Exhibit 10.38

 

 

KRAFT FOODS, INC.

SUPPLEMENTAL BENEFITS PLAN I

 

 

 

(As Amended and Restated

Effective as of January 1, 1996)

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Exhibit 10.38

 

TABLE OF CONTENTS

 

          PAGE

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SECTION 1

   General    1

1.1.

   History, Purpose and Effective Date    1

1.2.

   Plan Administration; Plan Year    2

1.3.

   Source of Benefits    2

1.4.

   Indemnification and Exculpation    2

1.5.

   Applicable Laws    2

1.6.

   Gender and Number    3

1.7.

   Action by Employers    3

1.8.

   Severability of Plan Provisions    3

1.9.

   Notices    3

1.10.

   Defined Terms    3

SECTION 2

   Participation    3

2.1.

   Participation    3

2.2.

   Plan Not Contract of Employment    3

SECTION 3

   Supplemental Thrift Plan Benefits    4

3.1.

   Eligibility for Supplemental Thrift Plan Benefits    4

3.2.

   Accounts    4

3.3.

   Participant Deferrals    5

3.4.

   Matching Contribution Credits    5

3.5.

   Earnings Equivalents    6

SECTION 4

   Supplemental Retirement Plan Benefits    7

4.1.

   Eligibility for Supplemental Retirement Plan Benefits    7

4.2.

   Amount of Supplemental Retirement Plan Benefits    7

SECTION 5

   Vesting and Payment of Plan Benefits    8

5.1.

   Vesting    8

5.2.

   Payment of Plan Benefits to Participants    8

5.3.

   Payment of Plan Benefits to Beneficiaries    8

5.4.

   Facility of Payment    9

5.5.

   Benefits May Not Be Assigned or Alienated    9

5.6.

   Tax Liability    9

5.7.

   Committee Discretion to Accelerate    9

SECTION 6

   Administration    10

6.1.

   Committee Membership and Authority    10

6.2.

   Allocation and Delegation of Committee Responsibilities and Powers    11

6.3.

   Information to be Furnished to Committee    11

6.4.

   Committee’s Decision Final    11

SECTION 7

   Amendment and Termination    11

7.1.

   Amendment and Termination    11

7.2.

   Merger    12

 

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Exhibit 10.38

 

TABLE OF CONTENTS

 

          PAGE

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SECTION 8    Change of Control    12

8.1.

   Definition    12

8.2.

   Effect of Change of Control    14

 

 

 

ii

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Exhibit 10.38

 

KRAFT FOODS, INC.

SUPPLEMENTAL BENEFITS PLAN I

 

(As Amended and Restated

Effective as of January 1, 1996)

 

SECTION 1

 

General

 

1.1. History, Purpose and Effective Date. This document sets forth the
provisions of Kraft Foods, Inc. Supplemental Benefits Plan I (the “Plan”) ,
established and maintained by Kraft Foods, Inc., a Delaware corporation (the
"Company"). The terms of the Plan as set forth herein are effective as of
January 1, 1996 (the “Effective Date”) and constitute an amendment, restatement
and continuation of that part of the Kraft Foods, Inc. Supplemental Benefits
Plan (as in effect immediately prior to the Effective Date) that provides
retirement income from a plan, program or arrangement described in section
114(b) (1) (I) (ii) of chapter 4 of Title 4, United States Code. The purpose of
the Plan is to enable the eligible employees of the Employers (as defined below)
to defer receipt of compensation and to receive retirement income and other
benefits in addition to the retirement income and other benefits payable under
the qualified plans of the Employers. The Company and any of its subsidiaries
that adopts the Plan with the consent of the Company’s Management Committee for
Employee Benefits (the “Committee”) are referred to below collectively as the
"Employers" and individually as an "Employer". The Plan is not intended to
qualify under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or be subject to Parts 2, 3 or 4 of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). For purposes of
applying Title I of ERISA, the Plan consists of two components: (a) an "excess
benefit" plan, within the meaning of section 3(36) of ERISA (the "Excess Plan"),
and (b) a plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of section 301(a)(3) of ERISA (the "Management Plan"). All
benefits provided under the Plan will be provided under the Excess Plan
component, except to the extent that such benefits may not be provided under an
excess plan as defined under section 3(36) of ERISA. Any benefits that may not
be provided under the Excess Plan component will be provided under the
Management Plan component. For purposes of applying section 72 of the Code, the
Plan consists of a separate program of interrelated contributions and benefits
that constitutes a defined contribution arrangement and a separate program of
interrelated contributions and benefits that constitutes a defined benefit
arrangement. Section 3

