<PAGE>

                                                                  Exhibit 10.6.2
                                                                  --------------

                             EMPLOYMENT AGREEMENT
                             --------------------

           AGREEMENT by and between Philip Morris Companies Inc., a Virginia
 corporation (the "Company") and Calvin J. Collier (the "Executive"), dated as
 of the 1st day of November, 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,
 notwithstanding 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 Senior Vice President and General Counsel of Kraft General Foods
 Group 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 Senior Vice President and General Counsel of Kraft
 General Foods Group (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 immediately prior to the date of such termination of employment
 or cessation of status as Senior Vice President and General Counsel of Kraft
 General Foods Group.
<PAGE>

           (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 on which the Executive ceases to hold the position of Senior
 Vice President and General Counsel of Kraft General Foods Group, (y) the third
 anniversary of the date hereof, and (z) the Executive's normal retirement date
 (the "Normal Retirement Date") under the The Kraft 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 following 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 maintained by the Company or any corporation
 controlled by the Company or (iv) any acquisition by any corporation pursuant
 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

                                       2
<PAGE>

 individual were a member of the Incumbent Board, but excluding, for this
 purpose, any such individual whose initial assumption of office occurs as a
 result of an actual or threatened election contest with respect to the election
 or removal of directors or other actual or threatened solicitation of proxies
 or consents by or on behalf of a Person other than the Board; or

           (c) Approval by the shareholders of the 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 Combination
 (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
 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 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 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

          (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
 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,

                                       3
<PAGE>

 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 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 action of the Board, providing for such sale or other
 disposition 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 position (including status, offices,
 titles and reporting requirements), authority, duties and responsibilities
 shall be at least commensurate in all material respects with the most
 significant of those held, exercised and assigned at any time during the 120-
 day period immediately preceding the Effective 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 excluding any periods of
  vacation and sick leave to which the Executive is entitled, the Executive
  agrees to devote reasonable attention and time during normal business hours to
  the business and affairs of the Company and, to the extent necessary to
  discharge the responsibilities assigned to the Executive hereunder, to use the
  Executive's reasonable best

                                       4
<PAGE>

  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,
  (B) deliver lectures, fulfill speaking engagements or teach at educational
  institutions and (C) manage personal investments, 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 1l(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 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

                                       5
<PAGE>

 other obligation to the Executive under this Agreement. Annual 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 in this Agreement, the term "affiliated companies" shall include any
 company control1ed by, controlling or under common 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 affiliated companies in respect of the
 five fiscal years immediately 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, 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 favorable, 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 immediately 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.

                                       6
<PAGE>

                 (v) Welfare Benefit Plans. During the Employment 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, 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 generally 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 reimbursement 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 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.

                 (viii)   Office and Support Staff.  During the Employment
                          ------------------------
 Period, the Executive shall be entitled to an office or offices of a size and
 with furnishings and other appointments, 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

                                       7
<PAGE>

 immediately preceding the Effective Date or, if more favorable to the
 Executive, as provided generally at any time thereafter with respect to other
 peer executives of the Company and its affiliated companies.

                 (ix) Vacation.  During the Employment Period, the Executive
                      --------
  shall be entitled to paid vacation in accordance 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 Disability.  The
               -------------------------        -------------------
 Executive's employment shall terminate automatically upon the Executive's death
 during the Employment 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 Executive's employment
                -----
  during the Employment Period for Cause. For the sole and exclusive purposes of
  this Agreement, "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

                                       8
<PAGE>

     Chief Executive Officer believes that the Executive has not substantially
     performed the Executive's duties, or

                 (ii) the willful engaging by the Executive in illegal 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" unless 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 pursuant to a resolution
  duly adopted by the Board or upon the instructions of the Chief Executive
  Officer or a senior officer 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 bean 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 (including status, offices,
     titles and reporting requirements), 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

                                       9
<PAGE>

      by the Company promptly after receipt of notice thereof given by the
      Executive;

                 (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 determination 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 Agreement.

