<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 11-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
/x/ SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
/ / SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-8940
-------------------
Philip Morris Deferred Profit-Sharing Plan
(Full title of the plan)
PHILIP MORRIS COMPANIES INC.
120 Park Avenue
New York, New York 10017
(Name of issuer of the securities held pursuant to the plan
and address of its principal executive office.)
===============================================================================
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
ANNUAL REPORT ON FORM 11-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page (s)
--------
<S> <C>
Report of Independent Accountants.............................. 3
Financial Statements:
Statements of Financial Condition as of December 31,
1993 and 1992............................................... 4-5
Statements of Income and Changes in Plan Equity for
the years ended December 31, 1993, 1992 and 1991............ 6-8
Notes to Financial Statements................................ 9-20
Signatures..................................................... 21
Schedules:
Schedule I - Investments as of December 31, 1993............. S-1-9
</TABLE>
Other schedules are omitted because the information required
is contained in the financial statements.
Exhibits:
23. Consent of Independent Accountants.
99. Philip Morris Deferred Profit-Sharing Plan, as
amended, effective January 1, 1994.
-2-
<PAGE>
REPORT of INDEPENDENT ACCOUNTANTS
To: The Corporate Employee Plans Investment
Committee of Philip Morris Companies Inc.,
the Corporate Employee Benefit Committee of
Philip Morris Companies Inc., the Philip Morris
Management Committee for Employee Benefits,
the Administrator and all Participants as a group
(but not individually) of the Philip Morris
Deferred Profit-Sharing Plan:
We have audited the accompanying statements of financial condition of the
Philip Morris Deferred Profit-Sharing Plan (the "Plan") as of December 31, 1993
and 1992, and the related statements of income and changes in plan equity for
each of the three years in the period ended December 31, 1993, and the schedule
of investments as of December 31, 1993. These financial statements and the
financial statement schedule are the responsibility of the fiduciaries of the
Plan appointed by Philip Morris Companies Inc. (or its delegate). Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Plan as of December 31,
1993 and 1992, and the income and changes in plan equity for each of the three
years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND
New York, New York
March 18, 1994
-3-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT of FINANCIAL CONDITION
as of December 31, 1993
(in thousands of dollars)
----------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government Participants'
Index Income Obligations Philip Morris Loan
Fund Fund Fund Stock Fund Account Total
-------- -------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $407,374 $538,650 $33,027 $449,211 $65,664 $1,493,926
Employer contributions
receivable 33,365 33,554 6,745 26,097 99,761
Employee contributions
receivable 545 580 72 559 1,756
Interfund receivables
(payables) (1,291) 4,671 (1,066) (2,314) -
Participants' loan
repayments receivables
(payables) 676 690 51 666 (2,083) -
-------- -------- ------- -------- ------- ----------
Total assets 440,669 578,145 38,829 474,219 63,581 1,595,443
-------- -------- ------- -------- ------- ----------
LIABILITIES:
Distributions and
withdrawals payable 6,585 11,509 293 9,637 1,572 29,596
Undistributed
participants' loans 445 319 40 229 (1,033) -
-------- -------- ------- -------- ------- ----------
Total liabilities 7,030 11,828 333 9,866 539 29,596
-------- -------- ------- -------- ------- ----------
Plan equity $433,639 $566,317 $38,496 $464,353 $63,042 $1,565,847
======== ======== ======= ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT of FINANCIAL CONDITION
as of December 31, 1992
(in thousands of dollars)
----------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government Participants'
Index Income Obligations Philip Morris Loan
Fund Fund Fund Stock Fund Account Total
-------- -------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $371,067 $448,091 $29,311 $703,652 $61,856 $1,613,977
Employer contributions
receivable 33,337 31,038 6,318 34,053 104,746
Employee contributions
receivable 526 545 67 773 1,911
Interfund receivables
(payables) 1,936 6,853 179 (8,968) -
Participants' loan
repayments receivables
(payables) 549 575 34 700 (1,858) -
-------- -------- ------- -------- ------- ----------
Total assets 407,415 487,102 35,909 730,210 59,998 1,720,634
-------- -------- ------- -------- ------- ----------
LIABILITIES:
Distributions and
withdrawals payable 1,195 3,012 67 2,925 171 7,370
Undistributed
participants' loans 398 308 8 388 (1,102) -
-------- -------- ------- -------- ------- ----------
Total liabilities 1,593 3,320 75 3,313 (931) 7,370
-------- -------- ------- -------- ------- ----------
Plan equity $405,822 $483,782 $35,834 $726,897 $60,929 $1,713,264
======== ======== ======= ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1993
(in thousands of dollars)
----------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government Participants'
Index Income Obligations Philip Morris Loan
Fund Fund Fund Stock Fund Account Total
-------- -------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 33,685 $ 34,241 $ 6,107 $ 25,757 $ 99,790
Employee contributions 7,048 7,610 1,031 8,145 23,834
Allocated share of Trust
investment activities:
Interest income 4 38,301 1,380 90 $ 4,388 44,163
Dividend income 1 22,644 22,645
Net (depreciation)
appreciation in
fair value of
investments 39,463 25 (198,100) (158,612)
-------- -------- ------- --------- ------- ----------
39,468 38,301 1,405 (175,366) 4,388 (91,804)
-------- -------- ------- --------- ------- ----------
Total additions 80,201 80,152 8,543 (141,464) 4,388 31,820
-------- -------- ------- --------- ------- ----------
DEDUCTIONS:
Distributions and
withdrawals (40,290) (75,258) (4,097) (53,254) (6,409) (179,308)
General and administrative
expenses (182) (327) (64) (161) (734)
-------- -------- ------- --------- ------- ----------
Total deductions (40,472) (75,585) (4,161) (53,415) (6,409) (180,042)
-------- -------- ------- --------- ------- ----------
Net transfers among funds (9,702) 79,015 (1,351) (67,962) -
Net transfers between plans 271 224 5 247 58 805
Participants' loans (9,913) (9,022) (910) (7,700) 27,545 -
Participants' loan repayments 7,432 7,751 536 7,750 (23,469) -
-------- -------- ------- --------- ------- ----------
Net (deductions)
additions 27,817 82,535 2,662 (262,544) 2,113 (147,417)
PLAN EQUITY:
Beginning of year 405,822 483,782 35,834 726,897 60,929 1,713,264
-------- -------- ------- --------- ------- ----------
End of year $433,639 $566,317 $38,496 $ 464,353 $63,042 $1,565,847
======== ======== ======= ========= ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1992
(in thousands of dollars)
----------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government Participants'
Index Income Obligations Philip Morris Loan
Fund Fund Fund Stock Fund Account Total
-------- -------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 33,372 $ 31,137 $ 6,270 $ 34,060 $ 104,839
Employee contributions 7,184 7,127 771 9,354 24,436
Allocated share of Trust
investment activities:
Interest income 13 33,723 1,480 221 $ 4,406 39,843
Dividend income 2 21,161 21,163
Net appreciation
(depreciation) in
fair value of
investments 27,628 6 (24,722) 2,912
-------- -------- ------- -------- ------- ----------
27,643 33,723 1,486 (3,340) 4,406 63,918
-------- -------- ------- -------- ------- ----------
Total additions 68,199 71,987 8,527 40,074 4,406 193,193
-------- -------- ------- -------- ------- ----------
DEDUCTIONS:
Distributions and
withdrawals (14,889) (21,923) (1,253) (23,355) (1,902) (63,322)
General and
administrative expenses (169) (324) (58) (158) (709)
-------- -------- ------- -------- ------- ----------
Total deductions (15,058) (22,247) (1,311) (23,513) (1,902) (64,031)
-------- -------- ------- -------- ------- ----------
Net transfers among funds (42,677) 4,135 (299) 38,841 -
Net transfers between plans (8) (2) (9) (6) (25)
Participants' loans (10,051) (8,799) (464) (11,427) 30,741 -
Participants' loan
repayments 6,876 6,447 385 8,129 (21,837) -
-------- -------- ------- -------- ------- ----------
Net additions 7,281 51,521 6,838 52,095 11,402 129,137
PLAN EQUITY:
Beginning of year 398,541 432,261 28,996 674,802 49,527 1,584,127
-------- -------- ------- -------- ------- ----------
End of year $405,822 $483,782 $35,834 $726,897 $60,929 $1,713,264
======== ======== ======= ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1991
(in thousands of dollars)
----------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government Participants'
Index Income Obligations Philip Morris Loan
Fund Fund Fund Stock Fund Account Total
-------- -------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 36,523 $ 31,544 $ 4,484 $ 29,821 $ 102,372
Employee contributions 7,446 8,309 604 6,253 22,612
Allocated share of Trust
investment activities:
Interest income 15 33,434 1,156 187 $ 3,877 38,669
Dividend income 62 15,056 15,118
Net appreciation in
fair value of
investments 81,023 262 219,283 300,568
-------- -------- ------- -------- ------- ----------
81,100 33,434 1,418 234,526 3,877 354,355
-------- -------- ------- -------- ------- ----------
Total additions 125,069 73,287 6,506 270,600 3,877 479,339
-------- -------- ------- -------- ------- ----------
DEDUCTIONS:
Distributions and
withdrawals (9,859) (15,984) (558) (15,653) (1,149) (43,203)
General and administrative
expenses (150) (321) (52) (147) (670)
-------- -------- ------- -------- ------- ----------
Total deductions (10,009) (16,305) (610) (15,800) (1,149) (43,873)
-------- -------- ------- -------- ------- ----------
Net transfers among funds (3,627) (14,275) 3,192 14,710 -
Net transfers between plans 75 24 166 12 277
Participants' loans (7,908) (8,467) (527) (6,742) 23,644 -
Participants' loan repayments 6,476 6,576 339 4,654 (18,045) -
-------- -------- ------- -------- ------- ----------
Net additions 110,076 40,840 8,900 267,588 8,339 435,743
PLAN EQUITY:
Beginning of year 288,465 391,421 20,096 407,214 41,188 1,148,384
-------- -------- ------- -------- ------- ----------
End of year $398,541 $432,261 $28,996 $674,802 $49,527 $1,584,127
======== ======== ======= ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
1. General Description of the Plan:
The Philip Morris Deferred Profit-Sharing Plan (the "Plan") is a defined
contribution plan maintained for the benefit of eligible non-union salaried
and hourly employees of Philip Morris Companies Inc., (the "Company"), and
certain of its domestic subsidiaries, including Philip Morris Incorporated
and certain of its subsidiaries ("Philip Morris"), Miller Brewing Company and
certain of its subsidiaries ("Miller"), Philip Morris Capital Corporation,
Philip Morris Management Corp. and certain headquarters employees of Philip
Morris International Inc., (collectively, the "Participating Companies").
The Plan is designed to provide eligible employees with an opportunity to
share in the profits of their respective Participating Companies and to
invest certain of their funds in a tax-advantaged manner. Employees of Kraft
General Foods, Inc. and its subsidiaries are not eligible to participate in
the Plan.
Eligible employees generally may make before-tax and after-tax contributions
beginning on or after the January 1 following their respective dates of hire.
Eligible employees who complete twenty-four months of accredited service are
eligible to share in their Participating Company's contribution (the
"Contribution") as described in Note 3. The provisions of the Plan are
detailed in the official Plan document which legally governs the operation of
the Plan.
The administration of the Plan has generally been delegated to the Corporate
Employee Benefit Committee of the Company (the "Committee"), a Management
Committee for Employee Benefits comprised of certain members of the Committee
and the Senior Vice President, Human Resources and Administration of the
Company (the "Administrator"). The Corporate Employee Plans Investment
Committee of Philip Morris Companies Inc. (the "Investment Committee") (the
Committee, the Administrator and the Investment Committee, collectively the
"Fiduciaries") is responsible for the selection of the investment options in
which participants invest their assets in the Plan and monitors the
performance of these investment options.
Assets of the Plan are co-invested with the assets of the Philip Morris
Incorporated Deferred Profit-Sharing Plan (the "PMI Plan") and the assets of
the Philip Morris Incorporated Deferred Profit-Sharing Plan for Craft
Employees (the "PMI Craft Plan") in a commingled investment fund known as the
Philip Morris Deferred Profit-Sharing Trust Fund (the "Trust") (see Note 7).
-9-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Participants have the option of investing their Plan Accounts (see Note 4)
in 10% increments in four funds:
EQUITY INDEX FUND - This fund is invested primarily in an index fund of
stocks on a weighted average basis in approximately the same proportion
as the Standard & Poor's Composite Index of 500 Stocks ("S&P 500").
INTEREST INCOME FUND - This fund consists primarily of investment
contracts entered into by Bankers Trust Company (the "Trustee") with
financial institutions, each of which agrees to repay in full the
amounts invested with the institution, plus interest. Beginning
January 1, 1993, the assets of the Interest Income Fund have also been
invested in pools of mortgage-backed and asset-backed securities,
corporate bonds, and obligations of the United States government and
its agencies. As an integral part of the purchase of each pool of these
investments for the Interest Income Fund, a financial institution
agrees to protect the pool to the extent its market value fluctuates,
but not in the event of a default of any security in the pool.
U.S. GOVERNMENT OBLIGATIONS FUND - This fund includes primarily direct
obligations of the U.S. Government or its agencies, obligations
guaranteed by the U.S. Government or its agencies, and fully insured
bank deposits.
PHILIP MORRIS STOCK FUND - This fund is invested in the common stock,
$1 par value, of the Company (the "Common Stock") and short-term
temporary investments.
None of the foregoing funds guarantees a return to the participant.
Participants may change their options up to three times during each
calendar year.
Any Contribution and participant contributions made to an Account
established prior to January 1, 1992 for which no investment direction was
given by the participant was invested in the Equity Index Fund. Any
Contribution and participant contributions made to an Account established
on and after January 1, 1992 for which no investment direction has been
given are invested in the U.S. Government Obligations Fund.
Each participant may vote all the shares of Common Stock held in his or her
Accounts and invested in the Philip Morris Stock Fund. The Trustee will
vote full and fractional shares of the Common Stock in accordance with each
individual participant's instruction. The Trustee votes those shares of
Common Stock for which no or inadequate voting instructions have been
received in the same proportions as the shares for which instructions have
been received.
-10-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
At December 31, 1993 and 1992, there were 13,817 and 14,515 participants,
respectively, some of whom elected to invest in more than one fund. Set
forth below is the number of participants investing in each fund.
<TABLE>
<CAPTION>
December 31,
--------------
1993 1992
------ ------
<S> <C> <C>
Equity Index Fund 9,181 9,659
Interest Income Fund 8,505 8,490
U.S. Government Obligations Fund 2,179 1,881
Philip Morris Stock Fund 11,157 12,737
</TABLE>
Each participant is at all times fully vested in the balance of all of his
or her Accounts, which includes a Company Account and may include a Personal
Before-Tax, Personal After-Tax, Rollover and PAYSOP Accounts.
2. Summary of Significant Accounting Policies:
Valuation of Trust Investments:
Investments in common trust funds of the General Employee Benefit Common
Trust of Bankers Trust Company ("GEBT") are valued on the basis of the
relative interest of each participating investor (including each
participant) in the fair value of the underlying assets of each of the
respective GEBT common trust funds.
Investment contracts and the pools of mortgaged-backed and asset-backed
securities and other investments held in the Interest Income Fund are
recorded at their contract values, which represent contributions and
reinvested income, less any withdrawals plus accrued interest.
Securities listed on an exchange are valued at the closing price on the
last business day of the year; listed securities for which no sale was
reported on that date are recorded at the last reported bid price.
Securities that are not listed on an exchange are generally traded in
active markets and valued by the Trustee from quoted market prices.
Short-term temporary investments are generally carried at cost, which
approximates fair value.
-11-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Investment Transactions and Investment Income of the Trust:
Investment transactions are accounted for on the dates purchases or sales
are executed. Realized gains and losses are computed on the basis of
average cost of investments sold. Dividend income is recorded on the ex-
dividend date; interest income is recorded as earned on an accrual basis.
In accordance with the policy of stating investments at fair value, the
net appreciation (depreciation) in the fair value of investments reflects
both realized gains or losses and the change in the unrealized
appreciation of investments held at year-end (see Note 8).
3. Contributions:
The Contribution for the year is accrued by the Plan based upon the amount
to be funded each year in accordance with the defined contribution formula
noted below. Participants' contributions are recorded in the period in which
they are withheld by the Participating Companies.
For the fiscal year ended December 31, 1993 and for each of the two
preceding years, the Contribution was an amount equal to the lesser of (1)
three percent of consolidated earnings of the Company and its subsidiaries
before income taxes and cumulative effect of any accounting change and
provisions for deferred profit-sharing and incentive compensation plans, less
the amounts allocated for participants in the PMI Plan and the PMI Craft Plan
and (2) fifteen percent of the aggregate participant compensation as defined
by the Plan.
Beginning in the fiscal year ending December 31, 1994, the Contribution on
behalf of eligible employees of Philip Morris who have met the twenty-four
month service requirement will be an amount equal to the lesser of (1) three
percent of Operating Profit (defined below), less the amounts allocated for
participants in the PMI Plan and the PMI Craft Plan and (2) fifteen percent
of the aggregate participant compensation for such year of the participants
employed by Philip Morris among whom the Contribution is to be allocated.
The Contribution on behalf of eligible employees of Miller who have met the
twenty-four month service requirement is an amount equal to the lesser of (1)
three percent of Operating Profit, and (2) fifteen percent of the aggregate
participant compensation for such year of the participants employed by Miller
among whom the Contribution is to be allocated.
The Contribution by Philip Morris, expressed as a percentage of aggregate
participant compensation, is allocated ratably among participants (the
"Philip Morris Contribution Percentage") according to their individual
compensation. The Contribution by Miller, expressed as a percentage of
aggregate participant compensation, is allocated ratably among participants
(the "Miller Contribution Percentage") according to their individual
compensation.
