Document:

<PAGE>

                                                       Exhibit 10.1
                                                       ------------

                              CORPORATE AGREEMENT

                                by and between

                               KRAFT FOODS INC.

                                      and

                         PHILIP MORRIS COMPANIES INC.

                            _________________, 2001
<PAGE>

                               TABLE OF CONTENTS

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ARTICLE I DEFINITIONS.............................................................................................1
         1.1. Definitions.........................................................................................1
         1.2. Internal References.................................................................................6

ARTICLE II KRAFT BOARD REPRESENTATION.............................................................................6
         2.1. General.............................................................................................6
         2.2. Philip Morris Designees.............................................................................6
         2.3. Additional Members of Kraft Board...................................................................6
         2.4. Efforts of Kraft....................................................................................7
         2.5. Chairman of Kraft Board.............................................................................7

ARTICLE III CERTAIN COVENANTS AND AGREEMENTS......................................................................7
         3.1. No Violations.......................................................................................7
         3.2. Access to Information...............................................................................8
         3.3. Intercompany Transactions...........................................................................9
         3.4. Actions Requiring Consent...........................................................................9

ARTICLE IV CORPORATE OPPORTUNITIES AND CONFLICTS OF INTEREST......................................................9
         4.1. General.............................................................................................9
         4.2. Business Activities.................................................................................9
         4.3. Corporate Opportunities............................................................................10
         4.4. Philip Morris Entities and Kraft Entities..........................................................10
         4.5. Notice.............................................................................................11

ARTICLE V INDEMNIFICATION........................................................................................11
         5.1. Kraft Indemnification of the Philip Morris Entities for Certain Liabilities........................11
         5.2. Philip Morris Indemnification of Kraft Entities....................................................11
         5.3. Third-Party Rights; Tax Benefits...................................................................12
         5.4. Notice and Payment of Claims.......................................................................12
         5.5. Notice and Defense of Third-Party Claims...........................................................12
         5.6. Contribution.......................................................................................13

ARTICLE VI OPTION................................................................................................14
         6.1. Option.............................................................................................14
         6.2. Notice.............................................................................................14
         6.3. Option Exercise and Payment........................................................................14
         6.4. Effect of Failure to Exercise......................................................................15
         6.5. Termination of Option..............................................................................15

ARTICLE VII REGISTRATION RIGHTS..................................................................................15
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ARTICLE VIII TERM................................................................................................15

ARTICLE IX MISCELLANEOUS.........................................................................................16
         9.1. Limitation of Liability............................................................................16
         9.2. Subsidiaries.......................................................................................16
         9.3. Amendments.........................................................................................16
         9.4. Severability.......................................................................................16
         9.5. Notices............................................................................................16
         9.6. Further Assurances.................................................................................17
         9.7. Counterparts.......................................................................................17
         9.8. Governing Law......................................................................................17
         9.9. Entire Agreement...................................................................................17
         9.10. Successors........................................................................................17
         9.11. Specific Performance..............................................................................19

APPENDIX I  - REGISTRATION RIGHTS AGREEMENT......................................................................A1
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                                      ii
<PAGE>

                              CORPORATE AGREEMENT

                  THIS CORPORATE AGREEMENT ("Agreement") is entered into as of
_______________, 2001 by and between KRAFT FOODS INC., a Virginia corporation
("Kraft"), and PHILIP MORRIS COMPANIES INC., a Virginia corporation ("Philip
Morris").

                                   RECITALS

                  A.   Philip Morris owns all of the issued and outstanding
Class B Common Stock, no par value per share ("Class B Common Stock"), of Kraft
and owns 275,000,000 shares of Class A Common Stock, no par value per share
("Class A Common Stock"), of Kraft, and Kraft is a member of Philip Morris'
"affiliated group" of corporations (the "Philip Morris Group") for federal
income tax purposes.

                  B.   The parties are contemplating that Kraft will issue
shares of Class A Common Stock in an initial public offering (the "Initial
Public Offering") registered under the Securities Act of 1933, as amended.

                  C.   The parties desire to enter into this Agreement to
set forth their agreement regarding: (i) the composition of the Kraft Board of
Directors; (ii) certain covenants and agreements regarding the conduct of
Kraft's business; (iii) treatment of potential corporate opportunities and
conflicts of interest between the parties; (iv) Philip Morris' rights to
purchase additional shares of Class A Common Stock upon certain issuances of
Kraft securities to any person to permit Philip Morris to maintain its
percentage ownership interest in Kraft; and (v) certain registration rights with
respect to Class A Common Stock.

                                  AGREEMENTS

                  NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Kraft and Philip
Morris, for themselves and their successors and assigns, hereby agree as
follows:

                                   ARTICLE I
                                  DEFINITIONS

         1.1.     Definitions.
                  -----------

         As used in this Agreement, the following terms will have the following
meanings, applicable both to the singular and the plural forms of the terms
described:

         "Action" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding of any nature (whether criminal, civil,
legislative, administrative, regulatory, prosecutorial or otherwise) by or
before any arbitrator or Governmental Entity.
<PAGE>

         "Affiliate" means, with respect to a given Person, any Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to direct the
vote of a majority of the votes that may be cast in the election of directors
(or other Persons acting in similar capacities) of such Person or otherwise to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.

         "Agreement" has the meaning ascribed thereto in the preamble hereto, as
such agreement may be amended and supplemented from time to time in accordance
with its terms.

         "Applicable Stock" means at any time the (i) shares of Common Stock
owned by the Philip Morris Entities that were owned on the date hereof, plus
(ii) shares of Class A Common Stock purchased by the Philip Morris Entities
pursuant to Article VI of this Agreement, plus (iii) shares of Common Stock that
were issued to Philip Morris Entities in respect of shares described in either
clause (i) or clause (ii) in any reclassification, share combination, share
subdivision, share dividend, share exchange, merger, consolidation or similar
transaction or event.

         "Class A Common Stock" has the meaning ascribed thereto in the recitals
to this Agreement.

         "Class B Common Stock" has the meaning ascribed thereto in the recitals
to this Agreement.

         "Common Stock" means the Class B Common Stock, the Class A Common Stock
and any other class of Kraft's capital stock representing the right to vote
generally for the election of directors and, for so long as Kraft continues to
be a subsidiary corporation includable in a consolidated federal income tax
return of the Philip Morris Group, any other security of Kraft treated as stock
for purposes of Section 1504(a) of the Internal Revenue Code of 1986, as
amended.

          "Finally Determined" means, with respect to any Action, threatened
Action or other matter, that the outcome or resolution of that Action,
threatened Action or matter has either (i) been decided by an arbitrator or
Governmental Entity of competent jurisdiction by judgment, order, award or other
ruling or (ii) has been settled or voluntarily dismissed and, in the case of
each of clauses (i) and (ii), the claimants' rights to maintain that Action,
threatened Action or other matter have been finally adjudicated, waived,
discharged or extinguished, and that judgment, order, ruling, award, settlement
or dismissal (whether mandatory or voluntary, but if voluntary that dismissal
must be final, binding and with prejudice as to all claims specifically pleaded
in that Action) is subject to no further appeal, vacatur proceeding or
discretionary review.

                                       2
<PAGE>

         "Governmental Entity" means any government or any state, department or
other political subdivision thereof, or any governmental body, 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.

         "Indemnified Party" has the meaning ascribed thereto in Section 5.4.
                                                                 -----------

         "Indemnifying Party" has the meaning ascribed thereto in Section 5.4.
                                                                  -----------

         "Information" has the meaning ascribed thereto in Section 3.2(a).
                                                           --------------

         "Initial Public Offering" has the meaning ascribed thereto in the
recitals to this Agreement.

         "Initial Public Offering Date" means the date of completion of the
initial sale of Class A Common Stock in the Initial Public Offering.

         "Issuance Event" has the meaning ascribed thereto in Section 6.2.
                                                              -----------

         "Issuance Event Date" has the meaning ascribed thereto in Section 6.2.
                                                                   -----------

         "Kraft" has the meaning ascribed thereto in the preamble hereto.

         "Kraft Articles" means the articles of incorporation of Kraft, as
amended.

         "Kraft Board" means the Board of Directors of Kraft.

         "Kraft Bylaws" means the amended and restated bylaws of Kraft.

