Exhibit 10.10

PHILIP MORRIS INTERNATIONAL BENEFIT EQUALIZATION PLAN

Effective as of January 1, 2008

(As amended and in effect on March 28, 2008)

 

 

 

 

 

 

 

 

(Adopted on

December 23, 2008)

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TABLE OF CONTENTS

 

     Page No

ARTICLE I

   DEFINITIONS    3

ARTICLE II

   BENEFIT EQUALIZATION RETIREMENT ALLOWANCES AND BENEFIT EQUALIZATION
PROFIT-SHARING ALLOWANCES    14

ARTICLE III

   FUNDS FROM WHICH ALLOWANCES ARE PAYABLE    22

ARTICLE IV

   THE ADMINISTRATOR    23

ARTICLE V

   AMENDMENT AND DISCONTINUANCE OF THE PLAN    24

ARTICLE VI

   FORMS; COMMUNICATIONS    25

ARTICLE VII

   INTERPRETATION OF PROVISIONS    26

ARTICLE VIII

   CHANGE IN CONTROL PROVISIONS    27

 

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PHILIP MORRIS INTERNATIONAL BENEFIT EQUALIZATION PLAN

The Philip Morris International Benefit Equalization Plan governs the rights of
an Employee whose benefit under the Retirement Plan or the Profit-Sharing Plan,
or both Qualified Plans, is subject to one or more of the Statutory Limitations,
or to the nondiscrimination requirements of Section 401(a)(4) of the Code and
the coverage requirements of Section 410(b) of the Code. The liabilities
allocable to Employees, former employees and retired employees of the
international tobacco operations conducted by the Company and the other
Participating Companies have been transferred from the Benefit Equalization Plan
maintained by Altria Corporate Services, Inc. to the Plan.

Employees who received target payments pursuant to a Supplemental Enrollment
Agreement generally are not eligible to participate in the Plan with respect to
services provided after December 31, 2004, but, instead, are eligible to accrue
future benefits under a separate plan. It is intended that Grandfathered Benefit
Equalization Retirement Allowances and Grandfathered Benefit Equalization
Profit-Sharing Allowances with respect to Grandfathered Employees and
Grandfathered Retired Employees (as well as their spouses and beneficiaries) not
be subject to the requirements of Section 409A of the Code and that the Plan be
interpreted and administered in accordance with this intention.

The Plan as hereinafter set forth shall be effective with respect to Employees
who incur a Separation from Service on or after January 1, 2008, except as
otherwise provided herein. The Plan will also be the source of benefits to
former employees of Philip Morris International Inc. and its subsidiaries who
terminated employment prior to January 1, 2008. The provisions of the Plan shall
not be construed to change the time and form of payment of that portion of the
Benefit Equalization Retirement Allowance (referred to as a Grandfathered
Benefit Equalization Retirement Allowance) and that portion of the Benefit
Equalization Profit-Sharing Allowance (referred to as a Grandfathered Benefit
Equalization Profit-Sharing Allowance) considered deferred before January 1,
2005 (within the meaning of Final Regulation §1.409A-6(a)(2) and other
provisions of the Final Regulations) of a Grandfathered Retired Employee.

The rights of a person whose Separation from Service or date of becoming an
Inactive Participant is before January 1, 2008 shall be governed by the
provisions of the plan in which he was a participant as in effect on his
Separation from Service or date of becoming an Inactive Participant, as the case
may be, except to the extent that the administrator of the plan has determined
in his sole discretion to administer the plan in good faith compliance with
Section 409A of the Code and any then published guidance and to not subject any
Grandfathered Benefit Equalization Retirement Allowance and Grandfathered
Benefit Equalization Profit-Sharing Allowance to Section 409A of the Code.

The Plan is comprised of three separate plans, programs or arrangements. Each
plan shall be treated as a separate plan, program or arrangement from the other
plans. One of the plans provides benefits to a Retired Employee (or his Spouse
or other Beneficiary) solely in excess of the Section 415 Limitations; the
second plan provides benefits to a Retired Employee (or his Spouse or other
Beneficiary) attributable solely to the Compensation Limitation; and the third
plan provides benefits to a Retired Employee (or his Spouse or other
Beneficiary) because payment of the benefit from one or both of the Qualified
Plans could result in a failure to meet

 

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the nondiscrimination requirements of Section 401(a)(4) of the Code or the
coverage requirements of Section 410(b) of the Code.

 

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ARTICLE I

DEFINITIONS

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

(a) “Actuarial Equivalent” shall mean a benefit which is at least 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
Retirement Plan.

(b) “Allowance” or “Allowances” shall mean a Benefit Equalization Retirement
Allowance, determined under ARTICLE IIA(1) of the Plan and a Benefit
Equalization Profit-Sharing Allowance, determined under ARTICLE IIB of the Plan.

(c) “Beneficiary” shall mean:

(i) In the case of a Retired Employee who is to receive all or a portion of his
Benefit Equalization Retirement Allowance after his Separation from Service in a
Single Sum Payment pursuant to ARTICLE IIC(1)(a), ARTICLE IIC(1)(b) or
ARTICLE IIC(1)(c)(z) of the Plan, but who dies after his Separation from Service
and before such Single Sum Payment is made:

(1) if the Retired Employee is married on the date of his death, the Beneficiary
of such Single Sum Payment shall be the Spouse to whom he was married on the
date of death; and

(2) if the Retired Employee is not married on the date of his death, the
Beneficiary of such Single Sum Payment shall be the Retired Employee’s estate.

An Employee or Retired Employee may designate any other person or persons as the
Beneficiary who is to receive a Single Sum Payment of his Benefit Equalization
Retirement Allowance in the event that he dies after his Separation from Service
and before such Single Sum Payment is paid to him by timely filing a beneficiary
designation form with the Administrator (or his delegate), provided, however,
that if the Employee or Retired Employee is married on the date of the filing of
such beneficiary designation form, his Spouse must consent, in writing before a
notary public or a duly authorized representative of his Participating Company,
to such designation.

(ii) In the case of a Grandfathered Employee who is a Secular Trust Participant
who has elected pursuant to ARTICLE IIC(2) of the Plan to receive after his
Separation from Service that portion of his Benefit Equalization Retirement
Allowance equal to the Grandfathered Benefit Equalization Retirement Allowance
in the form of an Optional Payment described in ARTICLE I(x)(i)(1) or (2) of the
Plan, the person or persons designated by the

 

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Grandfathered Employee to receive (or who, pursuant to the terms of such
Optional Payment, will receive) after his death a benefit according to the
option elected by the Grandfathered Employee.

(iii) In the case of an Employee or Retired Employee who has been credited with
a Benefit Equalization Profit-Sharing Allowance and who dies prior to the
payment of such Benefit Equalization Profit-Sharing Allowance (or prior to the
payment of the then remaining balance of such Benefit Equalization
Profit-Sharing Allowance in the case of a Grandfathered Employee who has elected
pursuant to ARTICLE IID(3) of the Plan to receive that portion of his Benefit
Equalization Profit-Sharing Allowance equal to the Grandfathered Benefit
Equalization Profit-Sharing Allowance in the form of an Optional Payment
described in ARTICLE I(x)(ii) of the Plan):

(1) if the Employee or Retired Employee is married on the date of his death, the
Beneficiary of such Benefit Equalization Profit-Sharing Allowance shall be the
Spouse to whom he was married on the date of death; and

(2) if the Employee or Retired Employee is not married on the date of his death,
the Beneficiary of such Benefit Equalization Profit-Sharing Allowance shall be
the Employee’s or Retired Employee’s estate.

