PHILIP MORRIS COMPANIES INC
EXHIBIT 10.1
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex10-1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>


<PAGE>


                                                             Exhibit 10.1

                      Agreement with William H. Webb



                                                      July 12, 2002

Mr. William H. Webb
120 Park Avenue
New York, NY  10017

Dear Bill:

         This letter agreement ("Agreement") will set forth and confirm the
undertakings and agreements with respect to which you will retire as Vice
Chairman of Philip Morris Companies Inc. ("PMC") and resign as a director of PMC
and from any director or officer positions with PMC's subsidiaries or affiliates
effective August 31, 2002. PMC, its subsidiaries, affiliates, successors and
assigns will hereinafter be collectively referred to as the "Company." A release
of claims herein will form a part of those undertakings and agreements.

                  1. You shall remain an employee through September 30, 2002 and
be paid your normal salary, less applicable withholding. From October 1, 2002
through September 30, 2004 you shall receive salary continuation payments at the
same rate as your current normal salary, less applicable withholding, in lieu of
any payments to which you might be entitled under any severance plan of the
Company, and you shall hold yourself available to consult with and advise the
officers, directors and other representatives of the Company as reasonably
requested by the Chief Executive Officer of PMC ("Chief Executive").

                  2. From October 1, 2004 through September 30, 2007, you will
hold yourself available to consult with and advise the officers, directors and
other representatives of the Company as reasonably requested by the Chief
Executive. In this regard you acknowledge that the terms of the Consulting
Agreement attached as Exhibit A are acceptable to you and that you will execute
an identical or virtually identical document on October 1, 2004.

                  3a. You will receive a pro-rated 2002 Annual Incentive
Compensation Award as determined by the PMC Compensation Committee in January
2003 for the period January 2002 through August of 2002, inclusive. In addition,
you shall receive a prorated Long-Term Incentive Award for the three-year
performance cycle 2001-2003, as determined by the PMC Compensation Committee in
January 2004 for the period January 2001 through August of 2002, inclusive.

                  3b(1). Provided you comply with paragraph 15 below, your June
2001 stock option grant will vest in accordance with its terms in the same
manner as if you remained actively employed by the Company. If you should obtain
other full-time noncompetitive employment, which shall mean, full-time active
employment for an entity that is not a "competitor" (defined in paragraph 15
below), before the vesting of this grant, you must apply for accelerated vesting
as a retiree in accordance with the terms of the option agreements, by giving
written notice to the Senior Vice President of Human Resources, PMC at the
address specified in paragraph 22 below. The Company agrees that for the
purposes of determining the period available to you for exercising all vested
stock options issued to you by the Company, your employment with the Company
will be deemed to have terminated on account of retirement at the earlier of
September 30, 2004 or the date you commence other full-time non-competitive




<PAGE>

                                                                    Exhibit 10.1

employment. You shall have the right to exercise such options in accordance with
the terms of the applicable option agreements and the applicable stock option
plans. You will not be eligible for any future stock option grants, but you will
be granted any reload Executive Ownership Stock Options in connection with the
exercise of any of your vested options prior to the earlier of the date you
commence other full-time noncompetitive employment or September 30, 2004.
Provided that you have not accepted full-time noncompetitve employment and have
complied with paragraph 15 below, any unvested reload Executive Ownership Stock
Options outstanding on September 30, 2004 shall vest on the six month
anniversary of their date of grant.

                  3b(2). Provided you comply with paragraph 15 below, your
restricted stock will vest in accordance with its terms in the same manner as if
you remained actively employed by the Company or upon such earlier date as shall
be approved by the Compensation Committee of the Board of Directors. If you
should obtain other full-time noncompetitive employment before the vesting of
any restricted stock, you will forfeit the stock unless you have obtained the
prior approval of the Chief Executive before commencement of such employment.

                  3b(3). Subject to the terms of paragraph 3b(4), you shall
remain an active participant in and be eligible to receive benefits under the
following benefit programs generally applicable to salaried employees through
September 30, 2004: Medical, Vision and Dental, Dependent Care Flexible Spending
Account, Survivor Income Benefit, Retirement, Deferred Profit Sharing (including
any Company contribution thereunder), in accordance with its terms (including
the Benefit Equalization Plan) and Life Insurance. Company-paid life insurance
shall remain at two times salary through your 65th birthday. Thereafter,
beginning at age 65, your life insurance benefit will be reduced in accordance
with Company policy.

