Document:

exv10w1

 

EXHIBIT
10.1

Kraft Foods Inc.

Change in Control Plan for Key Executives

Adopted: April 24, 2007

 

 

Kraft Foods Inc.

Change in Control Plan for Key Executives

1. Definitions

For purposes of the Change in Control Plan for Key Executives, the following terms are defined as
set forth below (unless the context clearly indicates otherwise):

	 	 	 
	 
	 	 
	Affiliate

	 	Any entity controlled by, controlling or under common control
with the Company.
	 
	 	 
	Annual Base
Salary

	 	Twelve times the higher of (i) the highest monthly base salary
paid or payable to the Participant by the Company and its
Affiliates in respect of the twelve-month period immediately
preceding the month in which the Change in Control occurs, or
(ii) the highest monthly base salary in effect at any time
thereafter, in each case including any base salary that has been
earned and deferred.
	 
	 	 
	Board

	 	The Board of Directors of the Company.
	 
	 	 
	Annual Incentive Target

	 	The annual incentive award that the Key Executive would receive
in a fiscal year under the Management Incentive Plan or any
comparable annual incentive plan if the target goals are
achieved.
	 
	 	 
	Annual Incentive
Target Percentage

	 	The Annual Incentive Target as a percentage of Annual Base Salary.

	 
	 	 
	
Cause

	 	
As defined in Section 3.2(b) (i) of this Plan.
	 
	 	 
	Change in Control

	 	“Change in Control” means the occurrence of any of the following
events: (A) Acquisition of 20% or more of the outstanding voting
securities of the Company by another entity or group; excluding,
however, the following:
	 
	 	 
	 

	 	(1) any acquisition by the Company or any of its Affiliates;
	 
	 	 
	 

	 	(2) any acquisition by an employee benefit plan or related trust
sponsored or maintained by the Company or any of its Affiliates;
or
	 
	 	 
	 

	 	(3) any acquisition pursuant to a merger or consolidation
described in clause (C) of this definition.
	 
	 	 
	 

	 	(B) During any consecutive 24 month period, persons who
constitute the Board at the beginning of such period cease to
constitute at least 50% of the Board; provided that each new
Board member who is approved by a majority of the directors who
began such 24 month period shall be deemed to have been a member
of the Board at the beginning of such 24 month period;
	 
	 	 
	 

	 	(C) The consummation of a merger or consolidation of the Company
with another company, and the Company is not the surviving
company; or, if after such transaction, the other entity owns,
directly or indirectly, 50% or

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	 	more of the outstanding voting
securities of the Company; excluding, however, a transaction
pursuant to which all or substantially all of the individuals or
entities who are the beneficial owners of the outstanding voting
securities of the Company immediately prior to such transaction
will beneficially own, directly or indirectly, more than 50% of
the combined voting power of the outstanding securities entitled
to vote generally in the election of directors (or similar
persons) of the entity resulting from such transaction
(including, without limitation, an entity which as a result of
such transaction owns the Company either directly or indirectly)
in substantially the same proportions relative to each other as
their ownership, immediately prior to such transaction, of the
outstanding voting securities of the Company; or
	 
	 	 
	 

	 	(D) The consummation of a plan of complete liquidation of the
Company or the sale or disposition of all or substantially all of
the Company’s assets, other than a sale or disposition pursuant
to which all or substantially all of the individuals or entities
who are the beneficial owners of the outstanding voting
securities of the Company immediately prior to such transaction
will beneficially own, directly or indirectly, more than 50% of
the combined voting power of the outstanding securities entitled
to vote generally in the election of directors (or similar
persons) of the entity purchasing or acquiring the Company’s
assets in substantially the same proportions relative to each
other as their ownership, immediately prior to such transaction,
of the outstanding voting securities of the Company.
	 
	 	 
	Code

	 	The Internal Revenue Code of 1986, as amended from time to time.
	 
	 	 
	Committee

	 	The Board’s Compensation Committee or a subcommittee thereof, any
successor thereto or such other committee or subcommittee as may
be designated by the Board to administer the Plan.
	 
	 	 
	Company

	 	Kraft Foods Inc., a corporation organized under the laws of the
Commonwealth of Virginia, or any successor thereto.
	 
	 	 
	Date of
Termination

	 	If the Participant’s employment is terminated by:

(i)    The Company for Cause or by the Participant for Good
Reason the Date of Termination shall be the date on which the
Participant or the Company, as the case may be, receives the
Notice of Termination (as described in Section 3.2(c)) or any
later date specified therein, as the case may be.

(ii)  The Company other than for Cause, death or Disability, the
Date of Termination shall be the date on which the Company
notifies the Participant of such termination.

(iii)  Reason of death or Disability, the Date of Termination
shall be the date of death of the Participant or the Disability
Effective Date, as the case may be.

	 
	 	 
	Disability

	 	As defined in Section 3.2(b) (ii).
	 
	 	 
	Disability Effective 

Date

	 	As defined in Section 3.2(b) (ii).

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	Effective Date

	 	April 24, 2007.
	 
	 	 
	Employer

	 	The Company or any of its Affiliates.
	 
	 	 
	Excise Tax

	 	The Excise Tax imposed by Section 4999 of the Code, together with
any interest or penalties imposed with respect to such excise
tax.
	 
	 	 
	Good Reason

	 	As defined in Section 3.2(a).
	 
	 	 
	Key Executive

	 	An employee who is employed on a regular basis by the Employer in
a salary band D or more senior position.
	 
	 	 
	Long-Term Incentive
Plan Award Target

	 	The long-term cash award that the Participant would receive
during a performance cycle under the Long-Term Incentive Plan or
any comparable annual incentive plan if the target goals
specified under the Long-Term Incentive Plan or such annual
incentive plan are achieved.
	 
	 	 
	Long-Term Incentive
Plan Target
Percentage

	 	The Long-Term Incentive Plan Target as a percentage of Annual
Base Salary.
	 
	 	 
	Non-Competition
Agreement

	 	The agreement of a Participant not to without the Company’s prior
written consent, engage in any activity or provide any services,
whether as a director, manager, supervisor, employee, adviser,
consultant or otherwise, for a period of up to one (1) year
following the date of the Participant’s termination of employment
with the Company, for a company that is substantially competitive
with a business conducted by the Company.
	 
	 	 
	Non-Solicitation
Agreement

	 	The agreement of a Participant that he or she will not solicit,
directly or indirectly, any employee of the Company, or a
surviving entity following a Change-in-Control, to leave the
Company and to work for any other entity, whether as an employee,
independent contractor or in any other capacity, for a period of
up to one (1) year following the Participant’s Date of
Termination of employment with the Company.
	 
	 	 
	Non-U.S. Executive

	 	A Key Executive whose designated home country, for purposes of
the Employer’s personnel and benefits programs and policies, is
other than the United States.
	 
	 	 
	Participant

	 	A Key Executive who meets the eligibility requirements of Section
2.1; provided, however, that any Non-U.S. Executive who, under
the laws of his or her designated home country or the legally
enforceable programs or policies of the Employer in such
designated home country, is entitled to receive, in the event of
termination of employment (whether or not by reason of a Change
in Control), Separation Benefits at least equal in aggregate
amount to the Separation Pay prescribed under Section 3.3(b), of
this Plan shall not be considered a Participant for the purposes
of this Plan.
	 
	 	 
	Payment

	 	Any payment or distribution in the nature of compensation (within
the

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	 	meaning of Section 280G (b) (2) of the Code) to or for the
benefit of the Participant, whether paid or payable pursuant to
this Plan or otherwise.
	 
	 	 
	Plan

	 	The Kraft Foods Inc. Change in Control Plan for Key Executives,
as set forth herein.
	 
	 	 
	Plan Administrator

	 	The third-party accounting, actuarial, consulting or similar firm
retained by the Company prior to a Change in Control to
administer this Plan following a Change in Control.
	 
	 	 
	Separation Benefits

	 	The amounts and benefits payable or required to be provided in
accordance with Section 3.3 of this Plan.
	 
