
his current investment directions with respect to such
Accounts.
(f) A Participant's obligation to repay a loan (or loans) from the Plan
shall be secured by the Participant's vested interest in the Plan.
The note evidencing the loan, the security agreement and the payroll
deduction authorization shall each be executed by the Participant by
entry of his PIN into the Access System. Endorsement of the loan
check shall constitute the Participant's affirmation of the note,
security agreement and payroll deduction authorization set forth in
the written confirmation sent to the Participant after he made his
loan request.
(g) Generally, loan repayments will be made by automatic payroll
deductions. However, during any period when payroll deduction is not
possible or is not permitted under applicable law, repayment will be
made by check or money order and shall be sent to the Plan's service
center. Loan repayments will be suspended under this Plan as
permitted under section 414(u)(4) of the Code.
(h) The loan may be prepaid in full, without penalty, at any time after
it has been outstanding for 12 months. In the event of early
repayment of the loan, the Participant may not apply for a new loan
until at least 30 days after the prior loan's repayment.
(i) Effective January 1, 1999, a loan to a Participant shall become
immediately due and payable without notice of any kind upon his
permanent and total disability or his termination of employment with
the Employers and Related Companies. Notwithstanding any other
provision of the Plan to the contrary, if the outstanding
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27
balance of principal and interest on any loan is not paid within the
grace period established by the Committee for a delinquent payment
(not later than the end of the calendar quarter following the
quarter in which it is due) or within 90 days after acceleration in
accordance with the preceding sentence, a default shall occur and
the Trustee shall apply all or a portion of the Participant's vested
interest in the Plan in satisfaction of such outstanding obligation,
but only to the extent such vested interest (or portion thereof) is
then distributable under applicable provisions of the Code. If
necessary to satisfy the entire outstanding obligation, such
application of the Participant's vested interest may be executed in
a series of actions as amounts credited to the Participant's
Accounts become distributable. Any partial payments shall be applied
first to the payment of accrued interest and thereafter to the
payment of outstanding principal.
(j) If distribution is to be made to a Beneficiary in accordance with
subsection 11.2, any outstanding promissory note of the Participant
shall be canceled and the unpaid balance of the loan, together with
any accrued interest thereon, shall be treated as a distribution to
or on behalf of the Participant immediately prior to commencement of
distribution to the Beneficiary.
(k) The Committee shall establish uniform procedures for applying for a
loan, evaluating loan applications, and setting reasonable rates of
interest, which shall be communicated to Participants in writing. A
Participant may have only one loan outstanding at any time, and any
prior loan must be repaid and credited to a Participant's Accounts
before the Participant may apply for a new loan.
10.2 Hardship Withdrawals. Subject to the provisions of this subsection
10.2 and of paragraph 10.3(c), a Participant who has not attained age 59-1/2,
whose Termination Date has not yet occurred, and who incurs a Hardship (as
defined in subsection 10.3) may elect to withdraw all or part of his interest in
the following Accounts, as provided and in the order set forth below:
(a) up to 100% of his After-Tax Account, and the earnings thereon;
(b) up to 100% of his Rollover Account; and
(c) up to 100% of the Before-Tax Contributions credited to his
Before-Tax Account and any earnings credited to such account as of
December 31, 1988.
Any such Hardship withdrawal is subject to a minimum amount of $500. A
Participant who does not have at least $500 in the Accounts listed above is
ineligible for a Hardship withdrawal. A Participant who is eligible to make a
withdrawal under subsection 10.5 and/or subsection 10.6 must withdraw the full
amount available to him under both such subsections before he makes a Hardship
withdrawal under this subsection 10.2.
10.3 Determination of Hardship. A withdrawal will not be considered to be
made on account of "Hardship" unless the following requirements are met:
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(a) The withdrawal is requested because of an immediate and heavy
financial need of the Participant, and will be so deemed if the
Participant represents that the withdrawal is made on account of:
(i) uninsured expenses for medical care described in section
213(d) of the Code incurred by the Participant, a parent of
the Participant, the Participant's spouse or any dependent of
the Participant (as defined in section 152 of the Code) or
necessary for such persons to obtain such medical care;
(ii) the purchase (excluding mortgage payments) of a principal
residence of the Participant;
(iii) payment of tuition and related educational fees for the next
12 months of post-secondary education for the Participant, or
his spouse, children or dependents;
(iv) the need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence;
(v) funeral expenses of a family member, past due taxes, past due
child support, other past due obligations, cash settlements
due in a divorce, the cost of repairs to the Participant's
home as a result of major damage or to a major appliance, or
repairs to or purchase of a car needed to commute to work; or
(vi) any other circumstances of immediate and heavy financial need
identified as such in revenue rulings, notices or other
documents of the Internal Revenue Service of general
applicability or other unusual or unexpected expenses meeting
such criteria as are determined by the Committee to constitute
an immediate and heavy financial need.
(b) The withdrawal must also be necessary to satisfy an immediate and
heavy financial need of the Participant. It will be considered
necessary if the Committee determines that the amount of the
withdrawal does not exceed the amount required to relieve the
financial need (taking into account any applicable income or penalty
taxes resulting from the withdrawal) and if the need cannot be
satisfied from other resources that are reasonably available to the
Participant. In making this determination, the Committee may
reasonably rely on the Participant's written representation that the
need cannot be relieved:
(i) through reimbursement or compensation by insurance or
otherwise;
(ii) by reasonable liquidation of the Participant's assets, to the
extent such liquidation would not itself give rise to an
immediate and heavy financial need;
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(iii) by ceasing to make Before-Tax or After-Tax Contributions to
the Plan (or any other plan of the Employer permitting
deferral of compensation); or
(iv) by a loan pursuant to subsection 10.1 or by borrowing from
commercial sources on reasonable commercial terms.
(c) The withdrawal must be made pursuant to a written request to the
Committee, which request shall include any representation required
by this subsection 10.3 and adequate proof thereof, as determined by
the Committee in its sole discretion.
10.4 Age 59 1/2 Withdrawals. Once a Participant attains age 59-1/2 he may
withdraw all or any portion of his entire vested Account balance regardless of
whether he has a Hardship.