                  3b(4). In the event you accept other full-time noncompetitive
employment prior to September 30, 2004, upon commencement of such employment you
shall no longer remain on salary continuation pursuant to paragraph 1, and you
shall cease to be eligible for active participation in the benefit programs
described in paragraph 3b(3) as of the last day of the month during which you
commence such employment. At such time, you shall be entitled to a lump-sum
payment equal to the sum of the remaining salary continuation payments to which
you would have been entitled less applicable withholding, pursuant to paragraph
1, had you not accepted such employment. In such eventuality, you will receive
the amounts payable under paragraph 3a in accordance with its terms. For
purposes of this Agreement, full-time noncompetitive employment shall not
include noncompetitive self-employment or services as an independent contractor,
nor noncompetitive services that do not involve a full-time schedule or are not
intended to be long-term.

                  3b(5). Within 10 days following your acceptance of such other
full-time noncompetitive employment, you shall notify the Company of that fact
in writing by sending such notification to the Senior Vice President of Human
Resources of PMC at the address specified in paragraph 22, advising of the
details of such employment and the date such employment is expected to begin.

                  4. As of October 1, 2004, you will be eligible to retire with
service credit to age 65 (capped at 35 years) and your earnings will be
projected to age 65 at 5% per year on total compensation (base plus annual
bonus). This benefit is expressed as a 100% Joint & Survivor


                                       2




<PAGE>

                                                                    Exhibit 10.1

annuity (the "Annual Pension Benefit") payable from three sources: (1) the
Company's tax-qualified pension plan; (2) the Company's non-qualified pension
plan; and (3) the Company's supplemental pension plan. It is assumed that you
will also elect to receive your qualified benefit as a 100% Joint and Survivor
benefit. Your qualified benefit is provided on pre-tax basis and is subject to
applicable taxes. Your nonqualified pension and supplemental pension benefits
will be paid on an after-tax basis in accordance with the provisions of the
Secular Trust program.

                  5. If you die prior to September 30, 2004, your estate or your
designated beneficiary shall receive an amount equal to the remaining salary
continuation and prorated incentive payments to which you are entitled under
paragraphs 1 and 3a, less all such payments previously made pursuant to this
Agreement, plus any amounts payable pursuant to the death benefit provisions of
the benefit programs referred to in paragraph 3b(3), and any unvested equity
awards shall vest in accordance with their terms. Further, your spouse would be
entitled to the survivor portion (100%) of the pension benefits payable in
accordance with paragraph 4, as of the first of the month following your death.

                  6. In the event you become disabled and file for disability
benefits under the Company's Long-Term Disability Program prior to September 30,
2004, your salary continuation payments will continue to be paid pursuant to the
terms of paragraph 1, reduced by any salary replacement amounts you receive
pursuant to the Company's Long-Term Disability Program. You will continue to be
entitled to the other payments and benefits set forth in this Agreement pursuant
to the terms of this Agreement as well as vested retirement benefits in
accordance with the provisions of the applicable plans.

                  7. The Company will provide you with an office in the
Greenwich, Connecticut area, together with secretarial service, office
furniture, supplies and equipment, and a telephone credit card, from September
1, 2002 until the earlier of the date you commence other full-time
noncompetitive employment or September 30, 2004.

                  8. The Company will provide you with a Company vehicle and
driver until the earlier of the date you commence other full-time noncompetitive
employment or September 30, 2004.

                  9. You shall continue to be reimbursed for financial
counseling (including, without limitation, legal, tax and investment advice)
through 2004 up to the current annual maximum. In addition, the Company shall
reimburse you for all legal and accounting fees and expenses incurred by you in
connection with the analysis and negotiation of this agreement.

                  10. The Company will continue to maintain and support your
security systems at your homes in New York City and Greenwich, Connecticut until
September 30, 2004.

                  11. Should you repatriate to Australia prior to age 70 the
Company shall: (i) provide you with a one month relocation allowance equal to
your current monthly salary, less applicable withholding; (ii) pay for the
shipment of your household goods; (iii) pay for storage of your household goods
in Australia for up to six months or until you move into your new home, if
earlier; (iv) pay your temporary living expenses for 30 days; and (v) pay for
first class air tickets


                                       3




<PAGE>

                                                                    Exhibit 10.1

from the United States to Australia for yourself, your wife and your son,
(should he choose to relocate with you to Australia).