-12-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Beginning in the fiscal year ending December 31, 1994, the Contribution on
behalf of eligible employees of any other Participating Company is the
greater of (1) the Philip Morris Contribution Percentage, or (2) the Miller
Contribution Percentage, multiplied in either case by aggregate participant
compensation for such year of the participants of these other Participating
Companies. The aggregate Contributions to the Plan and the contributions to
the PMI Plan and the PMI Craft Plan may not be more than three percent of
consolidated earnings of the Company and its subsidiaries before income taxes
and cumulative effect of any accounting change and provisions for deferred
profit-sharing and incentive compensation plans.
Operating Profit is defined as the earnings of Philip Morris or Miller, as
the case may be, before cumulative effect of any accounting changes,
discontinued operations and extraordinary items, interest and other debt
expense, income taxes, amortization of goodwill, minority interest,
unallocated corporate expenses, the amount of any deduction used in computing
such earnings for the Contribution to the Plan and the contributions to the
PMI Plan and the PMI Craft Plan and contributions to any incentive
compensation plan.
However, due to limitations under the Internal Revenue Code of 1986, as
amended (the "Code"), certain amounts for highly paid individuals are not
contributed to the Trust but are instead recorded as liabilities of the
Participating Companies.
No contribution is required from any participant under the Plan.
Participants may make contributions on a before-tax and after-tax basis to
the Plan. If a participant has not made the maximum after-tax contribution,
he or she may, subject to certain statutory limits, make a lump sum
contribution which may not exceed the maximum amount of personal after-tax
contributions permitted for all calendar years after January 1, 1971 in which
he or she was a participant, less the aggregate of all of such contributions
previously made. The percentage of compensation available for these
contributions varies from year-to-year in order that the aggregate
contributions actually made by participants do not cause the Plan to violate
limitations on such contributions set forth in the Code. The Code also
imposes a dollar limitation on the amount of before-tax contributions for a
calendar year. For 1993, a participant's before-tax contribution was limited
to $8,994; for 1994, each participant's before-tax contribution will be
limited to $9,240, with a limitation in each year of eight percent of
compensation on the total amount of before-tax and after-tax contributions.
While the Participating Companies have not expressed any intent to
discontinue making the Contribution, they are free to do so at any time. The
Contribution and participant contributions are subject to specified
limitations as described in the Code and the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
-13-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
The Plan provides, in the event of a Change of Control (as defined in the
Plan) of the Company, for a Contribution for the year in which the Change of
Control occurs and for two years thereafter at least equal to the lesser of
(a) the percentage of participants' compensation that was contributed to the
Plan for the year prior to the year in which the Change of Control occurs and
(b) ten percent of the participants' applicable annual compensation.
4. Valuation of Participant Accounts:
The Trustee maintains Accounts for each participant to reflect the source
and the participant's share of the funds invested in the Trust:
Account Source
------- ------
Company Account Contributions
Personal Before-Tax Account Before-tax contributions
Personal After-Tax Account After-tax contributions
Rollover Account Amounts transferred, directly or indirectly,
from another plan qualified under
Section 401(a) of the Code
PAYSOP Account The account balance transferred from the
Philip Morris Employee Stock Ownership
Plan to the Plan
Loan Account Outstanding loans obtained from the Plan
At the end of each month, the Trustee determines the current fair value of
each fund in the Trust. The fair value of each participant's share in the
Trust is determined with respect to their Company, Personal Before-Tax,
Personal After-Tax, Rollover and PAYSOP Accounts on the basis of their
proportionate share in each fund.
5. Withdrawals and Distributions:
Participants may make withdrawals against their Company, Personal Before-
Tax, Personal After-Tax, Rollover and PAYSOP Accounts in accordance with the
provisions outlined in the Plan.
All withdrawals by participants are subject to approval of the Committee
(or other administrator of the Plan acting pursuant to the Committee's
delegated authority) and will not be permitted if they would have the effect
of disqualifying the Plan and the related Trust from exemption from taxation.
-14-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars)
(Continued)
Distributions are made only in the event that a person ceases to be a
participant. Upon termination of employment, including retirement, a
participant has several options available, as described in the Plan, with
respect to his or her Company, Personal Before-Tax, Personal After-Tax,
Rollover and PAYSOP Accounts. Normally, distributions are made one month
after such termination.
In the event the Plan is terminated, distributions will be made in
accordance with the current value of participants' Accounts under the
direction of the Committee and in accordance with the Code.
6. Participants' Loans:
The loan program permits participants to borrow from their Company,
Personal Before-Tax, Personal After-Tax, Rollover and PAYSOP Accounts under
the Plan in accordance with the provisions outlined in the Plan.
A participant's Loan Account equals the principal amount of his or her
loans outstanding. The principal amount of loan repayments reduce the Loan
Account and are added back to the participant's Accounts originally used as
the source of the loan. The repaid amount (including interest) is reinvested
in the funds according to the participant's current investment authorization.
Participants' loans are carried at the original principal amount less
principal repayments. Participants' loan repayments receivable represent
amounts withheld by the Companies from participants' compensation and not yet
remitted to the Plan. Amounts to be disbursed under employee loan agreements
are recorded as undistributed participants' loans as of the loan agreement
date.
7. Investments Held by the Trust:
In 1993 and 1992, $805 and ($25) were transferred, respectively, between
the Plan and the PMI Plan and the PMI Craft Plan as a result of employees
being transferred between hourly and salaried status.
-15-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars)
(Continued)
The Plan's allocated share of the Trust's net assets and investment
activities is based upon the total of each individual participant's share of
the Trust. The Plan's allocated share of the Trust and its allocated share
of the net assets of each fund in the Trust at December 31, 1993 and 1992
was:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Trust 68% 69%
Equity Index Fund 67% 65%
Interest Income Fund 65% 66%
U.S. Government Obligations Fund 49% 58%
Philip Morris Stock Fund 76% 76%
Participants' Loan Account 61% 60%
</TABLE>
The Plan's allocated share of the Trust's investment activities for the
years ended December 31, 1993, 1992 and 1991 was 87%, 63% and 74%,
respectively.
Taxes and fees incurred by the Trust and certain costs of administering the
Plan and Trust are paid by the Trust. Other expenses, including expenses for
legal services, have been paid by the Participating Companies, unless the
Participating Companies direct that all or a portion of such expenses be
borne by the Trust. Effective January 1, 1993, most payments to third
parties for expenses in connection with the administration of the Plan are
paid by the Trust.
Investments that represented five percent or more of total Trust assets as
of December 31, 1993 and 1992 were:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Philip Morris Stock Fund
Common Stock $583,717 $918,694
GEBT Equity Index Fund $611,007 $567,535
Massachusetts Mutual Life Insurance Co. $114,812 -
</TABLE>
The GEBT Equity Index Fund currently includes the Common Stock.
-16-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars)
(Continued)
At December 31, 1993 and 1992 the financial position of the Trust was:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Assets:
Investments at fair value:
Equity Index Fund:
GEBT Equity Index Fund
(cost $378,818 and $361,585) $ 611,007 $ 567,535
Short-term temporary investments
(cost approximates fair value) 1,632 27
Philip Morris Stock Fund:
Common stock
(cost $391,987 and $424,157) 583,717 918,694
Short-term temporary investments
(cost approximates fair value) 1,012 114
Interest Income Fund:
Investment contracts
(cost approximates fair value) 814,023 652,575
Short-term temporary investments
(cost approximates fair value) 11,879 29,692
U.S. Government Obligations Fund:
Federal agency obligations
(cost $12,240 and $16,607) 12,290 16,746
Government securities
(cost $40,047 and $25,141) 40,050 25,556
Corporate obligations
(cost $1,636) 1,660 -
Short-term temporary investments
(cost approximates fair value) 13,240 7,700
Participants' Loan Account:
Loans to participants 106,306 101,611
---------- ----------
Total investments 2,196,816 2,320,250
Receivables:
Interest income 1,071 1,033
Dividend income 6,898 7,773
---------- ----------
Total assets 2,204,785 2,329,056
Liabilities:
Other payables 363 22
---------- ----------
Net assets $2,204,422 $2,329,034
========== ==========
</TABLE>
-17-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars, except per unit data)
(Continued)
The changes in the Trust net assets for the years ended December 31, 1993,
1992 and 1991 were:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Receipts from constituent plans:
Employer contributions $ 169,173 $ 164,444 $ 160,507
Employee contributions 30,289 31,496 29,178
Investment activities:
Interest 60,694 54,772 53,305
Dividends 30,052 27,537 18,776
Interest on participant loans 7,199 7,586 7,109
---------- ---------- ----------
97,945 89,895 79,190
Net (depreciation) appreciation
in fair value of investments (203,526) 11,303 399,096
---------- ---------- ----------
Net investment activities (105,581) 101,198 478,286
Deductions:
Distributions and withdrawals (217,387) (82,158) (62,645)
General and administrative
expenses (1,106) (1,060) (982)
---------- ---------- ----------
(Decrease) increase in Trust net assets (124,612) 213,920 604,344
Net assets:
Beginning of year 2,329,034 2,115,114 1,510,770
---------- ---------- ----------
End of year $2,204,422 $2,329,034 $2,115,114
========== ========== ==========
</TABLE>
The number of employee participation units and the net asset value per unit
for the funds at December 31, 1993 and 1992 were:
<TABLE>
<CAPTION>
U.S.
Equity Interest Government Participants'
Index Income Obligations Philip Morris Loan
Fund Fund Fund Stock Fund Account Total
-------- -------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1993:
Net assets $612,574 $825,882 $67,656 $591,415 $106,895 $2,204,422
Number of
participation units 146,575 293,146 29,406 175,318
Net asset value per
unit $4.1793 $2.8173 $2.3008 $3.3734
1992:
Net assets $567,525 $682,325 $50,320 $926,599 $102,265 $2,329,034
Number of
participation units 152,461 265,608 23,516 209,831
Net asset value per
unit $3.7224 $2.5689 $2.1398 $4.4159
</TABLE>
-18-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars)
(Continued)
8. Net (Depreciation) Appreciation in Fair Value of Trust Investments:
The realized gains and losses on disposals and changes in unrealized
appreciation of investments in the Trust for the years ended December 31,
1993, 1992 and 1991 were:
<TABLE>
<CAPTION>
U.S.
Equity Government
Index Obligations Philip Morris
Fund Fund Stock Fund Total
-------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
1993
- ----
Realized gains:
Proceeds $120,081 $465,701 $256,282 $842,064
Cost 87,110 465,217 216,219 768,546
-------- -------- -------- --------
Net realized gains 32,971 484 40,063 73,518
-------- -------- -------- --------
Unrealized appreciation:
Beginning of year 205,950 554 494,536 701,040
End of year 232,189 78 191,729 423,996
-------- -------- -------- --------
(Decrease) increase 26,239 (476) (302,807) (277,044)
-------- -------- -------- --------
Net (depreciation)
appreciation in fair
value of investments $ 59,210 $ 8 ($262,744) ($203,526)
======== ======== ======== ========
1992
- ----
Realized gains:
Proceeds $169,470 $ 97,959 $232,729 $500,158
Cost 141,824 97,889 216,234 455,947
-------- -------- -------- --------
Net realized gains 27,646 70 16,495 44,211
-------- -------- -------- --------
Unrealized appreciation:
Beginning of year 191,418 433 542,097 733,948
End of year 205,950 554 494,536 701,040
-------- -------- -------- --------
(Decrease) increase 14,532 121 (47,561) (32,908)
-------- -------- -------- --------
Net appreciation
(depreciation) in fair
value of investments $ 42,178 $ 191 ($ 31,066) $ 11,303
======== ======== ======== ========
</TABLE>
-19-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars)
(Concluded)
<TABLE>
<CAPTION>
U.S.
Equity Government
Index Obligations Philip Morris
Fund Fund Stock Fund Total
-------- ------------ ------------- --------
<S> <C> <C> <C> <C>
1991
- ----
Realized gains (losses):
Proceeds $132,878 $207,260 $ 91,958 $432,096
Cost 121,248 207,265 87,070 415,583
-------- -------- -------- --------
Net realized gains
(losses) 11,630 (5) 4,888 16,513
-------- -------- -------- --------
Unrealized appreciation:
Beginning of year 74,298 109 276,958 351,365
End of year 191,418 433 542,097 733,948
-------- -------- -------- --------
Increase 117,120 324 265,139 382,583
-------- -------- -------- --------
Net appreciation
in fair value of
investments $128,750 $ 319 $270,027 $399,096
======== ======== ======== ========
</TABLE>
9. Tax Status:
The U.S. Treasury Department has determined that the Plan, as amended and
in effect as of January 1, 1988, constitutes a qualified plan under Section
401(a) of the Code and the related Trust is, therefore, exempt from Federal
income taxes under the provisions of Section 501(a) of the Code. The Plan has
been amended several times since that date. These amendments have been
drafted to comply with the provisions of the Code applicable to qualified
plans. The Fiduciaries believe that the Plan, as so amended, continues to
comply with the applicable provisions of the Code and that the Plan continues
to be administered in accordance with the applicable provisions of the Code.
Participants will not be subject to income tax on the Contribution and
before-tax contributions made on their behalf by the Participating Companies,
nor on earnings credited to their Accounts until withdrawn or distributed.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporate Employee Benefit Committee of Philip Morris Companies Inc., having
administrative responsibility of the Plan, has duly caused this annual report to
be signed by the undersigned thereunto duly authorized.
PHILIP MORRIS DEFERRED
PROFIT-SHARING PLAN
(Name of Plan)
By /s/ JOHN J. TUCKER
------------------------------------
John J. Tucker, Chairman,
Corporate Employee Benefit Committee
of Philip Morris Companies Inc.