10.5 Withdrawals From 3/31/97 After-Tax and Matching Account Balances. A
Participant who was participating in the Plan prior to April 1, 1997 and whose
Termination Date has not yet occurred may elect to withdraw all or a portion of
his March 31, 1997 After-Tax Account and Matching Account balances, as provided
and in the order set forth below:
(a) that portion of his After-Tax Account attributable to After-Tax
Contributions made prior to April 1, 1997, and any earnings thereon;
and
(b) that portion of his Matching Account attributable to Matching
contributions made prior to April 1, 1997, and any earnings thereon.
Until November 1, 1999 any withdrawal under this subsection 10.5 is subject to a
minimum amount of $500 or the total amount that may be withdrawn pursuant to
this subsection, whichever is less.
10.6 Form of Withdrawals. Any loan or withdrawal from any Account
pursuant to this Section 10 shall be made proportionately from each of the
Investment Funds in which such Account is invested. All loan proceeds shall be
paid solely in cash. All Hardship withdrawals and, except as provided in the
following sentence, all withdrawals under subsections 10.4 and 10.5, shall be
made solely in cash. Withdrawals under subsections 10.4 and 10.5 from the
portion of a Participant's Accounts that is invested in the Philip Morris Stock
Fund shall be made in cash, except to the extent the Participant elects to
receive whole shares of Common Stock (with cash in lieu of any fractional
share).
SECTION 11
Distributions
11.1 Distributions to Participants After Termination of Employment. If a
Participant's Termination Date occurs (for a reason other than his death), the
vested portions of his Accounts shall be distributed in accordance with the
following provisions of this subsection 11.1, subject to the rules of
subsections 11.5 and 9.4:
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(a) Effective January 1, 1998, if the value of the vested portions of
such Participant's Accounts (including any loans outstanding on his
Termination Date) does not exceed $5,000 or such larger amount as
may be permitted for involuntary cash-outs under applicable
provisions of the Code, (and for determinations made prior to
September 1, 1999 did not exceed such amount at the time of any
earlier withdrawal), determined as soon as practicable following his
Termination Date, such vested portions, less any outstanding loan
balance distributable in accordance with paragraph 10.1(i), shall be
distributed to him as soon as practicable following notification, in
a lump sum payment; provided, however, that the distribution shall
not commence earlier than 30 days after the Participant is given the
direct rollover notice required under section 402(f) of the Code
unless the Participant has been informed of his right to a period of
at least 30 days to consider the decision of whether or not to elect
a direct rollover, and the Participant, after receiving such notice,
affirmatively elects the distribution.
(b) If a Participant is not cashed out under the provisions of the
foregoing paragraph (a), the vested portions of the Participant's
Account, less any outstanding loan balance distributable in
accordance with subsection 10.1(i), shall be distributed (or shall
begin to be distributed) to the Participant on (or as soon as
practicable after) the Distribution Date (as defined in paragraph
(c) below) he elects, by one of the following methods chosen by the
Participant:
(i) by payment in a lump sum; or
(ii) by payment in a series of monthly, quarterly, semi-annual or
annual installments for a period selected by the Participant
that complies with subsection 11.5 (the amount of each
installment as of each applicable Accounting Date shall be
equal to the product of the Participant's then Account
balances multiplied by a fraction, the numerator of which is
one and the denominator of which is the difference between the
number of installments selected and the number of installments
previously paid); provided, however, that a Participant may
elect payments in the form of a fixed amount option under
which the Participant will receive a specified dollar amount
payable at specified intervals (monthly, quarterly,
semiannually or annually) until his account is completely
liquidated, and a Participant may elect to change the fixed
amount (without changing the frequency of the payments)
subject to uniform rules established by the Committee; and
provided further that the Participant may elect to accelerate
any installment payments and to have his remaining vested
Account balance distributed to him in a lump sum payment as
soon as practicable after the Accounting Date coincident with
or next following the date his acceleration election is
submitted to the Committee; or
(iii) by purchase from an insurance company and distribution to him
of an annuity contract providing for periodic distributions to
him for his life (with or without a period certain) or to him
and his beneficiary for their joint lives, subject to the
provisions of subsection 11.3.
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(c) A Participant's "Distribution Date" shall mean the Accounting Date
as of which a payment in any form is made to him pursuant to this
Section 11, without regard to any reasonable administrative delay;
provided, however, that in the event of an election of an annuity
under clause (b)(iii) above, the Distribution Date shall be no later
than the date payment is irrevocably made on behalf of the
Participant to the insurance company issuing the annuity contract. A
Participant may elect that his Distribution Date occur as of any
Accounting Date occurring on or after his Termination Date (but not
later than the date on which he attains age 70-1/2), provided that
no election of a Distribution Date will be valid if it is made more
than 90 days prior to such date and further provided that the
distribution shall not commence earlier than 30 days after the
Participant is given the direct rollover notice required under
section 402(f) of the Code and the notice required under Treasury
regulation section 1.411(a)-11(c) unless the Participant has been
informed of his right to a period of at least 30 days to consider
the decision of whether or not to elect a direct rollover and
whether or not to elect a distribution, and the Participant, after
receiving such notices, affirmatively elects the distribution.
11.2 Distributions to Beneficiaries. Subject to subsection 11.5, the
following rules shall apply if a Participant dies while any vested portion of
his Accounts remains undistributed:
(a) If the Participant dies before benefit payments to him have
commenced, the vested balance of his Accounts, less any outstanding
loan balance distributable in accordance with paragraph 10.1(j),
shall be distributed as follows:
(i) If the value of the vested portion of the Participant's
Accounts (less the outstanding loan balance) does not exceed
$5,000 (or the applicable cash-out limit), determined as soon
as practicable following his date of death, or, effective
September 1, 1999, if the Beneficiary is not the Participant's
surviving spouse, such vested portion (less the outstanding
loan balance) shall be distributed to his Beneficiary as soon
as practicable after his death, in a lump sum payment.
(ii) If the value of the vested portion of the Participant's
Accounts (less the outstanding loan balance) exceeds $5,000
(or the applicable cash-out limit), determined as soon as
practicable following his date of death and effective
September 1, 1999 the Beneficiary is the Participant's
surviving spouse, such vested portion (less the outstanding
loan balance) shall be distributed to his Beneficiary as of
any Accounting Date following the date of his death selected
by the Beneficiary (in accordance with subsection 11.5), in
one of the methods described at paragraph 11.1(b) as chosen by
the Beneficiary.