         In the event you repatriate to Australia, the Company will no longer
have an obligation to provide you with an office and secretarial service as
provided in paragraph 7 or a Company vehicle and driver as provided in paragraph
8. In lieu thereof, the Company shall provide you with an office and secretarial
service at a Company facility in Australia, and, provided you have entered into
the Consulting Agreement referred to in paragraph 2 above, pay for the cost of
car and driver up to the annual limit provided for in such Agreement. In the
event you repatriate to Australia, the Company will continue to maintain and
support security systems at your homes in New York City and Greenwich,
Connecticut (if you continue to own them) until the earlier of September 30,
2004 or the date you commence other full-time noncompetitive employment.

                  12. In exchange for the payments and other consideration
described above, which you acknowledge you would not otherwise be entitled to,
you release and forever discharge, and by this instrument release and forever
discharge, the Company, including without limitation, its shareholders,
subsidiaries, divisions, affiliates, successors, assigns, representatives,
attorneys, directors and employees, from all debts, obligations, promises,
covenants, agreements, contracts, endorsements, bonds, controversies, suits,
actions, causes of action, judgments, damages, expenses, claims or demands of
any kind whatsoever (whether known or unknown) in law or in equity, which you
ever had, now have, or which may arise in the future regarding any matter
arising on or before the date this Agreement is executed by you, regarding your
employment with or your leaving the employment of the Company, any contract
(express or implied), any claim for equitable relief or recovery of punitive,
compensatory, or other damages or monies, commissions, attorneys' fees, any
tort, and all claims for wrongful termination or alleged violation of applicable
wage payment or benefits law, or alleged discrimination based upon sex,
religion, age, race, color, national origin, sexual orientation, handicap or
disability, including but not limited to any claim, asserted or unasserted,
which could arise under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, the Older Workers Benefit Protection
Act, the Americans With Disabilities Act of 1990, the Employee Retirement Income
Security Act of 1974, the Family and Medical Leave Act of 1993, the Civil Rights
Act of 1991, the Civil Rights Act of 1866, the Rehabilitation Act of 1973,
Executive Order 11246, the New York State Human Rights Law, the New York City
Human Rights Law, the Connecticut Law on Human Rights and Opportunities, as each
of those statutes and orders have been and may be amended from time to time and
any other federal, state or local equal employment opportunity laws, regulations
or ordinances.

                  The Company releases and forever discharges, and by this
instrument releases and forever discharges, you from all debts, obligations,
promises, covenants, agreements, endorsements, bonds, controversies, suits,
actions, causes of action, judgments, damages, expenses, claims or demands of
any kind whatsoever (whether known or unknown), in law or in equity, which it
ever had, now has, or which may arise in the future regarding any matter arising
on or before the execution of this Agreement regarding your employment with or
your leaving the employment of the Company.


                                       4




<PAGE>

                                                                    Exhibit 10.1

                  Anything herein to the contrary notwithstanding, neither party
is releasing the other from its obligations under this Agreement, including your
rights under any employee benefit plan and your rights to indemnification.

                  13. Pursuant to and as a part of your complete and total
release and discharge of the Company, you agree, to the extent consistent with
applicable law, not to initiate any legal action, charge or complaint ("Action")
against the Company, in any forum whatsoever, in connection with the claims
released herein. In addition, to the extent any such Action is pending or may be
brought, you expressly waive any claim to any form of monetary or other damages,
or any other form of recovery or relief (including, but not limited to,
injunctive relief) in connection with any such Action, or in any Action brought
against the Company by a third party. Further, to the extent consistent with the
law, you agree not to aid, assist or participate in any Action filed by third
parties against the Company.

                  The Company agrees, to the extent consistent with applicable
law, not to initiate any Action against you, in any forum whatsoever, in
connection with any claims released herein.

