Document:

EXHIBIT
10.2

EXECUTION
COPY

 

 

 

 

 

EMPLOYEE
MATTERS AGREEMENT

BY AND
BETWEEN

ALTRIA
GROUP, INC.

AND

KRAFT
FOODS INC.

DATED AS
OF MARCH 30, 2007

TABLE
OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  	
   

  
	
  ARTICLE
  I

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  	
   

  
	
  1.1

  	
   

  	
  General

  	
   

  	
  1

  	
   

  
	
  1.2

  	
   

  	
  References
  to Time

  	
   

  	
  8

  	
   

  
	
  ARTICLE II

  	
   

  	
  GENERAL
  PRINCIPLES

  	
   

  	
  8

  	
   

  
	
  2.1

  	
   

  	
  Altria Group
  Employees

  	
   

  	
  8

  	
   

  
	
  2.2

  	
   

  	
  Kraft
  Group Employees

  	
   

  	
  8

  	
   

  
	
  ARTICLE III

  	
   

  	
  EMPLOYEE TRANSFERS

  	
   

  	
  9

  	
   

  
	
  3.1

  	
   

  	
  Kraft
  Transferees

  	
   

  	
  9

  	
   

  
	
  3.2

  	
   

  	
  Altria
  Transferees

  	
   

  	
  13

  	
   

  
	
  ARTICLE IV

  	
   

  	
  EQUITY
  COMPENSATION

  	
   

  	
  16

  	
   

  
	
  4.1

  	
   

  	
  Altria Options

  	
   

  	
  16

  	
   

  
	
  4.2

  	
   

  	
  Kraft
  Options Issued by Altria

  	
   

  	
  17

  	
   

  
	
  4.3

  	
   

  	
  Restricted
  Stock

  	
   

  	
  18

  	
   

  
	
  4.4

  	
   

  	
  Deferred
  Stock

  	
   

  	
  18

  	
   

  
	
  4.5

  	
   

  	
  Existing
  Kraft Equity Compensation

  	
   

  	
  20

  	
   

  
	
  4.6

  	
   

  	
  Other

  	
   

  	
  20

  	
   

  
	
  ARTICLE V

  	
   

  	
  SAVINGS PLANS

  	
   

  	
  22

  	
   

  
	
  5.1

  	
   

  	
  Maintenance of
  Stock Funds

  	
   

  	
  22

  	
   

  
	
  ARTICLE VI

  	
   

  	
  ALTRIA STOCK
  PURCHASE PLAN

  	
   

  	
  22

  	
   

  
	
  6.1

  	
   

  	
  Termination of
  Participation

  	
   

  	
  22

  	
   

  
	
  ARTICLE VII

  	
   

  	
  GENERAL AND
  ADMINISTRATIVE

  	
   

  	
  23

  	
   

  
	
  7.1

  	
   

  	
  Sharing of Participant
  Information

  	
   

  	
  23

  	
   

  
	
  7.2

  	
   

  	
  No
  Third-Party Beneficiaries

  	
   

  	
  23

  	
   

  
	
  7.3

  	
   

  	
  Audit
  Rights with Respect to Information Provided

  	
   

  	
  23

  	
   

  
	
  7.4

  	
   

  	
  Fiduciary
  Matters

  	
   

  	
  24

  	
   

  
	
  7.5

  	
   

  	
  Collective
  Bargaining

  	
   

  	
  24

  	
   

  
	
  7.6

  	
   

  	
  Consent
  of Third Parties

  	
   

  	
  24

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  25

  	
   

  
	
  8.1

  	
   

  	
  Indemnification

  	
   

  	
  25

  	
   

  
	
  ARTICLE IX

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  25

  	
   

  
	
  9.1

  	
   

  	
  Relationship of
  Parties

  	
   

  	
  25

  	
   

  
	
  9.2

  	
   

  	
  Affiliates

  	
   

  	
  25

  	
   

  
	
  9.3

  	
   

  	
  Employee
  Communications

  	
   

  	
  25

  	
   

  
	
  9.4

  	
   

  	
  Incorporation
  of Distribution Agreement Provisions

  	
   

  	
  25

  	
   

  
	
  9.5

  	
   

  	
  Governing
  Law

  	
   

  	
  25

  	
   

  
	
  9.6

  	
   

  	
  References

  	
   

  	
  26

  	
   

  

 

 i

EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT, dated as
of March 30, 2007 (as amended and supplemented pursuant to the terms hereof,
this “Agreement”), is entered into by and between Altria Group, Inc., a
Virginia corporation (“Altria”), and Kraft Foods Inc., a Virginia corporation (“Kraft”).

W I T N E
S S E T H:

WHEREAS, Altria and Kraft have entered into
a Distribution Agreement, dated as of January 31, 2007 (the “Distribution
Agreement”), providing for, among other things, the distribution by Altria of
its entire ownership interest in Kraft through a pro-rata distribution of all
of the outstanding shares of Class A Common Stock of Kraft owned by Altria on
the Distribution Date to the holders of Altria Common Stock pursuant to the
terms and subject to the conditions of the Distribution Agreement (the “Distribution”);
and

WHEREAS, Altria and Kraft wish to set forth
their agreement as to certain matters regarding the treatment of, and the
compensation and employee benefits provided to, employees of Altria and Kraft
and their subsidiaries (as hereinafter defined).

NOW, THEREFORE, in consideration of the
premises and the mutual covenants herein contained and intending to be legally
bound hereby, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1          General. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

Adjusted
Altria Option: an Altria Option as adjusted pursuant to Section
4.1 hereof.

Affiliate:
with respect to any specified Person, a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such specified Person; provided, however, that for
purposes of this Agreement, no member of either Group and no officer or
director of any member of either Group shall be deemed to be an Affiliate of
any member of the other Group.

Altria:
as defined in the preamble to this Agreement.

Altria
Benefit Liabilities: as defined in Section 2.1 hereof.

Altria
Common Stock: the common stock, par value $0.33 1/3 per
share, of Altria.

Altria
Excess Severance Payment: as defined in Section 3.1(g)(ii)
hereof.

Altria
Deferred Stock: a deferred stock obligation relating to
Altria Common Stock granted by Altria before the Distribution Date under an
Altria Performance Incentive Plan, but not including any deferred stock granted
by Altria after January 1, 2007 that is held on the Distribution Date by an
employee of the Altria Group.

Altria
Group: Altria and the Subsidiaries of Altria other than
members of the Kraft Group.

Altria
Group Employee: any individual who (i), as of the close of
business on the Distribution Date, is either employed by, or on a leave of
absence (as defined by the personnel policies of the Altria Group) from, a
member of the Altria Group; (ii) is a Former Altria Group Employee; or (iii) is
or becomes an Altria Transferee.

Altria
Group Plans:

(i)            the Altria Pension
Plans;

(ii)           the Altria
Profit-Sharing Plans;

(iii)          the Altria Welfare
and Other Plans; and

(iv)          the Altria
Performance Incentive Plans.

Altria-Kraft
Option: an option to acquire Class A Common Stock, granted by
Altria, as of June 12, 2001.

Altria
Option: an option to acquire Altria Common Stock granted by
Altria under an Altria Performance Incentive Plan before the Distribution Date.

Altria
Pension Plans: any of the Retirement Plan for Salaried
Employees, the Retirement Plan for Hourly Employees, the Benefit Equalization
Plan, the Supplemental Management Employees’ Retirement Plan and any other
qualified or non-qualified defined benefit plan or program that is identified
by Altria before the Distribution Date as providing retirement income to Altria
Group Employees, all as in effect as of the time relevant to the applicable
provisions of this Agreement.

Altria
Performance Incentive Plans: any of the 1992 Incentive
Compensation and Stock Option Plan, the 1997 Performance Incentive Plan, the
2000 Performance Incentive Plan or the 2005 Performance Incentive Plan, or any
stock-based or other incentive plan for Altria Group Employees that is
identified by Altria before the Distribution Date, all as in effect as of the
time relevant to the applicable provisions of this Agreement.

Altria
Post-Adjustment Price: the difference between (i) the Altria
Pre-Adjustment Price and (ii) the Kraft Price multiplied by the Distribution
Ratio.

 2
 

Altria
Pre-Adjustment Price: the closing price of Altria Common
Stock on the NYSE on the Distribution Date (as traded on the “regular way”
market).

Altria
Profit-Sharing Plan: any of the Deferred Profit-Sharing Plan
for Salaried Employees, the Deferred Profit-Sharing Plan for Tobacco Workers,
the Deferred Profit-Sharing Plan for Craft Employees, the Benefit Equalization
Plan, the Supplemental Management Employees’ Retirement Plan and any other
qualified or non-qualified defined contribution plan or program for Altria
Group Employees that is identified by Altria before the Distribution Date, all
as in effect as of the time relevant to the applicable provisions of this
Agreement.

Altria
Restricted Stock: restricted Altria Common Stock granted by
Altria before the Distribution Date under an Altria Performance Incentive Plan.

Altria
Stock Fund: as defined in Section 5.1(a) hereof.

Altria
Transferee: as defined in Section 3.2 hereof.

Altria
Welfare and Other Plans: any plan, fund or program that
provides health, medical, surgical, hospital or dental care or other welfare
benefits or benefits in the event of sickness, accident or disability, or death
benefits to Altria Group Employees, all as in effect as of the time relevant to
the applicable provisions of this Agreement.

Arbitration
Act: the United States Arbitration Act, 9 U.S.C. §§ 1-16, as
the same may be amended from time to time.

Assumed
Altria Pension Plan Liability: as defined in Section
3.1(c) hereof.

Assumed
Kraft Pension Plan Liability: as defined in Section 3.2(c)
hereof.

Auditing
Party: as defined in Section 7.3(a) hereof.

Business
Day: any day other than a Saturday, a Sunday or a day on
which banking institutions located in the Commonwealth of Virginia or the State
of New York are authorized or obligated by law or executive order to close.

Class
A Common Stock: the Class A common stock, no par value, of
Kraft.

Class
B Common Stock: the Class B common stock, no par value, of
Kraft.

Code:
the Internal Revenue Code of 1986, as amended.

Distribution:
as defined in the recitals to this Agreement.

Distribution
Date: the date on which the Distribution becomes effective.

Distribution
Ratio: the fraction determined under Section 2.04(b) of the
Distribution Agreement.

 3
 

Equity
Compensation: Altria Options, Adjusted Altria Options, Kraft
Options, Altria-Kraft Options, Altria Restricted Stock, Kraft Restricted Stock,
Altria Deferred Stock and Kraft Deferred Stock.

ERISA:
Employee Retirement Income Security Act of 1974, as amended.

Existing
Kraft Options: an option to acquire Class A Common Stock,
granted by Kraft before the Distribution Date under a Kraft Performance
Incentive Plan.

Existing
Kraft Deferred Stock: a deferred stock obligation relating to
Class A Common Stock granted by Kraft before the Distribution Date under a
Kraft Performance Incentive Plan.

Existing
Kraft Restricted Stock: restricted Class A Common Stock
granted by Kraft before the Distribution Date under a Kraft Performance
Incentive Plan.

Fair
Value: the anticipated value of the Kraft Options, Adjusted
Altria Options, Altria-Kraft Options or Existing Kraft Options, as applicable,
determined using the Modified Black-Scholes option pricing model used by Altria
and Kraft in the preparation of their most recent respective annual or
quarterly financial reporting prepared before the Distribution Date. Variables
used in the pricing model will be determined as follows:

Expected Life: the lesser of two and
one-half years or one-half of the remaining contractual term for each option
grant.

Volatility: the annualized
volatilities of Altria or Kraft stock, as applicable, utilizing daily closing
stock prices for the period prior to January 31, 2007 that represents the
Expected Life of each option grant.

Adjusted Altria Dividend Yield: the
percentage that results from dividing (i) the annualized quarterly dividend per
share of Altria common stock as of the Distribution Date less the value per
Altria share of annualized quarterly dividends on Kraft common stock as of the
Distribution Date by (ii) the Altria Post-Adjustment Price.

Risk-Free Interest Rate: the rate
available on the day before the Distribution for zero-coupon U.S. government
securities with terms that approximate the Expected Life of each option grant.

Current Altria and Kraft Stock Prices:
the Altria Post-Adjustment Price with respect to Altria Common Stock, and the
Kraft Price with respect to Class A Common Stock.

Former
Altria Group Employee: any individual who: (i) before the
Distribution Date has retired from or otherwise separated from service from a
member of the Altria Group; and (ii) still participates in, or otherwise
receives, or is entitled to receive, benefits 

 4
 

under, any Altria
Group Plan; provided, however, that a “Former Altria Group
Employee” shall not include a Kraft Transferee.

Former
Kraft Group Employee: any individual who: (i) before the
Distribution Date has retired from or otherwise separated from service from a
member of the Kraft Group; and (ii) still participates in, or otherwise
receives, or is entitled to receive, benefits under, any Kraft Group Plan; provided,
however, that a “Former Kraft Group Employee” shall not include
an Altria Transferee.

Governmental
Authority: any federal, state, local, foreign or
international court, government, department, commission, board, bureau or
agency, authority (including, but not limited to, any central bank or taxing
authority) or instrumentality (including, but not limited to, any court,
tribunal or grand jury) exercising executive, prosecutorial, legislative,
judicial, regulatory or administrative functions of or pertaining to government
or any other regulatory, administrative or governmental authority, including
the NYSE.

Group:
the Altria Group or the Kraft Group, as the context requires.

Information:
all records, books, contracts, instruments, computer data and other data and
information.

Initial
Altria Calculation Date: as defined in Section 3.1(c)
hereof.

Initial
Kraft Calculation Date: as defined in Section 3.2(c)
hereof.

Intrinsic
Value: with respect to the relevant options, the product of
(i) the number of such options and (ii) the difference between the exercise
price of such options and, for Altria Options, the Altria Pre-Adjustment Price,
for Altria Adjusted Options, the Altria Post-Adjustment Price, and for Kraft
Options, the Kraft Price, as applicable.

Kraft:
as defined in the preamble to this Agreement.

Kraft
Benefit Liabilities: as defined in Section 2.2 hereof.

Kraft
Common Stock: the Class A Common Stock and the Class B Common
Stock.

