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                                                                Exhibit 10.5
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                               KRAFT FOODS INC.

            2001 STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS



SECTION 1.  Purpose; Definitions.

The purposes of the Plan are (i) to assist the Company in promoting a greater
identity of interest between the Company's Non-Employee Directors and the
Company's shareholders; and (ii) to assist the Company in attracting and
retaining Non-Employee Directors by affording them an opportunity to share in
the future successes of the Company.

For purposes of the Plan, the following terms are defined as set forth below:

      a.    "Award" means the grant under the Plan of Stock and Stock Options.

      b.    "Black-Scholes Value" means the value of a Stock Option determined
      pursuant to the option pricing model commonly known as the Black-Scholes
      method. The Black-Scholes Value shall be calculated as of the first day of
      the Plan Year, based on the applicable assumptions used in calculating
      values of stock options in the Company's then current annual meeting proxy
      statement and/or annual report with such adjustments as may be necessary
      to reflect different grant dates and terms.

      c.    "Board" means the Board of Directors of the Company.

      d.    "Committee" means the Compensation and Governance Committee of the
      Board or a subcommittee thereof, any successor thereto or such other
      committee or subcommittee as may be designated by the Board to administer
      the Plan.

      e.    "Common Stock" or "Stock" means the Class A Common Stock of the
      Company.

      f.    "Company" means Kraft Foods Inc., a corporation organized under the
      laws of the Commonwealth of Virginia, or any successor thereto.

      g.    "Deferred Stock" means an entry on the books and records of the
      Company in an amount equal to the value of one notional unit in the Kraft
      Stock Fund.

      h.    "Deferred Stock Account" means the unfunded deferred compensation
      account established by the Company with respect to each participant who
      elects to participate in the Deferred Stock Program in accordance with
      Section 7 of the Plan.

      i.    "Deferred Stock Program" means the provisions of Section 7 of the
      Plan that permit participants to defer all or part of any Award of Stock
      pursuant to Section 5(a)(i) of the Plan.

      j.    "Fair Market Value" means, as of any given date, the mean between
      the highest and lowest reported sales prices of the Common Stock on the
      New York Stock Exchange-
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         Composite Transactions or, if no such sale of Common Stock is reported
         on such date, the fair market value of the Stock as determined by the
         Committee in good faith; provided, however, that the Committee may in
         its discretion designate the actual sales price as Fair Market Value in
         the case of dispositions of Common Stock under the Plan.

      k.    "Kraft Stock Fund" means the Kraft Stock Fund of the Kraft Foods
      Thrift Plan, as amended from time to time. If the Kraft Foods Thrift Plan
      does not have a Kraft Foods Stock Fund in effect on any relevant date,
      earnings, losses and other adjustments required under the Deferred Stock
      Program shall be determined in the same manner as under the Philip Morris
      Companies Inc. stock fund under the Kraft Foods Thrift Plan except that
      Common Stock shall be used as the investment measure.

      l.    "Non-Employee Director" means each member of the Board who is not a
      full-time employee of the Company or Philip Morris Companies Inc. or of
      any corporation in which the Company or Philip Morris Companies Inc. owns,
      directly or indirectly, stock possessing at least 50% of the total
      combined voting power of all classes of stock entitled to vote in the
      election of directors in such corporation.

      m.    "Plan" means this 2001 Stock Compensation Plan for Non-Employee
      Directors, as amended from time to time.

      n.    "Plan Year" means the period commencing at the opening of business
      on the day on which the Company's annual meeting of stockholders is held
      and ending on the day immediately preceding the day on which the Company's
      next annual meeting of stockholders is held.

      o.    "Stock Option" means the right to purchase a share of Stock at a
      price equal to Fair Market Value on the date of grant. All Stock Options
      granted under the Plan shall be nonqualified stock options.

SECTION 2.  Administration.