	 	 
	Separation Pay

	 	The amount or amounts payable in accordance with Section 3.3(b)
of this Plan.
	 
	 	 
	U.S. Executive

	 	A Participant whose designated home country, for purposes of the
Employer’s personnel and benefits programs and policies, is the
United States.

2. Eligibility

2.1. Participation. Except as set forth in the definition of Participant above, each
employee who is a Key Executive on the Effective Date shall be a Participant in the Plan effective
as of the Effective Date and each other employee shall become a Participant in the Plan effective
as of the date of the employee’s promotion or hire as a Key Executive.

2.2. Duration of Participation. A Participant shall cease to be a Participant in the Plan
if (i) the Participant ceases to be employed by the Employer under circumstances not entitling him
or her to Separation Benefits or (ii) the Participant otherwise ceases to be a Key Executive,
provided that no Key Executive may be so removed from Plan participation in connection with or in
anticipation of a Change in Control that actually occurs. However, a Participant who is entitled,
as a result of ceasing to be a Key Executive of the Employer, to receive benefits under the Plan
shall remain a Participant in the Plan until the amounts and benefits payable under the Plan have
been paid or provided to the Participant in full.

3. Separation Benefits

3.1. Right to Separation Benefits. A Participant shall be entitled to receive from the
Company the Separation Benefits as provided in Section 3.3, if a Change in Control has occurred and
the Participant’s employment by the Employer is terminated under circumstances specified in Section
3.2(a), whether the termination is voluntary or involuntary, and if (i) such termination occurs
after such Change in Control and on or before the second anniversary thereof, or (ii) such
termination is reasonably demonstrated by the Participant to have been initiated by a third party
that has taken steps reasonably

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calculated to effect a Change in Control or otherwise to have
arisen in connection with or in anticipation of such Change in Control.

3.2. Termination of Employment.

	(a)	 	Terminations which give rise to Separation Benefits under this Plan. The circumstances
specified in this Section 3.2(a) are any termination of employment with the Employer by action
of the Company or any of its Affiliates or by a Participant for Good Reason, other than as set
forth in Section 3.2(b) below. For purposes of this Plan, “Good Reason” shall mean:

	 	(i)	 	the assignment to the Participant of any duties substantially inconsistent with
the Participant’s position, authority, duties or responsibilities in effect immediately
prior to the Change in Control, or any other action by the Company or the Employer that
results in a marked diminution in the Participant’s position, authority, duties or
responsibilities, excluding for this purpose:

	 	a.	 	changes in the Participant’s position, authority, duties or
responsibilities which are consistent with the Participant’s education,
experience, etc.;
	 
	 	b.	 	an isolated, insubstantial and inadvertent action not taken in
bad faith and that is remedied by the Company and/or the Employer promptly
after receipt of notice thereof given by the Participant;

	 	(ii)	 	any reduction in the Participant’s base salary, annual incentive or long-term
incentive opportunity as in effect immediately prior to the Change in Control, other
than an isolated, insubstantial and inadvertent failure not occurring in bad faith and
that is remedied by the Company and/or the Employer promptly after receipt of notice
thereof given by the Participant;
	 
	 	(iii)	 	the Company’s or the Affiliate’s requiring the Participant to be based at any
office or location other than any other location which does not extend the Participant’s
current home to work location commute by more than 50 miles;
	 
	 	(iv)	 	the Company’s or the Affiliate’s requiring the Participant to travel on business
to a substantially greater extent than required immediately prior to the Change in
Control;
	 
	 	(v)	 	any alleged termination by the Company or the Affiliate of the Participant’s
employment otherwise than as expressly permitted by this Plan; or
	 
	 	(vi)	 	any failure by the Company to require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform this Plan
in the same manner and to the same extent that the Company would be required to perform
it if no such succession had taken place, as required by Article 5.

	(b)	 	Terminations which DO NOT give rise to Separation Benefits under this Plan. Notwithstanding
Section 3.2(a), if a Participant’s employment is terminated for Cause or Disability (as those
terms are defined below) or as a result of the Participant’s death, or the Participant
terminates his or her own employment other

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	 	 	than for Good Reason, the Participant shall not be
entitled to Separation Benefits under the Plan, regardless of the occurrence of a Change in
Control.

	 	(i)	 	A termination for “Cause” shall have occurred where a Participant is terminated
because of:

	 	a.	 	Continued failure to substantially perform the Participant’s
job’s duties (other than resulting from incapacity due to disability);
	 
	 	b.	 	Gross negligence, dishonesty, or violation of any reasonable
rule or regulation of the Company where the violation results in significant
damage to the Company; or
	 
	 	c.	 	Engaging in other conduct which adversely reflects on the
Company in any material respect.

	 	(ii)	 	A “Termination for Disability” shall have occurred where a Participant is
absent from the Participant’s duties with the Employer on a full-time basis for 180
consecutive days as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company or its
insurers and acceptable to the Participant or the Participant’s legal representative.
In such event, the Participant’s employment with the Employer shall terminate effective
on the 30th day after receipt of such notice by the Participant (the “Disability
Effective Date”), provided that, within the 30 days after such receipt, the Participant
shall not have returned to full-time performance of the Participant’s duties.

	(c)	 	Notice of Termination. Any termination by the Company for Cause, or by the Participant for
Good Reason, shall be communicated by a Notice of Termination to the other party. For purposes
of this Plan, a “Notice of Termination” means a written notice which (i) indicates the
specific termination provision in this Plan relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Participant’s employment under the provision so indicated and (iii) if the
Date of Termination is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after the giving of such notice).
The failure by the Participant or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive
any right of the Participant or the Company, respectively, hereunder or preclude the
Participant or the Company, respectively, from asserting such fact or circumstance in
enforcing the Participant’s or the Company’s rights hereunder.

3.3. Separation Benefits. If a Participant’s employment is terminated under the
circumstances set forth in Section 3.2(a) entitling the Participant to Separation Benefits, and if
the Participant signs a Non-Competition Agreement and a Non-Solicitation Agreement, the Company
shall pay or provide, as the case may be, to the Participant the amounts and benefits set forth in
items (a) through (e) below (the “Separation Benefits”):

	(a)	 	The Company shall pay to the Participant, in a lump sum in cash within 30 days after the Date
of Termination (or, if later, 30 days after the date of the Change in Control), or on such
later date as required under Section 3.3(g), the sum of (A) the

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	 	 	 	Participant’s Annual Base
Salary through the Date of Termination to the extent not theretofore paid, (B) the product of
(x) the Participant’s Target Annual Incentive Award and (y) a fraction, the numerator of which
is the number of days in the current fiscal year through the Date of Termination and the
denominator of which is 365, (C) the product of (x) the Participant’s Long-Term Incentive
Award Target
and (y) a fraction, the numerator of which is the number of days completed in the applicable
performance cycle through the Date of Termination and the denominator of which is total
number of days in the performance cycle, and (D) any accrued vacation pay, in each case to
the extent not theretofore paid, the sum of the amounts described in sub clauses (A), (B),
(C) and (D), (the “Accrued Obligations”).
	 
	 	(b)	 	The Company also shall pay to the Participant, in a lump sum in cash within 30 days after the
Date of Termination (or, if later, 30 days after the date of the Change in Control), or on
such later date as required under Section 3.3(g), an amount (“Separation Pay”) equal to the
product of (A) two (or in the case of a Participant who served as Chairman and Chief Executive
Officer immediately prior to the Change in Control, three) and (B) the sum of (x) the
Participant’s Annual Base Salary and (y) the Participant’s Target Annual Incentive Award,
reduced (but not below zero) in the case of any Participant who is a Non-U.S. Executive by the
U.S. dollar equivalent (determined as of the Participant’s Date of Termination) of any
payments made to the Participant under the laws of his or her designated home country or any
program or policy of the Employer in such country on account of the Participant’s termination
of employment.
	 
