SEC Filing | Mondelēz International, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-16483

Kraft Foods Inc.
(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation or organization)	52-2284372 (I.R.S. Employer Identification No.)
Three Lakes Drive, Northfield, Illinois (Address of principal executive offices)	60093 (Zip Code)
Registrant's telephone number, including area code (847) 646-2000
Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

At July 30, 2004, there were 535,161,899 shares of the registrant's Class A Common Stock outstanding, and 1,180,000,000 shares of the registrant's Class B Common Stock outstanding.

KRAFT FOODS INC.

TABLE OF CONTENTS

		Page No.
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at June 30, 2004 and December 31, 2003	3-4
	Condensed Consolidated Statements of Earnings for the Six Months Ended June 30, 2004 and 2003	5
	Three Months Ended June 30, 2004 and 2003	6
	Condensed Consolidated Statements of Shareholders' Equity for the Year Ended December 31, 2003 and the Six Months Ended June 30, 2004	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003	8-9
	Notes to Condensed Consolidated Financial Statements	10-21
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22-43
Item 4.	Controls and Procedures	44
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	45-46
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	46
Item 6.	Exhibits and Reports on Form 8-K	47
Signature		48

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Kraft Foods Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions of dollars)
(Unaudited)

			June 30, 2004		December 31, 2003
ASSETS
	Cash and cash equivalents		$	164	$	514
	Receivables (less allowances of $108 and $114)			3,365		3,369
	Inventories:
		Raw materials		1,534		1,375
		Finished product		2,064		1,968

				3,598		3,343
	Deferred income taxes			659		681
	Other current assets			274		217

		Total current assets		8,060		8,124
	Property, plant and equipment, at cost			15,757		15,805
		Less accumulated depreciation		5,952		5,650

				9,805		10,155
	Goodwill			25,756		25,402
	Other intangible assets, net			11,120		11,477
	Prepaid pension assets			3,554		3,243
	Other assets			828		884

		TOTAL ASSETS	$	59,123	$	59,285

See notes to condensed consolidated financial statements.

Continued

Kraft Foods Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(in millions of dollars)
(Unaudited)

				June 30, 2004			December 31, 2003
LIABILITIES
	Short-term borrowings			$	481		$	553
	Current portion of long-term debt				1,498			775
	Due to Altria Group, Inc. and affiliates				307			543
	Accounts payable				1,856			2,005
	Accrued liabilities:
			Marketing		1,468			1,500
			Employment costs		532			699
			Other		1,341			1,335
	Income taxes				525			451

		Total current liabilities			8,008			7,861
	Long-term debt				10,972			11,591
	Deferred income taxes				5,771			5,856
	Accrued postretirement health care costs				1,921			1,894
	Other liabilities				3,574			3,553

		Total liabilities			30,246			30,755
Contingencies (Note 6)
SHAREHOLDERS' EQUITY
	Class A common stock, no par value (555,000,000 shares issued)
	Class B common stock, no par value (1,180,000,000 shares issued and outstanding)
	Additional paid-in capital				23,769			23,704
	Earnings reinvested in the business				7,527			7,020
	Accumulated other comprehensive losses (primarily currency translation adjustments)				(1,827	)		(1,792	)

					29,469			28,932
	Less cost of repurchased stock (18,750,181 and 13,062,876 Class A shares)				(592	)		(402	)

		Total shareholders' equity			28,877			28,530

		TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	59,123		$	59,285

See notes to condensed consolidated financial statements.

Kraft Foods Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(in millions of dollars, except per share data)
(Unaudited)

			For the Six Months Ended June 30,
			2004		2003
Net revenues			$	15,898	$	15,200
Cost of sales				9,921		9,044

		Gross profit		5,977		6,156
Marketing, administration and research costs				3,303		3,035
Asset impairment and exit costs				437
Amortization of intangibles				6		5

		Operating income		2,231		3,116
Interest and other debt expense, net				324		343

		Earnings before income taxes and minority interest		1,907		2,773
Provision for income taxes				646		974

		Earnings before minority interest		1,261		1,799
Minority interest in earnings, net				3		2

		Net earnings	$	1,258	$	1,797

Per share data:
	Basic earnings per share		$	0.73	$	1.04

	Diluted earnings per share		$	0.73	$	1.04

	Dividends declared		$	0.36	$	0.30

See notes to condensed consolidated financial statements.

Kraft Foods Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(in millions of dollars, except per share data)
(Unaudited)

			For the Three Months Ended June 30,
			2004		2003
Net revenues			$	8,205	$	7,841
Cost of sales				5,173		4,695

		Gross profit		3,032		3,146
Marketing, administration and research costs				1,657		1,515
Asset impairment and exit costs				129
Amortization of intangibles				4		3

		Operating income		1,242		1,628
Interest and other debt expense, net				159		164

		Earnings before income taxes and minority interest		1,083		1,464
Provision for income taxes				383		514

		Earnings before minority interest		700		950
Minority interest in earnings, net				2		1

		Net earnings	$	698	$	949

Per share data:
	Basic earnings per share		$	0.41	$	0.55

	Diluted earnings per share		$	0.41	$	0.55

	Dividends declared		$	0.18	$	0.15

See notes to condensed consolidated financial statements.

Kraft Foods Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
For the Year Ended December 31, 2003 and
the Six Months Ended June 30, 2004
(in millions of dollars, except per share data)
(Unaudited)

										Accumulated Other Comprehensive Earnings/(Losses)
			Class A and B Common Stock							Accumulated Other Comprehensive Earnings/(Losses)												Total Share- holders' Equity
			Class A and B Common Stock		Additional Paid-in Capital		Earnings Reinvested in the Business			Currency Translation Adjustments			Other			Total			Cost of Repurchased Stock			Total Share- holders' Equity
Balances, January 1, 2003			$	—	$	23,655	$	4,814		$	(2,249	)	$	(218	)	$	(2,467	)	$	(170	)	$	25,832
Comprehensive earnings:
	Net earnings							3,476															3,476
	Other comprehensive earnings (losses), net of income taxes:
		Currency translation adjustments									755						755						755
		Additional minimum pension liability												(68	)		(68	)					(68	)
		Change in fair value of derivatives accounted for as hedges												(12	)		(12	)					(12	)

	Total other comprehensive earnings																						675

Total comprehensive earnings																							4,151

Exercise of stock options and issuance of other stock awards						49		(129	)											148			68
Cash dividends declared ($0.66 per share)								(1,141	)														(1,141	)
Class A common stock repurchased																				(380	)		(380	)

Balances, December 31, 2003				—		23,704		7,020			(1,494	)		(298	)		(1,792	)		(402	)		28,530
Comprehensive earnings:
	Net earnings							1,258															1,258
	Other comprehensive earnings (losses), net of income taxes:
		Currency translation adjustments									(36	)					(36	)					(36	)
		Additional minimum pension liability												(10	)		(10	)					(10	)
		Change in fair value of derivatives accounted for as hedges												11			11						11

	Total other comprehensive losses																						(35	)

Total comprehensive earnings																							1,223

Exercise of stock options and issuance of other stock awards						65		(132	)											135			68
Cash dividends declared ($0.36 per share)								(619	)														(619	)
Class A common stock repurchased																				(325	)		(325	)

Balances, June 30, 2004			$	—	$	23,769	$	7,527		$	(1,530	)	$	(297	)	$	(1,827	)	$	(592	)	$	28,877

Total comprehensive earnings were $510 million and $1,324 million, respectively, for the quarters ended June 30, 2004 and 2003 and $2,297 million for the first six months of 2003.

See notes to condensed consolidated financial statements.

Kraft Foods Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions of dollars)
(Unaudited)

			For the Six Months Ended June 30,
			2004			2003
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings			$	1,258		$	1,797
Adjustments to reconcile net earnings to operating cash flows:
	Depreciation and amortization			424			388
	Deferred income tax provision			59			32
	Integration costs, net of cash paid			(1	)		(8	)
	Asset impairment and exit costs, net of cash paid			394
	Cash effects of changes, net of the effects from acquired and divested companies:
		Receivables, net		27			(54	)
		Inventories		(275	)		(103	)
		Accounts payable		(113	)		(411	)
		Income taxes		48			251
		Amounts due to Altria Group, Inc. and affiliates		62			14
		Other working capital items		(350	)		(297	)
	Change in pension assets and postretirement liabilities, net			(340	)		(49	)
	Other			139			19

		Net cash provided by operating activities		1,332			1,579

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
	Capital expenditures			(353	)		(497	)
	Purchases of businesses, net of acquired cash			(130	)		(83	)
	Other			18			19

		Net cash used in investing activities		(465	)		(561	)

See notes to condensed consolidated financial statements.
Continued

Kraft Foods Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(in millions of dollars)
(Unaudited)

			For the Six Months Ended June 30,
			2004			2003
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
	Net issuance of short-term borrowings		$	28		$	2,678
	Long-term debt proceeds			28			36
	Long-term debt repaid			(34	)		(343	)
	Repayment of notes payable to Altria Group, Inc. and affiliates						(1,150	)
	Decrease in amounts due to Altria Group, Inc. and affiliates			(297	)		(353	)
	Repurchase of Class A common stock			(314	)		(86	)
	Dividends paid			(620	)		(520	)
	Other			(20	)		6

		Net cash (used in) provided by financing activities		(1,229	)		268

Effect of exchange rate changes on cash and cash equivalents				12			5

Cash and cash equivalents:
	(Decrease) Increase			(350	)		1,291
	Balance at beginning of period			514			215

	Balance at end of period		$	164		$	1,506

See notes to condensed consolidated financial statements.

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1. Accounting Policies:

Basis of Presentation

The interim condensed consolidated financial statements of Kraft Foods Inc. ("Kraft"), together with its subsidiaries (collectively referred to as the "Company"), are unaudited. It is the opinion of the Company's management that all adjustments necessary for a fair statement of the interim results presented have been reflected therein. All such adjustments were of a normal recurring nature. Net revenues and net earnings for any interim period are not necessarily indicative of results that may be expected for the entire year.

These statements should be read in conjunction with the Company's consolidated financial statements and related notes, and management's discussion and analysis of financial condition and results of operations, which appear in the Company's Annual Report to Shareholders and which are incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 31, 2003.

During January 2004, the Company announced a new global organizational structure, which resulted in new segments. The Company's new segments are U.S. Beverages & Grocery; U.S. Snacks; U.S. Cheese, Canada & North America Foodservice; U.S. Convenient Meals; Europe, Middle East & Africa; and Latin America & Asia Pacific. The new segment structure in North America reflects a shift of certain divisions and brands between segments to more closely align these businesses to consumer sectors. Results for the Mexico and Puerto Rico businesses, which were previously reported in the Cheese, Meals and Enhancers segment, are now reported in the Latin America & Asia Pacific segment. Also, in connection with the new global organizational structure, Kraft, in March 2004, changed the legal name of one of its subsidiaries, Kraft Foods North America, Inc., to Kraft Foods Global, Inc.

Certain prior year amounts have been reclassified to conform with the current year's presentation, due primarily to the new global organizational structure.

Stock-Based Compensation Expense

The Company accounts for employee stock compensation plans in accordance with the intrinsic value-based method permitted by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which does not result in compensation cost for stock options. The market value at date of grant of restricted stock and rights to receive shares of stock is recorded as compensation expense over the period of restriction.

During the first quarter of 2004 and 2003, the Company granted shares of restricted stock and rights to receive shares of stock to eligible employees, giving them in most instances all of the rights of shareholders, except that they may not sell, assign, pledge or otherwise encumber the shares and rights. The shares and rights are subject to forfeiture if certain employment conditions are not met.

During the first quarter of 2004, the Company granted approximately 4.1 million restricted Class A shares to eligible U.S. based employees and also issued to eligible non-U.S. employees rights to receive approximately 1.9 million Class A equivalent shares. Restrictions on most of the stock and rights lapse in the first quarter of 2007. The market value per restricted share or right was $32.23 on the date of grant.

The fair value of the shares of restricted stock and rights to receive shares of stock at the date of grant is amortized to expense ratably over the restriction period. The Company recorded pre-tax compensation expense related to restricted stock and rights of $52 million and $27 million, respectively, for the six months and three months ended June 30, 2004, and $27 million and $16 million, respectively, for the six months and three

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

months ended June 30, 2003. The unamortized portion, which is reported on the condensed consolidated balance sheets as a reduction of earnings reinvested in the business, was $261 million at June 30, 2004.

In addition to restricted stock, at June 30, 2004, the Company had stock-based employee compensation plans that permit the issuance of stock options to employees. The Company applies the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for stock options within those plans. No compensation expense for employee stock options is reflected in net earnings, as all stock options granted under those plans had an exercise price equal to the market value of the common stock on the date of grant. The following table illustrates the effect on net earnings and earnings per share ("EPS") if the Company had applied the fair value recognition provisions of SFAS No. 123 to measure stock-based compensation expense for outstanding stock option awards for the six months and three months ended June 30, 2004 and 2003:

		For the Six Months Ended June 30,
		2004		2003
		(in millions, except per share data)
Net earnings, as reported		$	1,258	$	1,797
Deduct:
Total stock-based employee compensation expense determined under fair value method for all stock option awards, net of related tax effects			4		9

Pro forma net earnings		$	1,254	$	1,788

Earnings per share:
	Basic — as reported	$	0.73	$	1.04

	Basic — pro forma	$	0.73	$	1.03

	Diluted — as reported	$	0.73	$	1.04

	Diluted — pro forma	$	0.73	$	1.03

		For the Three Months Ended June 30,
		2004		2003
		(in millions, except per share data)
Net earnings, as reported		$	698	$	949
Deduct:
Total stock-based employee compensation expense determined under fair value method for all stock option awards, net of related tax effects			2		1

Pro forma net earnings		$	696	$	948

Earnings per share:
	Basic — as reported	$	0.41	$	0.55

	Basic — pro forma	$	0.41	$	0.55

	Diluted — as reported	$	0.41	$	0.55

	Diluted — pro forma	$	0.41	$	0.55

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 2. Restructuring Program:

In January 2004, the Company announced a three-year restructuring program with the objectives of leveraging the Company's global scale, realigning and lowering its cost structure, and optimizing capacity utilization. As part of this program, the Company anticipates the closing or sale of up to twenty plants and the elimination of approximately six thousand positions. From 2004 through 2006, the Company expects to incur up to $1.2 billion in pre-tax charges, reflecting asset disposals, severance and other implementation costs, including an estimated range of $750 million to $800 million in 2004. Approximately one-half of the pre-tax charges are expected to require cash payments.