(b) If a Participant dies after benefit payments to him have commenced,
the vested balance, if any, of his Accounts shall continue to be
distributed to his Beneficiary in accordance with the method of
distribution selected by the Participant; provided, however, that
the Beneficiary may elect to accelerate the payments and
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to have such remaining vested balances distributed in a lump sum
payment as soon as practicable after the Accounting Date next
following the date the Beneficiary's acceleration election is filed
with the Committee.
11.3 Special Rules Governing Annuity Elections. If a married Participant
elects distribution in the form of an annuity pursuant to clause 11.1(b)(iii),
the following rules shall apply and shall supersede any other provision of the
Plan to the contrary:
(a) The vested portions of the Participant's Accounts, less any
outstanding loan balance distributable in accordance with paragraph
10.1(i), shall be used to purchase a nontransferable "Joint and
Survivor Annuity" (that is, an annuity payable for the life of the
Participant with a survivor annuity payable for the life of his
spouse which is not less than 50% of the amount of the annuity
payable during the joint lives of the Participant and spouse),
unless he elects another form of annuity and, if applicable, a
Beneficiary other than his spouse, with the consent of his spouse to
such form and Beneficiary, during the 90-day period immediately
preceding his Distribution Date. The Participant's Distribution Date
shall be no earlier than 30 days after the Participant is given the
notice required under Treasury regulation section
1.411(a)-11(c), (including a written explanation of the terms and
conditions of the Joint and Survivor Annuity and the effect of an
election of a different annuity form), unless the Participant has
been informed of his right to a period of at least 30 days to
consider the decision of whether or not to elect a distribution and
a particular distribution option, and the Participant, after
receiving such notice, affirmatively elects the distribution.
(b) No consent by the spouse to the election of a form of annuity other
than the Joint and Survivor Annuity and, if applicable, Beneficiary
other than the spouse shall be effective unless it is in writing,
acknowledges the effect of such consent and is witnessed by a Plan
representative or a notary public (unless the Committee determines
that there is no spouse, that the spouse cannot be located, that the
Participant and his spouse are legally separated, that the
Participant has been abandoned (under applicable state law) and the
Participant has a court order to that effect, or that consent may be
waived because of such other circumstances as regulations or rulings
under Code section 417 set forth).
(c) During the period between his election of an annuity and his
Distribution Date, no loan may be made to a Participant pursuant to
subsection 10.1, no amount may be withdrawn by the Participant
pursuant to Section 10 and no amount may be distributed to the
Participant pursuant to subsection 11.1, in any form other than a
Joint and Survivor Annuity, without the written consent of the
spouse as provided in paragraph (b) of this subsection 11.3.
(d) Subject to paragraph (e) below, if the Participant dies during the
period between his election of an annuity and his Distribution Date,
the vested portions of his Accounts (less any amounts credited to
the Loan Fund, which shall be distributed in accordance with
paragraph 10.1(j)) shall be paid to his spouse in the form of a life
annuity as of the Accounting Date next following the date the
Participant
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would have attained age 65 or, if the spouse so elects, as soon as
practicable after any earlier Accounting Date next following his
death; provided, however, that a spouse to whom payment is due under
this paragraph (d) may elect to have such vested portions, if any,
distributed in the form of a lump sum payment.
(e) The provisions of paragraph (d) above shall not apply, and
distribution upon the death of the Participant shall be made in
accordance with subsection 11.2, if the spouse consents to the
designation of a Beneficiary other than the spouse in accordance
with subsection 11.6 during the period between the Participant's
election of an annuity and his death, and acknowledges that such
consent to the Participant's designation of such Beneficiary
constitutes the spouse's consent to the Participant's waiver of a
qualified pre-retirement survivor annuity payable to the spouse in
accordance with section 417 of the Code.
(f) A Participant may revoke his election pursuant to this subsection
11.3, and may make a new election of any form of distribution
permitted under paragraph 11.1(b), at any time during the 90-day
period immediately preceding his Distribution Date; provided,
however, that if the effect of such revocation is to select a
distribution form other than a Joint and Survivor Annuity, it shall
be ineffective without the written consent of his spouse in
accordance with paragraph (b) of this subsection 11.3 to the new
form of distribution and, if applicable, a Beneficiary other than
the spouse.
11.4 Forfeitures and Restorations of Non-Vested Contributions. If a
Termination Date occurs with respect to a Participant who is not fully vested in
his Accounts (as determined under Section 9), the following rules shall apply:
(a) The non-vested portion of his Accounts shall be forfeited as of the
earlier of the date as of which the vested portion of his Accounts
is distributed to him or the date the Participant incurs five
consecutive One Year Breaks in Service.
(b) If a forfeiture occurs due to the distribution of the vested portion
of the Participant's Accounts, and the Participant is reemployed by
an Employer or a Related Company before he incurs five consecutive
One Year Breaks in Service, the amount forfeited under paragraph (a)
above shall be restored, as adjusted for earnings in accordance with
uniform rules established by the Committee, as soon as practicable
after his reemployment.
(c) If a forfeiture occurs due to the distribution of the vested portion
of the Participant's Accounts, and the Participant is reemployed by
an Employer or Related Company after he incurs five consecutive One
Year Breaks in Service, such reemployment shall have no effect on
the forfeiture under paragraph (a) above.
(d) The restoration referred to in paragraph (b) above shall be made
first from current forfeitures, if any, under the Plan and then, if
necessary, from a special Employer contribution to the Plan.
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(e) A restoration pursuant to paragraph (b) above shall not be
considered an annual addition for purposes of subsection 8.3.
(f) If a Participant who is reemployed by an Employer or Related Company
prior to incurring five consecutive One Year Breaks in Service
received a distribution of the vested portion of his Matching
Account, the amount restored under paragraph (b) above shall be
maintained in a separate subaccount within the Participant's
Matching Account and his vested interest in each subaccount shall be
determined in accordance with the rules set forth in Treas. Reg.
Section 411(a)-7(d)(5)(iii)(A).
