FORM OF EMPLOYMENT AGREEMENT
 
                          EMPLOYMENT AGREEMENT
 
    AGREEMENT by and between Philip Morris Companies Inc., a Virginia
corporation (the ''Company'') and __________________  (the ''Executive''),
dated as of the __ day of _______, 1989.
 
    The Board of Directors of the Company (the ''Board''), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive, notwithstand- 
ing the possibility, threat or occurrence of a Change of Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement. 
 
    NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 
 
    1. Certain Definitions. (a) The ''Effective Date'' shall mean the first
       -------------------
date during the Change of Control Period (as defined in Section 1(b)) on which
a Change of Control (as
 
 
defined in Section 2) occurs. Anything in this Agreement to
the contrary notwithstanding, if a Change of Control occurs
and if the Executive's employment with the Company is
terminated or the Executive ceases to be [state position] of
the Company prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment or cessation of status as
[state position] (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control (an event described in
(i) or (ii) above being hereinafter referred to as a
''Potential Change of Control''), then for all purposes of this
Agreement the ''Effective Date'' shall mean the date im- 
mediately prior to the date of such termination of employment
or cessation of status as [state position]. 
 
    (b) The ''Change of Control Period'' shall mean the
period commencing on the date hereof and ending on the
earliest to occur of (x) any date prior to the Effective Date 
 
                             -2-
 
 
 
on which the Executive ceases to hold the position of [state
position] of the Company, (y) the third anniversary of the
date hereof, and (z) the Executive's normal retirement date
(the ''Normal Retirement Date'') under the Philip Morris
Salaried Employees' Retirement Plan (the ''Retirement Plan'');
provided, however, that commencing on the date one year after
the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof shall be
hereinafter referred to as the ''Renewal Date''), unless
previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from
such Renewal Date, unless at least 60 days prior to the
Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended. 
 
    2. Change of Control. For the purpose of this
       -----------------
Agreement, a ''Change of Control'' shall mean: 
 
    (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 fol- 
lowing 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
 
                             -3-
 
 
 
maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursu- 
ant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this Section 2; or 
 
    (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 exclud- 
ing, for this purpose, any such individual whose initial as- 
sumption of office occurs as a result of an actual or
threatened election contest with respect to the election or 
 
                             -4-
 
 
 
removal of directors or other actual or threatened solicita- 
tion 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 Combina- 
tion (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 Combina- 
tion 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 com- 
mon 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
 
                             -5-
 
 
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 corpora- 
tion, 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
 
                             -6-
 
 
 
such sale or other disposition in substantially 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 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 ac- 
tion of the Board, providing for such sale or other disposi- 
tion of assets of the Company or were elected, appointed or
nominated by the Board. 
 
    3. Employment Period. The Company hereby agrees to
       -----------------
continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the earlier to
occur of (x) the third anniversary of such date and (y) the
Executive's Normal Retirement Date (the ''Employment Period''). 
 
    4. Terms of Employment. (a) Position and Duties.
       -------------------      -------------------
(i) During the Employment Period, (A) the Executive's posi- 
tion (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
 
                             -7-
 
 
 
most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the Ef- 
fective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or
location less than 35 miles from such location. 
 
    (ii) During the Employment Period, and exclud- 
ing any periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote reason- 
able attention and time during normal business hours to the
business and affairs of the Company and, to the extent neces- 
sary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees,
 
                             -8-
 
 
 
(B) deliver lectures, fulfill speaking engagements or teach
at educational institutions and (C) manage personal invest- 
ments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance
with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's
responsibilities to the Company. 
 
    (b) Compensation. (i) Pro Rata Performance Award. 
        ------------      --------------------------
Within 30 days after the Effective Date, the Executive shall
be entitled to a lump sum cash payment equal to the pro rata
Long Term Performance Award he would have received pursuant
to Section 11(a)(4) of the Company's 1987 Long Term Incentive
Plan (the ''LTIP'') had the Executive been eligible to receive
an award pursuant to such section of the LTIP without regard
to Section 10(b) of the LTIP. 
 