         "Kraft Entities" means Kraft and its Subsidiaries; and "Kraft Entity"
shall mean any of the Kraft Entities.

         "Kraft Entity Liabilities" means, except as otherwise specifically
provided in any Transaction Document, all Liabilities, whether arising before,
at or after the Initial Public Offering Date, (i) of or in any way relating, in
whole or in part, to any Kraft Entity or (ii) arising from the conduct of, in
connection with or in any way relating to, in whole or in part, the businesses
and operations of the Kraft Entities or the ownership or use of assets or
property in connection therewith. Notwithstanding the foregoing, "Kraft Entity
Liabilities" shall exclude (i) all Liabilities for Taxes of the Kraft Entities
(because the Tax Sharing Agreement will govern those Liabilities); (ii) all
Liabilities of the Kraft Entities pursuant to the Services Agreement (because
the Services Agreement will govern those Liabilities); (iii) all Liabilities of
the Kraft Entities pursuant to the Registration Rights Agreement (because the
Registration Rights Agreement will govern those Liabilities); and (iv) all
Liabilities directly, indirectly or derivatively based on, arising out of or in
any way relating to, in whole or in part, the businesses and operations of the
Philip Morris Entities or the ownership or use of assets or property in
connection therewith.

                                       3
<PAGE>

          "Kraft Indemnitee" has the meaning ascribed thereto in Section 5.2(a).
                                                                 --------------

          "Liabilities" means any and all claims, debts, liabilities,
assessments, fines, penalties, damages, 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, all costs and expenses 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).

         "Market Price" of any shares of Class A Common Stock on any date means
(i) the last sale price of such shares on such date on the New York Stock
Exchange, Inc. or, if such shares are not listed thereon, on the principal
national securities exchange or automated interdealer quotation system on which
such shares are traded or (ii) if such sale price is unavailable or such shares
are not so traded, the value of such shares on such date determined in
accordance with agreed-upon procedures reasonably satisfactory to Philip Morris
and Kraft.

         "Option" has the meaning ascribed thereto in Section 6.1(a).
                                                      --------------

         "Option Notice" has the meaning ascribed thereto in Section 6.2.
                                                             -----------

         "Ownership Percentage" means, at any time, the fraction, expressed as a
percentage and rounded to the nearest thousandth of a percent, whose numerator
is the number of shares of the Applicable Stock and whose denominator is the
number of outstanding shares of Common Stock of Kraft; provided, however, that
any shares of Common Stock issued by Kraft in violation of its obligations under
Article VI of this Agreement shall not be deemed outstanding for the purpose of
determining the Ownership Percentage.

         "Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, government (and
any department or agency thereof) or other entity.

         "Philip Morris" has the meaning ascribed thereto in the preamble
hereto.

         "Philip Morris Board" means the Board of Directors of Philip Morris.

         "Philip Morris Designee" has the meaning ascribed thereto in Section
                                                                      -------
2.1(b).
------

         "Philip Morris Entities" means Philip Morris and Subsidiaries of Philip
Morris (other than Subsidiaries that constitute Kraft Entities); and "Philip
Morris Entity" shall mean any of the Philip Morris Entities.

         "Philip Morris Entity Liabilities" means, except as otherwise
specifically provided in any Transaction Document, all Liabilities, whether
arising before, at or after the Initial Public Offering Date, (i) of or in any
way relating, in whole or in part, to any Philip Morris Entity or (ii) arising
from the conduct of, in connection with or in any way relating to, in whole or
in part, the businesses and operations of the Philip Morris Entities or the
ownership or use of assets or

                                       4
<PAGE>

property in connection therewith. Notwithstanding the foregoing, "Philip Morris
Entity Liabilities" shall exclude (i) all Liabilities for Taxes of the Philip
Morris Entities (because the Tax Sharing Agreement will govern those
Liabilities); (ii) all Liabilities of the Philip Morris Entities pursuant to the
Services Agreement (because the Services Agreement will govern those
Liabilities); and (iii) all Liabilities of the Philip Morris Entities pursuant
to the Registration Rights Agreement (because the Registration Rights Agreement
will govern those Liabilities).

         "Philip Morris Group" has the meaning ascribed thereto in the recitals
to this Agreement.

         "Philip Morris Indemnitee" has the meaning ascribed thereto in Section
                                                                        -------
5.1.
---
         "Philip Morris Ownership Reduction" means any decrease at any time in
the Ownership Percentage to less than 50%.

         "Registration Rights Agreement" means the Registration Rights
Agreement, in the form attached hereto as Appendix I, to be dated as of the date
                                          ----------
hereof, between Kraft and Philip Morris.

         "Representative" shall mean, with respect to any Person, each of such
Person's directors, officers, employees, representatives, attorneys,
accountants, advisors and agents, and each of the heirs, executors and assigns
of any of the foregoing.

          "SEC" means the United States Securities and Exchange Commission.

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

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

         "Services Agreement" means the Services Agreement to be dated as of the
date hereof between Kraft and Philip Morris Management Corporation, a Delaware
corporation.

         "Subsidiary" means, as to any Person, any corporation, association,
partnership, joint venture or other business entity of which the power to direct
the vote of the majority of the votes that may be cast in the election of
directors (or other Persons acting in similar capacities) is held or controlled,
directly or indirectly, by such Person or by one or more of the Subsidiaries of
such Person or by a combination thereof. "Subsidiary," when used with respect to
Philip Morris or Kraft, shall also include any other entity affiliated with
Philip Morris or Kraft, as the case may be, that Philip Morris and Kraft may
hereafter agree in writing shall be treated as a "Subsidiary" for the purposes
of this Agreement.

         "Tax" has the meaning assigned to that term in the Tax Sharing
Agreement.

         "Tax Sharing Agreement" means the Tax Sharing Agreement to be dated as
of the date hereof between Kraft and Philip Morris.

         "Third-Party Claim" has the meaning ascribed thereto in Section 5.5.
                                                                 ------------

                                       5
<PAGE>

          "Transaction Documents" means this Agreement, the Tax Sharing
Agreement, the Registration Rights Agreement, the Services Agreement, and the
exhibits and schedules to those agreements.

          1.2.     Internal References.
                   -------------------

                   Unless the context indicates otherwise, references to
Articles, Sections and paragraphs shall refer to the corresponding articles,
sections and paragraphs in this Agreement and references to the parties shall
mean the parties to this Agreement.

                                  ARTICLE II
                          KRAFT BOARD REPRESENTATION

          2.1.     General.
                   -------

                   The provisions of this Article II contemplate that there will
                                          ----------
be nine members of the Kraft Board. If the number of members of the Kraft Board
is greater or lesser than nine, the parties shall amend this Article II to
                                                             ----------
maintain its purpose.

          2.2.     Philip Morris Designees.
                   -----------------------

                   (a) Philip Morris shall have the right to designate for
nomination by the Kraft Board (or any nominating committee thereof) to the Kraft
Board three of the members of the Kraft Board. Notwithstanding anything to the
contrary set forth herein, Kraft's obligations to Philip Morris with respect to
the election or appointment of Philip Morris designated members shall be limited
to the obligations set forth under subsection (b) and Section 2.5 below.
                                                      -----------

                   (b) Kraft shall exercise all authority under applicable law
and shall use its best efforts to cause three persons designated by Philip
Morris to be elected to the Kraft Board. Commencing with the annual meeting of
shareholders of Kraft to be held in 2002 and prior to each annual meeting of
shareholders of Kraft thereafter, Philip Morris shall be entitled to present to
the Kraft Board, or any nominating committee thereof, three designees of Philip
Morris (each, a "Philip Morris Designee") (or such other number of Philip Morris
Designees as would result in Philip Morris having the appropriate number of
Philip Morris Designees on the Kraft Board as determined pursuant to Section 2.1
above) for election to the Kraft Board at each annual meeting of shareholders of
Kraft. In the event that any Philip Morris Designee elected to the Kraft Board
shall cease to serve as a director for any reason, the vacancy resulting
therefrom shall be filled by the Kraft Board with a substitute Philip Morris
Designee.