Kraft
Deferred Stock: a deferred stock obligation relating to Class
A Common Stock granted by Kraft as of the Distribution Date under a Kraft
Performance Incentive Plan pursuant to Section 4.4(b) hereof.

Kraft
Group: Kraft and the Kraft Subsidiaries.

Kraft
Group Employee: any individual who (i), as of the close of
business on the Distribution Date, is either employed by, or on leave of
absence (as defined by the personnel policies of the Kraft Group) from, a
member of the Kraft Group; (ii) is a Former Kraft Group Employee; or (iii) is
or becomes a Kraft Transferee.

 5
 

Kraft
Group Plans:

(i)                                     the
Kraft Pension Plans;

(ii)                                  the
Kraft Savings Plans;

(iii)                               the
Kraft Welfare and Other Plans; and

(iv)                              the
Kraft Performance Incentive Plans.

Kraft
Option: an option to acquire Class A Common Stock granted by
Kraft under the Kraft Performance Incentive Plan in partial substitution for
the Altria Options.

Kraft
Pension Plans: any of the Kraft Foods Global, Inc. Retirement
Plan, the Kraft Foods Global, Inc. Hourly Retirement Plan, Kraft Foods Global,
Inc. Supplemental Benefits Plan I, Kraft Foods Global, Inc. Supplemental
Benefits Plan II, and any other qualified or non-qualified defined benefit plan
or program that is identified by Kraft before the Distribution Date as
providing retirement income to Kraft Group Employees, all as in effect as of
the time relevant to the applicable provisions of this Agreement.

Kraft
Performance Incentive Plans: any of the Kraft Foods Inc. 2001
Performance Incentive Plan, the Kraft Foods Inc. 2005 Performance Incentive
Plan and any stock-based or other incentive plan identified by Kraft before the
Distribution Date, all as in effect as of the time relevant to the applicable
provisions of this Agreement.

Kraft
Price: the closing price of Class A Common Stock on the NYSE
on the Distribution Date.

Kraft
Restricted Stock: restricted Class A Common Stock distributed
as of the Distribution Date and subject to terms and conditions pursuant to Section
4.3(a) hereof.

Kraft
Restricted Stock Forfeiture Value: the anticipated value of
the Kraft Restricted Stock that may be forfeited by holders and returned to
Kraft, determined using the Kraft Price and the forfeiture assumptions used for
Statement of Financial Accounting Standards 123(R) purposes in Altria’s most
recent quarterly or annual financial reporting prepared before the Distribution
Date for Altria Group employees (with respect to Altria Restricted Stock held
by Altria Group employees).

Kraft
Savings Plans: any of the Kraft Foods Global Inc. Thrift
Plan, the Kraft Foods Global, Inc. Employee TIP Plan, Kraft Canada Inc.
Employee Savings Plan and any other qualified or non-qualified defined
contribution plan or program for Kraft Group Employees that is identified by
Kraft before the Distribution Date, all as in effect as of the time relevant to
the applicable provisions of this Agreement.

Kraft
Severance Payment: as defined in Section 3.1(g)(i)
hereof.

Kraft
Stock Fund: as defined in Section 5.1(b) hereof.

 6
 

Kraft
Subsidiaries: all of the Subsidiaries of Kraft.

Kraft
Transferee: as defined in Section 3.1 hereof

Kraft
Welfare and Other Plans: any plan, fund or program that
provides health, medical, surgical, hospital or dental care or other welfare
benefits or benefits in the event of sickness, accident or disability, or death
benefits to Kraft Group Employees, all as in effect as of the time relevant to
the applicable provisions of this Agreement.

Law:
any federal, state or local statute, ordinance, regulation, code, license,
permit, authorization, approval, consent, common law, legal doctrine, order,
judgment, decree, injunction or requirement of any Governmental Authority or
any order or award of any arbitrator, now or hereafter in effect.

Liabilities:
means any and all claims, debts, liabilities, assessments, guarantees,
assurances, commitments, obligations, fines, penalties, damages (whether
compensatory, punitive, consequential, multiple or other), losses, disgorgements
and obligations, of any kind, character or description (whether absolute,
contingent, matured, not matured, liquidated, unliquidated, accrued, known,
unknown, direct, indirect, derivative or otherwise) whenever arising,
including, but not limited to, those arising under or in connection with any
Law, and those arising under any contract, guarantee, commitment or
undertaking, whether sought to be imposed by any Governmental Authority or
arbitrator, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, or otherwise, and including all
costs, expenses and interest relating thereto (including, but not limited to,
all expenses of investigation, all attorneys’ fees and all out-of-pocket
expenses in connection with any Action or threatened Action).

Losses:
with respect to any Person, all losses, Liabilities, damages, claims, demands,
judgments or settlements of any nature or kind, known or unknown, fixed,
accrued, absolute or contingent, liquidated or unliquidated, including all
costs and expenses (legal, accounting or otherwise as such costs are incurred) relating thereto, including punitive
damages and criminal fines and penalties, but excluding damages in respect of
actual or alleged lost profits, suffered by such Person, regardless of whether
any such losses, Liabilities, damages, claims, demands, judgments, settlements,
costs, expenses, fines and penalties relate to or arise out of such Person’s
own alleged or actual negligent, grossly negligent, reckless or intentional
misconduct or the capacity in which such Person was acting.

Non-parties:
as defined in Section 7.3(b) hereof.

NYSE:
the New York Stock Exchange, Inc.

Option
Conversion Ratio: the ratio of the pre-adjustment exercise
price of the Altria Options being adjusted to the Altria Pre-Adjustment Price.

Person:
an individual, a committee, a partnership, a joint venture, a corporation, a
trust, a limited liability company, an unincorporated organization, or a
government or any department or agency thereof.

 7
 

Personal
Data: as defined in Section 7.1 hereof.

Record
Date: the close of business on the date to be determined by
Altria’s Board of Directors as the record date for determining the holders of
Altria Common Stock entitled to receive shares of Class A Common Stock pursuant
to the Distribution.

Retained
Altria Pension Plan Liability: as defined in Section
3.1(c) hereof.

Retained
Kraft Pension Plan Liability: as defined in Section 3.2(c)
hereof.

SABMiller
Group: SABMiller PLC, a public limited company incorporated
in England and Wales under the Companies Act (1985), and the Subsidiaries of
SABMiller PLC.

SEC:
the United States Securities and Exchange Commission.

Securities
Act: the Securities Act of 1933, as amended, or any successor
statute.

Securities
Exchange Act: the Securities Exchange Act of 1934, as
amended, or any successor statute.

Subsidiary:
with respect to any specified Person, any corporation or other legal entity of
which such Person or any of its Subsidiaries controls or owns, directly or indirectly,
more than 50% of the stock or other equity interest entitled to vote on the
election of members to the board of directors or similar governing body;
provided, however, that for purposes of this Agreement, (1) the Kraft Subsidiaries shall be
deemed to be Subsidiaries of Kraft and (2) no member of the Kraft Group shall be deemed to be a Subsidiary
of any member of the Altria Group.

1.2          References to Time. All references
in this Agreement to times of the day shall be to Richmond, Virginia time,
except as otherwise specifically provided herein.

ARTICLE
II

GENERAL PRINCIPLES

2.1          Altria
Group Employees. Except as specifically provided
in this Agreement, to the exclusion of the Kraft Group, the appropriate member
of the Altria Group shall continue to be responsible for and pay, perform and
discharge each and every of the employment, compensation and employee benefits
Liabilities relating to the Altria Group Employees that arise from employment
with the Altria Group before, on or after the Distribution Date, including each
and every Liability arising under an Altria Group Plan or assumed pursuant to
the terms of this Agreement (collectively, the “Altria Benefit Liabilities”).

2.2          Kraft Group Employees. Except as
specifically provided in this Agreement, to the exclusion of the Altria Group,
the appropriate member of the Kraft Group shall continue to be responsible for
and pay, perform and discharge each and every of the employment, compensation
and employee benefits Liabilities relating to Kraft 

 8
 

Group Employees that arise from employment with the Kraft Group before,
on or after the Distribution Date, including each and every Liability arising
under a Kraft Group Plan or assumed pursuant to the terms of this Agreement
(collectively, the “Kraft Benefit Liabilities”).

ARTICLE
III

EMPLOYEE TRANSFERS

3.1          Kraft Transferees. The following
principles shall apply to any employee of a member of the Altria Group who has
transferred or will transfer employment to a member of the Kraft Group on or
prior to September 30, 2007 (each, a “Kraft Transferee”). Except as
specifically noted in this Agreement or as otherwise agreed in writing by the
parties, each Kraft Transferee will become, or continue to be, eligible upon
transfer for the rights and benefits of similarly situated Kraft Group
Employees.

(a)           Credit.
No later than as of the Distribution Date, each Kraft Group Plan shall provide
that each Kraft Transferee shall be credited with eligibility and vesting
service that is not less than the eligibility and vesting service that the
Kraft Transferee had earned under the comparable or equivalent Altria Group
Plan, including periods of service with the Altria Group prior to December 1,
1988; provided, however, that in no event shall a member
of the Kraft Group be required to provide any service credit to any Kraft
Transferee to the extent that the provision of such credit would result in the
payment of any duplicate benefits except as may arise by application of Section
3.1(c) hereof.

(b)           Amendments.
No member of the Kraft Group shall cause any amendments to be made to the Kraft
Group Plans or any policies regarding the Kraft Group Plans to be implemented
that have the direct or indirect effect of treating the Kraft Transferees less
favorably than the other Kraft Group Employees similarly situated in seniority
and job responsibilities.

(c)           Pension
Benefits. No transfer of assets between the Kraft Group Plans and Altria
Group Plans shall be needed in order to effectuate the purpose of this Section
3.1(c).

Each
Kraft Transferee shall remain entitled to all benefits under the appropriate
Altria Pension Plan to which he or she is or would be entitled if he or she had
separated from service with the Altria Group as of the later of (i) the date of
his or her transfer to the Kraft Group or (ii) the Distribution Date (the later
of which is referred to herein as the “Initial Altria Calculation Date”), and
the appropriate Altria Pension Plan shall retain all Liability for such
benefits (each, a “Retained Altria Pension Plan Liability”). For purposes of
calculating benefits under this Section 3.1(c), the Retained Altria
Pension Plan Liability and the Assumed Altria Pension Plan Liability of any
Kraft Transferee who has received target payments from Altria and accordingly
did not participate in non-qualified Altria Pension Plans for periods after
December 31, 2004, and before the Initial Altria Calculation Date shall be
calculated as if he or she participated in such Plans with respect to such
periods. A Kraft Transferee shall be considered as separated from the 

 9
 

service of the
Altria Group as of the Initial Altria Calculation Date and may elect to
commence receiving his or her benefit in accordance with the terms of the
applicable Altria Pension Plan and any individual agreements that alter such terms.

The
appropriate Kraft Pension Plan will also assume the Retained Altria Pension
Plan Liability with respect to each Kraft Transferee (whether or not vested) to
the Initial Altria Calculation Date (as to each Kraft Transferee an “Assumed
Altria Pension Plan Liability”) subject to the offset described later in this
paragraph. As of such date, the Assumed Altria Pension Plan Liability should be
equal to the Retained Altria Pension Plan Liability. The appropriate Kraft
Pension Plan is not required to credit the Kraft Transferee with benefit
service in determining the Assumed Altria Pension Plan Liability for periods of
employment with the Kraft Group on and after the Initial Altria Calculation
Date, but shall credit the Kraft Transferee with vesting and eligibility
service on and after such date for purposes of determining whether the Kraft
Transferee’s Assumed Altria Pension Plan Liability is vested and whether the
Kraft Transferee has completed the requisite years of service in order to be
eligible for an early retirement benefit and accompanying early retirement
subsidies (which must be no less favorable than the eligibility requirements
and other terms of the Altria Pension Plan in which the Kraft Transferee
participated on his or her date of transfer) with respect to the Assumed Altria
Pension Plan Liability. In computing the benefit determined pursuant to the
Assumed Altria Pension Plan Liability (and determined in accordance with the
applicable Altria Pension Plan) as of any date, the Kraft Pension Plan shall
use the same methodology as the relevant Altria Pension Plan (as in effect on
the Distribution Date) in determining the Kraft Transferee’s “five-year average
compensation” and “social security integration level” (as such terms are
defined in the Altria Pension Plan) as of the Kraft Transferee’s retirement or
other separation from service of the Kraft Group, but taking into account
compensation paid by the Kraft Group through the date of the Kraft Transferee’s
retirement or other separation from service. The benefit determined pursuant to
the Assumed Altria Pension Plan Liability, as adjusted pursuant to the
provisions of the preceding two sentences and payable from the appropriate
Kraft Pension Plan shall be offset by the benefit determined pursuant to the
Retained Altria Pension Plan Liability (and determined in accordance with the
applicable Altria Pension Plan) payable from the relevant Altria Pension Plan
as of the age at which the offset is applied. The early or late retirement
factors used to determine the amount of the Retained Altria Pension Plan
Liability that will be used as an offset to the Assumed Altria Pension Plan
Liability shall be based on the entitlement of the Kraft Transferee as of the
Initial Altria Calculation Date to a vested, early, full or deferred retirement
allowance, as applicable, under the appropriate Altria Pension Plan.

Altria
will calculate and notify Kraft in writing of the amount of the Retained Altria
Pension Plan Liability for each Kraft Transferee as soon as practicable
following the Distribution Date.

These
principles shall remain in effect so long as the Kraft Transferee continues to
be employed by a member of the Kraft Group irrespective of whether or when the
Kraft Transferee elects to begin receiving a benefit under an Altria Pension
Plan.

 10

(d)           Non-qualified
Deferred Compensation.

As
soon as practicable following the Initial Altria Calculation Date, Altria will
cause the appropriate member of the Altria Group to pay to each Kraft
Transferee in cash the full amount of any non-qualified deferred compensation
account or accounts under any Altria Pension Plan or Altria Profit-Sharing Plan
held by such Kraft Transferee or as otherwise required by the terms of the
applicable non-qualified deferred compensation plan or by individual
agreements; provided, however, that such payments may be deferred to the extent
doing so is, in the judgment of Altria, appropriate to avoid potential
violations of Code Section 409A.