An Employee or Retired Employee may designate any other person or persons
(including a trust created by the Employee or Retired Employee during his
lifetime or by will) as Beneficiary of his Benefit Equalization Profit-Sharing
Allowance in the event of his death by timely filing a beneficiary designation
form with the Administrator (or his delegate), provided, however, that if the
Employee or Retired Employee is married on the date of the filing of such
beneficiary designation form, his Spouse must consent, in writing before a
notary public or a duly authorized representative of his Participating Company,
to such designation.

(d) “Benefit Equalization Joint and Survivor Allowance” shall mean the total
amount that would be 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 (regardless of whether such form of benefit was available to such
Retired Employee and his Spouse), which together shall be the Actuarial
Equivalent of the Benefit Equalization Retirement Allowance of the Retired
Employee.

(e) “Benefit Equalization Profit-Sharing Allowance” or “Profit-Sharing
Allowance” shall mean the benefit determined under ARTICLE IIB of the Plan and
payable at the times and in the forms set forth in ARTICLE IID of the Plan. The
Benefit Equalization Profit-Sharing Allowance shall be comprised of the
Grandfathered Benefit Equalization Profit-Sharing Allowance, if any, and the
remaining portion of such Allowance.

(f) “Benefit Equalization Retirement Allowance” shall mean the benefit
determined under ARTICLE IIA of the Plan and payable at the times and in the
forms set forth in

 

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ARTICLE IIC of the Plan. The Benefit Equalization Retirement Allowance shall be
comprised of the Grandfathered Benefit Equalization Retirement Allowance, if
any, and the remaining portion of such Allowance.

(g) “Benefit Equalization Survivor Allowance” shall mean the benefit payable to:

(i) the Spouse of a Deceased Employee; and

(ii) the Spouse of a deceased Retired Employee;

in an amount equal one-half of the reduced Benefit Equalization Retirement
Allowance which would have been payable in the form of a Benefit Equalization
Joint and Survivor Allowance to the Deceased Employee or deceased Retired
Employee (regardless of whether such form of benefit was available to such
Deceased Employee or deceased Retired Employee).

(h) “Benefits Committee” shall mean the Philip Morris International Benefits
Committee.

(i) “BEP Benefit Commencement Date” shall mean the date on which the benefit to
which the recipient is entitled to is paid or commences to be paid pursuant to
the application filed in accordance with ARTICLE IIE of the Plan, or if no such
application is filed, in accordance with the terms of the Plan as determined in
the sole discretion of the Administrator. All such Allowances not paid in a
Single Sum Payment are paid in arrears so that the actual date of payment shall
be the first day of the calendar month next succeeding the BEP Benefit
Commencement Date.

(1) (i) Except as provided in clauses (ii), (iii) and (iv) of this
ARTICLE I(i)(1) of the Plan, the BEP Benefit Commencement Date of the Benefit
Equalization Retirement Allowance shall be the Payment Date, but not later than
the Latest Payment Date.

      (ii) (A) Except as provided in clauses (B) and (C) of this ARTICLE
I(i)(1)(ii), the BEP Benefit Commencement Date of that portion of a Benefit
Equalization Retirement Allowance that is the Grandfathered Benefit Equalization
Retirement Allowance payable in the form of an Optional Payment pursuant to an
election under ARTICLE IIC(2) of the Plan to a Grandfathered Retired Employee
who is a Secular Trust Participant shall be the Benefit Commencement Date of the
Grandfathered Retired Employee’s Full, Deferred or Early Retirement Allowance
under the Retirement Plan.

            (B) The BEP Benefit Commencement Date of that portion of a Benefit
Equalization Retirement Allowance that is the Grandfathered Benefit Equalization
Retirement Allowance payable in the form of an Optional Payment with respect to
a Grandfathered Retired Employee who voluntarily retires within the one (1) year
period following the date of the filing of his application for an Optional
Payment with the Administrator pursuant to ARTICLE IIC(2) of the Plan, or whose
employment is terminated for misconduct (as determined by the Benefits
Committee) within such one (1) year period, shall be the first day of the month
following the expiration of the one (1) year period following the date of the
filing of his application for an Optional Payment.

 

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(C) The BEP Benefit Commencement Date of the benefit payable pursuant to ARTICLE
IIC(2)(e) of the Plan to the Beneficiary of a Grandfathered Retired Employee who
died after his Date of Retirement and prior to his BEP Benefit Commencement Date
shall be the first day of the month following the death of the deceased
Grandfathered Retired Employee.

(iii) The BEP Benefit Commencement Date of that portion of a Benefit
Equalization Retirement Allowance that is the Grandfathered Benefit Equalization
Retirement Allowance payable to a Grandfathered Retired Employee who is only
eligible for a Vested Retirement Allowance at his Separation from Service shall
be the Benefit Commencement Date of the Retired Employee’s Vested Retirement
Allowance under the Retirement Plan.

(iv) The BEP Benefit Commencement Date of any Benefit Equalization Retirement
Allowance described in ARTICLE IIA(1)(f) shall be the benefit commencement date
of such Allowance as set forth in the General Release Agreement; provided,
however, that if no time of payment is specified, the BEP Benefit Commencement
Date shall be the Payment Date, but no later than the 15th day of the third
month following the end of the Employee’s Participating Company first taxable
year in which the right is no longer subject to a substantial risk of
forfeiture; provided, however, that no such Benefit Equalization Retirement
Allowance shall change either the time or form of payment of the Benefit
Equalization Retirement Allowance (including a Grandfathered Benefit
Equalization Retirement Allowance) otherwise payable pursuant to the terms of
the Plan.

(2) (A) Except as provided in clause (B) of this ARTICLE I(i)(2), the BEP
Benefit Commencement Date of the Benefit Equalization Profit-Sharing Allowance
shall be the Payment Date, but not later than the Latest Payment Date.

      (B) The BEP Benefit Commencement Date of that portion of a Benefit
Equalization Profit-Sharing Allowance that is the Grandfathered Benefit
Equalization Profit-Sharing Allowance that is payable in the form of an Optional
Payment pursuant to an election under ARTICLE IID(3) of the Plan to a
Grandfathered Retired Employee who is a Secular Trust Participant shall be the
date specified in the application.

(3) (A) Except as provided in clause (B) of this ARTICLE I(i)(3), the BEP
Benefit Commencement Date of the Benefit Equalization Survivor Allowance payable
to the Spouse of a Deceased Employee or deceased Retired Employee shall be the
Survivor Allowance Payment Date, but not later than the Survivor Allowance
Latest Payment Date.

      (B) The BEP Benefit Commencement Date of that portion of the Benefit
Equalization Survivor Allowance that is derived from the Grandfathered Benefit
Equalization Retirement Allowance that is payable to:

    (1) the Spouse of a Grandfathered Deceased Employee; or

    (2) the Spouse of a deceased Grandfathered Retired Employee,

 

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shall, in each case, be the Benefit Commencement Date of the Survivor Allowance
payable to such Spouse under the Retirement Plan, provided that the Spouse may
elect in accordance with the provisions of ARTICLE II, A5(c) or (f) of the
Retirement Plan, as applicable to the Spouse, that the BEP Benefit Commencement
Date be the first day of any month thereafter, but not later than the later of
(i) the first day of the second calendar month following the month in which the
Grandfathered Deceased Employee or deceased Grandfathered Retired Employee died
(or if his date of birth was on the first day of a calendar month, the first day
of the calendar month next following the calendar month in which the
Grandfathered Deceased Employee or deceased Grandfathered Retired Employee
died), or (ii) the date that would have been the Grandfathered Deceased
Employee’s or deceased Grandfathered Retired Employee’s Unreduced Early
Retirement Benefit Commencement Date.