           (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 Agreement. For purposes of this Agreement, a "Notice of Termination"
  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, 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

                                       10
<PAGE>

  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 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 of which is 365 and (3) any compensation previously
          deferred by the Executive (together with any accrued interest or
          earnings thereon) and any accrued vacation 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

                                       11
<PAGE>

               C.  an amount equal to the difference between (a) the actuarial
           equivalent of the benefit (utilizing actuarial assumptions no less
           favorable to the Executive than those in effect under the Retirement
           Plan 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 employment 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 benefits covered thereby or by the terms of the
      appropriate 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 Effective Date or, if more
      favorable to the Executive, as in effect generally at any time thereafter
      with respect

                                       12
<PAGE>

      to other peer executives of the Company and its affiliated companies and
      their families, provided, however, that if the Executive becomes
      reemployed with another employer and is eligible to receive medical or
      other 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 (including, 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 immediately 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 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

                                       13
<PAGE>

     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
     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 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

                                       14
<PAGE>

  time during the 120-day period immediately preceding the Effective 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.

            (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 obligation to pay to the Executive (x) his Annnua1 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 Obligations 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.

           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

                                       15
<PAGE>

  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 provision of this Agreement or any guarantee of
  performance thereof (including as a result of any contest by the 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
  much 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 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
 affecting 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).

                                       16
<PAGE>

 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
 Accounting Firm's determination. If the Accounting Firm determines 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 Accounting 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 possible 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 writing 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 apprise 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:

                 (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

                                       17
<PAGE>

                 (iv) permit the Company to participate in any proceedings
     relating to such claim;

     provided, however, that the Company shall bear and pay directly all costs
     and expenses (including additional interest 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 Section 9(c), the Company shall
     control all proceedings taken in connection with such contest and, at its
     sole option, may pursue or forgo any and all administrative appeals,
     proceedings, hearings and conferences with the taxing authority 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
     extension 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 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

                                       18
<PAGE>

      Company does not notify the Executive in writing of its intent to contest
      such denial of refund prior to the expiration of 30 days after such
      determination, then such advance shall be forgiven and shall not be
      required to be repaid and 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 at 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, communicate 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 withholding 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 assigns.

            (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

                                       19
<PAGE>

  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 at reflect. This Agreement may not be amended or modified
  otherwise than by a written agreement executed by the parties hereto or their
  respective successors and legal representatives.

            (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:
            -------------------

            Calvin J. Collier

            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 payable under this
 Agreement such Federal, state, local or foreign taxes as shall be required to
 be withheld pursuant to 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 assert 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

                                       20
<PAGE>

 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 employment of the Executive by the Company is "at will"
  and, prior 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 Senior Vice President and General Counsel of Kraft General Foods
  Group, 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, other than the
  Deferred Incentive Payment Agreement between the Company and the Executive
  dated March 8, 1989 as amended as of November 1, 1989 (the "DIPA") which shall
  remain in full force and effect, including, without limitation, with respect
  to the provision of lifetime medical, dental and life insurance benefits to
  the extent such benefits are more favorable than those provided by Section
  6(a)(ii) and (iii).  For purposes of the DIPA, with respect to an involuntary
  termination of the Executive's employment without cause (within the meaning of
  the DIPA) after February 15, 1991, this Agreement shall be considered to be a
  "normal severance plan" of the Company. Notwithstanding the foregoing, with
  respect to a termination of the Executive's employment on or prior to February
  15, 1991, nothing in the DIPA shall serve to limit the Executive's rights
  under this Agreement.

          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.


                                            /s/ Calvin J. Collier
                                        -----------------------------
                                              CALVIN J. COLLIER


                                        PHILIP MORRIS COMPANIES INC.

                                        By:   /s/ Richard L. Snyder
                                            -------------------------
                                                RICHARD L. SNYDER

                                       21