(e)           Performance
Incentive Compensation.

(i)            Long Term Incentive Compensation. Each
Kraft Transferee who is a participant in the 2007-2009 long-term incentive
performance cycle under an Altria Performance Incentive Plan will be eligible
to participate in the most similar program under the appropriate Kraft
Performance Incentive Plan, without proration for any period between January 1,
2007, and the date the individual becomes a Kraft Transferee.

(ii)           Annual Incentive Compensation. Each Kraft
Transferee will receive an annual incentive target under the appropriate Kraft
Performance Incentive Plan that is equivalent to his or her annual incentive
target under an Altria Performance Incentive Plan at the time of transfer,
without proration for any period between January 1, 2007, and the date the
individual becomes a Kraft Transferee.

(f)            Savings
Plan. As soon as administratively practicable following the date on which
the Kraft Transferee transfers and in no event later than 30 days following the
date of transfer, the Kraft Transferee shall be eligible to commence
participation in the appropriate Kraft Savings Plan. Any service requirements
contained in such Kraft Savings Plan with respect to eligibility to participate
generally or eligibility to share in any employer contributions thereunder
shall be waived for the Kraft Transferee. If a Kraft Transferee is transferred
to the Kraft Group in the same calendar year as the Distribution Date and would
otherwise be eligible for a company contribution (within the meaning of the
Altria Profit-Sharing Plan) for that calendar year, the appropriate member of the
Altria Group will contribute to each such Kraft Transferee’s account in the
appropriate Altria Profit-Sharing Plan the pro-rated amount of any employer
contribution to which the Kraft Transferee is entitled based on his
compensation (as defined in the Altria Profit-Sharing Plan) received from a
Participating Company (as defined in the Altria Profit-Sharing Plan) through
the date of transfer and irrespective of whether such Kraft Transferee is
employed by the Kraft Group on the last day of the calendar year in which he
transferred. Any Kraft Transferee who has an outstanding loan from an Altria
Profit-Sharing Plan as of the Initial Altria Calculation Date may continue to
repay such loan in accordance with the terms of such Altria Profit-Sharing
Plan.

 11
 

(g)           Severance.
Each Kraft Transferee who is involuntarily separated from a member of the Kraft
Group within two years after his or her transfer date (each such two year
period, a “Protection Period”), shall be eligible to receive a payment equal to
the sum of:

(i)                                     any
severance or other amounts payable by such member of the Kraft Group to such
Kraft Transferee, which severance or other amount shall be no less than that
paid to any employee of that member similarly situated in age, seniority or job
responsibility (each, a “Kraft Severance Payment”); and

(ii)                                  the
excess, if any, of: (A) any severance or other amounts that would have been
payable by the member of the Altria Group from which the Kraft Transferee
transferred if the Kraft Transferee had remained in the employ of such member
of the Altria Group through the date of his or her involuntary separation
(determined based on the Altria workforce reduction practices in effect on the
date of the involuntary separation, which practices shall in no event be less favorable
than the practices in effect on the date of transfer); over (B) the Kraft
Severance Payment (each, an “Altria Excess Severance Payment”);

provided
that a Kraft Transferee shall not be entitled to any benefit under this Section
3.1(g) if: (A) the Kraft Transferee is involuntarily separated because of
misconduct or violation of any Kraft Group policy or procedure as determined by
the appropriate member of the Kraft Group; or (B) the Kraft Transferee
voluntarily terminates his or her employment with a member of the Kraft Group.

The
member of the Kraft Group from which the Kraft Transferee is involuntarily
separated shall be solely responsible for the payment of the Kraft Severance
Payment. The member of the Altria Group from which the Kraft Transferee transferred
shall be solely responsible for the payment of the Altria Excess Severance
Payment. Kraft will calculate and notify Altria in writing of the amount of the
Kraft Severance Payment and Altria will calculate and notify Kraft in writing
of the amount of the Altria Excess Severance Payment as soon as practicable
following such Kraft Transferee’s involuntary termination. In order to receive
the payment of his or her Altria Excess Severance Payment the Kraft Transferee
must execute a general release agreement provided by Altria.

(h)           Retiree
Medical Benefits. Any salaried Kraft Transferee who has an aggregate of
five years of service with a member of the Altria Group and the Kraft Group and
becomes eligible for a severance payment pursuant to subsection (g) of this Section
3.1 and attains his or her fiftieth birthday before the end of the period
of time for which he or she is entitled to receive severance payments, shall
also be eligible to receive retiree medical benefits under the Kraft Foods
Salaried Retiree Medical Plan upon retirement or other separation from service
from the Kraft Group.

 12
 

(i)            Welfare
and Other Plans. Kraft Transferees will be entitled to participate
immediately upon transfer in the Kraft Welfare and Other Plans in accordance
with the Altria-Kraft practices in effect as of the Distribution Date.

3.2          Altria Transferees. The following
principles shall apply to any employee of a member of the Kraft Group who has
transferred or will transfer employment to a member of the Altria Group on or prior
to September 30, 2007 (each, an “Altria Transferee”). Except as specifically
noted in this Agreement as otherwise agreed in writing by the parties, each
Altria Transferee will become, or continue to be, eligible upon transfer for
the rights and benefits of similarly situated Altria Group Employees.

(a)           Credit.
No later than as of the Distribution Date, each Altria Group Plan shall provide
that each Altria Transferee shall be credited with eligibility and vesting
service that is not less than the eligibility and vesting service that the
Altria Transferee had earned under the comparable or equivalent Kraft Group
Plan, including periods of service with the Kraft Group prior to December 1,
1988, but subject to the terms and limitations on the crediting of such service
of the Altria Pension Plan in effect on the date of the execution of this
Agreement; provided, however, that in no event shall a
member of the Altria Group be required to provide any service credit to any
Altria Transferee to the extent that the provision of such credit would result
in the payment of any duplicate benefits except as expressly set forth in Section
3.2(c) hereof.

(b)           Amendments.
No member of the Altria Group shall cause any amendments to be made to the
Altria Group Plans or any policies regarding the Altria Group Plans to be
implemented that have the direct or indirect effect of treating the Altria
Transferees less favorably than the other Altria Group Employees similarly
situated in seniority and job responsibilities.

(c)           Pension
Benefits. No transfer of assets between the Altria Group Plans and Kraft
Group Plans shall be needed in order to effectuate the purpose of this Section
3.2(c)

Each
Altria Transferee shall remain entitled to all benefits under the appropriate
Kraft Pension Plan to which he or she is or would be entitled if he or she had
separated from service with the Kraft Group as of the later of (i) the date of
his or her transfer to the Altria Group or (ii) the Distribution Date (the
later of which is referred to herein as the “Initial Kraft Calculation Date”),
and the appropriate Kraft Pension Plan shall retain all Liability for such
benefits (each, a “Retained Kraft Pension Plan Liability”). An Altria
Transferee shall be considered as separated from the service of the Kraft Group
as of the Initial Kraft Calculation Date and may elect to commence receiving
his or her benefit in accordance with the terms of the applicable Kraft Pension
Plan and any individual agreements that alter such terms.

The
appropriate Altria Pension Plan will also assume the Retained Kraft Pension
Plan Liability with respect to each Altria Transferee (whether or not vested)
to the Initial Kraft Calculation Date, (as to each Altria Transferee an “Assumed
Kraft Pension Plan Liability”), subject to the offset described later in this
paragraph. As of such date, the 

 13
 

Assumed Kraft
Pension Plan Liability should be equal to the Retained Kraft Pension Plan
Liability. The appropriate Altria Pension Plan is not required to credit the
Altria Transferee with benefit service in determining the Assumed Kraft Pension
Plan Liability for periods of employment with the Altria Group on and after the
Initial Kraft Calculation Date, but shall credit the Altria Transferee with
vesting and eligibility service on and after such date for purposes of
determining whether the Altria Transferee’s Assumed Kraft Pension Plan
Liability is vested and whether the Altria Transferee has completed the
requisite years of service in order to be eligible for an early retirement
benefit and accompanying early retirement subsidies (which must be no less
favorable than the eligibility requirements and other terms of the Kraft
Pension Plan in which the Altria Transferee participated on his or her date of
transfer) with respect to the Assumed Kraft Pension Plan Liability. In
computing the benefit determined pursuant to the Assumed Kraft Pension Plan
Liability (as determined in accordance with the applicable Kraft Pension Plan)
as of any date, the Altria Pension Plan shall use the same methodology as the
relevant Kraft Pension Plan (as in effect on the Distribution Date) in
determining the Altria Transferee’s “final average pay” and “social security
integration level/covered compensation” (as such terms are defined in the Kraft
Pension Plan) as of the Kraft Transferee’s retirement or other separation from
service from the Altria Group, but taking into account compensation paid by the
Altria Group through the date of the Altria Transferee’s retirement or other
separation from service. The benefit determined pursuant to the Assumed Kraft
Pension Plan Liability, as adjusted pursuant to the provisions of the preceding
two sentences and payable from the appropriate Altria Pension Plan shall be
offset by the benefit determined pursuant to the Retained Kraft Pension Plan
Liability (as determined in accordance with the applicable Kraft Pension Plan)
payable from the relevant Kraft Pension Plan as of the age at which the offset
is applied. The early or late retirement factors used to determine the amount
of the Retained Kraft Pension Plan Liability that will be used as an offset to
the Assumed Kraft Pension Plan Liability shall be based on the entitlement of
the Altria Transferee as of the Initial Kraft Calculation Date to a vested,
early, full or deferred retirement benefit, as applicable, under the
appropriate Kraft Pension Plan.

Kraft
will calculate and notify Altria in writing of the amount of the Retained Kraft
Pension Plan Liability for each Altria Transferee as soon as practicable
following the Distribution Date.

These
principles shall remain in effect so long as the Altria Transferee continues to
be employed by a member of the Altria Group irrespective of whether or when the
Altria Transferee elects to begin receiving a benefit under a Kraft Pension
Plan.

(d)           General
Foods Management Performance Awards Plan.

As
soon as practicable following each Altria Transferee’s Initial Kraft
Calculation Date, Kraft will cause the appropriate member of the Kraft Group to
pay to such Altria Transferee in cash the full amount of any non-qualified
deferred compensation account or accounts under the terms of the General Foods
Management Performance Awards Plan held by such Altria Transferee.

 14
 

(e)           Performance
Incentive Compensation.

(i)            Long Term Incentive Compensation. Each Altria
Transferee who is a participant in the 2007-2009 long-term incentive
performance cycle under a Kraft Performance Incentive Plan will be eligible to
participate in the most similar program under the appropriate Altria
Performance Incentive Plan without proration for any period between January 1,
2007, and the date the individual becomes an Altria Transferee.

(ii)           Annual Incentive Compensation. Each Altria
Transferee will receive an annual incentive target under the appropriate Altria
Performance Incentive Plan that is equivalent to his or her annual incentive
target under a Kraft Performance Incentive Plan at the time of transfer without
proration for any period between January 1, 2007, and the date the individual
becomes an Altria Transferee.

(f)            Profit-Sharing
Plan. As soon as administratively practicable following the date on which
the Altria Transferee transfers, the Altria Transferee shall be eligible to
commence participation in the appropriate Altria Profit-Sharing Plan. Any
service requirements contained in such Altria Profit-Sharing Plan with respect
to eligibility to participate generally or eligibility to share in any employer
contributions thereunder shall be waived for the Altria Transferee. Any Altria
Transferee who has an outstanding loan from a Kraft Savings Plan as of the
Initial Kraft Calculation Date may continue to repay such loan in accordance
with the terms of such Kraft Savings Plan.

(g)           Severance.
Each Altria Transferee who is involuntarily separated from a member of the
Altria Group shall be eligible to receive a payment equal to any severance or
other amounts payable by such member of the Altria Group to such Altria
Transferee, which severance or other amount shall be no less than that paid to
any employee of that member similarly situated in age, seniority or job
responsibility.

The
member of the Altria Group from which the Altria Transferee is involuntarily
separated shall be solely responsible for the payment of such amounts.

(h)           Welfare
and Other Plans. Altria Transferees will be entitled to participate
immediately upon transfer in the Altria Welfare and Other Plans in accordance
with Altria-Kraft practices in effect as of the Distribution Date.

 15
 

ARTICLE
IV

EQUITY COMPENSATION

4.1          Altria Options.

(a)           Adjustment
Methodology. Each Altria Option shall be adjusted in the manner described
below, effective as of the time of the Distribution, so that each Altria Option
holder shall hold Adjusted Altria Options and Kraft Options in lieu of the
Altria Options previously held. The following procedure shall be applied to
each grant of Altria Options with the same grant date and exercise price held
by each Altria Option holder. For the avoidance of doubt, the term “exercise
price” refers to the amount payable by an option holder in order to acquire
shares pursuant to a stock option award.

(i)            The Adjusted Altria
Options shall have an exercise price equal to the Altria Post-Adjustment Price
multiplied by the Option Conversion Ratio. The number of Adjusted Altria
Options shall equal the number of Altria Options.

(ii)           The Kraft Options
shall have an exercise price equal to the Kraft Price multiplied by the Option
Conversion Ratio. The number of Kraft Options shall equal the number of Altria
Options multiplied by the Distribution Ratio, rounded down to the nearest whole
option. If the resulting aggregate Intrinsic Value of the Adjusted Altria
Options and Kraft Options is less than the Intrinsic Value of the Altria
Options, then the difference shall be paid to the option holder in cash as soon
as practicable following the Distribution Date. If the resulting aggregate
Intrinsic Value of the Adjusted Altria Options and Kraft Options is greater
than the Intrinsic Value of the Altria Options, then the number of Kraft
Options shall be reduced until the aggregate Intrinsic Value of the Adjusted
Altria Options and Kraft Options is less than or equal to the Intrinsic Value
of the Altria Options, and any difference shall be paid to the option holder in
cash as soon as practicable following the Distribution Date. Notwithstanding
the foregoing, if the Intrinsic Value of the Altria Options is negative, only
the first two sentences of this Section 4.1(a)(ii) shall be applied. The cash
payment described above shall be made by Altria to individuals who are Altria
Group employees on the Distribution Date (or individuals no longer performing
services for the Altria Group or the Kraft Group but whose last employment was
with the Altria Group), and by Kraft to individuals who are Kraft Group
employees on the Distribution Date (or individuals no longer performing
services for the Altria Group or the Kraft Group but whose last employment was
with the Kraft Group).

