Philip Morris Benefit Equalization Plan

PHILIP MORRIS BENEFIT EQUALIZATION PLAN


Effective September 2, 1974


(As amended and in effect as of January 1, 1994)


PHILIP MORRIS BENEFIT EQUALIZATION PLAN


The Philip Morris Benefit Equalization Plan governs the rights of a person whose benefits under the Retirement Plan or the Profit-Sharing Plan, or both Plans, are subject to the Statutory Limitations.


The Plan as hereinafter set forth shall, in the case of Benefit Equalization Retirement Allowances payable under Article II, A hereof, be effective with respect to each Employee whose date of retirement (as specified in an application for retirement under Article II, B of the PM Retirement Plan) is on or after April 1, 1993 or who has filed an application for an Optional Payment pursuant to Article II, C(2) of the Plan after March 1, 1992. The rights of a person who retired or otherwise terminated employment before March 1, 1993 shall be governed by the provisions of the Plan as in effect on the date of retirement or other termination of employment, unless an application for an Optional Payment was filed after March 1, 1992.


The Plan as hereinafter set forth shall, in the case of Benefit Equalization Profit-Sharing Allowances payable under Article II, B hereof, be effective with respect to Employees whose date of retirement or other termination of employment is on or after April 1, 1993 or who has filed an application for an Optional Payment pursuant to Article II, C(2) of the Plan after March 1, 1992. The rights of a person who retired or otherwise terminated employment before April 1, 1993 shall be governed by the provisions of the Plan as in effect on the date of retirement or other termination of employment, unless an application for an Optional Payment was filed after March 1, 1992.


That portion of the Philip Morris Benefit Equalization Plan which provides benefits to a Beneficiary solely in excess of the Section 415 Limitations shall be treated as a separate plan from that portion of the Plan which provides benefits to a Beneficiary attributable solely to the Compensation Limitation or to the Compensation Limitation and the Section 415 Limitations.


ARTICLE I


DEFINITIONS


The following terms as used herein shall have the meanings set forth below. Capitalized terms used herein and not defined below shall have the meanings set forth in the PM Retirement Plan or the Profit-Sharing Plan, as the context may require.


(a) "ACTUARIAL EQUIVALENT" shall mean a benefit which is equivalent
in value to the benefit otherwise payable pursuant to the terms of the
Plan, based on the actuarial principles and assumptions set forth in
Exhibit "I" to the PM Retirement Plan; provided, however, that a Single Sum
Payment shall be the Actuarial Equivalent of the Benefit Equalization
Retirement Allowance payable in equal monthly payments during a twelve (12)
month period for the life of the Retired Employee, using the actuarial
principles and assumptions set forth in Exhibit "A" to the Plan.


(b) "ALLOWANCES" shall mean a Benefit Equalization Retirement
Allowance and a Benefit Equalization Profit-Sharing Allowance.


(c) "BENEFICIARY" shall mean an Employee or the Spouse or other
beneficiary of such Employee whose benefits under the Retirement Plan or
Profit-Sharing Plan, or both Plans, are subject to the Statutory
Limitations.


(d) "BENEFIT EQUALIZATION PROFIT-SHARING ALLOWANCE" or "PROFIT- SHARING ALLOWANCE" shall mean the benefit determined under Article II, B hereof and payable at the time and in the manner set forth in Article II, D hereof.


(e) "BENEFIT EQUALIZATION JOINT AND SURVIVOR ALLOWANCE" shall mean
the total amount payable during a twelve (12) month period as a reduced
Benefit Equalization Retirement Allowance to a Retired Employee for life
and after his death the amount payable to his Spouse for life equal to
one-half of the reduced Benefit Equalization Retirement Allowance payable
to the Retired Employee, which together shall be the Actuarial Equivalent
of the Benefit Equalization Retirement Allowance of the Retired Employee.