The Plan shall be administered by the Committee, which shall have the power to
interpret the Plan and to adopt such rules and guidelines for carrying out the
Plan as it may deem appropriate. The Committee shall have the authority to adopt
such modifications, procedures and subplans as may be necessary or desirable to
comply with the laws, regulations, compensation practices and tax and accounting
principles of the countries in which Non-Employee Directors reside or are
citizens of and to meet the objectives of the Plan.

Any determination made by the Committee in accordance with the provisions of the
Plan with respect to any Award shall be made in the sole discretion of the
Committee, and all decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
Plan participants.

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SECTION 3.  Eligibility.

Only Non-Employee Directors shall be granted Awards under the Plan.

SECTION 4.  Common Stock Subject to the Plan.

The total number of shares of Common Stock reserved and available for
distribution pursuant to the Plan shall be 500,000 shares. If any Stock Option
is forfeited or expires without the delivery of Common Stock to a participant,
the shares subject to such Stock Option shall again be available for
distribution in connection with other Awards under the Plan. Any shares of
Common Stock that are used by a participant as full or partial payment of
withholding or other taxes or as payment for the exercise price of a Stock
Option shall be available for distribution in connection with other Awards under
the Plan.

In the event of any merger, share exchange, reorganization, consolidation,
recapitalization, reclassification, distribution, stock dividend, stock split,
reverse stock split, split-up, spin-off, issuance of rights or warrants or other
similar transaction or event affecting the Common Stock after the initial public
offering of the Common Stock, the Board is authorized, to the extent it deems
appropriate, to make substitutions or adjustments in the aggregate number and
kind of shares of Common Stock reserved for issuance under the Plan, in the
number, kind and price of shares of Common Stock subject to outstanding Awards
and in the Award limits set forth in Section 5 (or to make provision for cash
payments to the holders of Awards).

SECTION 5.  Awards.

(a)   Award Dates. Effective upon an individual's initial election or
appointment as a Non-Employee Director and on the first day of each Plan Year
thereafter, each Non-Employee Director serving as such immediately after the
annual meeting held on such day shall be awarded the following:

      (i)      a grant of that number of shares of Stock having an aggregate
      Fair Market Value on the date of grant equal to $30,000 (with any
      fractional share being rounded up to the next whole share); and

      (ii)     a grant of Stock Options to purchase that number of shares of
      Stock equal to the number derived from dividing $30,000 by the Black-
      Scholes Value of each such Stock Option (with any fractional share being
      rounded up to the next whole share).

(b)   Terms of Awards.

      (i)      Awards pursuant to Section 5(a)(i) are eligible for participation
      in the Deferred Stock Program described in Section 7. Subject to the
      limitations of applicable securities laws, shares of Common Stock awarded
      pursuant to Section 5(a)(i) shall be immediately transferable and vested
      and nonforfeitable.

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      (ii)     The term of each Stock Option shall be ten years. Subject to the
      applicable Award agreement, Stock Options may be exercised, in whole or in
      part, by giving written notice of exercise specifying the number of shares
      to be purchased. Such notice shall be accompanied by payment in full of
      the purchase price by certified or bank check or such other instrument as
      the Company may accept (including a copy of instructions to a broker or
      bank acceptable to the Company to deliver promptly to the Company an
      amount of sale or loan proceeds sufficient to pay the purchase price). As
      determined by the Committee, payment in full or in part may also be made
      in the form of Common Stock already owned by the Non-Employee Director
      valued at Fair Market Value; provided, however, that such Common Stock
      shall not have been acquired by the optionee within the preceding six
      months.

SECTION 6.  Plan Amendment and Termination.

The Board may amend or terminate the Plan at any time, provided that no such
amendment shall be made without stockholder approval if such approval is
required under applicable law, or if such amendment would: (i) decrease the
grant or exercise price of any Stock Option to less than the Fair Market Value
on the date of grant or (ii) increase the total number of shares of Common Stock
that may be distributed under the Plan. Except as may be necessary to comply
with a change in the laws, regulations or accounting principles of a foreign
country applicable to participants subject to the laws of such foreign country,
the Committee may not, without stockholder approval, cancel any option and
substitute therefor a new Stock Option with a lower option price. Except as set
forth in any Award agreement, no amendment or termination of the Plan may
materially and adversely affect any outstanding Award under the Plan without the
Award recipient's consent.