 

 

1

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Exhibit 10.38

 

describes the eligibility conditions and benefit amounts available under the
separate program that constitutes a defined contribution arrangement. Section 4
describes the eligibility conditions and benefit amounts available under the
separate program that constitutes a defined benefit arrangement. The two
programs shall each constitute a separate contract for purposes of section 72 of
the Code.

 

1.2. Plan Administration; Plan Year. The Plan shall be administered by the
Committee, as more fully described in Section 6. The "Plan Year" means the
12-consecutive-month period beginning on each January 1 and ending on the
following December 31.

 

1.3. Source of Benefits. The amount of any benefit payable under the Plan will
be paid in cash from the general assets of the Employers or from one or more
trusts, the assets of which are subject to the claims of the Employer’s general
creditors. Such amounts payable shall be reflected on the accounting records of
the Employers but shall not be construed to create, or require the creation of,
a trust, custodial or escrow account. No employee or other individual entitled
to benefits under the Plan shall have any right, title or interest whatever in
any assets of any Employer or to any investment reserves, accounts or funds that
an Employer may purchase, establish or accumulate to aid in providing the
benefits under the Plan. Nothing contained in the Plan and no action taken
pursuant to its provisions, shall create a trust or fiduciary relationship of
any kind between an Employer and an employee or any other person. Neither an
employee or beneficiary of an employee shall acquire any interest greater than
that of an unsecured creditor.

 

1.4. Indemnification and Exculpation. The members of the Committee, and its
agents, and the officers, directors, and employees of any Employer and its
affiliates shall be indemnified and held harmless by the Employer against and
from any and all loss, costs, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting from any claim,
action, suit, or proceeding to which they may be a party or in which they may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by them in settlement (with the
Employer’s written approval) or paid by them in satisfaction of a judgment in
any such action, suit, or proceeding. The foregoing provisions shall not be
applicable to any person if the loss, costs, liability, or expense is due to
such person’s gross negligence or willful misconduct.

 

1.5. Applicable Laws. The Plan shall be construed and administered in accordance
with the internal laws of the State of

 

 

2

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Exhibit 10.38

 

Illinois to the extent that such laws are not preempted by the laws of the
United States of America.

 

1.6. Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.

 

1.7. Action by Employers. Any action required of or permitted by the Company or
the Employers under the Plan shall be by approval of the Committee or any person
or persons authorized by the Committee.

 

1.8. Severability of Plan Provisions. In the event any provision of the Plan
shall be held invalid or illegal for any reason, any invalidity or illegality
shall not affect the remaining parts of the Plan, but the Plan shall be
construed and enforced as if the invalid or illegal provision had never been
inserted, and the Company shall have the right to correct and remedy such
questions of invalidity or illegality by amendment as provided in the Plan.

 

1.9. Notices. Any notice or document required to be filed with the Committee
under the Plan will be properly filed if delivered or mailed by registered mail,
postage prepaid, to the Committee (or its delegate), in care of the Company, at
its principal executive offices. Any notice required under the Plan may be
waived by the person entitled to notice.

 

1.10. Defined Terms. Terms used frequently with the same meaning are indicated
by initial capital letters, and are defined throughout the Plan. Appendix A
contains an alphabetical listing of such terms and the locations in which they
are defined.

 

SECTION 2

 

Participation

 

2.1. Participation. Each employee of an Employer who has met the eligibility and
enrollment requirements set forth in subsections 3.1 or 4.1 of the Plan will
become a "Participant" in the Plan as of the date on which he meets such
requirements.

 

2.2. Plan Not Contract of Employment. The Plan does not constitute a contract of
employment, and participation in the Plan will not give any employee the right
to be retained in the employ of any Employer nor any right or claim to any
benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan.