During the six months and three months ended June 30, 2004, pre-tax charges under the restructuring program of $408 million and $129 million, respectively, were recorded as asset impairment and exit costs on the condensed consolidated statements of earnings. These charges resulted from the 2004 announcement of the closing of ten plants, the termination of co-manufacturing agreements and the commencement of a number of workforce reduction programs. Approximately $137 million of the pre-tax charges incurred during the first six months of 2004 will result in cash payments. In addition, the Company announced the planned closure of two additional plants as of June 30, 2004. The majority of the restructuring charges for these two plants, which are located within Europe, will be recorded upon local regulatory approval of the plant closures, which is expected in the second half of 2004.

Pre-tax restructuring liability activity for the six months ended June 30, 2004 was as follows:

		For the Six Months Ended June 30, 2004
		Severance			Asset Write-downs			Other			Total
		(in millions)
Liability balance, January 1, 2004		$	—		$	—		$	—		$	—
	Charges		128			266			14			408
	Cash spent		(35	)					(8	)		(43	)
	Charges against assets		(5	)		(266	)					(271	)

Liability balance, June 30, 2004		$	88		$	—		$	6		$	94

Severance costs in the above schedule, which relate to the workforce reduction programs, include the cost of related benefits. Specific programs announced during the first six months of 2004, as part of the overall restructuring program, will result in the elimination of approximately 2,600 positions. Asset write-downs relate to the impairment of assets caused by the plant closings. Other costs incurred relate primarily to contract termination costs associated with the plant closings and the termination of co-manufacturing agreements.

During the six months and three months ended June 30, 2004, the Company recorded $10 million and $9 million, respectively, of pre-tax implementation costs associated with the restructuring program in cost of sales on the condensed consolidated statements of earnings. These costs include the discontinuance of certain product lines and other incremental costs related to the closure of facilities.

In addition, during the first quarter of 2004, the Company completed its annual review of goodwill and intangible assets. This review resulted in a $29 million non-cash pre-tax charge related to an intangible asset impairment for a small confectionery business in the United States and certain brands in Mexico. This charge was recorded as asset impairment and exit costs on the condensed consolidated statements of earnings.

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

These pre-tax asset impairment, exit and implementation costs, which totaled $447 million and $138 million, respectively, for the six months and three months ended June 30, 2004, were included in the operating companies income of the following segments:

	For the Six Months Ended June 30, 2004
	Restructuring Program		Intangible Asset Impairment		Total Asset Impairment and Exit Costs		Implementation Costs		Total
	(in millions)
U.S. Beverages & Grocery	$	19	$	—	$	19	$	—	$	19
U.S. Snacks		168		17		185		8		193
U.S. Cheese, Canada & North America Foodservice		89				89		1		90
U.S. Convenient Meals		8				8				8
Europe, Middle East & Africa		113				113		1		114
Latin America & Asia Pacific		11		12		23				23

Total	$	408	$	29	$	437	$	10	$	447

	For the Three Months Ended June 30, 2004
	Restructuring Program			Intangible Asset Impairment		Total Asset Impairment and Exit Costs			Implementation Costs		Total
	(in millions)
U.S. Beverages & Grocery	$	4		$	—	$	4		$	—	$	4
U.S. Snacks		9					9			8		17
U.S. Cheese, Canada & North America Foodservice		27					27			1		28
U.S. Convenient Meals		(1	)				(1	)				(1	)
Europe, Middle East & Africa		81					81					81
Latin America & Asia Pacific		9					9					9

Total	$	129		$	—	$	129		$	9	$	138

Note 3. Related Party Transactions:

At June 30, 2004, Altria Group, Inc. owned approximately 84.9% of the Company's outstanding shares of capital stock. Altria Group, Inc.'s subsidiary, Altria Corporate Services, Inc., provides the Company with various services, including planning, legal, treasury, accounting, auditing, insurance, human resources, office of the secretary, corporate affairs, information technology and tax services. Billings for these services, which were based on the cost to Altria Corporate Services, Inc. to provide such services and a management fee, were

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

$157 million and $165 million for the six months ended June 30, 2004 and 2003, respectively, and $84 million and $82 million for the three months ended June 30, 2004 and 2003, respectively.

At June 30, 2004, the Company had short-term amounts payable to Altria Group, Inc. of $307 million. Interest on these borrowings is based on the applicable London Interbank Offered Rate.

Note 4. Acquisitions:

During the first quarter of 2004, the Company acquired a U.S.-based beverage business. During the second quarter of 2003, the Company acquired a biscuits business in Egypt. During the first six months of 2004 and 2003, total purchases of businesses, net of acquired cash were $130 million and $83 million, respectively.

The operating results of businesses acquired were not material to the Company's consolidated financial position, results of operations or cash flows in any of the periods presented.

Note 5. Earnings Per Share:

Basic and diluted EPS were calculated using the following:

	For the Six Months Ended June 30,
	2004		2003
	(in millions)
Net earnings	$	1,258	$	1,797

Weighted average shares for basic EPS		1,714		1,729
Plus: Incremental shares from assumed conversions of restricted stock and stock rights		3

Weighted average shares for diluted EPS		1,717		1,729

	For the Three Months Ended June 30,
	2004		2003
	(in millions)
Net earnings	$	698	$	949

Weighted average shares for basic EPS		1,712		1,728
Plus: Incremental shares from assumed conversions of restricted stock and stock rights		3

Weighted average shares for diluted EPS		1,715		1,728

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 6. Contingencies:

Kraft and its subsidiaries are parties to a variety of legal proceedings arising out of the normal course of business, including a few cases in which substantial amounts of damages are sought. While the results of litigation cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on the Company's consolidated financial position or results of operations.

Guarantees: At June 30, 2004, the Company's third-party guarantees, which are primarily derived from acquisition and divestiture activities, approximated $28 million. Substantially all of these guarantees expire through 2013, with $5 million expiring through June 30, 2005. The Company is required to perform under these guarantees in the event that a third party fails to make contractual payments or achieve performance measures. The Company has a liability of $21 million on its condensed consolidated balance sheet at June 30, 2004, relating to these guarantees.

Note 7. Goodwill and Other Intangible Assets, Net:

Goodwill by reportable segment was as follows:

	June 30, 2004		December 31, 2003
	(in millions)
U.S. Beverages & Grocery	$	4,304	$	4,239
U.S. Snacks		9,190		8,963
U.S. Cheese, Canada & North America Foodservice		5,439		5,471
U.S. Convenient Meals		1,880		1,880
Europe, Middle East & Africa		4,636		4,562
Latin America & Asia Pacific		307		287

Total goodwill	$	25,756	$	25,402

Intangible assets were as follows:

		June 30, 2004				December 31, 2003
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
		(in millions)				(in millions)
Non-amortizable intangible assets		$	11,070			$	11,432
Amortizable intangible assets			94	$	44		84	$	39

	Total intangible assets	$	11,164	$	44	$	11,516	$	39

Non-amortizable intangible assets are substantially comprised of brand names purchased through the Nabisco acquisition. Amortizable intangible assets consist primarily of certain trademark licenses and non-compete agreements. Pre-tax amortization expense for intangible assets was $6 million and $5 million for the six months ended June 30, 2004 and 2003, respectively, and $4 million and $3 million for the three months ended June 30, 2004 and 2003, respectively. Amortization expense for each of the next five years is currently estimated to be approximately $12 million.

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The movement in goodwill and gross carrying amount of intangible assets from December 31, 2003, is as follows:

		Goodwill		Intangible Assets
		(in millions)
Balance at December 31, 2003		$	25,402	$	11,516
Changes due to:
	Acquisitions		65		71
	Currency		61		(13	)
	Intangible asset impairment				(29	)
	Other		228		(381	)

Balance at June 30, 2004		$	25,756	$	11,164

Other, above, includes the reclassification to goodwill of certain amounts previously classified as indefinite life intangible assets.

Note 8. Segment Reporting:

The Company manufactures and markets packaged food products, consisting principally of beverages, cheese, snacks, convenient meals and various packaged grocery products through Kraft Foods Global, Inc. and its subsidiaries. Kraft manages and reports operating results through two units, Kraft North America Commercial and Kraft International Commercial. Reportable segments for Kraft North America Commercial are organized and managed principally by product category. Kraft International Commercial's operations are organized and managed by geographic location.

During January 2004, the Company announced a new global organizational structure, which resulted in new segments. Kraft North America Commercial's new segments are U.S. Beverages & Grocery; U.S. Snacks; U.S. Cheese, Canada & North America Foodservice; and U.S. Convenient Meals. Kraft International Commercial's segments are Europe, Middle East & Africa; and Latin America & Asia Pacific. The new segment structure in North America reflects a shift of certain divisions and brands between segments to more closely align these businesses to consumer sectors. Results for the Mexico and Puerto Rico businesses, which were previously reported in the Cheese, Meals and Enhancers segment, are now reported in the Latin America & Asia Pacific segment. The Company's 2004 and 2003 results by segment are discussed herein under the new reporting structure, and historical amounts have been restated.

The Company's management uses operating companies income, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate segment performance and allocate resources. Management believes it is appropriate to disclose this measure to help investors analyze the business performance and trends of the various business segments.

Interest and other debt expense, net, and provision for income taxes are centrally managed and, accordingly, such items are not presented by segment since they are not included in the measure of segment profitability reviewed by management.

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Segment data were as follows:

			For the Six Months Ended June 30,
			2004			2003
			(in millions)
Net revenues:
	U.S. Beverages & Grocery		$	3,102		$	3,100
	U.S. Snacks			2,306			2,344
	U.S. Cheese, Canada & North America Foodservice			3,587			3,260
	U.S. Convenient Meals			2,101			2,055
	Europe, Middle East & Africa			3,542			3,240
	Latin America & Asia Pacific			1,260			1,201

		Total net revenues	$	15,898		$	15,200

Earnings before income taxes and minority interest:
Operating companies income:
	U.S. Beverages & Grocery		$	930		$	1,066
	U.S. Snacks			168			467
	U.S. Cheese, Canada & North America Foodservice			427			656
	U.S. Convenient Meals			384			424
	Europe, Middle East & Africa			301			428
	Latin America & Asia Pacific			115			172
Amortization of intangibles				(6	)		(5	)
General corporate expenses				(88	)		(92	)

	Total operating income			2,231			3,116
Interest and other debt expense, net				(324	)		(343	)

	Earnings before income taxes and minority interest		$	1,907		$	2,773

			For the Three Months Ended June 30,
			2004		2003
			(in millions)
Net revenues:
	U.S. Beverages & Grocery		$	1,601	$	1,588
	U.S. Snacks			1,184		1,201
	U.S. Cheese, Canada & North America Foodservice			1,859		1,690
	U.S. Convenient Meals			1,053		1,014
	Europe, Middle East & Africa			1,821		1,686
	Latin America & Asia Pacific			687		662

		Total net revenues	$	8,205	$	7,841

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

		For the Three Months Ended June 30,
		2004			2003
		(in millions)
Earnings before income taxes and minority interest:
Operating companies income:
	U.S. Beverages & Grocery	$	473		$	547
	U.S. Snacks		183			252
	U.S. Cheese, Canada & North America Foodservice		220			342
	U.S. Convenient Meals		187			199
	Europe, Middle East & Africa		143			232
	Latin America & Asia Pacific		82			107
Amortization of intangibles			(4	)		(3	)
General corporate expenses			(42	)		(48	)

	Total operating income		1,242			1,628
Interest and other debt expense, net			(159	)		(164	)

	Earnings before income taxes and minority interest	$	1,083		$	1,464

As discussed in Note 2. Restructuring Program, the Company recorded asset impairment, exit and implementation costs during the six months and three months ended June 30, 2004 of $447 million and $138 million, respectively. See Note 2 for the breakdown of these pre-tax charges by segment.

Net revenues by consumer sector, which include the separation of Canada and North America Foodservice into sector components, were as follows (in millions):

			For the Six Months Ended June 30, 2004						For the Six Months Ended June 30, 2003
			Kraft North America Commercial		Kraft International Commercial		Total		Kraft North America Commercial		Kraft International Commercial		Total
Consumer Sector:
	Snacks		$	2,622	$	1,807	$	4,429	$	2,645	$	1,611	$	4,256
	Beverages			1,569		1,683		3,252		1,526		1,611		3,137
	Cheese			2,251		706		2,957		2,026		663		2,689
	Grocery			2,300		419		2,719		2,270		380		2,650
	Convenient Meals			2,354		187		2,541		2,292		176		2,468

		Total net revenues	$	11,096	$	4,802	$	15,898	$	10,759	$	4,441	$	15,200

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

			For the Three Months Ended June 30, 2004						For the Three Months Ended June 30, 2003
			Kraft North America Commercial		Kraft International Commercial		Total		Kraft North America Commercial		Kraft International Commercial		Total
Consumer Sector:
	Snacks		$	1,357	$	904	$	2,261	$	1,371	$	820	$	2,191
	Beverages			800		899		1,699		740		874		1,614
	Cheese			1,146		371		1,517		1,018		346		1,364
	Grocery			1,207		228		1,435		1,226		210		1,436
	Convenient Meals			1,187		106		1,293		1,138		98		1,236

		Total net revenues	$	5,697	$	2,508	$	8,205	$	5,493	$	2,348	$	7,841

Note 9. Financial Instruments:

During the six months and three months ended June 30, 2004 and 2003, ineffectiveness related to cash flow hedges was not material. At June 30, 2004, the Company was hedging forecasted transactions for periods not exceeding the next fourteen months and expects substantially all amounts reported in accumulated other comprehensive earnings (losses) to be reclassified to the consolidated statement of earnings within the next twelve months.

Hedging activities affected accumulated other comprehensive earnings (losses), net of income taxes, as follows:

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2004			2003			2004			2003
	(in millions)
Gain (loss) at beginning of period	$	1		$	13		$	21		$	(24	)
Derivative gains transferred to earnings		(11	)		(13	)		(11	)		(4	)
Change in fair value		22			(22	)		2			6

Gain (loss) as of June 30	$	12		$	(22	)	$	12		$	(22	)

Note 10. Benefit Plans:

In December 2003, the Financial Accounting Standards Board ("FASB") issued a revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." In the first quarter of 2004, the Company adopted the new interim-period disclosure requirements of this pronouncement relating to net periodic benefit cost and employer contributions to benefit plans, except for certain interim-period disclosures about non-U.S. plans which are not required until after December 31, 2004.

The Company sponsors noncontributory defined benefit pension plans covering substantially all U.S. employees. Pension coverage for employees of the Company's non-U.S. subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

addition, the Company's U.S. and Canadian subsidiaries provide health care and other benefits to substantially all retired employees. Health care benefits for retirees outside the United States and Canada are generally covered through local government plans.