                2.3.     Additional Members of Kraft Board.
                         ---------------------------------

                         Four of the individuals designated for nomination by
the Kraft Board (or any nominating committee thereof) to the Kraft Board shall
be unaffiliated with either Philip Morris or Kraft (the "Additional Board
Nominees"). Notwithstanding anything to the contrary set forth herein, Kraft's
obligations to Philip Morris with respect to the election or appointment of the
Additional Board Nominees shall be limited to the obligations set forth under
this Section 2.3 and Section 2.5 below. In the event that any Additional Board
                     -----------
Nominee elected to the Kraft

                                       6
<PAGE>

Board shall cease to serve as a director for any reason, the vacancy resulting
therefrom shall be filled by the Kraft Board with a substitute Additional Board
Nominee.

                2.4.     Efforts of Kraft.
                         ----------------

                         Kraft shall at all such times exercise all authority
under applicable law and use its best efforts to cause all Philip Morris
Designees and Additional Board Nominees to be nominated as Kraft Board members
by the nominating committee of the Kraft Board, if there is such a committee.
Kraft shall cause each Philip Morris Designee and Additional Board Nominee for
election to the Kraft Board to be included in the slate of designees recommended
by the Kraft Board to Kraft's shareholders for election as directors at each
annual meeting of the shareholders of Kraft (or at any special meeting held for
the election of directors) and shall use its best efforts to cause the election
of each such Philip Morris Designee and Additional Board Nominee, including
soliciting proxies in favor of the election of such persons.

                2.5.     Chairman of Kraft Board.
                         -----------------------

                         Philip Morris shall have the right to designate the
chairman of the Kraft Board. Kraft shall exercise all authority under applicable
law and shall use its best efforts to cause the person designated by Philip
Morris to be elected as chairman of the Kraft Board.

                                  ARTICLE III
                       CERTAIN COVENANTS AND AGREEMENTS

                3.1.     No Violations.
                         -------------

                         (a) Kraft covenants and agrees that it will not take
any action or enter into any commitment or agreement that may reasonably be
anticipated to result, with or without notice and with or without lapse of time
or otherwise, in a contravention or event of default by any Philip Morris Entity
of: (i) any provisions of applicable law or regulation; (ii) any provision of
Philip Morris' articles of incorporation or bylaws; (iii) any credit agreement
or other material

                                       7
<PAGE>

instrument binding upon Philip Morris in effect as of the date of this
Agreement; or (iv) any judgment, order or decree of any Governmental Entity
having jurisdiction over Philip Morris or any of its assets.

                         (b) Philip Morris covenants and agrees that it will not
take any action or enter into any commitment or agreement that may reasonably be
anticipated to result, with or without notice and with or without lapse of time
or otherwise, in a contravention or event of default by any Kraft Entity of: (i)
any provisions of applicable law or regulation; (ii) any provision of the Kraft
Articles or of the Kraft Bylaws; (iii) any credit agreement or other material
instrument binding upon Kraft in effect as of the date of this Agreement; or
(iv) any judgment, order or decree of any Governmental Entity having
jurisdiction over Kraft or any of its assets.

                         (c) Kraft and Philip Morris agree to provide to the
other any information and documentation requested by the other for the purpose
of evaluating and ensuring compliance with Sections 3.1(a) and 3.1(b) hereof.
                                           ---------------     ------

                         (d) Notwithstanding the foregoing Sections 3.1(a),
                                                           ---------------
3.1(b) and 3.1(c), nothing in this Agreement is intended to limit or restrict in
------     ------
any way Philip Morris' rights as a shareholder of Kraft.

                 3.2.    Access to Information.
                         ---------------------

                         (a) Kraft, subject to compliance by its Subsidiaries
and all of its designated Representatives with the provisions of this Section
                                                                      -------
3.2, shall afford to Philip Morris and its authorized accountants, counsel and
---
other designated Representatives reasonable access and duplicating rights (with
copying costs to be borne by Philip Morris) during normal business hours to all
books and records and documents, communications, items and matters
(collectively, "Information") within the knowledge, possession or control of
Kraft or any Kraft Entity relating to their respective businesses insofar as
such access is (i) reasonably required by Philip Morris or any Philip Morris
Entity, as the case may be, for the purpose of performing their respective
obligations under this Agreement or any other agreement between the parties, and
(ii) permitted by law (and shall use reasonable efforts to cause Persons or
firms possessing relevant Information to give similar access).

                         (b) Except as required by law, regulation or legal or
judicial process, Philip Morris agrees that neither it nor any Philip Morris
Entity nor any of their respective directors, officers or employees will,
without the prior written consent of Kraft, disclose to any Person any material,
non-public information concerning the business or affairs of Kraft acquired from
any director, officer or employee of Kraft (including any director, officer or
employee of Kraft who is also a director, officer or employee of Philip Morris).

                                       8
<PAGE>

         3.3.     Intercompany Transactions.
                  -------------------------

                  All material intercompany transactions between Kraft and
Philip Morris after the date hereof, including any material amendments to this
Agreement, the Services Agreement, the Tax Sharing Agreement or any other
agreement between Kraft and Philip Morris, will be subject to the approval of
the Audit Committee of the Kraft Board.

         3.4.     Actions Requiring Consent.
                  -------------------------

                  (a)      Kraft must obtain Philip Morris' written consent
before:

                           (i)   entering into any agreement or arrangement that
binds or purports to bind Philip Morris or any of the other Philip Morris
Entities, or contains provisions that trigger a default or require a material
payment when Philip Morris exercises any of its rights: (A) under this
Agreement; or (B) to convert the shares of Class B Common Stock into Class A
Common Stock in accordance with the terms of the Kraft Articles;

                           (ii)  declaring any extraordinary dividend or making
any other extraordinary distribution to the holders of the Common Stock; or

                           (iii) issuing any Common Stock or securities
convertible into or exercisable for Common Stock except for Class A Common Stock
issued or granted to employees of the Kraft Entities pursuant to the terms of
any stock option or other executive or employee benefit or compensation plan.

                  (b) Philip Morris may assign all or any portion of its rights
under this Section 3.4 to any transferee of shares of Common Stock previously
           -----------
held by Philip Morris; provided, that such transferee may exercise these rights
only to the extent that and so long as such transferee owns or has the right to
acquire more than 50% of the then outstanding Common Stock.

                                  ARTICLE IV
               CORPORATE OPPORTUNITIES AND CONFLICTS OF INTEREST

         4.1.     General.
                  -------

                  The provisions of this Article IV are set forth to regulate
and define the conduct of certain affairs each party and their respective
officers and directors, and the powers, rights, duties and liabilities of each
party and their respective directors and shareholders in connection therewith.

         4.2.     Business Activities.
                  -------------------

                  (a) Philip Morris shall have no duty to refrain from: (i)
engaging in the same or similar activities or lines of business as Kraft; (ii)
doing business with any customer of Kraft; and (iii) employing or engaging any
officer or employee of Kraft, and no officer or director thereof (except as
provided in Section 4.3) shall be liable to Kraft or its shareholders for breach
            -----------
of any fiduciary duty by reason of any such activities of Philip Morris.

                                       9
<PAGE>

                  (b) Kraft shall have no duty to refrain from: (i) engaging in
the same or similar activities or lines of business as Philip Morris; (ii) doing
business with any customer of Philip Morris; and (iii) employing or engaging any
officer or employee of Philip Morris, and no officer or director thereof (except
as provided in Section 4.3) shall be liable to Philip Morris or its shareholders
               -----------
for breach of any fiduciary duty by reason of any such activities of Kraft.

         4.3.     Corporate Opportunities.
                  -----------------------

                  (a) In the event that a director or officer of Kraft who is
also a director or officer of Philip Morris acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for both Kraft and
Philip Morris, such director or officer of Kraft shall have fully satisfied and
fulfilled the fiduciary duty of such director or officer to Kraft and its
shareholders with respect to such corporate opportunity, if such director or
officer acts in a manner consistent with the following policy:

                           (i) If any officer or director of Kraft who also
serves as an officer or director of Philip Morris becomes aware of a potential
transaction related primarily to the food and beverage industry, other than
beer, that may represent a corporate opportunity for both Kraft and Philip
Morris, such officer or director has no duty to present that opportunity to
Philip Morris; and Kraft will have the sole right to pursue the transaction if
the Kraft Board so determines.