 

 

3

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Exhibit 10.38

 

SECTION 3

 

Supplemental Thrift Plan Benefits

 

3.1. Eligibility for Supplemental Thrift Plan Benefits. Subject to the
conditions and limitations of the Plan, each individual who was a Participant in
Section 3 of the Kraft Foods, Inc. Supplemental Benefits Plan immediately prior
to the Effective Date will continue to be a Participant in the Plan under this
Section 3 on and after that date, and each other employee of an Employer who was
not such a Participant immediately prior to the Effective Date will be eligible
to participate in the Plan under this Section 3 on the first day upon which he
satisfies the following requirements:

 

  (a) he is a participant in the Kraft Foods Thrift Plan or the General Foods
Employee Thrift-Investment Plan (collectively, the "Thrift Plan") and he has in
effect an election to make, and is making, before-tax and/or after-tax
contributions under the Thrift Plan; and

 

  (b) he is required to discontinue making before-tax and/or after-tax
contributions under the Thrift Plan as a result of the compensation limitations
of section 401(a)(17) of the Code or the annual additions limitations of
sections 415(c) or 415(e) of the Code.

 

An employee who first becomes eligible to participate in the Plan under this
Section 3 on or after January 1, 1996, or who has submitted a written request to
decline participation in the Plan, shall become enrolled in and participate in
the Plan on (or as soon as practicable after) the later of (i) the date on which
he meets the eligibility requirements set forth above, or (ii) the date he
submits a written request to the Committee to participate in the Plan and make
nonqualified compensation deferrals in accordance with subsection 3.3.

 

3.2. Accounts. The Committee shall maintain a bookkeeping "Account" in the name
of each Participant under this Section 3 to reflect such Participant’s
supplemental Thrift Plan benefits under the Plan. Each Participant’s Account
shall be credited with the following amounts:

 

  (a) the amount of compensation deferred by the Participant in accordance with
the provisions of subsection 3.3;

 

  (b) the amount of matching contribution credits to be credited to the
Participant’s Account in accordance with subsection 3.4;

 

 

4

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Exhibit 10.38

 

  (c) the amount of Earnings Equivalents to be credited to the Participant’s
Account in accordance with subsection 3.5; and

 

  (d) the amounts credited to a Participant’s account under any other defined
contribution type of nonqualified plan, program or arrangement which has been
merged into and continued in the form of the Plan (a "Prior Plan").

 

Each Participant’s Account shall be charged with any payments made in accordance
with Section 5 below.

 

3.3. Participant Deferrals. Subject to such limitations and procedures as the
Committee may from time to time impose, each Plan Year a Participant for whom
before-tax and/or after-tax contributions are being made under the Thrift Plan
and who is required to discontinue such contributions for the reasons set forth
in paragraph (b) of subsection 3.1 may elect to defer on a nonqualified
before-tax basis the receipt of the compensation otherwise payable to him by his
Employer for that Plan Year and which may not be contributed to the Thrift Plan
for that Plan Year. The nonqualified compensation deferral rate of a Participant
shall be equal to the rate of contributions last elected by him under the Thrift
Plan immediately prior to the date such contributions were required to be
discontinued; provided, however, that a Participant may elect to change the rate
of his compensation deferrals, or to suspend such deferrals, which election
shall be in writing or in accordance with such other procedures established by
the Committee, such as the use of an interactive telephone system. A
Participant’s nonqualified compensation deferrals shall automatically be
suspended as of the date the Participant is permitted to resume contributions
under the Thrift Plan. The Account of the Participant shall be credited with the
amounts deferred by the Participant as of the date on which such compensation
would otherwise have been paid to the Participant or such other date as the
Committee may reasonably provide. Subject to such limitations and procedures as
the Committee may from time to time impose, a Participant’s election to make
nonqualified compensation deferrals under this Plan may be considered to be a
continuing election, so that each Plan Year the Participant will re-commence
compensation deferrals under this subsection 3.3 immediately upon the date that
Thrift Plan contributions are discontinued for the reasons set forth in
paragraph (b) of subsection 3.1.