                  14. You understand and agree that, unless required by lawful
subpoena or court order, or as may be disclosed to the public generally through
no fault of your own, neither you nor anyone acting on your behalf will publish,
publicize, disseminate or communicate or cause to be published, publicized,
disseminated or communicated, to any entity or person whatsoever, directly or
indirectly, any of the Company's proprietary information, data or documents
relating to its operations, including: any trade secrets; information, whether
or not proprietary, not publicly known regarding the business or operations of
the Company; information concerning any disputes giving rise to this Agreement;
any claims giving rise to this Agreement; this Agreement; the terms of
settlement; or the discussions and circumstances preceding settlement, except to
your legal counsel and tax advisors after first informing them that they must
maintain the confidentiality of such information or risk breaching this
Agreement. Moreover, where required by subpoena or court order to publish,
publicize, etc. such information, you agree to notify the Company in advance of
same by providing written notice via overnight courier or hand delivery, to the
Senior Vice President of Human Resources of PMC, at the address specified in
paragraph 22. You also agree that if any confidential information is requested
by lawful subpoena or court, governmental or regulatory order, if requested by
the Company, you will undertake your best efforts to assist the Company in
obtaining a confidentiality order from the court or governmental or regulatory
agency requesting such information. The Company agrees that, unless required by
lawful subpoena, court order or federal securities laws, neither it nor anyone
acting on its behalf will publicize, disseminate or communicate or cause to be
published, disseminated or communicated, to any entity or person whatsoever,
directly or indirectly, confidential information relating to your personal
affairs and finances, and any information concerning any disputes giving rise to
this Agreement, any claims giving rise to this Agreement, this Agreement, the
terms of settlement, or the discussions and circumstances preceding settlement
except to the Company's legal advisors after first advising them that they must
maintain the confidentiality of such information or risk breaching this
Agreement. Moreover, where required by subpoena, court order or federal
securities laws to disclose such information, the Company agrees to notify you
in advance of same by providing written notice via overnight courier or hand
delivery to your home address in Greenwich, Connecticut.


                                       5




<PAGE>

                                                                    Exhibit 10.1

                  15a. You agree that for the period August 31, 2002 through
September 30, 2004, you will not accept employment, act as a consultant, provide
services to or otherwise be affiliated as a trustee, partner, principal,
officer, or director with any other corporation, partnership, proprietorship,
firm, or other business entity or otherwise engage in any business which in any
material manner competes with the tobacco, food or beer businesses of the
Company, as conducted during your employment ("competitor") unless you receive
advance written permission from the Senior Vice President of Human Resources
(hereafter "Executive") or his or her designee. Should any dispute arise over
what is a "competitor," the Company's reasonable determination of what is a
competitor shall govern.

                  15b. You also agree that for the period August 31, 2002
through September 30, 2004 you shall not solicit or encourage any incumbent
employee of the Company to leave the employ of the Company or otherwise assist
any third party in soliciting or encouraging any such employees to leave the
employ of the Company.

                  15c. You acknowledge and agree that you will be reasonably
able to earn a livelihood without violating the terms of this paragraph 15.
Further, in the event you violate the terms of this paragraph 15 in any material
respect, you agree that in addition to any other remedies that may be available
to the Company, the Company will be entitled to terminate (i) the salary
continuation payments pursuant to paragraph 1 and/or (ii) the consulting
arrangement provided for in paragraph 2 herein, as the case may be, and that in
such event you will not be entitled to any payment pursuant to paragraph 1
and/or 2 for any period subsequent to the date on which the Company elects to
terminate the salary continuation payments or consulting arrangement described
in paragraph 1 and/or 2. You also agree that the payment of the amounts and
benefits and the vesting of equity awards set forth in paragraphs 1, 3(a)
through 3b(3) and 7 through 11 are conditioned upon your meeting the terms of
this Agreement, and that notwithstanding anything in this Agreement to the
contrary, if you fail (or have failed) to comply with any of the material terms
of this Agreement, in addition to any other damages or remedies, the Company
will no longer be obligated to pay or provide to you any unpaid amounts or
benefits to which you may be entitled under paragraphs 1, 3(a) through 3b(3) and
7 through 11 hereunder, provided however that the Company's obligations shall
continue with respect only to accrued and vested pension benefits and retiree
health and life insurance benefits and any rights to which you may be entitled
under paragraph 17.

                  15d. The parties acknowledge that they intend this paragraph
15 to be enforced according to its terms. If, however, a court determines that
any restrictions contained in this paragraph are overly broad, void or
unenforceable for any reason, the parties hereby consent to have the court
modify any such restrictions to make them reasonable and enforceable in all
respects and come closest to the meaning intended by the parties.