	 	(c)	 	Solely with respect to U.S. Participants, for two years after the Participant’s Date of
Termination (or, if later, the date of the Change in Control), (or in the case of a
Participant who served as Chairman and Chief Executive Officer immediately prior to the Change
in Control, three years), or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue welfare benefits to
the Participant and/or the Participant’s family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and policies (including,
without limitation, medical, prescription, dental, disability, employee/spouse/child life
insurance, executive life, estate preservation (second-to-die life insurance) and travel
accident insurance plans and programs), as if the Participant’s employment had not been
terminated, or, if more favorable to the Participant, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its Affiliates and their
families; provided, however, that if the Participant becomes reemployed with another employer
and is eligible to receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For purposes of
determining the Participant’s eligibility for retiree benefits pursuant to such welfare plans,
practices, programs and policies, the Participant shall be considered to have remained
employed until two years (or in the case of a Participant who served as Chairman and Chief
Executive Officer immediately prior to the Change in Control, three years) after the Date of
Termination, provided, however, that the Participant’s commencement of

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	 	 	 	such retiree benefits
shall not be any sooner than the date on which the Participant attains 55 years of age.
	 
	 	(d)	 	The Company shall, at its sole expense, provide the Participant with outplacement services
through the provider of the Company’s choice, the scope of which shall be
chosen by the Participant in his or her sole discretion within the terms and conditions of
the Company’s outplacement services policy as in effect immediately prior to the Change in
Control, but in no event shall such outplacement services continue for more than two years
after the calendar year in which the Participant separates from service.
	 
	 	(e)	 	The Company shall, for two years after the Participant’s Date of Termination (or in the case
of a Participant who served as Chairman and Chief Executive Officer immediately prior to the
Change in Control, three years), or after the Change in Control, if later, or such longer
period as may be provided by the terms of the appropriate perquisite, continue the perquisites
at least equal to those which would have been provided to them in accordance with the
perquisites in effect at the immediately prior to the Change in Control. This clause does not
apply to personal use of the Company aircraft to the extent that this perquisite is in effect
for any Key Executive immediately prior to the Change in Control.
	 
	 	(f)	 	To the extent not theretofore paid or provided, the Employer shall timely pay or provide to
the Participant any other amounts or benefits required to be paid or provided or that the
Participant is eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliates.
	 
	 	(g)	 	Notwithstanding the foregoing, if the Participant is a “specified employee” within the
meaning of Section 409A of the Code, then (i) any payments described in Sections 3.3(a) and
(b) which the Company determines constitute the payment of nonqualified deferred compensation,
within the meaning of Section 409A of the Code, shall be delayed and become payable within
five days after the six-month anniversary of the date on which the Participant separates from
service and (ii) any benefits provided under Sections 3.3(c) and (e) which the Company
determines constitute the payment of nonqualified deferred compensation, within the meaning of
Section 409A of the Code, shall be provided at the Participant’s sole cost during the
six-month period after the date on which the Participant separates from service, and within
five days after the expiration of such period the Company shall reimburse the Participant for
the portion of such costs payable by the Company pursuant to Sections 3.3(c) and (e) hereof.

         3.4. Certain Additional Payments by the Company.

	 	(a)	 	Anything in this Plan to the contrary notwithstanding, with respect to any Participant who is
a citizen or resident of the United States, in the event it shall be determined that any
Payment would be subject to the Excise Tax, then the Participant shall be entitled to receive
an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the
Participant of all taxes (including any interest or penalties imposed with respect to such
taxes), including,

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	 	 	 	without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section 3.4(a), if it shall be
determined that any Participant, other than a Participant
who served as Chairman and Chief Executive Officer of the Company immediately prior to the
Change in Control, is entitled to a Gross-Up Payment, but that the Participant, after taking
into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit
(taking into account both income taxes and any Excise Tax) which is at least ten percent
(10%) greater than the net after-tax proceeds to the Participant resulting from an
elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an
amount (the “Reduced Amount”) that is one dollar less than the smallest amount that
would give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Participant
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
	 
	 	(b)	 	Subject to the provisions of Section 3.4(c), all determinations required to be made under
this Section 3.4, including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the Company’s independent auditors or such other nationally recognized
certified public accounting firm as may be designated by the Company and approved by the
Participant (the “Accounting Firm”) which shall provide detailed supporting calculations both
to the Company and the Participant within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company.
Subject to Section 3.4(e) below, any Gross-Up Payment, as determined pursuant to this Section
3.4, shall be paid by the Company to the Participant within five days of the receipt of the
Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Participant. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made by the Company
should have been made (“Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to Section 3.4(c) and
the Participant thereafter is required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the Participant.
	 
	 	(c)	 	The Participant shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten business days
after the Participant is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be paid. The
Participant shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives

10

 

	 	 	 	such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the Company notifies the
Participant in writing prior to the expiration of such period that it desires to contest such
claim, the Participant shall:

	 	(i)	 	give the Company any information reasonably requested by the Company relating to
such claim,
	 
	 	(ii)	 	take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney reasonably
selected by the Company,
	 
	 	(iii)	 	cooperate with the Company in good faith in order to effectively contest such
claim, and
	 
	 	(iv)	 	permit the Company to participate in any proceedings relating to such claim;

	 	 	 	PROVIDED, HOWEVER, that (A) the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Participant harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 3.4(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Participant to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner, and the
Participant agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; and (B) if the Company directs the Participant to pay such claim
and sue for a refund, the Company shall advance the amount of such payment to the
Participant, on an interest-free basis and shall indemnify and hold the Participant harmless,
on an after-tax basis, from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the Participant with
respect to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and the
Participant shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
	 
	 	(d)	 	If, after the receipt by the Participant of an amount advanced by the Company pursuant to
Section 3.4(c), the Participant becomes entitled to receive any refund with respect to such
claim, the Participant shall (subject to the Company’s complying with the requirements of
Section 3.4(c)) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after

11

 

	 	 	 	taxes applicable thereto). If, after the receipt by
the Participant of an amount advanced by the Company pursuant to Section 3.4(c), a
determination is made that the Participant shall not be entitled to any refund with respect to
such claim and the Company does not notify the Participant in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.
	 
	 	(e)	 	Notwithstanding any other provision of this Section 3.4, the Company may withhold and pay
over to the Internal Revenue Service for the benefit of the Participant all or any portion of
the Gross-Up Payment that it determines in good faith that it is or may be in the future
required to withhold, and the Participant hereby consents to such withholding.

3.5. Payment Obligations Absolute. Upon a Change in Control, the obligations of the
Company and its Affiliates to pay or provide the Separation Benefits described in Section 3.3 shall
be absolute and unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or any
of the Affiliates may have against any Participant. In no event shall a Participant be obligated to
seek other employment or take any other action by way of mitigation of the amounts payable to a
Participant under any of the provisions of this Plan, nor shall the amount of any payment or value
of any benefits hereunder be reduced by any compensation or benefits earned by a Participant as a
result of employment by another employer, except as specifically provided under Section 3.3.

3.6. Non-Competition and Non-Solicitation. Upon a Change in Control, the obligations of the
Company and its Affiliates to pay or provide the Separation Benefits described in Section 3.3 are
contingent on the Participant’s adhering to the Non-Competition Agreement and the Non-Solicitation
Agreement. Should the Participant violate the Non-Competition Agreement or Non-Solicitation
Agreement, the Participant will be obligated to pay back to the Employer all payments received
pursuant to this Plan and the Employer will have no further obligation to pay the Participant any
payments that may be remaining due under this Plan.

3.7. Non-Disparagement. Upon a Change in Control, the obligations of the Company and its
Affiliates to pay or provide the Separation Benefits described in Section 3.3 are contingent on the
Participant’s adhering to certain non-disparagement provisions. The Participant agrees that, in
discussing their relationship with Employer, such Participant will not disparage, discredit or
otherwise treat in a detrimental manner the Employer, its affiliated and parent companies or their
officers, directors and employees. The Employer agrees that, in discussing its relationship with
the Participant, it will not disparage or discredit such Participant or otherwise treat such
Participant in a detrimental way.