Pension Plans

Components of Net Periodic Benefit Cost

Net periodic pension cost (income) consisted of the following for the six months and three months ended June 30, 2004 and 2003:

		U.S. Plans						Non-U.S. Plans
		For the Six Months Ended June 30,						For the Six Months Ended June 30,
		2004			2003			2004			2003
		(in millions)
Service cost		$	70		$	67		$	34		$	34
Interest cost			174			167			78			78
Expected return on plan assets			(287	)		(296	)		(82	)		(85	)
Amortization:
	Unrecognized net loss from experience differences		45			7			16			10
	Unrecognized prior service cost		1			1			4			5
Other expense									5

Net periodic pension cost (income)		$	3		$	(54	)	$	55		$	42

		U.S. Plans						Non-U.S. Plans
		For the Three Months Ended June 30,						For the Three Months Ended June 30,
		2004			2003			2004			2003
		(in millions)
Service cost		$	33		$	34		$	17		$	13
Interest cost			87			83			39			31
Expected return on plan assets			(145	)		(149	)		(41	)		(30	)
Amortization:
	Unrecognized net loss from experience differences		23			3			8			4
	Unrecognized prior service cost		1						2			2
Other expense									5

Net periodic pension (income) cost		$	(1	)	$	(29	)	$	30		$	20

Other expense above is due to additional pension benefits related to workforce reduction programs under the Company's restructuring program.

Employer Contributions

The Company presently plans to make contributions, to the extent that they are tax deductible, in order to maintain plan assets in excess of the accumulated benefit obligation of its U.S. funded plans. During the six months ended June 30, 2004, $270 million of employer contributions were made to U.S. plans. Currently, the Company anticipates making additional contributions of approximately $5 million during the remainder of

Kraft Foods Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

2004, based on current tax law. However, this estimate is subject to change due primarily to asset performance significantly different than the assumed long-term rate of return on pension assets and significant changes in interest rates. In addition, during the six months ended June 30, 2004, the Company made pension plan contributions to non-U.S. plans of $140 million.

Postretirement Benefit Plans

Net postretirement health care costs consisted of the following for the six months and three months ended June 30, 2004 and 2003:

		For the Six Months Ended June 30,						For the Six Months Ended June 30,
		2004			2003			2004			2003
		(in millions)
Service cost		$	24		$	21		$	12		$	10
Interest cost			94			92			47			45
Amortization:
	Unrecognized net loss from experience differences		30			22			16			10
	Unrecognized prior service cost		(12	)		(12	)		(6	)		(6	)

Net postretirement health care costs		$	136		$	123		$	69		$	59

In December 2003, the United States enacted into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"). The Act establishes a prescription drug benefit under Medicare, known as "Medicare Part D," and a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D.

In May 2004, the FASB issued FASB Staff Position No. 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003" ("FSP 106-2"). FSP 106-2 requires companies to account for the effect of the subsidy on benefits attributable to past service as an actuarial experience gain and as a reduction of the service cost component of net postretirement health care costs for amounts attributable to current service, if the benefit provided is at least actuarially equivalent to Medicare Part D.

The Company has elected to adopt FSP 106-2 prospectively in the third quarter of 2004. The impact for the second half of 2004 will be to reduce net postretirement health care costs and to increase net earnings by approximately $20 million.

Item 2.		MANAGEMENT'S DISCUSSION AND ANALYSIS OF
		FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Description of the Company

Kraft Foods Inc. ("Kraft"), together with its subsidiaries (collectively referred to as the "Company"), is the largest branded food and beverage company headquartered in the United States. At June 30, 2004, Altria Group, Inc. held 97.9% of the combined voting power of Kraft's outstanding capital stock and owned approximately 84.9% of the outstanding shares of Kraft's capital stock.

The Company manufactures and markets packaged food products, consisting principally of beverages, cheese, snacks, convenient meals and various packaged grocery products through Kraft Foods Global, Inc. (formerly known as Kraft Foods North America, Inc.) and its subsidiaries. Kraft manages and reports operating results through two units, Kraft North America Commercial and Kraft International Commercial. Reportable segments for Kraft North America Commercial are organized and managed principally by product category. Kraft International Commercial's operations are organized and managed by geographic location.

Executive Summary

The following executive summary is intended to provide highlights of the Discussion and Analysis that follows.

Consolidated Operating Results for the Six Months Ended June 30, 2004—The changes in the Company's net earnings and diluted earnings per share ("EPS") for the six months ended June 30, 2004 from the six months ended June 30, 2003 were due primarily to the following (in millions, except per share data):

	Net Earnings			Diluted EPS
For the six months ended June 30, 2003	$	1,797		$	1.04
2004 Asset impairment, exit and implementation costs		(299	)		(0.18	)
Lower effective income tax rate		29			0.02
Currency		40			0.02
Operations		(309	)		(0.17	)

For the six months ended June 30, 2004	$	1,258		$	0.73

See discussion of events affecting the comparability of statement of earnings amounts in the Consolidated Operating Results section of the following Discussion and Analysis.

The unfavorable impact of asset impairment, exit and implementation costs on net earnings and diluted EPS is due to the following:

Restructuring Program—In January 2004, the Company announced a three-year restructuring program. As part of this program, the Company anticipates the closing or sale of up to twenty plants and the elimination of approximately six thousand positions. From 2004 through 2006, the Company expects to incur up to $1.2 billion in pre-tax charges, including an estimated range of $750 million to $800 million in 2004. The Company recorded pre-tax asset impairment and exit costs of $408 million for this program. In addition, the Company also recorded $10 million of pre-tax implementation costs, in cost of sales, associated with the restructuring program.

Intangible Asset Impairment Charge—During the first quarter of 2004, the Company completed its annual review of its goodwill and intangible assets. This review resulted in a $29 million non-cash pre-tax charge related to an intangible asset impairment for a small confectionery business in the United States and certain brands in Mexico.

For further details, see Note 2 to the Condensed Consolidated Financial Statements and the Business Environment section of the following Discussion and Analysis.

Lower Effective Income Tax Rate—The Company's reported effective income tax rate decreased by 1.2 percentage points to 33.9%, reflecting the reversal of tax accruals that are no longer required due to tax events that occurred during the first six months of 2004.

Currency—The favorable currency impact on net earnings and diluted EPS is due primarily to the weakness of the U.S. dollar versus the euro and the Canadian dollar.

Operations—The decrease in results from operations was due primarily to the following:

•: Lower income at Kraft North America Commercial reflecting higher commodity costs, increased promotional programs and higher benefit costs.
•: Lower income at Kraft International Commercial reflecting higher costs, including benefits, promotional programs and infrastructure investment in developing markets.

For further details, see the Consolidated Operating Results and Operating Results by Business Segment sections of the following Discussion and Analysis.

Consolidated Operating Results for the Three Months Ended June 30, 2004—The changes in the Company's net earnings and diluted EPS for the three months ended June 30, 2004 from the three months ended June 30, 2003 were due primarily to the following (in millions, except per share date):

	Net Earnings			Diluted EPS
For the three months ended June 30, 2003	$	949		$	0.55
2004 Asset impairment, exit and implementation costs		(88	)		(0.05	)
Higher effective income tax rate		(3	)
Currency		17			0.01
Operations		(177	)		(0.10	)

For the three months ended June 30, 2004	$	698		$	0.41

See discussion of events affecting the comparability of statement of earnings amounts in the Consolidated Operating Results section of the following Discussion and Analysis.

The unfavorable impact of asset impairment, exit and implementation costs on net earnings and diluted EPS is due to the following:

Restructuring Program—As discussed above, during the three months ended June 30, 2004, the Company recorded pre-tax asset impairment and exit costs of $129 million for its restructuring program. In addition, the Company recorded $9 million of pre-tax implementation costs, in cost of sales, associated with the restructuring program.

For further details, see Note 2 to the Condensed Consolidated Financial Statements and the Business Environment section of the following Discussion and Analysis.

Currency—The favorable currency impact on net earnings and diluted EPS is due primarily to the weakness of the U.S. dollar versus the euro and the Canadian dollar.

Operations—The decrease in results from operations was due primarily to the following:

•: Lower income at Kraft North America Commercial reflecting higher commodity costs, increased promotional programs and higher benefits costs.
•: Lower income at Kraft International Commercial reflecting higher costs, including benefits and promotional programs, and unfavorable mix.

For further details, see the Consolidated Operating Results and Operating Results by Business Segment sections of the following Discussion and Analysis.

2004 Projected Results—In July 2004, the Company lowered its 2004 full-year diluted EPS guidance range by $0.08 per share to $1.55 to $1.62, due primarily to higher commodity costs, particularly dairy, that the Company does not expect to fully recover from pricing actions in 2004. Cheese costs, which reached unprecedented highs earlier in the quarter declined to more historical levels by the end of June. The projected 2004 EPS includes anticipated charges of $0.30 from asset impairment, exit and implementation costs. The projected diluted EPS also reflects an expected income tax rate of 33% for the year due to the resolution of certain U.S. and foreign tax matters. The factors described in the section entitled Forward-Looking and Cautionary Statements of the following Discussion and Analysis represent continuing risks to these projections.

Discussion and Analysis

Business Environment

The Company is subject to a number of challenges that may adversely affect its businesses. These challenges, which are discussed below and under the "Forward-Looking and Cautionary Statements" section, include:

•: fluctuations in commodity prices;
•: movements of foreign currencies against the U.S. dollar;
•: competitive challenges in various products and markets, including price gaps with competitor products and the increasing price-consciousness of consumers;

•: a rising cost environment;
•: a trend toward increasing consolidation in the retail trade and consequent inventory reductions;
•: a growing presence of hard discount retailers, primarily in Europe, with an emphasis on own label products;
•: changing consumer preferences, including low-carbohydrate diet trends;
•: competitors with different profit objectives and less susceptibility to currency exchange rates; and
•: consumer concerns about food safety, quality and health, including concerns about genetically modified organisms, trans-fatty acids and obesity.

To confront these challenges, the Company continues to take steps to build the value of its brands, to improve its food business portfolio with new product and marketing initiatives, to reduce costs through productivity and to address consumer concerns about food safety, quality and health.

In January 2004, the Company announced its adoption of a four-point plan to achieve sustainable growth. The first element of the plan is to build brand value by continuing to improve its products, to use more value-added packaging, to develop innovative new products, to manage price gaps effectively and to build closer relationships with consumers. The Company anticipates $500 to $600 million of increased spending in 2004 over 2003 to manage price gaps, to increase media presence, to drive growth in developing markets and non-measured channels, to enhance brand equity and to support new products. During the first six months of 2004, the Company increased in-market spending by approximately $245 million versus the first six months of 2003.

The second element of the plan is to accelerate the shift in the Company's brand portfolio to address growing consumer demand including products to meet their health and wellness concerns and their desire for convenience. The Company is reducing trans-fat in its products, identifying its products that are low in carbohydrates, introducing more sugar-free products, and emphasizing positive nutrition products. The Company is addressing convenience needs by offering more convenient packaging, such as single-serve and resealable packaging, and products requiring reduced preparation. The Company is also offering packaging that is customized to suit the needs of growing alternate channels of distribution such as supercenters, mass merchandisers, drugstores and club stores. The Company also plans to shift its portfolio to reflect changing demographics, for example, by expanding the availability of Hispanic products and bilingual packaging.

The third component of the plan is to expand the Company's global scale through international growth, particularly in developing markets. These markets account for approximately 84% of the world's population and 30% of its packaged food consumption, but only 11% of the Company's 2003 net revenues. The plan calls for the Company to capture the growth potential of its core categories in markets where it has operations and to expand its core categories into new markets.

As the final component of its plan, the Company announced a three-year restructuring program with the objectives of leveraging the Company's global scale, realigning and lowering its cost structure, and optimizing capacity utilization. As part of this program, the Company anticipates the closing or sale of up to twenty plants and the elimination of approximately six thousand positions. From 2004 through 2006, the Company expects to incur up to $1.2 billion in pre-tax charges, reflecting asset disposals, severance and other implementation costs, including an estimated range of $750 million to $800 million in 2004. Approximately one-half of the pre-tax charges are expected to require cash payments.

During the six months and three months ended June 30, 2004, the Company recorded $437 million and $129 million, respectively, of asset impairment and exit costs on its condensed consolidated statements of earnings. During the six months ended June 30, 2004, these pre-tax charges were composed of $408 million of costs

under the restructuring program and $29 million of impairment charges relating to intangible assets. During the second quarter of 2004, all of the pre-tax charges related to the restructuring program. These charges resulted from the 2004 announcement of the closing of ten plants, the termination of co-manufacturing agreements and the commencement of a number of workforce reduction programs. Approximately $137 million of the pre-tax charges incurred during the first six months of 2004 will result in cash payments. In addition, the Company announced the planned closure of two additional plants as of June 30, 2004. The majority of the restructuring charges for these two plants, which are located within Europe, will be recorded upon local regulatory approval of the plant closures, which is expected in the second half of 2004. During the first quarter of 2004, the Company also completed its annual review of goodwill and intangible assets. This review resulted in a $29 million non-cash pre-tax charge related to an intangible asset impairment for a small confectionery business in the United States and certain brands in Mexico.

Pre-tax restructuring liability activity for the six months ended June 30, 2004 was as follows:

		For the Six Months Ended June 30, 2004
		Severance			Asset Write-downs			Other			Total
		(in millions)
Liability balance, January 1, 2004		$	—		$	—		$	—		$	—
	Charges		128			266			14			408
	Cash spent		(35	)					(8	)		(43	)
	Charges against assets		(5	)		(266	)					(271	)

Liability balance, June 30, 2004		$	88		$	—		$	6		$	94

In addition, the Company expects to spend approximately $140 million in capital over the next three years to implement the restructuring program, including approximately $50 million in 2004. Cost savings as a result of the restructuring program are expected to be approximately $120 million to $140 million in 2004, and are anticipated to reach approximately $400 million by 2006, all of which are expected to be used in supporting brand-building initiatives. Cost savings during the first six months of 2004 were approximately $40 million.

Fluctuations in commodity prices can lead to retail price volatility and intensive price competition, and can influence consumer and trade buying patterns. The Company's businesses are subject to fluctuating commodity costs, including dairy, coffee and cocoa costs. During the first six months of 2004, the Company's commodity costs on average have been higher than those incurred in 2003 (most notably dairy, soybean oil, pork and coffee), and have adversely affected earnings. Dairy costs rose to historical highs during the first six months of 2004, but subsequently moderated to historical levels.

In the ordinary course of business, the Company is subject to many influences that can impact the timing of sales to customers, including the timing of holidays and other annual or special events, seasonality of certain products, significant weather conditions, timing of Company and customer incentive programs, customer inventory reduction programs, Company initiatives to improve supply chain efficiency, including efforts to

align product shipments more closely with consumption by shifting some of its customer marketing programs to a consumption based approach, financial situations of customers and general economic conditions.

The operating results of businesses acquired were not material to the Company's consolidated financial position, results of operations or cash flows in any of the periods presented.