(iii)          The calculation
described in the preceding sentence shall be applied using the rounding
conventions determined by Altria to carry out the purpose of this Section
4.1.

(b)           Issuing
Entity and Settlement. Altria will adjust the exercise price of the Altria
Options to become Adjusted Altria Options pursuant to the Altria Performance
Incentive Plan. After the Distribution Date, Adjusted Altria Options,
regardless of by 

 16
 

whom held, shall be settled by Altria pursuant to the Altria
Performance Incentive Plan. Kraft will issue the Kraft Options pursuant to the
Kraft Performance Incentive Plan. After the Distribution Date, Kraft Options,
regardless of by whom held, shall be settled by Kraft pursuant to the Kraft
Performance Incentive Plan.

(c)           Option
Agreement Terms. The Adjusted Altria Options and the Kraft Options shall
have terms that are substantially identical to the terms of the Altria Options,
provided, however, that (i) the options shall not permit further Executive
Ownership Stock Options to be granted on or after the Distribution Date, (ii)
the options shall provide that individuals who are employees of the Kraft Group
shall continue while employed by the Kraft Group to be treated as employees of
an Altria affiliate solely for purposes of determining the exercise period
under the option agreements, provided, however, that this treatment shall apply
only to individuals who are employees of the Kraft Group on the Distribution
Date or who are Kraft Transferees, and (iii) the Kraft Options shall refer to
both Kraft and Altria as appropriate to effectuate the intent of this Section
4.1 including references to the Altria disability and retirement plans.
Furthermore, individuals who are employees of the SABMiller Group shall be
treated as employees of an Altria affiliate for purposes of determining the
exercise period under the Adjusted Altria Options and Kraft Options.

(d)           Consideration.
As soon as practicable following the Distribution Date, Altria shall pay to
Kraft the Fair Value of the Kraft Options held by individuals who are Altria
Group employees on the Distribution Date (or individuals no longer performing
services for the Altria Group or the Kraft Group but whose last employment was
with the Altria Group) and Kraft shall pay to Altria the Fair Value of the
Adjusted Altria Options held by individuals who are Kraft Group employees on
the Distribution Date (or individuals no longer performing services for the
Altria Group or the Kraft Group but whose last employment was with the Kraft
Group). The parties shall settle the obligations of the preceding sentence in
cash on a net basis such that the party required to pay the greater amount to
the other shall pay the difference between the two amounts to the other.

4.2          Kraft
Options Issued by Altria. Kraft has agreed to
purchase from Altria, at a time mutually agreed between the parties but no
later than three Business Days before the Record Date, the Class A Common Stock
held by Altria in connection with the Altria-Kraft Options. Altria has sold and
Kraft has purchased such shares at a per-share price equal to the average of
the high and low trading price of Class A Common Stock on the NYSE on the day
before day of the purchase. Effective as of the date of such purchase, holders
of the Altria-Kraft Options became entitled to receive from Altria upon
exercise of such options cash in the amount equal to the difference between the
exercise price of such options and the then-current fair market value of Class
A Common Stock determined pursuant to the terms of such options. As soon as
practicable following the Distribution Date, Kraft shall pay to Altria the Fair
Value of the Altria-Kraft Options held by individuals who are Kraft Group
employees on the Distribution Date (or individuals no longer performing
services for the Altria Group or the Kraft Group but whose last employment was
with the Kraft Group).

 17

4.3          Restricted Stock.

(a)           Adjustment.
Pursuant to the Distribution, each holder of Altria Restricted Stock will
receive from Altria as of the time of the Distribution shares of Class A Common
Stock in the same manner and based on the same ratio as other shareholders of
Altria Common Stock. Such Class A Common Stock shall be subject to the same
vesting requirements and dates and other terms and conditions as the Altria
Restricted Stock to which it relates (including the right to receive all
dividends or other distributions paid on Class A Common Stock); provided
that any fractional shares of Kraft Restricted Stock shall be paid to the
holder by Altria in cash as soon as practicable following the Distribution Date
in accordance with the Distribution Agreement.

(b)           Restricted Stock Agreement Terms. The
Kraft Restricted Stock shall have terms that are substantially identical to the
terms of the Altria Restricted Stock, provided, however, that (i) the Altria
Restricted Stock and the Kraft Restricted Stock shall provide that individuals
who are employees of the Kraft Group shall continue to be treated as employees
of an Altria affiliate for purposes of continued vesting in the restricted
stock, provided, however, that this treatment shall apply only to individuals who
are employees of the Kraft Group on the Distribution Date or who are Kraft
Transferees; and (ii) the Kraft Restricted Stock shall refer to both Kraft and
Altria as appropriate to effectuate the intent of this Section 4.3.

(c)           Forfeiture
of Kraft Stock and Consideration. If a holder of Kraft Restricted Stock
forfeits such stock under the terms of the Kraft Restricted Stock, the
forfeited stock shall be returned to Kraft, not Altria. In consideration of the
anticipated receipt of such forfeitures, Kraft shall pay in cash to Altria as
soon as practicable following the Distribution Date the Kraft Restricted Stock
Forfeiture Value attributable to Kraft Restricted Stock held by individuals who
are Altria Group employees on the Distribution Date. In addition, Kraft shall
pay in cash to Altria as soon as practicable following the Distribution Date
the value of the Altria Restricted Stock held by the Kraft Group employees on
the Distribution Date. The value of the Altria Restricted Stock shall be equal
to the Altria Pre-Adjustment Price of the underlying Altria shares, reduced by
assumed forfeitures based on the assumptions used for Statement of Financial
Accounting Standards 123(R) purposes in Altria’s most recent quarterly or
annual financial reporting prepared before the Distribution Date for
forfeitures by Kraft Group employees (with respect to Kraft restricted stock
held by Kraft Group employees).

4.4          Deferred Stock.

(a)           Adjustment. Effective at the time of
the Distribution, each holder of Altria Deferred Stock shall receive a number
of Kraft Deferred Stock shares equal to the number of Altria Deferred Stock
shares held by such individual multiplied by the Distribution Ratio. Any
fractional shares of Kraft Deferred Stock shall be paid to such individual in
cash as soon as practicable following the Distribution Date; provided, however,
that with respect to any individual (i) who is subject to U.S. federal
income tax on the deferred stock and (ii) who has attained normal retirement
age (within the meaning of the Altria Deferred Stock agreement) or who will
attain normal retirement age before 

 18
 

the Altria and Kraft Deferred Stock becomes payable (and any other
individual who holds Deferred Stock that is subject to Code Section 409A), any
fractional shares of Kraft Deferred Stock shall instead be rounded up to a
whole share of Kraft Deferred Stock. The cash payment described above shall be
made by Altria to individuals who are Altria Group employees on the
Distribution Date, and by Kraft to individuals who are Kraft Group employees on
the Distribution Date.

(b)           Issuing Entity and Settlement. After
the Distribution Date, Altria shall be responsible for any cash payments in
lieu of dividends required pursuant to the terms of the Altria Deferred Stock,
and such Altria Deferred Stock, regardless of by whom held, shall be settled by
Altria pursuant to the Altria Performance Incentive Plan. Kraft will issue
Kraft Deferred Stock pursuant to the Kraft Performance Incentive Plan. After
the Distribution Date, Kraft shall be responsible for any cash payments in lieu
of dividends required pursuant to the terms of the Kraft Deferred Stock, and
such deferred stock, regardless of by whom held, shall be settled by Kraft
pursuant to the Kraft Performance Incentive Plan.

(c)           Deferred
Stock Agreement Terms. The Kraft Deferred Stock shall have terms that are
substantially identical to the terms of the Altria Deferred Stock, provided,
however, that (i) the Altria Deferred Stock and the Kraft Deferred Stock shall
provide that individuals who are employees of the Kraft Group shall continue to
be treated as employees of an Altria affiliate for purposes of continued
vesting in the deferred stock, provided, however, that this treatment shall
apply only to individuals who are employees of the Kraft Group on the
Distribution Date or who are Kraft Transferees, and (ii) the Kraft Deferred
Stock shall refer to both Kraft and Altria as appropriate to effectuate the
intent of this Section 4.4.

(d)           Consideration.
As soon as practicable following the Distribution Date, Altria shall pay to
Kraft the value of the Kraft Deferred Stock held by individuals who are Altria
Group employees on the Distribution Date and Kraft shall pay to Altria the
value of the Altria Deferred Stock held by Kraft Group employees. The parties
shall settle the obligations of the preceding sentence in cash on a net basis
such that the party required to pay the greater amount to the other shall pay
the difference between the two amounts to the other. For purposes of this Section
4.4(d), the value of the Altria Deferred Stock or Kraft Deferred Stock
shall be equal to the closing price on the NYSE of the underlying Altria or
Kraft shares on the Distribution Date, reduced by assumed forfeitures based on
the assumptions used for Statement of Financial Accounting Standards 123(R)
purposes in Altria’s most recent quarterly or annual financial reporting
prepared before the Distribution Date for forfeitures by Altria Group employees
(with respect to Kraft Deferred Stock held by Altria Group employees) and by
Kraft Group employees (with respect to Altria Deferred Stock held by Kraft
Group employees).

(e)           Taxes. Altria shall reimburse
any Altria Group employee, and Kraft shall reimburse any Kraft Group employee,
who becomes liable for income taxes earlier or in an amount greater than would
have been the case absent the implementation of Section 4.4(a) in an
amount equal to the excess of (i) any income taxes to which such employee
becomes liable over (ii) the present value of such income taxes had such income
taxes 

 19
 

been paid at such time as the Altria or Kraft
Deferred Stock would otherwise have been subject to income taxes, assuming, for
purposes of determining present value, the same value for Deferred Stock used
for purposes of clause (i) of this sentence and a discount rate equal to the
weighted average discount rate used for Altria’s domestic pension plans at
December 31, 2006, which was 5.9%. Any such reimbursement shall be further
adjusted to hold the employee harmless from all additional taxes on the
reimbursement payment itself. The amounts payable pursuant to this Section
4.4(e) shall be calculated using reasonable assumptions (in addition to
those specified above) as may be determined by the third-party accounting firm
or firms selected by the party responsible for the reimbursement.

4.5          Existing Kraft Equity Compensation.

(a)           Consideration.
As soon as practicable following the Distribution Date, Altria shall pay to
Kraft the Fair Value of the Existing Kraft Options held by individuals who
transferred employment from the Kraft Group to the Altria Group before the
Distribution Date. As soon as practicable following the Distribution Date,
Altria shall also pay to Kraft the value of the Existing Kraft Restricted Stock
and Existing Kraft Deferred Stock held by individuals who transferred
employment from the Kraft Group to the Altria Group before the Distribution
Date. The value of the Existing Kraft Restricted Stock and Existing Kraft
Deferred Stock shall be equal to the closing price on the NYSE of the
underlying Kraft shares on the Distribution Date, reduced by assumed
forfeitures based on the assumptions used for Statement of Financial Accounting
Standards 123(R) purposes in Altria’s most recent quarterly or annual financial
reporting prepared before the Distribution Date for Altria Group employees
(with respect to the relevant Altria equity compensation held by Altria Group
employees).

(b)           Employment
Treatment. Equity compensation issued by Kraft before the Distribution Date
shall provide that individuals who are Altria Transferees shall continue while
employed by Altria to be treated as employees of a member of the Kraft Group
for purposes of determining the exercise period of Kraft options and continued
vesting in Kraft restricted stock and deferred stock.

4.6          Other.

(a)           Administration and Withholding.
Altria and Kraft agree that UBS Financial Services Inc. shall be the
administrator and recordkeeper for the Adjusted Altria Options, Kraft Options,
Altria-Kraft Options, Altria Restricted Stock, Kraft Restricted Stock, Altria
Deferred Stock, and Kraft Deferred Stock for the life of the options,
restricted stock and deferred stock, unless the parties mutually agree
otherwise. Altria will be responsible for all payroll taxes, withholding, and
reporting with respect to Equity Compensation of Altria Group employees (or
individuals no longer performing services for the Altria Group or the Kraft
Group but whose last employment was with the Altria Group). Kraft will be
responsible for all payroll taxes, withholding, and reporting with respect to
Equity Compensation of Kraft Group employees (or individuals no longer
performing services for the Altria Group or the Kraft Group but whose last
employment was with the Kraft Group). Altria and Kraft agree to designate the
other party as an agent 

 20
 

for withholding pursuant to IRS Revenue
Procedure 70-6 and to accept such designation to effectuate the intent of this Section
4.6(a). Upon the exercise of an Adjusted Altria Option, Kraft Option, or
Altria-Kraft Option, the exercise price shall be remitted by the option
administrator to the issuer of the option (Altria or Kraft, as applicable) and
the applicable withholding shall be remitted by the option administrator to the
entity (Altria or Kraft, as applicable) responsible for payroll taxes,
withholding, and reporting with respect to the option. Upon vesting or payment,
as applicable, of Altria and Kraft Restricted Stock and Altria and Kraft
Deferred Stock, the applicable withholding shall be remitted by the
administrator to the entity (Altria or Kraft, as applicable) responsible for
payroll taxes, withholding, and reporting with respect to the Restricted or
Deferred Stock. With respect to dividends on Kraft Restricted Stock or dividend
equivalents on Kraft Deferred Stock payable by Kraft to an Altria Group
employee (or to an individual no longer performing services for the Altria
Group or Kraft Group but whose last employment was with the Altria Group),
Kraft shall make such payments to Altria, and Altria, as an agent for Kraft,
shall make such payments to its employees and former employees and shall be
responsible for payroll taxes, withholding, and reporting in accordance with
this Section 4.6(a). With respect to dividends on Altria Restricted
Stock or dividend equivalents on Altria Deferred Stock payable by Altria to a
Kraft Group employee (or to an individual no longer performing services for the
Altria Group or Kraft Group but whose last employment was with the Kraft
Group), Altria shall make such payments to Kraft, and Kraft, as an agent for
Altria, shall make such payments to its employees and former employees and
shall be responsible for payroll taxes, withholding, and reporting in
accordance with this Section 4.6(a). With respect to fractional shares
of Kraft Restricted Stock payable by Altria to a Kraft Group employee (or to an
individual no longer performing services for the Altria Group or Kraft Group
but whose last employment was with the Kraft Group), Altria shall make such
payments to Kraft, and Kraft, as an agent for Altria, shall make such payments
to its employees and former employees and shall be responsible for payroll
taxes, withholding, and reporting in accordance with this Section 4.6(a).

