PHILIP MORRIS
LONG-TERM DISABILITY BENEFIT EQUALIZATION PLAN
Effective January 1, 1989
(As amended and in effect as of January 1, 1996)
TABLE OF CONTENTS
Page No.
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PHILIP MORRIS LONG-TERM DISABILITY BENEFIT
EQUALIZATION PLAN - Preamble..................................... 1
ARTICLE I........................................................ 2
DEFINITIONS................................................. 2
(a) Committee......................................... 2
(b) Compensation Limitation........................... 2
(c) Disability Benefit Equalization Allowance or
Allowance......................................... 2
(d) Long-Term Disability Plan......................... 2
(e) Plan.............................................. 2
(f) Retirement Allowance.............................. 2
ARTICLE II....................................................... 3
DISABILITY BENEFIT EQUALIZATION ALLOWANCES.................. 3
A. Disability Benefit Equalization Allowances
payable under this Plan........................... 3
B. Commencement and termination of Disability
Benefit Equalization Allowances................... 3
ARTICLE III...................................................... 4
FUNDS FROM WHICH ALLOWANCES ARE PAYABLE..................... 4
ARTICLE IV....................................................... 5
THE CORPORATE EMPLOYEE BENEFIT COMMITTEE AND ITS
DELEGATEES............................................. 5
ARTICLE V........................................................ 6
AMENDMENT AND DISCONTINUANCE OF THE PLAN.................... 6
ARTICLE VI....................................................... 7
CHANGE IN CONTROL PROVISIONS................................ 7
A. In the event of a Change of Control............... 7
B. Definition of Change of Control................... 7
PHILIP MORRIS
LONG-TERM DISABILITY BENEFIT EQUALIZATION PLAN
The Philip Morris Long-Term Disability Benefit Equalization Plan as
hereinafter set forth shall govern the rights of an Employee or Disabled
Employee who is eligible for benefits on or after January 1, 1996 under the
Long-Term Disability Plan and whose benefits under the Long-Term Disability
Plan are or will in the future be limited by reason of Section 505 of the
Internal Revenue Code of 1986, as amended from time to time.
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ARTICLE I
DEFINITIONS
The following terms as used herein shall have the meanings set forth
below. All capitalized terms not defined below shall have the same meaning
as in the Long-Term Disability Plan.
(a) 'Committee' shall mean the Corporate Employee Benefit Committee of
Philip Morris Companies Inc. charged with the administration of the
Plan as from time to time constituted.
(b) 'Compensation Limitation' shall mean the limitation of Section
505(b)(7) of the Code on the annual compensation of an Employee
which may be taken into account under the Long-Term Disability Plan.
(c) 'Disability Benefit Equalization Allowance' or 'Allowance' shall
mean the amount payable under the Plan to a former Employee in equal
monthly payments during a twelve (12) month period.
(d) 'Long-Term Disability Plan' shall mean the Philip Morris Long-Term
Disability Plan, effective February 1, 1974, as amended from time
to time.
(e) 'Plan' shall mean the Philip Morris Long-Term Disability Benefit
Equalization Plan described herein and in any amendments hereto.
(f) 'Retirement Allowance' shall mean the total amount payable under the
Retirement Plan and Benefit Equalization Plan during a twelve (12)
month period to a former Employee for life. Any benefit payable to
the Employee in any other form shall be converted to a Retirement
Allowance in such manner as the Administrator deems fair and
equitable.
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ARTICLE II
DISABILITY BENEFIT EQUALIZATION ALLOWANCES
A. Disability Benefit Equalization Allowances payable under this Plan shall be
as follows:
(1) The Disability Benefit Equalization Allowance payable to a
Disabled Employee who is eligible for a Disability Allowance under Article
II, A(1)(b) or A(1)(c)(i) of the Long-Term Disability Plan shall equal the
amount by which a Disability Allowance under such provisions of the Long-Term
Disability Plan, if computed without regard to the Compensation Limitation,
exceeds the amount of the Disability Allowance actually payable to the
Disabled Employee under the Long-Term Disability Plan.
(2) The Disability Benefit Equalization Allowance payable to a
Disabled Employee who is eligible for a Disability Allowance under any other
provision of the Long-Term Disability Plan shall be computed in the same
manner as under the applicable provision of the Long-Term Disability Plan,
provided, however, that (a) in computing such Disability Benefit Equalization
Allowance under Article II, A(1)(c)(ii) of the Long-Term Disability Plan, the
Retirement Allowance referred to in said Article II, A(1)(c)(ii) shall be
computed without regard to the Compensation Limitation with respect to the
compensation (as such term is defined in the Retirement Plan) of the Disabled
Employee, (b) in computing such Disability Benefit Equalization Allowance
under Article II, A(2)(c)(i) or (ii) of the Long-Term Disability Plan, the
Retirement Allowance referred to in said Article II, A(2)(c)(i) and (ii) such
Disabled Employee would have received shall be computed based on the
assumptions set forth in said Article II, A(2)(c)(i) or (ii), but without
regard to the Compensation Limitation and (c) the Disabled Employee's Pension
Offset computed under Article I(v)(i)(A) and I(v)(ii)(A) of the Long-Term
Disability Plan shall only be determined with respect to any Retirement
Allowance payable under the Benefit Equalization Plan. The amount of the
Disability Benefit Equalization Allowance shall be reduced by the amount of
the Disability Allowance actually payable to the Disabled Employee under the
Long-Term Disability Plan.