In 2003, the Company had operations and plants or sold products to third-party distributors located in 15 Middle East countries (as defined by the U.S. Department of State, Bureau of Near Eastern Affairs), including a biscuit business acquired during 2003 in Egypt. In the region, the Company had operations and plants in three countries (Egypt, Morocco and, through a majority owned joint venture, Saudi Arabia). In addition, the Company sold products to third-party distributors located in 12 of these countries (Algeria, Bahrain, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Syria, Tunisia, United Arab Emirates and Yemen). Revenue generated from operations or sales to the third-party distributors in the Middle East was approximately $230 million in 2003 representing 3.3% of the net revenues of the Europe, Middle East and Africa segment. In 2004, the Company continues to have operations and plants or to sell products to third-party distributors in these countries, except for Syria, where the Company ceased sales to the third-party distributor early in the year. In addition, in 2004, the Company entered into agreements with third parties for the resale of the Company's products into Iraq, Libya and Syria.

In November 2003, the Company was advised by the Fort Worth District Office of the Securities and Exchange Commission ("SEC") that the staff is considering recommending that the SEC bring a civil injunctive action against the Company charging it with aiding and abetting Fleming Companies ("Fleming") in violations of the securities laws. District staff alleges that a Company employee, who received a similar notice, signed documents requested by Fleming, which Fleming used in order to accelerate its revenue recognition. The notice does not contain any allegations or statements regarding the Company's accounting for transactions with Fleming. The Company believes that it properly recorded the transactions in accordance with accounting principles generally accepted in the United States. The Company has submitted a response to the staff indicating why it believes that no enforcement action should be brought against it. The Company is cooperating fully with the SEC with respect to this matter and the SEC's investigation of Fleming.

Consolidated Operating Results

			For the Six Months Ended June 30,
			2004			2003
			(in millions, except per share data)
Volume (in pounds)				9,568			9,371

Net revenues			$	15,898		$	15,200

Operating income:
	Operating companies income:
		U.S. Beverages & Grocery	$	930		$	1,066
		U.S. Snacks		168			467
		U.S. Cheese, Canada & North America Foodservice		427			656
		U.S. Convenient Meals		384			424
		Europe, Middle East & Africa		301			428
		Latin America & Asia Pacific		115			172
	Amortization of intangibles			(6	)		(5	)
	General corporate expenses			(88	)		(92	)

Operating income			$	2,231		$	3,116

Net earnings			$	1,258		$	1,797

Weighted average shares for diluted earnings per share				1,717			1,729

Diluted earnings per share			$	0.73		$	1.04

			For the Three Months Ended June 30,
			2004			2003
			(in millions, except per share data)
Volume (in pounds)				5,082			4,907

Net revenues			$	8,205		$	7,841

Operating income:
	Operating companies income:
		U.S. Beverages & Grocery	$	473		$	547
		U.S. Snacks		183			252
		U.S. Cheese, Canada & North America Foodservice		220			342
		U.S. Convenient Meals		187			199
		Europe, Middle East & Africa		143			232
		Latin America & Asia Pacific		82			107
	Amortization of intangibles			(4	)		(3	)
	General corporate expenses			(42	)		(48	)

Operating income			$	1,242		$	1,628

Net earnings			$	698		$	949

Weighted average shares for diluted earnings per share				1,715			1,728

Diluted earnings per share			$	0.41		$	0.55

The following events occurred during the first six months and second quarter of 2004 that affected the comparability of statement of earnings amounts:

•: Asset impairment and exit costs—As previously discussed, the Company announced a three-year restructuring program in January 2004. During the first six months and second quarter of 2004, the Company recorded pre-tax asset impairment and exit costs of $437 million and $129 million, respectively, relating to the restructuring program and the write-off of intangible assets which were included in the operating companies income of the following segments:

	For the Six Months Ended June 30, 2004
	Restructuring Program		Intangible Asset Impairment		Total Asset Impairment and Exit Costs
	(in millions)
U.S. Beverages & Grocery	$	19	$	—	$	19
U.S. Snacks		168		17		185
U.S. Cheese, Canada & North America Foodservice		89				89
U.S. Convenient Meals		8				8
Europe, Middle East & Africa		113				113
Latin America & Asia Pacific		11		12		23

	$	408	$	29	$	437

	For the Three Months Ended June 30, 2004
	Restructuring Program			Intangible Asset Impairment		Total Asset Impairment and Exit Costs
	(in millions)
U.S. Beverages & Grocery	$	4		$	—	$	4
U.S. Snacks		9					9
U.S. Cheese, Canada & North America Foodservice		27					27
U.S. Convenient Meals		(1	)				(1	)
Europe, Middle East & Africa		81					81
Latin America & Asia Pacific		9					9

	$	129		$	—	$	129

•: Implementation Costs—As previously discussed, the Company incurred implementation costs associated with the restructuring program. During the first six months and second quarter of 2004, the Company recorded $10 million and $9 million, respectively, of pre-tax implementation costs associated with the restructuring program in cost of sales.

	Implementation Costs
	Six Months Ended June 30, 2004		Three Months Ended June 30, 2004
	(in millions)
U.S. Beverages & Grocery	$	—	$	—
U.S. Snacks		8		8
U.S. Cheese, Canada & North America Foodservice		1		1
U.S. Convenient Meals
Europe, Middle East & Africa		1
Latin America & Asia Pacific

	$	10	$	9

As discussed in Note 8. Segment Reporting, management uses operating companies income, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate segment performance and allocate resources. Management believes it is appropriate to disclose this measure to help investors analyze the business performance and trends of the various business segments.

Consolidated Results of Operations for the Six Months Ended June 30, 2004

The following discussion compares consolidated operating results for the six months ended June 30, 2004 with the six months ended June 30, 2003.

Volume increased 2.1%, due primarily to acquisitions and increased shipments in the U.S. Cheese, Canada & North America Foodservice segment, partially offset by the impact of divested businesses.

Net revenues increased $698 million (4.6%), due primarily to favorable currency ($543 million), higher volume/mix ($99 million), the impact of acquisitions ($69 million) and higher net pricing ($51 million, reflecting commodity-driven pricing, partially offset by increased promotional spending), partially offset by the impact of divested businesses ($64 million).

Operating income decreased $885 million (28.4%), due primarily to pre-tax charges in 2004 for asset impairment and exit costs ($437 million), unfavorable costs, net of higher pricing ($303 million, due primarily to higher commodity costs and increased promotional spending), higher marketing, administration and research costs ($172 million, including higher benefit costs), higher fixed manufacturing costs ($34 million, including higher benefit costs), the impact of divested businesses ($12 million) and the 2004 implementation costs associated with the restructuring program, partially offset by favorable currency ($61 million) and higher volume/mix ($18 million).

Currency movements increased net revenues by $543 million and operating income by $61 million. These increases were due primarily to the weakness of the U.S. dollar against the euro and the Canadian dollar.

Interest and other debt expense, net, decreased $19 million, due primarily to lower average debt outstanding.

The Company's reported effective income tax rate decreased by 1.2 percentage points to 33.9%, reflecting the reversal of tax accruals that are no longer required due to tax events that occurred during the first six months of 2004.

Net earnings of $1,258 million decreased $539 million (30.0%), due primarily to lower operating income, partially offset by a lower effective tax rate. Diluted and basic EPS, which were both $0.73, decreased by 29.8%.

Consolidated Results of Operations for the Three Months Ended June 30, 2004

The following discussion compares consolidated operating results for the three months ended June 30, 2004 with the three months ended June 30, 2003.

Volume increased 3.6%, due primarily to acquisitions in the U.S. Beverages & Grocery segment and increased shipments in the U.S. Cheese, Canada & North America Foodservice segment, partially offset by the impact of divested businesses.

Net revenues increased $364 million (4.6%), due primarily to favorable currency ($237 million), higher volume/mix ($56 million), the impact of acquisitions ($55 million) and higher net pricing ($49 million, reflecting commodity-driven price increases, partially offset by higher promotional spending), partially offset by the impact of divested businesses ($33 million).

Operating income decreased $386 million (23.7%), due primarily to unfavorable costs, net of higher pricing ($169 million, due primarily to higher commodity costs and increased promotional spending), pre-tax charges in 2004 for asset impairment and exit costs ($129 million), higher marketing, administration and research costs ($114 million, including higher marketing and benefit costs), the 2004 implementation costs associated with the restructuring program ($9 million) and the impact of divestitures, partially offset by favorable currency ($26 million) and higher volume/mix.

Currency movements increased net revenues by $237 million and operating income by $26 million. These increases were due primarily to the weakness of the U.S. dollar against the euro and the Canadian dollar.

Net earnings of $698 million decreased $251 million (26.4%), due primarily to lower operating income. Diluted and basic EPS, which were both $0.41, decreased by 25.5%.

Operating Results by Business Segment

Kraft North America Commercial

Operating Results

The following discussion compares Kraft North America Commercial's operating results for the six months ended June 30, 2004 with the six months ended June 30, 2003.

			For the Six Months Ended June 30,
			2004		2003
			(in millions)
Volume (in pounds):
	U.S. Beverages & Grocery			2,708		2,571
	U.S. Snacks			1,017		1,018
	U.S. Cheese, Canada & North America Foodservice			2,237		2,160
	U.S. Convenient Meals			1,117		1,121

		Volume (in pounds)		7,079		6,870

Net revenues:
	U.S. Beverages & Grocery		$	3,102	$	3,100
	U.S. Snacks			2,306		2,344
	U.S. Cheese, Canada & North America Foodservice			3,587		3,260
	U.S. Convenient Meals			2,101		2,055

		Net revenues	$	11,096	$	10,759

Operating companies income:
	U.S. Beverages & Grocery		$	930	$	1,066
	U.S. Snacks			168		467
	U.S. Cheese, Canada & North America Foodservice			427		656
	U.S. Convenient Meals			384		424

		Operating companies income	$	1,909	$	2,613

Volume increased 3.0%, due primarily to acquisitions in the U.S. Beverages & Grocery segment and increased shipments in the U.S. Cheese, Canada & North America Foodservice segment, partially offset by a decline in the U.S. Convenient Meals segment and U.S. Snacks segment.

Net revenues increased $337 million (3.1%), due primarily to favorable currency ($112 million), higher volume/mix ($106 million), higher net pricing ($71 million, reflecting commodity-driven price increases, partially offset by increased promotional spending) and the impact of acquisitions ($48 million).

Operating companies income decreased $704 million (26.9%), due primarily to the 2004 pre-tax charges for asset impairment and exits costs ($301 million), unfavorable costs, net of higher pricing ($269 million, including higher commodity costs and increased promotional spending), higher marketing, administration and research costs ($145 million, including higher benefit costs), higher fixed manufacturing costs ($24 million, including higher benefit costs) and the 2004 implementation costs associated with the restructuring program, partially offset by higher volume/mix ($26 million) and favorable currency ($18 million).

The following discusses operating results within each of Kraft North America Commercial's reportable segments.

U.S. Beverages & Grocery. Volume increased 5.3%, due primarily to the 2004 acquisition of a beverage business and gains in enhancers, coffee and desserts, partially offset by a decline in cereals. Beverages volume

increased, due primarily to the 2004 acquisition of a beverage business and new product introductions. In desserts, volume increased, due primarily to higher shipments of sugar-free, ready-to-eat desserts and frozen toppings. Volume also increased in enhancers, primarily salad dressings and mayonnaise, and in coffee, due to increased marketing spending and strong performance in supercenters. In cereals, volume declined driven by health and wellness concerns, which impacted the category, and the timing of new product introductions relative to competitive entries.

Net revenues increased $2 million (0.1%), due primarily to the impact of acquisitions ($39 million), partially offset by lower pricing and increased promotional spending ($24 million) and unfavorable volume/mix ($13 million).

Operating companies income decreased $136 million (12.8%), due primarily to unfavorable costs and higher promotional spending ($63 million, including higher commodity costs), higher marketing, administration and research costs ($56 million), the 2004 pre-tax charges for asset impairment and exit costs ($19 million), unfavorable volume/mix and higher benefit costs, partially offset by the impact of acquisitions.

U.S. Snacks. Volume decreased 0.1%, as lower biscuits and confectionery volume was essentially offset by higher salted snacks volume. In biscuits, volume declined, as consumer health and wellness concerns continued to affect consumption. Confectionery volume also declined due to category softness, timing of new product introductions and increased competitive activity. Salted snacks volume increased due to consumer nutrition trends and marketing programs in nuts.

Net revenues decreased $38 million (1.6%), due primarily to lower volume/mix ($52 million), partially offset by higher pricing ($14 million, including the absence of high product returns associated with new products incurred in the prior year, partially offset by increased promotional spending).

Operating companies income decreased $299 million (64.0%), due primarily to the 2004 pre-tax charges for asset impairment and exit costs ($185 million), higher marketing, administration and research costs ($52 million), lower volume/mix ($34 million), unfavorable costs, net of higher pricing ($22 million, driven by higher commodity costs and increased promotional spending), the 2004 implementation costs associated with the restructuring program and higher benefit costs.

U.S. Cheese, Canada & North America Foodservice. Volume increased 3.6%, due primarily to the impact of acquisitions and higher volume in foodservice and cheese. Volume in the foodservice business increased, due primarily to an acquisition of a beverage business in 2004 and higher shipments to national accounts. In cheese, volume also increased, benefiting from increased promotional spending.

Net revenues increased $327 million (10.0%), due primarily to higher volume/mix ($147 million), favorable currency ($112 million) and higher pricing, net of higher promotional reinvestment spending in cheese ($61 million), and the impact of acquisitions.

Operating companies income decreased $229 million (34.9%), due primarily to unfavorable costs, net of higher pricing ($164 million, including higher commodity costs and increased promotional spending), the 2004 pre-tax charges for asset impairment and exit costs ($89 million), higher fixed manufacturing costs ($27 million, including higher benefit costs) and higher marketing, administration and research costs ($23 million), partially offset by higher volume/mix ($57 million) and favorable currency ($18 million).

U.S. Convenient Meals. Volume decreased 0.4%, due primarily to lower shipments in meals, partially offset by gains in meats. In meals, volume declined due to the discontinuation of certain product lines in the second half of 2003. Meats volume increased driven by higher consumption of cold cuts, supported by higher investment spending.

Net revenues increased $46 million (2.2%), due primarily to favorable volume/mix ($24 million), higher pricing ($20 million, reflecting commodity-driven pricing in meats and pizza) and the impact of acquisitions.

Operating companies income decreased $40 million (9.4%), due primarily to unfavorable costs, net of higher pricing ($20 million, including higher commodity costs and increased promotional spending), higher marketing, administration and research costs ($14 million), the 2004 pre-tax charges for asset impairment and exit costs and higher fixed manufacturing costs ($7 million, including higher benefit costs), partially offset by favorable volume/mix ($11 million).

Kraft International Commercial

Operating Results

The following discussion compares Kraft International Commercial's operating results for the six months ended June 30, 2004 with the six months ended June 30, 2003.