(b)           Tax
Deductions. With respect to the Equity Compensation held by individuals who
are employees of the Altria Group at the time the Equity Compensation becomes
taxable and individuals who are not employees of the Altria Group or Kraft
Group at such time but were last employees of the Altria Group, Altria shall
claim any federal, state, and/or local tax deductions after the Distribution
Date, and Kraft shall not claim such deductions. With respect to the Equity
Compensation held by individuals who are employees of the Kraft Group at the
time the Equity Compensation becomes taxable and individuals who are not
employees of the Altria Group or Kraft Group at such time but were last
employees of the Kraft Group, Kraft shall claim any federal, state, and/or
local tax deductions after the Distribution Date, and Altria shall not claim
such deductions. If either Altria or Kraft determines in its reasonable
judgment that there is a substantial likelihood that a tax deduction that was
assigned to Altria or Kraft pursuant to this Section 4.6(b) will instead
be available only to the other party (whether as a result of a determination by
the Internal Revenue Service, a change in the Code or the regulations or
guidance thereunder, or otherwise), it will notify the other party and both
parties will negotiate in good faith to resolve the issue in accordance with
the following principle: the party entitled to the deduction shall pay to the
other party an amount that puts the 

 21
 

other party in a financial position equivalent to the financial
position the party would have been in had the party received the deduction as
intended under this Section 4.6(b). Such amount shall be paid within 90
days of filing the last tax return necessary to make the determination
described in the preceding sentence.

(c)           Intended
Results; Tax Benefit. If Altria determines in its reasonable judgment that
any action required under this Article IV will not achieve the intended tax,
accounting and legal results, including, without limitation, the intended
results under Code Section 409A and Statement of Financial Accounting Standards
123(R), then at the request of Altria, Kraft and Altria shall mutually
cooperate in taking such actions as are necessary or appropriate to achieve
such results, or most nearly achieve such results if the originally-intended
results are not fully attainable.

(d)           Registration.
Kraft shall register the Class A Common Stock relating to the Kraft Options and
Kraft Deferred Stock and make any necessary filings with the appropriate
governmental authorities as required under U.S. and foreign securities Laws.

ARTICLE V

SAVINGS PLANS

5.1          Maintenance of Stock Funds.

(a)           Kraft.
The Kraft Savings Plans will be amended as of the Distribution Date to provide
that no new amounts may be contributed to any fund in such Plans whose value is
based on the value of Altria Common Stock (each, an “Altria Stock Fund”)
whether through employee contribution, employer contribution, dividend payment
or intra-plan transfers. Kraft further will cause the Altria Stock Fund in each
of the Kraft Savings Plans to be maintained until the fiduciary for the Plan,
in exercise of its obligations under applicable Law, determines that the
maintenance of such Altria Stock Fund is no longer consistent with ERISA.

(b)           Altria.
Each of the Altria Profit-Sharing Plans will be amended as of the Distribution
Date: (A) to create a new fund whose value is based on the value of Class A
Common Stock (each, a “Kraft Stock Fund”); (B) to enable the Kraft Stock Fund
to receive shares of Class A Common Stock to be distributed in the Distribution
on behalf of Plan participants; and (C) to provide that, following the
Distribution, no new amounts may be contributed to a Kraft Stock Fund whether
through employee contribution, employer contribution, dividend payment or
intra-plan transfer. Altria further will cause the Kraft Stock Fund in each of
the Altria Profit-Sharing Plans to be maintained until the fiduciary for the
Plan, in exercise of its obligations under applicable Law, determines that the
maintenance of such Kraft Stock Fund is no longer consistent with ERISA.

ARTICLE
VI

ALTRIA STOCK PURCHASE PLAN

6.1          Termination
of Participation. As of the Distribution Date, the
Kraft Group Employees shall cease to be eligible to participate in the Altria
Stock Purchase Plan, in accordance with the terms of such Plan.

 22
 

ARTICLE
VII

GENERAL AND ADMINISTRATIVE

7.1          Sharing of Participant Information.
Altria and
Kraft shall share, Altria shall cause each applicable member of the Altria
Group to share, and Kraft shall cause each applicable member of the Kraft Group
to share, with each other and their respective agents and vendors (without
obtaining releases), all participant information necessary for the efficient
and accurate administration of each of the Altria Plans and the Kraft Plans, as
well as the performance of their respective obligations under this Agreement.
Altria and Kraft and their respective authorized agents shall, subject to
applicable Laws on confidentiality, data protection and labor, be given reasonable and timely access to,
and may make copies of, all information relating to the subjects of this
Agreement in the custody of the other party, to the extent necessary for such
administration. All participant information shall be provided in a manner and
medium that is compatible with the data processing systems of Altria as in
effect as of the Distribution Date, unless otherwise agreed to by Altria and
Kraft. Altria and Kraft shall
ensure that they each have in place
appropriate technical and organizational security
measures to protect the personal data of the transferring participants (“Personal
Data”). Each of Altria and Kraft shall comply fully with its
obligations under applicable Laws as controller of any Personal Data and shall do all such things as may be necessary to
discharge such obligations.

7.2          No Third-Party Beneficiaries. No
provision of this Agreement or the Distribution Agreement shall be construed to
create any right, or accelerate entitlement, to any compensation or benefit
whatsoever on the part of any Kraft Transferee, any Altria Transferee or other
future, present, or former employee of Altria, a member of the Altria Group,
Kraft or a member of the Kraft Group under any Altria Group Plan or Kraft Group
Plan or otherwise. Without limiting the generality of the foregoing: (i) except
as expressly provided in this Agreement, nothing in this Agreement shall
preclude Kraft or any member of the Kraft Group, at any time after the
Distribution Date, from amending, merging, modifying, terminating, eliminating,
reducing, or otherwise altering in any respect any Kraft Group Plan, any
benefit under any Plan or any trust, insurance policy or funding vehicle
related to any Kraft Group Plan; and (ii) except as expressly provided in this
Agreement, nothing in this Agreement shall preclude Altria or any member of the
Altria Group, at any time after the Distribution modifying, terminating,
eliminating, reducing, or otherwise altering in any respect any Altria Group
Plan, any benefit under any Plan or any trust, insurance policy or funding
vehicle related to any Altria Plan. In no event shall any provision of this
Agreement be deemed to amend any Altria Group Plan or Kraft Group Plan.

7.3          Audit Rights with Respect to Information Provided.

(a)           Each
of Altria and Kraft, and their duly authorized representatives, shall have the
right to conduct audits with respect to all information provided to it by the
other party. The party conducting the audit (the “Auditing Party”) shall have
the sole discretion to determine the procedures and guidelines for conducting
audits and the selection of audit representatives under this Section 7.3(a).
The Auditing Party shall have 

 23
 

the right to make copies of any records at its expense, subject to the
confidentiality provisions set forth in the Distribution Agreement, which are
incorporated by reference herein. The party being audited shall provide the
Auditing Party’s representatives with reasonable access during normal business
hours to its operations, computer systems and paper and electronic files, and
provide workspace to its representatives. After any audit is completed, the
party being audited shall have the right to review a draft of the audit
findings and to comment on those findings in writing within five business days
after receiving such draft.

(b)           The
Auditing Party’s audit rights under this Section 7.3(b) shall include
the right to audit, or participate in an audit facilitated by the party being
audited, of any Subsidiaries and Affiliates of the party being audited and of
any benefit providers and third parties with whom the party being audited has a
relationship, or agents of such party, to the extent any such persons are
affected by or addressed in this Agreement (collectively, the “Non-parties”).
The party being audited shall, upon written request from the Auditing Party,
provide an individual (at the Auditing Party’s expense) to supervise any audit
of a Non-party. The Auditing Party shall be responsible for supplying, at the
Auditing Party’s expense, additional personnel sufficient to complete the audit
in a reasonably timely manner. The responsibility of the party being audited
shall be limited to providing, at the Auditing Party’s expense, a single
individual at each audited site for purposes of facilitating the audit.

7.4          Fiduciary Matters. Altria and Kraft
each acknowledge that actions required to be taken pursuant to this Agreement
may be subject to fiduciary duties or standards of conduct under ERISA or other
applicable law, and no party shall be deemed to be in violation of this
Agreement if it fails to comply with any provisions hereof based upon its good
faith determination that to do so would violate such a fiduciary duty or
standard. Each party shall be responsible for taking such actions as are deemed
necessary and appropriate to comply with its own fiduciary responsibilities.

7.5          Collective Bargaining. To the
extent any provision of this Agreement is contrary to the provisions of any
collective bargaining agreement to which Altria or Kraft or their respective
Affiliates is a party, the terms of such collective bargaining agreement shall
prevail. Should any provisions of this Agreement be deemed to relate to a topic
determined by an appropriate authority to be a mandatory subject of collective
bargaining, Altria or Kraft may be obligated to bargain with the union
representing affected employees concerning those subjects.

7.6          Consent of Third Parties. If any
provision of this Agreement is dependent on the consent of any third party
(such as a vendor or a union) and such consent is withheld, Altria and Kraft
shall use their reasonable best efforts to implement the applicable provisions
of this Agreement to the full extent practicable. If any provision of this
Agreement cannot be implemented due to the failure of such third party to
consent, Altria and Kraft shall negotiate in good faith to implement the
provision in a mutually satisfactory manner. The phrase “reasonable best
efforts” as used herein shall not be construed to require the incurrence of any
non-routine or unreasonable expense or Liability or the waiver of any right.

 24
 

ARTICLE
VIII

INDEMNIFICATION

8.1          Indemnification. All Liabilities
retained or assumed by or allocated to Altria or the Altria Group pursuant to
this Agreement shall be deemed to be Altria Group Liabilities for purposes of
Article III of the Distribution Agreement, and all Liabilities retained or
assumed by or allocated to Kraft or the Kraft Group pursuant to this Agreement
shall be deemed to be Kraft Group Liabilities for the purposes of Article III
of the Distribution Agreement.

ARTICLE
IX

MISCELLANEOUS

9.1          Relationship of Parties. Nothing in
this Agreement shall be deemed or construed by the parties or any third party
as creating the relationship of principal and agent, partnership or joint
venture between or among the parties, it being understood and agreed that no
provision contained herein, and no act of the parties, shall be deemed to
create any relationship between the parties other than the relationship set
forth herein.

9.2          Affiliates. Each of Altria and
Kraft shall cause to be performed, and hereby guarantees the performance of,
all actions, agreements and obligations set forth in this Agreement to be
performed by a member of the Altria Group or a member of the Kraft Group.

9.3          Employee Communications. Kraft will
coordinate with Altria all written and electronic communications to the Kraft
Group employees regarding the terms of this Employee Matters Agreement to
assure that all such communications are uniform, consistent and accurate.

9.4          Incorporation of Distribution Agreement Provisions.
The following provisions of the Distribution Agreement are hereby incorporated
herein by reference, and unless otherwise expressly specified herein, such
provisions shall apply as if fully set forth herein (references in this Section
9.4 to an “Article” or “Section” shall mean Articles or Sections of the
Distribution Agreement, and, except as expressly set forth below, references in
the material incorporated herein by reference shall be references to the
Distribution Agreement): Article III (relating to Mutual Releases and
Indemnification); Article IV (relating to certain Additional Covenants);
Article V (relating to Access to Information); Article VI (relating to Dispute
Resolution); and Article IX (relating to Miscellaneous).

9.5          Governing Law. To the extent not
preempted by applicable federal law, this Agreement shall be governed by,
construed and interpreted in accordance with the laws of the Commonwealth of
Virginia (other than the laws regarding the choice of laws and conflict of laws
as to all matters), including matters of validity, construction, effect,
performance and remedies provided, however, that the
Arbitration Act shall govern the matter described in Article VIII.

 25
 

9.6          References. Except as provided in Section
9.4 hereof, all references to Sections, Articles or Schedules contained
herein mean Sections, Articles or Schedules of or to this Agreement, as the
case may be, unless otherwise stated.

 26
 

IN WITNESS WHEREOF, the parties have caused
this Employee Matters Agreement to be duly executed as of the day and year
first above written.

	
  

  	
  ALTRIA GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Louis C. Camilleri

  
	
   

  	
  Name:

  	
  Louis C. Camilleri

  
	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  KRAFT FOODS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Irene B. Rosenfeld

  
	
   

  	
  Name:

  	
  Irene B. Rosenfeld

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  

 

 27Exhibit
10.3

 

TAX SHARING AGREEMENT

BY AND BETWEEN

ALTRIA GROUP, INC.

AND

KRAFT FOODS INC.