    (ii) Base Salary. During the Employment
         -----------
Period, the Executive shall receive an annual base salary
(''Annual Base Salary''), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has
been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve-month
period immediately preceding the month in which the Effective
Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12 months after the
 
                             -9-
 
 
 
last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually and shall be
first increased no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date
and thereafter at least annually by the highest of (x) 7%,
(y) the average increase (excluding promotional increases) in
base salary awarded to the Executive for each of the three
full fiscal years (annualized in the case of any fiscal year
consisting of less than twelve full months or during which
the Executive was employed for less than twelve months) prior
to the Effective Date, and (z) the percentage increase
(excluding promotional increases) in base salary generally
awarded to peer executives of the Company and its affiliated
companies for the year of determination. Any increase in
Annual Base Salary shall not serve to limit or reduce any
other obligation to the Executive under this Agreement. An- 
nual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased. As used
 
                             -10-
 
 
 
in this Agreement, the term ''affiliated companies'' shall
include any company controlled by, controlling or under com- 
mon control with the Company. 
 
    (iii) Annual Bonus. In addition to Annual
          ------------
Base Salary, the Executive shall be awarded, for each fiscal
year ending during the Employment Period, an annual bonus
(the ''Annual Bonus''), in cash at least equal to the higher of
(x) the average of the three highest bonuses paid or payable,
including any bonus or portion thereof which has been earned
but deferred, to the Executive by the Company and its af- 
filiated companies in respect of the five fiscal years im- 
mediately preceding the fiscal year in which the Effective
Date occurs (annualized for any fiscal year during such
period consisting of less than twelve full months or with
respect to which the Executive has been employed by the
Company for less than twelve full months) and (y) the bonus
paid or payable (annualized as described above), including
any bonus or portion thereof which has been earned but
deferred, to the Executive by the Company and its affiliated
companies in respect of the most recently completed fiscal
year prior to the Effective Date (such higher amount being
referred to as the ''Recent Annual Bonus''). Each such Annual
Bonus shall be paid no later than the end of the third month
of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect
to defer the receipt of such Annual Bonus. 
 
    (iv) Incentive, Savings and Retirement Plans.
         ---------------------------------------
During the Employment Period, the Executive shall be entitled
to participate in all incentive, savings and retirement
plans, practices, policies and programs applicable generally
to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
 
                             -11-
 
 
 
policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and
retirement benefit opportunities, in each case, less favor- 
able, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period im- 
mediately preceding the Effective Date or if more favorable
to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company
and its affiliated companies.
 
    (v) Welfare Benefit Plans. During the Employ- 
        ---------------------
ment Period, the Executive and/or the Executive's family, as
the case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
 
                             -12-
 
 
 
practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company
and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies
and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, those provided gener- 
ally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies. 
 
    (vi) Expenses. During the Employment Period,
         --------
the Executive shall be entitled to receive prompt reimburse- 
ment for all reasonable expenses incurred by the Executive in
accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in
effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the
Company and its affiliated companies. 
 
   (vii) Fringe Benefits. During the Employment
         ---------------
Period, the Executive shall be entitled to fringe benefits,
including, without limitation, tax and financial planning
services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance
with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in ef- 
fect for the Executive at any time during the 120-day period
 
                           -13-
 
 
immediately preceding the Effective Date or, if more favor- 
able to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies. 
 
   (viii) Office and Support Staff. During the
          ------------------------
Employment Period, the Executive shall be entitled to an of- 
fice or offices of a size and with furnishings and other ap- 
pointments, and to exclusive personal secretarial and other
assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its
affiliated companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favor- 
able to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies. 
 
                           -14- 
 
 
   (ix) Vacation. During the Employment Period,
        --------
the Executive shall be entitled to paid vacation in ac- 
cordance with the most favorable plans, policies, programs
and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the
Company and its affiliated companies. 
 
   5. Termination of Employment. (a) Death or Dis- 
      -------------------------      ------------
ability. The Executive's employment shall terminate
- -------
automatically upon the Executive's death during the Employ- 
ment Period. If the Company determines in good faith that
the Disability of the Executive has occurred during the
Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice
in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such
notice by the Executive (the ''Disability Effective Date''),
provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of
the Executive's duties. For purposes of this Agreement,
''Disability'' shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not
to be withheld unreasonably). 
 