			For the Six Months Ended June 30,
			2004		2003
			(in millions)
Volume (in pounds):
	Europe, Middle East & Africa			1,392		1,410
	Latin America & Asia Pacific			1,097		1,091

		Volume (in pounds)		2,489		2,501

Net revenues:
	Europe, Middle East & Africa		$	3,542	$	3,240
	Latin America & Asia Pacific			1,260		1,201

		Net revenues	$	4,802	$	4,441

Operating companies income:
	Europe, Middle East & Africa		$	301	$	428
	Latin America & Asia Pacific			115		172

		Operating companies income	$	416	$	600

Volume decreased 0.5%, due primarily to the impact of the divestiture of a rice business and a branded fresh cheese business in Europe in 2003, as well as price competition and trade inventory reductions in several markets, partially offset by the impact of acquisitions.

Net revenues increased $361 million (8.1%), due primarily to favorable currency ($431 million) and the impact of acquisitions ($21 million), partially offset by the impact of divestitures ($64 million), increased promotional spending, net of higher pricing ($20 million) and lower volume/mix.

Operating companies income decreased $184 million (30.7%), due primarily to the 2004 pre-tax charges for asset impairment and exit costs ($136 million), unfavorable costs and increased promotional spending ($44 million), higher marketing, administration and research costs ($27 million, including higher benefit costs and infrastructure investment in developing markets) and the impact of divestitures ($12 million), partially offset by favorable currency ($43 million).

The following discusses operating results within each of Kraft International Commercial's reportable segments.

Europe, Middle East & Africa. Volume decreased 1.3%, due primarily to the divestiture of a rice business and a branded fresh cheese business in Europe in 2003, price competition and trade inventory reductions in France and Russia, partially offset by volume growth in Italy and the United Kingdom and the impact of acquisitions.

Beverages volume declined, driven by price competition on coffee in France and lower shipments of refreshment beverages in the Middle East. Cheese volume also declined, impacted by the divestiture of a branded fresh cheese business in Europe in 2003, partially offset by increased cream cheese shipments in Germany, Italy and the United Kingdom. Convenient meals volume declined, impacted by the divestiture of a rice business in Europe in 2003. In grocery, volume increased due primarily to an acquisition in Egypt. Snacks volume also increased, as gains in biscuits, benefiting from acquisitions, and new confectionery product introductions across the segment, were partially offset by price competition and trade inventory reductions in Russia.

Net revenues increased $302 million (9.3%), due primarily to favorable currency ($377 million) and the impact of acquisitions ($21 million), partially offset by the impact of divestitures ($64 million) and lower pricing and increased promotional spending ($37 million).

Operating companies income decreased $127 million (29.7%), due primarily to the 2004 pre-tax charges for asset impairment and exit costs ($113 million), lower pricing and increased promotional spending, net of favorable costs ($26 million), higher marketing, administration and research costs ($25 million, including higher benefit costs as well as infrastructure investment in Eastern Europe) and the impact of divestitures ($12 million), partially offset by favorable currency ($46 million).

Latin America & Asia Pacific. Volume increased 0.5%, due primarily to gains in Argentina, Brazil, China and Venezuela, partially offset by declines in Mexico and Southeast Asia. Snacks volume increased in Argentina, Brazil and China, aided by new product introductions, and growth in Venezuela, due to the 2003 national strike. Cheese volume increased, due primarily to gains across several markets, including Australia and the Philippines. In grocery, volume also increased due primarily to the 2003 national strike in Venezuela. Beverages volume declined, impacted by price competition in Mexico, partially offset by gains in China, benefiting from marketing and new product development programs in refreshment beverages.

Net revenues increased $59 million (4.9%), due primarily to favorable currency ($54 million) and higher pricing ($17 million, reflecting devaluation-driven cost increases, partially offset by increased promotional spending), partially offset by unfavorable volume/mix ($12 million).

Operating companies income decreased $57 million (33.1%), due primarily to the 2004 pre-tax charges for asset impairment and exit costs ($23 million), unfavorable costs, net of higher pricing ($18 million, including increased promotional spending) and unfavorable volume/mix ($11 million).

Kraft North America Commercial

Operating Results

The following discussion compares Kraft North America Commercial's operating results for the three months ended June 30, 2004 with the three months ended June 30, 2003.

			For the Three Months Ended June 30,
			2004	2003
			(in millions)
Volume (in pounds):
	U.S. Beverages & Grocery		1,525	1,384
	U.S. Snacks		516	517
	U.S. Cheese, Canada & North America Foodservice		1,152	1,116
	U.S. Convenient Meals		562	561

		Volume (in pounds)	3,755	3,578

			For the Three Months Ended June 30,
			2004		2003
			(in millions)
Net revenues:
	U.S. Beverages & Grocery		$	1,601	$	1,588
	U.S. Snacks			1,184		1,201
	U.S. Cheese, Canada & North America Foodservice			1,859		1,690
	U.S. Convenient Meals			1,053		1,014

		Net revenues	$	5,697	$	5,493

Operating companies income:
	U.S. Beverages & Grocery		$	473	$	547
	U.S. Snacks			183		252
	U.S. Cheese, Canada & North America Foodservice			220		342
	U.S. Convenient Meals			187		199

		Operating companies income	$	1,063	$	1,340

Volume increased 4.9%, due primarily to acquisitions in the U.S. Beverages & Grocery segment and increased shipments in the U.S. Cheese, Canada & North America Foodservice segment.

Net revenues increased $204 million (3.7%), due primarily to higher net pricing ($69 million, reflecting commodity-driven pricing in cheese, meats and foodservice, partially offset by increased promotional spending), higher volume/mix ($49 million), the impact of acquisitions ($46 million) and favorable currency ($40 million).

Operating companies income decreased $277 million (20.7%), due primarily to unfavorable costs, net of higher pricing ($144 million, including higher commodity costs and increased promotional spending), higher marketing, administration and research costs ($114 million, including higher marketing and benefit costs), the 2004 pre-tax charges for asset impairment and exits costs ($39 million), the 2004 implementation costs associated with the restructuring program ($9 million) and higher benefit costs, partially offset by higher volume/mix ($17 million) and favorable currency.

The following discusses operating results within each of Kraft North America Commercial's reportable segments.

U.S. Beverages & Grocery. Volume increased 10.2%, due primarily to the 2004 acquisition of a beverage business and increased shipments in enhancers and coffee, partially offset by a decline in cereals. Beverages volume increased, due primarily to the 2004 acquisition of a beverage business, new product introductions and growth in non-measured channels. In coffee, volume increased, benefiting from increased promotional spending. Enhancers volume also increased, due primarily to higher shipments in mayonnaise and barbecue sauce. In cereals, volume declined due primarily to increased competitive activity and health and wellness concerns on the category.

Net revenues increased $13 million (0.8%), due primarily to the impact of acquisitions ($39 million) and higher volume/mix, partially offset by lower pricing and higher promotional spending ($35 million).

Operating companies income decreased $74 million (13.5%), due primarily to higher marketing, administration and research costs ($48 million), unfavorable costs ($37 million, including higher commodity costs and increased promotional spending), the 2004 pre-tax charges for asset impairment and exit costs ($4 million) and higher benefit costs, partially offset by higher volume/mix ($4 million) and the impact of acquisitions.

U.S. Snacks. Volume decreased 0.2%, due primarily to lower confectionery volume, partially offset by higher salted snacks volume. Confectionery volume declined, due primarily to category softness, the timing of new products and increased competitive activity. Salted snacks volume increased due to consumer nutrition trends and increased marketing spending in nuts.

Net revenues decreased $17 million (1.4%), due primarily to lower volume/mix ($30 million) and higher promotional spending, partially offset by the absence of high product returns associated with new products incurred in the prior year.

Operating companies income decreased $69 million (27.4%), due primarily to higher marketing, administration and research costs ($39 million), lower volume/mix ($19 million), the 2004 pre-tax charges for asset impairment and exit costs ($9 million) and the 2004 implementation costs associated with the restructuring program ($8 million), partially offset by the absence of high product returns associated with new products incurred in the prior year.

U.S. Cheese, Canada & North America Foodservice. Volume increased 3.2%, due primarily to higher volume in foodservice, cheese and Canada. Volume in the foodservice business increased, driven by higher shipments to national accounts and the 2004 acquisition of a beverage business. In cheese, volume increased due primarily to share gains resulting from increased promotional spending. Canada volume also increased, aided by new product introductions in beverages.

Net revenues increased $169 million (10.0%), due primarily to higher foodservice and cheese pricing, net of higher promotional reinvestment spending in cheese ($68 million), higher volume/mix ($54 million), favorable currency ($40 million) and the impact of acquisitions.

Operating companies income decreased $122 million (35.7%), due primarily to unfavorable costs, net of higher pricing ($98 million, including higher commodity costs and increased promotional spending), the 2004 pre-tax charges for asset impairment and exit costs ($27 million), higher marketing, administration and research costs ($15 million) and higher fixed manufacturing costs ($12 million, including higher benefit costs), partially offset by higher volume/mix ($24 million) and favorable currency.

U.S. Convenient Meals. Volume increased 0.2%, due primarily to higher shipments in meats, partially offset by declines in meals and pizza. Meats volume increased driven by higher consumption of cold cuts and hot dogs, which benefited from increased marketing spending. In meals, volume declined due to the discontinuation of certain product lines in the second half of 2003. Pizza volume declined, due primarily to increased competitive activity.

Net revenues increased $39 million (3.8%), due primarily to higher pricing and lower promotional spending ($23 million, reflecting commodity-driven pricing in meats and pizza) and higher volume/mix ($16 million).

Operating companies income decreased $12 million (6.0%), due primarily to higher marketing, administration and research costs ($12 million), unfavorable costs ($7 million, including higher commodity costs, partially offset by higher pricing and lower promotional spending) and higher benefit costs, partially offset by higher volume/mix ($8 million).

Kraft International Commercial

Operating Results

The following discussion compares Kraft International Commercial's operating results for the three months ended June 30, 2004 with the three months ended June 30, 2003.

			For the Three Months Ended June 30,
			2004		2003
			(in millions)
Volume (in pounds):
	Europe, Middle East & Africa			734		740
	Latin America & Asia Pacific			593		589

		Volume (in pounds)		1,327		1,329

Net revenues:
	Europe, Middle East & Africa		$	1,821	$	1,686
	Latin America & Asia Pacific			687		662

		Net revenues	$	2,508	$	2,348

Operating companies income:
	Europe, Middle East & Africa		$	143	$	232
	Latin America & Asia Pacific			82		107

		Operating companies income	$	225	$	339

Volume decreased 0.2%, due primarily to the impact of the divestiture of a rice business and a branded fresh cheese business in Europe in 2003, price competition, trade inventory reductions and the transportation strike in Norway, partially offset by the impact of acquisitions and growth in developing markets.

Net revenues increased $160 million (6.8%), due primarily to favorable currency ($197 million) and the impact of acquisitions ($9 million), partially offset by the impact of divestitures ($33 million) and lower pricing and increased promotional spending ($20 million).

Operating companies income decreased $114 million (33.6%), due primarily to the 2004 pre-tax charges for asset impairment and exit costs ($90 million), unfavorable costs ($29 million, including increased promotional spending), lower volume/mix and the impact of divestitures, partially offset by favorable currency ($19 million).

The following discusses operating results within each of Kraft International Commercial's reportable segments.

Europe, Middle East & Africa. Volume decreased 0.8%, due primarily to the divestiture of a rice business and a branded fresh cheese business in Europe in 2003, and a decline in some Western European markets, particularly France and the Nordic region, partially offset by the impact of acquisitions. Beverages volume declined, driven by coffee price competition and market softness in France. Cheese volume also declined, impacted by the divestiture of a branded fresh cheese business in Europe in 2003, partially offset by increased cream cheese shipments in Italy and Germany. In convenient meals, volume declined, impacted by the divestiture of a rice business in Europe in 2003. Snacks volume increased, as gains in biscuits, benefiting from acquisitions, were partially offset by a decline in confectionery, reflecting price competition and trade inventory reductions in Russia and a national transportation strike in Norway. In grocery, volume increased due primarily to an acquisition in Egypt.

Net revenues increased $135 million (8.0%), due primarily to favorable currency ($169 million), favorable volume/mix ($13 million) and the impact of acquisitions, partially offset by the impact of divestitures ($33 million) and lower pricing and increased promotional spending ($23 million).

Operating companies income decreased $89 million (38.4%), due primarily to the 2004 pre-tax charges for asset impairment and exit costs ($81 million), lower pricing and higher promotional spending ($23 million) and the impact of divestitures, partially offset by favorable currency ($20 million).

Latin America & Asia Pacific. Volume increased 0.7%, due primarily to gains in both the Latin America and Asia Pacific regions. Cheese volume increased, due primarily to gains across several markets, including Australia and the Philippines. In beverages, volume declined, impacted by price competition in Mexico, partially offset by gains in Puerto Rico, Brazil and China. Snacks volume was in-line with the prior year, as increased confectionery shipments in Argentina and Brazil were offset by a decline in biscuits volume in Venezuela and Southeast Asia.

Net revenues increased $25 million (3.8%), due primarily to favorable currency ($28 million) and higher pricing, partially offset by unfavorable volume/mix and higher promotional spending.

Operating companies income decreased $25 million (23.4%), due primarily to unfavorable volume/mix ($10 million), the 2004 pre-tax charges for asset impairment and exit costs ($9 million) and unfavorable costs, net of higher pricing ($9 million, including increased promotional spending).

Financial Review

Net Cash Provided by Operating Activities

During the first six months of 2004, net cash provided by operating activities was $1.3 billion compared with $1.6 billion in the comparable 2003 period. The decrease in net cash provided by operating activities is due primarily to lower net earnings and an increase in voluntary pension plan contributions in 2004. The impact of net working capital is unchanged as higher commodity-driven inventory and accounts payable balances are offset by lower accounts receivable and taxes payable.

Net Cash Used in Investing Activities

One element of the growth strategy of the Company is to strengthen its brand portfolios through disciplined programs of selective acquisitions and divestitures. The Company is constantly investigating potential acquisition candidates and from time to time sells businesses that are outside its core categories or that do not meet its growth or profitability targets.

During the first six months of 2004, net cash used in investing activities was $465 million, compared with $561 million in the first six months of 2003. This decrease primarily reflects lower capital expenditures in 2004.

Capital expenditures for the first six months of 2004 were $353 million, compared with $497 million in the first six months of 2003. The Company expects full-year capital expenditures to be approximately $1.1 billion, including capital expenditures estimated at $50 million for the restructuring program announced in January 2004. These expenditures are expected to be funded from operations.

During the first six months of 2004, the Company acquired a U.S.-based beverage business. During the first six months of 2003, the Company purchased a biscuits business in Egypt.