DATED AS OF MARCH 30, 2007

 

TABLE OF
CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  DEFINITIONS
  

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.01

  	
   

  	
  General

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  TAX
  SHARING

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.01

  	
   

  	
  General

  	
   

  	
  6

  	
   

  
	
  2.02

  	
   

  	
  Payment
  of Taxes

  	
   

  	
  6

  	
   

  
	
  2.03

  	
   

  	
  Carrybacks
  from Post-Distribution Period

  	
   

  	
  7

  	
   

  
	
  2.04

  	
   

  	
  Preparation
  of Returns

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  REFUNDS

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.01

  	
   

  	
  Refunds

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.01

  	
   

  	
  General
  Indemnification

  	
   

  	
  9

  	
   

  
	
  4.02

  	
   

  	
  Indemnification
  for Distribution Taxes

  	
   

  	
  10

  	
   

  
	
  4.03

  	
   

  	
  Indemnification
  Payments

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  REPRESENTATIONS

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.01

  	
   

  	
  Altria
  and Kraft Representations

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  COVENANTS

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.01

  	
   

  	
  Altria
  and Kraft Covenants

  	
   

  	
  11

  	
   

  
	
  6.02

  	
   

  	
  Specific
  Kraft Covenants

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  TAX
  CONTESTS

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.01

  	
   

  	
  Representation
  with Respect to Tax Contests

  	
   

  	
  13

  	
   

  

 

 i
 

 

	
  ARTICLE VIII

  	
   

  	
  PAYMENTS

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.01

  	
   

  	
  Method
  of Payment

  	
   

  	
  13

  	
   

  
	
  8.02

  	
   

  	
  Interest

  	
   

  	
  14

  	
   

  
	
  8.03

  	
   

  	
  Characterization
  of Payments

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.01

  	
   

  	
  Allocation

  	
   

  	
  14

  	
   

  
	
  9.02

  	
   

  	
  Payment
  of Reserves

  	
   

  	
  14

  	
   

  
	
  9.03

  	
   

  	
  Cooperation
  and Exchange of Information

  	
   

  	
  15

  	
   

  
	
  9.04

  	
   

  	
  Retention
  of Records

  	
   

  	
  15

  	
   

  
	
  9.05

  	
   

  	
  Dispute
  Resolution

  	
   

  	
  16

  	
   

  
	
  9.06

  	
   

  	
  Changes
  in Law

  	
   

  	
  16

  	
   

  
	
  9.07

  	
   

  	
  Confidentiality

  	
   

  	
  16

  	
   

  
	
  9.08

  	
   

  	
  Successors

  	
   

  	
  16

  	
   

  
	
  9.09

  	
   

  	
  Authorization

  	
   

  	
  17

  	
   

  
	
  9.10

  	
   

  	
  Notices

  	
   

  	
  17

  	
   

  
	
  9.11

  	
   

  	
  Entire
  Agreement

  	
   

  	
  17

  	
   

  
	
  9.12

  	
   

  	
  Section
  Captions

  	
   

  	
  18

  	
   

  
	
  9.13

  	
   

  	
  Governing
  Law

  	
   

  	
  18

  	
   

  
	
  9.14

  	
   

  	
  Counterparts

  	
   

  	
  18

  	
   

  
	
  9.15

  	
   

  	
  Waiver
  and Amendments

  	
   

  	
  18

  	
   

  
	
  9.16

  	
   

  	
  Effective
  Date

  	
   

  	
  18

  	
   

  
	
  9.17

  	
   

  	
  Termination

  	
   

  	
  18

  	
   

  

 

 ii

TAX SHARING AGREEMENT

THIS TAX SHARING AGREEMENT dated as of March 30, 2007 (the “Agreement”)
is between Altria Group, Inc., a Virginia corporation (“Altria”), and Kraft
Foods Inc., a Virginia corporation (“Kraft”) (sometimes referred to herein
individually as “Party”, or together, as “Parties”).

W I T N E S S E T H:

WHEREAS, Altria is the
common parent corporation of an affiliated group of corporations (the “Altria
Consolidated Return Group”) within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, as amended (the “Code”);

WHEREAS, Kraft is a member of the affiliated group of corporations with
respect to which Altria is the common parent corporation;

WHEREAS, as set forth in the Distribution Agreement by and between
Altria and Kraft, dated as of January 31, 2007 (the “Distribution Agreement”),
and subject to the terms and conditions thereof, Altria will distribute on a
pro rata basis to the holders of Altria common stock all of the outstanding
shares of Kraft common stock then owned by Altria (the “Distribution”);

WHEREAS, the Distribution is intended to qualify as a tax-free
distribution to Altria and its shareholders under Section 355 of the Code; and

WHEREAS, in contemplation of the Distribution, pursuant to which Kraft
(and its direct and indirect Subsidiaries) will cease to be a member of the
Altria Consolidated Return Group, the Parties hereto have determined to enter
into this Agreement, setting forth their agreement with respect to certain tax
matters;

NOW, THEREFORE in consideration of the premises and mutual covenants
herein contained, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.01         General.  For
the purposes of this Agreement, the terms set forth below shall have the
following meanings.

“Altria
Non-Food Group” means Altria and any direct or indirect Subsidiary of
Altria that is not also a member of the Kraft Group or otherwise a direct or
indirect Subsidiary of Kraft and that would be eligible, from time to time, to
join with Altria, with respect to Federal Income Taxes, in the filing of a
consolidated United States Federal Income Tax return and, with respect to
Combined State Taxes, in the filing of a consolidated, combined or unitary
income or franchise tax return.

“Altria
Non-Food Group Tax” means (i) the Federal Income Tax liability of the
Altria Consolidated Return Group less the Kraft Federal Income Tax Liability;
(ii) the Altria Combined State Tax liability less the Kraft Combined State Tax
Liability; (iii) any other Tax imposed on any member of the Altria Non-Food
Group or, with respect to any taxable year, any other Tax imposed on any direct
or indirect Subsidiary of Altria (excluding, however, the Kraft Group and any
direct or indirect Subsidiary of Kraft) that is not a member of the Altria
Non-Food Group; and (iv) liability of any member of the Altria Non-Food Group
for the payment of any amounts of the type described in (i), (ii) or (iii) as a
result of any express or implied obligation to indemnify any other person.

“Combined
State Tax” means, with respect to each state or local taxing jurisdiction,
any income or franchise tax payable to such state or local taxing jurisdiction
in which a member of the Kraft Group files tax returns with a member of the
Altria Consolidated Return Group that is not also a member of the Kraft Group
on a consolidated, combined or unitary basis for purposes of such income or
franchise tax.

“Distribution
Date” shall mean the date on which the Distribution becomes effective.

 “Distribution Taxes” shall mean any
Taxes imposed on, increase in Taxes incurred by, or reduction of a Tax Asset of
Altria, and any Taxes of an Altria shareholder that are paid or reimbursed by
Altria, together with any fines or penalties, pursuant to a Final Determination
resulting from, or arising in connection with, the failure of the Distribution
to qualify as a tax-free transaction under Section 355 of the Code (including,
without limitation, any Tax resulting from the application of Section 355(d) or
Section 355(e) to the Distribution) or corresponding provisions of the laws of
any other jurisdictions.  Any Tax
referred to in the immediately preceding sentence shall be determined using the
highest applicable statutory corporate income tax rate for the relevant taxable
period (or portion thereof).

“Effective
Realization” (and the correlative term “Effectively Realized”) means, with
respect to a tax saving or tax benefit, including from the use of any Tax
Asset, the earliest to occur of (i) the receipt by Altria or Kraft (or any
other member of Altria Non-Food Group or Kraft Group) of cash from a Taxing
Authority reflecting such tax saving or tax benefit, or (ii) the application of
such tax saving or tax benefit to reduce any payments, including estimated tax
payments, with respect to (A) the tax liability on a return of any of such
entities or of any consolidated group of which any of such entities is 

 2
 

a member, or (B) any other outstanding tax liability of any of such
entities or of any such consolidated group, provided that any reference in this
definition to tax shall include, without limitation, a reference to a recovery
of statutory interest.

“Federal
Income Tax” means any Tax imposed under Subtitle A of the Code and any
related interest and any penalties, additions to such Tax, or additional
amounts imposed with respect thereto.

“Final
Determination” shall mean (i) with respect to Federal Income Taxes, a “determination”
as defined in Section 1313(a) of the Code or execution of an Internal Revenue
Service Form 870-AD and, with respect to taxes other than Federal Income Taxes,
any decision, judgment, decree or other order by a court of competent
jurisdiction that, under applicable law, is not subject to further appeal,
review or modification through proceedings or otherwise; (ii) a closing
agreement or accepted offer in compromise under Sections 7121 or 7122 of the
Code, or a comparable agreement under the laws of a State, local, or foreign
taxing jurisdiction; (iii) the payment of tax by any member of the Altria
Consolidated Return Group with respect to any item disallowed or adjusted by a
Taxing Authority, provided that Altria determines that no action should be
taken to recoup such payment; or (iv) any other final disposition, by mutual
agreement of the Parties or by reason of the expiration of a statute of limitations
or period for the filing of claims for refunds, amended returns, or appeals
from adverse determinations.

“Kraft
Combined State Tax Liability” shall mean, with respect to any taxable
period (or portion thereof) in the Pre-Distribution Period, an amount of
Combined State Taxes, including any interest, penalties and other additions to
such taxes for such taxable year except to the extent attributable to Altria’s
negligence, determined by taking the total separately computed state income or
franchise tax liabilities of the Kraft Group over the total separately computed
state income or franchise tax liabilities of the Altria Consolidated Return
Group multiplied by the combined state income or franchise tax liability of the
Altria Consolidated Return Group.

“Kraft
Current Federal Income Tax Provision” shall mean, with respect to any
financial statement year (or portion thereof) in the Pre-Distribution Period,
the sum of the Kraft Group’s current federal income tax provision determined in
accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) recorded
on the Kraft Group’s books and records and reported in the Kraft Group’s
published financial statements.

“Kraft
Federal Income Tax Liability” shall mean, with respect to any taxable
period (or portion thereof) in the Pre-Distribution Period, the sum of the
Kraft Group’s Federal Income Tax liability and other additions to such Taxes
except to the extent attributable to Altria’s negligence (as determined under
the applicable principles of agency law rather than Section 6662 of the Code)
for such taxable period (or portion thereof), computed as if the Kraft Group
were not and never were part of the Altria 

 3
 

Consolidated Return Group, but rather were a separate affiliated group
of corporations filing a consolidated United States Federal Income Tax return
pursuant to Section 1501 of the Code (provided, however, that transactions with
members of the Altria Non-Food Group  or
between members of the Kraft Group shall be reflected according to the provisions
of the consolidated return regulations promulgated under the Code governing
intercompany transactions).  Such
computation shall be made: (A) without regard to the income, deductions
(including net operating loss and capital loss deductions) and credits in any
year of any member of the Altria Consolidated Return Group that is not a member
of the Kraft Group, (B) by taking account of any Tax Asset of the Kraft Group
in accordance with Section 2.02(e) hereof, (C) with regard to net operating
loss and capital loss carryforwards and carrybacks and minimum tax credits from
earlier years of the Kraft Group, (D) as though the highest rate of tax
specified in Section 11(b) of the Code were the only rate set forth in that
subsection, and (E) reflecting the positions, elections and accounting methods
and periods used with respect to the Kraft Group in preparing the Altria
consolidated Federal Income Tax return.

“Kraft
Group” shall mean Kraft and any direct or indirect Subsidiary of Kraft that
would be eligible, from time to time, to join with Kraft, with respect to
Federal Income Taxes, in the filing of a consolidated United States Federal
Income Tax return and, with respect to Combined State Taxes, in the filing of a
consolidated, combined or unitary income or franchise tax return if Kraft were
not a member of the Altria Consolidated Return Group.

“Kraft
Group Tax” means (i) Kraft Federal Income Tax Liability; (ii) Kraft
Combined State Tax Liability; (iii) any other Tax imposed on any member of the
Kraft Group with respect to any taxable year, or, with respect to any taxable
year, any other Tax imposed on any direct or indirect Subsidiary of Kraft that
is not a member of the Kraft Group; and (iv) liability of any member of the
Kraft Group for the payment of any amounts of the type described in (i), (ii)
or (iii) as a result of any express or implied obligation to indemnify any
other person.

“Kraft
Pro Forma Combined State Return” means, for each state in which a combined
state income tax return may be filed, either a formal combined state income tax
return, or, in the alternative, a schedule on which the Kraft Combined State
Tax Liability is reflected.

“Kraft
Pro Forma Federal Return” means either a formal Form 1120, or, in the
alternative, a schedule on which the Kraft Federal Income Tax Liability is
reflected.

“Post-Distribution
Period” means any taxable period (or portion thereof) beginning after the
close of business on the Distribution Date.

“Pre-Distribution
Period” means any taxable period (or portion thereof) ending on or before
the close of business on the Distribution Date.

 4
 

“Subsidiary”
means any corporation or other legal entity (or any successor thereto) directly
or indirectly “controlled”, where “control” means the ownership of 50% or more
of the ownership interests (by vote or value) of such corporation or other
legal entity (or any successor thereto) or the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such corporation or other legal entity.

“Tax”
or “Taxes” shall mean all national, federal, state (including, but not
limited to the Ohio Commercial Activities tax or the Texas Margin tax), county,
local, foreign or other taxes, levies, or imposts, including any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, capital stock, occupation,
property, real property gains, social security or disability, environmental or
windfall profit tax, premium, custom duty or other tax, governmental fee, or
other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any Taxing
Authority responsible for the imposition of any such tax (United States or
non-United States).

“Tax
Asset” means any federal or state net operating loss, net capital loss,
general business credit, foreign tax credit, charitable deduction, or any other
loss, credit, deduction, or tax attribute which could reduce any Tax
(including, without limitation, deductions, credits, alternative minimum net
operating loss carryforwards related to alternative minimum taxes or additions
to the basis of property).

“Taxing
Authority” means any governmental authority (whether United States or
non-United States, and including, without limitation, any state, municipality,
political subdivision or governmental agency) responsible for the imposition of
any Tax.

“Tax
Contest” means any audit, review, examination, assessment, notice of
deficiency or any other administrative or judicial proceeding with the purpose
or effect of redetermining any Taxes (including any administrative or judicial
review of any claim for refund).

“Tax-Free
Status” means qualification of the Distribution as tax-free under Section
355 of the Code.

 “Tax Opinion Document” means the tax
opinion related to the Distribution delivered by Sutherland Asbill &
Brennan LLP (“Tax Advisor”) and including all exhibits thereto, which contain,
inter alia, information and representations provided by Altria and Kraft in
connection with the Distribution.

 5
 

ARTICLE II

TAX SHARING

2.01         General.  For each taxable year of the Altria
Consolidated Return Group for which a United States consolidated Federal Income
Tax return is filed that includes any Pre-Distribution Period of the Kraft
Group, Kraft shall pay to Altria an amount equal to the sum of the Kraft
Federal Income Tax Liability for such taxable year as shown on a Kraft Pro
Forma Federal Return.  For each taxable
year of the Altria Consolidated Return Group for which a Combined State Tax
return is filed that includes any Pre-Distribution Period of the Kraft Group,
Kraft shall pay to Altria an amount equal to the Kraft Combined State Tax
Liability for such taxable year as shown on a Kraft Pro Forma Combined State
Return.