 

3.4. Matching Contribution Credits. If a Participant has a nonqualified
compensation deferral election in effect under subsection 3.3, his Account under
the Plan will be credited with an amount equal to the matching contributions
that the Participant would have been eligible for under the Thrift Plan if the
amounts deferred under subsection 3.3 had been contributed to

 

 

5

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Exhibit 10.38

 

the Thrift Plan. Matching contribution amounts shall be credited to a
Participant’s Account as of the date matching contributions would have been
credited under the Thrift Plan if the amounts deferred under subsection 3.3 had
been contributed to the Thrift Plan.

 

3.5. Earnings Equivalents. The Accounts of Participants shall be credited with
deemed earnings and/or losses ("Earnings Equivalents") as of each Accounting
Date (as defined in paragraph (a) below) in accordance with the following
provisions:

 

  (a) The term "Accounting Date" means, each business day (as determined by the
Committee in its sole discretion).

 

  (b) As of each Accounting Date, a Participant’s Account shall be credited with
an amount determined by multiplying the Participant’s Account balance on that
date by an "earnings equivalent rate" as described below. Except as provided in
paragraph (c) below, the earnings equivalent rate to be credited for any period
shall be equal to the rate of earnings (as determined by the Committee) for such
period on the Interest Income Fund of the Thrift Plan.

 

  (c) Prior to 1991 the General Foods business unit of the Company maintained a
plan known as the Supplemental Thrift-Investment Plan (the "General Foods
Plan"), which permitted participants to have their accounts credited with
assumed earnings based upon hypothetical investment elections in certain
investment funds known as the Guaranteed Return Fund (now known as the Interest
Income Fund), U.S. Government Securities Fund, Diversified Equity Index Fund,
and Philip Morris Stock Fund. The outstanding accounts previously maintained
under the General Foods Plan are now maintained under this Plan. With respect to
that portion of any Participant’s Account that was originally credited under the
General Foods Plan prior to January 1, 1991, the earnings equivalent rate
applicable to such portion for any period shall be equal to the rate of earnings
(as determined by the Committee) on the investment funds under the Thrift Plan
corresponding to the Participant’s hypothetical investment election, as in
effect on December 31, 1990, under the General Foods Plan, which investment
election may not be changed, except that the Participant may irrevocably elect,
on a prospective basis only, to have such portion credited with Earnings
Equivalents in the manner set forth in paragraph (b) next above.

 

 

6

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Exhibit 10.38

 

SECTION 4

 

Suplemental Retirement Plan Benefits

 

4.1. Eligibility for Supplemental Retirement Plan Benefits. Subject to the
conditions and limitations of the Plan, each individual who was a Participant in
Section 4 of the Kraft Foods, Inc. Supplemental Benefits Plan immediately prior
to the Effective Date will continue to be a Participant in the Plan under this
Section 4 on and after that date, and each other employee of an Employer who was
not a Participant immediately prior to the Effective Date will automatically be
enrolled in and become a Participant in the Plan under this Section 4 on the
first day upon which he satisfies the following requirements:

 

  (a) he is a participant in the Kraft Foods Retirement Plan or the Kraft Foods
Hourly Retirement Plan (collectively, the "Retirement Plan"); and

 

  (b) his benefits under the Retirement Plan are limited as a result of the
compensation limitations of section 401(a) (17) of the Code or the benefit
limitations of sections 415(b) or 415(e) of the Code.

 

4.2. Amount of Supplemental Retirement Plan Benefits. A Participant under this
Section 4 shall be eligible for a supplemental Retirement Plan benefit payable
under the Plan in an amount equal to:

 

  (a) the amount of the Retirement Benefit or Deferred Vested Benefit (as
defined in the Retirement Plan), expressed in the form of the benefit the
Participant is actually receiving under the Retirement Plan, that the
Participant would have been entitled to receive under the Retirement Plan, if
such benefit were determined without regard to the compensation limitations of
section 401(a)(17) of the Code and without regard to the limitations imposed by
section 415 of the Code,

 

REDUCED BY

 

  (b) the amount of the actual benefit payable under the Retirement Plan to or
on account of the individual.