(g) During the period between the Participant's Termination Date and the
date he is either reemployed by an Employer or Related Company or
the date the non-vested portion of his Matching Account is forfeited
such non-vested portion shall be credited to a forfeiture subaccount
and invested in accordance with rules established by the Committee
to minimize the risk of loss, and shall not be subject to the
investment direction of the Participant.
(h) All forfeitures under this subsection 11.4 shall be used to reduce
Matching Contributions under Section 5, except to the extent needed
to restore prior forfeitures under paragraph (b) above.
11.5 Limits on Commencement and Duration of Distributions. The following
distribution rules shall be applied in accordance with sections 401(a)(9) and
401(a)(14) of the Code and applicable regulations thereunder, including the
minimum distribution incidental benefit requirement of Treas. Reg. Section
1.401(a)(9)-2, and shall supersede any other provision of the Plan to the
contrary:
(a) Unless the Participant elects otherwise, in no event shall
distribution commence later than 60 days after the close of the Plan
Year in which the latest of the following events occurs: the
Participant's attainment of age 65; the 10th anniversary of the year
in which the Participant began participating in the Plan; or the
Participant's Termination Date. The failure of a Participant to
consent to a distribution is deemed to be an election to defer
commencement of payment for purposes of the preceding sentence.
(b) Notwithstanding any other provision herein to the contrary,
distribution of a Participant's Accounts shall commence to be made
to him (or on his behalf) once he has attained age 70-1/2 in the
form of a lump sum distribution or, if elected by the Participant,
in any other form permitted by paragraph 11.1(b), on or before his
Required Beginning Date (as defined below) and each December 31
thereafter. (In the event an annuity or lump sum has been elected,
each additional payment shall consist of a lump sum payment of all
amounts then credited to his Accounts.) For years beginning after
December 31, 1998, a Participant's "Required Beginning Date" shall
mean April 1 of the calendar year following the later of (i) the
calendar year in which he attains age 70 1/2, or (ii) the calendar
year in which the Participant's Termination Date occurs; provided,
however, that
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clause (ii) shall not apply to any Participant who is a 5-percent
owner of any Employer or Related Company (as defined in section 416
of the Code).
(c) Distribution payments made in the form of an annuity shall be made
over the life of the Participant or, if the Participant provides
accurate and timely Beneficiary information, over the lives of such
Participant and his Beneficiary (or over a period not extending
beyond the life expectancy of such Participant or the life
expectancy of such Participant and his Beneficiary).
(d) If a Participant dies after distribution of his vested interest in
the Plan has begun, the remaining portion of such vested interest,
if any, shall be distributed to his Beneficiary at least as rapidly
as under the method of distribution used prior to the Participant's
death.
(e) If a Participant dies before distribution of his vested interest in
the Plan has begun, distribution of such vested interest to his
Beneficiary shall be completed by December 31 of the calendar year
in which the fifth anniversary of the Participant's death occurs;
provided, however, that this five-year rule shall not apply to a
natural person designated as Beneficiary by the Participant or under
the specific terms of the Plan, if
(i) such vested interest will be distributed over the life of such
designated Beneficiary (or over a period not extending beyond
the life expectancy of such Beneficiary), and
(ii) such distribution to the Beneficiary begins not later than
December 31 of the calendar year following the calendar year
in which the Participant died or, if such Beneficiary is the
Participant's surviving spouse, not later than December 31 of
the calendar year following the calendar year in which the
Participant would have attained age 70 1/2.
(f) If the Participant's surviving spouse is his Beneficiary and such
spouse dies before the distributions to such spouse begins,
paragraph (e) shall be applied as if the surviving spouse were the
Participant.
(g) For purposes of paragraph (d) and (e), distribution of a
Participant's vested interest in the Plan is considered to begin on
his Required Beginning Date; provided, however, that distribution
irrevocably begun in the form of an annuity shall be considered to
begin on the date it actually commences.
(h) For purposes of this subsection 11.5, the life expectancy of a
Participant or a Beneficiary will be determined in accordance with
Tables V and VI of Treas. Reg. Section 1.72-9 (provided that the
Participant gives the Committee or its delegate timely and accurate
Beneficiary information), and shall not be recalculated.
11.6 Beneficiary Designations. The term "Beneficiary" shall mean the
Participant's surviving spouse. However, if the Participant is not married, or
if the Participant is married but his spouse consents (as provided below) to the
designation of a person other than the spouse, the
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36
term Beneficiary shall mean such person or persons as the Participant designates
to receive the vested portions of his Accounts upon his death. Such designation
may be made, revoked or changed (without the consent of any
previously-designated Beneficiary except his spouse) only by an instrument
signed by the Participant and filed with the Committee prior to his death. A
spouse's consent to the designation of a Beneficiary other than the spouse shall
be in writing, shall acknowledge the effect of such designation, shall be
witnessed by a Plan representative or a notary public and shall be effective
only with respect to such consenting spouse. In default of such designation, or
at any time when there is no surviving spouse and no surviving Beneficiary
designated by the Participant, his Beneficiary shall be his surviving children
(in equal shares) or, if he has no living child, his living parents (in equal
shares) or, if he has no living parent, his living brothers and sisters (in
equal shares) or, if he has no living brother or sister, his legal
representative. For purposes of the Plan, "spouse" means the person to whom the
Participant is legally married at the relevant time. Notwithstanding the
foregoing provisions of this subsection 11.6, no spouse's consent to the
designation of a person other than, or in addition to, the spouse as Beneficiary
shall be required if (i) the Participant and his spouse are legally separated or
the Participant has been abandoned (under applicable state law) and the
Participant has a court order to that effect or (ii) it is established to the
satisfaction of the Committee that the spouse's consent cannot be obtained
because there is no spouse, because the spouse cannot be located or because of
such other circumstances as may be prescribed in applicable Treasury
regulations.
11.7 Form of Payment. Distributions to or on behalf of a Participant or
Beneficiary shall be made proportionately from each of the Investment Funds in
which the Participant's Accounts are invested and, except as provided otherwise
in the following sentence, shall be paid solely in cash. Distributions from the
portion of a Participant's Accounts, if any, that is invested in the Philip
Morris Stock Fund shall be made in cash, except to the extent the Participant or
Beneficiary elects, solely with respect to distributions to be made in the form
of a lump sum or installments (and not with respect to any distribution to be
made in the form of an annuity), to receive whole shares of Common Stock (with
cash distributed in lieu of any fractional share).