                           (ii) If any officer or director of Kraft who also
serves as an officer or director of Philip Morris becomes aware of any other
potential transaction that may represent a corporate opportunity for both Kraft
and Philip Morris, such officer or director will have a duty to present that
opportunity to Philip Morris; and Philip Morris will have the sole right to
pursue the transaction if the Philip Morris Board so determines.

                  (b) If any officer or director of Kraft who does not serve as
an officer or director of Philip Morris becomes aware of a potential transaction
that may represent a corporate opportunity for both Kraft and Philip Morris,
neither Kraft nor such officer or director has a duty to present that
opportunity to Philip Morris; and Kraft may pursue the transaction if the Kraft
Board so determines.

                  (c) If any officer or director of Philip Morris who does not
serve as an officer or director of Kraft becomes aware of a potential
transaction that may represent a corporate opportunity for both Philip Morris
and Kraft, neither Philip Morris nor such officer or director has a duty to
present that opportunity to Kraft; and Philip Morris may pursue the transaction
if the Philip Morris Board so determines.

         4.4.     Philip Morris Entities and Kraft Entities.
                  -----------------------------------------

                  For purposes of this Article IV only, the term "Kraft" shall
                                       ----------
include any Kraft Entity and the term "Philip Morris" shall include any Philip
Morris Entity.

                                      10
<PAGE>

       4.5.     Notice.
                ------

                Any Person purchasing or otherwise acquiring any interest in
shares of the Common Stock shall be deemed to have notice of and to have
consented to the provisions of this Article IV.
                                    ----------

                                   ARTICLE V
                                INDEMNIFICATION

       5.1.     Kraft Indemnification of the Philip Morris Entities for Certain
                ---------------------------------------------------------------
Liabilities.
-----------

                (a) Subject to Section 5.3, on and after the Initial Public
                               -----------
Offering Date, Kraft shall indemnify and hold harmless each Philip Morris Entity
and its respective directors, officers and employees (each, a "Philip Morris
Indemnitee") from and against any and all Liabilities incurred or suffered by
any Philip Morris Indemnitee arising out of (i) any and all Kraft Entity
Liabilities and (ii) the breach by any Kraft Entity of any obligation under this
Agreement.

                (b) Subject to Section 5.3, Kraft shall indemnify and hold
                               -----------
harmless each Philip Morris Indemnitee from and against any and all Liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any document filed with the SEC by any Philip Morris Entity
pursuant to the Securities Act or the Securities Exchange Act, or caused by any
omission or alleged omission to state therein a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
those Liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information that is either furnished to
any Philip Morris Indemnitee by any Kraft Entity or incorporated by reference by
any Philip Morris Indemnitee from any filings made by any Kraft Entity with the
SEC under the Securities Act or the Securities Exchange Act, if that statement
or omission was made or occurred after the Initial Public Offering Date.

       5.2.     Philip Morris Indemnification of Kraft Entities.
                -----------------------------------------------

                (a) Subject to Section 5.3, on and after the Initial Public
                               -----------
Offering Date, Philip Morris shall indemnify and hold harmless each Kraft Entity
and their respective directors, officers and employees (each, a "Kraft
Indemnitee") from and against any and all Liabilities incurred or suffered by
any Kraft Indemnitee arising out of (i) any and all Philip Morris Entity
Liabilities and (ii) the breach by any Philip Morris Entity of any obligation
under this Agreement.

                (b) Subject to Section 5.3, Philip Morris shall indemnify and
                               -----------
hold harmless each Kraft Indemnitee from and against any and all Liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any document filed with the SEC by any Kraft Entity pursuant to the
Securities Act or the Securities Exchange Act, or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
those Liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information that is

                                      11
<PAGE>

either furnished to any Kraft Indemnitee by any Philip Morris Entity or
incorporated by reference by any Kraft Indemnitee from any filings made by any
Philip Morris Entity with the SEC under the Securities Act or the Securities
Exchange Act, if that statement or omission was made or occurred after the
Initial Public Offering Date.

         5.3.     Third-Party Rights; Tax Benefits.
                  --------------------------------

                  Any indemnification pursuant to Section 5.1 or Section 5.2
                                                  -----------    ------- ---
shall be paid net of any tax benefit to the Indemnified Party attributable to
the relevant payment. It is expressly agreed that no insurer or any other third
party shall be (i) entitled to a benefit (as a third-party beneficiary or
otherwise) that it would not be entitled to receive in the absence of Section
                                                                      -------
5.1 or Section 5.2, (ii) relieved of the responsibility to pay any claims to
---    -----------
which it is obligated or (iii) entitled to any subrogation rights with respect
to any obligation under Section 5.1 or Section 5.2.
                        -----------    ------------

         5.4.     Notice and Payment of Claims.
                  ----------------------------

                  If any Philip Morris Indemnitee or Kraft Indemnitee (the
"Indemnified Party") determines that it is or may be entitled to indemnification
by any party (the "Indemnifying Party") under Article V of this Agreement (other
                                              ---------
than in connection with any Action subject to Section 5.5), the Indemnified
                                              -----------
Party shall deliver to the Indemnifying Party a written notice specifying, to
the extent reasonably practicable, the basis for its claim for indemnification
and the amount for which the Indemnified Party reasonably believes it is
entitled to be indemnified. Within 30 days after receipt of that notice, the
Indemnifying Party shall pay the Indemnified Party that amount in cash or other
immediately available funds unless the Indemnifying Party objects to the claim
for indemnification or the amount of the claim. If the Indemnifying Party does
not give the Indemnified Party written notice objecting to that indemnity claim
and setting forth the grounds for the objection(s) within that 30-day period,
the Indemnifying Party shall be deemed to have acknowledged its liability for
that claim and the Indemnified Party may exercise any and all of its rights
under applicable law to collect that amount. If there is a timely objection by
the Indemnifying Party, the Indemnifying Party shall pay to the Indemnified
Party in cash the amount, if any, that is Finally Determined to be required to
be paid by the Indemnifying Party in respect of that indemnity claim within 15
days after that indemnity claim has been so Finally Determined.

         5.5.     Notice and Defense of Third-Party Claims.
                  ----------------------------------------

                  Promptly after the earlier of receipt of (i) notice that a
third party has commenced an Action against or otherwise involving any
Indemnified Party or (ii) information from a third party alleging the existence
of a claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought under Article V of this Agreement (a "Third-Party
                                    ---------
Claim"), the Indemnified Party shall give the Indemnifying Party written notice
of the Third-Party Claim. The failure of the Indemnified Party to give notice as
provided in this Section 5.5 shall not relieve the Indemnifying Party of its
                 -----------
obligations under this Agreement, except to the extent that the Indemnifying
Party is prejudiced by the failure to give notice. Within 30 days after receipt
of that notice, the Indemnifying Party may (i) at its option, elect to assume
and control the defense of that Third-Party Claim at its sole cost and expense
by giving written notice to that
                                      12
<PAGE>

effect to the Indemnified Party, or (ii) object to the claim for indemnification
set forth in the notice delivered by the Indemnified Party pursuant to the first
sentence of this Section 5.5; provided, that if the Indemnifying Party does not
                 -----------
within that 30-day period give the Indemnified Party written notice objecting to
that indemnification claim and setting forth the grounds for the objection(s),
the Indemnifying Party shall be deemed to have acknowledged its liability for
that indemnification claim. If the Indemnifying Party has acknowledged liability
and elected to assume the defense of a Third-Party Claim, (x) the defense shall
be conducted by counsel retained by the Indemnifying Party and reasonably
satisfactory to the Indemnified Party, provided that the Indemnified Party shall
have the right to participate in those proceedings and to be represented by
counsel of its own choosing at the Indemnified Party's sole cost and expense;
and (y) the Indemnifying Party may settle or compromise the Third-Party Claim
without the prior written consent of the Indemnified Party so long as any
settlement or compromise of the Third-Party Claim includes an unconditional
release of the Indemnified Party from all claims that are the subject of that
Third-Party Claim; provided, that the Indemnifying Party may not agree to any
such settlement or compromise pursuant to which any remedy or relief, other than
monetary damages for which the Indemnifying Party shall be responsible under
this Agreement, shall be applied to or against the Indemnified Party, without
the prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. If the Indemnifying Party does not assume the defense of
a Third-Party Claim for which it has acknowledged liability for indemnification
hereunder, the Indemnified Party will act in good faith with respect to that
Third-Party Claim and may require the Indemnifying Party to reimburse it on a
current basis for its reasonable expenses of investigation, reasonable
attorney's fees and reasonable out-of-pocket expenses incurred in investigating
and defending against that Third-Party Claim and the Indemnifying Party shall be
bound by the result obtained with respect to that claim by the Indemnified
Party; provided, that the Indemnifying Party shall not be liable for any
settlement or compromise of any Third-Party Claim effected without its consent,
which consent shall not be unreasonably withheld. The Indemnifying Party shall
pay to the Indemnified Party in cash the amount, if any, for which the
Indemnified Party is entitled to be indemnified under this Agreement within 15
days after that Third-Party Claim has been Finally Determined.