3.8 General Release of Claims. Upon a Change in Control, the obligations of the Company
and its Affiliates to pay or provide the Separation Benefits described in Section 3.3 are
contingent on the Participant’s (for him/herself, his/her heirs, legal representatives and assigns)
agreement to release the Employer, its affiliated companies and their

12

 

officers, directors, agents
and employees from any claims or causes of action of any kind that the Participant might have
against any one or more of them as of the date of this Release, regarding his/her employment or the
termination of that employment. The Participant understands that this Release applies to all
claims the Participant might have under any federal, state or local statute or ordinance, or the
common law, for employment
discrimination, wrongful discharge, breach of contract, violations of Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Older
Workers Benefit Protection Act, the Employee Retirement Income Security Act, the Americans With
Disabilities Act, or the Family and Medical Leave Act, and all other claims related in any way to
Participant’s employment or the termination of that employment.

3.9. Non-Exclusivity of Rights. Nothing in this Plan shall prevent or limit the
Participant’s continuing or future participation in any plan, program, policy or practice provided
by the Company or any of the Affiliates and for which the Participant may qualify, nor, subject to
Section 6.2, shall anything herein limit or otherwise affect such rights as the Participant may
have under any contract or agreement with the Company or any of the Affiliates. Amounts or benefits
which the Participant is otherwise entitled to receive under any plan, policy, practice or program
of or any contract or agreement with the Company or any of the Affiliates shall be payable in
accordance with such plan, policy, practice or program or contract or agreement, except as
explicitly modified by this Plan.

4. Successor to Company

This Plan shall bind any successor of the Company, its assets or its businesses (whether direct or
indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same
extent that the Company would be obligated under this Plan if no succession had taken place.

In the case of any transaction in which a successor would not by the foregoing provision or by
operation of law be bound by this Plan, the Company shall require such successor expressly and
unconditionally to assume and agree to perform the Company’s obligations under this Plan, in the
same manner and to the same extent that the Company would be required to perform if no such
succession had taken place. The term “Company,” as used in this Plan, shall mean the Company as
hereinbefore defined and any successor or assignee to the business or assets which by reason hereof
becomes bound by this Plan.

5. Duration, Amendment and Termination

5.1. Duration. This Plan shall remain in effect until terminated as provided in Section
5.2. Notwithstanding the foregoing, if a Change in Control occurs, this Plan shall continue in full
force and effect and shall not terminate or expire until after all Participants who become entitled
to any payments or benefits hereunder shall have received such payments or benefits in full.

13

 

5.2. Amendment and Termination. The Plan may be terminated or amended in any respect by
resolution adopted by the Committee unless a Change in Control has previously occurred. However,
after the Board has knowledge of a possible transaction or event that if consummated would
constitute a Change in Control, this Plan may not be terminated or amended in any manner which
would adversely affect the rights or potential rights of Participants, unless and until the Board
has determined that all
transactions or events that, if consummated, would constitute a Change in Control have been
abandoned and will not be consummated, and, provided that, the Board does not have knowledge of
other transactions or events that, if consummated, would constitute a Change in Control. If a
Change in Control occurs, the Plan shall no longer be subject to amendment, change, substitution,
deletion, revocation or termination in any respect that adversely affects the rights of
Participants, and no Participant shall be removed from Plan participation.

6. Miscellaneous

6.1. Legal Fees. The Company agrees to pay, to the full extent permitted by law, all legal
fees and expenses which the Participant may reasonably incur as a result of any contest by the
Company or the Affiliates, the Participant or others of the validity or enforceability of, or
liability under, any provision of this Plan or any guarantee of performance thereof (including as a
result of any contest by the Participant about the amount of any payment pursuant to this Plan),
plus in each case interest on any delayed payment at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Code; provided that the Company shall have no obligation under this
Section 6.1 to the extent the resolution of any such contest includes a finding denying, in total,
the Participant’s claims in such contest.

6.2. Employment Status. This Plan does not constitute a contract of employment or impose on
the Participant, the Company or the Participant’s Employer any obligation to retain the Participant
as an employee, to change the status of the Participant’s employment as an “at will” employee, or
to change the Company’s or the Affiliates’ policies regarding termination of employment.

6.3. Tax Withholding. The Company may withhold from any amounts payable under this Plan
such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.

6.4. Validity and Severability. The invalidity or unenforceability of any provision of the
Plan shall not affect the validity or enforceability of any other provision of the Plan, which
shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other jurisdiction.

6.5. Governing Law. The validity, interpretation, construction and performance of the Plan
shall in all respects be governed by the laws of the Commonwealth of Virginia, without reference to
principles of conflict of law.

14

 

6.6. Claim Procedure. If a Participant makes a written request alleging a right to receive
Separation Benefits under the Plan or alleging a right to receive an adjustment in benefits being
paid under the Plan, the Company shall treat it as a claim for benefits. All claims for Separation
Benefits under the Plan shall be sent to the General Counsel of the Company and must be received
within 30 days after the Date of Termination. If the Company determines that any individual who has
claimed a right to receive Separation
Benefits under the Plan is not entitled to receive all or a part of the benefits claimed, it will
inform the claimant in writing of its determination and the reasons therefore in terms calculated
to be understood by the claimant. The notice will be sent within 90 days of the written request,
unless the Company determines additional time, not exceeding 90 days, is needed. The notice shall
make specific reference to the pertinent Plan provisions on which the denial is based, and describe
any additional material or information that is necessary. Such notice shall, in addition, inform
the claimant what procedure the claimant should follow to take advantage of the review procedures
set forth below in the event the claimant desires to contest the denial of the claim. The claimant
may within 90 days thereafter submit in writing to the Plan Administrator a notice that the
claimant contests the denial of his or her claim by the Company and desires a further review. The
Plan Administrator shall within 60 days thereafter review the claim and authorize the claimant to
appear personally and review the pertinent documents and submit issues and comments relating to the
claim to the persons responsible for making the determination on behalf of the Plan Administrator.
The Plan Administrator will render its final decision with specific reasons therefor in writing and
will transmit it to the claimant within 60 days of the written request for review, unless the Plan
Administrator determines additional time, not exceeding 60 days, is needed, and so notifies the
Participant. If the Plan Administrator fails to respond to a claim filed in accordance with the
foregoing within 60 days or any such extended period, the Plan Administrator shall be deemed to
have denied the claim.

6.7. Unfunded Plan Status. This Plan is intended to be an unfunded plan and to qualify as a
severance pay plan within the meaning of Labor Department Regulations Section 2510.3-2(b). All
payments pursuant to the Plan shall be made from the general funds of the Company and no special or
separate fund shall be established or other segregation of assets made to assure payment. No
Participant or other person shall have under any circumstances any interest in any particular
property or assets of the Company as a result of participating in the Plan. Notwithstanding the
foregoing, the Committee may authorize the creation of trusts or other arrangements to assist in
accumulating funds to meet the obligations created under the Plan; provided, however, that, unless
the Committee otherwise determines, the existence of such trusts or other arrangements is
consistent with the “unfunded” status of the Plan.

6.8. Reliance on Adoption of Plan. Subject to Section 5.2, each person who shall become a
Key Executive shall be deemed to have served and continue to serve in such capacity in reliance
upon the Change in Control provisions contained in this Plan.

6.9. Plan Supersedes Prior U.S. Arrangements with One Exception. For the period of two
years following the occurrence of a Change in Control, the provisions of this Plan shall
supersede, with respect to U.S. Participants, any and all plans, programs, policies and

15

 

arrangements of the Company providing severance benefits, EXCEPT FOR the 2005 Performance Incentive
Plan.

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer
effective as of the Effective Date set forth above.

	 	 	 	 	 
	 	KRAFT FOODS INC.

 	 
	 	By:  	/s/ Karen May
 	 
	 	 	EVP, Global Human Resources 	 
	 	 	 	 
	 

16exv10w2

 

EXHIBIT
10.2

KRAFT FOODS INC. 2005 PERFORMANCE INCENTIVE PLAN

(Amended April 24, 2007)

Section 1. Purpose; Definitions.