                  16. You acknowledge that a breach of the confidentiality,
noncompetition and nonsolicitation provisions contained in paragraphs 14 and 15
of this Agreement could cause immediate and irreparable harm to the Company
and/or its affiliates or subsidiaries and their competitive position and that
such provisions provide a material element of the Company's consideration for
and inducement to enter into this Agreement. Accordingly, it is expressly agreed
and understood that, should you breach such provisions, the Company,
notwithstanding paragraph


                                       6




<PAGE>

                                                                    Exhibit 10.1

21 herein, in addition to pursuing other remedies that it may have in law or
equity, may obtain an injunction in a court of law to restrain you from further
violating paragraphs 14 and 15. The parties further agree that in the event of a
breach of paragraphs 14 and 15 hereof by you, the Company's damages will be
incalculable with any degree of certainty and thus the Company will be entitled
to liquidated damages in an amount equal to the payments made to you pursuant to
paragraphs 1, 3(a) through 3b(3) and 7 through 11 hereof.

                  17. If at any time in the future you are made a party or
witness, or are threatened to be made a party or witness, to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding") by reason of the fact that you are or were an officer or employee
of the Company (or any subsidiary or affiliate thereof) whether or not the basis
for such proceedings is your alleged action in an official capacity while
serving as a director, officer, member, employee or agent, the Company agrees
that you shall be indemnified and held harmless by the Company to the fullest
extent permitted or authorized by applicable law against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines and amounts paid or to be paid in settlement) reasonably incurred or
suffered by you in connection therewith, and such indemnification will continue
after you have ceased to be an officer, director, member, employee or agent of
the Company and will inure to the benefit of your heirs, executors and
administrators. The Company shall advance to you all reasonable costs and
expenses incurred by you in connection with a Proceeding within 20 days after
receipt by the Company of a written request for such advance as well as your
written agreement to submit subsequent documentation of such costs. Such request
shall include a written statement, executed personally, of your good faith
belief that you met any standard of conduct that is a prerequisite to your
entitlement to indemnification under applicable law and a written undertaking by
you to repay the amount of such advance if it shall ultimately be determined
that you did not meet such standard of conduct.

                  18. This Agreement will not be construed as an admission by
the Company of any unlawful action. The Company expressly denies that it has
acted unlawfully toward you and denies any liability to you other than as
specifically provided herein.

                  19. This Agreement is not assignable, other than to a
successor of the Company pursuant to a merger of the Company or a purchase of
the Company of all or substantially all of the Company's assets.

                  20. You acknowledge that you have been informed that you have
up to 21-days to consider this Agreement, and a period of seven days following
execution to revoke your acceptance by providing written notice via overnight
courier or hand delivery to the Senior Vice President of Human Resources of PMC
at the address specified in paragraph 22. You further acknowledge that you have
been advised to consult with an attorney regarding the terms and conditions of
this Agreement and that you have in fact done so.

                  21. Except as otherwise provided in this paragraph, any
disputes arising under or in connection with this Agreement shall be resolved by
arbitration to be held in New York, New York in accordance with the rules and
procedures for the Resolution of Employment Disputes of the American Arbitration
Association and the laws of the State of New York then in effect. Judgment upon
the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Each party shall bear its own costs of the arbitration,
including, without limitation, reasonable


                                       7




<PAGE>

                                                                    Exhibit 10.1

attorneys' fees. Pending the resolution of any arbitration or court proceeding,
the Company shall continue payment of all amounts due to you under this
Agreement and all benefits to which you are entitled at the time the dispute
arises.

                  It is expressly agreed that arbitration, as provided herein,
shall be the exclusive means for determination of all matters arising in
connection with this Agreement and neither of the parties hereto shall institute
any action or proceeding in any court of law or equity other than: (a) to
request enforcement of the arbitrator's award hereunder; or (b) for the Company
to bring an action or proceeding seeking injunctive relief from a Court of
competent jurisdiction as set forth in paragraph 16. The foregoing sentence
shall be a bona fide defense to any action or proceeding instituted contrary to
this Agreement.

                  22. Any notices under this Agreement will be sent by overnight
courier or hand delivery and, if to the Company, to the Senior Vice President of
Human Resources, Philip Morris Companies Inc., 120 Park Avenue, New York, New
York 10017-5592 or, if to you, to the address set forth on the first page
hereof, with a copy to John J. Cannon III, Esq., Shearman & Sterling, 599
Lexington Avenue, New York, New York 10022.

                  23. The terms of this Agreement, including all facts,
circumstances, statements and documents relating thereto, shall not be
admissible or submitted as evidence in any litigation in any forum for any
purpose other than to secure enforcement of the terms and conditions of this
Agreement. In this regard, the Company agrees in the event that it is found by a
court of law with appropriate jurisdiction, after all appeals have been
exhausted, to have been in default with respect to the terms and conditions set
forth in this Agreement, it will be responsible for your reasonable attorney's
fees incurred in enforcing this Agreement.