11.8 Facility of Payment. Notwithstanding the provisions of subsections
11.1 and 11.2, if, in the Committee's opinion, a Participant or other person
entitled to benefits under the Plan is under a legal disability or is in any way
incapacitated so as to be unable to manage his financial affairs, the Committee
may direct the Trustee to make payment to a relative or friend of such person
for his benefit until claim is made by a conservator or other person legally
charged with the care of his person or his estate. Thereafter, any benefits
under the Plan to which such Participant or other person is entitled shall be
paid to such conservator or other person legally charged with the care of his
person or his estate.
11.9 Interests Not Transferable. The interests of Participants and other
persons entitled to benefits under the Plan are not subject to the claims of
their creditors and may not be voluntarily or involuntarily assigned, alienated
or encumbered, except in the case of qualified domestic relations orders that
relate to the provision of child support, alimony or marital rights of a spouse,
child or other dependent and which meet such other requirements as may be
imposed by section 414(p) of the Code or regulations issued thereunder.
Notwithstanding any other provision of the Plan to the contrary, distribution of
the entire portion of the Account balance of a Participant awarded to his
alternate payee may be made in a lump sum payment, as soon as practicable after
the Committee determines that such order is qualified, without regard to
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whether the Participant would himself be entitled under the terms of the Plan to
withdraw or receive a distribution of such amount at that time, but only if the
terms of the order provide for such immediate distribution either specifically
or by general reference to any manner of distribution permitted under the Plan.
11.10 Absence of Guaranty. None of the Committee, the Trustee, or the
Employers in any way guarantee the assets of the Plan from loss or depreciation.
The Employers do not guarantee any payment to any person. The liability of the
Trustee to make any payment is limited to the available assets of the Plan held
under the Trust.
11.11 Missing Participants or Beneficiaries. Each Participant and each
designated Beneficiary must file with the Committee from time to time in writing
his post office address and each change of post office address. Any
communication, statement or notice addressed to a Participant or designated
Beneficiary at his last post office address filed with the Committee, or, in the
case of a Participant, if no address is filed with the Committee, then at his
last post office address as shown on the Employers' records, will be binding on
the Participant and his designated Beneficiary for all purposes of the Plan.
None of the Committee, the Employers, or the Trustee will be required to search
for or locate a Participant or designated Beneficiary.
11.12 Direct Rollover Option. In accordance with uniform rules established
by the Committee, each Participant, surviving spouse of a Participant or
alternate payee under a qualified domestic relations order within the meaning of
section 414(p) of the Code who is due to receive an eligible rollover
distribution from the Plan may direct the Committee to transfer all or a portion
of such distribution directly to another eligible retirement plan. For purposes
of this subsection, the terms "eligible rollover distribution" and "eligible
retirement plan" as applied to any such individual shall have the meaning
accorded such terms under section 401(a)(31) of the Code (or any successor
provision thereto) and applicable regulations thereunder.
11.13 Distributions on Account of Permanent and Total Disability. For
purposes of this Section 11, a Participant will be considered to have terminated
employment and will be entitled to a distribution of his vested Account balances
when he is determined by the Committee to be permanently and totally disabled
(as defined in subsection 9.2).
SECTION 12
No Reversion to Employers
No part of the corpus or income of the Trust shall revert to the Employers
or be used for, or diverted to, purposes other than the exclusive benefit of
Participants and Beneficiaries, subject to the following:
(a) Employer contributions under the Plan are conditioned upon the
deductibility of the contributions under section 404 of the Code,
and, to the extent any such deduction is disallowed, the Trustee
shall, upon written request of the Employer, return the amount of
any contribution (to the extent disallowed), reduced by the amount
of any losses thereon, to the Employer within one year after the
date the deduction is disallowed.
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(b) If a contribution or any portion thereof is made by an Employer by a
mistake of fact, the Trustee shall, upon written request of that
Employer, return the amount of such contribution or portion, reduced
by the amount of any losses thereon, to that Employer within one
year after the date of payment.
(c) If, upon termination of the Plan, any amounts are held under the
Plan in a suspense account pursuant to Treas. Reg. Section
1.415-6(b)(6)(ii) and such amounts may not be credited to the
Accounts of Participants, such amount will be returned to the
Employers as soon as practicable after the termination of the Plan.
SECTION 13
Administration
13.1 Committee Membership and Authority. The Committee referred to in
subsection 1.3 shall consist of one or more members appointed by the Company.
Except as otherwise specifically provided in this Section 13, the Committee
shall act by a majority of its then members, by meeting or by writing filed
without meeting, and shall have the following discretionary authority, powers,
rights and duties in addition to those vested in it elsewhere in the Plan or
Trust Agreement:
(a) to adopt such rules of procedure and regulations as, in its opinion,
may be necessary for the proper and efficient administration of the
Plan and as are consistent with the provisions of the Plan;
(b) to enforce the Plan in accordance with its terms and with such
applicable rules and regulations as may be adopted by the Committee;
(c) to determine conclusively all questions arising under the Plan,
including the power to determine the eligibility of employees and
the rights of Participants and other persons entitled to benefits
under the Plan and their respective benefits, to make factual
findings and to remedy ambiguities, inconsistencies or omissions of
whatever kind;
(d) to maintain and keep adequate records concerning the Plan and
concerning its proceedings and acts in such form and detail as the
Committee may decide;
(e) to direct all payments of benefits under the Plan;
(f) to perform the functions of a "plan administrator", as defined in
section 414(g) of the Code, for all purposes of the Plan, including
for purposes of establishing and implementing procedures to
determine the qualified status of domestic relations orders (in
accordance with the requirements of section 414(p) of the Code) and
to administer distributions under such qualified orders;
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(g) to employ agents, attorneys, accountants or other persons (who may
also be employed by or represent the Employers) for such purposes as
the Committee considers necessary or desirable to discharge its
duties;
(h) to establish a claims procedure in accordance with section 503 of
ERISA; and
(i) to furnish the Employers, the Investment Committee and the Trustee
with such information with respect to the Plan as may be required by
them for tax or other purposes.
The certificate of a majority of the members of the Committee that the Committee
has taken or authorized any action shall be conclusive in favor of any person
relying on the certificate.
