Exhibit 10.1
 
 
This AGREEMENT, dated as of November 7, 2007 (the “Agreement”), is by and among
Kraft Foods Inc., a Virginia corporation (the “Company”), and the other entities
and persons signatory hereto (collectively, the “Investors”).
 
WHEREAS, the Board of Directors of the Company (the “Board”) intends to (1)
increase the size of the Board from nine (9) to eleven (11) members and (2)
appoint as directors to fill the two newly created vacancies Lois D. Juliber and
Frank G. Zarb, with terms expiring in 2008;
 
WHEREAS, at the Company’s 2008 annual meeting of shareholders, the Board intends
to nominate for election as a member of the Board, and recommend that the
shareholders of the Company vote to elect as a director of the Company,
Ms. Juliber and Mr. Zarb;
 
WHEREAS, the Investors economically own (as defined below) the interests in
Class A Common Stock, without par value, of the Company (the “Common Stock”)
specified on Schedule A of this Agreement; and
 
WHEREAS, the Investors support the election of the two new directors to the
Board;
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
 
ARTICLE I

 
REPRESENTATIONS
 
SECTION 1.1.  Authority; Binding Agreement.  (a) The Company hereby represents
that this Agreement and the performance by the Company of its obligations
hereunder (i) has been duly authorized, executed and delivered by it, and is a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, (ii) does not require the approval of the
shareholders of the Company and (iii) does not and will not violate any law, any
order of any court or other agency of government, the Articles of Incorporation
of the Company, as amended, or the Amended and Restated By-laws of the Company,
or any stock exchange rule or regulation, or any provision of any indenture,
agreement or other instrument to which the Company or any of its properties or
assets is bound, or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or result in the creation or imposition of, or give rise
to, any lien, charge, restriction, claim, encumbrance or adverse penalty of any
nature whatsoever pursuant to any such indenture, agreement or other instrument.
 
(b)  Each of the Investors represents and warrants that this Agreement and the
performance by such Investor of its obligations hereunder (i) has been duly
authorized, executed and delivered by such Investor, and is a valid and binding
obligation of such Investor, enforceable against such Investor in accordance
with its terms, (ii) does not require approval by any owners or holders of any
equity interest in such Investor (except as has already been obtained) and (iii)
does not and will not violate any law, any order of any court or other agency of
government, the charter or other organizational documents of such Investor, as
amended, or any provision of any agreement or other instrument to which such
Investor or any of its properties or assets is bound, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such agreement or other instrument, or result in the creation
or imposition of, or give rise to, any lien, charge, restriction, claim,
encumbrance or adverse penalty of any nature whatsoever pursuant to any such
agreement or instrument.
 
 

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SECTION 1.2.  Interests in Common Stock.  The Investors hereby represent and
warrant that, as of the date hereof, they and their Affiliates (as such term is
hereinafter defined) are, collectively, the “economic owners” (as such term is
hereinafter defined) of such number of shares of Common Stock (the “Shares”) as
are accurately and completely set forth (including, without limitation, as to
the form of ownership) on Schedule A.  Within 5 business days after the end of
each calendar quarter during the Standstill Period (as such term is hereinafter
defined), commencing with the quarter ending December 31, 2007, Trian Fund
Management, L.P., on its own behalf and on behalf of the Investors, shall
provide written certification to the Company that they and their Affiliates did
not, in the aggregate, economically own more than 9.9% of the outstanding shares
of Common Stock at any time during such quarter.
 
SECTION 1.3.  Defined Terms.  For purposes of this Agreement:
 
(a)  “Affiliate” has the meaning set forth in Rule 12b-2 promulgated by the SEC
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and,
with respect to the Investors, shall include Triarc Companies, Inc. and its
Affiliates but shall not include (i) any fund, account or entity as to which
Deerfield Capital Management, LLC provides investment advice or management
services of the nature provided on the date hereof so long as there is not any
material change in the relationship between Deerfield Capital Management, LLC
and any Investor or any Affiliate of any Investor (and provided that none of the
Investors participates in or encourages any investment in capital stock of the
Company by any such fund, account or entity) or (ii) with respect to any entity
whose equity securities are registered under the Exchange Act (or are publicly
traded in a foreign jurisdiction), such entity solely by reason of the fact that
a principal of any of the Investors serves as a member of its board of directors
or similar governing body, unless the Investors or their Affiliates otherwise
control such entity (as the term “control” is defined in Rule 12b-2 promulgated
by the SEC under the Exchange Act).
 