(f) "BENEFIT EQUALIZATION OPTIONAL PAYMENT ALLOWANCE" shall mean (1)
the total amount payable during a twelve (12) month period in accordance
with one of the payment methods described in Article II, A(4)(d) of the PM
Retirement Plan designated by the Employee in the application for an
Optional Payment under Article II, C(2) hereof pursuant to which the
Employee receives for life after his retirement a reduced Benefit
Equalization Retirement Allowance and after his death after retirement his
beneficiary receives for life a benefit according to the option elected by


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the Employee, which together shall be the Actuarial Equivalent of the
Benefit Equalization Retirement Allowance payable in equal monthly
payments for the life of the Employee after his retirement, or (2) the
total amount payable during a twelve (12) month period in accordance
with one of the payment methods described in Article II, A(4)(d) of
the PM Retirement Plan pursuant to an election described in Article
II, A(4)(c) of the PM Retirement Plan and designated by the Employee
in the application for an Optional Payment under Article II, C(2)
hereof pursuant to which the Employee receives for life after his
retirement a reduced Benefit Equalization Retirement Allowance and
after his death his beneficiary receives for life a benefit according
to the option elected by the Employee, which together shall be the
Actuarial Equivalent of the Benefit Equalization Retirement Allowance
accrued to the date of election.


(g) "BENEFIT EQUALIZATION RETIREMENT ALLOWANCE" shall mean the
benefit determined under Article II, A hereof and payable at the time and
in the manner set forth in Article II, C, provided, that payment to a
Retired Employee in any form shall be the Actuarial Equivalent of a Benefit
Equalization Retirement Allowance expressed as a benefit payable in equal
monthly payments during a twelve (12) month period for the life of the
Retired Employee commencing at the Retired Employee's Normal Retirement
Age.


(h) "BENEFIT EQUALIZATION SURVIVOR ALLOWANCE" shall mean the total
amount payable during a twelve (12) month period in equal monthly payments
for the life of the Spouse of a Deceased Employee or deceased Retired
Employee who has died after the date of his retirement and prior to the
date his Optional Payment under Paragraph I(r)(i) or (ii) hereof commences
to be paid in an amount equal to one-half of the reduced Benefit
Equalization Retirement Allowance which would have been payable as a
Benefit Equalization Joint and Survivor Allowance to the Deceased Employee
or deceased Retired Employee.


(i) "CHANGE IN CIRCUMSTANCE" shall mean (1) the marriage of the
Employee or Retired Employee, (2) the divorce of the Employee or Retired
Employee from his Spouse, provided such Spouse was designated as the
beneficiary in the currently effective application to receive an Optional
Payment, or the Employee or Retired Employee elected to receive an Optional
Payment pursuant to clause (i) of Paragraph (r) hereof, (3) the death of
the beneficiary designated in the application to receive an Optional
Payment, or (4) a medical condition, based on medical evidence satisfactory
to the Administrator, which is expected to result in the death of the
beneficiary (including the Spouse) who is designated to receive a benefit
after the death of the Retired Employee in accordance with the application
to receive an Optional Payment originally filed with the Administrator,
within five (5) years of the filing of an application for change in
Optional Payment method pursuant to Article II, C(2) or Article II,D(2)
hereof.


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(j) "COMMITTEE" shall mean the Corporate Employee Benefit Committee
of the Company charged with the administration of the Plan as from time to
time constituted.


(k) "COMPANY" shall mean Philip Morris Companies Inc.


(l) "COMPENSATION LIMITATION" shall mean the limitation of Section
401(a)(17) of the Code on the annual compensation of an Employee which may
be taken into account under the Plans.


(m) "DEFERRED RETIREMENT ALLOWANCE" shall mean the Retirement
Allowance payable pursuant to Article II, A(2) of the PM Retirement Plan.


(n) "EARLY RETIREMENT ALLOWANCE" shall mean the Retirement Allowances
payable pursuant to Article II, A(3) of the PM Retirement Plan.


(o) "EMPLOYEE" shall mean any person employed by a Participating
Company on a salaried basis whose benefits under the Retirement Plan or
Profit-Sharing Plan, or both Plans, are subject to the Statutory
Limitations.


(p) "FULL RETIREMENT ALLOWANCE" shall mean the Retirement Allowance
payable pursuant to Article II, A(1) of the PM Retirement Plan.


(q) "FUND" shall mean the trust fund provided for in the
Profit-Sharing Plan and established under the trust agreement with respect
to the Profit-Sharing Plan.