(j) “Change in Circumstance” shall mean, with respect to a Grandfathered
Employee or Grandfathered Retired Employee who is a Secular Trust Participant:

(1) the marriage of the Grandfathered Employee or Grandfathered Retired
Employee;

(2) the divorce of the Grandfathered Employee or Grandfathered Retired Employee
from his spouse (determined in accordance with applicable state law), provided:

(A) such spouse was the Beneficiary who is to receive an Optional Payment, or

(B) the Grandfathered Employee or Grandfathered Retired Employee elected
pursuant to ARTICLE IIC(2) of the Plan to receive an Optional Payment pursuant
to ARTICLE (x)(i)(1) of the Plan;

(3) the death of the Beneficiary designated by the Grandfathered Employee or
Grandfathered Retired Employee to receive an Optional Payment after the death of
the Grandfathered Retired Employee; or

(4) a medical condition of the Beneficiary, based on medical evidence
satisfactory to the Administrator, which is expected to result in the death of
the Beneficiary within five (5) years of the filing of an application for change
in Optional Payment method pursuant to ARTICLE IIC(2) or ARTICLE IID(3) hereof.

(k) “Company” shall mean PMI Global Services Inc. PMI Global Services Inc. is
the sponsor of the Plan.

(l) “Compensation” shall have the same meaning as in the Retirement Plan.

(m) “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 Qualified Plans.

(n) “Earned and Vested” shall mean, when referring to an Allowance or any
portion of an Allowance, an amount that, as of January 1, 2005, is not subject
to a substantial risk of

 

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forfeiture (as defined in Treasury Regulation §1.83-3(c)) or a requirement to
perform future services.

(o) “Employee” shall mean any person employed by a Participating Company who has
accrued a benefit under the Retirement Plan or the Profit-Sharing Plan, but
whose entire accrued benefit, if computed without regard to the Statutory
Limitations, cannot be paid under the Retirement Plan or Profit-Sharing Plan, or
both Qualified Plans, as a result of the Statutory Limitations, provided that an
Employee shall not include:

(i) an EPF Employee; or

(ii) effective on and after January 1, 2005, a TP Employee; provided, however,
that nothing shall deprive such employee of any Grandfathered Benefit
Equalization Retirement Allowance and Grandfathered Benefit Equalization
Profit-Sharing Allowance earned prior to January 1, 2005.

(p) “Grandfathered Benefit Equalization Joint and Survivor Allowance” shall mean
the total amount that would be payable during a twelve (12) month period as a
reduced Grandfathered Benefit Equalization Retirement Allowance to a
Grandfathered Retired Employee for life and after his death the amount payable
to his Spouse for life equal to one-half of the reduced Grandfathered Benefit
Equalization Retirement Allowance payable to the Grandfathered Retired Employee,
which together shall be the Actuarial Equivalent of the Grandfathered Benefit
Equalization Retirement Allowance of the Grandfathered Retired Employee.

(q) “Grandfathered Benefit Equalization Optional Payment Allowance” shall mean,
with respect to a Grandfathered Retired Employee who is a Secular Trust
Participant, that portion of his Benefit Equalization Retirement Allowance that
is the Grandfathered Benefit Equalization Retirement Allowance and equal to the
total amount payable during a twelve (12) month period in accordance with one of
the payment methods described in ARTICLE II, A4(d) of the Retirement Plan and
designated by the Grandfathered Retired Employee in his application for an
Optional Payment under ARTICLE IIC(2) of the Plan, pursuant to which the
Grandfathered Retired Employee receives for life after his Date of Retirement a
reduced Grandfathered Benefit Equalization Retirement Allowance in equal monthly
payments for life and after his death after his Date of Retirement his
Beneficiary receives for life a benefit in equal monthly payments according to
the option elected by the Grandfathered Retired Employee, which together shall
be the Actuarial Equivalent of the Grandfathered Benefit Equalization Retirement
Allowance payable in equal monthly payments for the life of the Grandfathered
Retired Employee after his Date of Retirement.

(r) “Grandfathered Benefit Equalization Profit-Sharing Allowance” shall mean
that portion of a Grandfathered Retired Employee’s Benefit Equalization
Profit-Sharing Allowance as of December 31, 2004, the right to which is Earned
and Vested as of December 31, 2004, plus any future contributions to the
account, the right to which was Earned and Vested as of December 31, 2004, but
only to the extent such contributions are actually made, plus earnings (whether
actual or notional) attributable to such Grandfathered Benefit Equalization
Profit-Sharing Allowance as of December 31, 2004, or to such income.

 

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(s) “Grandfathered Benefit Equalization Retirement Allowance” shall mean the
present value of that portion (or all) of the Benefit Equalization Retirement
Allowance earned to December 31, 2004 to which the Grandfathered Employee or
Retired Grandfathered Employee would have been entitled under the Plan if he had
voluntarily terminated services without cause on or before December 31, 2004 and
received payment of such benefit on the earliest permissible date following
termination of employment in the form with the greatest value, expressed for
purposes of this calculation as a single life annuity commencing at age 65;
provided, however, that for any subsequent year such Grandfathered Benefit
Equalization Retirement Allowance may increase to equal the present value of
such portion of his benefit the Grandfathered Employee or Grandfathered Retired
Employee actually becomes entitled to, in the form and at the time actually
paid, determined in accordance with the terms of the Plan (including applicable
Statutory Limitations) as in effect on October 3, 2004, without regard to any
further services rendered by the Grandfathered Employee or Grandfathered Retired
Employee after December 31, 2004, or any other events affecting the amount of or
the entitlement to benefits (other than an election with respect to the time and
form of an available benefit). In computing the Grandfathered Benefit
Equalization Retirement Allowance of a Grandfathered Employee who is eligible
for an Early Retirement Allowance, whether reduced or unreduced (but is not
eligible for a Full or Deferred Retirement Allowance) under the Retirement Plan
as of the Grandfathered Employee’s Separation from Service or, in the discretion
of the Administrator, the end of the Grandfathered Employee’s policy severance,
such Grandfathered Benefit Equalization Retirement Allowance shall be the
Actuarial Equivalent of the Grandfathered Employee’s Grandfathered Benefit
Equalization Retirement Allowance, computed as though such benefit were payable
under the terms of the Retirement Plan in the form of a Retirement Allowance
commencing on the first day of the month coincident with or next following the
Grandfathered Employee’s Separation from Service or, in the discretion of the
Administrator, the end of the Grandfathered Employee’s policy severance;
provided, however, that solely for purposes of determining the early retirement
factor to be applied in determining the Actuarial Equivalent of such benefit,
the earliest date on which the Grandfathered Employee shall be treated as being
entitled to an unreduced benefit under the Retirement Plan for purposes of
Exhibit I to the Retirement Plan shall be the earliest date on which the
Grandfathered Employee would have been entitled to an unreduced benefit if the
Grandfathered Employee had voluntarily terminated employment on December 31,
2004.

(t) “Grandfathered Deceased Employee” shall mean a Grandfathered Employee who
died while he was an Employee at a time when he had a nonforfeitable right to
any portion of his Benefit Equalization Retirement Allowance.

(u) “Grandfathered Employee” shall mean:

(i) A Grandfathered Employee who is eligible for a Grandfathered Benefit
Equalization Retirement Allowance that was Earned and Vested; or

(ii) A Grandfathered Employee who is eligible for a Grandfathered Benefit
Equalization Profit-Sharing Allowance,

and who, in either instance, is a participant in the executive trust or is a
Secular Trust Participant.