13.2 Allocation and Delegation of Committee Responsibilities and Powers.
In exercising its authority to control and manage the operation and
administration of the Plan, the Committee may allocate all or any part of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it. Any such allocation or delegation may be revoked at any time.
Any member or delegate exercising Committee responsibilities and powers under
this subsection shall periodically report to the Committee on its exercise
thereof and the discharge of such responsibilities.
13.3 Uniform Rules. In managing the Plan, the Committee shall uniformly
apply rules and regulations adopted by it to all persons similarly situated.
13.4 Information to be Furnished to Committee. The Employers and Related
Companies shall furnish the Committee such data and information as may be
required for it to discharge its duties. The records of the Employers and
Related Companies as to an employee's or Participant's period of employment,
termination of employment and the reason therefor, leave of absence,
reemployment and Compensation shall be conclusive on all persons unless
determined to be incorrect. Participants and other persons entitled to benefits
under the Plan must furnish to the Committee such evidence, data or information
as the Committee considers desirable to carry out the Plan.
13.5 Committee's Decision Final. Any interpretation of the Plan and any
decision on any matter within the discretion of the Committee made by the
Committee shall be binding on all persons. A misstatement or other mistake of
fact shall be corrected when it becomes known, and the Committee shall make such
adjustment on account thereof as it considers equitable and practicable.
13.6 Exercise of Committees' Duties. Notwithstanding any other provisions
of the Plan, the Committees shall discharge their duties hereunder solely in the
interests of the Participants and other persons entitled to benefits under the
Plan, and:
(a) for the exclusive purpose of providing benefits to Participants and
other persons entitled to benefits under the Plan; and
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(b) with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise
of a like character and with like aims.
13.7 Remuneration and Expenses. No remuneration shall be paid from the
Plan to a member of any of the Committees who is an employee of any Employer or
Related Company. Except as otherwise determined by the Committee, the reasonable
expenses of administering the Plan and the fees and expenses incurred in
connection with the collection, administration, management, investment,
protection and distribution of the Plan assets under the Trust shall be paid
directly by the Trust out of Plan assets or, if paid by one or more Employers,
reimbursed by the Trust to the maximum extent permitted by law.
13.8 Indemnification of the Committees. To the extent not reimbursed by
any applicable insurance policy, the Committees, the individual members thereof
and the secretary (if any) of each of the Committees shall be indemnified by the
Employers against any and all liabilities, losses, costs and expenses (including
legal fees and expenses) of whatsoever kind and nature which may be imposed on,
incurred by or asserted against any of them by reason of the performance of the
Committees' functions if the Committees or such members or secretary did not act
dishonestly or in willful violation of the law or regulation under which such
liability, loss, cost or expense arises.
13.9 Resignation or Removal of Committee Member. A Committee member may
resign at any time by giving ten days' advance written notice to the Company,
the Trustee and the other Committee members. The Company may remove a Committee
member by giving advance written notice to him and the other Committee members.
13.10 Appointment of Successor Committee Members. The Company may fill any
vacancy in the membership of the Committee and shall give prompt written notice
thereof to the other Committee members. While there is a vacancy in the
membership of the Committee, the remaining Committee members shall have the same
powers as the full Committee until the vacancy is filled.
SECTION 14
Amendment and Termination
14.1 Amendment. While it is expected that the Plan will be continued,
either the Company or the Committee nevertheless may terminate the Plan or amend
it from time to time, except that no amendment will reduce a Participant's
interest in the Plan to less than an amount equal to the amount he would have
been entitled to receive if he had resigned from the employ of the Employers and
the Related Companies on the day of the amendment, and no amendment will
eliminate an optional form of benefit with respect to a Participant or
Beneficiary except as otherwise permitted by law.
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14.2 Termination. The Plan will terminate as to all of the Employers on
any day specified by the Company upon advance written notice of the termination
given to the Employers. Employees of an Employer shall cease active
participation in the Plan (and will be treated as inactive Participants in
accordance with subsection 2.3) on the first to occur of the following:
(a) the date on which that Employer ceases to be a contributing sponsor
of the Plan, by appropriate action taken by the Company or by such
Employer;
(b) the date that Employer is judicially declared bankrupt or insolvent;
or
(c) the dissolution, merger, consolidation, reorganization or sale of
that Employer, or the sale of all or substantially all of the assets
of an Employer, except that, subject to the provisions of subsection
14.3, with the consent of the Company or the Committee, in any such
event arrangements may be made whereby the Plan will be continued by
any successor to that Employer or any purchaser of all or
substantially all of that Employer's assets, in which case the
successor or purchaser will be substituted for the Employer under
the Plan.
14.3 Merger and Consolidation of the Plan, Transfer of Plan Assets. The
Committee in its discretion may direct the Trustee to transfer all or a portion
of the assets of this Plan to another defined contribution plan of the Employers
or Related Companies which is qualified under section 401(a) of the Code or, in
the event of the sale of stock of an Employer or all or a portion of the assets
of an Employer, to a qualified plan of an employer which is not a Related
Company, or to accept a transfer of assets and liabilities to this Plan from
another defined contribution plan that is qualified under section 401(a) of the
Code. In the case of any such merger, or transfer of assets and liabilities,
provision shall be made so that each affected Participant in the Plan on the
date thereof would receive a benefit immediately after the merger, consolidation
or transfer which is equal to the benefit he would have been entitled to receive
immediately prior to the merger or transfer. The Committee may adopt such
amendment or Supplement to the Plan as may be necessary to preserve the
protected rights that may not be changed or eliminated by reason of such
transfer or merger under section 411 of the Code; pending such amendment or
adoption of such Supplement, the applicable provisions of the merged or
transferee plan describing such section 411 protected rights shall be
incorporated herein by reference.
14.4 Distribution on Termination and Partial Termination. Upon
termination or partial termination of the Plan, all benefits under the Plan
shall continue to be paid in accordance with Sections 10 and 11 as those
sections may be amended from time to time.
14.5 Notice of Amendment, Termination or Partial Termination. Affected
Participants will be notified of an amendment, termination or partial
termination of the Plan as required by law.