   (b) Cause. The Company may terminate the
       -----
 
                           -15-
 
 
Executive's employment during the Employment Period for
Cause. For the sole and exclusive purposes of this Agree- 
ment, ''Cause'' shall mean: 
 
    (i) the willful and continued failure of the
 Executive to perform substantially the Executive's duties
 with the Company or one of its affiliates (other than any
 such failure resulting from incapacity due to physical or
 mental illness), after a written demand for substantial
 performance is delivered to the Executive by the Board or
 the Chief Executive Officer of the Company which
 specifically identifies the manner in which the Board or
 Chief Executive Officer believes that the Executive has
 not substantially performed the Executive's duties, or 
 
                            -16- 
 
 
    (ii) the willful engaging by the Executive in il- 
 legal conduct or gross misconduct which is materially and
 demonstrably injurious to the Company. 
 
 
For purposes of this provision, no act or failure to act, on
the part of the Executive, shall be considered ''willful'' un- 
less it is done, or omitted to be done, by the Executive in
bad faith or without reasonable belief that the Executive's
action or omission was in the best interests of the Company.
Any act, or failure to act, based upon authority given pursu- 
ant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer or a senior of- 
ficer of the Company or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the
best interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail. 
 
   (c) Good Reason. The Executive's employment may be
       -----------
terminated by the Executive for Good Reason. For the sole
and exclusive purposes of this Agreement, ''Good Reason'' shall
mean: 
 
    (i) the assignment to the Executive of any duties
 inconsistent in any respect with the Executive's position
 
                           -17-
 
 
 (including status, offices, titles and reporting require- 
 ments), authority, duties or responsibilities as
 contemplated by Section 4(a) of this Agreement, or any
 other action by the Company which results in a diminution
 in such position, authority, duties or responsibilities,
 excluding for this purpose an isolated, insubstantial and
 inadvertent action not taken in bad faith and which is
 remedied by the Company promptly after receipt of notice
 thereof given by the Executive; 
 
    (ii) any failure by the Company to comply with any
 of the provisions of Section 4(b) of this Agreement,
 other than an isolated, insubstantial and inadvertent
 failure not occurring in bad faith and which is remedied
 by the Company promptly after receipt of notice thereof
 given by the Executive; 
 
                             -18- 
 
 
    (iii) the Company's requiring the Executive to be
 based at any office or location other than as provided in
 Section 4(a)(i)(B) hereof or the Company's requiring the
 Executive to travel on Company business to a
 substantially greater extent than required immediately
 prior to the Effective Date; 
 
    (iv) any purported termination by the Company of
 the Executive's employment otherwise than as expressly
 permitted by this Agreement; or 
 
    (v) any failure by the Company to comply with and
 satisfy Section 11(c) of this Agreement. 
 
For purposes of this Section 5(c), any good faith determina- 
tion of ''Good Reason'' made by the Executive shall be
conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the Effective Date shall be deemed to be
a termination for Good Reason for all purposes of this Agree- 
ment. 
 
   (d) Notice of Termination. Any termination by the
       ---------------------
Company for Cause, or by the Executive for Good Reason, shall
be communicated by Notice of Termination to the other party
hereto given in accordance with Section 12(b) of this Agree- 
ment. For purposes of this Agreement, a ''Notice of Termina- 
tion'' means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to
the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision
so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice,
 
                           -19-
 
 
specifies the termination date (which date shall be not more
than thirty days after the giving of such notice). The
failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's
rights hereunder. 
 
   (e) Date of Termination. ''Date of Termination''
       -------------------
means (i) if the Executive's employment is terminated by the
Company for Cause, or by the Executive for Good Reason, the
date of receipt of the Notice of Termination or any later
date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by the Company other
 
                           -20- 
 
 
than for Cause or Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or
the Disability Effective Date, as the case may be. 
 