 

SECTION 5

 

Vesting and Payment of Plan Benefits

 

5.1. Vesting. A Participant shall at all times have a fully vested,
nonforfeitable interest in the portion of his Account maintained under Section 3
of the Plan attributable to

 

 

7

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Exhibit 10.38

 

his compensation deferrals made under subsection 3.3 (or under the equivalent
terms of a Prior Plan), and the Earnings Equivalents attributable thereto. A
Participant shall become vested and have a nonforfeitable interest in the
portion of his Account maintained under Section 3 of the Plan attributable to
matching contribution credits when and to the extent that his matching account
maintained under the Thrift Plan becomes vested and nonforfeitable . A
Participant shall become vested and have a nonforfeitable interest in his
benefits determined under Section 4 of the Plan when and to the extent that his
accrued benefit under the Retirement Plan becomes vested and nonforfeitable.
Notwithstanding the foregoing provisions of this subsection 5.1, a Participant
or his beneficiary shall have no right to any benefits under the Plan if the
Committee or his Employer determines that he engaged in a willful, deliberate or
grossly negligent act of commission or omission which is substantially injurious
to the finances or reputation of the Employers.

 

5.2. Payment of Plan Benefits to Participants. Except as provided by the
following provisions of this paragraph, an amount equal to a Participant’s
vested Account under Section 3 of the Plan will be paid to him in a lump sum as
soon as practicable after he has elected to commence distribution of all his
vested interest in the Thrift Plan, and a Participant’s vested benefits under
Section 4 of the Plan will be paid to him in the same form, on the same dates
and for the same period during which benefits are payable to him under the
Retirement Plan; provided, however, that no benefits under the Plan shall be
payable to a Participant sooner than 30 days after the Participant (and his
spouse or beneficiary, as applicable) has made all elections required to
commence distributions under the terms of the Thrift Plan or Retirement Plan, as
applicable.

 

5.3. Payment of Plan Benefits to Beneficiaries. If a Participant dies before the
payment of vested benefits accrued under Section 3, the vested portion of his
Account shall be paid to his Beneficiary (as defined below) in a lump sum amount
as soon as practicable following the completion of all forms and applications
requested by the Committee. If a Participant dies before he has commenced the
payment of vested benefits accrued under Section 4, his Beneficiary shall
receive such death benefits or preretirement surviving spouse benefits, if any,
as would be provided under the Retirement Plan, calculated and paid in the same
form and manner as under the Retirement Plan. If a Participant dies after he has
commenced the payment of benefits accrued under Section 4, there are no death
benefits payable under the Plan with respect to his Section 4 benefits except as
may be provided under the distribution method applicable to such benefits in
accordance with subsection 5.2. For purposes of this Plan, a Participant’s
"Beneficiary" with respect to benefits

 

 

8

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Exhibit 10.38

 

payable under a specific Section of the Plan shall be the same person or persons
as his beneficiary determined under the terms of the Thrift Plan or Retirement
Plan, as applicable; provided, however, that each Participant may designate in
writing any legal or natural person or persons as Beneficiary of any benefits
payable under the Plan after his death, and, to the extent that death benefits
are payable both with respect to supplemental Thrift Plan benefits under
Section 3 of the Plan and supplemental Retirement Plan benefits under Section 4
of the Plan, separate Beneficiary designations may be made with respect to those
components of the Plan. A Beneficiary designation made with respect to benefits
payable under the Plan will be effective only after it is filed in writing with
the Committee or its delegate while the Participant is alive and will cancel all
beneficiary designation forms filed earlier.

 

5.4. Facility of Payment. If, in the Committee’s opinion, a Participant or other
person entitled to benefits under the Plan is under a legal disability or is in
any way incapacitated so as to be unable to manage his financial affairs,
payment will be made to the conservator or other person legally charged with the
care of his person or his estate or, if no such legal conservator will have been
appointed, then to any individual (for the benefit of such Participant or other
person entitled to benefits under the Plan) whom the Committee may from time to
time approve.

 

5.5. Benefits May Not Be Assigned or Alienated. The benefits payable to, or on
account of, any individual under the Plan may not be voluntarily or
involuntarily assigned or alienated.

 

5.6. Tax Liability. The Employers may withhold from any payment of benefits
hereunder any taxes required to be withheld and such sum as the Employers may
reasonably estimate to be necessary to cover any taxes for which the Employers
may be liable and which may be assessed with regard to such payment.