                  24. The validity and construction of this Agreement shall be
governed by the laws of the State of New York, without regard to its conflicts
of law principles.

                  25. This Agreement sets forth the entire agreement between you
and the Company, and supersedes any and all prior oral and/or written agreements
between you and the Company, with respect to the subject matter hereof. This
Agreement may not be altered, amended or modified except by a further writing
signed by you and the Company.

                  26. The failure of you or the Company to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof nor deprive either party of the right thereafter to insist upon
strict adherence to that term or any other term of the Agreement.

                  27. This Agreement may be pleaded as a full and complete
defense to, and may be used as the basis for an injunction against, any action,
suit or other proceeding that may be instituted, prosecuted or attempted in
breach of this Agreement.

                  28. In the event that any provision or portion of this
Agreement shall be determined by a court of competent jurisdiction to be invalid
or unenforceable for any reason, the remaining provisions or portions of this
Agreement shall be unaffected thereby and shall remain in full force and effect
to the fullest extent permitted by law. The parties agree that if a court of
competent jurisdiction should determine that any provision herein is invalid or
unenforceable the parties will mutually request that such court revise such
provision so as to comply with applicable


                                       8





<PAGE>

                                                                    Exhibit 10.1

law and that, the provision as revised shall come closest to the meaning
intended by the parties and be enforced as rewritten and the remaining
provisions of this Agreement shall be unaffected thereby. If at any time the
release contained herein is deemed ineffective, the parties agree that the
consideration, benefits or other monies provided herein shall be returned to
PMC.

                  If you agree to the terms set forth herein, please sign, date
and return the enclosed counterpart of this Agreement in accordance with
paragraph 20, under which your right to revoke your acceptance will expire seven
days after the date of your signature. Provided you do not revoke your
acceptance of this Agreement, it will become binding upon you and the Company
when the Company executes this Agreement.

                  If you have any questions regarding payments to be made
pursuant to this Agreement, please address such questions to Timothy A.
Sompolski, Senior Vice President, Human Resources, Philip Morris Companies Inc.
at 917-663-3312.




                                        I certify and acknowledge that I have
                                        consulted an attorney, John J. Cannon
                                        III, Esq., about this Agreement prior to
                                        executing same, and have read this
                                        document, understand it and agree to be
                                        bound by its terms.



Date: July 12, 2002                     /s/ WILLIAM H. WEBB
      -------------                     ----------------------------------------
                                        William H. Webb



                                        WITNESS: /s/ JOHN J. CANNON III
                                                 -------------------------------
                                                  John J. Cannon III, Esq.


                                        PHILIP MORRIS COMPANIES INC.


Date: July 12, 2002                     By: /s/ TIMOTHY A. SOMPOLSKI
      -------------                         ------------------------------------
                                            Timothy A. Sompolski


                                       9





<PAGE>

                                                                    Exhibit 10.1

                                                                       Exhibit A


                              CONSULTING AGREEMENT


         AGREEMENT, effective the 1st day of October, 2004 between Philip Morris
Companies Inc., a corporation organized and existing under the laws of the
Commonwealth of Virginia (the "Company") and William H. Webb (the "Consultant").

         WHEREAS, Consultant had been the Vice Chairman of the Company, is
currently on salary continuation through September 30, 2004 and will retire
effective October 1, 2004 (the "Retirement Date");

         WHEREAS, the Company wishes to retain the services of Consultant as a
consultant after the Retirement Date on the terms herein provided;

         WHEREAS, Consultant is willing to provide consulting services to the
Company on the terms herein provided;

         NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties agree as follows:

         1)  During the three-year term commencing October 1, 2004 and ending
             September 30, 2007 (the "Consulting Term"), Consultant shall make
             himself available at reasonable times to provide business
             consulting services to the officers, directors and other
             representatives of the Company as reasonably requested by the
             Chairman and Chief Executive Officer of the Company (hereafter, the
             "Executive"). It is understood that this paragraph will require
             Consultant to provide consultation regarding the Company's business
             which may require the Company to disclose to Consultant secret,
             proprietary and confidential information concerning the Company and
             its business affairs. It is further understood that this
             undertaking shall not, without Consultant's consent, require his
             presence outside of the New York City Metropolitan area.