(b)  The terms “beneficial owner” and “beneficially own” have the same meanings
as set forth in Rule 13d-3 promulgated by the SEC under the Exchange Act.  The
terms “economic owner” and “economically own” shall have the same meanings as
“beneficial owner” and “beneficially own”, except that a person will also be
deemed to economically own and to be the economic owner of (i) all shares of
Common Stock which such person has the right to acquire pursuant to the exercise
of any rights in connection with any securities or any agreement, regardless of
when such rights may be exercised and whether they are conditional, and (ii) all
shares of Common Stock in which such person has any economic interest,
including, without limitation, pursuant to a cash settled call option or other
derivative security, contract or instrument in any way related to the price of
shares of Common Stock.
 
 
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(c)  The “Standstill Period” means the period from the date of this Agreement
through the earlier of (x) the date that is 60 days prior to the first day of
the notice period specified in the advance notice bylaw applicable to the
Company’s 2010 annual meeting of shareholders and (y) such date, if any, as the
Company shall have materially breached any of its commitments or obligations set
forth hereunder and shall not have cured such breach after 15 days’ written
notice from the Investors; provided, that the Investors may terminate the
Standstill Period at any time by written notice to the Company if (a) the
Company has announced or entered into a definitive agreement providing for, or
has recommended that its shareholders support, an Extraordinary Matter (as
hereinafter defined) or (b) the Nominating Committee of the Board does not
deliver to the Investors, on or prior to the date that is 60 days prior to the
first day of the notice period specified in the advance notice bylaw applicable
to the Company’s 2009 annual meeting of shareholders, its written commitment to
include Lois D. Juliber and Frank G. Zarb (or the applicable replacement
nominee(s) agreed pursuant to clause (c) below) in the Company’s slate of
nominees for director of the Company for the Company’s 2009 annual meeting,
unless in either case, she or he (or such replacement nominee) refuses to serve
or (c) in the event that (i) either Ms. Juliber or Mr. Zarb is unable to serve
as a director of the Company as a result of her or his death or incapacity or
her or his failure to be elected at the Company's 2008 annual meeting (other
than in the case of her or his refusal to serve) and (ii) the Company and the
Investors fail to agree on a replacement nominee (or the Company fails to
appoint such agreed replacement nominee to the Board) within 90 days following
the date that she or he ceased to be a director of the Company (in the event
that a replacement nominee is so agreed and appointed, references to the
applicable former director in Section 2.1(b) and Section 2.1(c) shall be deemed
to be references to such replacement).
 
(d)  “Extraordinary Matter” means (x) any merger, consolidation, share exchange,
recapitalization or other business combination, in each case as a result of
which the holders of the Common Stock of the Company immediately prior to
consummation of such transaction would cease to own at least a majority of the
outstanding shares of common stock of the resulting company (or, if such
resulting company is a subsidiary, then the ultimate parent company) or (y) any
liquidation, dissolution or sale of all or substantially all of the assets of
the Company, in each case that is subject to Company shareholder approval.
 
ARTICLE II

 
COVENANTS
 
SECTION 2.1.  Directors.  (a) As promptly as practicable following the date of
this Agreement the Company shall (a) increase the size of the Board from nine
(9) to eleven (11) directors and (b) appoint Lois D. Juliber and Frank G. Zarb
as a director of the Company, in each case with terms expiring at the Company’s
2008 annual meeting.  For the avoidance of doubt, the Company may at any time or
from time to time increase or decrease the size of the Board and/or change its
composition.
 
 
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(b)  The Company agrees that, provided that the Standstill Period has not
terminated, the Board will:
 
 
(1)
nominate each of Ms. Juliber and Mr. Zarb (other than in the case of her, his or
their refusal to serve), together with the other persons included in the
Company's slate of nominees for director, as a director of the Company, in each
case with a term expiring at the Company’s 2009 annual meeting; and

 
 
(2)
recommend that the shareholders of the Company vote to elect Ms. Juliber and
Mr. Zarb as a director of the Company at the 2008 annual meeting and, if
renominated by the Nominating Committee, the 2009 annual meeting.

 
(c)  The Company shall use all reasonable best efforts (which shall include the
solicitation of proxies) to ensure that each of Ms. Juliber and Mr. Zarb are
elected at the 2008 annual meeting and, if renominated by the Nominating
Committee, the 2009 annual meeting.
 
SECTION 2.2.  Voting Provisions.  During the Standstill Period, the Investors,
together with their respective Affiliates, will cause all shares of Common Stock
for which they have the right to vote as of the record date for any meeting of
shareholders to be present for quorum purposes and to be voted at any such
meeting or at any adjournments or postponements thereof, (x) in favor of each
director nominated and recommended by the Board for election at any such meeting
and (y) against any shareholder nominations for director which are not approved
and recommended by the Board for election at any such meeting.
 