 

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(v) “Grandfathered Retired Employee” shall mean:

(i) a Retired Employee who is eligible for a Grandfathered Benefit Equalization
Retirement Allowance that was Earned and Vested; and

(ii) a Retired Employee who is eligible for a Grandfathered Benefit Equalization
Profit-Sharing Allowance.

(w) “Latest Payment Date” shall mean the later of:

(i) December 31st of the year in which the Payment Date occurs, and

(ii) the fifteenth day of the third month following the Payment Date.

(x) “Optional Payment” shall mean:

(i) the following optional forms in which that portion of a Benefit Equalization
Retirement Allowance that is the Grandfathered Benefit Equalization Retirement
Allowance of a Grandfathered Retired Employee who is a Secular Trust Participant
may be paid:

(1) in equal monthly payments for the life of the Grandfathered Retired
Employee,

(2) a Grandfathered Benefit Equalization Joint and Survivor Allowance, or

(3) a Grandfathered Benefit Equalization Optional Payment Allowance, and

(ii) in the case of that portion of a Benefit Equalization Profit-Sharing
Allowance that is the Grandfathered Benefit Equalization Profit-Sharing
Allowance of a Grandfathered Employee or Grandfathered Retired Employee, any of
the methods of distribution permitted under ARTICLE VII of the Profit-Sharing
Plan (other than a Single Sum Payment payable at the Benefit Commencement Date
described in ARTICLE I(i)(2)(A) of the Plan) and in the event the Grandfathered
Employee or Grandfathered Retired Employee dies before distribution of that
portion of his Benefit Equalization Profit-Sharing Allowance that is the
Grandfathered Benefit Equalization Profit-Sharing Allowance is made, commences
to be made or is fully distributed, to his Beneficiary in accordance with the
method of distribution designated by such Grandfathered Employee or
Grandfathered Retired Employee; provided, however, that payment to a Beneficiary
who is not the Spouse of the Grandfathered Employee or Grandfathered Retired
Employee shall be made no later than one (1) year following the death of the
Grandfathered Employee or Grandfathered Retired Employee.

Any election to receive an Optional Payment with respect to any Allowance or
Allowances under the Plan shall be independent of any election with respect to
benefits

 

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payable under the Retirement Plan, the Profit-Sharing Plan, or any other plan of
a member of the Controlled Group.

(y) “Payment Date” shall mean the first day of the third calendar month
following the month in which the Employee Separates from Service; provided,
however, that in all cases of a Separation from Service other than on account of
death, the Payment Date in the case of a Specified Employee shall be the first
day of the calendar month following the date that is six (6) months following
the date that such Specified Employee Separates from Service.

(z) “Plan” shall mean the Philip Morris International Benefit Equalization Plan
described herein and in any amendments hereto.

(aa) “Profit-Sharing Plan” shall mean the Philip Morris International Deferred
Profit-Sharing Plan, effective January 1, 2008, and as amended from time to
time.

(bb) “Qualified Plans” shall mean the Retirement Plan and the Profit-Sharing
Plan.

(cc) “Retired Employee” shall mean a former Employee who is eligible for or in
receipt of, an Allowance. A Retired Employee shall cease to be such when he has
received all of the Allowances payable to him under the Plan.

(dd) “Retirement Plan” shall mean the Philip Morris International Retirement
Plan, effective as of January 1, 2008, and as amended from time to time.

(ee) “Section 415 Limitations” shall mean:

(i) 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

(ii) 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.

(ff) “Secular Trust Participant” shall mean a Grandfathered Employee who is a
participant in the secular trust arrangement.

(gg) “Separation from Service”, “Separates from Service” or “Separated from
Service” shall each have the same meaning as the term “separation from service”
in Treasury Regulation §1.409A-1(h)(1); provided, however, that with respect to
the payment of any Grandfathered Allowance that is not subject to Section 409A
of the Code, such terms shall mean the date that the Employee terminated his
services as an Employee with his Participating Company and each other member of
the Controlled Group.

(hh) “Single Sum Payment” shall mean payment of a benefit or portion of a
benefit in a single payment to a Retired Employee, or to the Spouse or other
Beneficiary of an Employee, Deceased Employee or deceased Retired Employee. A
Single Sum Payment shall be (i) the Actuarial Equivalent of the (or portion of
the) Benefit Equalization Retirement Allowance

 

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payable in equal monthly payments during a twelve (12) month period for the life
of the Retired Employee, and (ii) the Actuarial Equivalent of the (or portion of
the) Benefit Equalization Survivor Allowance payable in equal monthly payments
during a twelve (12) month period for the life of the Spouse of the Deceased
Employee or deceased Retired Employee, in each case using the actuarial
principles and assumptions set forth in Exhibit A to the Plan; provided,
however, that a Single Sum Payment with respect to a Grandfathered Employee who
is a Secular Trust Participant shall equal the greater of (i) the amount
determined pursuant to the foregoing provisions of this ARTICLE I(hh) and
(ii) the amount required to purchase a single life annuity (or, for purposes of
Appendix 2, a Benefit Equalization Joint and Survivor Allowance) equal to the
benefit otherwise identified under the Plan from a licensed commercial insurance
company, as determined in the sole discretion of the Administrator.

(i) A Single Sum Payment shall be the exclusive form of distribution of the
Benefit Equalization Retirement Allowance, except with respect to:

(1) that portion of the Benefit Equalization Retirement Allowance derived solely
from the Grandfathered Benefit Equalization Retirement Allowance and that is
payable to a Grandfathered Retired Employee who is only eligible for a Vested
Retirement Allowance at his Separation from Service; and

(2) that portion of the Benefit Equalization Retirement Allowance derived solely
from the Grandfathered Benefit Equalization Retirement Allowance and that is
payable to a Grandfathered Retired Employee who is a Secular Trust Participant
who has timely elected to receive after his Date of Retirement that portion of
his Benefit Equalization Retirement Allowance equal to the Grandfathered Benefit
Equalization Retirement Allowance in the form of an Optional Payment pursuant to
ARTICLE IIC(2) of the Plan and which election does not cease to be of any force
and effect pursuant to ARTICLE IIC(2) hereof.

(ii) A Single Sum Payment shall be the exclusive form of distribution of the
Benefit Equalization Survivor Allowance, except with respect to that portion of
the Benefit Equalization Survivor Allowance derived solely from the
Grandfathered Benefit Equalization Retirement Allowance payable to the Spouse of
a Grandfathered Deceased Employee or the Spouse of a deceased Grandfathered
Retired Employee.

(iii) A Single Sum Payment shall be the exclusive form of distribution of the
Benefit Equalization Profit-Sharing Allowance, except with respect to that
portion of the Benefit Equalization Profit-Sharing Allowance derived solely from
the Grandfathered Benefit Equalization Profit-Sharing Allowance payable to a
Grandfathered Retired Employee who has timely elected to receive after his Date
of Retirement that portion of his Benefit Equalization Profit-Sharing Allowance
equal to the Grandfathered Benefit Equalization Profit-Sharing Allowance in the
form of an Optional Payment pursuant to ARTICLE IID(3) of the Plan.

 

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(ii) “Specified Employee” shall have the meaning given in Treasury Regulation
§1.409A-1(i).

(jj) “Statutory Limitations” shall mean:

(i) the Section 415 Limitations, and

(ii) the Compensation Limitation.