         5.6.     Contribution.
                  ------------

                  If for any reason the indemnification provided for in
Section 5.1 or 5.2 is unavailable to any Indemnified Party, or insufficient to
-----------    ---
hold it harmless, then the Indemnifying Party shall contribute to the amount
paid or payable by that Indemnified Party as a result of those Liabilities in
that proportion as is appropriate to reflect the relative fault of the
Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand, in connection with those statements or omissions, which relative fault
shall be determined by reference to the Philip Morris Entity or Kraft Entity to
which those actions, conduct, statements or omissions are primarily related, as
well as any other relevant equitable considerations.

                                      13
<PAGE>

                                  ARTICLE VI
                                    OPTION

         6.1.     Option.
                  ------

                  (a) Kraft hereby grants to Philip Morris, on the terms and
conditions set forth herein, a continuing right (the "Option") to purchase from
Kraft, at the times set forth herein, such number of shares of Class A Common
Stock as is necessary to allow the Philip Morris Entities to maintain the
Ownership Percentage. The Option shall be assignable, in whole or in part and
from time to time, by Philip Morris to any Philip Morris Entity. The exercise
price for each share of Class A Common Stock purchased pursuant to an exercise
of the Option shall be: (i) in the event of the issuance by Kraft of Class A
Common Stock in exchange for cash consideration, the per share price paid to
Kraft for shares of the Class A Common Stock issued by Kraft in the related
Issuance Event; and (ii) in the event of: (A) the issuance by Kraft of Common
Stock other than Class A Common Stock or (B) the issuance by Kraft of Class A
Common Stock for consideration other than cash, the per share Market Price of
Class A Common Stock at the Issuance Event Date of such issuance.

                  (b) The provisions of Section 6.1(a) hereof notwithstanding,
                                        --------------
the Option granted pursuant to Section 6.1(a) shall not apply and shall not be
                               --------------
exercisable in connection with the issuance by Kraft of any shares of Common
Stock in connection with the Initial Public Offering, including the full
exercise of all underwriters' over-allotment options granted in connection
therewith or pursuant to any stock option or other executive or employee benefit
or compensation plan maintained by Kraft.

         6.2.     Notice.
                  ------

                  At least 20 business days prior to the issuance of any shares
of Common Stock (other than in connection with the Initial Public Offering,
including the full exercise of all underwriters' over-allotment options granted
in connection therewith, and other than issuances of Common Stock to any Philip
Morris Entity) or the first date on which any event could occur that, in the
absence of a full or partial exercise of the Option, would result in a reduction
in the Ownership Percentage, Kraft will notify Philip Morris in writing (an
"Option Notice") of any plans it has to issue such shares or the date on which
such event could first occur. Each Option Notice must specify the date on which
Kraft intends to issue such additional shares of Common Stock or on which such
event could first occur (such issuance or event being referred to herein as an
"Issuance Event" and the date of such issuance or event as an "Issuance Event
Date"), the number of shares Kraft intends to issue or may issue and the other
terms and conditions of such Issuance Event.

         6.3.     Option Exercise and Payment.
                  ---------------------------

                  The Option may be exercised by Philip Morris (or any Philip
Morris Entity to which all or any part of the Option has been assigned) for a
number of shares equal to or less than the number of shares that are necessary
for the Philip Morris Entities to maintain, in the aggregate, the then-current
Ownership Percentage. The Option may be exercised at any time after receipt of
an applicable Option Notice and prior to the applicable Issuance Event Date by
the delivery to Kraft of a written notice to such effect specifying (i) the
number of shares of Class

                                      14
<PAGE>

A Common Stock to be purchased by Philip Morris, or any of the Philip Morris
Entities and (ii) a determination of the exercise price for such shares. Upon
any such exercise of the Option, Kraft will, prior to the applicable Issuance
Event Date, deliver to Philip Morris (or any Philip Morris Entity designated by
Philip Morris), against payment therefor, certificates (issued in the name of
Philip Morris or its permitted assignee hereunder or as directed by Philip
Morris) representing the shares of Class A Common Stock being purchased upon
such exercise. Payment for such shares shall be made by wire transfer or
intrabank transfer of immediately-available funds to such account as shall be
specified by Kraft, for the full purchase price for such shares.

         6.4.     Effect of Failure to Exercise.
                  -----------------------------

                  Except as provided in Section 6.5, any failure by Philip
                                        -----------
Morris to exercise the Option, or any exercise for less than all shares
purchasable under the Option, in connection with any particular Issuance Event
shall not affect Philip Morris' right to exercise the Option in connection with
any subsequent Issuance Event; provided, however, that the Ownership Percentage
following such Issuance Event in connection with which Philip Morris so failed
to exercise such Option in full or in part shall be recalculated as set forth in
Section 1.1.
-----------

         6.5.     Termination of Option.
                  ---------------------

                  The Option, or any part thereof assigned to any Philip Morris
Entity other than Philip Morris, shall terminate in the event that the Person to
whom the Option, or such part thereof, has been transferred, ceases to be a
Philip Morris Entity for any reason whatsoever.

                                  ARTICLE VII
                              REGISTRATION RIGHTS

                  Philip Morris and Kraft shall enter into the Registration
Rights Agreement in the form as set forth on the attached Appendix I, which will
                                                          ----------
govern the registration rights of Philip Morris and certain other holders of the
Common Stock.

                                 ARTICLE VIII
                                     TERM

                  This Agreement shall remain in effect until the Ownership
Percentage is less than 50%; provided, however, that: (i) the provisions of
Section 3.4 and Article VII shall remain in effect until terminated in
-----------     -----------
accordance with their terms; and (ii) the provisions of Article V shall survive
any termination of this Agreement.                      ---------

                                  ARTICLE IX
                                 MISCELLANEOUS

         9.1.     Limitation of Liability.
                  -----------------------

                  Neither Philip Morris nor Kraft shall be liable to the other
for any special, indirect, incidental or consequential damages of the other
arising in connection with this Agreement.

                                      15
<PAGE>

         9.2.     Subsidiaries.
                  ------------

                  Philip Morris agrees and acknowledges that Philip Morris shall
be responsible for the performance by each Philip Morris Entity of the
obligations hereunder applicable to such Philip Morris Entity. Kraft agrees and
acknowledges that Kraft shall be responsible for the performance by each Kraft
Entity of the obligations hereunder applicable to such Kraft Entity.

         9.3.     Amendments.
                  ----------

                  This Agreement may not be amended or terminated orally, but
only by a writing duly executed by or on behalf of the parties hereto. Subject
to the approval requirements provided for in Section 3.3, any such amendment
                                             -----------
shall be validly and sufficiently authorized for purposes of this Agreement if
it is signed on behalf of Philip Morris and Kraft by any of their respective
presidents or vice presidents.

         9.4.     Severability.
                  ------------

                  If any provision of this Agreement or the application of any
such provision to any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid, illegal or unenforceable to any extent,
the remainder of this Agreement or such provision of the application of such
provision to such party or circumstances, other than those to which it is so
determined to be invalid, illegal or unenforceable, shall remain in full force
and effect to the fullest extent permitted by law and shall not be affected
thereby, unless such a construction would be unreasonable.