Date: April 12, 1994
-21-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ------------ ------------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ------------ ------------
<S> <C> <C> <C>
EQUITY INDEX FUND -- 27.9%
GEBT Equity Index Fund -- 27.8% 618,021 $378,818,123 $611,006,755
Short-Term Investments -- 0.1%
GEBT Short-Term Investment Fund 1,631,940 1,631,940 1,631,940
------------ ------------
Total Equity Index Fund 380,450,063 612,638,695
------------ ------------
PHILIP MORRIS STOCK FUND -- 26.6%
Common Stock -- 26.5%
Tobacco -- 26.5%
Philip Morris Companies Inc. 10,493,784 391,987,263 583,716,735
Short-Term Investments -- 0.1%
GEBT Short-Term Investment Fund 1,011,925 1,011,925 1,011,925
------------ ------------
Total Philip Morris Stock Fund 392,999,188 584,728,660
------------ ------------
INTEREST INCOME FUND -- 37.6%
Investment Contracts -- 37.1%
Participation Contracts With Institutions -- 28.7%
Confederation Life Insurance Company
No. GA-61554 9.40%
matures 1/11/94 10,910,420 10,910,420 10,910,420
John Hancock Mutual Life Insurance
Company GAC No. 5430 8.44%
matures 3/1/94 7,196,154 7,196,154 7,196,154
New York Life
No. GA 20012 6.07%
matures 3/31/94 26,854,209 26,854,209 26,854,209
John Hancock Mutual Life Insurance
Company No. 5486 9.02%
matures 4/1/94 5,339,175 5,339,175 5,339,175
John Hancock Mutual Life Insurance
Company No. 5292 8.90%
matures 4/1/94 and 10/1/94 4,378,742 4,378,742 4,378,742
</TABLE>
S-1
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ----------- -----------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
Participation Contracts with Institutions (continued)
Penn Mutual Life Insurance Company
No. GVC-90603 9.30%
matures 4/4/94 1,955,825 $ 1,955,825 $ 1,955,825
Provident National Assurance
Company No. 27-04253A2 8.52%
matures 5/1/94 5,789,888 5,789,888 5,789,888
CNA Insurance Company
GP 12276 8.9%
matures 6/1/94 4,103,339 4,103,339 4,103,339
Allstate Life Insurance Company
No. GA-4603 9.18%
matures 12/31/94 5,407,852 5,407,852 5,407,852
Crown Life Insurance Company
No. 9001285 9.34%
matures 1/12/95 4,022,269 4,022,269 4,022,269
Crown Life Insurance Company
No. 9001294 8.54%
matures 2/11/95 3,842,244 3,842,244 3,842,244
Crown Life Insurance Company
No. 9001301 9.00%
matures 3/23/95 5,674,458 5,674,458 5,674,458
Prudential Asset Management Company
No. 5880 9.42%
matures 3/31/95 8,221,450 8,221,450 8,221,450
Crown Life Insurance Company
GAC No. 9002410 9.10%
matures 10/12/95 2,380,323 2,380,323 2,380,323
John Hancock Mutual Life Insurance
Company GAC No. 4688 8.54%
matures 10/31/95 4,162,251 4,162,251 4,162,251
Metropolitan Life Insurance Company
GAC No. 9893-9 9.32%
matures 11/1/95 17,070,555 17,070,555 17,070,555
Massachusetts Mutual Life Insurance
Company No. 6200 9.20%
matures 3/1/96 15,616,681 15,616,681 15,616,681
CNA Insurance Company
GP 35000-B 4.71%
matures 3/8/96 259,573 259,573 259,573
Provident National Assurance
Company No. 0270425303A 8.93%
matures 3/15/96 32,255,030 32,255,030 32,255,030
</TABLE>
S-2
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ----------- -----------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
Participation Contracts with Institutions (continued)
Massachusetts Mutual Life Insurance
Company No. 6280 9.55%
matures 6/30/96 14,375,226 $14,375,226 $14,375,226
Prudential Insurance Company of
America No. GA 5905-213 9.50%
matures 8/31/96 6,344,487 6,344,487 6,344,487
Massachusetts Mutual Life Insurance
Company No. PGIC-10403 6.63%
matures 9/30/96 84,820,619 84,820,619 84,820,619
Metropolitan Life Insurance Company
No. 12861 6.62%
matures 12/31/96 57,264,268 57,264,268 57,264,268
Prudential Asset Management Company
No. 5905-215 9.19%
matures 12/31/96 16,378,500 16,378,500 16,378,500
Prudential Insurance Company of America
No. 5905-211 8.29%
matures 2/1/97 6,614,912 6,614,912 6,614,912
John Hancock Mutual Life Insurance
Company GAC No. 6435 7.69%
matures 7/15/97 27,087,283 27,087,283 27,087,283
Bank of America
No. 212 9.47%
matures 7/31/97 20,882,137 20,882,137 20,882,137
Hartford Life Insurance Company
GA No. 9067 8.60%
matures 9/30/97 31,868,878 31,868,878 31,868,878
Prudential Life Insurance Company
No. 5905-216 9.45%
matures 9/30/97 20,694,588 20,694,588 20,694,588
Commonwealth Life Insurance Company
No. 00343 FR 8.68%
matures 2/28/98 23,595,435 23,595,435 23,595,435
New York Life Insurance Company
No. 06121 8.50%
matures 3/1/98 43,102,697 43,102,697 43,102,697
Principal Mutual Life Insurance
Company GAC No. 748-112 8.87%
matures 5/1/98 57,115,186 57,115,186 57,115,186
Allstate Life Insurance Company
No. GA-5421 6.47%
matures 4/7/99 26,263,746 26,263,746 26,263,746
</TABLE>
S-3
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ------------ ------------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ------------ ------------
<S> <C> <C> <C>
Participation Contracts with Institutions
(continued)
Principal Mutual Life Insurance Company
GAC No. 3-748-114 5.82%
matures 9/6/99 24,093,171 $ 24,093,171 $ 24,093,171
Security Life of Denver
No. FA 0147 9.10%
matures 12/31/99 4,639,878 4,639,878 4,639,878
------------ ------------
Total Contracts 630,581,449 630,581,449
------------ ------------
Financial Institution Pools -- 8.4%
Provident Life & Accident
GAC No. 63005580 5.50%
GEBT Short-Term Investment Fund 456,719 456,719 456,719
Federal Home Loan Mtg. Corporation
matures 9/15/2002 4.85% 2,471,000 2,505,487 2,505,487
Federal Home Loan Mtg. Corporation
matures 1/15/2008 5.78% 2,471,000 2,454,461 2,454,461
Federal Home Loan Mtg. Corporation
matures 9/15/2008 6.00% 2,306,826 2,369,906 2,369,906
Federal Home Loan Mtg. Corporation
matures 10/15/2008 5.90% 2,807,056 2,817,611 2,817,611
Federal National Mortgage Association
matures 6/25/2013 5.00% 2,273,320 2,302,817 2,302,817
Federal National Mortgage Association
matures 11/25/2013 5.50% 2,471,000 2,476,314 2,476,314
Federal National Mortgage Association
matures 3/25/2018 5.75% 2,471,000 2,515,972 2,515,972
Federal National Mortgage Association
matures 9/25/2019 5.50% 2,471,000 2,446,200 2,446,200
Federal National Mortgage Association
matures 10/25/2022 5.40% 2,619,260 2,696,999 2,696,999
Federal National Mortgage Association Pool
matures 4/1/2023 6.50% 2,471,000 2,494,845 2,494,845
Federal National Mortgage Association
matures 8/25/2023 3.00% 2,767,520 2,412,253 2,412,253
Federal Home Loan Mtg. Corporation
matures 10/15/2023 7.00% 2,386,408 2,473,672 2,473,672
------------ ------------
Total Provident Life & Accident Contract 30,423,256 30,423,256
------------ ------------
</TABLE>
S-4
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ----------- -----------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
Financial Institution Pools (continued)
National Westminster Bank
No. SAM 0104A 5.80%
GEBT Short-Term Investment Fund 27,647 $ 27,647 $ 27,647
Federal Home Loan Mtg. Corporation
matures 6/15/99 6.00% 3,312,750 3,319,611 3,319,611
Federal National Mortgage Association
matures 6/25/2005 6.25% 1,766,800 1,789,818 1,789,818
Federal Home Loan Mtg. Corporation
matures 8/15/2005 6.25% 883,400 905,806 905,806
Federal National Mortgage Association
matures 8/25/2005 6.00% 386,488 386,432 386,432
Federal National Mortgage Association
matures 8/25/2005 6.00% 2,738,540 2,742,466 2,742,466
Federal National Mortgage Association
matures 11/25/2005 7.00% 4,858,700 5,048,475 5,048,475
Federal Home Loan Mtg. Corporation
matures 3/15/2007 6.75% 1,325,100 1,376,028 1,376,028
Federal Home Loan Mtg. Corporation
matures 5/15/2007 6.25% 2,142,245 2,156,606 2,156,606
Federal Home Loan Mtg. Corporation
matures 4/15/2008 6.50% 552,125 557,865 557,865
Federal Home Loan Mtg. Corporation
matures 8/15/2008 6.50% 2,766,812 2,809,573 2,809,573
Federal Home Loan Mtg. Corporation
matures 4/15/2011 5.00% 1,766,800 1,777,527 1,777,527
Federal National Mortgage Association
matures 8/25/2012 5.60% 1,181,548 1,192,563 1,192,563
Federal National Mortgage Association
matures 8/25/2013 6.70% 3,091,900 3,118,713 3,118,713
Federal National Mortgage Association
matures 9/25/2015 6.00% 1,766,800 1,811,239 1,811,239
Federal Home Loan Mtg. Corporation
matures 12/15/2015 6.50% 2,142,245 2,204,487 2,204,487
Federal National Mortgage Association
matures 6/25/2016 5.70% 3,268,580 3,315,866 3,315,866
Federal National Mortgage Association
matures 7/25/2016 5.65% 1,753,549 1,772,739 1,772,739
Federal National Mortgage Association
matures 6/15/2018 7.00% 234,101 246,850 246,850
Federal National Mortgage Association
matures 1/25/2020 7.00% 3,091,900 3,223,115 3,223,115
Federal Home Loan Mtg. Corporation
matures 5/15/2021 6.50% 574,210 562,202 562,202
----------- -----------
Total National Westminster Bank Contract 40,345,628 40,345,628
----------- -----------
</TABLE>
S-5
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ----------- ----------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Financial Institution Pools (continued)
Commonwealth Life Insurance Company
No. ADA 00043 TR 6.04%
GEBT Short-Term Investment Fund 1,365,691 $1,365,691 $1,365,691
Standard Credit Card Master Trust
matures 7/7/95 5.88% 2,500,000 2,618,963 2,618,963
U. S. Treasury Note
matures 11/15/96 7.25% 1,200,000 1,293,452 1,293,452
U. S. Treasury Note
matures 10/31/98 4.75% 3,325,000 3,282,022 3,282,022
MBNA Master Credit Card Trust
matures 8/15/99 6.20% 2,500,000 2,582,879 2,582,879
Federal National Mortgage Association
matures 9/9/2003 5.97% 275,000 279,397 279,397
Federal National Mortgage Association
matures 5/25/2004 6.50% 6,000,000 6,170,499 6,170,499
Federal Home Loan Mtg. Corporation
matures 2/15/2005 6.65% 5,000,000 5,131,789 5,131,789
Federal National Mortgage Association
matures 5/25/2005 6.70% 5,000,000 5,141,438 5,141,438
Federal Home Loan Mtg. Corporation
matures 8/15/2005 6.70% 5,000,000 5,127,826 5,127,826
Federal Home Loan Mtg. Corporation
matures 4/15/2006 6.75% 5,795,000 5,937,365 5,937,365
Federal National Mortgage Association
matures 4/25/2006 6.25% 5,000,000 4,999,292 4,999,292
Federal National Mortgage Association
matures 8/25/2006 6.00% 5,000,000 4,928,175 4,928,175
Federal Home Loan Mtg. Corporation
matures 11/15/2007 5.50% 7,750,000 7,814,068 7,814,068
Federal National Mortgage Association Pool
matures 2/1/2009 7.00% 2,095,930 2,101,514 2,101,514
Federal National Mortgage Association Pool
matures 2/1/2009 7.00% 1,483,193 1,524,108 1,524,108
Federal National Mortgage Association Pool
matures 2/1/2009 7.00% 500,000 501,333 501,333
Federal National Mortgage Association Pool
matures 2/1/2009 7.00% 106,589 109,530 109,530
Federal National Mortgage Association Pool
matures 2/1/2009 7.00% 980,000 1,007,034 1,007,034
</TABLE>
S-6
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ------------ ------------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue Of Shares/Units Investments Fair Value
- --------------------------------- --------------- ------------ ------------
<S> <C> <C> <C>
Financial Institution Pools (continued)
Federal National Mortgage Association Pool
matures 2/1/2009 7.00% 2,450,000 $ 2,517,585 $ 2,517,585
Federal National Mortgage Association
matures 7/25/2011 5.50% 7,283,300 7,304,656 7,304,656
Federal Home Loan Mtg. Corporation
matures 12/15/2011 5.25% 5,000,000 4,985,768 4,985,768
Federal Home Loan Mtg. Corporation
matures 5/15/2018 6.00% 2,500,000 2,529,506 2,529,506
Federal Home Loan Mtg. Corporation
matures 12/15/2018 6.00% 2,500,000 2,498,770 2,498,770
Federal Home Loan Mtg. Corporation
matures 1/25/2019 6.25% 2,000,000 1,991,623 1,991,623
------------ ------------
Total Commonwealth Life Insurance Company Contract 83,744,283 83,744,283
------------ ------------
CNA Insurance Company
GP 35000 5.85%
Federal Home Loan Mtg. Corporation
matures 8/15/2001 4.00% 4,000,000 3,961,032 3,961,032
Federal Home Loan Mtg. Corporation
matures 11/15/2003 5.50% 5,000,000 4,955,955 4,955,955
Federal National Mortgage Association
matures 1/25/2006 7.00% 3,500,000 3,623,291 3,623,291
Federal Home Loan Mtg. Corporation Pool
matures 6/1/2008 7.00% 5,672,310 5,821,103 5,821,103
Federal Home Loan Mtg. Corporation Pool
matures 7/1/2008 7.00% 757,077 776,932 776,932
Federal Home Loan Mtg. Corporation
matures 5/15/2014 5.40% 5,057,235 4,999,723 4,999,723
Federal National Mortgage Association
matures 12/25/2018 4.75% 5,000,000 4,790,079 4,790,079
------------ ------------
Total CNA Insurance Company Contract 28,928,115 28,928,115
------------ ------------
Total Pools 183,441,282 183,441,282
------------ ------------
Total Investment Contracts 814,022,731 814,022,731
------------ ------------
Short-term Investments -- 0.5%
GEBT Short-Term Investment Fund 11,879,283 11,879,283 11,879,283
------------ ------------
Total Interest Income Fund 825,902,014 825,902,014
------------ ------------
</TABLE>
S-7
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ----------- -----------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS FUND -- 3.1%
Government Securities -- 1.8%
United States Treasury Notes
3.875% due 3/31/95 20,000,000 $20,006,250 $20,006,200
United States Treasury Notes
4.125% due 5/31/95 20,000,000 20,040,625 20,043,800
----------- -----------
Total Government Securities 40,046,875 40,050,000
----------- -----------
Federal Agency Obligations -- 0.6%
Federal Home Loan Mtg Corp.
Multiclass Mtg Partn CTFS GTD SER
1317 CL 1317-A Prin Only 1/15/97 349,859 334,334 349,859
Federal Home Loan BKS
CONS BD 4.0% 1/21/97 5,000,000 5,009,900 5,008,000
Federal Home Loan Mtg Corporation
Multiclass Mtg Partn CTFS GTD
SER 1304 CL 1304-F Var Rt 6/15/97 2,453,254 2,453,254 2,470,869
Federal Nat'l Mtg Association
GTD Remic Pass Thru CTF Remic TR
1992-106 CL-F Var Rate 6/25/99 545,214 542,488 544,358
Federal Home Loan Mtg Corporation
Multiclass Mtg Partn CTFS GTD
SER 1296 CL 1296-I Var Rt 7/15/99 2,353,394 2,343,098 2,351,923
Federal Home Loan Mtg Corp.
Multiclass Mtg Partn CTF GTD
SER 1329 CL 1329-FA Var Rt 8/15/99 1,556,686 1,556,443 1,565,435
----------- -----------
Total Federal Agency Obligations 12,239,517 12,290,444
----------- -----------
Corporate Obligations -- 0.1%
Merrill Lynch SAM/FNMA
Pool #41732 V/R Series 87-3
9.92% 2/2/2027 1,660,325 1,636,457 1,660,325
----------- -----------
Total Corporate Obligations 1,636,457 1,660,325
----------- -----------
</TABLE>
S-8
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
SCHEDULE I - INVESTMENTS as of December 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- -------------- --------------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- -------------- --------------
<S> <C> <C> <C>
Short-Term Investments -- 0.6%
GEBT Short-Term Investment Fund 13,239,594 $ 13,239,594 $ 13,239,594
-------------- --------------
Total U.S. Government Obligations Fund 67,162,443 67,240,363
-------------- --------------
PARTICIPANTS' LOAN ACCOUNT -- 4.8%
Participants' Loans 106,306,455 106,306,455
-------------- --------------
TOTAL INVESTMENTS $1,772,820,163 $2,196,816,187
============== ==============
</TABLE>
S-9
<PAGE>
Exhibit 23
CONSENT of INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Philip Morris Companies
Inc. registration statement on Form S-8 (File No. 33-10218) of the Philip Morris
Deferred Profit-Sharing Plan of our report dated March 18, 1994, on our audits
of the financial statements of the Philip Morris Deferred Profit-Sharing Plan as
of December 31, 1993 and 1992 and for the years ended December 31, 1993, 1992
and 1991, and the financial statement schedule as of December 31, 1993, which
report is included in this annual report on Form 11-K.
COOPERS & LYBRAND
New York, New York
April 13, 1994
<PAGE>
EXHIBIT 99
PHILIP MORRIS DEFERRED
PROFIT-SHARING PLAN
Effective January 1, 1956
(As amended and in effect as of January 1, 1994)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS..................................... 1
ARTICLE II OPERATING COMPANY CONTRIBUTIONS................. 11
ARTICLE III ALLOCATION OF THE OPERATING COMPANY
CONTRIBUTION.................................... 14
ARTICLE IV PARTICIPANT CONTRIBUTIONS....................... 15
ARTICLE V VALUATION....................................... 18
ARTICLE VI DISTRIBUTION.................................... 21
ARTICLE VII WITHDRAWALS..................................... 26
ARTICLE VIII THE FUND........................................ 29
ARTICLE IX LOANS TO PARTICIPANTS........................... 32
ARTICLE X THE FIDUCIARIES AND THEIR DELEGATEES............ 33
ARTICLE XI AMENDMENT OR TERMINATION........................ 36
ARTICLE XII RESTRICTIONS ON ALIENATION AND ASSIGNMENT....... 38
ARTICLE XIII GENERAL PROVISIONS.............................. 39
ARTICLE XIV FORMS; COMMUNICATIONS........................... 42
ARTICLE XV MERGER, ETC..................................... 43
ARTICLE XVI CHANGE OF CONTROL PROVISIONS.................... 44
ARTICLE XVII LIMITATION ON ALLOCATIONS....................... 47
ARTICLE XVIII RULES IN THE EVENT PLAN BECOMES A TOP-HEAVY PLAN 51
</TABLE>
<PAGE>
PHILIP MORRIS DEFERRED
PROFIT-SHARING PLAN
As amended and in effect as of January 1, 1994
ARTICLE I
DEFINITIONS
-----------
The following terms as used herein or in the Trust Agreement shall have
the meanings set forth below:
(a) "ACCOUNTS" means the aggregate of the Participant's
Company Account, Personal After-Tax Account, if any, Personal Before-Tax
Account, if any, Rollover Account, if any, and Paysop Account, if any.
(b) "ACCREDITED SERVICE" means the accumulated periods of
service taken into account in determining an Employee's eligibility for benefits
under the Plan. Each twelve (12) months of Accredited Service shall constitute
one (1) year of Accredited Service. The Accredited Service of a Full-Time
Employee shall include the following periods of service:
(1) all periods of service commencing on the
Employee's date of employment with any member of the Controlled Group and ending
on the earlier of (A) the date on which the Employee resigns, is discharged,
dies or retires, or (B) the first anniversary of the date the Employee remains
absent from service for any other reason;
(2) all periods of service during which the Employee
is deemed employed by any member of the Controlled Group;
(3) all periods during which the Employee has been
severed from the service of any member of the Controlled Group if such severance
is by reason of (A) his resignation, discharge or retirement and he then
performs an Hour of Service within twelve (12) months of his severance from
service date, or (B) his resignation, discharge or retirement during an absence
from service of twelve (12) months or less for any reason other than his
resignation, discharge or retirement, and he then performs an Hour of Service
within twelve (12) months of the date on which he was first absent from service;
<PAGE>
(4) all periods of service with Liggett Group, Inc.
with respect to an Employee who was employed by Liggett Group, Inc. on June 25,
1978 and employed by a Participating Company on or before September 1, 1978;
(5) all periods of service with General Foods
Corporation, a Delaware corporation, or any of its subsidiaries with respect to
an Employee who was employed by General Foods Corporation or any of its
subsidiaries on November 1, 1985; and
(6) all periods of service with Kraft, Inc., a
Delaware Corporation, or any of its subsidiaries with respect to an Employee who
was employed by Kraft, Inc. or any of its subsidiaries on October 30, 1988.