B. Commencement and termination of Disability Benefit Equalization Allowances:
A Disability Benefit Equalization Allowance payable to a Disabled
Employee shall commence and terminate simultaneously with, and be paid in
accordance with the terms of the Long-Term Disability Plan. An application
for a Disability Allowance under the Long-Term Disability Plan shall be
deemed an application for payment of a Disability Benefit Equalization
Allowance under this Plan.
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ARTICLE III
FUNDS FROM WHICH ALLOWANCES ARE PAYABLE
The Company's obligations under this Plan shall not be funded.
Payments of Allowances shall be made out of the general funds of the Company.
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ARTICLE IV
THE CORPORATE EMPLOYEE BENEFIT COMMITTEE AND ITS DELEGATEES
The general administration of the Plan shall be vested in the
Committee and the Administrator.
All powers, rights, duties and responsibilities assigned to the
Committee and the Administrator under the Long-Term Disability Plan
applicable to this Plan shall be the powers, rights, duties and
responsibilities of the Committee and the Administrator under the terms of
this Plan.
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ARTICLE V
AMENDMENT AND DISCONTINUANCE OF THE PLAN
The Board may, by resolution, from time to time, and at any time,
amend the Plan; provided, however, that authority to amend the Plan is
delegated to the following committees or individuals where approval of the
Plan amendment or amendments by the shareholders of Philip Morris Companies
Inc. is not required: (1) to the Committee, if the amendment (or amendments)
will not increase the annual cost of the Plan by $10,000,000, (2) to a
management committee for employee benefits, if the amendment (or amendments)
will not increase the annual cost of the Plan by $4,000,000, and (3) to the
Administrator, if the amendment (or amendments) will not increase the annual
cost of the Plan by $500,000.
Any amendment to the Plan may effect a substantial change in the
Plan, and may include (but shall not be limited to) any change deemed by the
Philip Morris Companies Inc. to be necessary or desirable to obtain tax
benefits under any existing or future laws or rules or regulations
thereunder; provided, however, that no such amendment shall deprive any
Disabled Employee of the Disability Benefit Equalization Allowance accrued to
the time of such amendment.
The Plan may be discontinued at any time by the Board; provided,
however, that such discontinuance shall not deprive any Disabled Employee of
his Disability Benefit Equalization Allowance accrued to the time of such
discontinuance.
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ARTICLE VI
CHANGE IN CONTROL PROVISIONS
A. In the event of a Change of Control, each Disabled Employee (including,
for purposes of this Article VI, an Employee who incurs a disability prior to
the Change in Control during the periods specified in Article II, A(1)(a) of
the Long-Term Disability Plan, irrespective of his eligibility at the time of
the Change in Control for disability benefits under the Social Security Act;
provided, however, such Disabled Employee subsequently becomes eligible for
disability benefits under the Social Security Act or becomes eligible for a
Disability Allowance pursuant to Article II, A(1)(i) of the Long-Term
Disability Plan, shall, upon the Change of Control, be entitled to a lump sum
in cash, payable within 30 days of the Change of Control, equal to the
actuarial equivalent of his Disability Benefit Equalization Allowance,
determined using actuarial assumptions no less favorable than those used
under the Philip Morris Salaried Employees' Retirement Plan immediately prior
to the Change of Control.
B. Definition of Change of Control
'Change of Control' shall mean the happening of any of the following
events:
(1) 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, and amended (the 'Exchange Act')) (a 'Person') of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of Philip Morris Companies Inc. (the 'Outstanding Company
Common Stock') or (ii) the combined voting power of the then outstanding
voting securities of Philip Morris Companies Inc. 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
Philip Morris Companies Inc., (ii) any acquisition by Philip Morris
Companies Inc., (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Philip Morris Companies Inc. or
any corporation controlled by Philip Morris Companies Inc. or (iv) any
acquisition by any corporation pursuant to a transaction described in
clauses (i), (ii) and (iii) of paragraph (3) of this Section B; or
(2) 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 shareholders of Philip Morris Companies Inc., was
approved by a vote of at least a majority of the
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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
(3) Approval by the shareholders of Philip Morris Companies Inc. 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 Philip Morris Companies Inc. 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 Philip Morris
Companies Inc. 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
(4) Approval by the shareholders of Philip Morris Companies Inc. of
(i) a complete liquidation or dissolution of Philip Morris Companies Inc.
or (ii) the sale or other disposition of all or substantially all of the
assets of Philip Morris Companies Inc., 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
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the same proportion as 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 Philip
Morris Companies Inc. 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 Philip Morris
Companies Inc. or were elected, appointed or nominated by the Board.
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