 

5.7. Committee Discretion to Accelerate. The Committee may accelerate the date
of distribution of any benefits payable under the Plan to or on behalf of any
Participant to the extent that the Committee determines that such acceleration
is in the best interests of the Employers because of changes in tax laws or
accounting principles, Department of Labor regulations, or any other reason
which negates or diminishes the continued value of the Plan to any Employer or
Participant. The amount distributed pursuant to this subsection 5.7 will be paid
in the form of a lump sum.

 

 

9

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Exhibit 10.38

 

SECTION 6

 

Administration

 

6.1. Committee Membership and Authority. The "Committee" referred to in
subsection 1.2 shall consist of one or more members appointed by the Company.
Except as otherwise specifically provided in this Section 6, the Committee shall
act by a majority of its then members, by meeting or by writing filed without
meeting, and shall have the following discretionary authority, powers, rights
and duties in addition to those vested in it elsewhere in the Plan:

 

  (a) to adopt and apply in a uniform and nondiscriminatory manner to all
persons similarly situated, such rules of procedure and regulations as, in its
opinion, may be necessary for the proper and efficient administration of the
Plan and as are consistent with the provisions of the Plan;

 

  (b) to enforce the Plan in accordance with its terms and with such applicable
rules and regulations as may be adopted by the Committee;

 

  (c) to determine conclusively all questions arising under the Plan, including
the power to determine the eligibility of employees and the rights of
Participants and other persons entitled to benefits under the Plan and their
respective benefits, to make factual findings and to remedy ambiguities,
inconsistencies or omissions of whatever kind;

 

  (d) to maintain and keep adequate records concerning the Plan and concerning
its proceedings and acts in such form and detail as the Committee may decide;

 

  (e) to direct all payments of benefits under the Plan; and

 

  (f) to employ agents, attorneys, accountants or other persons (who may also be
employed by or represent the Employers) for such purposes as the Committee
considers necessary or desirable to discharge its duties.

 

The certificate of a majority of the members of the Committee that the Committee
has taken or authorized any action shall be conclusive in favor of any person
relying on the certificate.

 

6.2. Allocation and Delegation of Committee Responsibilities and Powers. In
exercising its authority to control and manage the operation and administration
of the Plan, the Committee may allocate all or any part of its responsibilities

 

 

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Exhibit 10.38

 

and powers to any one or more of its members and may delegate all or any part of
its responsibilities and powers to any person or persons selected by it. Any
such allocation or delegation may be revoked at any time.

 

6.3. Information to be Furnished to Committee. The Employers shall furnish the
Committee such data and information as may be required for it to discharge its
duties and the records of the Employers shall be conclusive on all persons
unless determined to be incorrect. Participants and other persons entitled to
benefits under the Plan must furnish to the Committee such evidence, data or
information as the Committee considers desirable to carry out the Plan.

 

6.4. Committee’s Decision Final. Any interpretation of the Plan and any decision
on any matter within the discretion of the Committee made by the Committee shall
be binding on all persons. A misstatement or other mistake of fact shall be
corrected when it becomes known, and the Committee shall make such adjustment on
account thereof as it considers equitable and practicable.

 

SECTION 7

 

Amendment and Termination

 

7.1. Amendment and Termination. The Company and the Committee have the right to
amend the Plan from time to time, and the right to terminate it; provided,
however, that no such amendment or termination of the Plan will:

 

  (a) reduce or impair the interests of Participants in benefits being paid
under the Plan as of the date of amendment or termination, as the case may be;
or

 

  (b) reduce the aggregate amount of benefits payable from the Plan and from any
other plan, program or arrangement established to supplement or replace the Plan
to or on account of any employee of an Employer to an amount which is less than
the amount to which he would be entitled in accordance with the provisions of
the Plan if the employee terminated employment immediately prior to the date of
the amendment or termination, as the case may be.

 

7.2. Merger. No Employer will merge or consolidate with any other corporation,
or liquidate or dissolve, without making suitable arrangements, satisfactory to
the Committee, for the payment of any benefits payable under the Plan.