A Part-Time Employee shall be credited with a year of Accredited Service
for each twelve (12) month period commencing on the Employee's date of
employment with any member of the Controlled Group and ending on the anniversary
date thereof during which he completes one thousand (1,000) Hours of Service.
(c) "ADMINISTRATOR" means the Senior Vice President, Human
Resources and Administration of the Company (or his delegatee) designated by the
Committee to carry out certain responsibilities in connection with the
administration of the Plan.
(d) "ALTERNATE PAYEE" means the Spouse, former Spouse, child
or other dependent of a Participant who is recognized pursuant to a Qualified
Domestic Relations Order to be eligible to receive all or a portion of the
Participant's Accounts and Loan Account under the Plan; provided, however, that
only an Alternate Payee who is the Participant's Spouse or former Spouse may
direct to have all or any portion of an Eligible Rollover Distribution paid to
an Eligible Retirement Plan pursuant to Article VI, 2(a)(iii) hereof.
(e) "BENEFICIARY" means (1) the Spouse of the Participant, or
(2) the person or persons (including the estate of the Participant) designated
by the Participant to receive distribution of all or a portion of the Current
Value of his Accounts in the event of death and (i) his Spouse consents, in
writing before a notary public or an authorized representative of the
Administrator, to such designation, or (ii) the Administrator has determined
that the consent of the Participant's Spouse need not be obtained (A) because
the Spouse cannot be located, or (B) as a result of such other circumstances as
the Secretary of the Treasury may prescribe by regulations.
(f) "BOARD" means the Board of Directors of the Company.
(g) "CASH OR DEFERRED ARRANGEMENT" means (1) the provisions of
Article IV, 1 of the Plan permitting each Participant to make Salary Reduction
Contributions and (2) those provisions of any other plan qualified under Section
401(a) of the Code maintained
2
<PAGE>
by a member of the Controlled Group which permit an individual to make Elective
Contributions.
(h) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(i) "COMMITTEE" means the Corporate Employee Benefit Committee
of the Company charged with the administration of the Plan as from time to time
constituted, which Committee shall be the Plan administrator and the named
fiduciary with respect to such administrative duties within the meaning of
ERISA.
(j) "COMMON STOCK" means the common stock, $1 par value, of
the Company.
(k) "COMPANY" means Philip Morris Companies Inc.
(l) "COMPANY ACCOUNT" means the account maintained by the
Trustee reflecting the Participant's share of the Fund resulting from the
Contribution, and for Plan Years on and after January 1, 1994, the Operating
Company Contribution.
(m) "COMPENSATION" means an Employee's base salary or wage,
including compensation for overtime, received by him in cash during each
calendar year while an Employee of a Participating Company and Salary Reduction
Contributions made by a Participating Company on behalf of the Employee pursuant
to Article IV, 1(a) of the Plan and salary reduction contributions to a
cafeteria plan (as defined in Section 125 of the Code), except that it shall in
no event include cash bonuses, cost-of-living or other allowances, the Operating
Company Contribution by a Participating Company under Article II of the Plan or
contributions to any retirement, disability or survivor benefit plan of a
Participating Company or awards under any incentive compensation plan of a
Participating Company or any other member of the Controlled Group. For Plan
Years beginning on and after January 1, 1989, Compensation in excess of $200,000
(as increased as of January 1 of each calendar year beginning after December 31,
1989 and applicable to the Plan Year coinciding with such year to reflect
increases in the cost-of-living in accordance with regulations prescribed by the
Secretary of the Treasury) shall not be taken into account under the Plan;
provided, however, that the Compensation of an Employee who is a five percent
(5%) owner (as defined in Section 416(i)(1) of the Code) or one of the ten (10)
Highly Compensated Employees paid the greatest amount of compensation (as
defined in Section 414(q)(7) of the Code) from the Controlled Group during a
Plan Year shall be aggregated with the Compensation of an Employee who is the
Highly Compensated Employee's Spouse or lineal descendent under the age of
nineteen (19) years (determined as of the close of the Plan Year) for the
purpose of determining the amount of the Operating Company Contribution
allocable to the Highly Compensated Employee and the amount of his Salary
Reduction Contributions. For purposes of Article III hereof, an Employee who
transfers from a Participating Company of a Participating Group to a
Participating Company of another Participating Group shall be
3
<PAGE>
deemed to have received Compensation for the calendar year of the transfer from
the Participating Company by whom he is employed on the last day of the calendar
year.
(n) "CONSOLIDATED EARNINGS" means the amount reported as
earnings before income taxes and cumulative effect of accounting changes in the
Company's consolidated statements of earnings included in its audited
consolidated financial statements, before deduction of the Operating Company
Contribution, of the operating company contribution to the PM Incorporated Plan
and to the Craft Plan and of allocations to or contributions under incentive
compensation plans.
(o) "CONTRIBUTION" shall have the meaning as set forth in the
Plan, as amended and in effect on December 31, 1993.
(p) "CONTROLLED GROUP" means a controlled group of
corporations within the meaning of Section 414(b) of the Code, where the Company
is the common parent corporation and owns directly or indirectly, stock,
possessing at least eighty percent (80%) of the total combined voting power of
all classes of stock entitled to vote of the other corporations and at least
eighty percent (80%) of the total number of shares of all other classes of stock
of such other corporations, provided that for purposes of Article XVII,
Controlled Group shall mean as defined aforesaid, but the phrase, fifty percent
(50%), shall be substituted for the phrase, eighty percent (80%), in each place
where it appears aforesaid. For purposes of determining Accredited Service for
Full-Time Employees, Controlled Group shall include any corporation, whether
domestic or foreign, where the Company is the common parent and owns, directly
or indirectly, stock possessing at least twenty-five percent (25%) of the total
combined voting power of all classes of stock entitled to vote of the other
corporations and at least twenty-five percent (25%) of the total number of
shares of all other classes of stock of such other corporations.
(q) "CRAFT PLAN" means the Philip Morris Incorporated Deferred
Profit-Sharing Plan for Craft Employees, effective as of January 1, 1990 and as
amended from time to time.
(r) "CURRENT VALUE" means the value of each of a Participant's
Accounts and Loan Account as of the most recent valuation, determined in
accordance with Article V hereof.
(s) "ELECTIVE CONTRIBUTIONS" means (1) Salary Reduction
Contributions and (2) elective deferrals (as defined in Section 402(g)(3) of the
Code) to the trust fund under a Cash or Deferred Arrangement described in
Article I(g)(2) hereof.
(t) "ELIGIBLE RETIREMENT PLAN" means (i) an individual
retirement account described in Section 408(a) of the Code, (ii) an individual
retirement annuity (other than an endowment contract) described in Section
408(b) of the Code, (iii) an annuity plan described in Section 403(a) of the
Code, (iv) a trust forming part of a defined contribution plan (as
4
<PAGE>
defined in Section 414(i) of the Code) qualified under Section 401(a) of the
Code, provided the terms of such defined contribution plan permit the trustee of
the trust to accept a direct transfer of all or any portion of an Eligible
Rollover Distribution, and (v) any other trust forming part of a plan qualified
under Section 401(a) of the Code and exempt from tax under Section 501(a) of the
Code.
(u) "ELIGIBLE ROLLOVER CONTRIBUTION" means (i) all or any
portion of an Eligible Rollover Distribution from an Eligible Retirement Plan
other than the Fund which the Participant elects to have paid directly by the
trustee or custodian of the Eligible Retirement Plan to the Fund or which is
timely transferred to the Fund in accordance with Section 402(c) of the Code, or
(ii) a payment to the Fund from an individual retirement account or annuity in
accordance with the provisions of Section 408(d)(3) of the Code.
(v) "ELIGIBLE ROLLOVER DISTRIBUTION" means each distribution
on and after January 1, 1993 from the Fund or any other Eligible Retirement Plan
of all or any portion of the balance to the credit of the Participant, except
(i) that portion of any distribution that is not includible in gross income
(determined without regard to Section 402(e)(4) of the Code), (ii) any
distribution that is one of a series of substantially equal periodic payments
(payable not less frequently than annually) made over a period of ten (10) or
more years or for the life of the Participant, the joint life expectancy of the
Participant and his beneficiary, or for the life expectancy of the Participant
or the joint life and last survivor expectancy of the Participant and his
beneficiary, (iii) any distribution to the extent required to be made pursuant
to Section 401(a)(9) of the Code, and (iv) such other amounts actually
distributed to a Participant as may be designated by the Commissioner of
Internal Revenue in regulations, revenue rulings, notices and other guidance of
general applicability.
(w) "EMPLOYEE" means any person who receives a regular and
stated compensation (other than a retainer) directly from a Participating
Company and is either a Full-Time Employee or a Part-Time Employee, and who is
not:
(1) a member of a collective bargaining agreement
unless such agreement specifically provides for such member's inclusion in the
Plan; or
(2) covered under another profit-sharing plan
qualified under Section 401(a) of the Code to which a Participating Company is
contributing; or
(3) compensated at an hourly rate, except hourly rate
employees at the York Engineering facility, and employed in a job position which
is not administrative or clerical; or
(4) employed by Mission Viejo Company or any of its
subsidiaries in a job position with an exempt grade level equivalent to 15 or
lower; or
5
<PAGE>
(5) employed by Packaged Food & Beverage Co., Inc. in
a job position with an exempt grade level equivalent to 11 or lower; or
(6) a Highly Compensated Employee who is transferred
from a member of the Controlled Group organized outside of the United States to
a Participating Company and who is excluded from participation in the Plan at
the time of such transfer by the Administrator; or
(7) employed by the Philip Morris de Puerto Rico
division of Philip Morris Sales Inc.
A Full-Time Employee means any person in the regular full-time service
of a Participating Company. A Part-Time Employee means any person in the part-
time service of a Participating Company. An Employee shall cease to be such upon
termination of his service for any cause whatsoever; provided, however, that he
shall be deemed, for the purposes of this Plan, to be an Employee and
continuously employed by a Participating Company during all periods of leave of
absence with or without pay, including Service in the Armed Forces of the United
States for a period not in excess of sixty (60) months or for such other period
as may be prescribed by law.
(x) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
(y) "FIDUCIARY" means the Committee, the Investment Committee,
the Management Committee and the Administrator to the extent that such person or
body (1) exercises any discretionary authority or control respecting management
of the Plan or management or disposition of any part of the Fund, or (2) has
discretionary authority or responsibility in the administration of the Plan.
(z) "FUND" means the trust fund provided for in the Plan and
established under the Trust Agreement.
(aa) "HIGHLY COMPENSATED EMPLOYEE" means an Employee described
in Section 414(q) of the Code.
(ab) "HOUR OF SERVICE" means (1) each hour for which an
Employee is paid, or entitled to payment, for the performance of duties for any
member of the Controlled Group (such hours to be credited to the period in which
the duties were performed), (2) each hour for which an Employee is paid, or
entitled to payment, by any member of the Controlled Group on account of a
period of time during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or leave of
absence (such hours to be credited to the period or periods in which the
nonperformance of duties occurs and in accordance with Section 2530.200b-2(b)
and (c) of the Department of
6
<PAGE>
Labor Regulations) and (3) each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed upon by any member of the
Controlled Group (such hours to be credited to the period or periods to which
the award pertains). Further, the term Hour of Service shall include periods of
time during which the Employee is not entitled to be paid for an authorized
leave of absence or for a period not in excess of sixty (60) months, or such
other period as may be prescribed by law, during which his absence is due to
Service in the Armed Forces of the United States. No Employee shall be credited
more than once with Hours of Service with respect to the same actual hours.
(ac) "INVESTMENT COMMITTEE" means the Corporate Employee Plans
Investment Committee of the Company as from time to time constituted, charged
with the control and management of the Fund as set forth in Article X hereof,
which Investment Committee shall be the named fiduciary with respect to the
control and management of the Fund within the meaning of ERISA.
(ad) "INVESTMENT MANAGER" means (1) a bank (as defined in the
Investment Advisers Act of 1940), (2) an insurance company, (3) a registered
Investment Adviser under the Investment Advisers Act of 1940, or (4) an in-house
investment adviser who may register under the Investment Advisers Act of 1940,
appointed by the Investment Committee to manage all or part of the Fund held by
the Trustee, provided such appointee acknowledges in writing that it is a
fiduciary (as defined in ERISA) with respect to its investment duties under the
Plan.
(ae) "LOAN ACCOUNT" means the account maintained by the Trustee
to reflect the principal balance of any outstanding loan or loans extended to
the Participant pursuant to Article IX of the Plan.
(af) "MANAGEMENT COMMITTEE" means the Philip Morris Management
Committee for Employee Benefits designated by the Committee to carry out certain
responsibilities in connection with the administration of the Plan.
(ag) "OPERATING COMPANY CONTRIBUTION" shall have the meaning
set forth in Article II.
(ah) "OPERATING PROFIT" means earnings of a Participating Group
before cumulative effect of accounting changes, discontinued operations and
extraordinary items, interest and other debt expense, income taxes, amortization
of goodwill, unallocated corporate expenses, any minority interest, the amount
of any deduction used in computing such earnings for the Operating Company
Contribution to the Plan and the operating company contributions to the PM
Incorporated Plan and the Craft Plan and contributions to any incentive
compensation plan. Operating Profit shall be determined by the Company (and
verified by the independent public accountants of the Company) in accordance
with generally accepted accounting principles applicable to reporting for
segments of a business enterprise, and the determination of the Company shall,
to the extent permitted by law, be final, binding
7
<PAGE>
and conclusive upon all Participating Companies, Participating Groups,
Participants (and their Beneficiaries) and all other persons who may at any time
have any interest in the Fund.
(ai) "PARTICIPANT" means an Employee who has completed twenty-
four (24) months of Accredited Service and who is not a leased employee (as
defined in Section 414(n) of the Code); provided, however, that for purposes of
making Participant contributions pursuant to Article IV hereof, a Full-Time
Employee shall become a Participant on the January 1 of the calendar year next
succeeding the Employee's date of employment and a Part-Time Employee shall
become a Participant after he has completed one (1) year of Accredited Service.
An Employee or former Participant shall become a Participant in the Plan
immediately upon satisfying the above requirements. Every Employee shall cease
to be a Participant whenever he ceases to be an Employee; provided, however,
that a Participant who (1) transfers to a job position whereby he becomes a
participant in the PM Incorporated Plan, the Craft Plan or any other defined
contribution plan maintained by a member of the Controlled Group, or (2) retires
from the employ of a Participating Company and is eligible for an early or full
retirement benefit under a retirement plan of a Participating Company or any
other member of the Controlled Group shall be deemed to be a Participant on the
last business day of the year in which he so transfers or retires for purposes
of Articles II and III of the Plan.
(aj) "PARTICIPATING COMPANY" means the Company and any other
corporation which is a member of the Controlled Group and which, with the
approval of the Committee, determines to participate in the Plan and executes
such instruments of participation as the Committee deems necessary.
(ak) "PARTICIPATING GROUP" means Participating Group A,
Participating Group B and Participating Group C, each of which shall be
comprised of at least one Participating Company. A list of the members of the
Controlled Group which comprise Participating Group A, Participating Group B and
Participating Group C is set forth in Exhibit A to the Plan as such Exhibit may
be amended from time to time.
(al) "PAYSOP" means the Philip Morris Employee Stock Ownership
Plan, as amended and in effect immediately prior to the merger of its assets and
liabilities with the assets and liabilities of the Plan.
(am) "PAYSOP ACCOUNT" means the account maintained by the
Trustee reflecting the Participant's share of the Fund resulting from the
transfer of his account, if any, under the PAYSOP to the Fund.
(an) "PERSONAL AFTER-TAX ACCOUNT" means the account maintained
by the Trustee reflecting a Participant's share of the Fund resulting from
making voluntary contributions (other than Salary Reduction Contributions)
pursuant to Article IV, 2 hereof.
8
<PAGE>
(ao) "PERSONAL BEFORE-TAX ACCOUNT" means the account maintained
by the Trustee reflecting a Participant's share of the Fund resulting from
making Salary Reduction Contributions pursuant to Article IV, 1 hereof.
(ap) "PLAN" means the Philip Morris Deferred Profit-Sharing
Plan, effective as of January 1, 1956 and as amended from time to time.
(aq) "PLAN YEAR" means a calendar year or such other period as
the Management Committee, with the approval of the Committee, may from time to
time determine.
(ar) "PM INCORPORATED PLAN" means the Philip Morris
Incorporated Deferred Profit-Sharing Plan, as amended from time to time.
(as) "QUALIFIED DOMESTIC RELATIONS ORDER" means any judgment,
decree or order (including approval of a property settlement agreement) pursuant
to a State domestic relations law (including a community property law) which (1)
relates to the provision of child support, alimony payments or marital property
rights to an Alternate Payee, (2) creates or recognizes the existence of an
Alternate Payee's right to, or assigns to an Alternate Payee the right to,
receive all or a portion of the Accounts and Loan Account of a Participant under
the Plan and (3) specifies: (i) the name and last known mailing address of the
Participant and each Alternate Payee; (ii) the portion of the Participant's
Accounts and Loan Account to be distributed to each Alternate Payee, or the
manner in which such portion is to be determined; (iii) the period and frequency
distribution of the Accounts and Loan Account is to be made; and (iv) each plan
qualified under Section 401(a) of the Code maintained by the Controlled Group to
which it applies; provided such Qualified Domestic Relations Order does not
require: (1) distribution of the Participant's Accounts and Loan Account to be
made under the Plan at a date or in a form not authorized by Article VI hereof
(other than a distribution to an Alternate Payee made or commencing to be made
pursuant to Article VI on or after the date the Participant attains or would
have attained the age of fifty-five (55) years and computed on the basis of the
Current Value of his Accounts and his Loan Account as of the date the Qualified
Domestic Relations Order provides distribution is to commence); (2) distribution
to be made to the Alternate Payee in an amount which is greater than the Current
Value of the Participant's Accounts and Loan Account; and (3) distribution to be
made to an Alternate Payee which is required to be made to another Alternate
Payee pursuant to another judgment, decree or order previously determined to be
a Qualified Domestic Relations Order.