(r) "OPTIONAL PAYMENT" shall mean (1) in the case of a Benefit
Equalization Retirement Allowance, the following optional forms in which
the Benefit Equalization Retirement Allowance of an Employee who has made
an election pursuant to Article II, C(2) hereof may be paid: (i) in equal
monthly payments for the life of the Retired Employee, (ii) as a Benefit
Equalization Joint and Survivor Allowance, or (iii) as a Benefit
Equalization Optional Payment Allowance, and (2) in the case of a Benefit
Equalization Profit-Sharing Allowance, any of the methods of distribution
permitted under Article VI of the Profit-Sharing Plan (other than a Single
Sum Payment payable at the time specified in Article II, D(1) hereof) and
in the event the Retired Employee dies before distribution of his Benefit
Equalization Profit-Sharing Allowance is made, commences to be made or is
fully distributed, to the beneficiary designated in the notification set
forth in Article II, E, hereof, in accordance with the method of
distribution specified in such notification; provided however, that an
Employee may not revoke or modify the method or the timing of any
distribution of his Benefit Equalization Profit-Sharing Allowance later
than at the times specified in Article II, D(2) hereof. Any election to
receive an Optional Payment with respect to a Retired Employee's Allowances
under the Plan shall be


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independent of any election with respect to his benefits payable under
the Retirement Plan, the Profit-Sharing Plan, or any other plan of a
member of the Controlled Group.


(s) "PARTICIPATING COMPANY" shall mean the Company and any other
corporation which is a member of the Controlled Group and which, with the
approval of the Committee, determines to participate in the Plan for the
benefit of its eligible employees and executes such instruments of
participation as the Committee deems necessary.


(t) "PLAN" shall mean the Philip Morris Benefit Equalization Plan
described herein and in any amendments hereto.


(u) "PLANS" shall mean the Retirement Plan and the Profit-Sharing
Plan.


(v) "PM RETIREMENT PLAN" shall mean the Philip Morris Salaried
Employees' Retirement Plan, effective as of September 1, 1978 and as
amended from time to time.


(w) "PROFIT-SHARING PLAN" shall mean the Philip Morris Deferred
Profit-Sharing Plan, effective January 1, 1956 and as amended from time to
time.


(x) "RETIREMENT PLAN" shall mean the PM Retirement Plan and each
other defined benefit plan qualified under Section 401(a) of the Code
maintained by a member of the Controlled Group in which an Employee has an
accrued benefit, other than a defined benefit plan whose benefits in excess
of the Statutory Limitations are payable from one or more of the following
plans maintained by a member of the Controlled Group other than a
Participating Company: (1) an excess benefit plan (as defined in Section
3(36) of ERISA), or (2) a plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees.


(y) "SECTION 415 LIMITATIONS" shall mean: (1) in the case of the
Retirement Plan, the limitations on benefits applicable to defined benefit
plans set forth in Section 415 of the Code and the Treasury Regulations
promulgated thereunder, and (2) in the case of the Profit-Sharing Plan, the
limitations on contributions applicable to defined contribution plans set
forth in Section 415 of the Code and the Treasury Regulations promulgated
thereunder.


(z) "SINGLE SUM PAYMENT" shall mean (1) in the case of a Benefit
Equalization Retirement Allowance, the normal form of distribution to a
Retired Employee who is eligible for a Full, Deferred or Early Retirement
Allowance, which distribution shall be made in one payment to the Retired
Employee (or his Spouse or


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other beneficiary) at the time set forth in Article II, C(1)(a) hereof
and which is the Actuarial Equivalent of the Benefit Equalization
Retirement Allowance payable in equal monthly payments during a twelve
(12) month period for the life of the Retired Employee and (2) in the
case of a Benefit Equalization Profit-Sharing Allowance, the normal
form of distribution of the balance to the credit of a Retired
Employee as determined in accordance with Article II, B hereof, which
distribution shall be made in one payment to the Retired Employee (or
his Spouse or other beneficiary) at the time set forth in Article II,
D(1) hereof.


(aa) "STATUTORY LIMITATIONS" shall mean (1) the Section 415
Limitations and (2) the Compensation Limitation.


(ab) "VESTED RETIREMENT ALLOWANCE" shall mean the Retirement Allowance
payable pursuant to Article II, A(6) of the PM Retirement Plan.


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ARTICLE II


BENEFIT EQUALIZATION RETIREMENT ALLOWANCES AND
BENEFIT EQUALIZATION PROFIT-SHARING ALLOWANCES


A. Benefit Equalization Retirement Allowances and other benefits payable under
this Plan shall be as follows:


(1) (a) The Benefit Equalization Retirement Allowance with respect ...