(kk) “Survivor Allowance Latest Payment Date” shall mean the later of:

(i) December 31st of the year in which the Survivor Allowance Payment Date
occurs, and

(ii) the fifteenth day of the third month following the Survivor Allowance
Payment Date.

(ll) “Survivor Allowance Payment Date” shall mean the first day of the third
calendar month following the month in which the Deceased Employee or deceased
Retired Employee died.

(mm) “TP Employee” shall mean a Grandfathered Employee who has elected to
participate in the target payment arrangement.

The masculine pronoun shall include the feminine pronoun unless the context
clearly requires otherwise.

 

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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) Subject to the provisions of subparagraphs (c), (d) and (e) of this
ARTICLE IIA(1), the Benefit Equalization Retirement Allowance with respect to a
Retired Employee (other than a Grandfathered Employee who is a TP Employee)
shall equal the sum of (i) and (ii) below:

(i) the amount by which the Retirement Allowance under the Retirement Plan
accrued to the Date of Retirement, if computed without regard to the Statutory
Limitations, exceeds the amount of the Retirement Allowance actually payable
under the Retirement Plan, plus

(ii) in the case of a Retired Employee who is eligible to receive an enhanced
benefit under the Qualified Plan (such as a benefit payable pursuant to a
voluntary early retirement program or a shutdown benefit), but whose additional
accrued benefit resulting solely from participation in such program or benefit
may not be paid from the Qualified Plan because of the nondiscrimination
requirements of Section 401(a)(4) of the Code, or the coverage requirements of
Section 410(b) of the Code, the amount of such additional accrued benefit
payable to such Retired Employee solely as a result of his participation in such
program or benefit.

(b) Subject to the provisions of subparagraphs (c), (d) and (e) of this ARTICLE
IIA(1), the Benefit Equalization Retirement Allowance with respect to a
Grandfathered Retired Employee who is a TP Employee shall equal the
Grandfathered Benefit Equalization Retirement Allowance.

(c) In no event shall any increase in a Grandfathered Employee’s Benefit
Equalization Retirement Allowance resulting from an amendment to the Retirement
Plan to add or remove a subsidized benefit change the time and form of payment
of the Benefit Equalization Retirement Allowance earned prior to the date of
such amendment.

(d) In the event that all or any portion of the Benefit Equalization Retirement
Allowance with respect to the Retired Employee described in ARTICLE IIA(1)(a) or
(b) is paid in a Single Sum Payment in accordance with the provisions of ARTICLE
IIC prior to the Retired Employee’s Benefit Commencement Date under the
Retirement Plan, the amount of such Benefit Equalization Retirement Allowance
shall equal the amount by which the Retirement Allowance under the Retirement
Plan accrued to the Date of Retirement, if computed without regard to the
Statutory Limitations, is reasonably estimated by the Administrator to exceed
the amount of the Retirement Allowance which is projected by the Administrator
to be actually payable under the Retirement Plan.

 

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(e) In the event that all or any portion of the Benefit Equalization Retirement
Allowance with respect to a Retired Employee described in ARTICLE IIA(1)(a) or
(b) of the Plan is paid in a Single Sum Payment in accordance with the
provisions of ARTICLE IIC prior to the date the Retired Employee shall have
specified on his application for retirement as the Benefit Commencement Date of
his Retirement Allowance under the Retirement Plan, the Single Sum Payment shall
be calculated based on the assumption that the Retired Employee elected to
receive a Retirement Allowance at his Unreduced Early Retirement Benefit
Commencement Date or Unreduced Vested Retirement Benefit Commencement Date, as
applicable to the Retired Employee.

(f) If, as a result of the execution of a General Release Agreement (and not
revoking it), (A) an Employee first obtains a legally binding right to payment
of an increase in his Benefit Equalization Retirement Allowance, (B) as of the
first date the Employee obtains a legally binding right to such increase it is
subject to a substantial risk of forfeiture (within the meaning of Treasury
Regulation §1.409A-1(d)), then the amount of such increase in the Benefit
Equalization Retirement Allowance with respect to such Employee shall be the
amount as set forth in the General Release Agreement and shall be payable at the
BEP Benefit Commencement Date specified in ARTICLE I(i)(1)(iv), provided,
however, that no such increase in an Employee’s Benefit Equalization Allowance
shall change either the time or form of payment of the Grandfathered Benefit
Equalization Retirement Allowance of a Grandfathered Employee otherwise payable
pursuant to the terms of the Plan. The provisions of this paragraph are in lieu
of and not in addition to the benefits provided pursuant to the provisions of
ARTICLE IIA(1)(a)(ii) of the Plan.

(2) The Spouse of:

(i) a Deceased Employee; or

(ii) a deceased Retired Employee (other than a Grandfathered Retired Employee
who is a Secular Trust Participant who made an election for a Grandfathered
Benefit Equalization Optional Payment Allowance and designated a Beneficiary
other than his Spouse and or is described in clause (iii) hereof) who has died
after his Date of Retirement and before his BEP Benefit Commencement Date; or

(iii) a Grandfathered Retired Employee who is a Secular Trust Participant whose
request for an Optional Payment pursuant to ARTICLE I(x)(i)(1) or (2) of the
Plan with respect to that portion of his Benefit Equalization Retirement
Allowance that is the Grandfathered Benefit Equalization Allowance has been
granted by the Administrator, but who has died after his Date of Retirement and
before his BEP Benefit Commencement Date,

shall, in each case, be eligible to receive a Benefit Equalization Survivor
Allowance.

 

15

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B. Benefit Equalization Profit-Sharing Allowances payable under this Plan shall
be as follows:

 

  (1) (a) The Benefit Equalization Profit-Sharing Allowance of a Retired
Employee (other than a Grandfathered Employee who is a TP Employee) shall equal
the amounts which would have been credited, but were not credited to his Company
Account as a result of the Statutory Limitations.

 

       (b) The Benefit Equalization Profit-Sharing Allowance of a Grandfathered
Employee who is a TP Employee shall equal the Grandfathered Benefit Equalization
Profit-Sharing Allowance.

 

  (2) All such amounts shall be deemed to have been invested in Part A of the
Fund (as defined in the Profit-Sharing Plan) and valued in accordance with the
provisions of the Profit-Sharing Plan.

 

C. BEP Benefit Commencement Date and termination of Benefit Equalization
Retirement Allowances payable in the form of an Optional Payment:

 

  (1) (a) The Benefit Equalization Retirement Allowance payable pursuant to
ARTICLE IIA(1)(a) of the Plan shall be distributed to a Retired Employee who is
not a Grandfathered Retired Employee in a Single Sum Payment on the BEP Benefit
Commencement Date specified in ARTICLE I(i)(1)(i) of the Plan. If a Retired
Employee described in ARTICLE IIA(1)(a) dies after his Date of Retirement and
before payment of his Benefit Equalization Retirement Allowance is paid in a
Single Sum Payment, his Beneficiary shall receive a Single Sum Payment on the
Benefit Commencement Date specified in ARTICLE I(i)(1)(i) of the Plan.