SECTION 2.3.  Actions by the Investors.  Each of the Investors agrees that,
during the Standstill Period, neither it nor any of its Affiliates will, unless
specifically requested or authorized in writing by a resolution of a majority of
the Directors, directly or indirectly:
 
(a)  purchase or cause to be purchased or otherwise acquire or agree to acquire
economic ownership of, any Common Stock or other securities issued by the
Company, if in any such case, immediately after the taking of such action the
Investors, together with their respective Affiliates, would, in the aggregate,
economically own more than 9.9% of the then outstanding shares of Common Stock;
 
 
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(b)  form, join in or in any other way participate in a “partnership, limited
partnership, syndicate or other group” within the meaning of Section 13(d)(3) of
the Exchange Act with respect to the Common Stock or deposit any shares of
Common Stock in a voting trust or similar arrangement or subject any shares of
Common Stock to any voting agreement or pooling arrangement, or grant any proxy
with respect to any shares of Common Stock (other than to a designated
representative of the Company pursuant to a proxy statement of the Company),
other than solely with other Investors or one or more Affiliates of an Investor
with respect to the Shares and any other shares of Common Stock acquired in
compliance with paragraph (a) above or to the extent such a group may be deemed
to result with the Company or any of its Affiliates as a result of this
Agreement;
 
(c)  solicit proxies or written consents of shareholders, or conduct any
nonbinding referendum with respect to Common Stock, or make, or in any way
participate in, any “solicitation” of any “proxy” within the meaning of
Rule 14a-1 promulgated by the SEC under the Exchange Act (but without regard to
the exclusion set forth in Rule 14a-1(l)(2)(iv) from the definition of
“solicitation”) to vote any shares of Common Stock with respect to any matter,
or become a participant in any contested solicitation for the election of
directors with respect to the Company (as such terms are defined or used in the
Exchange Act and the Rules promulgated thereunder), other than solicitations or
acting as a participant in support of all of the Company’s nominees;
 
(d)  seek to call, or to request the call of, or call a special meeting of the
shareholders of the Company, or seek to make, or make, a shareholder proposal
(whether pursuant to Rule 14a-8 under the Exchange Act or otherwise) at any
meeting of the shareholders of the Company, or make a request for a list of the
Company’s shareholders, or seek election to the Board, seek to place a
representative on the Board or seek the removal of any director from the Board,
or otherwise acting alone, or in concert with others, seek to control or
influence the governance or policies of the Company;
 
(e)  effect or seek to effect (including, without limitation, by entering into
any discussions, negotiations, agreements or understandings whether or not
legally enforceable with any third person), offer or propose (whether publicly
or otherwise) to effect, or cause or participate in, or in any way assist or
facilitate any other person to effect or seek, offer or propose (whether
publicly or otherwise) to effect or participate in, (i) any acquisition of any
securities (or economic ownership thereof as defined herein), or any material
assets or businesses, of the Company or any of its subsidiaries, except pursuant
to the limits specified in paragraph (a) above, (ii) any tender offer or
exchange offer, merger, acquisition, share exchange or other business
combination involving the Company or any of its subsidiaries, or (iii) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its subsidiaries or any
material portion of its or their businesses;
 
 
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(f)  publicly disclose, or cause or facilitate the public disclosure (including
without limitation the filing of any document or report with the SEC or any
other governmental agency or any disclosure to any journalist, member of the
media or securities analyst) of any intent, purpose, plan or proposal to obtain
any waiver, or consent under, or any amendment of, any of the provisions of
Sections 2.2 or 2.3, or otherwise (i) seek in any manner to obtain any waiver,
or consent under, or any amendment of, any provision of this Agreement or
(ii) bring any action or otherwise act to contest the validity of this
Section 2.3 or seek a release from the restrictions contained in this Section
2.3;
 
(g)  unless required by law, make or issue or cause to be made or issued any
public disclosure, announcement or statement (including without limitation the
filing of any document or report with the SEC or any other governmental agency
or any disclosure to any journalist, member of the media or securities analyst)
(i) in support of any solicitation described in paragraph (c) above (other than
solicitations by the Company), (ii) in support of any matter described in
paragraph (d) above, (iii) concerning any potential matter described in
paragraph (e) above or (iv) negatively commenting upon the Company, including
the Company’s corporate strategy, business, corporate activities or management;
or
 
(h)  enter into any discussions, negotiations, agreements or understandings with
any Person with respect to the foregoing or advise, assist, encourage or seek to
persuade others to take any action with respect to any of the foregoing.
 