The purpose of the Plan is to support the Company’s ongoing efforts to develop and retain
world-class leaders and to provide the Company with the ability to provide incentives more directly
linked to the profitability of the Company’s businesses and increases in shareholder value.

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

	(a)	 	“Annual Incentive Award” means an Incentive Award made pursuant to Section 5(a) with a
Performance Cycle of one year or less.
	 
	(b)	 	“Awards” mean grants under the Plan or, to the extent relevant, under any Prior Plan, of
Incentive Awards, Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock
Units, Deferred Stock Units, or Other Stock-Based Awards.
	 
	(c)	 	“Board” means the Board of Directors of the Company.
	 
	(d)	 	“Cause” means termination because of:

(i) Continued failure to substantially perform the Participant’s job’s duties
(other than resulting from incapacity due to disability);

(ii) Gross negligence, dishonesty, or violation of any reasonable rule or
regulation of the Company where the violation results in significant damage to the
Company; or

(iii) Engaging in other conduct which adversely reflects on the Company in any
material respect.

	(e)	 	“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any
successor thereto.
	 
	(f)	 	“Commission” means the Securities and Exchange Commission or any successor agency.
	 
	(g)	 	“Committee” means the Compensation Committee of the Board or a subcommittee thereof, any
successor thereto or such other committee or subcommittee as may be designated by the Board to
administer the Plan.
	 
	(h)	 	“Common Stock” or “Stock” means the Class A Common Stock of the Company.
	 
	(i)	 	“Company” means Kraft Foods Inc., a corporation organized under the laws of the Commonwealth
of Virginia, or any successor thereto.

 

 

	(j)	 	“Deferred Stock Unit” means an Award described in Section 5(a)(v).
	 
	(k)	 	“Economic Value Added” means net after-tax operating profit less the cost of capital.
	 
	(l)	 	“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and
any successor thereto.
	 
	(m)	 	“Fair Market Value” means, as of any given date, the mean between the highest and lowest
reported sales prices of the Common Stock on the New York Stock Exchange-Composite
Transactions or, if no such sale of Common Stock is reported on such date, the fair market
value of the Stock as determined by the Committee in good faith; provided, however, that the
Committee may in its discretion designate the actual sales price as Fair Market Value in the
case of dispositions of Common Stock under the Plan.
	 
	(n)	 	“Good Reason” means:

	 	(i)	 	the assignment to the Participant of any duties substantially inconsistent with
the Participant’s position, authority, duties or responsibilities in effect immediately
prior to the Change in Control, or any other action by the Company that results in a
marked diminution in the Participant’s position, authority, duties or responsibilities,
excluding for this purpose:

	 	a.	 	changes in the Participant’s position, authority, duties or
responsibilities which are consistent with the Participant’s education,
experience, etc.;
	 
	 	b.	 	an isolated, insubstantial and inadvertent action not taken in
bad faith and that is remedied by the Company promptly after receipt of notice
thereof given by the Participant;

	 	(ii)	 	any reduction in the Participant’s base salary, annual incentive or long-term
incentive opportunity as in effect immediately prior to the Change in Control, other
than an isolated, insubstantial and inadvertent failure not occurring in bad faith and
that is remedied by the Company promptly after receipt of notice thereof given by the
Participant;
	 
	 	(iii)	 	the Company’s, its subsidiaries’ or affiliates’ requiring the Participant to be
based at any office or location other than any other location which does not extend the
Participant’s current home to work location commute by more than 50 miles;
	 
	 	(iv)	 	the Company’s, its subsidiaries’ or affiliates’ requiring the Participant to
travel on business to a substantially greater extent than required immediately prior to
the Change in Control;
	 
	 	(v)	 	any alleged termination by the Company, its subsidiaries or affiliates of the
Participant’s employment otherwise than as expressly permitted by this Plan; or
	 
	 	(vi)	 	any failure by the Company to require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform this Plan
in the same manner and to the

2

 

	 	 	 	same extent that the Company would be required to perform it if no such succession
had taken place, as required by Article 5.

	(o)	 	“Incentive Award” means any Award that is either an Annual Incentive Award or a Long-Term
Incentive Award.
	 
	(p)	 	“Incentive Stock Option” means any Stock Option that complies with Section 422 (or any
amended or successor provision) of the Code.
	 
	(q)	 	“Long-Term Incentive Award” means an Incentive Award made pursuant to Section 5(a)(vi) with a
Performance Cycle of more than one year.
	 
	(r)	 	“Nonqualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
	 
	(s)	 	“Other Stock-Based Award” means an Award made pursuant to Section 5(a)(iii).
	 
	(t)	 	“Participant” means any eligible individual as set forth in Section 3 to whom an Award is
granted.
	 
	(u)	 	“Performance Cycle” means the period selected by the Committee during which the performance
of the Company or any subsidiary, affiliate or unit thereof or any individual is measured for
the purpose of determining the extent to which an Award subject to Performance Goals has been
earned.
	 
	(v)	 	“Performance Goals” mean the objectives for the Company or any subsidiary or affiliate or any
unit thereof or any individual that may be established by the Committee for a Performance
Cycle with respect to any performance-based Awards contingently awarded under the Plan.
Performance Goals may be provided in absolute terms, or in relation to the Company’s peer
group. The Company’s peer group will be determined by the Committee, in its sole discretion.
The Performance Goals for Awards that are intended to constitute “performance-based”
compensation within the meaning of Section 162(m) (or any amended or successor provision) of
the Code shall be based on one or more of the following criteria: earnings per share, total
stockholder return, return on equity, return on capital, net income, adjusted net income, cash
flow, operating income or Economic Value Added.
	 
	(w)	 	“Plan” means this Kraft Foods Inc. 2005 Performance Incentive Plan, as amended from time to
time.
	 
	(x)	 	“Prior Plan” means the Kraft Foods Inc. 2001 Performance Incentive Plan.
	 
	(y)	 	“Restricted Period” means the period during which an Award may not be sold, assigned,
transferred, pledged or otherwise encumbered.

3

 

	(z)	 	“Restricted Stock” means an Award of shares of Common Stock pursuant to Section 5(a)(iv).
	 
	(aa)	 	“Restricted Stock Unit” means an Award described in Section 5(a)(v).
	 
	(bb)	 	“Spread Value” means, with respect to a share of Common Stock subject to an Award, an amount
equal to the excess of the Fair Market Value, on the date such value is determined, over the
Award’s exercise or grant price, if any.
	 
	(cc)	 	“Stock Appreciation Right” or “SAR” means a right granted pursuant to Section 5(a)(ii).
	 
	(dd)	 	“Stock Option” means an Incentive Stock Option or a Nonqualified Stock Option granted
pursuant to Section 5(a)(i).

In addition, the terms “Affiliated Group,” “Business Combination,” “Change in Control,” “Change in
Control Price,” “Incumbent Board,” “Outstanding Company Stock,” “Outstanding Company Voting
Securities” and “Person” have the meanings set forth in Section 6.

Section 2. Administration.

The Plan shall be administered by the Committee, which shall have the power to interpret the Plan
and to adopt such rules and guidelines for carrying out the Plan as it may deem appropriate. The
Committee shall have the authority to adopt such modifications, procedures and subplans as may be
necessary or desirable to comply with the laws, regulations, compensation practices and tax and
accounting principles of the countries in which the Company, a subsidiary or an affiliate may
operate to assure the viability of the benefits of Awards made to individuals employed in such
countries and to meet the objectives of the Plan.

Subject to the terms of the Plan, the Committee shall have the authority to determine those
employees eligible to receive Awards and the amount, type and terms of each Award and to establish
and administer any Performance Goals applicable to such Awards. The Committee may delegate its
authority and power under the Plan to one or more officers of the Company, subject to guidelines
prescribed by the Committee, but only with respect to Participants who are not subject to either
Section 16 (or any amended or successor provision) of the Exchange Act or Section 162(m) (or any
amended or successor provision) of the Code.