(at) "REQUIRED BENEFIT COMMENCEMENT DATE" means (1) in the case
of a Participant or former Participant who attained or attains the age of
seventy and one-half (70 1/2) years on and after January 1, 1988, April 1 of the
calendar year next succeeding the calendar year in which the Participant or
former Participant attained or attains the age of seventy and one-half (70 1/2)
years and (2) in the case of a Participant or former Participant who attained
the age of seventy and one-half (70 1/2) years before January 1, 1988 and who is
9
<PAGE>
not a five percent (5%) owner (as defined in Section 416(i) of the Code), April
1 of the calendar year next succeeding the later of (i) the calendar year in
which the Participant or former Participant attained the age of seventy and one-
half (70 1/2) years, or (ii) the calendar year in which the Participant or
former Participant retires.
(au) "ROLLOVER ACCOUNT" means the account maintained by the
Trustee reflecting a Participant's share of the Fund resulting from the making
of an Eligible Rollover Contribution pursuant to Article IV, 4 hereof.
(av) "SALARY REDUCTION CONTRIBUTION" means a contribution by a
Participating Company to the Fund on behalf of a Participant who has elected to
reduce his Compensation (or to forego an increase in his Compensation) and which
is subject to a cash or deferred election (as defined in Treasury Regulation
Section 1.401(k)-1(a)(3)) pursuant to the Cash or Deferred Arrangement set forth
in Article IV, 1 hereof.
(aw) "SERVICE IN THE ARMED FORCES OF THE UNITED STATES" means
service in the Armed Forces of the United States during any war or state of
emergency in which the United States is engaged, or in the Armed Forces of the
United States while any form of law requiring compulsory military service shall
be in effect and when such law shall be applicable to an Employee, or during a
period of voluntary enlistment, or service in a reserve component of the Armed
Forces of the United States during periods in which the Employee is voluntarily
or involuntarily on active service, provided that the Employee shall have
directly entered into such Armed Forces and shall not have reenlisted after the
date of first entering, and shall have made application for employment within
ninety (90) days after discharge or release from such Armed Forces or within
such other time as his re-employment rights are guaranteed by law.
(ax) "SPOUSE" means (1) in the case of a deceased Participant
or deceased former Participant, the widow or widower of such deceased
Participant or deceased former Participant and who was married to such deceased
Participant or deceased former Participant (determined in accordance with
applicable state law) on the date of his death; provided, however, that a former
Spouse shall be deemed to be the Spouse of such deceased Participant or deceased
former Participant to the extent provided in a Qualified Domestic Relations
Order and (2) for the purpose of Article IX, 3(b) hereof, the person who is
married to the Participant on the date such Participant makes application for a
loan.
(ay) "TRUST AGREEMENT" means the trust agreement entered into
by the Company or the Investment Committee and a Trustee under the Plan.
(az) "TRUSTEE" means a trustee for the time being under a trust
agreement.
(ba) "VALUATION DATE" means the end of each calendar month and
such other times as the Management Committee may direct.
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ARTICLE II
OPERATING COMPANY CONTRIBUTIONS
-------------------------------
1. Each Participating Group shall make available for the purposes of
the Plan after the end of each Plan Year and before the time prescribed by law
for filing the Federal income tax return of the Company for each year, including
any extension thereof, an amount, hereinafter called the "Operating Company
Contribution".
2. (a) Subject to the provisions of Sections 3, 4, 5 and 6 hereof,
the Operating Company Contribution on behalf of Participating Group A shall
equal the lesser of:
(i) the sum remaining after deducting from three percent
(3%) of Operating Profit of Participating Group A for the calendar
year the amount of the operating company contribution (as defined
in the PM Incorporated Plan and the Craft Plan) to the PM
Incorporated Plan and the Craft Plan; and
(ii) fifteen percent (15%) of the aggregate Compensation
for such year of the Participants of Participating Group A among
whom the Operating Company Contribution is to be allocated
pursuant to Article III hereof.
For purposes of this Section 2(a), (A) the amount of the operating
company contribution (as so defined) to the PM Incorporated Plan shall
equal three percent (3%) of Operating Profit times a fraction, the
numerator of which is the compensation (as defined in the PM Incorporated
Plan) of participants in the PM Incorporated Plan and the denominator of
which is the sum of the numerator herein, plus the compensation (as defined
in the Craft Plan) of participants in the Craft Plan, and the Compensation
of Participants who were such on the last business day of the Plan Year;
and (B) the amount of the operating company contribution (as so defined) to
the Craft Plan shall equal three percent (3%) of Operating Profit times a
fraction, the numerator of which is the compensation (as defined in the
Craft Plan) of participants in the Craft Plan and the denominator of which
is the sum of the numerator herein, plus the compensation (as defined in
the PM Incorporated Plan) of participants in the PM Incorporated Plan, and
the Compensation of Participants who were such on the last business day of
the Plan Year.
(b) Subject to the provisions of Sections 3, 4, 5 and 6
hereof, the Operating Company Contribution on behalf of Participating Group B
shall equal the lesser of:
(i) three percent (3%) of Operating Profit of
Participating Group B for the calendar year; and
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(ii) fifteen percent (15%) of the aggregate
Compensation for such year of the Participants of Participating
Group B among whom the Operating Company Contribution is to be
allocated pursuant to Article III hereof.
(c) Subject to the provisions of Sections 3, 4, 5 and 6
hereof, the Operating Company Contribution on behalf of Participating Group C
shall equal the greater of
(i) the percentage of Compensation made to the Plan on
behalf of the Participants of Participating Group A among whom the
Operating Company Contribution is to be allocated pursuant to
Article III hereof, determined under Section 2(a); or
(ii) the percentage of Compensation made on behalf of
the Participants of Participating Group B among whom the Operating
Company Contribution is to be allocated pursuant to Article III
hereof, determined under Section 2(b).
3. (a) In no event shall the sum of the aggregate Operating
Company Contributions and the operating company contributions to the PM
Incorporated Plan and the Craft Plan for any calendar year exceed three percent
(3%) of Consolidated Earnings for such year. In the event that the sum of the
aggregate Operating Company Contributions and operating company contributions to
the PM Incorporated Plan and Craft Plan exceed three percent (3%) of
Consolidated Earnings, each Operating Company Contribution to the Plan and the
operating company contributions to the PM Incorporated Plan and the Craft Plan
for such calendar year shall be reduced, pro rata, so that this limitation is
not exceeded.
(b) A Participating Group may make the Operating Company
Contribution computed under Section 2 hereof notwithstanding that one or more
Participating Companies which are a part of such Participating Group have
insufficient or no current or accumulated profits from which to make its share
of the Operating Company Contribution.
4. The amount of any Operating Company Contribution for each Plan
Year shall be reduced by the amount by which an allocation of such Operating
Company Contribution to any Participant would exceed the limitations described
in Article XVII.
5. Each Operating Company Contribution shall be contributed to the
Fund by the Company on behalf of each Participating Group prior to the time
prescribed by law for filing the Federal income tax return of the Company.
6. (a) Each Operating Company Contribution for each Plan Year
shall be reduced to the extent that it is not deductible by a Participating
Company pursuant to Sections 404(j) and 404(l) of the Code.
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(b) The making of any Operating Company Contribution or Salary
Reduction Contribution to the Fund is conditioned upon its deductibility under
Section 404 of the Code. If the deduction of any Operating Company Contribution
or Salary Reduction Contribution is disallowed, in whole or in part, solely
under Section 404 of the Code, then to the extent such amount is not deductible,
the Salary Reduction Contribution shall first be returned to the affected
Participants and the Operating Company Contribution shall next be returned to
the affected Participating Company in each instance within twelve (12) months
after the deduction is disallowed.
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ARTICLE III
ALLOCATION OF THE OPERATING COMPANY CONTRIBUTION
------------------------------------------------
1. The Operating Company Contribution of each Participating Group for
a Plan Year shall be allocated, promptly after the amount thereof has been
determined, among those who were Employees of a Participating Company of the
Participating Group and Participants on the last business day of such year in
the proportion which the Compensation for such year of such Participant bears to
the aggregate Compensation for such year of all such Participants of all such
Participating Companies of the Participating Group; provided, however, that in
no event shall the amount of the Operating Company Contribution allocated to a
Participant exceed the limitations described in Article XVII hereof. The
Administrator shall determine the names of such Participants and the amount of
the Operating Company Contribution to be allocated to each Participant's Company
Account.
2. The Administrator shall notify each Participating Company of a
Participating Group and the Trustee as to the amount to be credited to each
Participant's Company Account under Section 1 above.
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ARTICLE IV
PARTICIPANT CONTRIBUTIONS
-------------------------
1. (a) Salary Reduction Contributions. Each Participant may elect
------------------------------
to make Salary Reduction Contributions; provided, however, that a Participant
may not make Salary Reduction Contributions for the twelve (12) month period
following receipt of a hardship withdrawal from Salary Reduction Contributions
pursuant to Article VII, 3 hereof or from Elective Contributions pursuant to a
Cash or Deferred Arrangement described in Article I (g)(2) hereof. The total
amount of Salary Reduction Contributions on behalf of any Participant for any
Plan Year shall not exceed a percentage of the Participant's Compensation for
such Plan Year as determined by the Administrator, but in no event shall the
aggregate amount of Elective Contributions for a Participant's taxable year
commencing on and after January 1, 1987 exceed $7,000 (as adjusted annually for
Plan Years on and after January 1, 1988 to reflect future increases in the cost-
of-living in the same manner as the dollar limitation of Section 415(b)(1)(A) of
the Code is adjusted); provided, however, that the total amount of Salary
Reduction Contributions and other Elective Contributions for the Participant's
taxable year immediately succeeding the year he received a hardship withdrawal
pursuant to Article VII, 3 hereof from his Personal Before-Tax Account or from
Elective Contributions pursuant to a Cash or Deferred Arrangement described in
Article I(g)(2) hereof shall not exceed $7,000 (as so adjusted), less the amount
of his Salary Reduction Contributions and Elective Contributions made on behalf
of the Participant for the taxable year of the hardship withdrawal.
(b) The election to make Salary Reduction Contributions shall
be exercisable only on forms provided by the Management Committee. An election
by a Participant to make Salary Reduction Contributions may be revoked or
modified by a Participant in accordance with rules established by the Committee
and on forms provided by the Management Committee.
(c) Salary Reduction Contributions on behalf of any Highly
Compensated Employee shall not be in an amount which causes the Plan to fail to
satisfy the provisions of Section 401(k)(3) of the Code and Treasury Regulation
Section 1.401(k)-1(b)(2). If Salary Reduction Contributions on behalf of any
Highly Compensated Employee are in excess of these limits, the Administrator
shall (1) recharacterize such excess Salary Reduction Contributions as voluntary
contributions under Section 2 hereof no later than March 15 of the calendar year
next succeeding the Plan Year for which the Salary Reduction Contributions were
made, or (2) cause the Trustee to distribute the entire amount of such excess
(and any income allocable thereto) to the affected Highly Compensated Employee
after the close of the Plan Year for which such Salary Reduction Contributions
were made, but no later than twelve (12) months following the close of such Plan
Year.
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<PAGE>
(d) If Salary Reduction Contributions, together with Elective
Contributions to a Cash or Deferred Arrangement described in Article I(g)(2)
hereof, made by the Participating Company or any other member of the Controlled
Group on behalf of the Participant exceed $7,000 (as so adjusted) for the
Participant's taxable year, the Administrator shall cause the Trustee to
distribute to the affected Participant the amount of such excess (including
allocable earnings) contributed to the Fund on or before April 15 of the
calendar year following the close of the Plan Year for which the excess Salary
Reduction Contributions were made.
(e) Salary Reduction Contributions with respect to any Plan
Year may only be made with respect to Compensation which has not been received
by the Participant nor otherwise currently available to the Participant and may
be made solely by means of periodic payroll deductions.
(f) Salary Reduction Contributions so deducted by a
Participating Company shall be paid to the Trustee promptly after the next
Valuation Date and before the succeeding Valuation Date.
2. (a) Other Voluntary Contributions. Each Participant during
-----------------------------
any Plan Year may make voluntary contributions to the Fund; provided, however,
that a Participant may not make voluntary contributions for the twelve (12)
month period following receipt of a hardship withdrawal from his Personal
Before-Tax Account pursuant to Article VII, 3 hereof or from Elective
Contributions pursuant to a Cash or Deferred Arrangement described in Article
I(g)(2) hereof. The total contributions by any Participant under this Section 2
during any Plan Year shall not exceed the lesser of (1) the aggregate amount of
voluntary contributions the Participant could have made to the Fund for all Plan
Years during which he was a Participant in the Plan after January 1, 1971, less
the aggregate of all of the Participant's voluntary contributions previously
made to the Plan after such date, or (2) such amount as approved by the
Administrator.
(b) Voluntary contributions to the Fund made by a Participant
who is a Highly Compensated Employee, together with any Salary Reduction
Contributions recharacterized by the Administrator as voluntary contributions no
later than March 15 of the calendar year immediately succeeding the Plan Year
for which the Salary Reduction Contributions were made, shall not be in an
amount which causes the Plan to fail to satisfy the provisions of Section 401(m)
of the Code and Treasury Regulation Section 1.401(m)-1(b)(1).
(c) If voluntary contributions made by a Participant who is a
Highly Compensated Employee, together with any Salary Reduction Contributions
made on his behalf and recharacterized as voluntary contributions pursuant to
Section 1(c) hereof, exceed the limitations of Section 401(m) of the Code and
Treasury Regulation Section 1.401(m)-1(b)(1), the Administrator shall cause the
Trustee to distribute to the affected Participant the amount of such excess
(including allocable earnings) no later than twelve (12) months following the
16
<PAGE>
end of the Plan Year for which the excess voluntary contributions were made (or
recharacterized as such).
(d) Voluntary contributions with respect to a current Plan
Year may be made by means of periodic payroll deductions or by lump-sum payments
to a Participating Company. A Participant shall not make more than one lump-sum
payment in any calendar month.
(e) Voluntary contributions with respect to a prior Plan Year
may be made by means of a lump-sum payment to a Participating Company. A
Participant shall not make more than one lump-sum payment in any Plan Year. Such
lump-sum payments shall be made on a date or dates prescribed by the
Administrator and in accordance with rules established by the Committee and on
forms provided by the Management Committee.
(f) Voluntary contributions so deducted or received by a
Participating Company shall be paid to the Trustee promptly after the next
Valuation Date and before the succeeding Valuation Date.
3. In addition to the contribution limitations referred to in this
Article IV, a Participant's aggregate Salary Reduction Contributions and
voluntary after-tax contributions shall not exceed a percentage of the
Participant's Compensation as determined by the Committee.
4. (a) Eligible Rollover Contributions. The Administrator may, in
-------------------------------
accordance with nondiscriminatory rules established by the Committee, permit a
Participant to make one or more Eligible Rollover Contributions to the Fund.
Before an Eligible Rollover Contribution described in Article I(u)(ii) is
accepted, the Administrator may require, at the Participant's expense, an
opinion of a qualified tax advisor that the contribution constitutes an Eligible
Rollover Contribution described in Section 408(d)(3) of the Code. Any Eligible
Rollover Contribution accepted by the Administrator shall not be considered in
determining the maximum amount a Participant can contribute under Sections 2 or
3 of this Article IV, or the maximum annual additions under Article XVII of the
Plan. Eligible Rollover Contributions shall be made in cash only and shall be
invested as part of the Fund.
(b) Eligible Rollover Contributions received by a
Participating Company shall be paid to the Trustee promptly after the next
Valuation Date and before the succeeding Valuation Date.
17
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ARTICLE V
VALUATION
---------
1. The Trustee shall maintain a Company Account for each Participant,
a Personal Before-Tax Account for each Participant who makes Salary Reduction
Contributions, a Personal After-Tax Account for each Participant who makes
voluntary contributions to the Fund, a Rollover Account for each Participant who
has made a rollover contribution to the Fund prior to January 1, 1993 or an
Eligible Rollover Contribution on or after January 1, 1993, a Paysop Account for
each Participant whose account balance in the PAYSOP was transferred from the
PAYSOP and a Loan Account for each Participant who obtains a loan pursuant to
Article IX of the Plan. A Participant shall at all times have a nonforfeitable
interest in his Accounts and his Loan Account.
2. (a) As of each Valuation Date, the Trustee shall determine the
current market value of the Fund (exclusive of contributions not yet received by
it) and shall determine the value of each Participant's share in the Fund with
respect to his Accounts and Loan Account on the basis of proportionate shares in
the Fund on such date.
(b) The value of each Participant's Company Account as
determined in the last valuation, plus the amount of the Contribution (Operating
Company Contribution for Plan Years beginning on and after January 1, 1994) for
the preceding year thereafter to be credited to him and the amount of principal
of any outstanding loans transferred from the Participant's Loan Account to his
Company Account, less the withdrawals and distributions thereafter made to him
and the amount transferred to his Loan Account, and as adjusted for any earnings
and/or losses thereon attributable to his Company Account shall constitute the
Current Value of his Company Account until the next Valuation Date and shall be
used in determining the proportionate share of such Company Account in the Fund
in the next Valuation Date. Effective as of December 31, 1988, a Participant's
Company Account shall be divided equally into a Sub-account A and a Sub-account
B. The amount of the Contribution for any Plan Year after 1988 and before 1994
and the amount of any Operating Company Contribution for Plan Years on and after
January 1, 1994 shall be credited to Sub-account A of such Participant.