Notwithstanding the foregoing, nothing in this Section 2.3 shall be deemed to in
any way restrict or limit the Investors’ ability to (a) discuss any matter
confidentially with the Company, the Board or any of its members, (b) take any
action required by applicable law (whether or not otherwise restricted by this
Section 2.3) or (c) communicate, on a confidential basis, with attorneys,
accountants or financial advisors (excluding any such advisor who has taken any
action that if taken by the Investors would violate this Section 2.3).
 
SECTION 2.4.  [Intentionally Omitted.]
 
SECTION 2.5.  Additional Preparations by the Investors.  As of the date of this
Agreement, the Investors are not engaged in any discussions or negotiations and
do not have any agreements or understandings, whether or not legally
enforceable, concerning the acquisition of economic ownership of any Common
Stock, and have no actual knowledge that any other shareholders of the Company
have any present or future intention of taking any actions that if taken by the
Investors would violate any of the terms of this Agreement. The Investors agree
during the Standstill Period to refrain from taking actions which are intended
by the Investors to encourage other shareholders to engage in such actions
referred to in the previous sentence.
 
SECTION 2.6.  Form of Ownership.  The Investors will take all steps necessary,
if any, so that on or before January 25, 2008 (such actual date, subject to
extension as provided in the second proviso to this sentence, the "Conversion
Date"), an amount of shares of Common Stock equal to no less than 2% of the
Company's then outstanding Common Stock (based on the Company's most recent
periodic or current report filed with the Securities and Exchange Commission as
of the date of conversion, it being agreed that for the purpose of this
calculation, the number of outstanding shares of Common Stock shall not exceed
1,576,711,404) shall be beneficially owned and owned of record in the form of
shares (including, for this purpose, through a nominee such as Cede & Co., the
nominee of the Depository Trust Company, or similar organization); provided,
however, that in no event shall the Investors be required to purchase any
additional shares of Common Stock beyond the number of shares set forth on
Schedule A; and provided, further, that if such conversion of shares of Common
Stock requires filing and expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
Act”), then such filing shall be made on or before December 1, 2007, and the
Conversion Date shall be extended to the date which is two business days after
such waiting period expires or is terminated if after January 25, 2008.  In
connection with the conversion into Common Stock referenced in this Section 2.6,
the Company agrees to make appropriate filings in a timely manner under the HSR
Act and use commercially reasonable efforts to cooperate in all respects with
any filing or submission by the Investors with respect to the HSR Act.
 
 
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SECTION 2.7.  Publicity.  Promptly after the execution of this Agreement, the
Company will issue a press release in the form attached hereto as Schedule B.
 
ARTICLE III

 
OTHER PROVISIONS
 
SECTION 3.1.  Remedies.  (a) Each party hereto hereby acknowledges and agrees,
on behalf of itself and its Affiliates, that irreparable harm would occur in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties will be entitled to specific relief hereunder, including,
without limitation, an injunction or injunctions to prevent and enjoin breaches
of the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in the Chancery Court of the State of Delaware or if such
court does not accept jurisdiction then any state or federal court in the State
of Delaware, or, if such courts do not accept jurisdiction then any state or
federal court in the State of New York, in addition to any other remedy to which
they may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with such remedy are hereby waived.
 
(b)  Each party hereto agrees, on behalf of itself and its Affiliates, that any
actions, suits or proceedings arising out of or relating to this Agreement or
the transactions contemplated hereby will be brought solely and exclusively in
the Chancery Court of the State of Delaware, or if such court does not accept
jurisdiction then any state or federal court in the State of Delaware, or, if
such courts do not accept jurisdiction then any state or federal court in the
State of New York (and the parties agree not to commence any action, suit or
proceeding relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
the respective addresses set forth in Section 3.3 will be effective service of
process for any such action, suit or proceeding brought against any party in any
such court. Each party, on behalf of itself and its Affiliates, irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby, in the Chancery Court of the State of Delaware or if such court does not
accept jurisdiction then the state or federal courts in the State of Delaware,
or, if such courts do not accept jurisdiction then any state or federal court in
the State of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an improper or
inconvenient forum.
 
 
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SECTION 3.2.  Entire Agreement.  This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and may
be amended only by an agreement in writing executed by the parties hereto.
 