 

 

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Exhibit 10.38

 

SECTION 8

 

Change of Control

 

8.1. Definition. "Change of Control" means the happening of any of the following
events:

 

  (a) The acquisition by any individual, entity or group (within the meaning of
Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either(i) the then outstanding shares of common stock of Philip Morris Companies
Inc. (the "Parent") (such stock hereinafter referred to as the "Outstanding
Parent Common Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Parent entitled to vote generally in the election of
directors (the "Outstanding Parent Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Parent, (ii) any acquisition by the Parent,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Parent or any corporation controlled by the Parent or
(iv) any acquisition by any corporation pursuant to a transaction described in
clauses (i), (ii) and (iii) of paragraph (c) of this subsection 8.1; or

 

  (b) Individuals who, as of November 1, 1989, constitute the Board of Directors
of Parent (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 November 1, 1989 whose election, or nomination for
election by the Parent’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

 

  (c) Approval by the shareholders of the Parent of a reorganization, merger,
share exchange or consolidation (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or

 

 

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Exhibit 10.38

 

       substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Parent Common Stock and Outstanding
Parent Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 80% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Parent through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Parent Common Stock and Outstanding
Parent Voting Securities, as the case may be, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Parent or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or

 

  (d) Approval by the shareholders of the Parent of (i) a complete liquidation
or dissolution of the Parent or (ii) the sale or other disposition of all or
substantially all of the assets of the Parent, other than to a corporation, with
respect to which following such sale or other disposition, (A) more than 80% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Parent Common Stock and Outstanding Parent Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Parent Common Stock and Outstanding

 

 

13

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Exhibit 10.38

 

Parent voting Securities, as the case may be, (B) less than 20% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the Parent or such corporation),
except to the extent that such Person owned 20% or more of the Outstanding
Parent Common Stock or Outstanding Parent Voting Securities prior to the sale or
disposition and (C) at least a majority of the members of the board of directors
of such corporation were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such sale or other disposition of assets of the Parent or were elected,
appointed or nominated by the Board.

 

8.2. Effect of Change of Control. Notwithstanding any other provisions of the
Plan to the contrary, in the event of a Change of Control, each Participant
shall immediately be fully vested in the amounts credited to his Account under
Section 3 of the Plan and any benefits accrued under Section 4 of the Plan
through the date of the Change of Control, and each Participant (or his
beneficiary) shall be paid a lump sum payment in cash within 30 days of the
Change of Control equal to the amounts credited to his Account under Section 3
and the actuarially determined present value of his accrued benefits under
Section 4. For purposes of the foregoing sentence, the calculation of the lump
sum payment of the benefit accrued under Section 4 shall be based upon the same
actuarial factors and adjustments used under the Retirement Plan for purposes of
lump sum payments as in effect immediately prior to the Change of Control.

 

 

14

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Exhibit 10.38

 

APPENDIX A

 

Index of Defined Terms

 

Section Where Defined    Defined Term 3.2   

Account

3.5   

Accounting Date

5.3   

Beneficiary

8.1   

Business Combination

8.1   

Change of Control

1.1   

Code

1.1   

Company

1.1   

Committee

3.5   

Earnings Equivalents

1.1   

Effective Date

1.1   

Employers

1.1   

ERISA

1.1   

Excess Plan

8.1   

Exchange Act

3.5   

General Foods Plan

8.1   

Incumbent Board

1.1   

Management Plan

8.1   

Outstanding Parent Common Stock

8.1   

Outstanding Parent Voting Securities

8.1   

Parent

2.1   

Participant

8.1   

Person

1.1   

Plan

1.2   

Plan Year

3.2   

Prior Plan

4.1   

Retirement Plan

3.1   

Thrift Plan

 

APPENDIX B

 

Former Dart Industries Pilots

 

Tracy Gilman

Gordon Robinson

Philip Schultz

Hartley Smith

 

 

15

--------------------------------------------------------------------------------

Exhibit 10.38

 

FIRST AMENDMENT

TO

KRAFT FOODS, INC. SUPPLEMENTAL BENEFITS PLAN I

(As Amended and Restated Effective

as of January 1, 1996)

 

The Kraft Foods, Inc. Supplemental Benefits Plan I (as Amended and Restated
Effective as of January 1, 1996) (the "Plan")is hereby amended by adding the
following new supplement to the Plan, effective as of January 1, 1996:

 

"SUPPLEMENT A

TO

KRAFT FOODS, INC. SUPPLEMENTAL BENEFITS PLAN I

(As Amended and Restated

Effective As of January 1, 1996)

 

Calculation of Benefits For Former Foodservice Employees

 

A-1. Purpose. The purpose of this Supplement A is to specify the procedures to
be used to compute benefits payable from the Kraft Foods, Inc. Supplemental
Benefits Plan I for former employees of Kraft Foodservice, Inc. ("Foodservice")
who were transferred to Alliant Foodservice, Inc. ("Alliant") in connection with
the Company’s sale of its food service business in 1995.