Net Cash Used in / Provided by Financing Activities

During the first six months of 2004, net cash used in financing activities was $1.2 billion. During the comparable period of 2003, $268 million of net cash was provided by financing activities. The increase in net cash used in financing activities was due primarily to lower net issuances of short-term debt in 2004 and an increase in the Company's Class A share repurchases and dividend payments.

Debt and Liquidity

Debt. The Company's total debt, including amounts due to Altria Group, Inc. and affiliates, was $13.3 billion at June 30, 2004 and $13.5 billion at December 31, 2003. The Company's debt-to-equity ratio was 0.46 at June 30, 2004 and 0.47 at December 31, 2003. The Company's debt-to-capitalization ratio was 0.31 at June 30, 2004 and 0.32 at December 31, 2003.

At June 30, 2004 and December 31, 2003, the Company had short-term amounts payable to Altria Group, Inc. of $307 million and $543 million, respectively. Interest on these borrowings is based on the applicable London Interbank Offered Rate.

During March 2004, the Company filed a Form S-3 shelf registration statement with the SEC, which became effective in May 2004, under which the Company may sell debt securities and/or warrants to purchase debt securities in one or more offerings up to a total amount of $4.0 billion. The prospectus contained in the registration statement is a combined prospectus which also covers an additional $250 million of unissued principal amount under the previous Form S-3 shelf registration statement filed with the SEC in April 2002.

Credit Lines. The Company maintains revolving credit facilities that have historically been used to support the issuance of commercial paper. At June 30, 2004, credit lines for the Company and the related activity were as follows (in billions):

	June 30, 2004
Type	Credit Lines		Amount Drawn		Commercial Paper Outstanding
364-day (expired July 2004)	$	2.5	$	—	$	0.3
Multi-year (expires July 2006)		2.0				2.0

	$	4.5	$	—	$	2.3

The Company's revolving credit facilities, which are for its sole use, require the maintenance of a minimum net worth of $18.2 billion. The Company met this covenant at June 30, 2004 and expects to continue to meet this covenant. The foregoing revolving credit facilities do not include any other financial tests, any credit rating triggers or any provisions that could require the posting of collateral. The multi-year revolving credit facility enables the Company to reclassify short-term debt on a long-term basis. At June 30, 2004, $2.0 billion of commercial paper borrowings that the Company intends to refinance were reclassified as long-term debt. The Company expects to continue to refinance long-term and short-term debt from time to time. The nature and amount of the Company's long-term and short-term debt and the proportionate amount of each can be expected to vary as a result of future business requirements, market conditions and other factors.

In addition to the above, certain international subsidiaries of Kraft maintain uncommitted credit lines to meet the short-term working capital needs of the international businesses. These credit lines, which amounted to approximately $0.7 billion as of June 30, 2004, are for the sole use of the Company's international businesses. At June 30, 2004, borrowings on these lines amounted to approximately $0.2 billion.

In July 2004, Kraft negotiated a new $2.5 billion, 364-day revolving credit facility to replace the one that expired on July 13, 2004. The new 364-day revolving credit facility expires in July 2005, although it contains a provision allowing Kraft to extend the maturity of outstanding borrowings for up to one additional year.

Guarantees. As discussed in Note 6. Contingencies, the Company had third-party guarantees, which are primarily derived from acquisition and divestiture activities, of approximately $28 million at June 30, 2004. Substantially all of these guarantees expire through 2013, with $5 million expiring through June 30, 2005. The Company is required to perform under these guarantees in the event that a third party fails to make contractual payments or achieve performance measures. The Company has a liability of $21 million on its condensed consolidated balance sheet at June 30, 2004, relating to these guarantees.

In addition, at June 30, 2004, the Company was contingently liable for $136 million of guarantees related to its own performance. These include surety bonds related to dairy commodity purchases and guarantees related to the payment of custom duties and taxes, and letters of credit.

Guarantees do not have, and are not expected to have, a significant impact on the Company's liquidity.

The Company believes that its cash from operations and existing credit facilities will provide sufficient liquidity to meet its working capital needs, planned capital expenditures, future contractual obligations and payment of its anticipated quarterly dividends.

Equity and Dividends

Kraft repurchased 10.1 million shares of its Class A common stock during the first six months of 2004 at a cost of $325 million. At June 30, 2004, cumulative repurchases under its previously announced $700 million authority totaled 11.7 million shares of Class A common stock at an aggregate cost of $375 million. The Company expects to utilize the $700 million authority by the end of 2004.

As discussed in Note 1. Accounting Policies, during the first quarter of 2004, the Company granted approximately 4.1 million restricted Class A shares to eligible U.S. based employees and also issued to eligible non-U.S. employees rights to receive approximately 1.9 million Class A equivalent shares. Restrictions on most of the stock and rights lapse in the first quarter of 2007. The market value per restricted share or right was $32.23 on the date of grant.

Dividends paid in the first six months of 2004 and 2003 were $620 million and $520 million, respectively, an increase of 19.2%, reflecting a 20.0% higher dividend rate in 2004, partially offset by a lower number of shares outstanding as a result of Class A share repurchases. The present annualized dividend rate is $0.72 per common share. The declaration of dividends is subject to the discretion of Kraft's Board of Directors and will depend on various factors, including the Company's net earnings, financial condition, cash requirements, future prospects and other factors deemed relevant by Kraft's Board of Directors.

Market Risk

The Company operates globally, with manufacturing and sales facilities in various locations around the world, and utilizes certain financial instruments to manage its foreign currency and commodity exposures, which primarily relate to forecasted transactions. Derivative financial instruments are used by the Company, principally to reduce exposures to market risks resulting from fluctuations in foreign exchange rates and commodity prices by creating offsetting exposures. The Company is not a party to leveraged derivatives and, by policy, does not use financial instruments for speculative purposes.

Substantially all of the Company's derivative financial instruments are effective as hedges. During the six months and three months ended June 30, 2004 and 2003, ineffectiveness related to cash flow hedges was not

material. At June 30, 2004, the Company was hedging forecasted transactions for periods not exceeding fourteen months and expects substantially all amounts reported in accumulated other comprehensive earnings (losses) to be reclassified to the consolidated statement of earnings within the next twelve months.

Foreign exchange rates. The Company uses forward foreign exchange contracts and foreign currency options to mitigate its exposure to changes in foreign currency exchange rates from third-party and intercompany forecasted transactions. The primary currencies to which the Company is exposed, based on the size and location of its businesses, include the euro, Swiss franc, British pound and Canadian dollar. At June 30, 2004 and December 31, 2003, the Company had foreign exchange option and forward contracts with aggregate notional amounts of $2.6 billion and $2.5 billion, respectively. The effective portion of unrealized gains and losses associated with forward contracts is deferred as a component of accumulated other comprehensive earnings (losses) until the underlying hedged transactions are reported on the Company's consolidated statement of earnings.

Commodities. The Company is exposed to price risk related to forecasted purchases of certain commodities used as raw materials by the Company's businesses. Accordingly, the Company uses commodity forward contracts as cash flow hedges, primarily for coffee, cocoa, milk and cheese. Commodity futures and options are also used to hedge the price of certain commodities, including milk, coffee, cocoa, wheat, corn, sugar and soybean oil. In general, commodity forward contracts qualify for the normal purchase exception under Statement of Financial Accounting Standards ("SFAS") No. 133 and are, therefore, not subject to the provisions of SFAS No. 133. At June 30, 2004 and December 31, 2003, the Company had net long commodity positions of $456 million and $255 million, respectively. Unrealized gains or losses on net commodity positions were immaterial at June 30, 2004 and December 31, 2003. The effective portion of unrealized gains and losses on commodity futures and option contracts is deferred as a component of accumulated other comprehensive earnings (losses) and is recognized as a component of cost of sales in the Company's consolidated statement of earnings when the related inventory is sold.

Contingencies

See Note 6. Contingencies and Part II—Other Information, Item 1. Legal Proceedings for a discussion of contingencies.

Forward-Looking and Cautionary Statements

The Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission ("SEC"), in its reports to shareholders and in press releases and investor webcasts. One can identify these forward-looking statements by use of words such as "strategy," "expects," "plans," "anticipates," "believes," "will," "continues," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are based on our assumptions and estimates and are subject to risks and uncertainties. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company is hereby identifying important factors that could cause actual results and outcomes to differ materially from those contained in any forward-looking statement made by or on behalf of the Company; any such statement is qualified by reference to the following cautionary statements.

Each of the Company's segments is subject to intense competition, changes in consumer preferences and demand for its products, including low-carbohydrate diet trends, the effects of changing prices for its raw materials and local economic and market conditions. Their results are dependent upon their continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new products and markets, to broaden brand portfolios, to compete effectively with lower priced products in a consolidating environment at the retail and manufacturing levels and to improve productivity. The Company's results are also dependent on its ability to consummate and successfully integrate acquisitions and to realize the cost savings and improved asset utilization contemplated by its restructuring program. In addition, the Company is subject to the effects of foreign economies, currency movements, fluctuations in levels of customer inventories and credit and other business risks related to its customers operating in a challenging economic and competitive environment. The Company's results are affected by its access to credit markets, borrowing costs and credit ratings, which may in turn be influenced by the credit ratings of Altria Group, Inc. The Company's benefit expense is subject to the investment performance of pension plan assets, interest rates and cost increases for medical benefits offered to employees and retirees. The Company's assessment of the fair value of its operations for purposes of assessing impairment of goodwill and intangibles is based on discounting projections of future cash flows and is affected by the interest rate market and general economic and market conditions. The food industry continues to be subject to recalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose confidence in the safety and quality of certain food products. The food industry is also subject to consumer concerns regarding genetically modified organisms and the health implications of obesity and trans-fatty acids. Developments in any of these areas, which are more fully described elsewhere in this document and which descriptions are incorporated into this section by reference, could cause the Company's results to differ materially from results that have been or may be projected by or on behalf of the Company. The Company cautions that the foregoing list of important factors is not exclusive. Any forward-looking statements are made as of the date of the document in which they appear. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

Item 4. Controls and Procedures.

The Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's reports filed or submitted under the Securities Exchange Act of 1934, as amended. There has been no change in the Company's internal control over financial reporting during the quarter ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.		Legal Proceedings.
		The Company is party to a variety of legal proceedings arising out of the normal course of business, including the matters discussed below. While the results of litigation cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.
		On January 2, 2004, the Canada Border Services Agency ("CBSA"), an agency of the Canadian government, announced the initiation of an investigation into an allegation of injurious dumping by Kraft Foods North America, Inc. ("KFNA") of frozen self-rising crust pizza from the United States following a complaint filed by McCain Foods Limited, which claims that the alleged dumping is materially injuring Canadian production by causing price erosion, price suppression, lost sales and reduced profits. Kraft Canada is the major importer of frozen self-rising crust pizza from the United States, which it sells under the brand name Delissio. On the basis of McCain's allegation, the Canadian International Trade Tribunal ("CITT") issued a preliminary finding that there was a reasonable indication of injury in the Canadian market. On May 17, 2004, the CBSA made a preliminary determination that dumping had occurred. The CITT has commenced a formal inquiry into whether the imports are in fact materially injuring Canadian production and will make a final determination as to material injury, if any, by the end of August 2004. The Company is vigorously contesting McCain's allegations of dumping and material injury. If material injury is found by the CITT, dumping duties will be assessed against imports of frozen self-rising crust pizza from the United States for an initial period of five years. The dumping duties will be based upon a comparison of normal values determined by the CBSA for KFNA against KFNA's export prices. Frozen pizzas are currently imported into Canada from the United States on a duty-free basis under the terms of the North American Free Trade Agreement.
		In November 2003, the Company was advised by the Fort Worth District Office of the Securities and Exchange Commission ("SEC") that the staff is considering recommending that the SEC bring a civil injunctive action against the Company charging it with aiding and abetting Fleming Companies ("Fleming") in violations of the securities laws. District staff alleges that a Company employee, who received a similar notice, signed documents requested by Fleming, which Fleming used in order to accelerate its revenue recognition. The notice does not contain any allegations or statements regarding the Company's accounting for transactions with Fleming. The Company believes that it properly recorded the transactions in accordance with accounting principles generally accepted in the United States. The Company has submitted a response to the staff indicating why it believes that no enforcement action should be brought against it. The Company is cooperating fully with the SEC with respect to this matter and the SEC's investigation of Fleming.
		In October 2002, Mr. Mustapha Gaouar and five other family members (collectively "the Gaouars") filed suit in the Commercial Court of Casablanca against the Company and Mr. Omar Berrada claiming damages of approximately $31 million arising from a non-compete undertaking signed by Mr. Gaouar allegedly under duress. The non-compete clause was contained in an agreement concluded in 1986 between Mr. Gaouar and Mr. Berrada acting for himself and for his group of companies, including Les Cafes Ennasr (renamed Kraft Foods Maroc), which was acquired by the Company from Mr. Berrada in 2001. In June 2003, the court issued a preliminary judgment against Kraft Foods Maroc and Mr. Berrada holding that Mr. Gaouar is entitled to damages for being deprived of the possibility of engaging in coffee roasting from 1986 due to such non-compete undertaking. At that time, the court appointed two experts to assess the amount of damages to be awarded. In December 2003, these experts delivered a report concluding that they could see no evidence of loss suffered by the Gaouars. The Gaouars asked the court that this report be set aside and new court

		experts be appointed. On April 15, 2004, the court delivered a judgment upholding the defenses of Kraft Foods Maroc and rejecting the claims of the Gaouars. The Gaouars have appealed this judgment. A hearing has been fixed for September 20, 2004 for the delivery of submissions in response. The existence of the claims of Mr. Gaouar was not disclosed by Mr. Berrada at the time of the Company's acquisition of Kraft Foods Maroc in 2001. As a result, in the event that the Company is ultimately found liable on appeal for damages to plaintiff in this case, the Company believes that it may have claims against Mr. Berrada for recovery of all or a portion of the amount.
		Environmental Matters
		In May 2001, the State of Ohio notified the Company that it may be subject to an enforcement action for alleged past violations of the Company's wastewater discharge permit at its production facility in Farmdale, Ohio. The State has offered to attempt to negotiate a settlement of this matter, and the parties currently are involved in settlement negotiations.
Item 2.		Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.
		The Company's share repurchase program activity for each of the three months ended June 30, 2004 was as follows:

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)(2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 1—April 30, 2004	855,000	$32.84	7,362,160	$459,425,048
May 1—May 31, 2004	2,160,000	$31.04	9,522,160	$392,370,983
June 1—June 30, 2004	2,191,550	$30.74	11,713,710	$325,001,314
For the Quarter Ended
June 30, 2004	5,206,550	$31.21

(1): In December 2003, Kraft's Board of Directors approved a new share repurchase program of up to $700 million of its Class A common stock. All share repurchases have been made pursuant to this program.
(2): Aggregate number of shares repurchased under the share repurchase program as of the end of the period presented.