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SECTION 15
Change of Control Provisions
15.1 Application. In the event of a Change of Control (as defined in
subsection 15.2), the provisions of this Section 15 shall apply, notwithstanding
any other provision in the Plan to the contrary.
15.2 Definition of Change of Control. For purposes of the Plan, a "Change
of Control" means the happening of any of the following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of Philip Morris Companies Inc.
(the "Parent") (such stock hereinafter referred to as the
"Outstanding Parent Common Stock") or (ii) the combined voting power
of the then outstanding voting securities of the Parent entitled to
vote generally in the election of directors (the "Outstanding Parent
Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Parent, (ii) any acquisition by the
Parent, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Parent or any
corporation controlled by the Parent or (iv) any acquisition by any
corporation pursuant to a transaction described in clauses (i), (ii)
and (iii) of paragraph (c) of this subsection 15.2; or
(b) Individuals who, as of November 1, 1989, constitute the Board of
Directors of the Parent (the "Incumbent Board") cease for any reason
to constitute at least a majority of such Board; provided, however,
that any individual becoming a director subsequent to November 1,
1989 whose election, or nomination for election by the Parent's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Incumbent Board;
or
(c) Approval by the shareholders of the Parent of a reorganization,
merger, share exchange or consolidation (a "Business Combination"),
in each case, unless, following such Business Combination, (i) all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Parent Common
Stock and Outstanding Parent Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly,
more than 80% of, respectively, the then Outstanding shares of
common stock and the
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combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Parent through one or more subsidiaries)
in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities, as the
case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Parent or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common
stock of the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Incumbent Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Parent of (i) a complete
liquidation or dissolution of the Parent or (ii) the sale or other
disposition of all or substantially all of the assets of the Parent,
other than to a corporation, with respect to which following such
sale or other disposition, (A) more than 80% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Parent Common
Stock and Outstanding Parent Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Parent Common Stock and Outstanding
Parent Voting Securities, as the case may be, (B) less than 20% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or
related trust) of the Parent or such corporation), except to the
extent that such Person owned 20% or more of the Outstanding Parent
Common Stock or Outstanding Parent Voting Securities prior to the
sale or disposition and (C) at least a majority of the members of
the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Incumbent Board, providing for
such sale or other disposition of assets of the Parent or were
elected, appointed or nominated by the Incumbent Board.
15.3 Contribution Requirement. Subject to the conditions and limitations
of Section 8 (after taking into account the affect thereon of the last sentence
of this subsection 15.3) and of the next sentence, upon the occurrence of a
Change of Control, for the year in which the Change
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of Control occurs and for each of the two years following the year in which the
Change of Control occurs the "Control Period", each Employer shall make a
"Matching Contribution" to the Plan on behalf of each Participant employed by
such Employer who has made Before-Tax or After-Tax Contributions to the Plan for
that year in an amount equal to the greater of:
(a) $.30 for each $1.00 contributed to the Plan by the Participants for
each year in the Control Period, or
(b) the average rate of the Matching Contributions for the two Plan
Years prior to the Plan Year in which the Change of Control occurs.
In no event shall the sum of the Before-Tax Contributions and any Matching
Contributions made by an Employer for any Plan Year exceed the limitations
imposed by section 404 of the Code on the maximum amount deductible on account
thereof by the Employer for that year. Each Employer's Matching Contributions
for any Plan Year shall be paid to the Trustee, without interest, no later than
the time prescribed by law for filing the Federal corporate income tax return of
Philip Morris Companies Inc., or its successors, as applicable, including any
extensions thereof. The Matching Contributions made on behalf of a Participant
pursuant to this Section 14 shall be allocated to the Participant's Matching
Account.
15.4 Vesting. Upon and after a Change of Control, a Participant's vested
percentage in all his Accounts under the Plan shall be 100%.
15.5 Enforcement Rights; Amendment Restrictions.
(a) In addition to all other rights under the Plan and applicable law,
any individual who shall be a Participant or Beneficiary at the date
on which the Change of Control occurs (the "Control Date") shall
from and after such date have the right to bring an action, either
individually or on behalf of all Participants and Beneficiaries, to
enforce the provisions of this Section 15 by seeking injunctive
relief or damages, or both, and the Company shall be obligated to
pay or reimburse such Participant or Beneficiary who shall prevail,
in whole or in substantial part, for all reasonable expenses,
including attorney's fees, in connection with such action.
(b) Anything in the Plan to the contrary notwithstanding, on and after
the Control Date none of the provisions of this Section 15 shall be
amended unless within sixty days after the date of the action taken
to amend such provisions at least two-thirds of the individuals who
were Participants at the date of such action shall have given their
written approval of such action based on full and complete
information provided to them regarding the actual and potential
effects of such action on them.
15.6 Construction. The foregoing provisions of this Section 15 shall be
construed liberally to the end that its purposes shall be fully implemented.
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SUPPLEMENT A
KRAFT FOODS TIP PLAN
California Vegetable Concentrates Division
This Supplement A to the Kraft Foods TIP Plan sets forth special
provisions that first became effective February 16, 1993 and continue to be
applicable to the Participating Group described below on and after May 12, 1997
and supersedes any provisions of the Plan which are not consistent with this
Supplement A.
1. Participating Group: This Supplement A is applicable to those Participants
in the Plan who were employees of the California Vegetable Concentrates
division of Kraft Food Ingredients Corp. and who became employees of Basic
Vegetable Products, L.P., pursuant to that certain Asset Purchase
Agreement entered into as of February 16, 1993 by and between Basic
Vegetable Products, L.P., and Kraft Food Ingredients Corp.
2. Special Vesting Provisions: On and after February 16, 1993, a Participant
in this Participating Group shall be 100% vested in his Matching Account.
3. Special Withdrawal Provisions:
Notwithstanding any provisions of the Plan to the contrary, the provisions
of Section 10 relating to hardship withdrawals and in-service withdrawals
of After-Tax and Matching Contributions shall continue to apply to a
Participant in the Participating Group for such time as said Participant
remains an employee of Basic Vegetable Products, L.P., or its successors
or affiliates (collectively referred to as the "Successor Employer").
Notwithstanding any provisions of the Plan to the contrary, for purposes
of applying the post-employment termination distribution provisions of
Section 11 of the Plan to a Participant in the Participating Group, such
Participant's employment shall not be considered to have terminated
(whether on account of retirement, permanent and total disability, or for
any other reason) until such time as said Participant has terminated
employment with the Successor Employer.