   6. Obligations of the Company upon Termination.
      -------------------------------------------
(a) Good Reason; Other Than for Cause, Death or Disability.
    ------------------------------------------------------
If, during the Employment Period, the Company shall terminate
the Executive's employment other than for Cause or Disability
or the Executive shall terminate employment for Good Reason: 
 
    (i) the Company shall pay to the Executive in a
 lump sum in cash within 30 days after the Date of
 Termination the aggregate of the following amounts: 
 
    A. the sum of (1) the Executive's Annual Base
 Salary through the Date of Termination to the extent
 not theretofore paid, (2) the product of (x) the
 higher of (I) the Recent Annual Bonus and (II) the
 Annual Bonus paid or payable, including any bonus or
 portion thereof which has been earned but deferred
 (and annualized for any fiscal year consisting of
 less than twelve full months or during which the
 Executive was employed for less than twelve full
 months), for the most recently completed fiscal year
 during the Employment Period, if any (such higher
 amount being referred to as the ''Highest Annual
 Bonus'') and (y) a fraction, the numerator of which
 is the number of days in the current fiscal year
 through the Date of Termination, and the denominator
 
                      -21-
 
 
 of which is 365 and (3) any compensation previously
 deferred by the Executive (together with any accrued
 interest or earnings thereon) and any accrued vaca- 
 tion pay, in each case to the extent not theretofore
 paid (the sum of the amounts described in clauses
 (1), (2), and (3) shall be hereinafter referred to
 as the ''Accrued Obligations''); and 
 
    B. the amount equal to the product of (1) two
 and one-half and (2) the sum of (x) the Executive's
 Annual Base Salary and (y) the Highest Annual Bonus
 and (3) a fraction, the numerator of which is the
 number of full months from the Date of Termination
 until the Executive's Normal Retirement Date but
 which shall be no greater than thirty (30), and the
 denominator of which is thirty (30); and 
 
    C. an amount equal to the difference between
 (a) the actuarial equivalent of the benefit (utiliz- 
 ing actuarial assumptions no less favorable to the
 
                         -22- 
 
 
 Executive than those in effect under the Retirement
 Plan (as defined below) immediately prior to the
 Effective Date, except as specified below with
 respect to increases in base salary and annual
 bonus) under the Retirement Plan and any excess or
 supplemental retirement plan in which the Executive
 participates (together, the ''SERP'') which the
 Executive would receive if the Executive's employ- 
 ment continued for two and one-half years after the
 Date of Termination assuming for this purpose that
 all accrued benefits are fully vested, and, assuming
 that (1) the Executive's base salary increased on an
 annualized basis during the two and one-half year
 period by the amount required by Section 4(b)(ii)
 (in the case of Section 4(b)(ii)(z) based on
 increases (excluding promotional increases) in base
 salary for the most recently completed fiscal year
 prior to the Date of Termination) had the Executive
 remained employed, and (2) the Executive's annual
 bonus (annualized for any fiscal year consisting of
 less than twelve full months or during which the
 Executive was employed for less than twelve full
 months) in each of the two and one-half years (on an
 annualized basis) bears the same proportion to the
 Executive's base salary in such year or fraction
 thereof as it did for the last full year prior to
 the Date of Termination, and (b) the actuarial
 equivalent of the Executive's actual benefit (paid
 or payable), if any, under the Retirement Plan and
 the SERP as of the Date of Termination;
 
    (ii) for two and one-half years after the
 Executive's Date of Termination, or such longer period as
 may be provided by Section 6(a)(iii) with respect to the
 
                          -23-
 
 
 benefits covered thereby or by the terms of the appropri- 
 ate plan, program, practice or policy, the Company shall
 continue benefits to the Executive and/or the Executive's
 family at least equal to those which would have been
 provided to them in accordance with the plans, programs,
 practices and policies described in Section 4(b)(v) and
 Section 4(b)(vii) of this Agreement if the Executive's
 employment had not been terminated in accordance with the
 most favorable plans, practices, programs or policies of
 the Company and its affiliated companies applicable
 generally to other peer executives and their families
 during the 120-day period immediately preceding the Ef- 
 fective Date or, if more favorable to the Executive, as
 in effect generally at any time thereafter with respect
 to other peer executives of the Company and its af- 
 filiated companies and their families, provided, however,
 that if the Executive becomes reemployed with another
 employer and is eligible to receive medical or other
 