         9.5.     Notices.
                  -------

                  All notices and other communications required or permitted
hereunder shall be in writing, shall be deemed duly given upon actual receipt,
and shall be delivered (a) in person, (b) by registered or certified mail,
postage prepaid, return receipt requested or (c) by facsimile or other generally
accepted means of electronic transmission (provided that a copy of any notice
delivered pursuant to this clause (c) shall also be sent pursuant to clause
(b)), addressed as follows:

              (a) if to Kraft, to:
                  Kraft Foods Inc.
                  Three Lakes Drive
                  Northfield, Illinois  60093
                  Attention:  General Counsel
                  With a copy to:  Corporate Secretary
                  Telecopy No.:

                                      16
<PAGE>

             (b) if to Philip Morris, to:
                 Philip Morris Companies Inc.
                 120 Park Avenue
                 New York, New York
                 Attention:  General Counsel
                 With a copy to:  Corporate Secretary
                 Telecopy No.:

or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.

        9.6.     Further Assurances.
                 ------------------

                 Philip Morris and Kraft shall execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such instruments
and take such other action as may be necessary or advisable to carry out their
obligations under this Agreement and under any exhibit, document or other
instrument delivered pursuant hereto.

        9.7.     Counterparts.
                 ------------

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

        9.8.     Governing Law.
                 -------------

                 This Agreement and the transactions contemplated hereby shall
be construed in accordance with, and governed by, the laws of the Commonwealth
of Virginia.

        9.9.     Entire Agreement.
                 ----------------

                 This Agreement constitutes the entire understanding of the
parties hereto with respect to the subject matter hereof.

        9.10.    Successors.
                 ----------

                 Except specifically provided in this Agreement, the parties
hereto may not assign any of their rights or obligations under this Agreement.
This Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
other person or entity any benefits, rights or remedies, including any
shareholder of any party hereto.

                                      17
<PAGE>

         9.11.    Specific Performance.
                  --------------------

                  The parties hereto acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, it is agreed that they shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any other
remedy to which they may be entitled at law or equity.

                                      18
<PAGE>

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

                        PHILIP MORRIS COMPANIES INC.

                        By: ______________________________
                        Name:
                        Title:

                        KRAFT FOODS INC.

                        By: ______________________________
                        Name:
                        Title:

                                      19<PAGE>

                                                                    Exhibit 10.2
                                                                    ------------

                               SERVICES AGREEMENT
                               ------------------

          This Services Agreement, dated as of January 1, 2001 by and between
Philip Morris Management Corp., a New York corporation ("PMMC"), and Kraft
Foods Inc., a Virginia corporation ("Kraft"), recites and provides:

          WHEREAS, PMMC currently provides certain services to the wholly-owned
subsidiaries of Kraft (the "Kraft Subsidiaries"); and

          WHEREAS, it is contemplated that an initial public offering will be
made of a portion of the capital stock of Kraft, resulting in partial public
ownership of Kraft, and that PMMC and Kraft both desire for PMMC to continue to
provide certain services to Kraft and the Kraft Subsidiaries following the
initial public offering; and

          WHEREAS, PMMC and Kraft desire to enter into this Agreement to set
forth the roles and responsibilities with regard to services to be provided by
PMMC to Kraft.

          NOW, THEREFORE, the parties agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

     1.1. Affiliate
          ---------

          of a Person shall mean a Person that directly or indirectly controls,
is controlled by, or is under common control with, the first Person. For
purposes of this definition, "Control" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "Controlling" and "Controlled" have meanings
correlative to the foregoing.

     1.2. AOP
          ---

          shall have the meaning specified in Section 5.1.
                                              -----------

     1.3. Confidential Information
          ------------------------

          shall have the meaning specified in Section 9.1.
                                              -----------

     1.4. Governmental Authority
          ----------------------

          shall mean any federal, state, local, or foreign government or
governmental, quasi-governmental, administrative or regulatory authority,
agency, body, or entity, including any court or other tribunal.

     1.5. Kraft Subsidiaries
          ------------------

          shall have the meaning specified in the Recitals to this Agreement.
<PAGE>

     1.6.  Parties
           -------

           shall mean PMMC and Kraft (Party means either PMMC or Kraft).

     1.7.  Person
           ------

           shall mean an individual, corporation, partnership, trust,
association, or entity of any kind or nature; or a Governmental Authority.

     1.8.  Records
           -------

           shall have the meaning specified in Section 2.4.
                                               -----------

     1.9.  Representative
           --------------

           shall have the meaning specified in Section 4.1.
                                               -----------

     1.10. Services
           --------

           shall have the meaning specified in Section 2.1.
                                               -----------

                                   ARTICLE II
                             SERVICES TO BE PROVIDED

     2.1.  Exhibits.
           --------

           (a) Exhibits 1 through 13 attached to and made a part of this
Agreement describe the services to be provided by PMMC to Kraft and one or more
of the Kraft Subsidiaries, as designated from time to time by Kraft (the
"Services"). The Parties have made a good faith effort as of the date hereof to
identify each Service and to complete the content of the Exhibits accurately. It
is anticipated that the Parties will modify the Services from time to time. In
that case or to the extent that any Exhibit is incomplete, the Parties will use
good faith efforts to modify the Exhibits. There are certain terms that are
specifically addressed in the Exhibits attached hereto that may differ from the
terms provided hereunder. In those cases, the specific terms described in the
Exhibits shall govern that Service.

           (b) The Parties may also identify additional Services that they wish
to incorporate into this Agreement. The Parties will create additional Exhibits
setting forth the description of such Services, the Fees for such Services and
any other applicable terms.

     2.2.  Independent Contractors.
           -----------------------

           PMMC will provide the Services either through its own resources, the
resources of its subsidiaries or Affiliates, or by contracting with independent
contractors as agreed hereunder. To the extent that PMMC decides to provide a
Service through an independent contractor in the future, PMMC shall consult with
and obtain the prior approval of Kraft, which approval shall not be unreasonably
withheld.

                                      -2-
<PAGE>

     2.3.  Standard of Care.
           ----------------

           In providing the Services hereunder PMMC will exercise the same
degree of care as it has historically exercised in providing such Services to
its Affiliates prior to the date hereof, including at least the same level of
quality, responsiveness and timeliness as has been exercised by PMMC with
respect to such Services.

     2.4.  Records.
           -------

           PMMC shall keep full and detailed records dealing with all aspects of
the Services performed by it hereunder (the "Records") and:

           (a) shall provide access to the Records to Kraft at all reasonable
times; and

           (b) shall maintain the Records in accordance with good record
management practices and with at least the same degree of completeness and care
as it maintains for its other similar business interests.

                                   ARTICLE III
                                      FEES

     3.1.  General.
           -------

           Kraft will pay to PMMC a fixed annual fee for each Service as set
forth in the attached Exhibits (collectively, the "Fees"). The Fees constitute
full compensation to PMMC for all charges, costs and expenses incurred by PMMC
on behalf of Kraft in providing the Services, unless otherwise specifically
provided in the Exhibits or agreed in an AOP (as defined below). Except as
specifically provided herein or in the Exhibits, or as subsequently agreed in an
AOP or otherwise by Kraft, Kraft will not be responsible to PMMC or to any
independent contractor retained by PMMC, for any additional fees, charges, costs
or expenses relating to the Services, unless such additional fees, charges,
costs or expenses are a direct result of Kraft's unilateral deviation from the
scope of the services defined in the Exhibits.

     3.2.  Payments.
           --------

           PMMC will deliver to Kraft, no later than the last day of each month,
an invoice for the aggregate Fees incurred for that month. Kraft will pay to
PMMC, through inter-company cash transfer monthly no later than the third
Wednesday of the following month, the aggregate Fees incurred during the
previous month.

     3.3.  Review of Fees.
           --------------

           (a) At the end of each six months during the term of the Agreement,
commencing as of the date of the Agreement, PMMC will review the charges, costs
and expenses actually incurred by PMMC in providing any Service, as well as the
calculation of any related Fee (collectively, "Actual Cost") during the previous
six months. In the event that PMMC determines that the Actual Cost for any
Service differs from the aggregate Fees for that Service

                                      -3-
<PAGE>

for that period by more than 2%, PMMC will deliver to Kraft documentation for
such Actual Cost and the Parties will renegotiate in good faith to adjust the
appropriate Fees accordingly, retroactively or prospectively.