Item 6.	Exhibits and Reports on Form 8-K.
	(a) Exhibits
		10.15	364-Day Revolving Credit Agreement dated as of July 13, 2004.
		12	Statement regarding computation of ratios of earnings to fixed charges.
		31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b): Reports on Form 8-K. The Registrant furnished to the SEC (i) a Current Report on Form 8-K on April 19, 2004, covering Item 7 (Financial Statements and Exhibits) and Item 12 (Results of Operations and Financial Condition), which contained the earnings release dated April 19, 2004; and (ii) a Current Report on Form 8-K on July 19, 2004, covering Item 7 (Financial Statements and Exhibits) and Item 12 (Results of Operations and Financial Condition), which contained the earnings release dated July 19, 2004.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KRAFT FOODS INC.
	/s/ JAMES P. DOLLIVE James P. Dollive, Executive Vice President and Chief Financial Officer
	August 6, 2004

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                                                                   Exhibit 10.15

                                                                  EXECUTION COPY

                               U.S.$2,500,000,000
                       364-DAY REVOLVING CREDIT AGREEMENT
                            Dated as of July 13, 2004
                                      Among
                                KRAFT FOODS INC.
                                       and
                        THE INITIAL LENDERS NAMED HEREIN
                                       and
                               JPMORGAN CHASE BANK
                                       and
                                 CITIBANK, N.A.
                            AS ADMINISTRATIVE AGENTS
                                       and
                           CREDIT SUISSE FIRST BOSTON
                                       and
                          DEUTSCHE BANK SECURITIES INC.
                              AS SYNDICATION AGENTS
                                       and
                               ABN AMRO BANK N.V.
                                       and
                                   BNP PARIBAS
                                       and
              DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
                                       and
                                  HSBC BANK USA
                      AS ARRANGERS AND DOCUMENTATION AGENTS
                               * * * * * * * * * *
           J.P. MORGAN SECURITIES INC., CITIGROUP GLOBAL MARKETS INC.,
          CREDIT SUISSE FIRST BOSTON and DEUTSCHE BANK SECURITIES INC.
                     AS JOINT LEAD ARRANGERS AND BOOKRUNNERS



                                TABLE OF CONTENTS



                                                                                                           PAGE
                                                                                                       
ARTICLE I         DEFINITIONS AND ACCOUNTING TERMS............................................................1
Section 1.01.     Certain Defined Terms.......................................................................1
Section 1.02.     Computation of Time Periods................................................................10
Section 1.03.     Accounting Terms...........................................................................10

ARTICLE II        AMOUNTS AND TERMS OF THE ADVANCES..........................................................10

Section 2.01.     The Pro Rata Advances......................................................................10
Section 2.02.     Making the Pro Rata Advances...............................................................11
Section 2.03.     Repayment of Pro Rata Advances.............................................................12
Section 2.04.     Interest on Pro Rata Advances..............................................................13
Section 2.05.     Additional Interest on LIBO Rate Advances..................................................13
Section 2.06.     Conversion of Pro Rata Advances............................................................13
Section 2.07.     The Competitive Bid Advances...............................................................14
Section 2.08.     LIBO Rate Determination....................................................................19
Section 2.09.     Fees.......................................................................................20
Section 2.10.     Optional Termination, Reduction or Increase of the Commitments and Term-Out Option.........20
Section 2.11.     Optional Prepayments of Pro Rata Advances..................................................22
Section 2.12.     Increased Costs............................................................................23
Section 2.13.     Illegality.................................................................................24
Section 2.14.     Payments and Computations..................................................................24
Section 2.15.     Taxes......................................................................................25
Section 2.16.     Sharing of Payments, Etc...................................................................28
Section 2.17.     Evidence of Debt...........................................................................28
Section 2.18.     Use of Proceeds............................................................................29

ARTICLE III       CONDITIONS TO EFFECTIVENESS AND LENDING....................................................29

Section 3.01.     Conditions Precedent to Effectiveness......................................................29
Section 3.02.     Initial Advance to Each Designated Subsidiary..............................................31
Section 3.03.     Conditions Precedent to Each Pro Rata Borrowing............................................31
Section 3.04.     Conditions Precedent to Each Competitive Bid Borrowing.....................................32


                                        i


                                TABLE OF CONTENTS
                                   (continued)



                                                                                                           PAGE
                                                                                                       
ARTICLE IV        REPRESENTATIONS AND WARRANTIES.............................................................33

Section 4.01.     Representations and Warranties of Kraft....................................................33

ARTICLE V         COVENANTS OF KRAFT.........................................................................34

Section 5.01.     Affirmative Covenants......................................................................34
Section 5.02.     Negative Covenants.........................................................................35

ARTICLE VI        EVENTS OF DEFAULT..........................................................................37

Section 6.01.     Events of Default..........................................................................37
Section 6.02.     Lenders' Rights upon Event of Default......................................................38

ARTICLE VII       THE ADMINISTRATIVE AGENTS..................................................................39

Section 7.01.     Authorization and Action...................................................................39
Section 7.02.     Administrative Agents' Reliance, Etc.......................................................39
Section 7.03.     JPMorgan Chase, Citibank and Affiliates....................................................40
Section 7.04.     Lender Credit Decision.....................................................................40
Section 7.05.     Indemnification............................................................................41
Section 7.06.     Successor Administrative Agents............................................................41
Section 7.07.     Syndication Agents and Arrangers and Documentation Agents..................................42

ARTICLE VIII      GUARANTY...................................................................................42

Section 8.01.     Guaranty...................................................................................42
Section 8.02.     Guaranty Absolute..........................................................................42
Section 8.03.     Waivers....................................................................................43
Section 8.04.     Continuing Guaranty........................................................................43

ARTICLE IX        MISCELLANEOUS..............................................................................44

Section 9.01.     Amendments, Etc............................................................................44
Section 9.02.     Notices, Etc...............................................................................44
Section 9.03.     No Waiver; Remedies........................................................................46
Section 9.04.     Costs and Expenses.........................................................................46
Section 9.05.     Right of Set-Off...........................................................................47


                                       ii


                                TABLE OF CONTENTS
                                   (continued)



                                                                                                           PAGE
                                                                                                       
Section 9.06.     Binding Effect.............................................................................47
Section 9.07.     Assignments and Participations.............................................................48
Section 9.08.     Designated Subsidiaries....................................................................51
Section 9.09.     Governing Law..............................................................................51
Section 9.10.     Execution in Counterparts..................................................................51
Section 9.11.     Jurisdiction, Etc..........................................................................51
Section 9.12.     Confidentiality............................................................................52
Section 9.13.     Integration................................................................................53

SCHEDULE

Schedule I        -   List of Applicable Lending Offices

EXHIBITS

Exhibit A-1       -   Form of Pro Rata Note
Exhibit A-2       -   Form of Competitive Bid Note
Exhibit B-1       -   Form of Notice of Pro Rata Borrowing
Exhibit B-2       -   Form of Notice of Competitive Bid Borrowing
Exhibit C         -   Form of Assignment and Acceptance
Exhibit D         -   Form of Designation Agreement
Exhibit E-1       -   Form of Opinion of Counsel for Kraft
Exhibit E-2       -   Form of Opinion of Counsel for Kraft
Exhibit F         -   Form of Opinion of Counsel for Designated Subsidiary
Exhibit G         -   Form of Opinion of Counsel for JPMorgan Chase, as Adminstrative Agent
Exhibit H         -   Form of New Lender Supplement


                                       iii


                       364-DAY REVOLVING CREDIT AGREEMENT

                            DATED AS OF JULY 13, 2004

        KRAFT FOODS INC., a Virginia corporation ("KRAFT"), the banks, financial
institutions and other institutional lenders (the "INITIAL LENDERS") listed on
the signature pages hereof, and JPMORGAN CHASE BANK ("JPMORGAN CHASE") and
CITIBANK, N.A. ("CITIBANK"), as administrative agents (each, in such capacity,
an "ADMINISTRATIVE AGENT"), CREDIT SUISSE FIRST BOSTON and DEUTSCHE BANK
SECURITIES INC., as syndication agents (each, in such capacity, a "SYNDICATION
AGENT") and ABN AMRO BANK N.V., BNP PARIBAS, DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES and HSBC BANK USA, as arrangers and documentation agents
(each, in such capacity, an "ARRANGER AND DOCUMENTATION AGENT") for the Lenders
(as hereinafter defined), agree as follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

                Section 1.01. CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

                "ADVANCE" means a Pro Rata Advance or a Competitive Bid Advance.

                "AGENTS" means each Administrative Agent, each Syndication Agent
        and each Arranger and Documentation Agent.

                "APPLICABLE FACILITY FEE RATE" means, for any period, a
        percentage per annum equal to 0.0800%.

                "APPLICABLE INTEREST RATE MARGIN" means for any Interest Period
        a percentage per annum equal to 0.2200%; PROVIDED that for any day
        during any Interest Period that the aggregate amount of Advances
        outstanding under this Agreement and the 5-Year Facility exceeds
        one-third of the aggregate amount of Commitments under this Agreement
        and commitments under the 5-Year Facility, the Applicable Interest Rate
        Margin shall be increased by 0.1000% per annum; and PROVIDED FURTHER
        that for any Pro Rata Advances that have been extended pursuant to
        Section 2.10(c), the Applicable Interest Rate Margin shall be increased
        by 0.1250% per annum.

                "APPLICABLE LENDING OFFICE" means, with respect to each Lender,
        such Lender's Domestic Lending Office in the case of a Pro Rata Advance
        and, in the case of a Competitive Bid Advance, the office of such Lender
        notified by such Lender to JPMorgan Chase, as Administrative Agent, as
        its Applicable Lending Office with respect to such Competitive Bid
        Advance.

                "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
        entered into by a Lender and an Eligible Assignee, and accepted by
        JPMorgan Chase, as Administrative Agent, in substantially the form of
        Exhibit C hereto.



                "BASE RATE" means a fluctuating interest rate per annum in
        effect from time to time, which rate per annum shall at all times be
        equal to the higher of:

                        (i) the rate of interest announced publicly by JPMorgan
        Chase in New York, New York, from time to time, as JPMorgan Chase's
        prime rate; and

                        (ii) 1/2 of one percent per annum above the Federal
        Funds Effective Rate.

                "BASE RATE ADVANCE" means a Pro Rata Advance that bears interest
        as provided in Section 2.04(a)(i).

                "BOARD" means the Board of Governors of the Federal Reserve
        System of the United States (or any successor).

                "BORROWERS" means, collectively, Kraft and each Designated
        Subsidiary that shall become a party to this Agreement pursuant to
        Section 9.08.

                "BORROWING" means a Pro Rata Borrowing or a Competitive Bid
                Borrowing.

                "BUSINESS DAY" means a day of the year on which banks are not
        required or authorized by law to close in New York City and, if the
        applicable Business Day relates to any LIBO Rate Advances or Floating
        Rate Bid Advances, on which dealings are carried on in the London
        interbank market and banks are open for business in London.

                "COMMITMENT" means as to any Lender (i) the Dollar amount set
        forth opposite such Lender's name on the signature pages hereof or (ii)
        if such Lender has entered into an Assignment and Acceptance, or entered
        into a New Lender Supplement, the Dollar amount set forth for such
        Lender in the Register maintained by JPMorgan Chase, as Administrative
        Agent, pursuant to Section 9.07(d), in each case, as such amount may be
        reduced or increased pursuant to Section 2.10.

                "COMPETITIVE BID ADVANCE" means an advance by a Lender to any
        Borrower as part of a Competitive Bid Borrowing resulting from the
        competitive bidding procedure described in Section 2.07 and refers to a
        Fixed Rate Bid Advance or a Floating Rate Bid Advance.

                "COMPETITIVE BID BORROWING" means a borrowing consisting of
        simultaneous Competitive Bid Advances from each of the Lenders whose
        offer to make one or more Competitive Bid Advances as part of such
        borrowing has been accepted under the competitive bidding procedure
        described in Section 2.07.

                "COMPETITIVE BID NOTE" means a promissory note of any Borrower
        payable to the order of any Lender, in substantially the form of Exhibit
        A-2 hereto, evidencing the



        indebtedness of such Borrower to such Lender resulting from a
        Competitive Bid Advance made by such Lender to such Borrower.

                "COMPETITIVE BID REDUCTION" has the meaning specified in
        Section 2.01.

                "CONSOLIDATED TANGIBLE ASSETS" means the total assets appearing
        on a consolidated balance sheet of Kraft and its Subsidiaries, less
        goodwill and other intangible assets and the minority interests of other
        Persons in such Subsidiaries, all as determined in accordance with
        accounting principles generally accepted in the United States, EXCEPT
        that if there has been a material change in an accounting principle as
        compared to that applied in the preparation of the financial statements
        of Kraft and its Subsidiaries as of and for the quarter ended March 31,
        2004, then such new accounting principle shall not be used in the
        determination of Consolidated Tangible Assets. A material change in an
        accounting principle is one that, in the year of its adoption, changes
        Consolidated Tangible Assets at any quarter in such year by more than
        10%.

                "CONVERT," "CONVERSION" and "CONVERTED" each refers to a
        conversion of Pro Rata Advances of one Type into Pro Rata Advances of
        the other Type pursuant to Section 2.06, 2.08 or 2.13.

                "DEBT" means (i) indebtedness for borrowed money or for the
        deferred purchase price of property or services, whether or not
        evidenced by bonds, debentures, notes or similar instruments, (ii)
        obligations as lessee under leases that, in accordance with accounting
        principles generally accepted in the United States, are recorded as
        capital leases, and (iii) obligations under direct or indirect
        guaranties in respect of, and obligations (contingent or otherwise) to
        purchase or otherwise acquire, or otherwise to assure a creditor against
        loss in respect of, indebtedness or obligations of any other Person of
        the kinds referred to in clause (i) or (ii) above.

                "DEFAULT" means any event specified in Section 6.01 that would
        constitute an Event of Default but for the requirement that notice be
        given or time elapse or both.

                "DESIGNATED SUBSIDIARY" means any wholly-owned Subsidiary of
        Kraft designated for borrowing privileges under this Agreement pursuant
        to Section 9.08.

                "DESIGNATION AGREEMENT" means, with respect to any Designated
        Subsidiary, an agreement in the form of Exhibit D hereto signed by such
        Designated Subsidiary and Kraft.

                "DOLLARS" and the "$" sign each means lawful currency of the
                United States of America.

                "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
        office of such Lender specified as its "Domestic Lending Office"
        opposite its name on Schedule I



        hereto or in the Assignment and Acceptance or New Lender Supplement
        pursuant to which it became a Lender, or such other office of such
        Lender as such Lender may from time to time specify to Kraft and
        JPMorgan Chase, as Administrative Agent.