                           -24- 
 
 
 welfare benefits under another employer provided plan,
 the medical and other welfare benefits described herein
 shall be secondary to those provided under such other
 plan during such applicable period of eligibility. For
 purposes of determining eligibility (but not the time of
 commencement of benefits) of the Executive for retiree
 benefits pursuant to such plans, practices, programs and
 policies, the Executive shall be considered to have
 remained employed until two and one-half years after the
 Date of Termination and to have retired on the last day
 of such period;
 
    (iii) if two and one-half years after the Executive's
 Date of Termination, the Executive would be at least 55
 years old and eligible for retirement benefits (includ- 
 ing, without limitation, early retirement benefits) under
 the Retirement Plan (assuming continuous service with the
 Company during such two and one-half year period), the
 Company shall continue lifetime medical, dental and life
 insurance benefits (including supplemental benefits) to
 the Executive and/or the Executive's family at least
 equal to those that would have been provided to them in
 accordance with the plans, programs and policies
 described in Section 4(b)(v) of this Agreement (except
 the Company's business travel accident plans) if the
 Executive's employment had not been terminated, if and as
 in effect at any time during the 120-day period im- 
 mediately preceding the Effective Date with respect to
 other peer executives and their families or, if more
 favorable to the Executive, as in effect at any time
 thereafter with respect to other peer executives and
 their families; provided, however, that, in the event
 that the Executive becomes reemployed with another
 employer, whether or not such employer is related to the
 
                          -25-
 
 
 Corporation or any of its affiliates, and is eligible to
 receive medical or other welfare benefits under any
 employer-sponsored plan, the medical and other welfare
 benefits described herein shall be the secondary coverage
 for such applicable period of eligibility; 
 
    (iv) the Company shall, at its sole expense as
 incurred, provide the Executive with outplacement
 services the scope and provider of which shall be
 selected by the Executive in his sole discretion; and
 
    (v) to the extent not theretofore paid or provided,
 the Company shall timely pay or provide to the Executive
 any other amounts or benefits required to be paid or
 provided or which the Executive is eligible to receive
 under any plan, program, policy or practice or contract
 or agreement of the Company and its affiliated companies,
 including, without limitation, any amounts payable
 
                          -26- 
 
 
 pursuant to Section 4(b)(i) (such other amounts and
 benefits shall be hereinafter referred to as the ''Other
 Benefits''). 
 
    (b) Death. If the Executive's employment is
        -----
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without
further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(b) shall include,
without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company
and affiliated companies to the estates and beneficiaries of
peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating
to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the
Executive's death with respect to other peer executives of
the Company and its affiliated companies and their
beneficiaries.
 
   (c) Disability. If the Executive's employment is
       ----------
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without
 
                          -27-
 
 
further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after
the Disability Effective Date to receive, disability and
other benefits at least equal to the most favorable of those
generally provided by the Company and its affiliated
companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Ef- 
fective Date or, if more favorable to the Executive and/or
the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the
Company and its affiliated companies and their families. 
 
                           -28- 
 
 
   (d) Cause; Other than for Good Reason. If the
       ---------------------------------
Executive's employment shall be terminated for Cause during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obliga- 
tion to pay to the Executive (x) his Annual Base Salary
through the Date of Termination, (y) the amount of any
compensation previously deferred by the Executive, and (z)
Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment
during the Employment Period, excluding a termination for
Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obliga- 
tions and the timely payment or provision of Other Benefits.
In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of
Termination. 
 
    7. Non-exclusivity of Rights. Nothing in this
       -------------------------
Agreement shall prevent or limit the Executive's continuing
or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except
as explicitly modified by this Agreement. 
 
                        -29-
 
 
 8. Full Settlement. The Company's obligation to
    ---------------
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or
other claim, right or action which the Company may have
against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to
pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the
validity or enforceability of, or liability under, any provi- 
sion of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the
 
                         -30- 
 
 
Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the ''Code''). 
 
   9. Certain Additional Payments by the Company. 
      ------------------------------------------
 
   (a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit
of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional
payments required under this Section 9) (a ''Payment'') would
be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are
hereinafter collectively referred to as the ''Excise Tax''),
then the Executive shall be entitled to receive an additional
payment (a ''Gross-Up Payment'') in an amount such that after
payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. 
 