2.02         Payment of Taxes.

(a)           Estimated
Payments.  Not later than thirty days
after the Distribution Date, Kraft shall identify on its books the Kraft
Current Federal Income Tax Provision for that portion of the current quarter
that ends on the Distribution Date, determined in accordance with United States
GAAP, and shall transfer such amount to Altria within thirty days after the
Distribution Date.

(b)           Preparation
and Delivery of Estimated Pro Formas. 
On a date that is at least thirty days prior to the due date for the
Altria Consolidated Return Group’s consolidated Federal Income Tax return for a
taxable year to which Section 2.01 of this Agreement applies, Kraft shall
deliver to Altria a Kraft Pro Forma Federal Return reflecting the Kraft Federal
Income Tax Liability on an estimated basis. 
On a date that is at least ten days prior to the due date for each
Combined State Tax return for a taxable year to which Section 2.01 of this
Agreement applies, Kraft shall deliver to Altria a Kraft Pro Forma Combined
State Return (together with the Kraft Pro Forma Federal Return, the “Kraft Pro
Forma Returns”) reflecting the relevant Kraft Combined State Tax Liability on
an estimated basis.  Kraft’s preparation
and delivery of the Kraft Pro Forma Federal Return shall include related
schedules and returns, including, but not limited to, preparation of Form 1118
or in the alternative, a schedule reflecting what is on Form 1118, for purposes
of computing any separate foreign tax credit limitation under Section 904(d) of
the Code.

(c)           Preparation
and Delivery of Final Pro Formas.  On
or before November 1 following the end of any taxable year to which Section
2.01 of this Agreement applies, Altria shall deliver to Kraft a Kraft Pro Forma
Federal Return reflecting the Kraft Federal Income Tax Liability.  On or before December 15 following the end of
any taxable year to which Section 2.01 of this Agreement applies, Altria shall
deliver to Kraft a Kraft Pro Forma Combined State Return reflecting the
relevant Kraft 

 6
 

Combined State
Tax Liability.  Altria’s preparation and
delivery of the Kraft Pro Forma Federal Return hereunder shall include related
schedules and returns, including, but not limited to, preparation of Form 1118
or in the alternative, a schedule reflecting what is on Form 1118, for purposes
of computing any separate foreign tax credit limitation under Section 904(d) of
the Code.

(d)           Reconciliation
of Payments.  On or before November 1
following the end of any taxable year to which Section 2.01 of this Agreement
applies, Kraft shall pay to Altria, or Altria shall pay to Kraft, as
appropriate, an amount equal to the difference, if any, between: (x) the Kraft
Federal Income Tax Liability reflected on the Kraft Pro Forma Federal Return
for such year; and (y) the aggregate amount of the payments of the Kraft
Current Federal Income Tax Provision for such year made pursuant to Section
2.02(a) of this Agreement or Section 2(b)(i) of the prior tax sharing agreement
entered into by the Parties on April 11, 2001 (“Prior Agreement”).  On or before December 15 following the end of
any taxable year to which Section 2.01 of this Agreement applies, Kraft shall
pay to Altria the Kraft Combined State Tax Liability as reflected on the Kraft
Pro Forma Combined State Return.

(e)           Use
of Tax Assets.  If a Kraft Pro Forma
Return reflects a Tax Asset that may under applicable law be used to reduce a
Federal Income Tax or Combined State Tax liability of the Altria Non-Food Group
for any taxable period, Altria shall pay to Kraft, or shall reduce the amount
owed by Kraft to Altria by, an amount equal to the actual tax saving produced
by such Tax Asset within thirty days after such tax saving has been Effectively
Realized by the Altria Non-Food Group. 
The amount of any such tax saving for any taxable period shall be the
amount of the reduction in Taxes payable to a Taxing Authority with respect to
such tax period, including with respect to any estimated Tax payments, as
compared to the Taxes that would have been payable to a Taxing Authority by the
Altria Non-Food Group with respect to such tax period in the absence of such
Tax Asset.  To the extent Kraft has been
compensated for any Tax Asset prior to the filing of a final tax return for any
year, including with respect to any estimated payments for such year, Altria
shall pay to Kraft, or Kraft shall pay to Altria, as appropriate, the
difference between the amount Effectively Realized with respect to each Tax
Asset with respect to such interim payments and the amount Effectively Realized
with respect to the filing of the final tax return.

2.03         Carrybacks from
Post-Distribution Period.

(a)           Within
thirty days after Effective Realization by the Altria Consolidated Return
Group, Altria agrees to pay to Kraft the actual tax benefit from the carryback
of any Tax Asset of the Kraft Group from a Post-Distribution Period.  Such benefit shall be equal to the excess of
(i) the amount of Federal Income Taxes or Combined State Taxes, as the case may
be, that would have been payable (or of the Federal Income Tax or Combined
State Tax refund actually receivable) by the Altria Consolidated Group for such
period in the absence of such carryback, over (ii) the 

 7
 

amount of
Federal Income Taxes or Combined State Taxes, as the case may be, actually
payable for such period (or of the Federal Income Tax or Combined State Tax
refund that would have been receivable) by the Altria Consolidated Return
Group.

(b)           If,
subsequent to the payment by Altria to Kraft of any amount pursuant to (or in
accordance with the principles of) Section 2.03(a), there shall be a Final
Determination that results in a disallowance or a reduction of the Tax Asset of
the Kraft Group so carried back, Kraft shall repay to Altria, within thirty
days after such Final Determination, any amount that would not have been
payable to Kraft pursuant to (or in accordance with the principles of) Section
2.03(a) of this Agreement had the amount of the tax benefit been determined in
light of the Final Determination.  In
addition, Kraft shall hold each member of the Altria Non-Food Group harmless
from any penalty or interest payable by any member of the Altria Non-Food Group
as a result of any such Final Determination. 
Any such amount shall be paid by Kraft within thirty days of the payment
by the Altria Non-Food Group of any such penalty or interest.

2.04         Preparation of
Returns.

(a)           For each taxable year to which Section 2.01 of this
Agreement applies that the Altria Consolidated Return Group elects to file a
consolidated Federal Income Tax return as permitted by Section 1501 of the Code
or any Combined State Tax return, Altria shall prepare and file such return and
any other returns, documents or statements required to be filed with the
Internal Revenue Service with respect to the determination of the Federal
Income Tax liability of the Altria Consolidated Return Group and with the
appropriate Taxing Authorities with respect to the determination of the
Combined State Tax liability of the Altria Consolidated Return Group.  With respect to such return preparation,
Altria shall not discriminate among any members of the Altria Consolidated
Return Group.  Altria shall have the
right with respect to any consolidated Federal Income Tax returns or Combined
State Tax returns that it has filed or will file to determine (i) the manner in
which such returns, documents or statements shall be prepared and filed,
including, without limitation, the manner in which any item of income, gain,
loss, deduction or credit shall be reported; (ii) whether any extensions should
be requested; and (iii) the elections that will be made by any member of the
Altria Consolidated Return Group.  Each
member of the Kraft Group hereby irrevocably appoints Altria as its agent and
attorney-in-fact to take any action (including the execution of documents)
Altria may deem necessary or appropriate to implement this Section 2.04.

(b)           With respect to any Tax return other than a United States
consolidated Federal Income Tax return that includes any Pre-Distribution
Period of the Kraft Group or any Combined State Tax return, the Party that
bears indemnification responsibility under Article IV of this Agreement shall
be responsible for the preparation and filing of such Tax return; provided,
however, that in the preparation and filing of such Tax return, such Party
shall not take any position (or make any election) that is 

 8
 

inconsistent with any position or election
made by Altria in connection with the preparation and filing of any United
States consolidated Federal Income Tax return that includes any
Pre-Distribution Period of the Kraft Group or any Combined State Tax return.

ARTICLE III

REFUNDS

3.01         Refunds.

(a)           If, with respect to any Kraft Group
Tax, Altria receives a refund, offset or credit, Altria shall remit to Kraft
within thirty days of Effective Realization the amount of such refund, offset
or credit, together with any interest received thereon.

(b)           If, with respect to any Altria
Non-Food Group Tax, Kraft receives a refund, offset or credit, Kraft shall
remit to Altria within thirty days of Effective Realization the amount of such
refund, offset or credit, together with any interest received thereon.

(c)           Any payments required to be made by
Sections 3.01(a) or 3.01(b) of this Agreement shall be paid net of any Tax
liability to a Party resulting from such Party’s receipt of such refund from
the Taxing Authority.

ARTICLE IV

INDEMNIFICATION

4.01         General
Indemnification.

(a)           Altria will indemnify each member of
the Kraft Group or any other direct or indirect Subsidiary of Kraft against and
hold it harmless from (1) any Altria Non-Food Group Tax or any adjustments made
by a Taxing Authority that would result in an increase in any Altria Non-Food
Group Tax (including, but not limited to, any Taxes or adjustments attributable
to taxable years ending prior to January 1, 2001); and (2) all liabilities,
costs, expenses (including, without limitation, reasonable expenses of
investigation and attorney’s fees and expenses), losses, damages, assessments,
settlements or judgments arising out of or incident to the imposition,
assessment or assertion of any Tax or adjustment described in this
subsection.  Notwithstanding any other
provision of this Agreement to the contrary, Altria’s indemnification
responsibility for Distribution Taxes, if any, shall be determined solely under
Section 4.02(a) of this Agreement.

 9

(b)           Kraft will indemnify each member of the Altria Non-Food
Group or any other direct or indirect Subsidiary of Altria other than a member
of the Kraft Group or any other direct or indirect Subsidiary of Kraft against
and hold it harmless from (1) any Kraft Group Tax, or any adjustments made by a
Taxing Authority that would result in an increase in any Kraft Group Tax
(including, but not limited to, any Taxes or adjustments attributable to
taxable years ending prior to January 1, 2001), or any adjustments by a Taxing
Authority that result in a disallowance or reduction of any Tax Asset of the
Kraft Group that was used to reduce any Altria Non-Food Group Tax; and (2) all
liabilities, costs, expenses (including, without limitation, reasonable
expenses of investigation and attorney’s fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Tax or adjustment described in this
subsection.  Notwithstanding any other
provision of this Agreement to the contrary, Kraft’s indemnification
responsibility for Distribution Taxes, if any, shall be determined solely under
Section 4.02(b) of this Agreement.

4.02         Indemnification for Distribution Taxes.

(a)           Notwithstanding any other provision of this Agreement to
the contrary, Altria shall indemnify and hold harmless each member of the Kraft
Group or any other direct or indirect Subsidiary of Kraft from and against (1)
any and all Distribution Taxes that are not the responsibility of Kraft
pursuant to Section 4.02(b) of this Agreement and (2) all liabilities, costs,
expenses (including, without limitation, reasonable expenses of investigation
and attorney’s fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax or adjustment described in this subsection.

(b)           Notwithstanding any other provision of this Agreement to
the contrary, Kraft agrees to indemnify and hold harmless each member of the
Altria Non-Food Group or any other direct or indirect Subsidiary of Altria
other than a member of the Kraft Group or any other direct or indirect
Subsidiary of Kraft from and against (1) any and all Distribution Taxes
resulting from or attributable to (i) any act or failure to act on the part of
Kraft (or any member of the Kraft Group or any other direct or indirect
Subsidiary of Kraft) following the Distribution; or (ii) any breach by Kraft
(or any other member of Kraft Group or any other direct or indirect Subsidiary
of Kraft) of any of the representations or covenants set forth in Articles V
and VI of this Agreement or any representations or covenants made by Kraft in
the Tax Opinion Document and (2) all liabilities, costs, expenses (including,
without limitation, reasonable expenses of investigation and attorney’s fees
and expenses), losses, damages, assessments, settlements or judgments arising
out of or incident to the imposition, assessment or assertion of any Tax or
adjustment described in this subsection.

 10
 

4.03         Indemnification Payments. In the event that a Party is entitled to receive indemnification
under this Article IV with respect to any Tax for which there has been a Final
Determination, such Party (“Indemnified Party”) shall send to the other Party (“Indemnifying
Party”) an invoice requesting payment accompanied by a statement describing in
reasonable detail the amount owed and the particulars relating thereto.  The Indemnifying Party shall pay to the
Indemnified Party any payment owed under this Article IV within thirty days (or
within another time period mutually agreed to by the Parties) after the receipt
of the invoice for such payment.

ARTICLE V

REPRESENTATIONS

5.01         Altria and Kraft Representations.  Altria and Kraft each represent that the information
and representations furnished by Altria or Kraft, as the case may be, in any
Tax Opinion Document are accurate and complete as of the date hereof.

ARTICLE VI

COVENANTS

6.01         Altria and Kraft
Covenants. Altria and Kraft each covenant (1) to use its best efforts to
verify that the foregoing representations made by it in Article V are accurate
and complete as of the Distribution Date and (2) if, after the date
hereof, it obtains information indicating, or otherwise becomes aware, that any
such representations are or may be inaccurate or incomplete, promptly to inform
Altria or Kraft, as the case may be.

6.02         Specific Kraft
Covenants.  Kraft may take actions
inconsistent with the representations in Section 5.01 of this Agreement and
covenants in this Section 6.02 only if, prior to taking such action, Kraft (1)
provides notification, upon determining that it shall pursue such action, to
Altria of its plans with respect to such action, and promptly responds to any
inquiries made by Altria following such notification, and (2) obtains Altria’s
written consent to such action (such consent not to be unreasonably
withheld).  Notwithstanding the
foregoing, any Altria consent shall not relieve Kraft of any of its liabilities
or obligations under this Agreement, including, but not limited to, any Kraft
indemnity obligation arising under Section 4.02(b) of this Agreement.  Kraft covenants to Altria that:

(a)           During
the two-year period following the Distribution Date, Kraft will not liquidate
or merge or consolidate with any other person in one or more transactions
pursuant to which the shareholders of the other person(s) in such 

 11
 

transaction(s) hold directly or indirectly a forty percent or greater
interest (by vote or value) in the combined company.

(b)           During
the two-year period following the Distribution Date, Kraft and each of its
Subsidiaries will not transfer all or substantially all of its assets in a
transaction, including all or substantially all of the assets of Kraft’s active
trade or business used to satisfy Section 355(b) of the Code.

(c)           During
the two-year period following the Distribution Date, Kraft will continue the
active conduct of its trade or business used to satisfy Section 355(b) of the
Code.