           (b) As a part of the AOP process referred to in Section 5.1, the
                                                           -----------
Parties will set Fees or new budgets for each ensuing year, and may make other
changes to the Fees with respect to each Service, based upon an increase or
reduction to such Service. Once an AOP has been finalized (whether by agreement
or pursuant to the provisions of Section 5.1), the Fee for each Service set out
                                 -----------
in that AOP will apply for the ensuing year, subject to any subsequent written
agreements between Parties.

                                   ARTICLE IV
                                 REPRESENTATIVES

     4.1.  Representatives.
           ---------------

           (a) The Controller of Philip Morris Companies Inc. and the Controller
of Kraft will serve as administrative representatives ("Representative(s)") of
PMMC and Kraft, respectively, to facilitate day-to-day communications and
performance under this Agreement. Each Party may treat an act of a
Representative of the other Party as being authorized by such other Party. Each
Party may replace its Representative by giving written notice of the replacement
to the other Party.

           (b) No additional Exhibits, modifications to existing Exhibits,
modifications to an AOP approved pursuant to Section 5.1, or amendments to this
                                             -----------
Agreement shall be effective unless and until executed by the Representatives of
each of PMMC and Kraft.

                                    ARTICLE V
                                PLANNING PROCESS

     5.1.  Annual Operating Plan.
           ---------------------

           The Representative of each Party will coordinate the development of
an annual operating plan ("AOP") setting forth the specific objectives, Service
standards, performance measures, activity levels and a detailed budget for each
of the Services. In the AOP process, the Parties agree to use their best efforts
to harmonize the interests of Kraft to have quality services at affordable cost
and the interest of PMMC to recover its costs of performing the Services. On or
before November 15 of each calendar year, an AOP for each Service for the next
calendar year will be submitted to the Controller and Chief Financial Officer
("CFO") of Kraft by the Treasurer and Controller of Philip Morris Companies Inc.
on behalf of PMMC, for review and approval. Approval by the CFO of Kraft and the
CFO of Philip Morris Companies Inc. will constitute approval by the Parties of
the AOP.

     5.2.  Performance Review.
           ------------------

           The Parties will meet annually on or about September 30 to review
progress against the AOP objectives, Service standards, performance measures and
activity levels. The

                                      -4-
<PAGE>

Parties will use their good faith efforts to resolve any issues concerning
Service standards, performance measures or changes in Fees from the AOP during
these meetings. If the Parties are unable to resolve those issues, they will
refer the disputed issues to the CFO of Kraft and the CFO of Philip Morris
Companies Inc. on behalf of PMMC, pursuant to Article VII.
                                              -----------

                                   ARTICLE VI
                             THIRD PARTY AGREEMENTS

           To the extent that it is not practicable to have Kraft as the
contracting Party for a third party obligation, PMMC, with respect to all
Services supplied by PMMC or contracted for by PMMC on behalf of Kraft, shall
use commercially reasonable efforts to cause all such third party contracts to
extend to and be enforceable by Kraft, or to assign such contracts to Kraft. In
the event that such contracts are not extendable or assignable, PMMC shall act
as agent for Kraft in the pursuit of any claims, issues, demands or actions
against such third party provider at Kraft's expense. Kraft will indemnify PMMC
for any liability under third party contracts arising directly out of the acts
or omissions of Kraft.

                                   ARTICLE VII
                 AUTHORITY; INFORMATION; COOPERATION; CONSENTS

     7.1.  Authority.
           ---------

           Each Party warrants to the other Party that:

           (a) it has the requisite corporate authority to enter into and
perform this Agreement;

           (b) its execution, delivery, and performance of this Agreement have
been duly authorized by all requisite corporate action on its behalf;

           (c) this Agreement is enforceable against it; and

           (d) it has obtained all consents or approvals of Governmental
Authorities and other Persons that are conditions to its entering into this
Agreement.

     7.2. Information Regarding Services.
          ------------------------------

           Each Party shall make available to the other Party any information
required or reasonably requested by that other Party regarding the performance
of any Service and shall be responsible for timely providing that information
and for the accuracy and completeness of that information; provided, however,
                                                           --------  -------
that a Party shall not be liable for not providing any information that is
subject to a confidentiality obligation owed by it to a Person other than an
Affiliate of it or the other Party. PMMC shall not be liable for any impairment
of any Service caused by its not receiving information, either timely or at all,
or by its receiving inaccurate or incomplete information from Kraft that is
required or reasonably requested regarding that Service.

                                      -5-
<PAGE>

     7.3.  Cooperation.
           -----------

           The Parties will use good faith efforts to cooperate with each other
in all matters relating to the provision and receipt of Services. Such good
faith cooperation will include providing electronic access to systems used in
connection with Services and using commercially reasonable efforts to obtain all
consents, licenses, sublicenses or approvals necessary to permit each Party to
perform its obligations. The Parties will cooperate with each other in making
such information available as needed in the event of any and all internal or
external audits, whether in the United States or any other country. If this
Agreement is terminated in whole or in part, the Parties will cooperate with
each other in all reasonable respects in order to effect an efficient transition
and to minimize the disruption to the business of both Parties, including the
assignment or transfer of the rights and obligations under any contracts.

     7.4.  Further Assurances.
           ------------------

          Each Party shall take such actions, upon request of the other Party
and in addition to the actions specified in this Agreement, as may be necessary
or reasonably appropriate to implement or give effect to this Agreement.

                                  ARTICLE VIII
                               AUTHORITY AS AGENT

           PMMC is hereby authorized to act as agent for Kraft for the purpose
of performing Services hereunder and as is necessary or desirable to perform
such Services. Kraft will execute and deliver or cause the appropriate Kraft
Subsidiary to execute and deliver to PMMC any document or other evidence which
may be reasonably required by PMMC to demonstrate to third parties the authority
of PMMC described in this Article VIII.
                          ------------

                                   ARTICLE IX
                            CONFIDENTIAL INFORMATION

     9.1.  Definition.
           ----------

           For the purposes of this Agreement, "Confidential Information" means
non-public information about the disclosing Party's or any of its Affiliates'
business or activities that is proprietary and confidential, which shall
include, without limitation, all business, financial, technical and other
information, including software (source and object code) and programming code,
of a Party or its Affiliates marked or designated "confidential" or
"proprietary" or by its nature or the circumstances surrounding its disclosure
should reasonably be regarded as confidential. Confidential Information includes
not only written or other tangible information, but also information transferred
orally, visually, electronically or by any other means. Confidential Information
will not include information that (i) is in or enters the public domain without
breach of this Agreement, or (ii) the receiving Party lawfully receives from a
third party without restriction on disclosure and to the receiving Party's
knowledge without breach of a nondisclosure obligation.

                                      -6-
<PAGE>

     9.2.  Nondisclosure.
           -------------

           Each of PMMC and Kraft agree that (i) it will not disclose to any
third party or use any Confidential Information disclosed to it by the other
except as expressly permitted in this Agreement, and (ii) it will take all
reasonable measures to maintain the confidentiality of all Confidential
Information of the other Party in its possession or control, which will in no
event be less than the measures it uses to maintain the confidentiality of its
own information of similar type and importance.

     9.3.  Permitted Disclosure.
           --------------------

           Notwithstanding the foregoing, each Party may disclose Confidential
Information (i) to the extent required by a court of competent jurisdiction or
other governmental authority or otherwise as required by law, including without
limitation disclosure obligations imposed under the federal securities laws,
provided that such Party has given the other Party prior notice of such
requirement when legally permissible to permit the other Party to take such
legal action to prevent the disclosure as it deems reasonable, appropriate or
necessary, or (ii) on a "need-to-know" basis under an obligation of
confidentiality to its consultants, legal counsel, Affiliates, accountants,
banks and other financing sources and their advisors.

     9.4.  Ownership of Confidential Information.
           -------------------------------------

           All Confidential Information supplied or developed by either Party
shall be and remain the sole and exclusive property of the Party who supplied or
developed it.

                                    ARTICLE X
                              TERM AND TERMINATION

     10.1. Term.
           ----

           This Agreement shall remain in effect until such time as it has been
terminated as to all Services in accordance with Section 10.2 below.
                                                 ------------

     10.2. Termination.
           -----------

           Either Party may terminate this Agreement without cause with respect
to one or more Services under this Agreement by providing twelve months' written
notice to the other Party or as otherwise agreed between the Parties hereto.