Any determination made by the Committee or by one or more officers pursuant to delegated authority
in accordance with the provisions of the Plan with respect to any Award shall be made in the sole
discretion of the Committee or such delegate, and all decisions made by the Committee or any
appropriately designated officer pursuant to the provisions of the Plan shall be final and binding
on all persons, including the Company and Plan Participants.

4

 

Section 3. Eligibility.

Salaried employees of the Company, its subsidiaries and affiliates who are responsible for or
contribute to the management, growth and profitability of the business of the Company, its
subsidiaries or its affiliates, are eligible to be granted Awards under the Plan; provided that
employees of Altria Group, Inc. and its subsidiaries other than the Company and the Company’s
subsidiaries are not eligible to be granted Awards under the Plan (except that employees and former
employees of Altria Group, Inc. and its subsidiaries shall be eligible to be granted Awards under
the Plan in connection with any event as a result of which the Company ceases to be a subsidiary of
Altria Group, Inc.).

Section 4. Common Stock Subject to the Plan.

	(a)	 	Common Stock Available. The total number of shares of Common Stock reserved and available for
distribution pursuant to the Plan shall be 150,000,000 shares. An amount not to exceed
45,000,000 shares of Common Stock may be issued pursuant to Restricted Stock Awards, Other
Stock-Based Awards, and Incentive Awards, except that Other Stock-Based Awards with values
based on Spread Values shall not be included in this limitation. Except as otherwise provided
herein, any Award made under the Prior Plan before the expiration of such Prior Plan shall
continue to be subject to the terms and conditions of such Prior Plan and the applicable Award
agreement. Any adjustments, substitutions, or other actions that may be made or taken in
accordance with Section 4(b) below in connection with the corporate transactions or events
described therein shall, to the extent applied to outstanding Awards made under the Prior
Plan, be deemed made from shares reserved for issuance under such Prior Plan, rather than this
Plan, pursuant to the authority of the Board under the Prior Plan to make adjustments and
substitutions in such circumstances to the aggregate number and kind of shares reserved for
issuance under the Prior Plan and to Awards granted under the Prior Plan. To the extent any
Award under this Plan is exercised or cashed out or terminates or expires or is forfeited
without a payment being made to the Participant in the form of Common Stock, the shares
subject to such Award that were not so paid, if any, shall again be available for distribution
in connection with Awards under the Plan; provided, however, that any shares which are
available again for Awards under the Plan also shall count against the limit described in
Section 5(b)(i). If an SAR or similar Award based on Spread Value with respect to shares of
Common Stock is exercised, only the number of shares of Common Stock issued, if any, will be
deemed delivered for purposes of determining the maximum number of Shares available for
delivery under the Plan. Any shares of Common Stock that are used by a Participant as full or
partial payment of withholding or other taxes or as payment for the exercise or conversion
price of an Award under the Plan shall be available for distribution in connection with Awards
under the Plan. If an SAR or similar Award based on Spread Value with respect to shares of
Common Stock is exercised, the full number of shares of Common Stock with respect to which the
Award is measured will nonetheless be deemed distributed for purposes of determining the
maximum number of shares remaining available for delivery under the Plan. Similarly, any
 shares of Common Stock that are used by a Participant as full or partial payment

5

 

	 	 	of withholding or other taxes or as payment for the exercise or conversion price of an
Award under the Plan will be deemed distributed for purposes of determining the maximum
number of shares remaining available for delivery under the Plan.
	 
	(b)	 	Adjustments for Certain Corporate Transactions

	 	(i)	 	In the event of any merger, share exchange, reorganization, consolidation,
recapitalization, reclassification, distribution, stock dividend, stock split, reverse
stock split, split-up, spin-off, issuance of rights or warrants or other similar
transaction or event affecting the Common Stock or any event as a result of which the
Company ceases to be a subsidiary of Altria Group, Inc., in any case after adoption of
the Plan by the Board, the Committee is authorized to make such adjustments or
substitutions with respect to the Plan and the Prior Plan and to Awards granted
thereunder as it deems appropriate to reflect the occurrence of such event, including,
but not limited to, adjustments (A) to the aggregate number and kind of securities
reserved for issuance under the Plan, (B) to the Award limits set forth in Section 5,
(C) to the Performance Goals or Performance Cycles of any outstanding
Performance-Based Awards, and (D) to the number and kind of securities subject to
outstanding Awards and, if applicable, the grant or exercise price or Spread Value of
outstanding Awards. In addition, the Committee may make an Award in substitution for
incentive awards, stock awards, stock options or similar awards held by an individual
who is, previously was, or becomes an employee of the Company, a subsidiary or an
affiliate in connection with a transaction described in this Section 4(b)(i).
Notwithstanding any provision of the Plan (other than the limitation set forth in
Section 4(a)), the terms of such substituted Awards shall be as the Committee, in its
discretion, determines is appropriate.
	 
	 	(ii)	 	In connection with any of the events described in 4(b)(i), the Committee
shall also have authority with respect to the Plan and the Prior Plan and to Awards
granted thereunder (A) to grant Awards (including Stock Options, Stock Appreciation
Rights, and Other Stock-Based Awards) with a grant price that is less than Fair Market
Value on the date of grant in order to preserve existing gain under any similar type
of award previously granted by the Company or another entity to the extent that the
existing gain would otherwise be diminished without payment of adequate compensation
to the holder of the award for such diminution, and (B) except as may otherwise be
required under an applicable Award agreement, to cancel or adjust the terms of an
outstanding Award as appropriate to reflect the substitution for the outstanding Award
of an award of equivalent value granted by another entity. In connection with a
spin-off or similar corporate transaction, the adjustments described in this Section
4(b) may include, but are not limited to, (C) the imposition of restrictions on any
distribution with respect to Restricted Stock or similar Awards and (D) the
substitution of comparable Stock Options to purchase the stock of another entity or
Stock Appreciation Rights, Restricted Stock

6

 

	 	 	 	Units, Deferred Stock Units or Other Stock-Based Awards denominated in the
securities of another entity, which may be settled in the form of cash, Common
Stock, stock of such other entity, or other securities or property, as determined
by the Committee; and, in the event of such a substitution, references in this Plan
and the Prior Plan and in the applicable Award agreements thereunder to “Common
Stock” or “Stock” shall be deemed (except for purposes of Section 6(b) hereunder
and for any similar provisions of the Prior Plan or applicable Award agreements) to
also refer to the securities of the other entity where appropriate.
	 
	 	(iii)	 	In connection with any of the events described in Section 4(b)(i), with
respect to the Plan and the Prior Plan and to Awards granted hereunder, the Committee
is also authorized to provide for the payment of any outstanding Awards in cash,
including, but not limited to, payment of cash in lieu of any fractional Awards.
	 
	 	(iv)	 	In the event of any conflict between this Section 4(b) and other provisions
of the Plan or the Prior Plan, the provisions of this section shall control. Receipt
of an Award under the Plan shall constitute an acknowledgement by the Participant
receiving such Award of the Committee’s ability to adjust Awards under the Prior Plans
in a manner consistent with this Section 4(b).

Section 5. Awards.

	(a)	 	General. The types of Awards that may be granted under the Plan are set forth below. Awards
may be granted singly, in combination or in tandem with other Awards.