         2)  For the consulting services provided pursuant to paragraph 1, the
             Company shall pay Consultant an annual retainer of $75,000, payable
             at the end of each year of the Consulting Term, and provide
             Consultant at Company expense the following:

             a)  an office in the Greenwich, Connecticut area, together with
                 secretarial service, office furniture, supplies and equipment,
                 and a telephone credit card;

             b)  maintain and support the security systems currently in
                 existence at Consultant's residences in New York City and
                 Greenwich, Connecticut;

             c)  reasonable access to Company facilities, including the Dining
                 Rooms, Fitness Center and the Company doctor;









<PAGE>

                                                                    Exhibit 10.1

             d)  a Company car, garage expenses for a Company-provided car, and
                 Company-paid driver or assistance in obtaining automobile or
                 limousine transportation when Consultant reasonably requests
                 it. Any cost incurred by the Company in this regard shall be
                 limited to and applied against the retainer provided for in
                 this paragraph 2. Any transportation costs in excess of the
                 retainer provided for in this paragraph 2 shall be borne by
                 Consultant.

         3)  Should Consultant repatriate to Australia during the term of this
             Consulting Agreement, the Company will no longer have the
             obligation to provide Consultant with an office and secretarial
             service as provided in paragraph 2(a). In lieu thereof, the Company
             shall provide you with an office and secretarial service at a
             Company facility in Australia. The Company's obligations under
             paragraphs 2(b), 2(c) and 2(d) shall continue as long as this
             agreement is in effect, provided that the Company's obligations
             under paragraph 2(b) will cease if Consultant ceases to own those
             residences.

         4)  This Agreement and the provisions of paragraphs l and 2 above may
             be renewed for an additional three-year term, at the election of
             Consultant with the concurrence of the Company. Consultant shall
             inform the Senior Vice President of Human Resources of the Company
             in writing sixty (60) days prior to the expiration of the
             Consulting Term whether he wishes to renew the Consulting Term and
             provide the consulting services described in paragraph 1 above for
             an additional three-year term.

         5)  The Company shall reimburse Consultant for reasonable business
             expenses incurred in providing consulting services pursuant to this
             Agreement.

         6)  In rendering services as a consultant hereunder, Consultant shall
             be an independent contractor. As an independent contractor, the
             Company will issue an IRS Form 1099 for payments made pursuant to
             this Agreement and Consultant will be responsible for paying all
             federal, state and local income and social security taxes arising
             out of any such payments. In addition, during the Consulting Term,
             Consultant will not accrue further service or compensation credit
             or benefits for any purpose under any of the Company's retirement,
             profit-sharing, disability, survivor's income, medical, dental or
             other plans of the Company, or any of its affiliated companies.

         7)  In exchange for the payments and other consideration described
             above, which Consultant acknowledges he would not otherwise be
             entitled to, Consultant releases and forever discharges, and by
             this instrument release and forever discharge, the Company,
             including without limitation, its shareholders, subsidiaries,
             divisions, affiliates, successors, assigns, representatives,
             attorneys, directors and employees, from all debts, obligations,
             promises, covenants, agreements, contracts, endorsements, bonds,
             controversies, suits, actions, causes of action, judgments,
             damages, expenses, claims or demands of any kind whatsoever
             (whether known or unknown) in law or in equity, which Consultant
             ever had, now have, or which may arise in the future regarding any
             matter arising on or before


                                      -2-






<PAGE>

                                                                    Exhibit 10.1

             the date this Agreement is executed by Consultant, regarding his
             employment with or your leaving the employment of the Company,
             any contract (express or implied), any claim for equitable relief
             or recovery of punitive, compensatory, or other damages or
             monies, commissions, attorneys' fees, any tort, and all claims
             for wrongful termination, or alleged violation of applicable wage
             payment or benefits law, or alleged discrimination based upon
             sex, religion, age, race, color, national origin, sexual
             orientation, handicap or disability, including but not limited to
             any claim, asserted or unasserted, which could arise under Title
             VII of the Civil Rights Act of 1964, the Age Discrimination in
             Employment Act of 1967, the Older Workers Benefit Protection Act,
             the Americans With Disabilities Act of 1990, the Employee
             Retirement Income Security Act of 1974, the Family and Medical
             Leave Act of 1993, the Civil Rights Act of 1991, the Civil Rights
             Act of 1866, the Rehabilitation Act of 1973, Executive Order
             11246, the New York State Human Rights Law, the New York City
             Human Rights Law, the Connecticut Law on Human Rights and
             Opportunities, as each of those statutes and orders have been and
             may be amended from time to time and any other federal, state or
             local equal employment opportunity laws, regulations or
             ordinances.