   (b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and
 
                           -31-
 
 
the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
Coopers & Lybrand or such other certified public accounting
firm as may be designated by the Executive (the ''Accounting
Firm'') which shall provide detailed supporting calculations
both to the Company and the Executive within 15 business days
of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group ef- 
fecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the Company to
the Executive within five days of the receipt of the Account- 
ing Firm's determination. If the Accounting Firm determines
 
                          -32- 
 
 
that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to
report the Excise Tax on the Executive's applicable federal
income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Ac- 
counting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is pos- 
sible that Gross-Up Payments which will not have been made by
the Company should have been made (''Underpayment''),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit
of the Executive. 
 
    (c) The Executive shall notify the Company in writ- 
ing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall ap- 
prise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest
such claim, the Executive shall: 
 
                          -33-
 
 
    (i) give the Company any information reasonably
 requested by the Company relating to such claim, 
 
    (ii) take such action in connection with contesting
 such claim as the Company shall reasonably request in
 writing from time to time, including, without limitation,
 accepting legal representation with respect to such claim
 by an attorney reasonably selected by the Company, 
 
    (iii) cooperate with the Company in good faith in
 order effectively to contest such claim, and
 
    (iv) permit the Company to participate in any
 proceedings relating to such claim; 
 
                         -34- 
 
 
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional inter- 
est and penalties) incurred in connection with such contest
and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole op- 
tion, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing author- 
ity in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any exten- 
sion of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
 
                          -35-
 
 
Internal Revenue Service or any other taxing authority. 
 
   (d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expira- 
tion of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and
 
                           -36- 
 
 
the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid. 
 
    10. Confidential Information. The Executive shall
        ------------------------
hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment
by the Company or any of its affiliated companies and which
shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, com- 
municate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withhold- 
ing any amounts otherwise payable to the Executive under this
Agreement. 
 
    11. Successors. (a) This Agreement is personal to
        ----------
the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives. 
 
   (b) This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and as- 
signs. 
 
                         -37-
 
 
    (c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
such succession had taken place. As used in this Agreement,
''Company'' shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise. 
 
    12. Miscellaneous. (a) This Agreement shall be
        -------------
governed by and construed in accordance with the laws of the
Commonwealth of Virginia, without reference to principles of
conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or ef- 
fect. This Agreement may not be amended or modified
 
                          -38- 
 
 
otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representa- 
tives. 
 
   (b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to
the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows: 
 
 If to the Executive: 
 -------------------
 
 
 If to the Company: 
 -----------------
 
 Philip Morris Companies Inc. 
 120 Park Avenue 
 New York, N.Y. 10017 
 
 Attention: General Counsel 
 
 
 
or to such other address as either party shall have furnished
to the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by
the addressee. 
 
   (c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement. 
 
   (d) The Company may withhold from any amounts pay- 
able under this Agreement such Federal, state, local or
foreign taxes as shall be required to be withheld pursuant to
 
                         -39-
 
 
any applicable law or regulation. 
 
   (e) The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or
any other provision of this Agreement or the failure to as- 
sert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to
be a waiver of such provision or right or any other provision
or right of this Agreement. 
 
   (f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employ- 
ment of the Executive by the Company is ''at will'' and, prior
 
                           -40- 
 
 
to the Effective Date, may be terminated by either the
Executive or the Company at any time. Moreover, if prior to
the Effective Date, (i) the Executive's employment with the
Company terminates or (ii) the Executive ceases to be [state
position] of the Company, except, in each case in connection
with a Potential Change of Control then the Executive shall
have no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject
matter hereof. 
 
    IN WITNESS WHEREOF, the Executive has hereunto set
the Executive's hand and, pursuant to the authorization from
its Board of Directors, the Company has caused these presents
to be executed in its name on its behalf, all as of the day
and year first above written. 
 
                                -----------------------------
                                         [Executive] 
 
 
                                PHILIP MORRIS COMPANIES INC. 
 
 
                                By 
                                   --------------------------
 

                             -41-