	 	(i)	 	Stock Options. A Stock Option represents the right to purchase a share of
Stock at a predetermined grant price. Stock Options granted under the Plan may be in
the form of Incentive Stock Options or Nonqualified Stock Options, as specified in the
Award agreement but no Stock Option designated as an Incentive Stock Option shall be
invalid in the event that it fails to qualify as an Incentive Stock Option. The term
of each Stock Option shall be set forth in the Award agreement, but no Stock Option
shall be exercisable more than ten years after the grant date. The grant price per
share of Common Stock purchasable under a Stock Option shall not be less than 100% of
the Fair Market Value on the date of grant. Subject to the applicable Award agreement,
Stock Options may be exercised, in whole or in part, by giving written notice of
exercise specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price by certified or bank check or
such other instrument as the Company may accept (including a copy of instructions to a
broker or bank acceptable to the Company to deliver promptly to the Company an amount
sufficient to pay the purchase price). Unless otherwise determined by the Committee,
payment in full or in part may also be made in the form of Common Stock already owned
by

7

 

	 	 	 	the Participant valued at Fair Market Value on the day preceding the date of
exercise; provided, however, that such Common Stock shall not have been acquired by
the Participant within the six months following the exercise of a Stock Option or
Stock Appreciation Right, within six months after the lapse of restrictions on
Restricted Stock, or within six months after the receipt of Common Stock from the
Company, whether in settlement of any Award or otherwise.
	 
	 	(ii)	 	Stock Appreciation Rights. An SAR represents the right to receive a payment,
in cash, shares of Common Stock, or both (as determined by the Committee), with a
value equal to the Spread Value on the date the SAR is exercised. The grant price of
an SAR shall be set forth in the applicable Award agreement and shall not be less than
100% of the Fair Market Value on the date of grant. Subject to the terms of the
applicable Award agreement, an SAR shall be exercisable, in whole or in part, by
giving written notice of exercise.
	 
	 	(iii)	 	Other Stock-Based Awards. Other Stock-Based Awards are Awards, other than
Stock Options, SARs, Restricted Stock, Restricted Stock Units, or Deferred Stock
Units, that are denominated in, valued in whole or in part by reference to, or
otherwise based on or related to, Common Stock. The grant, purchase, exercise,
exchange or conversion of Other Stock-Based Awards granted under this subsection (iii)
shall be on such terms and conditions and by such methods as shall be specified by the
Committee. Where the value of an Other Stock-Based Award is based on the Spread Value,
the grant price for such an Award will not be less than 100% of the Fair Market Value
on the date of grant.
	 
	 	(iv)	 	Restricted Stock. Shares of Restricted Stock are shares of Common Stock that
are awarded to a Participant and that during the Restricted Period may be forfeitable
to the Company upon such conditions as may be set forth in the applicable Award
agreement. Except as provided in the applicable Award agreement, Restricted Stock may
not be sold, assigned, transferred, pledged or otherwise encumbered during the
Restricted Period. Except as provided in the applicable Award agreement, a Participant
shall have with respect to such Restricted Stock all the rights of a holder of Common
Stock during the Restricted Period.
	 
	 	(v)	 	Restricted Stock Units and Deferred Stock Units. Restricted Stock Units and
Deferred Stock Units represent the right to receive shares of Common Stock, cash, or
both (as determined by the Committee) upon satisfaction of such conditions as may be
set forth in the applicable Award agreement. Except as provided in the applicable
Award agreement, Restricted Stock Units and Deferred Stock Units may not be sold,
assigned, transferred, pledged or otherwise encumbered during the Restricted Period.
Except as provided in the applicable Award agreement, a Participant shall have with
respect to such Restricted Stock Units and Deferred Stock Units none of the rights of
a holder of Common Stock unless and until shares of

8

 

	 	 	 	Common Stock are actually delivered in satisfaction of the restrictions and other
conditions of such Restricted Stock Units or Deferred Stock Units.
	 
	 	(vi)	 	Incentive Awards. Incentive Awards are performance-based Awards that are
expressed in U.S. currency or Common Stock or any combination thereof. Incentive
Awards shall either be Annual Incentive Awards or Long-Term Incentive Awards.

	(b)	 	Maximum Awards. Subject to the exercise of the Committee’s authority pursuant to Section 4:

	 	(i)	 	The total number of shares of Common Stock subject to Stock Options and Stock
Appreciation Rights awarded during any calendar year to any Participant shall not
exceed 3,000,000 shares.
	 
	 	(ii)	 	The total amount of any Annual Incentive Award awarded to any Participant
with respect to any Performance Cycle, taking into account the cash and the Fair
Market Value of any Common Stock payable with respect to such Award, shall not exceed
$10,000,000.
	 
	 	(iii)	 	The total amount of any Long-Term Incentive Award awarded to any Participant
with respect to any Performance Cycle shall not exceed 400,000 shares of Common Stock
multiplied by the number of years in the Performance Cycle or, in the case of Awards
expressed in currency, $8,000,000 multiplied by the number of years in the Performance
Cycle.
	 
	 	(iv)	 	An amount not in excess of 1,000,000 shares of Common Stock may be issued or
issuable to any Participant in a Plan Year pursuant to Restricted Stock, Restricted
Stock Units, Deferred Stock Units, and Other Stock-Based Awards, except that Other
Stock-Based Awards with values based on Spread Values shall not be included in this
limitation.

	(c)	 	Performance-Based Awards. Any Awards granted pursuant to the Plan may be in the form of
performance-based Awards through the application of Performance Goals and Performance Cycles.

Section 6. Change in Control Provisions.

	(a)	 	Impact of Event. Notwithstanding any other provision of the Plan to the contrary, in the
event of a Change in Control (as defined below in 6(a)(vii)):

	 	(i)	 	If and to the extent that outstanding Awards, other than Incentive
Awards, under the Plan (A) are assumed by the successor corporation
(or affiliate thereto) or (B) are replaced with equity awards that
preserve the existing value of the Awards at the time of the Change in
Control and provide for subsequent payout in accordance with a vesting
schedule and Performance Goals, as applicable, that are the same or
more favorable to the Participants

9

 

	 	 	 	than the vesting schedule and
Performance Goals applicable to the Awards, then all such Awards or
such substitutes thereof shall remain outstanding and be governed by
their respective terms and the provisions of the Plan subject to
Section 6(a)(iv) below.
	 
	 	(ii)	 	If and to the extent that outstanding Awards, other than Incentive
Awards, under the Plan are not assumed or replaced in accordance with
Section 6(a)(i) above, then upon the Change in Control the following
treatment (referred to as “Change-in-Control Treatment”) shall apply
to such Awards: (A) outstanding Options and SARs shall immediately
vest and become exercisable; (B) the restrictions and other
conditions applicable to outstanding Restricted Shares, Restricted
Stock Units and Stock Awards, including vesting requirements, shall
immediately lapse; such Awards shall be free of all restrictions and
fully vested; and, with respect to Restricted Stock Units, shall be
payable immediately in accordance with their terms or, if later, as
of the earliest permissible date under Code Section 409A.
	 
	 	(iii)	 	If and to the extent that outstanding Awards under the Plan are not
assumed or replaced in accordance with Section 6(a)(i) above, then
in connection with the application of the Change-in-Control
Treatment set forth in Section 6(a)(ii) above, the Board may, in its
sole discretion, provide for cancellation of such outstanding Awards
at the time of the Change in Control in which case a payment of
cash, property or a combination thereof shall be made to each such
Participant upon the consummation of the Change in Control that is
determined by the Board in its sole discretion and that is at least
equal to the excess (if any) of the value of the consideration that
would be received in such Change in Control by the holders of the
securities of Kraft Foods Inc. relating to such Awards over the
exercise or purchase price (if any) for such Awards.
	 
	 	(iv)	 	If and to the extent that (A) outstanding Awards are assumed or
replaced in accordance with Section 6(a)(i) above and (B) a
Participant’s employment with, or performance of services for, the
Company is terminated by the Company for any reasons other than Cause
or, by such Participant eligible to participate in the Kraft Foods
Inc. Change in Control Plan for Key Executives, for Good Reason, in
each case, within the two-year period commencing on the Change in
Control, then, as of the date of such Participant’s termination, the
Change-in-Control Treatment set forth in Section 6(a)(ii) above shall
apply to all assumed or replaced Awards of such Participant then
outstanding.
	 
	 	(v)	 	Outstanding Options or SARs that are assumed or replaced
in accordance with Section 6(a)(i) may be exercised by the
Participant in accordance with the applicable terms and
conditions of such Award as set forth in the applicable
award agreement or elsewhere; provided, however, that
Options or SARs that become exercisable in accordance with
Section 6(a)(iv) may be exercised until the expiration of
the original full term of such Option or SAR
notwithstanding the other original terms and conditions of
such Award.