             The Company releases and forever discharges, and by this
             instrument releases and forever discharges, Consultant from all
             debts, obligations, promises, covenants, agreements,
             endorsements, bonds, controversies, suits, actions, causes of
             action, judgments, damages, expenses, claims or demands of any
             kind whatsoever (whether known or unknown), in law or in equity,
             which it ever had, now has, or which may arise in the future
             regarding any matter arising on or before the execution of this
             Agreement regarding Consultant's employment with or Consultant's
             leaving the employment of the Company.

         8)  Consultant agrees to maintain the confidentiality of all Company
             trade secrets and proprietary information. Consultant also
             acknowledges that, during the course of his employment with the
             Company, he has been entrusted with certain personnel, business,
             financial, technical and other information and material which are
             the property of the Company and which involve trade secrets or
             "confidential information" of the Company and the Company's
             employees. Consultant agrees that he will not communicate or
             disclose to any third party (and acknowledges that he has not
             communicated or disclosed), or use (or has used) for his own
             account, without first obtaining written consent of the Company,
             any of such confidential information or material, except in
             response to a lawfully issued subpoena, court order or other lawful
             request by any regulatory agency or government authority having
             supervisory authority over the business of the Company, unless and
             until such information or material becomes generally available to
             the public through no fault of Consultant.

         9)  Consultant agrees that if any confidential information is requested
             by subpoena or court, governmental or regulatory order, he will
             notify the Company as soon as practicable and if requested by the
             Company, he will undertake his best efforts to assist the Company
             in obtaining a confidentiality order from the court or governmental
             or regulatory agency requesting such information.


                                      -3-






<PAGE>

                                                                    Exhibit 10.1

         10) Consultant agrees that after his retirement and during the
             Consulting Term, he will not accept employment with or act as a
             consultant or provide services to a competitor in the tobacco, food
             or beer businesses of the Company unless he receives advance
             written permission from the Senior Vice President of Human
             Resources, Philip Morris Companies Inc.

         11) Consultant acknowledges and agrees that after his retirement, he
             will reasonably be able to earn a livelihood without violating the
             terms of paragraph 10 and that employment or engagement with
             competitors or any activities in violation of paragraph 10 could
             result in immediate and irreparable harm to the Company and/or its
             affiliates or subsidiaries or their competitive position.
             Consultant further acknowledges and agrees that the Company is
             entitled to preliminary and permanent injunctive relief in order to
             prevent or stop such violations, in addition to damages, costs and
             other relief that may be appropriate.

         12) This Agreement is not assignable, other than to a successor of the
             Company pursuant to a merger of the Company or a purchase of the
             Company of all or substantially all of the Company's assets.

         13) In the event that any provision or portion of this Agreement will
             be determined to be invalid or unenforceable for any reason, the
             remaining provisions or portions of this Agreement will be
             unaffected thereby and will remain in full force and effect to the
             fullest extent permitted by the law.

         14) This Agreement has been entered into in New York, New York, and
             will be governed by and construed, interpreted and enforced in
             accordance with the laws of the State of New York without giving
             effect to the principles thereof relating to the conflict of laws.
             Consultant and the Company irrevocably submit to the jurisdiction
             of the United States District Court for the Southern District of
             New York and of any New York state court sitting in New York City
             for the purposes of all legal proceedings arising out of or
             relating to this Agreement or the transactions contemplated
             thereby, and agree that all such suits, actions or proceedings
             brought by either Consultant or the Company will be brought in such
             courts. Consultant and the Company also irrevocably waive, to the
             fullest extent permitted by applicable law, any objection which he
             or it may now have or hereafter may have to the venue of such
             proceeding brought in such a court and any claim that any such
             proceeding brought in such a court has been brought in an
             inconvenient forum.



                                      -4-






<PAGE>



                IN WITNESS WHEREOF, the parties hereto have executed this
        Agreement as of the day and year first mentioned above.



        PHILIP MORRIS COMPANIES INC.


        By:
            -------------------------              ---------------------
                Timothy A. Sompolski                   William H. Webb





                                      -5-





</TEXT>
</DOCUMENT>