(c) The value of each Participant's Personal Before-Tax
Account as determined in the last valuation, plus the amount of his Salary
Reduction Contributions thereafter received by the Trustee and the amount of
principal of any outstanding loans transferred from the Participant's Loan
Account to his Personal Before-Tax Account, less the withdrawals and
distributions thereafter made to him and the amount transferred to his Loan
Account, and as adjusted for any earnings and/or losses thereon attributable to
his Personal Before-Tax Account shall constitute the Current Value of his
Personal Before-Tax Account until the next Valuation Date and shall be used in
determining the proportionate share of such Personal Before-Tax Account in the
Fund in the next Valuation Date.
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<PAGE>
(d) The value of each Participant's Personal After-Tax Account
as determined in the last valuation, plus the amount of his voluntary
contributions thereafter received by the Trustee and the amount of principal of
any outstanding loans transferred from the Participant's Loan Account to his
Personal After-Tax Account, less the withdrawals and distributions thereafter
made to him and the amount transferred to his Loan Account, and as adjusted for
any earnings and/or losses thereon attributable to his Personal After-Tax
Account shall constitute the Current Value of his Personal After-Tax Account
until the next Valuation Date and shall be used in determining the proportionate
share of such Personal After-Tax Account in the Fund in the next Valuation Date.
(e) The value of each Participant's Rollover Account as
determined in the last valuation, plus the amount of any Eligible Rollover
Contribution attributable to the Participant thereafter received by the Trustee
and the amount of principal of any outstanding loans transferred from the
Participant's Loan Account to his Rollover Account, less the withdrawals and
distributions thereafter made to him and the amount transferred to his Loan
Account, and as adjusted for any earnings and/or losses thereon attributable to
his Rollover Account shall constitute the Current Value of his Rollover Account
until the next Valuation Date and shall be used in determining the proportionate
share of such Rollover Account in the Fund in the next Valuation Date.
(f) The value of each Participant's Paysop Account as
determined in the last valuation, plus the amount of principal of any
outstanding loans transferred from the Participant's Loan Account to his Paysop
Account, less the withdrawals and distributions thereafter made to him and the
amount transferred to his Loan Account, and as adjusted for any earnings and/or
losses thereon attributable to his Paysop Account shall constitute the Current
Value of his Paysop Account until the next Valuation Date and shall be used in
determining the proportionate share of such Paysop Account in the Fund in the
next Valuation Date.
(g) The value of each Participant's Loan Account as determined
in the last valuation, plus the principal balance of any outstanding loans
thereafter extended to the Participant pursuant to Article IX, less any payments
of principal thereafter made by the Participant shall constitute the Current
Value of his Loan Account until the next Valuation Date.
3. Notwithstanding anything to the contrary contained in the Plan, if
a Participant transfers to a job position whereby he becomes a participant in
the PM Incorporated Plan or the Craft Plan, the value of such Participant's
Accounts and Loan Account shall be transferred to the trustee of the PM
Incorporated Plan or Craft Plan, promptly after the Valuation Date following the
effective date of the Participant's transfer.
4. Solely for purposes of this Article, Article VI, Article VII,
Article VIII and Article IX, a Participant shall include (a) an Employee whose
account balance in the PAYSOP is transferred from the PAYSOP to the Plan but who
is not otherwise eligible to
19
<PAGE>
become a Participant in the Plan and (b) a former Participant who has not
received a distribution of his Accounts under the Plan.
20
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ARTICLE VI
DISTRIBUTION
------------
1. Subject to the provisions of Section 2 of this Article VI and
Article VII hereof, distribution shall be made only in the event that a person
ceases to be a Participant. Except as hereinafter provided in this Article VI,
when a person ceases to be a Participant he thereafter shall have no right or
interest under the Plan other than his right to receive the Current Value of his
Accounts, less the Current Value of his Loan Account, as of the date he ceases
to be a Participant.
2. (a) Subject to the provisions of Article VII, a Participant
shall have the following rights with respect to elections filed on and after
January 1, 1987 regarding the distribution of his Accounts, less the Current
Value of his Loan Account; provided, however, that in no event shall the
Accounts of a Participant be distributed or commence to be distributed later
than the Participant's Required Benefit Commencement Date:
(i) To have distribution thereof commence:
(A) at such time as he ceases to be a
Participant; or
(B) at any time within five (5) years after he
ceases to be a Participant, but in no event later
than April 1 of the calendar year next succeeding
the calendar year in which he attains age seventy
and one-half (70 1/2); or
(C) at age fifty-nine and one-half (59 1/2); or
(D) at age sixty-five (65); or
(E) at April 1 of the calendar year next
succeeding the calendar year in which he attains
age seventy and one-half (70 1/2).
(ii) To have distribution thereof made in:
(A) a single payment and in the event of his
death prior to the receipt of such single payment,
such payment shall be made to his Beneficiary:
(y) in one payment within one (1) year of
the date of death of the Participant; or
21
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(z) if the Beneficiary is the
Participant's Spouse, in a single payment on
the date the Participant's distribution was
to be made; or
(B) quarter annual, semi-annual or annual
installments over a period not exceeding the life
expectancy of the Participant or the joint life
expectancies of the Participant and his
Beneficiary and in the event of his death prior to
the receipt of all such installments, the balance
remaining unpaid shall, subject to subsection (c)
hereof, be payable to his Beneficiary:
(y) in like installments for the remainder
of the period; or
(z) in one payment.
(iii) To have all or a portion of an Eligible Rollover
Distribution paid directly to the trustee or custodian of an
Eligible Retirement Plan described in clauses (i), (ii), (iii) or
(iv) of Article I(t) hereof designated by the Participant and in
the event of his death prior to the payment of a single sum
payment or all installments, the single sum payment or remaining
installments shall be payable to an Eligible Retirement Plan
described in clauses (i) or (ii) of Article I(t) hereof at the
election of the Participant's Beneficiary if such Beneficiary is
the Participant's Spouse.
(b) (i) A Participant who retires on an early retirement
allowance under the Philip Morris Salaried Employees' Retirement
Plan or any other defined benefit plan maintained by a member of
the Controlled Group after attaining the age of fifty-five (55)
years shall be deemed to have ceased to be a Participant on
account of his early retirement under the provisions of this Plan.
(ii) A distribution of the Accounts to a Participant
who is eligible for benefits under the Philip Morris Long-Term
Disability Plan or other long-term disability plan of a member of
the Controlled Group shall be deemed to be attributable to the
Participant's disability.
(c) If a Participant files a valid election with the
Administrator to have distribution made pursuant to subsection (a)(ii)(B) of
this Section 2 and the Participant dies before distribution of the Current Value
of his Accounts has been made or completed, distribution shall be made or
commence to be made: (i) in the case of a Beneficiary who is not the
Participant's Spouse, not later than one (1) year after the Participant's date
of death (or such later date as the Secretary of the Treasury may by regulations
prescribe) or (ii) in the case of a Beneficiary who is the Participant's Spouse,
not later than (A) one (1) year after the Participant's death, or (B) on the
date the Participant's benefits were scheduled to
22
<PAGE>
commence with distribution to be made as elected by the Participant, but in no
event over a period extending beyond the life expectancy of the Beneficiary and
provided, further, that if the Participant's Beneficiary who is his Spouse
should die before distribution commences, distribution shall commence within one
(1) year after the Spouse's date of death (or such later date as the Secretary
of the Treasury may by regulation prescribe).
(d) For the purpose of determining the period over which
distribution may be made pursuant to subsections (a)(ii)(B) and (c) above to a
Participant and his Beneficiary who is his Spouse, life expectancy of the
Participant and his Spouse shall be redetermined annually based on the ages of
the Participant and such Beneficiary on the anniversary date payments are
scheduled to commence.
(e) (i) If a Participant fails to file a valid election
with the Administrator and the Current Value of his Accounts and
his Loan Account as of the Valuation Date coincident with or next
preceding the date he ceases to be a Participant is less than
$3,500, distribution shall be made in one or more payments during
the calendar year in which he ceases to be a Participant or in one
or more payments during the next succeeding calendar year as the
Administrator, in his sole discretion, may determine. In the case
of death before complete distribution has been made, such
distribution or remainder thereof, as the case may be, shall be
made to his Beneficiary or, if none, to his legal representative,
in a single cash payment to be made within one (1) year after the
death of the former Participant.
(ii) If the Current Value of the Accounts and Loan
Account of a Participant who fails to file a valid election with
the Administrator is not less than $3,500, distribution shall be
made in one payment as of the Valuation Date coincident with or
next preceding the date the Participant attains age sixty-five
(65). In the case of death before distribution has been made, such
distribution shall be made to his Beneficiary or, if none, to his
legal representative, in a single cash payment to be made within
one (1) year after the death of the former Participant. A former
Participant may elect to have distribution made or commence to be
made earlier than as of the Valuation Date coincident with or next
preceding the date he attains age sixty-five (65).
(f) (i) Any election filed pursuant to this Section 2 must
be filed with the Administrator (i) no later than sixty (60) days
after the date a Participant ceases to be such, and (ii) in
accordance with such rules established by the Committee and on
forms provided by the Management Committee.
(ii) A Participant or former Participant may revoke or
modify an election to have distribution commence pursuant to
Section 2(a)(i)(B), (C), (D) or (E) hereof and elect, in
accordance with such rules of the Committee as shall be in force
to the time of election, to have distribution made or
23
<PAGE>
commence to be made pursuant to the provisions of Section
2(a)(ii)(A) or (B) hereof within sixty (60) days of the filing of
such revocation or modification. A revocation or modification of a
previous election pursuant to the provisions of the preceding
sentence shall be effective only with respect to distributions
scheduled to be made more than sixty (60) days after the filing of
such revocation or modification with the Administrator.
3. (a) A Participant (or his Beneficiary who is his Spouse) must
affirmatively make an election under Section 2(a)(iii) hereof in order for an
Eligible Rollover Distribution to be paid directly to an Eligible Retirement
Plan.
(b) A Participant (or his Beneficiary who is his Spouse) may
revoke any election with respect to whether a distribution is to be paid to an
Eligible Retirement Plan and any such change shall be effective with respect to
all subsequent payments until a new election is filed.
4. Notwithstanding the provisions of Section 2 hereof, any
Participant or former Participant may at any time and from time to time in
accordance with rules established by the Committee and on forms provided by the
Management Committee designate the Beneficiary to whom distribution shall be
made in the event of his death.
5. After a Participant ceases to be such, his Accounts shall remain
in the Fund until distributed in accordance with Section 2 hereof. After a
Participant ceases to be such, no Participating Company shall allocate any
portion of the Contribution (Operating Company Contribution for Plan Years
beginning on and after January 1, 1994) to his Company Account or make Salary
Reduction Contributions to his Personal Before-Tax Account, and the Participant
shall make no contributions to his Personal After-Tax Account or his Rollover
Account. The amount of each payment to be made to the former Participant shall
be determined by dividing the value (determined in accordance with Article V),
as of the most recent Valuation Date preceding each payment, of the
Participant's share in the Fund with respect to his Accounts by the remaining
number of payments to be made, including the payment which is then being made.
6. The Administrator shall have full discretion to accelerate the
payment of any unpaid installments.
7. (a) Any distribution may be made in kind or in cash or partly
in kind and partly in cash, according to the determination of the Administrator,
except that if any portion of a Participant's Accounts are invested in Part D of
the Fund (as defined in Article VIII, 2(a)) and such Accounts are to be
distributed as a result of ceasing to be a Participant in the Plan or a
withdrawal authorized pursuant to Article VII, 4 hereof, such Participant may
elect to have distribution of such portion made in full shares of Common Stock
(with cash in lieu of a fractional share).
24
<PAGE>
(i) Any distribution of an Eligible Rollover Distribution
directly to the trustee or custodian of an Eligible Retirement Plan
may be made by any reasonable means determined by the Administrator in
his sole and absolute discretion.
8. For purposes of this Article VI, an Alternate Payee shall have the
same rights and obligations as a Participant in the Plan, but only to the extent
consistent with the Qualified Domestic Relations Order.
25
<PAGE>
ARTICLE VII
WITHDRAWALS
-----------
1. A Participant, by written request to the Administrator, shall be
entitled to withdraw all or any part of the Current Value of his Personal After-
Tax Account. The Administrator may, as a condition for the granting of a loan
authorized by Article IX hereof, require that the Participant authorize a
withdrawal of all or a portion of the Current Value of his Personal After-Tax
Account in an amount sufficient to cure a default on the repayment of such loan.
2. No more than one withdrawal from his Personal After-Tax Account
may be made by a Participant in any Plan Year without the consent of the
Administrator.
3. (a) A Participant may apply to the Administrator for a
distribution from his Personal Before-Tax Account on account of hardship,
provided, that he satisfies the requirements of Subsections (b) and (c) hereof.
Subject to the provisions of Paragraph (f) hereof, a Participant who has been
such for no less than twenty-four (24) months may apply to the Administrator for
a distribution from his Company Account, his Personal Before-Tax Account, his
Rollover Account and his Paysop Account on account of hardship; provided,
however, that in no event may a Participant withdraw on account of hardship
earnings credited on and after January 1, 1989 to his Personal Before-Tax
Account and Sub-account B of his Company Account; and provided, further, that he
satisfies the requirements of Subsections (b) and (c) hereof. A distribution is
made on account of hardship if such distribution is necessary to alleviate or
satisfy an immediate and heavy financial need of the Participant.
(b) Prior to applying to the Administrator for a distribution
on account of hardship, a Participant must obtain all distributions (other than
a distribution pursuant to this Section 3) and any loans (including loans
pursuant to Article IX hereof) available to him under all plans qualified under
Section 401(a) of the Code maintained by any member of the Controlled Group.
(c) A distribution shall be made on account of an immediate
and heavy financial need if a Participant lacks adequate financial resources to:
(i) make payment to prevent the eviction of the
Participant from his principal residence or the foreclosure on the
mortgage on such residence; or
(ii) make payment of the costs directly related to the
purchase of a principal residence of such Participant (excluding
mortgage payments); or
26
<PAGE>
(iii) make payment of expenses for medical care (within
the meaning of Section 213(d) of the Code) previously incurred by
such Participant, his Spouse, or any dependents of such
Participant, or expenses necessary for these persons to obtain
medical care (within the meaning of Section 213(d) of the Code);
or
(iv) make payment of tuition and related educational
fees for the next twelve (12) months of post-secondary education
for such Participant, his Spouse, children or other dependents; or
(v) make repayment of the outstanding balance of a
loan obtained from the Plan pursuant to Article IX hereof.
(d) If the Administrator, in his sole discretion, determines
that an immediate and heavy financial need exists or is imminent, it may
authorize a distribution from such Participant's Company Account, or Personal
Before-Tax Account or Rollover Account, or Paysop Account or a combination
thereof.
(e) The amount of a distribution under this Section 3 to a
Participant who has been such for less than twenty-four (24) months shall not
exceed the lesser of (i) the amount determined by the Administrator to be
necessary to meet the immediate and heavy financial need of the Participant, or
(ii) the Current Value of his Personal Before-Tax Account, less the amount of
earnings credited to his Personal Before-Tax Account on and after January 1,
1989.
(f) The amount of a distribution under this Section 3 to a
Participant shall not exceed the amount determined by the Administrator to be
necessary to meet the immediate and heavy financial need of the Participant.
(g) As used in Paragraph (c)(iii) of this Section 3, the term
"dependent" shall have the same meaning as in Section 152 of the Code.
(h) Neither the application nor the distribution of any funds
in accordance with this Section 3 shall have the effect of terminating the
Participant's participation in the Plan.
(i) The Administrator may prescribe the use of such forms,
conduct such investigation and require making of such representation or
warranties as he deems desirable or necessary to carry out the purpose of this
Section 3. (Any misrepresentation or omission of a material fact made by the
Participant to the Administrator in connection with an application for a
distribution under this Section 3 may be cause for dismissal of employment.)
27
<PAGE>
(j) The Administrator shall apply the provisions of this
Section 3 on a uniform and nondiscriminatory basis to all Participants in
similar circumstances.
(k) If a distribution authorized under this Section 3 shall
render the Trust under this Plan disqualified for exemption from taxation and
disqualify the Plan under the Code, then such distribution may be reduced in
amount, if necessary to zero, in order to maintain qualification.
4. (a) Any Participant who has attained the age of fifty-nine and
one-half (59 1/2) years may apply to the Administrator for withdrawal of all or
a portion of the Current Value of his Personal Before-Tax Account.
(b) Any Participant who has been such for at least five (5)
calendar years and who has attained the age of fifty-nine and one-half (59 1/2)
years may apply to the Administrator for withdrawal of the Current Value of his
Accounts.
(c) Neither the application for nor the payment of any
withdrawal in accordance with this Section 4 shall have the effect of
terminating the Participant's participation in the Plan.
(d) The Administrator may prescribe the use of such forms and
require the making of such representation or warranties as he deems desirable or
necessary to carry out the purpose of this Section 4.
5. Any withdrawal pursuant to the provisions of this Article VII
shall be made in a lump sum as soon as is practicable after such withdrawal is
authorized by the Administrator. A Participant may elect to have any withdrawal
paid directly to the trustee or custodian of the Eligible Retirement Plan
designated by the Participant.
6. Solely for purposes of determining the eligibility of a
Participant for a withdrawal pursuant to Sections 3 and 4 of this Article, a
Participant whose account balance in the PAYSOP has been transferred from the
PAYSOP to the Plan shall be deemed to have been a Participant in the Plan for
any period during which he was a participant in the PAYSOP and not a Participant
in the Plan.