SECTION 7.  Payments and Payment Deferrals.

The Committee, either at the time of grant or by subsequent amendment, may
require or permit deferral of the payment of Awards under such rules and
procedures as it may establish. It also may provide that deferred settlements
include the payment or crediting of interest or other earnings on the deferred
amounts, or the payment or crediting of dividend equivalents where the deferred
amounts are denominated in Common Stock equivalents.

Each participant may elect to participate in a Deferred Stock Program with
respect to Awards granted under Section 5(a)(i). Any election to have the
Company establish a Deferred Stock Account shall be made in terms of integral
multiples of 25% of the value of the Common Stock that the participant otherwise
would have received on each date of grant and any such election shall remain in
effect for purposes of the Plan until the participant executes a new election
not to participate in the Deferred Stock Program for any future grants of Common
Stock. The Deferred Stock Account of a participant who elects to participate in
the Deferred Stock Program shall be credited with that number of shares of
Deferred Stock that is equal to the number of shares in the Stock Award that the
participant elected to receive as Deferred Stock. The Deferred Stock Account
shall be credited with earnings and charged with losses, if any, and shall be
subject to other adjustments on the same basis as the Kraft Stock Fund. The
Deferred Stock Program shall

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otherwise be administered under such rules and procedures as the Committee may,
from time to time establish, including rules with respect to elections to defer,
beneficiary designations and distributions under the Deferred Stock Program.

SECTION 8.  Transferability.

Unless otherwise required by law, Awards shall not be transferable or assignable
other than by will or the laws of descent and distribution.

SECTION 9.  Award Agreements.

Each Award of a Stock Option under the Plan shall be evidenced by a written
agreement (which need not be signed by the Award recipient unless otherwise
specified by the Committee) that sets forth the terms, conditions and
limitations for each such Award. Each Stock Option shall vest i.e., become
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exercisable, in not less than six months (or such longer period set forth in the
Award agreement) and shall be forfeited if the participant does not continue to
be a Non-Employee Director for the duration of the vesting period. The Committee
may amend an Award agreement, provided that no such amendment may materially and
adversely affect an Award without the Award recipient's consent.

SECTION 10. Unfunded Status Plan.

It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.

SECTION 11. General Provisions.

(a)   The Committee may require each person acquiring shares of Common Stock
pursuant to an Award to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to the distribution thereof.
The certificates for such shares may include any legend that the Committee deems
appropriate to reflect any restrictions on transfer.

All certificates for shares of Common Stock or other securities delivered under
the Plan shall be subject to such stock transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission (or any successor
agency), any stock exchange upon which the Common Stock is then listed, and any
applicable Federal, state or foreign securities law, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

(b)   Nothing contained in the Plan shall prevent the Company from adopting
other or additional compensation arrangements for Non-Employee Directors.

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(c)   No later than the date as of which an amount first becomes includible in
the gross income of the participant for income tax purposes with respect to any
Award under the Plan, the participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any Federal,
state, local or foreign taxes of any kind which are required by law or
applicable regulation to be withheld with respect to such amount. Unless
otherwise determined by the Committee, withholding obligations arising from an
Award may be settled with Common Stock, including Common Stock that is part of,
or is received upon exercise of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment otherwise due
to the participant. The Committee may establish such procedures as it deems
appropriate, including the making of irrevocable elections, for the settling of
withholding obligations with Common Stock.

(d)   The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia.

(e)   If any provision of the Plan is held invalid or unenforceable, the
invalidity or unenforceability shall not affect the remaining parts of the Plan,
and the Plan shall be enforced and construed as if such provision had not been
included.

(f)   The Plan shall be effective upon approval by Philip Morris Companies Inc.
in its capacity as the Company's sole shareholder. Except as otherwise provided
by the Board, no Awards shall be made after the Awards made immediately
following the 2006 Annual Meeting of Stockholders, provided that any Awards
granted prior to that date may extend beyond it.


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