 

A-2. Background. As a part of the Foodservice sale agreement with Alliant, Kraft
generally agreed to provide benefits under its nonqualified supplemental
benefits plans to Foodservice employees who were participants in such plans as
of February 13, 1995, the Closing Date of the sale, as though such employees had
continued to be Foodservice employees earning benefits under such plans through
the second anniversary of such closing date.

 

A-3. The Eligible Group. Former Foodservice employees who were transferred to
Alliant on the Closing Date who were participants in the Plan as of the Closing
Date.

 

A-4. Amount of Supplemental Benefit. The benefit payable to a Participant
described in paragraph A-3 will be determined in accordance with the following
instead of the normal provisions of the Plan:

 

  (a) if any such Participant terminates employment with Alliant (and is not
rehired by Alliant prior to payment under this Plan) on or before February 13,
1997, such Participant’s benefit will be determined under the normal rules of
the Alliant Nonqualified Plan. "Alliant Nonqualified Plan" means an unfunded
deferred

 

 

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--------------------------------------------------------------------------------

Exhibit 10.38

 

compensation arrangement sponsored by Alliant that provides a benefit equal to
the difference between (i) the amount actually payable from the qualified
pension plan sponsored by Alliant to which assets and liabilities were
transferred in connection with the Foodservice sale from the Kraft Foods
Retirement Plan (the "Alliant Pension Plan") and (ii) the amount that would have
been payable from the Alliant Pension Plan without application of the limits
under sections 415 and 401(a)(17) of the Internal Revenue Code of 1986, as
amended (the "Code"); and

 

  (b) if the Participant terminates employment with Alliant after February 13,
1997, the supplemental benefit under this Plan will be calculated by multiplying
the actual non-qualified benefit payable at commencement determined in
accordance with paragraph (a) above by the ratio of (i) the age 65 accrued
retirement benefit calculated as of December 13, 1997 under the Kraft Foods
Retirement Plan, using the GATT interest rate assumption, without regard to the
aforementioned statutory limits to (ii) the age 65 accrued retirement benefit
under the Alliant Pension Plan calculated as of the employee’s date of
termination from Alliant without regard to the aforementioned statutory limits.

 

The following example illustrates the foregoing provisions of paragraph (b):

 

Unlimited age 65 benefit at

February 13, 1997: $140,000

 

Unlimited age 65 accrued benefit at

termination of employment: $200,000

 

Total non-qualified benefit at

benefit commencement: $20,000

 

Kraft portion of the $20,000 x $140,000 = $14,000

non-qualified benefit: $200,000

 

Alliant portion of the

non-qualified benefit: $20,000 – $14,000 = $6,000

 

In the event Alliant changes the Alliant Pension Plan to a defined lump sum
pension plan, the following example will govern:

 

Unlimited age 65 benefit at 2/13/97: $60,000

 

Unlimited age 65 accrued benefit at termination of employment

($720,000 lump sum divided by a deferred to age

 

 

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--------------------------------------------------------------------------------

Exhibit 10.38

 

65 factor using GATT mortality and interest rate — a factor of 5.00

is used at age 57): $144,000

 

Total non-qualified benefit at benefit

commencement (lump sum): $180,000

 

Kraft portion of $180,000 x $ 60,000 = $75,000

non-qualified benefit: $144,000

 

Alliant portion of the

non-qualified benefit: $180,000 – $75,000 = $105,000

 

A-5. Responsibility for Calculation. Alliant will be responsible for calculating
the unlimited age 65 accrued benefit at termination of employment, the total
non-qualified benefit payable at commencement and both the Kraft and Alliant
portions of the non-qualified benefit. Kraft will review the calculations.

 

- 3 -