28
<PAGE>
ARTICLE VIII
THE FUND
--------
1. The Fund shall be held in trust by the Trustee and shall consist
of all amounts, including the Contribution (Operating Company Contribution for
Plan Years on and after January 1, 1994) paid into the Fund pursuant to the
Plan, investments made therewith, reinvestments thereof, proceeds of such
investments and reinvestments and earnings and profits thereon, less payments
made by the Trustee from the Fund. It shall be impossible for any part of the
Fund to be used for or diverted to purposes other than for the exclusive benefit
of Participants, former Participants and their Beneficiaries. The Trustee shall
be vested with the exclusive responsibility, authority and discretion to manage
or control Parts A, B and C of the Fund. A Participant shall be the named
fiduciary with respect to the full and fractional shares of Common Stock
allocated to his Accounts held in Part D of the Fund. The Trustee shall purchase
shares of Common Stock invested in Part D pursuant to a non-discretionary
purchasing program pursuant to the terms of the Trust Agreement and retain such
Common Stock, regardless of market fluctuations and, in the normal course, shall
sell such shares of the Common Stock only upon the direction of Participants (or
Beneficiaries) or to otherwise meet the administrative and distribution
requirements of the Plan.
2. (a) The Trustee shall, in accordance with Participant's
directions as provided in Sections 3 and 4 of this Article VIII, invest and
reinvest the principal and income of the Fund and keep the Fund invested in the
following Parts:
Part A
------
a fund invested in direct obligations of the United States
Government or agencies thereof, or obligations guaranteed as to the
payment of interest and principal by the United States Government or
agencies thereof, or in fully-insured bank deposits, as the Trustee in
its discretion may select.
Part B
------
a fund invested primarily in securities comprising the S&P 500
Index or other broad market index as the Investment Committee, in its
sole discretion, shall determine and in such proportions in order to
replicate the S&P 500 Index or other broad market index.
Part C
------
a fund invested or deposited with institutions which agree to
repay in full amounts transferred to the institutions, plus interest, at
a fixed or variable annual rate for a specified period. The repayment
obligations are to be provided by the
29
<PAGE>
institution through contracts or other agreements between the Trustee
and the institution. In the event such investments cannot be made as
herein provided, such fund shall be invested in direct obligations of
the United States Government or agencies thereof, or in obligations
guaranteed as to the payment of principal and interest by the United
States Government or agencies thereof, or in fully insured deposits with
commercial banks and savings and loan associations, as the Trustee, in
its discretion may select. Beginning January 1, 1993, the fund may also
be invested in mortgage-backed and asset-backed securities, some of
which are guaranteed as to the payment of principal and interest by the
United States government or its agencies, corporate bonds and
obligations of the United States government and its agencies. A
financial institution will agree to protect a designated pool of these
investments to the extent the value fluctuates due to a change in
interest rates, a change in the credit rating of the securities or on
such other events as the Investment Committee may determine.
Part D
------
a fund invested in Common Stock. Common Stock may be purchased at
its then fair market value on the open market or by private purchase.
(b) The Trustee may, in its sole discretion, keep any portion
of Part A, Part B and Part D in certain temporary investments pending the
selection and purchase of permanent investments for Part A and Part B and the
purchase of permanent investment of Part D and may invest temporary cash
balances of Part C in cash or in short term obligations, including a commingled
fund of the Trustee.
(c) All taxes and fees, including brokerage commissions
incurred by the Fund and certain costs of administering the Plan and the Fund
shall be paid from the Fund to the extent not paid by the Participating
Companies. All other expenses of administering the Plan and the investment of
Plan assets, including expenses for legal services, are paid by the
Participating Companies unless directed by the Investment Committee to be paid
from the Fund, but until paid will constitute a charge upon the Fund.
3. Each Participant shall, on or before such date as shall be fixed
by the Administrator, file with his Participating Company an initial direction
with respect to the portion of such Participant's Accounts and any future
contributions to such Accounts which is to be invested in Part A, Part B, Part C
and Part D. In the event a Participant shall not file with his Participating
Company, on or before the date fixed by the Administrator, an initial direction,
such Participant's Accounts and all future contributions to such Accounts shall
be invested (1) in Part B, in the case of any of such Participant's Accounts
established before January 1, 1992 and (2) in Part A, in the case of any of such
Participant's Accounts established on and after January 1, 1992. Any
apportionment of a Participant's investment direction among Part A, Part B, Part
C and Part D shall be in integral multiples of ten percent (10%).
30
<PAGE>
4. Subject to such rules and conditions as the Committee shall
prescribe on a uniform, consistent and nondiscriminatory basis, any Participant
may file with a Participating Company a modification of such Participant's
investment direction as then in effect, which modification shall become
effective no later than the first day of the next succeeding month for
modifications of investment direction filed after January 8, 1987, with respect
to the portion of the Participant's Accounts and any future contributions to
such Accounts which is to be invested in Part A, Part B, Part C and Part D,
subject in all instances to the apportionment limitation set forth in Section 3
of this Article VIII.
5. If a Participant dies before distribution is made or completed,
his Beneficiary may file with the former Participant's Participating Company a
direction with respect to the investment of such former Participant's Accounts
pursuant to the provisions of this Article VIII.
6. For purposes of this Article VIII only, Personal After-Tax Account
shall mean a Participant's Personal After-Tax Account and his Rollover Account.
7. The Administrator and the Committee may prescribe the use of such
forms as they deem desirable or necessary to carry out the purpose of Sections 3
and 4, respectively, of this Article VIII.
31
<PAGE>
ARTICLE IX
LOANS TO PARTICIPANTS
---------------------
1. A Participant may, in accordance with nondiscriminatory rules
established by the Committee, make application for not more than two (2) loans
from his Accounts in an aggregate amount not greater than the lesser of (i)
fifty percent (50%) of the Current Value of his Accounts, or (ii) $50,000,
reduced by the amount, if any, by which the highest outstanding balance of all
loans made to the Participant pursuant to the provisions of this Article IX
during the twelve (12) month period immediately preceding the date on which the
loan is made, exceeds the outstanding balance on the date the loan is made of
all loans made to the Participant pursuant to this Article. A Participant may
not have more than two (2) loans outstanding at any time.
2. (a) The application for a loan shall specify the period of
repayment, which period shall not be less than two (2) years nor more than five
(5) years, provided that a Participant may apply for a period of repayment of
not more than twenty-five (25) years if the proceeds of the loan are to be used
to acquire any dwelling unit which is to be used within a reasonable period of
time as the principal residence of the Participant.
(b) The application for a loan, or the renegotiation,
extension, renewal or other revision of an outstanding loan of a Participant who
is married on the date he makes application for a loan shall not be approved
unless his Spouse consents, in writing before a notary public or a
representative of the Administrator, to the use of the Participant's Accounts as
security for the loan.
3. Each loan shall be amortized in level payments over the term of
the loan.
4. Outstanding balances of all loans made to a Participant pursuant
to the provisions of this Article IX shall become due upon the Participant's
termination of employment and upon such other instances as the Administrator, in
his sole and absolute discretion, shall determine.
5. The Administrator and the Management Committee shall prescribe the
use of such forms, require the making of such representations and warranties and
adopt such rules, as they deem necessary or desirable to carry out the purpose
of this Article IX.
32
<PAGE>
ARTICLE X
THE FIDUCIARIES AND THEIR DELEGATEES
------------------------------------
1. The general administration of the Plan shall be vested in the
Committee; provided, however, that the Committee may delegate its authority to
the Management Committee and the Administrator to carry out certain
responsibilities in the administration of the Plan as set forth in the Plan and
in the Trust Agreement.
(a) The Committee shall be appointed by the Board and shall
consist of not less than three (3) nor more than fifteen (15) members (at least
one of whom shall be an officer or director of the Company) as the Board may
from time to time determine. The Committee may act by a majority of its number
then in office, either by vote at a meeting or in writing without a meeting. Any
act of the Committee shall be sufficiently evidenced if certified by the
Secretary of the Committee, any two (2) members thereof or in accordance with
by-laws adopted by the Committee.
(b) The Management Committee shall be appointed by the
Committee and shall consist of not less than three (3) members as the Committee
may from time to time determine. The Management Committee may act by a majority
of its number then in office, either by vote at a meeting or in writing without
a meeting. Any act of the Management Committee shall be sufficiently evidenced
if certified by the Secretary of the Management Committee, any two (2) members
thereof or in accordance with by-laws adopted by the Management Committee.
(c) The Committee may appoint a chairman from among its
members, and a secretary and such other officers as it may deem advisable, none
of whom need be a member. The Management Committee may appoint a chairman from
among its members, and a secretary and such other officers as it may deem
advisable, none of whom need be a member. The Fiduciaries may employ counsel,
agents and such clerical, financial and other services as they deem expedient,
and may adopt by-laws governing the transaction of any business. All expenses
incurred by the Fiduciaries shall be paid by the Participating Companies. Any
Fiduciary (other than an employee of any member of the Controlled Group) may
receive from the Participating Companies such reasonable remuneration for his
services as the Board may from time to time determine.
(d) The Administrator shall establish reasonable procedures to
determine whether a judgment, decree or order (including approval of a property
settlement agreement) pursuant to a State domestic relations law is a Qualified
Domestic Relations Order and to administer distribution of benefits pursuant to
such Qualified Domestic Relations Order.
(e) The Administrator shall prescribe the procedures for a
Participant (or his Beneficiary who is his Spouse) or an Alternate Payee to
elect to have an Eligible Rollover
33
<PAGE>
Distribution paid directly to a trustee or custodian of an Eligible Retirement
Plan designated by the Participant (or Beneficiary) or Alternate Payee,
including the necessity of receiving adequate information concerning the
Eligible Retirement Plan to which the Eligible Rollover Distribution is to be
paid.
2. (a) Except for the authority of the Trustee as set forth in
Article VIII, 1 hereof and the right of each Participant and Beneficiary to
direct the Trustee with respect to the investment of his Accounts as provided in
Article VIII, 2 hereof, the Investment Committee shall in all other respects
have full authority with respect to the operation and management of the
investment of the assets of the Plan, including by way of example, but not of
limitation:
(i) to monitor the investment performance of the Parts
of the Fund;
(ii) to direct the Trustee with respect to the
investment of a Part of the Fund;
(iii) to select the Parts of the Fund in which
Participants and Beneficiaries may direct the Trustee to invest
their Accounts;
(iv) to appoint one or more Investment Managers to
manage (including the power to acquire or dispose of) one or more
Parts or any portion of a Part of the Fund;
(v) to appoint one or more successor Trustees and to
enter into a trust agreement with the Trustee or any successor
trustee on behalf of the Participating Companies;
(vi) if the relief offered by Section 404(c) of ERISA
is elected with respect to any or all portion of the Fund, to
coordinate with the Committee (A) on providing and making
available sufficient information to enable Participants and
Beneficiaries to make informed investment decisions, (B) on
establishing procedures to ensure the confidentiality of
information relating to the purchase, holding and sale of
interests in Part D of the Fund and on the exercise of voting,
tender and similar rights by Participants and Beneficiaries, and
(C) on performing any and all acts necessary to obtain the relief
offered by Section 404(c) of ERISA;
(vii) to establish policies relating to the exercise of
proxy voting, tender and similar rights; and
(viii) to determine the expenses of administering the
Plan and the investment of the Plan's assets which shall be
payable from the Fund.
34
<PAGE>
(b) The Investment Committee may act by a majority of its
number then in office, either by vote at a meeting or in writing without a
meeting. Any act of the Investment Committee shall be sufficiently evidenced if
certified by the Secretary of the Investment Committee, any two (2) members
thereof or in accordance with any by-laws adopted by the Investment Committee.
(c) The Investment Committee may appoint a chairman from among
its members, and a secretary and such other officers as it may deem advisable,
none of whom need be a member; may employ counsel, agents and such clerical,
investment, financial and other services as it deems expedient; and may adopt
by-laws governing the transaction of its business. All expenses incurred by the
Investment Committee shall be paid by the Participating Companies. The members
of the Investment Committee (other than employees of any member of the
Controlled Group) may receive from the Participating Companies such reasonable
remuneration for their services as the Board may from time to time determine.
35
<PAGE>
ARTICLE XI
AMENDMENT OR TERMINATION
------------------------
1. The Board may amend, retroactively or otherwise, suspend, or
terminate the Plan or the Trust Agreement, in whole or in part; provided,
however, that authority to amend the Plan is delegated to the following
Fiduciaries where approval of the Plan amendment or amendments by the
shareholders of the Company is not required: (1) to the Committee, if the
amendment (or amendments) will not increase the annual expenditure of the Plan
by $10,000,000, (2) to the Management Committee, if the amendment (or
amendments) will not increase the annual expenditure of the Plan by $4,000,000,
and (3) to the Administrator, if the amendment (or amendments) will not increase
the annual expenditure of the Plan by $500,000. Each Participating Company
reserves the right to terminate its participation in the Plan, by delivering to
the Trustee and the Committee a copy of such amendment, suspension or
termination, as duly incorporated in a resolution of the Board or of the board
of directors of such Participating Company, as the case may be; provided,
however, that the Board shall have no power to (i) increase the aggregate
Operating Company Contributions and operating company contributions to the PM
Incorporated Plan and the Craft Plan for any year to an amount in excess of
three percent (3%) of Consolidated Earnings for such year, or (ii) cause or
permit any part of the Fund to be used for or diverted to purposes other than
for the exclusive benefit of Participants, former Participants and their
Beneficiaries. Notwithstanding the foregoing, the provisions of Paragraphs 2
through 6 of Article II shall not be amended more than once every six months
unless such amendment is required because of changes in the Code, ERISA or the
rules thereunder.
2. Upon the termination or partial termination of the Plan or upon
complete discontinuance of contributions thereto, the rights of all Participants
to amounts credited to the Participants' Accounts shall be nonforfeitable. Upon
the occurrence of any of such events, the Committee, in accordance with the
direction of the Board, shall direct the Trustee either:
(a) To continue to act in accordance with the Plan and the
Trust Agreement until all assets have been distributed in accordance with the
Plan or until such time as the Board directs distribution in accordance with the
provisions of subsection (b) hereof; or
(b) To distribute all assets remaining in the Fund to
Participants, former Participants, their Beneficiaries or legal representatives
in accordance with the Current Value of the Participants' Accounts, less the
Current Value of the Participants' Loan Accounts, as of a date to be determined
by the Board.
The Committee in office at the time of such termination, partial
termination or complete discontinuance of contributions shall continue to act
with its full powers hereunder
36
<PAGE>
until the completion of the distribution of such assets; and a majority of the
members of the Committee then in office shall have the power to fill vacancies
occurring in the Committee by resignation, death or otherwise after such
termination, partial termination or complete discontinuance of contributions.
37
<PAGE>
ARTICLE XII
RESTRICTIONS ON ALIENATION AND ASSIGNMENT
-----------------------------------------
The right of any person to receive any distribution or to withdraw any
amount pursuant to the Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge or to the
creation, assignment or recognition of a right to any benefits under the Plan
pursuant to a domestic relations order, unless determined to be a Qualified
Domestic Relations Order and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same or to create, assign or
recognize a right to the same pursuant to a domestic relations order which is
not a Qualified Domestic Relations Order shall be void; nor shall said right be
in any manner liable for or subject to the debts, contracts, liabilities,
engagements or torts of any such person.
38
<PAGE>
ARTICLE XIII
GENERAL PROVISIONS
------------------
1. The adoption and maintenance of the Plan shall not be deemed to
constitute a contract between any Participating Company and any Employee or to
be a consideration for, or an inducement or condition of, the employment of any
person. Nothing herein contained shall be deemed to give any Employee the right
to be retained in the service of a Participating Company or to interfere with
the right of any Participating Company to discharge any Employee at any time.
2. Full and fractional shares of Common Stock invested in Part D and
allocated to a Participant's Accounts shall be voted by the Trustee only in
accordance with, and upon instructions of, such Participant (or Beneficiary)
given on forms provided for that purpose. Such forms, together with all
information distributed to stockholders regarding the exercise of such rights,
shall be provided to each Participant (or Beneficiary) whose Accounts are
invested in Part D. Upon timely receipt of instructions, the Trustee shall vote
such shares as so instructed. Shares of Common Stock for which the Trustee has
not received voting instructions shall be voted in accordance with the terms of
the Trust Agreement.
3. (a) If the Administrator denies a request for a distribution
of or a withdrawal from an Account, the Administrator will furnish to the
Participant or his Beneficiary a written statement setting forth:
(i) the specific reason or reasons for the denial;
(ii) a specific reference to each provision of the Plan
on which the denial is based;
(iii) a description of any additional material or
information necessary to perfect the application, together with an
explanation of why such material or information is necessary; and
(iv) an explanation of the review procedure under the
Plan.
If the Administrator denies any such request or if the Participant or
his Beneficiary believes that any distribution determined to be payable is
incorrect, such Participant or his Beneficiary may appeal such determination by
filing (or causing his duly authorized representative to file) with the
Management Committee within sixty (60) days after receipt of the notice of the
determination of the Administrator a written request for review. Such request
shall contain such issues, comments and information and be accompanied by such
documents as such Participant or his Beneficiary (or such representative) shall
deem advisable to submit in order to support his position. All pertinent
documents in the
39
<PAGE>
possession of the Administrator, the Management Committee or a Participating
Company may be examined by such Participant, Beneficiary or authorized
representative, provided the request for review specifies the documents to be
reviewed. Within sixty (60) days after the receipt by the Management Committee
of a request for review, it shall render a decision thereon, which decision
shall be in writing and shall include specific reasons for the decision with
specific references to the pertinent provisions of the Plan upon which the
decision is based. A copy of such decision shall be furnished promptly to the
person requesting the review.
(b) Upon receipt of any judgment, decree or order (including
approval of a property settlement agreement) pursuant to a State domestic
relations law claimed to be a Qualified Domestic Relations Order, the
Administrator shall promptly notify the Participant whose Accounts may be
subject thereto and any Alternate Payee specified therein of the receipt thereof
and the Plan's procedures for determining whether such judgment, decree or order
is a Qualified Domestic Relations Order.