10

 

	 	(vi)	 	Any Incentive Awards relating to Performance Cycles prior to the Performance
Cycle in which the Change in Control occurs that have been earned but not paid shall
become immediately payable in cash. In addition, each Participant who has been awarded
an Incentive Award shall be deemed to have earned a pro rata Incentive Award equal to
the product of (A) such Participant’s target award opportunity for such Performance
Cycle, and (B) a fraction, the numerator of which is the number of full or partial
months that have elapsed since the beginning of such Performance Cycle to the date on
which the Change in Control occurs, and the denominator of which is the total number
of months in such Performance Cycle.
	 
	 	(vii)	 	Definition of Change in Control. “Change in Control” means the occurrence of
any of the following events:
	 
	 	 	 	(A) Acquisition of 20% or more of the outstanding voting securities of the Company
by another entity or group; excluding, however, the following:

(1) any acquisition by the Company or any of its Affiliates;

(2) any acquisition by an employee benefit plan or related trust sponsored
or maintained by the Company or any of its Affiliates; or

(3) any acquisition pursuant to a merger or consolidation described in
clause (C);

(B) During any consecutive 24-month period, persons who constitute the Board at the
beginning of the period cease to constitute at least 50% of the Board (unless the
election of each new Board member was approved by a majority of directors who began
the two-year period);

(C) The consummation of a merger or consolidation of the Company with another
company, and the Company is not the surviving company; or, if after such
transaction, the other entity owns, directly or indirectly, 50% or more of the
outstanding voting securities of the Company; excluding, however, a transaction
pursuant to which all or substantially all of the individuals or entities who are
the beneficial owners of the outstanding voting securities of the Company
immediately prior to such transaction will beneficially own, directly or
indirectly, more than 50% of the combined voting power of the outstanding
securities entitled to vote generally in the election of directors (or similar
persons) of the entity resulting from such transaction (including, without
limitation, an entity which as a result of such transaction owns the Company either
directly or indirectly) in substantially the same proportions relative to each
other as their ownership, immediately prior to such transaction, of the outstanding
voting securities; or

(D) The consummation of a plan of complete liquidation of the Company or the sale
or disposition of all or substantially all of the Company’s assets.

11

 

	(b)	 	Change in Control Price. Unless the Committee determines otherwise, “Change in Control Price”
means the value of the consideration paid to holders of shares of Common Stock for such Common
Stock in connection with a Change in Control transaction (or, if no consideration is paid in
connection with a Change in Control transaction, the Fair Market Value of a share of Common
Stock immediately prior to a Change in Control), except that, in the case of Incentive Stock
Options, such price shall be based only on transactions reported for the date on which such
Incentive Stock Options are cashed out.
	 
	(c)	 	Incumbent Board. “Incumbent Board” means the members of the Board as of the effective date
of the Plan. Notwithstanding the preceding sentence, any individual who becomes a member of
the Board after such effective date whose election, or nomination for election by the
shareholders of the Company, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such member were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board.

Section 7. Plan Amendment and Termination.

The Board may amend or terminate the Plan at any time, provided that no such amendment shall be
made without shareholder approval if such approval is required under applicable law, regulation, or
stock exchange rule, or if such amendment would (i) decrease the grant or exercise price of any
Stock Option, SAR or Other Stock-Based Award to less than the Fair Market Value on the date of
grant, or (ii) increase the total number of shares of Common Stock that may be distributed under
the Plan. Except as may be necessary to comply with a change in the laws, regulations or accounting
principles of a foreign country applicable to Participants subject to the laws of such foreign
country, the Committee may not cancel any Stock Option and substitute therefore a new Stock Option
with a lower grant price. Except as set forth in any Award agreement or as necessary to comply with
applicable law or avoid adverse tax consequences to some or all Plan Participants, no amendment or
termination of the Plan may materially and adversely affect any outstanding Award under the Plan
without the Award recipient’s consent.

Section 8. Payments and Payment Deferrals.

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

12

 

Section 9. Dividends and Dividend Equivalents.

The Committee may provide that any Awards under the Plan earn dividends or dividend equivalents.
Such dividends or dividend equivalents may be paid currently or may be credited to a Participant’s
Plan account. Any crediting of dividends or dividend equivalents may be subject to such
restrictions and conditions as the Committee may establish, including reinvestment in additional
shares of Common Stock or Common Stock equivalents.

Section 10. Transferability.

Except as provided in the applicable Award agreement or otherwise required by law, Awards shall not
be transferable or assignable other than by will or the laws of descent and distribution.

Section 11. Award Agreements.

Each Award under the Plan shall be evidenced by a written agreement (which need not be signed by
the recipient unless otherwise specified by the Committee) that sets forth the terms, conditions
and limitations for each Award. Such terms may include, but are not limited to, the term of the
Award, vesting and forfeiture provisions, and the provisions applicable in the event the
Participant’s employment terminates. The Committee may amend an Award agreement, provided that,
except as set forth in any Award agreement or as necessary to comply with applicable law or avoid
adverse tax consequences to some or all Plan Participants, no such amendment may materially and
adversely affect an Award without the Participant’s consent.

Section 12. Unfunded Status Plan.

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

Section 13. General Provisions.

	(a)	 	The Committee may require each person acquiring shares of Common Stock pursuant to an Award
to represent to and agree with the Company in writing that such person is acquiring the shares
without a view to the distribution thereof. The certificates for such shares may include any
legend that the Committee deems appropriate to reflect any restrictions on transfer.
	 
	 	 	All certificates for shares of Common Stock or other securities delivered under the Plan
shall be subject to such stock transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other

13

 

	 	 	requirements of the Commission, any stock exchange upon which the Common Stock is then
listed, and any applicable Federal, state or foreign securities law, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate reference
to such restrictions.
	 
	(b)	 	Nothing contained in the Plan shall prevent the Company, a subsidiary or an affiliate from
adopting other or additional compensation arrangements for their respective employees.
	 
	(c)	 	Neither the adoption of the Plan nor the granting of Awards under the Plan shall confer upon
any employee any right to continued employment nor shall they interfere in any way with the
right of the Company, a subsidiary or an affiliate to terminate the employment of any employee
at any time.
	 
	(d)	 	No later than the date as of which an amount first becomes includible in the gross income of
the Participant for income tax purposes with respect to any Award under the Plan, the
Participant shall pay to the Company, or make arrangements satisfactory to the Company
regarding the payment of, any Federal, state, local or foreign taxes of any kind which are
required by law or applicable regulation to be withheld with respect to such amount. Unless
otherwise determined by the Committee, withholding obligations arising from an Award may be
settled with Common Stock, including Common Stock that is part of, or is received upon
exercise or conversion of, the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment or
arrangements, and the Company, its subsidiaries and its affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment otherwise due to
the Participant. The Committee may establish such procedures as it deems appropriate,
including the making of irrevocable elections, for the settling of withholding obligations
with Common Stock.
	 
	(e)	 	The Plan and all Awards made and actions taken thereunder shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia, excluding any conflicts or choice
of law rule or principle that might otherwise refer construction or interpretation of the Plan
to the substantive law of another jurisdiction. Unless otherwise provided in an Award,
recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and
venue of the Federal or state courts of the Commonwealth of Virginia, to resolve any and all
issues that may arise out of or relate to the Plan or any related Award.
	 
	(f)	 	All obligations of the Company under the Plan with respect to Awards granted hereunder shall
be binding on any successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.

14

 

	(g)	 	If any provision of the Plan is held invalid or unenforceable, the invalidity or
unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be
enforced and construed as if such provision had not been included.
	 
	(h)	 	If approved by stockholders, the Plan shall be effective on May 1, 2005. Except as otherwise
provided by the Board, no Awards shall be made after May 1, 2010, provided that any Awards
granted prior to that date may extend beyond it.

15

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