 

      

(b) The Benefit Equalization Retirement Allowance payable pursuant to
ARTICLE IIA(1)(a) or (b) of the Plan shall be distributed to a Grandfathered
Retired Employee who is eligible for an Early, Full or Deferred Retirement
Allowance at his Separation from Service in a Single Sum Payment on the BEP
Benefit Commencement Date specified in ARTICLE I(i)(1)(i) of the Plan, unless,
in the case of a Grandfathered Retired Employee who is a Secular Trust
Participant, the Administrator has approved the election of the Grandfathered
Retired Employee to have distribution of that portion of his Benefit
Equalization Retirement Allowance that is the Grandfathered Benefit Equalization
Retirement Allowance made in the form of an Optional Payment, in which case the
BEP Benefit Commencement Date of his Grandfathered Benefit Equalization
Retirement Allowance made in the form of an Optional Payment shall be as
specified in ARTICLE I(i)(1)(ii)(A) or ARTICLE I(i)(1)(ii)(B) of the Plan, as
applicable to the Grandfathered Retired Employee. If a Grandfathered Retired
Employee described in ARTICLE IIA(1)(a) or (b) of the Plan who is eligible for
an Early, Full or Deferred Retirement Allowance at his Separation from Service
dies after his Date of Retirement and before payment of his Benefit Equalization
Retirement Allowance in a Single Sum Payment, his Beneficiary shall receive a
Single Sum Payment on the BEP Benefit

 

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Commencement Date specified in ARTICLE I(i)(1)(i) of the Plan, provided,
however, that the Administrator has not granted the Grandfathered Retired
Employee’s application to receive an Optional Payment.

(c) The Benefit Equalization Retirement Allowance payable pursuant to
ARTICLE IIA(1)(a) or (b) of the Plan shall be distributed to a Grandfathered
Retired Employee who is only eligible for a Vested Retirement Allowance at his
Separation from Service, as follows:

(y) that portion of the Benefit Equalization Retirement Allowance that is the
Grandfathered Benefit Equalization Allowance shall be distributed in accordance
with the Grandfathered Retired Employee’s BEP Benefit Commencement Date
described in ARTICLE I(i)(1)(iii) of the Plan and shall be paid in the same form
of Optional Payment which the Grandfathered Retired Employee’s Vested Retirement
Allowance is paid from the Retirement Plan; and

(z) that portion of the Benefit Equalization Retirement Allowance that is not
the Grandfathered Benefit Equalization Allowance shall be distributed to the
Retired Employee in a Single Sum Payment on Benefit Commencement Date specified
in ARTICLE I(i)(1)(i) of the Plan. The amount of the Benefit Equalization
Retirement Allowance to be distributed in a Single Sum Payment pursuant to this
ARTICLE IIC(1)(c)(z) of the Plan shall equal the present value of such Allowance
that would be payable to the Grandfathered Retired Employee as of the date he
will attain the age of sixty-five (65). The present value of such Benefit
Equalization Retirement Allowance shall be determined as of the first day of the
month following the month in which the Grandfathered Retired Employee Separated
from Service (or died, in the case of a payment to the Spouse of the deceased
Grandfathered Retired Employee).

(d) If any Benefit Equalization Retirement Allowance payable in a Single Sum
Payment is paid after the Payment Date, interest (at a rate determined in the
sole discretion of the Administrator), from the date the Retired Employee
Separated from Service to the last day of the month preceding the month in which
payment is made, shall be added to the amount of the Benefit Equalization
Retirement Allowance otherwise payable to the Retired Employee (or Spouse).

(2) (a)(i) A Grandfathered Retired Employee who is a Secular Trust Participant
who is eligible to retire on a Full, Deferred or Early Retirement Allowance at
his Separation from Service may make application to the Administrator to receive
an Optional Payment with respect to his Grandfathered Benefit Equalization
Retirement Allowance in lieu of the Single Sum Payment otherwise payable after
his Date of Retirement. The application for an Optional Payment shall specify:

(ii) the form in which such Optional Payment is to be paid; and

(iii) the Beneficiary, if any, who will receive benefits after the death of the
Grandfathered Retired Employee; and

(iv) the BEP Benefit Commencement Date.

 

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(b) In the case of a Grandfathered Retired Employee who eighteen (18) months
prior to attaining the age of sixty-five (65) years could be compulsorily
retired by his Participating Company upon attaining the age of sixty-five
(65) years pursuant to Section 12(c) of the Age Discrimination in Employment
Act, any application for an Optional Payment must be filed with the
Administrator more than one (1) year preceding the date the Grandfathered
Retired Employee attains the age of sixty-five (65) years.

(c) The Administrator may grant or deny any such application in its sole and
absolute discretion. Except as provided in Subparagraphs (d)(i) and (g) of this
ARTICLE IIC, a Grandfathered Retired Employee shall not receive that portion of
his Benefit Equalization Retirement Allowance that is the Grandfathered Benefit
Equalization Retirement Allowance in the form of a Single Sum Payment after the
Administrator has granted the Grandfathered Retired Employee application for an
Optional Payment. In the event the Grandfathered Retired Employee incurs a
Change in Circumstance on or after the date of the filing of the application for
an Optional Payment and prior to his BEP Benefit Commencement Date, the
Grandfathered Retired Employee may file an application with the Administrator
within ninety (90) days of the Change in Circumstance, but in no event later
than his BEP Benefit Commencement Date, to change the form of Optional Payment,
or to change the Beneficiary who is to receive a benefit after the death of the
Grandfathered Retired Employee in accordance with the Optional Payment method
originally filed with the Administrator.

(d) An application for an Optional Payment shall be of no force and effect if:

(i) the Grandfathered Retired Employee does not retire on a Full, Deferred or
Early Retirement Allowance;

(ii) the Grandfathered Retired Employee incurs a disability at any time before
the date his Optional Payment commences to be made which causes him to be
eligible for benefits under the Philip Morris International Long-Term Disability
Plan; or

(iii) the Grandfathered Retired Employee is retired for ill health, or
disability under ARTICLE II, A 3(a) of the Retirement Plan.

(e) In the event the application for an Optional Payment is of no force and
effect as a result of an event described in clauses (ii) or (iii) of
ARTICLE IIC(2)(d) of the Plan, payment of that portion of the Grandfathered
Retired Employee’s Benefit Equalization Retirement Allowance that is the
Grandfathered Benefit Equalization Retirement Allowance shall be made in a
Single Sum Payment pursuant to ARTICLE IIC(1)(a) of the Plan on the Payment
Date, but not later than the Latest Payment Date, but otherwise such application
for an Optional Payment shall be effective on the Grandfathered Retired
Employee’s Date of Retirement on a Full, Deferred or Early Retirement Allowance
and the Grandfathered Retired Employee’s benefits shall commence on the BEP
Benefit Commencement Date specified in ARTICLE I(i)(1)(ii)(A) of the Plan;
provided, however, that if within the one (1) year period following the date of
the filing of the application with the Administrator the Grandfathered Retired
Employee voluntarily retires or his employment is terminated for misconduct (as
determined by the Administrator) by any member of the Controlled Group, the
Optional Payment

 

18

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shall be reduced by one percent (1%) for each month (or portion of a month) by
which the month in which the Grandfathered Retired Employee’s termination of
employment precedes the first anniversary of the filing of the application with
the Administrator and his benefits shall commence in the BEP Benefit
Commencement Date specified in ARTICLE I(i)(1)(ii)(B) of the Plan.

(f) If a Grandfathered Retired Employee whose request for an Optional Payment in
the form of a Grandfathered Benefit Equalization Optional Payment Allowance has
been granted by the Administrator dies after his Date of Retirement and prior to
his BEP Benefit Commencement Date, his Beneficiary shall be eligible to receive
that portion of the Grandfathered Benefit Equalization Optional Payment
Allowance elected by the Grandfathered Retired Employee which is payable after
the death of the Grandfathered Retired Employee.