     10.3. Termination Assistance Services.
           -------------------------------

           PMMC agrees that, upon termination of this Agreement or any of the
Exhibits, PMMC will cooperate in good faith with Kraft to provide Kraft (or its
designee) with reasonable assistance to make an orderly transition from PMMC to
another supplier of the Services. Transition assistance services shall include
the following:

           (a) developing a transition plan with assistance from Kraft or its
designee;

                                      -7-
<PAGE>

            (b) providing training to Kraft personnel or its designee's
personnel to perform Services; and

            (c) organizing and delivering to Kraft records and documents
necessary to allow continuation of the Services, including delivering such
materials in electronic forms and versions as requested by Kraft.

                                   ARTICLE XI
                    LIMITATION OF LIABILITY; INDEMNIFICATION

     11.1.  Limitation of Liability.
            -----------------------

            Except as may be provided in Section 11.2 below, PMMC, its
                                         ------------
controlling persons, if any, directors, officers, employees, agents and
permitted assigns (each, a "PMMC Party") shall not be liable to Kraft, the Kraft
Subsidiaries and their respective directors, officers, employees, agents or
permitted assigns (each, a "Kraft Party") and each Kraft Party shall not be
liable to any PMMC Party, in each case, for any liabilities, claims, damages,
losses or expenses, including, but not limited to, any special, indirect,
incidental or consequential damages, of a Kraft Party or a PMMC Party arising in
connection with this Agreement and the Services provided hereunder.

     11.2.  Indemnification.
            ---------------

            (a) PMMC shall indemnify, defend and hold harmless each of the Kraft
Parties from and against all liabilities, claims, damages, losses and expenses
(including, but not limited to, court costs and reasonable attorneys' fees)
(collectively referred to as "Damages") of any kind or nature, of third parties
unrelated to any Kraft Party caused by or arising in connection with the gross
negligence or willful misconduct of any employee of PMMC in connection with the
performance of the Services, except to the extent that Damages were caused
directly or indirectly by acts or omissions of any Kraft Party. Notwithstanding
the foregoing, PMMC shall not be liable for any special, indirect, incidental,
or consequential damages relating to such third party claims.

            (b) Kraft shall indemnify, defend and hold harmless each of the PMMC
Parties from and against all Damages of any kind or nature, of third parties
unrelated to any PMMC Party caused by or arising in connection with the gross
negligence or willful misconduct of any employee of Kraft in connection with
Kraft's performance under this Agreement, except to the extent that Damages were
caused directly or indirectly by acts or omissions of any PMMC Party.
Notwithstanding the foregoing, Kraft shall not be liable for any special,
indirect, incidental, or consequential damages relating to such third party
claims.

     11.3.  Indemnification Procedures.
            --------------------------

            (a) A party entitled to indemnification pursuant to this Agreement
(an "Indemnified Party") shall, with respect to any claim made against such
Indemnified Party for which indemnification is available, notify the other party
(the "Indemnifying Party") in writing of the nature of the claim as soon as
practicable but not more than ten days after the Indemnified Party receives
notice of the assertion of the claim. (The failure by an Indemnified Party to
give

                                      -8-
<PAGE>

notice as provided above, shall not relieve the Indemnifying Party of its
obligations under this Section 11.3, except to the extent that the failure
                       ------------
results in the failure of actual notice and the Indemnifying Party is damaged as
a result of the failure to give notice.) Upon receipt of notice of the assertion
of a claim, the Indemnifying Party may, at its option, assume the defense of the
claim, and if so, the Indemnifying Party shall employ counsel reasonably
acceptable to the Indemnified Party. If the Indemnifying Party assumes the
defense, the Indemnified Party shall have the right to employ separate counsel
and to participate in (but not control) any such action, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Party unless
(a) the employment of counsel by the Indemnified Party has been authorized by
the Indemnifying Party, or (b) the Indemnified Party has been advised by its
counsel in writing that there is a conflict of interest between the Indemnifying
Party and the Indemnified Party in the conduct of the defense of the action (in
which case the Indemnifying Party shall not have the right to direct the defense
of the action on behalf of the Indemnified Party), in each of which cases the
reasonable fees and expenses of such counsel shall be at the expense of the
Indemnifying Party. If the Indemnifying Party does not assume the defense, the
Indemnified Party shall have the right to employ counsel and to control any such
action, and the reasonable fees and expenses of such counsel shall be at the
expense of the Indemnifying Party. An Indemnifying Party shall not be liable for
any settlement of an action effected without its written consent (which consent
shall not be unreasonably withheld), nor shall an Indemnifying Party settle any
such action without the written consent of the Indemnified Party (which consent
shall not be unreasonably withheld). No Indemnifying Party will consent to the
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
Indemnified Party a release from all liability with respect to the claim. Each
of the Indemnifying Party and the Indemnified Party shall cooperate in the
defense of any claim for which indemnification is available and shall furnish
such records, information, testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may reasonably be requested.

                                   ARTICLE XII
                               DISPUTE RESOLUTION

            If any AOP is not submitted or is not approved by the Parties, or if
the Parties are unable to resolve any service, performance or budget issues or
if there is a material breach of this Agreement that has not been corrected
within thirty (30) days of receipt of notice of such breach, the Controller and
CFO of Kraft and the Treasurer and Controller of Philip Morris Companies Inc.,
on behalf of PMMC, will meet promptly to review and resolve those issues in good
faith.

                                      -9-
<PAGE>

                                  ARTICLE XIII
                                  MISCELLANEOUS

     13.1.  Governing Law.
            -------------

            This Agreement and performance hereunder will be governed by and
construed in accordance with the laws of the Commonwealth of Virginia without
regard to the principles of conflict of laws.

     13.2.  Assignment.
            ----------

            This Agreement is not assignable in whole or in part by either Party
without the prior written consent of the other; provided that either Party may
                                                -------- ----
assign this Agreement in whole or in part to a parent, a direct or indirect
wholly-owned subsidiary, an Affiliate or a successor thereto.

     13.3.  Entire Agreement.
            ----------------

            This Agreement, including the attached Exhibits, is the complete and
exclusive statement of the agreement between the Parties and supersedes all
prior proposals, understandings and all other agreements, oral and written,
between the Parties relating to the subject matter of this Agreement. This
Agreement may not be modified or altered except by written instrument duly
executed by both Parties.

     13.4.  Force Majeure.
            -------------

            Any delay or failure by either Party in the performance of this
Agreement will be excused to the extent that the delay or failure are due solely
to causes or contingencies beyond the reasonable control of such Party.

     13.5.  Severability.
            ------------

            If any provision, clause or part of this Agreement, or the
application thereof under certain circumstances is held invalid or unenforceable
for any reason, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances shall not be affected
thereby.

     13.6.  Notices.
            -------

            All communications, notices and disclosures required or permitted by
this Agreement shall be in writing and shall be deemed to have been given one
day after being delivered personally or by messenger or being received via
telecopy, telex or other electronic transmission, or two days after being sent
by overnight delivery service, in all cases addressed to the person for whom it
is intended at the addresses as follows:

            If to PMMC:

                                      -10-
<PAGE>

            Joseph A. Tiesi
            Vice President and Controller
            Philip Morris Companies Inc.
            120 Park Avenue
            New York, New York  10017
            (917) 663-5000

            If to Kraft:

            John F. Mowrer III
            Vice President and Controller
            Kraft Foods Inc.
            Three Lakes Drive
            Northfield, IL  60093-2753
            (847) 646-2000

            or to such other address as a Party shall have designated by notice
in writing to the other Party in the manner provided by this Section 13.6.
                                                             ------------

     13.7.  Counterparts; Headings.
            ----------------------

            This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. The Article and Section headings in this
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.

                                      -11-
<PAGE>

            IN WITNESS WHEREOF, the Parties have signed this Agreement on the
date first set forth above.

                                 PHILIP MORRIS MANAGEMENT CORP.

                                 By:_____________________________

                                    Name:________________________

                                    Title:_______________________

                                 KRAFT FOODS INC.

                                 By:_____________________________

                                    Name:________________________

                                    Title:_______________________

                                      -12-

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