A-1
46
SUPPLEMENT B
KRAFT FOODS TIP PLAN
Naperville Hourly Employees
This Supplement B to Kraft Foods TIP Plan sets forth special provisions
that first became effective January 4, 1993 and that continue to be applicable
on and after May 12, 1997 with respect to the Participating Group described
below and supersedes any provisions of the Plan which are not consistent with
this Supplement B.
1. Participating Group: This Supplement B is applicable to hourly employees
covered by a collective bargaining contract at the Kraft Foods facility
(formerly a Nabisco cereal plant) in Naperville, Illinois.
2. Special Service Provisions: For purposes of Section 3 and subsection 9.1
of the Plan, service with Nabisco Brands, Inc. and those companies treated
as a single employer under sections 414(b) and (c) of the Code prior to
January 4, 1993, shall be treated as service under the Plan for this
Participating Group.
3. Special Contribution Provisions. The following provisions shall apply in
lieu of subsections 4.1, 4.2, 4.3, 4.6 and 5.1 of the Plan:
(a) Before-Tax Contributions. Subject to the limitations set forth in
paragraph (c) below and subsection 4.7 and Section 8 of the Plan,
and such additional rules as the Committee may establish on a
uniform and nondiscriminatory basis, for any payroll period a
Participant in this Participating Group may elect to have his salary
or wages from his Employer reduced by a whole percentage, and a
corresponding amount contributed on his behalf to the Plan by his
Employer as a "Before-Tax Contribution", which amount shall not be
less than 1 percent nor more than 16 percent of his Eligible
Compensation (as defined in paragraph (d) below), for that payroll
period. Any election made pursuant to this paragraph (a) shall be
effective as soon as practicable after the Participant has made his
election in accordance with applicable Access System procedures.
(b) After-Tax Contributions. Subject to the limitations set forth in
paragraph (c) below and subsection 4.7 and Section 8 of the Plan,
and such additional rules as the Committee may establish on a
uniform and nondiscriminatory basis, for any payroll period a
Participant in this Participating Group may elect to make "After-Tax
Contributions" to the Plan through payroll deduction in a whole
percentage that is not less than 1 percent nor more than 16 percent
of his Eligible Compensation (as defined in paragraph (d) below) for
that payroll period. Any election made pursuant to this paragraph
(b) shall be effective as soon as practicable after the Participant
has made his election in accordance with applicable Access System
procedures.
B-1
47
(c) Total Before-Tax and After-Tax Contributions. Notwithstanding the
foregoing provisions of this paragraph 4 of Supplement B to the
Kraft Foods TIP Plan, for any payroll period the Before-Tax
Contributions made on behalf of a Participant in this Participating
Group and After-Tax Contributions made by such Participant may not
together exceed 16 percent of the Participant's Eligible
Compensation (as defined in paragraph (d) below) for such payroll
period.
(d) Eligible Compensation. With respect to Participants in this
Participating Group, "Eligible Compensation" means wages, overtime,
shift differential pay, vacation pay, sick pay, holiday pay and
other forms of cash compensation that are includible on the
Participant's Federal income tax form W-2 with respect to the
Participant's periods of active participation in the Plan, plus any
amounts contributed by an Employer pursuant to a salary reduction
agreement and which is not includable in gross income under sections
125, 402(e)(3), 402(h) or 403(b) of the Code, and excluding any
bonus payments.
(e) Matching Contributions. Subject to the conditions and limitations of
subsection 4.7 and Section 8 of the Plan, for each payroll period
during a Plan Year an Employer shall contribute to the Plan on
behalf of each Participant in this Participating Group employed by
such Employer a Matching Contribution amount equal to 25 percent of
the Before-Tax and After-Tax Contributions made by and on behalf of
the Participant that do not exceed 6 percent of such Participant's
Eligible Compensation for such payroll period. Match-eligible
Before-Tax and After-Tax Contributions from the first 6 percent of a
Participant's Eligible Compensation are sometimes referred to as
"Basic Contributions", and unmatched contributions in excess of the
first 6 percent of Eligible Compensation are sometimes referred to
as "Supplemental Contributions".
4. Special Accounting Provisions. The After-Tax Account maintained under the
Plan for each Participant in the Participating Group shall include the
after-tax contribution balances for such Participant, if any, that were
transferred to the Plan from the Nabisco Brands Employee Savings Plan. The
Matching Account maintained under the Plan for each Participant in the
Participating Group shall include the company contribution account
balances for such Participant, if any, that were transferred to the Plan
from the Nabisco Brands Employee Savings Plan, and all of such transferred
balances shall be 100% vested.
5. Special Vesting Provisions. In addition to the vesting provisions of
subsections 9.1 and 9.2 of the Plan, each individual who is a Participant
in this Participating Group on March 31, 1997 will have a fully vested,
nonforfeitable interest in his Matching Account upon the completion of 24
months of employment after his initial enrollment date in the Plan.
6. Special In-Service Withdrawal Provisions. The last sentence of subsection
10.5 of the Plan shall not apply to the Participants in this Participating
Group and accordingly no minimum withdrawal amount shall apply to such
Participants.
B-2
48
SUPPLEMENT C
KRAFT FOODS TIP PLAN
Kraft Foods Inc. Common Stock
This Supplement C has an effective date of October 3, 2001 (or such other
date as approved by the Vice President Benefits of the Company). All references
in the Plan to "Kraft Foods, Inc." or the "Company" shall be a reference to
"Kraft Foods North America, Inc." In addition, Section 6.1 of the Plan is
amended and restated to read as follows:
6.1 Investment Funds and Loan Account. The Investment Committee shall
establish and cause the Trustee to maintain one or more "Investment Funds" for
the investment of Participants' Accounts, including one or more Investment Funds
that invest in the common stock of a corporation that is a member of the
controlled group of corporations (as defined under Section 414(b) of the Code)
that includes the Company. The Investment Committee shall also cause the Trustee
to maintain a "Loan Account" to reflect any loans to Participants pursuant to
subsection 10.1. The Investment Committee in its discretion may change the
Investment Strategy of any Investment Fund without prior notice to Participants.
C-1