(g) Notwithstanding the preceding provisions of this Paragraph C,

(i) the Administrator may cause the distribution of that portion of the Benefit
Equalization Retirement Allowance that is the Grandfathered Benefit Equalization
Retirement Allowance to any group of similarly situated Grandfathered Retired
Employees (or their Spouses or other Beneficiaries) in a Single Sum Payment or
as an Optional Payment; and

(ii) the Administrator shall distribute that portion of an Employee’s Benefit
Equalization Retirement Allowance that is the Grandfathered Benefit Equalization
Retirement Allowance in a Single Sum Payment if such portion of the Benefit
Equalization Retirement Allowance payable in equal monthly payments is not more
than $250 per month.

(3) The Benefit Equalization Survivor Allowance payable pursuant to
ARTICLE IIA(2) shall be paid in a Single Sum Payment on the BEP Benefit
Commencement Date described in ARTICLE I(i)(3)(A) of the Plan, provided,
however, that the portion of the Benefit Equalization Survivor Allowance that is
derived from the Grandfathered Benefit Equalization Retirement Allowance shall
be paid on the BEP Benefit Commencement Date described in ARTICLE I(i)(3)(B) of
the Plan.

(4) The Benefit Equalization Optional Payment Allowance payable pursuant to
ARTICLE IIA(3) shall be paid on the BEP Benefit Commencement Date described in
ARTICLE (i)(1)(C) of the Plan.

 

D. Commencement and termination of Benefit Equalization Profit-Sharing
Allowances:

(1) The Benefit Equalization Profit-Sharing Allowance payable pursuant to
ARTICLE IIB(1) of the Plan shall be distributed to the Retired Employee in a
Single Sum Payment on the Payment Date, but not later than the Latest Payment
Date, unless, solely in the case of a Grandfathered Retired Employee, the
Administrator has approved his election to have distribution of that portion of
his Benefit Equalization Profit-Sharing Allowance that is the Grandfathered
Benefit Equalization Profit-Sharing Allowance made in accordance with
ARTICLE IID(3) of the Plan.

 

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(2) If an Employee or Retired Employee dies before his Single Sum Payment has
been paid and without having the approval by the Administrator for payment of
that portion of his Benefit Equalization Profit-Sharing Allowance that is the
Grandfathered Benefit Equalization Profit-Sharing Allowance in the form of an
Optional Payment, the Single Sum Payment otherwise payable to the Employee or
Retired Employee shall be paid to his Beneficiary on the Payment Date, but not
later than the Latest Payment Date.

(3) (a) A Grandfathered Employee who is a Secular Trust Participant may make
application to the Administrator to receive an Optional Payment with respect to
that portion of his Benefit Equalization Profit-Sharing Allowance that is the
Grandfathered Benefit Equalization Profit-Sharing Allowance in lieu of the
Single Sum Payment otherwise payable to him on the Benefit Commencement Date
specified in ARTICLE I(i)(2)(A) after he becomes a Grandfathered Retired
Employee. The application for an Optional Payment shall specify:

(i) the form in which such Optional Payment is to be paid;

(ii) the Beneficiary who will receive the balance of that portion of his Benefit
Equalization Profit-Sharing Allowance that is the Grandfathered Benefit
Equalization Profit-Sharing Allowance after the death of the Grandfathered
Employee or Grandfathered Retired Employee.

(b) In the case of a Grandfathered Employee who eighteen (18) months prior to
attaining the age of sixty-five (65) years could be compulsorily retired by his
Participating Company upon attaining the age of sixty-five (65) years pursuant
to Section 12(c) of the Age Discrimination in Employment Act, any application
for an Optional Payment must be filed with the Administrator more than one
(1) year preceding the date the Grandfathered Employee attains the age of
sixty-five (65) years.

(c) The Administrator may grant or deny any such application in its sole and
absolute discretion. A Grandfathered Employee shall not receive that portion of
his Benefit Equalization Profit-Sharing Allowance that is the Grandfathered
Benefit Equalization Profit-Sharing Allowance in the form of a Single Sum
Payment after the Administrator has granted the Grandfathered Employee’s
application for an Optional Payment. In the event the Grandfathered Employee or
Grandfathered Retired Employee has elected to receive his Optional Payment over
the joint life expectancies of he and his Beneficiary and incurs a Change in
Circumstance described in ARTICLE I(j)(2), (3) or (4) hereof on or after the
date of the filing of the application and prior to the date his Optional Payment
commences to be paid, the Grandfathered Employee or Grandfathered Retired
Employee may file an application with the Administrator within ninety (90) days
of the Change in Circumstance, but in no event later than the date his Optional
Payment is scheduled to commence to be paid to designate a new Beneficiary or
elect to receive his Optional Payment over the life expectancy of the
Grandfathered Employee or Grandfathered Retired Employee.

(d) If within the one (1) year period following the date of the filing of the
application for an Optional Payment with the Administrator, the Grandfathered
Employee voluntarily retires (other than for ill health, disability or hardship
under ARTICLE II, A

 

20

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(3)(a) of the Retirement Plan), voluntarily terminates his employment with his
Participating Company (other than for a disability which causes him to be
eligible for benefits under the Long-Term Disability Plan for Salaried
Employees), or his employment is terminated for misconduct (as determined by the
Administrator) by any member of the Controlled Group, the Optional Payment shall
be reduced in the same manner as specified in ARTICLE IIC(2)(e) hereof.

(e) If a Grandfathered Retired Employee dies after he Separates from Service and
prior to the date his Grandfathered Benefit Equalization Profit-Sharing
Allowance is paid or commences to be paid, payment shall be made to his
Beneficiary commencing in the form and on the date specified in the application.

(4) Notwithstanding the preceding provisions of this Paragraph D,

(a) the Administrator may cause the distribution of that portion of the Benefit
Equalization Profit-Sharing Allowance that is the Grandfathered Benefit
Equalization Profit-Sharing Allowance to any group of similarly situated
Beneficiaries in a Single Sum Payment or as an Optional Payment and

(b) the Administrator shall distribute a Grandfathered Employee’s or
Grandfathered Retired Employee’s Benefit Equalization Profit-Sharing Allowance
in a Single Sum Payment if the value of such Benefit Equalization Profit-Sharing
Allowance is not more than $10,000.

 

E. Application or Notification for Payment of Allowances:

An application for retirement pursuant to ARTICLE II, B of the Retirement Plan
shall be deemed notification to the Administrator of the BEP Benefit
Commencement Date of a Benefit Equalization Retirement Allowance (or other
benefit) in accordance with the terms of this Plan. In the event a Grandfathered
Employee shall not have elected an Optional Payment method with respect to his
Grandfathered Benefit Equalization Retirement Allowance, any such notification
shall specify the Beneficiary to whom payment of the Single Sum Payment shall be
made in the event the Employee dies after his Date of Retirement and prior to
his BEP Benefit Commencement Date.

An Employee or Retired Employee (or Beneficiary) shall make application to the
Administrator (or his delegate) for distribution of Benefit Equalization
Profit-Sharing Allowance under this Plan.

 

21

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ARTICLE III

FUNDS FROM WHICH ALLOWANCES ARE PAYABLE

Individual accounts shall be established for the benefit of each Employee and
Retired Employee (or Beneficiary) under the Plan. Any benefits payable from an
individual account shall be payable solely to the Employee, Retired Employee (or
Beneficiary) for whom such account was established. The Plan shall be unfunded.
All benefits intended to be provided under the Plan shall be paid from time to
time from the general assets of the Employee’s or Retired Employee’s
Participating Company and paid in accordance with the provisions of the Plan;
provided, however, that the Participating Companies reserve the right to meet
the obligations created under the Plan through one or more trusts or other
agreements. In no event shall any such trust or trusts be outside of the United
States. The contributions by each Participating Company on behalf of its
Employees and Retired Employees to the individual accounts established pursuant
to the provisions of the Plan, whether in trust or otherwise, shall be in an
amount which such Participating Company, with the advice of an actuary,
determines to be sufficient to provide for the payment of the benefits under the
Plan.