(d)           Kraft
will not redeem or repurchase Kraft stock in a manner contrary to the
requirements of Revenue Procedure 96-30 or in any other manner contrary to the
representations made in the Tax Opinion Document.

(e)           During the two-year period following
the Distribution Date, Kraft will not issue, in one or more transactions, Kraft
stock (or any instrument that is convertible or exchangeable into such Kraft
stock) that in the aggregate represents more than a forty percent interest (by
vote or value) of Kraft.

(f)            During
the two-year period following the Distribution Date, Kraft will not enter into
any negotiations, agreements, understandings, or arrangements with respect to
transactions or events (including, without limitation, stock issuances,
pursuant to the exercise of options or otherwise, option grants, capital
contributions or acquisitions or a series of such transactions or events, but
excluding the Distribution) that may alone or in the aggregate cause the
Distribution to be treated as part of a plan (i) pursuant to which one or more
persons would acquire directly or indirectly stock of Kraft representing a
forty percent or greater interest (by vote or value); or (ii) which would
result in a transaction described in Section 6.02(a) above.

(g)           Kraft
will not otherwise take any action or fail to take any other action, which
action or failure to act may result in Distribution Taxes.

(h)           For
purposes of paragraphs (a), (e) and (f) of Section 6.02, whether a forty
percent or greater ownership change is or would be involved in one or more
transactions shall be determined under multiple methods that reflect the
differing number of Kraft shares outstanding at various times (e.g., on the
Distribution Date, immediately prior to each transaction, etc.) and the method
chosen shall be the one that results in the largest potential ownership change.

 12
 

ARTICLE VII

TAX CONTESTS

7.01         Representation
with Respect to Tax Contests.  Altria
shall have the right to (i) contest, compromise, or settle any adjustment or
deficiency proposed, asserted or assessed as a result of any audit of any
consolidated or combined return filed by the Altria Consolidated Return Group;
(ii) file, prosecute, compromise or settle any claim for refund; and (iii)
determine whether any refunds to which the Altria Consolidated Return Group may
be entitled shall be received by way of refund or credited against the tax
liability of the Altria Consolidated Return Group; provided, however, that
Altria shall be obligated to act in good faith with respect to any Tax Contest
of any consolidated or combined return filed by the Altria Consolidated Return
Group which involves a Tax or adjustment for which Kraft is liable pursuant to
this Agreement (“Kraft Tax Contest”). 
Specifically, Altria shall, in good faith, (i) consult with Kraft
regarding its comments with respect to any such Kraft Tax Contest, including
any correspondence or filings submitted in connection therewith; (ii) consult
with Kraft as to strategy and settlement decisions with respect to any Kraft
Tax Contest, including any correspondence or filings submitted in connection
therewith; and (iii) use its best efforts to arrive at a settlement of any such
Kraft Tax Contest that reflects the ultimate merits of the issues without
taking into account the fact that Kraft is liable for the Tax or adjustment
under this Agreement.

(a)           With
respect to any Kraft Tax Contest, Altria shall (i) keep Kraft informed in a
timely manner of all actions taken or proposed to be taken by Altria and (ii)
timely provide Kraft with copies of any correspondence or filings submitted to any
Taxing Authority in connection with any contest, litigation, compromise or
settlement relating to any such adjustment in any such Tax Contest.  In addition, with respect to any Tax Contest
in which a Taxing Authority has asserted a position that may result in a Kraft
indemnification obligation arising under Section 4.02(b) of this Agreement,
Kraft shall have the right, at its own expense, to attend and participate in
any such Tax Contest.

(b)           The
failure of Altria timely to forward notification in accordance with Section
7.01(a) shall not relieve Kraft of any obligation to pay such Tax or adjustment
or indemnify Altria, except to the extent Kraft was actually materially
prejudiced by such failure, and in no event shall such failure relieve Kraft
from any other liability or obligation which it may have to Altria.

ARTICLE VIII

PAYMENTS

8.01         Method
of Payment.  All payments required by
this Agreement shall be made by (1) wire transfer to the appropriate bank
account as may from time to time be designated by the Parties for such purpose,
or (2) any other method agreed to by the 

 13
 

Parties.  All payments due under
this Agreement shall be deemed to be paid when available funds are actually
received by the payee.

8.02         Interest.  Any payment required by this Agreement that
is not made on or before the date required hereunder shall bear interest, from
and after such date through the date of payment, calculated at the rate
determined under Section 6621(a)(2) of the Code as modified by Section 6621(c)
of the Code or as otherwise determined by any relevant Taxing Authority.

8.03         Characterization
of Payments.  For all Tax purposes,
the Parties hereto agree to treat, and to cause their respective affiliates to
treat, (1) any payment required by this Agreement (to the extent not otherwise
treated as a payment in respect of an existing intercompany account) either as
a contribution by Altria to Kraft or a distribution by Kraft to Altria, as the
case may be, occurring immediately prior to the Distribution and (2) any
payment of interest or non-Federal Income Taxes by or to a Tax Authority, as
taxable or deductible, as the case may be, to the Parties entitled under this
Agreement to retain such payment or required under this Agreement to make such
payment, in either case, except as otherwise mandated by applicable law or a
Final Determination; provided that in the event it is determined (i) pursuant
to applicable law that it is more likely than not, or (ii) pursuant to a Final
Determination, that any such treatment is not permissible (or that an
Indemnified Party nevertheless suffers an income Tax or other Tax detriment as
a result of such payment), the payment in question shall be adjusted to place
the Indemnified Party in the same after-tax position it would have enjoyed
absent such applicable law or Final Determination.

ARTICLE IX

MISCELLANEOUS

9.01         Allocation.
Altria may, at its option, elect, and the Kraft Group shall join it in electing
(if necessary), to ratably allocate items (other than extraordinary items) of
the Kraft Group in accordance with relevant provisions of Treasury Regulations
Section 1.1502-76.  If Altria makes such
an election, the members of the Kraft Group shall provide to Altria such
statements as are required under the regulations and other appropriate assistance.

9.02         Payment
of Reserves.  Within thirty days
after the Distribution Date, Altria shall pay to Kraft an amount equal to the
Federal Income Tax reserve for uncertain Tax positions attributable to the
Kraft Group and recorded on the books and records of Altria as of the
Distribution Date.  The amount paid by
Altria to Kraft under this Section 9.02 shall include interest at the
intercompany rate accruing on such reserve amounts from the later of January 1,
2001 or the various dates on which Kraft paid particular amounts to Altria with
respect to such reserve, through the date that Altria pays the amount equal to
the reserve to Kraft pursuant to this Section 9.02.

 14
 

9.03         Cooperation
and Exchange of Information.

(a)           Altria and Kraft shall each cooperate fully with all
reasonable requests from the other Party in connection with the preparation and
filing of Tax returns, claims for refund, and audits concerning issues or other
matters covered by this Agreement (including, without limitation, cooperating
in meeting those deadlines as established and reasonably determined by Altria
to be necessary to facilitate the timely filing of any United States
consolidated Federal Income Tax return of the Altria Consolidated Return
Group).  Such cooperation
shall include, without limitation:

(i)            the retention until
the expiration of the applicable statute of limitations, and the provision upon
request, of Tax returns, books, records (including information regarding
ownership and Tax basis of property), documentation and other information
relating to the Tax returns, including accompanying schedules, related work
papers, and documents relating to rulings or other determinations by Taxing
Authorities;

(ii)           the execution of
any document that may be necessary or reasonably helpful in connection with any
audit, or the filing of a Tax return or refund claim by a member of the Altria
Non-Food Group or the Kraft Group, including certification, to the best of a
Party’s knowledge, of the accuracy and completeness of the information it has
supplied;

(iii)          for each taxable
year of the Altria Consolidated Return Group for which a United States
consolidated Federal Income Tax return is filed that includes any
Pre-Distribution Period of the Kraft Group, the use of the same tax preparation
software required to facilitate the filing of the Altria Group Consolidated
Return;

(iv)          the use of the Party’s
best efforts to obtain any documentation that may be necessary or reasonably
helpful in connection with any of the foregoing. Each Party shall make its
employees and facilities available on a reasonable and mutually convenient
basis in connection with the foregoing matters; and

(v)           the participation in
regularly scheduled meetings between the Parties to further the purposes of
this Agreement.

(b)           If
a Party fails to comply with any of its obligations set forth in Section
9.03(a) of this Agreement upon reasonable request and notice by the other
Party, and such failure results in the imposition of additional Taxes, the
nonperforming Party shall be liable in full for such additional Taxes.

9.04         Retention
of Records.  A Party intending to dispose of documentation of
Altria (or any other member of Altria Non-Food Group) or Kraft (or any other
member of Kraft Group), including without limitation, books, records, Tax
returns and all supporting schedules and information relating thereto (after
the expiration of the 

 15
 

applicable statute of limitations), which relates to Tax returns
described in Section 2.04 (to the extent it affects the separate Tax liability
of Kraft (or any other member of Kraft Group) or Altria (or any other member of
Altria Non-Food Group) shall provide written notice to the other Party
describing the documentation to be destroyed or disposed of at least sixty days
prior to taking such action.  The other Party may arrange to take
delivery of the documentation described in the notice at its expense during the
succeeding sixty day period.  The documentation described in the
notice will not be disposed of without the affirmative written consent of an
officer of the notified Party.

9.05         Dispute
Resolution.  Any and all disputes between the Parties relating to
this Agreement, including the interpretation or application thereof, shall be
resolved through the procedures provided in Article VI of the Distribution
Agreement.

9.06         Changes
in Law.  Any reference to a provision
of the Code or a law of another jurisdiction shall include a reference to any
applicable successor provision or law. 
If, due to any change in applicable law or regulations or their
interpretation by any court of law or other governing body having jurisdiction
subsequent to the date of this Agreement, performance of any provision of this
Agreement or any transaction contemplated thereby shall become unlawful,
impracticable or impossible, the Parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such provision.

9.07         Confidentiality.  Each Party shall hold and cause its
directors, officers, employees, advisors and consultants to hold in strict
confidence, unless compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law, all
information (other than any such information relating solely to the business or
affairs of such Party) concerning the other Party hereto furnished to it by
such other Party or its representatives pursuant to this Agreement (except to
the extent that such information can be shown to have been (1) in the public
domain through no fault of such Party, (2) later lawfully acquired from other
sources not known to be under a duty of confidentiality by the Party to which
it was furnished, or (3) independently developed), and each Party shall not
release or disclose such information to any other person, except its directors,
officers, employees, auditors, attorneys, financial advisors, bankers and other
consultants who shall be advised of and agree to be bound by the provisions of
this Section 9.07.  Each Party shall be
deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other Party if it exercises the same care as it
takes to preserve confidentiality for its own similar information.

9.08         Successors.  This agreement shall be binding on and inure
to the benefit of any successor, by merger, acquisition of assets or otherwise,
to any of the Parties hereto (including, but not limited to, any successor of
Altria and Kraft succeeding to the tax 

 16
 

attributes of such Party under Section 381 of the Code), to the same
extent as if such successor had been an original Party hereto.

9.09         Authorization,
etc.  Each of the Parties hereto
hereby represents and warrants that it has the power and authority to execute,
deliver and perform this Agreement; that this Agreement has been duly
authorized by all necessary corporate action on the part of such Party; that
this Agreement constitutes a legal, valid and binding obligation of each such
Party; and that the execution, delivery and performance of this Agreement by
such Party does not contravene or conflict with any provision of law or of its
charter or bylaws or any agreement, instrument or order binding on such Party.

9.10         Notices.  All notices, requests, and other
communications to any Party hereunder shall be in writing (including electronic
mail and facsimile transmission) and shall be given to:

If to Altria, to:

Altria
Group, Inc.

120
Park Avenue

New
York, New York 10017

Attn: Vice President, Taxes

If to Kraft, to:

Kraft
Foods Inc.

Three
Lakes Drive

Northfield,
Illinois 60093

Attn:  Vice
President, Taxes

9.11         Entire
Agreement.  This Agreement contains
the entire agreement among the Parties hereto with respect to the subject
matter hereof and supersedes any prior tax sharing agreements, and such prior
tax sharing agreements shall have no further force and effect; provided,
however, that regardless of whether this Agreement specifically refers to any
prior tax sharing agreement entered into by the Parties, that payments already
made and actions already taken pursuant to any such prior tax sharing agreement
shall be taken into account in determining the respective rights and
obligations of the Parties pursuant to this Agreement.  In addition, the provisions of any prior tax
sharing agreement shall be taken into account to the extent necessary for the
implementation of this Agreement but only if not inconsistent with the
provisions of this Agreement.  If and to
the extent that the provisions of this Agreement conflict with the Distribution
Agreement or any other agreement entered into in connection with the
Distribution, the provisions of this Agreement shall control.

 17
 

9.12         Section
Captions.  Section captions used in
this Agreement are for convenience and reference only and shall not affect the
construction of this Agreement.

9.13         Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia (other than the laws regarding choice of laws and conflicts of laws)
as to all matters, including matters of validity, construction, effect,
performance and remedies; provided, however, that the United States Arbitration
Act, 9 U.S.C. §§ 1-16 (as may be amended from time to time) shall govern the
matters described in Section 9.05 of this Agreement.

9.14         Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.

9.15         Waivers
and Amendments.  This Agreement shall
not be waived, amended or otherwise modified except in writing, duly executed
by all of the Parties hereto.

9.16         Effective
Date.  This Agreement shall be
effective as of the Distribution Date.

9.17         Termination.  The Agreement shall remain in force and be
binding so long as the applicable period of assessments (including extensions)
remains unexpired for any taxes contemplated by the Agreement.

IN WITNESS WHEREOF, each of the Parties hereto has
caused this agreement to be executed by a duly authorized officer as of the
date first above written.

	
  

  	
  ALTRIA GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dinyar S. Devitre

  
	
   

  	
   

  	
  Name: 

  	
  Dinyar S. Devitre

  
	
   

  	
   

  	
  Title: 

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KRAFT FOODS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James P. Dollive

  
	
   

  	
   

  	
  Name: 

  	
  James P. Dollive

  
	
   

  	
   

  	
  Title: 

  	
  Chief Financial Officer

  

 

 18

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