The Administrator shall determine, within a reasonable period of time
after receipt thereof, whether such judgment, decree or order is a Qualified
Domestic Relations Order and shall notify the affected Participant and each
Alternate Payee of such determination. Pending final determination as to whether
a judgment, decree or order is a Qualified Domestic Relations Order (by the
Administrator, a court of competent jurisdiction, or otherwise) the
Administrator shall cause the Trustee to separately account for the portion of
the Participant's Accounts that would have been payable to the Alternate Payee
during such period if such order had been determined to be a Qualified Domestic
Relations Order.
If, within the eighteen (18) month period beginning on the date on which
the first payment would be required to be made under the claimed Qualified
Domestic Relations Order, the judgment, decree or order is finally determined to
be a Qualified Domestic Relations Order, the Administrator shall direct the
Trustee to pay the separately accounted for amounts (plus any interest thereon)
to the Alternate Payee entitled thereto.
If, within the eighteen (18) month period beginning on the date on which
the first payment would be required to be made under the claimed Qualified
Domestic Relations Order, the judgment, decree or order is finally determined
not to be a Qualified Domestic Relations Order, or no such determination has
been made, the Administrator shall direct the Trustee to pay the separately
accounted for amounts (plus any interest thereon) to the Participant or
Beneficiary entitled thereto as if no judgment, decree or order had been served.
Any subsequent determination that such judgment, decree or order is a Qualified
Domestic Relations Order shall apply to benefits paid or payable on or after the
date of such determination.
4. In case any person entitled to a distribution or entitled to
withdraw any amount pursuant to Article VII hereof shall be indebted to a
Participating Company, the Administrator shall, upon the request of the
Participating Company and in accordance with
40
<PAGE>
regulations promulgated by the Department of the Treasury, deduct, or direct the
Trustee to deduct, from any amount payable to such person an amount equal to
such indebtedness and pay the same to the Participating Company.
5. If any person entitled to a payment under the Plan is an infant,
or if the Administrator determines that any such person is incompetent by reason
of physical or mental disability, the Administrator shall have power to cause
the payments becoming due to such person to be made to another for his benefit,
without any responsibility of the Administrator or the Trustee for the
application of such payments. Payments made pursuant to such power shall
operate, to the extent thereof, as a complete discharge of all obligations
arising pursuant to the Plan and the Trust Agreement.
6. Except in those cases in which the power of determination is
expressly reserved to a Participating Company, the appropriate Fiduciary shall
have full power and authority to determine all matters arising in the
administration, interpretation and application of the Plan.
7. Except as otherwise required by ERISA, the Plan shall be construed
and enforced and its provisions shall be administered according to the laws of
the State of New York.
41
<PAGE>
ARTICLE XIV
FORMS; COMMUNICATIONS
---------------------
The Management Committee shall provide such appropriate forms as it may
deem expedient in the administration of the Plan and no instrument for which a
form is so provided shall be valid unless upon such form. All communications
concerning the Plan shall be in writing addressed to the Management Committee or
the Administrator at such address as may from time to time be designated. No
communication shall be effective for any purpose unless received by the
Management Committee or the Administrator.
42
<PAGE>
ARTICLE XV
MERGER, ETC.
------------
In the case of any merger or consolidation of the Fund with, or transfer
of the assets or liabilities of the Fund to, any trust holding assets of any
other employee benefit plan, each Participant in the Plan must (if the Plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger, consolidation or transfer if
the Plan had terminated.
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ARTICLE XVI
CHANGE OF CONTROL PROVISIONS
----------------------------
1. (a) In the event of a "Change of Control" (as defined in
Section 2 of this Article XVI), the provisions of subsection (b) of this Section
1 shall apply, anything in the other provisions of this Article or any other
provision in the Plan other than Section 1 of Article XI to the contrary
notwithstanding.
(b) For the year in which the Change of Control occurs and for
each of the succeeding two (2) years following the year in which the Change of
Control occurs (the "Control Period") each Participating Group shall make an
Operating Company Contribution on behalf of its Employees who were Participants
at least equal to the lesser of:
(i) the percentage of the aggregate Compensation of
Participants that was contributed to the Plan for the year prior
to the year in which the Change of Control occurs; and
(ii) ten percent (10%) of the aggregate Compensation of
the Participants for each year in the Control Period.
(c) The Operating Company Contribution for each year in the
Control Period shall be contributed to the Fund prior to the time prescribed by
law for the filing of the Federal corporate income tax return of the Company, or
its successors, as applicable, for each such year.
2. For purposes of the Plan, a "Change of Control" shall mean 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 the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute a Change
of Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
described in clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
44
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(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company'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
Board; or
(c) Approval by the shareholders of the Company 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 Company Common Stock and Outstanding
Company 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 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 Company through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Company 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 corporation resulting from such Business Combination or 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 Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, 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 Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as
45
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their ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company 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
Company or such corporation), except to the extent that such Person owned 20% or
more of the Outstanding Company Common Stock or Outstanding Company 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 Board, providing for such sale or other disposition of assets of
the Company or were elected, appointed or nominated by the Board.
3. (a) In addition to all other rights under 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 Article XVI by
seeking injunctive relief or damages, or both, and the Participating Companies
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) The foregoing provisions of this Article XVI shall be
construed liberally to the end that the purpose of Section 1 above shall be
fully implemented.
(c) Anything in the Plan to the contrary notwithstanding, on
and after the Control Date none of the provisions of this Article XVI shall be
amended unless within sixty (60) 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.
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ARTICLE XVII
LIMITATION ON ALLOCATIONS
-------------------------
1. General Rule. The amount of Annual Additions (as defined in
------------
Section 7) for Plan Years beginning on and after January 1, 1983 allocated to a
Participant's accounts under the Plan and all other defined contribution plans
qualified under Section 401(a) of the Code maintained by the Controlled Group
shall be subject to the limitations of Sections 2 through 6 below. If the
allocation of Annual Additions to a Participant's accounts for any Plan Year
beginning on and after January 1, 1983 should exceed these limitations, such
Annual Additions shall be reduced in the order set forth in Section 6 below so
that these limitations are not exceeded.
2. Limit on Allocations for Defined Contribution Plan. The maximum
--------------------------------------------------
allocation of Annual Additions to accounts of any Participant under the Plan and
all other defined contribution plans qualified under Section 401(a) of the Code
maintained by one or more members of the Controlled Group for any Plan Year on
and after January 1, 1983, shall be the lesser of (i) the greater of (x) $30,000
(as increased as of January 1 of each calendar year beginning after December 31,
1987 and applicable to the Plan Year coinciding with such calendar year to
reflect cost of living adjustments in accordance with regulations prescribed by
the Secretary of the Treasury) or (y) twenty-five percent (25%) of the dollar
limitation on annual benefits under Section 415(b)(1)(A) of the Code for such
Plan Year, and (ii) twenty-five percent (25%) of such Participant's
Compensation, less the amount of his Salary Reduction Contributions and salary
reduction contributions to a cafeteria plan (as defined in Section 125 of the
Code).
3. Combined Limit for Participation in Defined Contribution and
------------------------------------------------------------
Defined Benefit Plans. A Participant who participates, or has participated at
- ---------------------
any time, in one or more defined benefit pension plans qualified under Section
401(a) of the Code maintained by a member of the Controlled Group shall be
subject to a combined limit. The combined limit for any Plan Year beginning on
and after January 1, 1983 is reached when the sum of the defined contribution
plan fraction and the defined benefit plan fraction exceeds 1.0.
(a) Defined Benefit Plan Fraction. The defined benefit plan
-----------------------------
fraction shall be a fraction, the numerator of which is the projected annual
benefit of the Participant under all defined benefit plans qualified under
Section 401(a) of the Code maintained by the Controlled Group in which such
Participant participates (determined as of the close of the Plan Year) and the
denominator of which is the lesser of (i) the product of 1.25, multiplied by the
dollar limitation in effect under Section 415(b)(1)(A) of the Code for such Plan
Year, or (ii) the product of 1.4, multiplied by the amount which may be taken
into account under Section 415(b)(1)(B) of the Code for such Plan Year with
respect to such Participant under all defined benefit plans qualified under
Section 401(a) of the Code maintained by the Controlled Group in which the
Participant participates.
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<PAGE>
(b) Defined Contribution Plan Fraction. The defined
----------------------------------
contribution plan fraction shall be a fraction, the numerator of which is the
sum of the Annual Additions to the Participant's accounts under the Plan and all
other defined contribution plans qualified under Section 401(a) of the Code
maintained by the Controlled Group in which such Participant participates
(determined as of the close of the Plan Year), and the denominator of which is
the sum of the lesser of the following amounts determined for such Plan Year and
for each prior year of Accredited Service of the Participant with the Controlled
Group: (i) the product of 1.25, multiplied by the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for such Plan Year (determined without
regard to subsection (c)(6) thereof), and (ii) the product of 1.4, multiplied by
the amount which may be taken into account under Section 415(c)(1)(B) of the
Code with respect to such Participant under the Plan and all other defined
contribution plans qualified under Section 401(a) of the Code maintained by the
Controlled Group in which such Participant participates for such Plan Year.
4. Election with Respect to Defined Contribution Plan Fraction. The
-----------------------------------------------------------
amount taken into account in computing the denominator of the fraction under
Section 3(b) above with respect to each Participant for all years of Accredited
Service prior to January 1, 1983 shall, at the election of the Committee, be an
amount equal to the product of multiplying the denominator of the fraction
determined in accordance with Section 3(b) (as in effect for the Plan Year
ending December 31, 1982), by the transition fraction, the numerator of which is
the lesser of (a) $51,875, or (b) 1.4, multiplied by twenty-five percent (25%)
of the Participant's Compensation for the Plan Year ending December 31, 1981,
and the denominator of which is the lesser of (y) $41,500, and (z) twenty-five
percent (25%) of the Participant's Compensation for the Plan Year ending
December 31, 1981.
5. Transitional Rule for Defined Contribution Plan Fraction. In
--------------------------------------------------------
computing whether the sum of the defined benefit plan and defined contribution
plan fractions set forth in Section 3 does not exceed 1.0 as of January 1, 1983,
an amount equal to the product of (a) and (b), below shall be permanently
subtracted from the numerator of the defined contribution plan fraction in
Section 3(b) above:
(a) the sum of the defined contribution plan fraction and the
defined benefit plan fraction as of December 31, 1982, minus one (1), multiplied
by
(b) the denominator of the defined contribution plan fraction
as of December 31, 1982.
In computing the product of (a) and (b) above, the defined benefit plan
fraction and defined contribution plan fraction shall be determined in
accordance with Section 415 of the Code (as amended and modified by the Tax
Equity and Fiscal Responsibility Act of 1982, including Section 235(g)(3) of
that Act).
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<PAGE>
6. Priority of Reduction of Annual Additions and Projected Annual
--------------------------------------------------------------
Benefit. If, for any Plan Year, the sum of (a) Annual Additions allocated to
- -------
the accounts of a Participant under the Plan and all other defined contribution
plans qualified under Section 401(a) of the Code maintained by the Controlled
Group, and (b) the projected annual benefit (as defined in Section 415(e)(2) of
the Code) of the Participant under all defined benefit plans qualified under
Section 401(a) of the Code maintained by the Controlled Group in which such
Participant participates, should exceed the limitations of Sections 2 or 3 of
this Article XVII, then such Annual Additions and projected annual benefit shall
be reduced in the following order in order that the limitations of Section 2 or
3 hereof are not exceeded:
(a) the projected annual benefit of the Participant under all
defined benefit pension plans qualified under Section 401(a) of the Code
maintained by the Controlled Group shall first be reduced (but not below zero);
(b) the amount of the Participant's voluntary (after-tax)
contributions shall, to the extent they exceed the permissible Annual Additions
allocated to the Participant's accounts under subsections (c) and (d) hereof
(determined as of the close of the Plan Year), next be reduced and any excess
(including voluntary contributions previously made by the Participant for the
Plan Year) shall be returned to the Participant;
(c) the amount of the Operating Company Contribution allocated
to the Participant's Company Account for the Plan Year shall then be reduced in
an amount equal to the greater of (i) the amount by which the Operating Company
Contribution allocated to the Participant's Company Account, when added to the
sum of the Participant's Salary Reduction Contributions allocated to the
Participant's Personal Before-Tax Account under subsection (d) hereof, exceeds
the permissible Annual Additions for such Plan Year, or (ii) the amount by which
the Operating Company Contribution, when included in the computation of the
combined defined benefit plan and defined contribution plan limit described in
Section 3 for the Plan Year, exceeds said limits; provided, however, that any
excess Annual Additions attributable to Operating Company Contributions as a
result of the foregoing application of clauses (i) or (ii) above, shall reduce
the Operating Company Contributions for the Plan Year in a like amount; and
(d) the amount of the Participant's Salary Reduction
Contributions shall be reduced to the extent that, after the application of
subsections (a), (b) and (c) hereof, the Annual Additions continue to exceed the
limitations of Sections 2 or 3 hereof and any excess (including Salary Reduction
Contributions previously made by the Participant for the Plan Year) shall be
returned to the Participant.
7. Annual Additions. Annual Additions shall mean (i) the Operating
----------------
Company Contribution (and the Contribution for Plan Years prior to January 1,
1994) made by the Participating Companies in accordance with Article II, (ii)
employee stock ownership credit contributions under any employee stock ownership
plan, (iii) Salary Reduction Contributions, (iv) for Plan Years beginning after
December 31, 1986, voluntary contributions and (v) any
49
<PAGE>
forfeitures allocated to the Participant under any other defined contribution
plan maintained by the Controlled Group.
50
<PAGE>
ARTICLE XVIII
RULES IN THE EVENT PLAN BECOMES A TOP-HEAVY PLAN
------------------------------------------------
1. If, for any Plan Year, the Plan is a top-heavy plan pursuant to
the rules set forth in Section 2 below, the following provisions shall apply for
such Plan Year notwithstanding any other Article in the Plan to the contrary:
(a) For the purpose of determining the combined limit pursuant
to Section 415(e) of the Code where a Participant also participates or has
participated in one or more defined benefit pension plans qualified under
Section 401(a) of the Code maintained by a member of the Controlled Group:
(i) The denominators of the defined benefit plan fraction
in Section 3(a)(i) of Article XVII and the defined contribution
plan fraction in Section 3(b)(i) of Article XVII shall be
determined by multiplying the dollar limitation in effect under
Section 415(b)(1)(A) of the Code (in the case of the defined
benefit plan fraction) and the dollar limitation in effect under
Section 415(c)(1)(A) of the Code (in the case of the defined
contribution plan fraction) by 1.0; and
(ii) The numerator of the transition fraction in Section 4
of Article XVII shall be determined by substituting $41,500 for
$51,875 in subsection (a) thereof; provided, however, that the
limitations of this subsection (b) shall not apply if the Plan
would not be a top-heavy plan pursuant to the rules set forth in
Section 2 hereof, if ninety percent (90%) were substituted for
sixty percent (60%) each place in which it appears in Section 2.
(b) The Operating Company Contribution of each Participating
Group for a Plan Year shall be allocated, promptly after the amount thereof has
been determined, among those who were Employees of a Participating Company of
the Participating Group and Participants on any business day of such year in the
proportion which the Compensation paid by a Participating Company of the
Participating Group for such year to such Participant bears to the aggregate
Compensation paid by each Participating Company of the Participating Group for
such year for all such Participants of all such Participating Companies of the
Participating Group; provided, however, that in no event shall the amount of the
Operating Company Contribution allocated to a Participant exceed the limitations
described in Article XVII hereof. The Administrator shall determine the names of
such Participants and the amount of the Operating Company Contribution to be
allocated to each Participant's Company Account.
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<PAGE>
2. (a) The Plan shall be a top-heavy plan for a Plan Year if, as
of the last day of the preceding Plan Year, the sum of (i) the aggregate of the
accounts (determined in accordance with Section 416(g) of the Code) of key
employees (as defined in Section 416(i) of the Code) under all plans which are
defined contribution plans aggregated pursuant to subsections (b) and (c) below,
and (ii) the present value of cumulative accrued benefits (using the same
actuarial assumptions and principles for all defined benefit plans maintained by
one or more members of the Controlled Group) of key employees in such plans
which are defined benefit plans, exceeds sixty percent (60%) of the product of
clauses (i) and (ii) of this Section 2, determined for all employees under plans
aggregated pursuant to subsections (b) and (c).
(b) Each plan qualified under Section 401(a) of the Code
maintained by one or more members of the Controlled Group (i) in which a key
employee participates, and (ii) which plan enables a plan described in clause
(i) to satisfy the requirements of Section 401(a)(4) or 410 of the Code shall be
aggregated for the purpose of determining if any or all of such plans are top-
heavy plans.
(c) The Committee may elect to include any other plan or plans
qualified under Section 401(a) of the Code maintained by one or more members of
the Controlled Group with the plan or plans required to be aggregated pursuant
to subsection (b), provided that after such aggregation, all of such plans
(including the plan or plans which the Committee has elected to include pursuant
to this subsection (c)) continue to meet the requirements of Sections 401(a)(4)
and 410 of the Code and provided, further, that the plan or plans included
pursuant to the provisions of this subsection (c) shall not be subject to the
additional requirements set forth in Section 1.
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EXHIBIT A
PARTICIPATING GROUPS
PARTICIPATING GROUP A
- ---------------------
Philip Morris Incorporated and its subsidiaries
PARTICIPATING GROUP B
- ---------------------
Miller Brewing Company and its subsidiaries
PARTICIPATING GROUP C
- ---------------------
Philip Morris Companies Inc.
Philip Morris Capital Corp.
Philip Morris Management Corp.
Philip Morris Corporate Services Inc.
Philip Morris International, Inc.
PM Products, Inc.
Mission Viejo Company
53
