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I AGREEMENT made this day of , by and between PamIP MORRIS INCORPORATED, a Virginia corporation, (hereinafter referred to as the "Company") and (hereinafter referred to as the "Optionee" ) . 1. The Optionee agrees to remain in the full-time employ of the Company or its subsidiaries, as the Company may from time to time designate, at such rate of compensation (not less than the rate in effect at the date of this agreement) as shall be determined from time to time by the Company or its subsidiaries, for a period of one year from the date hereof. Nothing in this agreement shall be deemed to confer upon the Optionee any right to continue in the employ of the Company or any of its subsidiaries, or interfere in any way with the right of the Company or any of its subsidiaries to terminate his employment at any time, for or without cause. 2. The Optionee warrants and represents that he, was born on 3. The Company hereby grants to the Optionee an option to purchase from the Company during the period commencing on the date hereof and ending (hereinafter re- ferred to as the "option term") up to, but not exceeding in the ag- gregate, shares of the Common Stock, $5 par value, of the Company at the price of $ per share, in accordance with and subject to the following: (a) The option may not be exercised with respect to more than five per cent of the shares to which it relates prior to , nor with respect to more than a total of one-third of such shares prior to , nor with respect to more than a total of two-thirds of such shares prior to (b) Except as otherwise provided in subparagraph (c), all or any part of the number of full shares with respect to which the right of exercise has accrued may be purchased at the time of such accrual, or at any time or from time to time thereafter during the option term. (c) In the event that the Optionee's employment shall be ter- minated, the option may not be exercised with respect to any shares as to which, the right of egercise,had not accrued at the time_ of such termination of employment, and no shares may be purchased after a period of (i) one year from the date of death of the Optionee if the same, was the cause of, or occurred within three months after, such N termination, or (ii) three months from the date of such termination in ~ . ~a ~. 4k ~ ~ w

all other cases. The foregoing shall in no event permit the purchase of any shares after the expiration of the option term. The Optionee's employment shall be deemed to be terminated when, by reason of retirement or otherwise, he is no longer employed by (i) the Company or a subsidiary thereof, or (ii) a corporation, or a parent or sub- sidiary thereof, substituting a new option for the option granted by this Agreement (or assuming the option granted by this Agreement) by reason of a merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation. Leaves of absence on military or government service or otherwise shall not constitute termination of employment. (d) The stock delivered upon exercise of the option may be either authorized and unissued stock or issued stock reacquired by the Company, as the Company shall determine. (e) The option may be exercised only with respect to full shares. 4. Exercise of the option shall occur on the date the Company receives at its principal executive offices a written notice specifying the number of shares to be purchased and payment in full of the option price of such shares in cash or by certified check, bank draft, or postal or express money order to the order of the Company. If both of the foregoing are not received on the same date, exercise shall occur on the date that the Company so receives the second of them. The Optionee shall have no right as a stockholder with respect to any shares covered by his option until the date of the issuance of a stock certificate to him for such shares. 5. Upon the issuance of any shares, a sum equal to the par value thereof will be credited to the capital stock account and the balance of the purchase price will be credited to the paid-in surplus account. 6. The option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution and is exercisable dur- ing Optionee's lifetime only by him. 7. The terms and provisions of the option (including without limiting the generality of the foregoing, terms and provisions relating to the option price and the number and class of shares subject to the option) shall be subject to appropriate adjustment in the event of any recapitalization, merger, consolidation, disposition of *property or stock, separation, reorganization, stock dividend in excess of five per cent, combination, split-up or exchange of shares, or the like, except that no adjustment shall be made which will disqualify the option as a restricted stock option under the Internal Revenue Code nor shall any adjustment be made by reason of the issuance of rights to subscribe to any shares of stock. I

I 8. Whenever the word "Optionee" is used in any provision of this Agreement under circumstances such that the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom this option may be transferred by will or by the laws of descent and distribution, it shall be deemed to include such person or persons. 9. This Agreement is intended to provide for the grant of an option which will qualify as a "restricted stock option" and for the treatment thereof provided by the Internal Revenue Code. All terms and conditions hereof are to be construed to carry out such intent. IN WITNESS WHEREOF, the parties hereto have caused this Agree- ment to be duly executed as of the day and year first above written. PHILIP MORRIS INCORPORATED By .............. .... ........................... Vice President I Attest : Assistant Secretary ............................................................ (L.S.) Optionee I ~

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