 

22

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ARTICLE IV

THE ADMINISTRATOR

The general administration of the Plan shall be vested in the Administrator.

All powers, rights, duties and responsibilities assigned to the Administrator
under the Retirement Plan applicable to this Plan shall be the powers, rights,
duties and responsibilities of the Administrator under the terms of this Plan,
except that the Administrator shall not be a fiduciary (within the meaning of
Section 3(21) of ERISA) with respect to any portion or all of the Plan which is
intended to be exempt from the requirements of ERISA pursuant to Section 4(b)(5)
of ERISA or which is described in Section 401(a)(1) of ERISA and exempt from the
requirements of Part 4 of Title I of ERISA.

 

23

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ARTICLE V

AMENDMENT AND

DISCONTINUANCE OF THE PLAN

The Board may, from time to time, and at any time, amend the Plan; provided,
however, that authority to amend the Plan is delegated to the following
committees or individuals where approval of the Plan amendment or amendments by
the shareholders of Philip Morris International Inc. is not required: (1) to the
Benefits Committee, if the amendment (or amendments) will not increase the
annual cost of the Plan by $10,000,000 and (2) to the Administrator, if the
amendment (or amendments) will not increase the annual cost of the Plan by
$500,000.

Any amendment to the Plan may effect a substantial change in the Plan and may
include (but shall not be limited to) any change deemed by the Company to be
necessary or desirable to obtain tax benefits under any existing or future laws
or rules or regulations thereunder; provided, however, that no such amendment
shall deprive any Employee, Retired Employee (or Beneficiary) of any Allowances
accrued at the time of such amendment.

The Plan may be discontinued at any time by the Board; provided, however, that
such discontinuance shall not deprive any Employee, Retired Employee (or
Beneficiary) of any Allowances accrued at the time of such discontinuance.

 

24

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ARTICLE VI

FORMS; COMMUNICATIONS

The Administrator shall provide such appropriate forms as it may deem expedient
in the administration of the Plan and no action to be taken under the Plan for
which a form is so provided shall be valid unless upon such form. Any Plan
communication may be made by electronic medium to the extent allowed by
applicable law. The Administrator may adopt reasonable procedures to enable an
Employee or Retired Employee to make an election using electronic medium
(including an interactive telephone system and a website on the Intranet).

All communications concerning the Plan shall be in writing addressed to the
Administrator at such address as may from time to time be designated. No
communication shall be effective for any purpose unless received by the
Administrator.

 

25

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ARTICLE VII

INTERPRETATION OF PROVISIONS

The Administrator shall have the full power and authority to grant or deny
requests for payment of a Benefit Equalization Retirement Allowance in
accordance with a form of distribution authorized under the Retirement Plan and
to grant or deny requests for payment of a Benefit Equalization Profit-Sharing
Allowance in accordance with a form of distribution authorized under the
Profit-Sharing Plan to the extent permitted under Code §409A. The Management
Committee shall have the full power and authority to grant or deny requests for
payment of a Benefit Equalization Retirement Allowance or Benefit Equalization
Profit-Sharing Allowance by the Administrator.

The Administrator shall have full power and authority with respect to all other
matters arising in the administration, interpretation and application of the
Plan, including discretionary authority to construe plan terms and provisions,
to determine all questions that arise under the Plan such as the eligibility of
any employee of a Participating Company to participate under the Plan; to
determine the amount of any benefit to which any person is entitled to under the
Plan; to make factual determinations and to remedy any ambiguities,
inconsistencies or omissions of any kind.

The Plan is intended to comply with the applicable requirements of Section 409A
of the Code. Accordingly, where applicable, this Plan shall at all times be
construed and administered in a manner consistent with the requirements of
Section 409A of the Code and applicable regulations without any diminution in
the value of benefits. Notwithstanding the preceding sentence, no Participating
Company shall be liable to any person if the Internal Revenue Service or any
court or other authority having jurisdiction over such matter determines for any
reason that any payment under this Plan is subject to taxes, penalties or
interest as a result of failing to comply with Section 409A of the Code.

 

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ARTICLE VIII

CHANGE IN CONTROL PROVISIONS

A. In the event of a Change in Control, each Employee shall be fully vested in
his Allowances and any other benefits accrued through the date of the Change in
Control (“Accrued Benefits”). Each Employee (or his Beneficiary) shall, upon the
Change in Control, be entitled to a lump sum in cash, payable within 30 days of
the Change in Control, equal to the Actuarial Equivalent of his Accrued
Benefits, determined using actuarial assumptions no less favorable than those
used under the Supplemental Management Employees’ Retirement Plan immediately
prior to the Change in Control.

B. Definition of Change in Control.

“Change in Control” shall mean the happening of any of the following events with
respect to a Grandfathered Benefit Equalization Retirement Allowance and
Grandfathered Benefit Equalization Profit-Sharing Allowance:

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

(2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by Philip Morris
International Inc.’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

(3) Approval by the shareholders of Philip Morris International Inc. of a
reorganization, merger, share exchange or consolidation (a “Business
Combination”), in each case, unless, following such Business Combination,
(i) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common

 

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

(4) Approval by the shareholders of Philip Morris International Inc. of (i) a
complete liquidation or dissolution of Philip Morris International Inc. or
(ii) the sale or other disposition of all or substantially all of the assets of
Philip Morris International Inc., other than to a corporation, with respect to
which following such sale or other disposition, (A) more than 80% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) less than 20% of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by any Person (excluding any employee benefit
plan (or related trust) of Philip Morris International Inc. or such
corporation), except to the extent that such Person owned 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities prior
to the sale or disposition and (C) at least a majority of the members of the
board of directors of such corporation were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such sale or other disposition of assets of Philip Morris
International Inc. or were elected, appointed or nominated by the Board.

“Change in Control” shall mean the happening of any of the events specified in
Treasury Regulation §1.409A- 3(i)(5)(v), (vi) (vii) with respect to that portion
of a Benefit Equalization Allowance that is not a Grandfathered Benefit
Equalization Retirement Allowance and that portion of a Benefit Equalization
Profit-Sharing Allowance that is not a Grandfathered Benefit Equalization
Profit-Sharing Allowance. For purposes of determining if a Change in Control has

 

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occurred, the Change in Control event must relate to a corporation identified in
Treasury Regulation §1.409A-3(i)(5)(ii), provided, however, that (i) the
spin-off of the shares of Philip Morris International Inc. to the shareholders
of Altria Group, Inc. shall not be considered to be a Change in Control, and
(ii) any change in the Incumbent Board coincident with such spin-off shall not
be considered to be a Change in Control.

 

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EXHIBIT A

BENEFIT EQUALIZATION PLAN

ACTUARIAL ASSUMPTIONS USED TO CALCULATE A SINGLE SUM PAYMENT

INTEREST RATE: The average of the monthly rate of interest specified in
Section 417(e)(3)(A)(ii)(II) of the Code, but published for 24 months preceding
the Employee’s Date of Retirement, less 1/2 of 1%.

MORTALITY ASSUMPTION: The mortality table specified in
Section 417(e)(3)(A)(ii)(I) of the Code and Section 1.417(e)-1(c)(2) of the
Treasury Regulations (currently the table prescribed in Revenue Ruling 2001-62).

 

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