SECTION 3.3.  Notices.  All notices, consents, requests, instructions, approvals
and other communications provided for herein and all legal process in regard
hereto shall be in writing and shall be deemed validly given, made or served, if
(a) given by telecopy, when such telecopy is transmitted to the telecopy number
set forth below and the appropriate confirmation is received or (b) if given by
any other means, when actually received during normal business hours at the
address specified in this subsection:
 
if to the Company:
 
Kraft Foods Inc.
Three Lakes Drive
Northfield, Illinois 60093-2753
Facsimile: (847) 646-2950
Attention: Corporate Secretary

with a copy to:

Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, New York 10019
Facsimile: (212) 474-3700
Attention:     Philip A. Gelston, Esq.
Faiza J. Saeed, Esq.

if to the Investors:

Trian Fund Management, L.P.
280 Park Avenue, 41st Floor
New York, New York 10017
Facsimile: (212) 451-3216
Attention: Brian L. Schorr, Chief Legal Officer
 
 
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with a copy to:

Cadwalader, Wickersham & Taft LLP
One World Financial Center
New York, New York 10281
Facsimile: (212) 504-6666
Attention:  Dennis J. Block, Esq.

SECTION 3.4.  Governing Law.  This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware, without
regard to any conflict of laws provisions thereof.
 
SECTION 3.5.  Further Assurances.  Each party agrees to take or cause to be
taken such further actions, and to execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments, and to
obtain such consents,
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 

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as may be reasonably required or requested by the other party in order to
effectuate fully the purposes, terms and conditions of this Agreement.

SECTION 3.6.  Third-Party Beneficiaries.  This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, and nothing in this Agreement is intended to confer on
any person other than the parties hereto or their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
 
SECTION 3.7.  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
 
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
caused the same to be executed by its duly authorized representative as of the
date first above written.
 

KRAFT FOODS INC.,
 
by
   /s/ Irene B. Rosenfeld  
Name: Irene B. Rosenfeld
 
Title:   Chairman & CEO

TRIAN PARTNERS, L.P.    By: Trian Partners GP, L.P., its general partner   
By: Trian Partners General Partner, LLC, its general partner
 
by:
   /s/ Peter W. May   
Name: Peter W. May
 
Title:   Member

 
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TRIAN PARTNERS MASTER FUND, L.P.   
By: Trian Partners GP, L.P., its general partner 
 
By: Trian Partners General Partner, LLC, its general partner
 
by:
   /s/ Peter W. May  
Name: Peter W. May
 
Title:   Member

TRIAN PARTNERS PARALLEL FUND I, L.P.   
By: Trian Partners Parallel Fund I General Partner, LLC, its general partner
 
by:
   /s/ Peter W. May  
Name: Peter W. May
 
Title:   Member

TRIAN PARTNERS PARALLEL FUND II, L.P.    By: Trian Partners Parallel Fund II GP,
L.P., its general partner  
By: Trian Partners Parallel Fund II General Partner, LLC, its general partner
 
by:
   /s/ Peter W. May  
Name: Peter W. May
 
Title:   Member

 
 
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TRIAN SPV (SUB) III, L.P.    By: Trian Partners GP, L.P., its general partner   
By: Trian Partners General Partner, LLC, its general partner
 
by:
   /s/ Peter W. May  
Name: Peter W. May
 
Title:   Member

TRIAN FUND MANAGEMENT, L.P.   
By: Trian Fund Management GP, LLC, its general partner
 
by:
   /s/ Peter W. May  
Name: Peter W. May
 
Title:   Member

 /s/  Nelson Peltz
NELSON PELTZ

 /s/  Peter W. May
PETER W. MAY

 /s/  Edward P. Garden
EDWARD P. GARDEN

 
 
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SCHEDULE A
 
The Investors beneficially own, in the aggregate, 37,326,183 shares of Common
Stock.  All of these shares are owned through a series of back-to-back call and
put transactions as a result of which the Investors are subject to the same
economic gain or loss as if they had purchased the underlying shares.  These
call options are exercisable for the underlying shares at any time.  The
Investors party to these transactions and the corresponding number of shares
underlying such transactions are set forth below.
 
Investor
Shares of Common Stock
   
Trian Fund Management, L.P.
729,0591
   
Trian Partners, L.P.
3,426,965
   
Trian Partners Master Fund, L.P.
10,750,955
   
Trian Partners Parallel Fund I, L.P.
393,597
   
Trian Partners Parallel Fund II, L.P.
89,032
   
Trian SVP (SUB) III, L.P.
21,936,575

 

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1 These shares are held in a separately managed account managed by Trian Fund
Management, L.P.
 
 
 
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