                "EFFECTIVE DATE" has the meaning specified in Section 3.01.

                "ELIGIBLE ASSIGNEE" means (i) a commercial bank organized under
        the laws of the United States, or any State thereof, and having total
        assets in excess of $5,000,000,000; (ii) a commercial bank organized
        under the laws of any other country which is a member of the
        Organization for Economic Cooperation and Development (or any successor)
        ("OECD"), or a political subdivision of any such country, and having
        total assets in excess of $5,000,000,000, provided that such bank is
        acting through a branch or agency located in the country in which it is
        organized or another country which is also a member of the OECD or the
        Cayman Islands; (iii) the central bank of any country which is a member
        of the OECD; (iv) a commercial finance company or finance Subsidiary of
        a corporation organized under the laws of the United States, or any
        State thereof, and having total assets in excess of $3,000,000,000; (v)
        an insurance company organized under the laws of the United States, or
        any State thereof, and having total assets in excess of $5,000,000,000;
        (vi) any Lender; (vii) an affiliate of any Lender; and (viii) any other
        bank, commercial finance company, insurance company or other Person
        approved in writing by Kraft, which approval shall be notified to
        JPMorgan Chase, as Administrative Agent and, for the purposes of Section
        2.10(b), approved in writing by JPMorgan Chase, as Administrative Agent.

                "ERISA" means the Employee Retirement Income Security Act of
        1974, as amended from time to time, and the regulations promulgated and
        rulings issued thereunder.

                "ERISA AFFILIATE" means any Person that for purposes of Title IV
        of ERISA is a member of any Borrower's controlled group, or under common
        control with any Borrower, within the meaning of Section 414 of the
        Internal Revenue Code.

                "ERISA EVENT" means (a) (i) the occurrence with respect to a
        Plan of a reportable event, within the meaning of Section 4043 of ERISA,
        unless the 30-day notice requirement with respect thereto has been
        waived by the Pension Benefit Guaranty Corporation (or any successor)
        ("PBGC"), or (ii) the requirements of subsection (1) of Section 4043(b)
        of ERISA (without regard to subsection (2) of such section) are met with
        respect to a contributing sponsor, as defined in Section 4001(a)(13) of
        ERISA, of a Plan, and an event described in paragraph (9), (10), (11),
        (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur
        with respect to such Plan within the following 30 days; (b) the
        application for a minimum funding waiver with respect to a Plan; (c) the
        provision by the administrator of any Plan of a notice of intent to
        terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including
        any such notice with respect to a



        plan amendment referred to in Section 4041(e) of ERISA); (d) the
        cessation of operations at a facility of any Borrower or Kraft or any of
        their ERISA Affiliates in the circumstances described in Section 4062(e)
        of ERISA; (e) the withdrawal by any Borrower or Kraft or any of their
        ERISA Affiliates from a Multiple Employer Plan during a plan year for
        which it was a substantial employer, as defined in Section 4001(a)(2) of
        ERISA; (f) the conditions set forth in Section 302(f)(1)(A) and (B) of
        ERISA to the creation of a lien upon property or rights to property of
        any Borrower or Kraft or any of their ERISA Affiliates for failure to
        make a required payment to a Plan are satisfied; (g) the adoption of an
        amendment to a Plan requiring the provision of security to such Plan,
        pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
        proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or
        the occurrence of any event or condition described in Section 4042 of
        ERISA that constitutes grounds for the termination of, or the
        appointment of a trustee to administer, a Plan.

                "EUROCURRENCY LIABILITIES" has the meaning assigned to that term
        in Regulation D of the Board, as in effect from time to time.

                "EUROCURRENCY LENDING OFFICE" means, with respect to any Lender,
        the office of such Lender specified as its "Eurocurrency Lending Office"
        opposite its name on Schedule I hereto or in the Assignment and
        Acceptance or New Lender Supplement pursuant to which it became a Lender
        (or, if no such office is specified, its Domestic Lending Office), or
        such other office of such Lender as such Lender may from time to time
        specify to Kraft and JPMorgan Chase, as Administrative Agent.

                "EUROCURRENCY RATE RESERVE PERCENTAGE" means, for any Interest
        Period, for all LIBO Rate Advances or Floating Rate Bid Advances
        comprising part of the same Borrowing, the reserve percentage applicable
        two Business Days before the first day of such Interest Period under
        regulations issued from time to time by the Board for determining the
        maximum reserve requirement (including, without limitation, any
        emergency, supplemental or other marginal reserve requirement) for a
        member bank of the Federal Reserve System in New York City with respect
        to liabilities or assets consisting of or including Eurocurrency
        Liabilities (or with respect to any other category of liabilities that
        includes deposits by reference to which the interest rate on LIBO Rate
        Advances or Floating Rate Bid Advances is determined) having a term
        equal to such Interest Period.

                "EVENT OF DEFAULT" has the meaning specified in Section 6.01.

                "EXISTING LOAN AGREEMENT" means Kraft's existing
        U.S.$2,500,000,000 364-Day Revolving Credit Agreement dated as of July
        14, 2003.

                "FEDERAL BANKRUPTCY CODE" means the Bankruptcy Reform Act of
        1978, as amended from time to time.



                "FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
        fluctuating interest rate per annum equal, for each day during such
        period, to the weighted average of the rates on overnight Federal funds
        transactions with members of the Federal Reserve System arranged by
        Federal funds brokers, as published for such day (or, if such day is not
        a Business Day, for the next preceding Business Day) on Telerate Page
        120 (or any successor page), or, if such rate is not so published for
        any day that is a Business Day, the average of the quotations for such
        day on such transactions received by JPMorgan Chase, as Administrative
        Agent, from three Federal funds brokers of recognized standing selected
        by it.

                "5-YEAR FACILITY" means the U.S.$2,000,000,000 5-Year Revolving
        Credit Agreement dated as of July 24, 2001 among Kraft and the agents
        and lenders parties thereto.

                "FIXED RATE BID ADVANCE" means a Competitive Bid Advance bearing
        interest based on a fixed rate per annum as specified in the relevant
        Notice of Competitive Bid Borrowing.

                "FLOATING RATE BID ADVANCE" means a Competitive Bid Advance
        bearing interest at a rate of interest quoted as a margin over the LIBO
        Rate as specified in the relevant Notice of Competitive Bid Borrowing.

                "HOME JURISDICTION WITHHOLDING TAXES" means (a) in the case of
        Kraft, withholding for United States income taxes, United States back-up
        withholding taxes and United States withholding taxes and (b) in the
        case of a Designated Subsidiary, withholding taxes imposed by the
        jurisdiction under the laws of which such Designated Subsidiary is
        organized or any political subdivision thereof.

                "INTEREST PERIOD" means, for each LIBO Rate Advance comprising
        part of the same Pro Rata Borrowing and each Floating Rate Bid Advance
        comprising part of the same Competitive Bid Borrowing, the period
        commencing on the date of such LIBO Rate Advance or Floating Rate Bid
        Advance or the date of Conversion of any Base Rate Advance into such
        LIBO Rate Advance and ending on the last day of the period selected by
        the Borrower requesting such Borrowing pursuant to the provisions below.
        The duration of each such Interest Period shall be one, two, three or
        six months, or, if available to all Lenders, nine months, as such
        Borrower may select upon notice received by JPMorgan Chase, as
        Administrative Agent, not later than 11:00 A.M. (New York City time) on
        the third Business Day prior to the first day of such Interest Period;
        PROVIDED, HOWEVER, that:

                (a)     such Borrower may not select any Interest Period that
        ends after the Termination Date, subject to Section 2.10(c);



                (b)     whenever the last day of any Interest Period would
        otherwise occur on a day other than a Business Day, the last day of such
        Interest Period shall be extended to occur on the next succeeding
        Business Day, PROVIDED that if such extension would cause the last day
        of such Interest Period to occur in the next following calendar month,
        the last day of such Interest Period shall occur on the immediately
        preceding Business Day; and

                (c)     whenever the first day of any Interest Period occurs on
        a day of an initial calendar month for which there is no numerically
        corresponding day in the calendar month that succeeds such initial
        calendar month by the number of months equal to the number of months in
        such Interest Period, such Interest Period shall end on the last
        Business Day of such succeeding calendar month.

                "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
        as amended from time to time, and the regulations promulgated and the
        rulings issued thereunder.

                "JPMORGAN CHASE'S ADMINISTRATIVE AGENT ACCOUNT" means (a) the
        account of JPMorgan Chase, as Administrative Agent, maintained by
        JPMorgan Chase, as Administrative Agent, at its office at 1111 Fannin,
        Houston, Texas 77002, Account No. 323243088, Attention: Leah Hughes, or
        (b) such other account of JPMorgan Chase, as Administrative Agent, as is
        designated in writing from time to time by JPMorgan Chase, as
        Administrative Agent, to Kraft and the Lenders for such purpose.

                "LENDERS" means the Initial Lenders and any New Lender and their
        respective successors and permitted assignees.

                "LIBO RATE" means an interest rate per annum equal to either:

                (a)     the offered rate per annum at which deposits in Dollars
        appear on Telerate Page 3750 (or any successor page) as of 11:00 A.M.
        (London time) two Business Days before the first day of such Interest
        Period, or

                (b) if the LIBO Rate does not appear on Telerate Page 3750 (or
        any successor page), then the LIBO Rate will be determined by taking the
        average (rounded upward to the nearest whole multiple of 1/16 of 1% per
        annum, if such average is not such a multiple) of the rates per annum at
        which deposits in Dollars are offered by the principal office of each of
        the Reference Banks in London, England to prime banks in the London
        interbank market at 11:00 A.M. (London time) two Business Days before
        the first day of such Interest Period for an amount substantially equal
        to the amount that would be the Reference Banks' respective ratable
        shares of such Borrowing outstanding during such Interest Period and for
        a period equal to such Interest Period, as determined by JPMorgan Chase,
        as Administrative Agent, SUBJECT, HOWEVER, to the provisions of
        Section 2.08.



                "LIBO RATE ADVANCE" means a Pro Rata Advance that bears interest
        as provided in Section 2.04(a)(ii).

                "LIEN" has the meaning specified in Section 5.02(a).

                "MAJOR SUBSIDIARY" means any Subsidiary (a) more than 50% of the
        voting securities of which is owned directly or indirectly by Kraft, (b)
        which is organized and existing under, or has its principal place of
        business in, the United States or any political subdivision thereof,
        Canada or any political subdivision thereof, any country which is a
        member of the European Union on the date hereof (other than Greece,
        Portugal or Spain) or any political subdivision thereof, or Switzerland,
        Norway or Australia or any of their respective political subdivisions,
        and (c) which has at any time total assets (after intercompany
        eliminations) exceeding $1,000,000,000.

                "MARGIN STOCK" means margin stock, as such term is defined in
        Regulation U.

                "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
        Section 4001(a)(3) of ERISA, to which any Borrower or any ERISA
        Affiliate is making or accruing an obligation to make contributions, or
        has within any of the preceding five plan years made or accrued an
        obligation to make contributions, such plan being maintained pursuant to
        one or more collective bargaining agreements.

                "MULTIPLE EMPLOYER PLAN" means a single employer plan, as
        defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
        employees of any Borrower or any ERISA Affiliate and at least one Person
        other than such Borrower and the ERISA Affiliates or (b) was so
        maintained and in respect of which such Borrower or any ERISA Affiliate
        could have liability under Section 4064 or 4069 of ERISA in the event
        such plan has been or were to be terminated.

                "NEW LENDER" has the meaning specified in Section 2.10(b).

                "NEW LENDER SUPPLEMENT" has the meaning specified in
        Section 2.10(b).

                "NOTE" means a Pro Rata Note or a Competitive Bid Note. ----

                "NOTICE OF COMPETITIVE BID BORROWING" has the meaning specified
        in Section 2.07(b).

                "NOTICE OF PRO RATA BORROWING" has the meaning specified in
        Section 2.02(a).

                "OBLIGATIONS" has the meaning specified in Section 8.01.

                "OTHER TAXES" has the meaning specified in Section 2.15(b).



                "PERSON" means an individual, partnership, corporation
        (including a business trust), joint stock company, trust, unincorporated
        association, joint venture, limited liability company or other entity,
        or a government or any political subdivision or agency thereof.

                "PLAN" means a Single Employer Plan or a Multiple Employer Plan.

                "PRO RATA ADVANCE" means an advance by a Lender to any Borrower
        as part of a Pro Rata Borrowing and refers to a Base Rate Advance or a
        LIBO Rate Advance (each of which shall be a "TYPE" of Pro Rata Advance).

                "PRO RATA BORROWING" means a borrowing consisting of
        simultaneous Pro Rata Advances of the same Type made by each of the
        Lenders pursuant to Section 2.01.

                "PRO RATA NOTE" means a promissory note of any Borrower payable
        to the order of any Lender, delivered pursuant to a request made under
        Section 2.17 in substantially the form of Exhibit A-1 hereto, evidencing
        the aggregate indebtedness of such Borrower to such Lender resulting
        from the Pro Rata Advances made by such Lender to such Borrower.

                "REFERENCE BANKS" means JPMorgan Chase, Citibank, Credit Suisse
        First Boston and Deutsche Bank AG New York Branch.

                "REGISTER" has the meaning specified in Section 9.07(d).

                "REGULATION A" means Regulation A of the Board, as in effect
        from time to time.

                "REGULATION U" means Regulation U of the Board, as in effect
        from time to time.

                "REQUIRED LENDERS" means at any time Lenders owed at least 50.1%

        of the then aggregate unpaid principal amount of the Pro Rata Advances
        owing to Lenders, or, if no such principal amount is then outstanding,
        Lenders having at least 50.1% of the Commitments.

                "SINGLE EMPLOYER PLAN" means a single employer plan, as defined
        in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
        any Borrower or any ERISA Affiliate and no Person other than such
        Borrower and the ERISA Affiliates or (b) was so maintained and in
        respect of which such Borrower or any ERISA Affiliate could have
        liability under Section 4069 of ERISA in the event such plan has been or
        were to be terminated.

                "SUBSIDIARY" of any Person means any corporation of which (or in
        which) more than 50% of the outstanding capital stock having voting
        power to elect a majority of the Board of Directors of such corporation
        (irrespective of whether at the time capital stock



        of any other class or classes of such corporation shall or might have
        voting power upon the occurrence of any contingency) is at the time
        directly or indirectly owned or controlled by such Person, by such
        Person and one or more of its other Subsidiaries or by one or more of
        such Person's other Subsidiaries.

                "TERMINATION DATE" means the earlier of (a) the date that is the
        Business Day preceding the first anniversary of the Effective Date and
        (b) the date of termination in whole of the Commitments pursuant to
        Section 2.10 or 6.02.

                "TERM NOTICE" has the meaning specified in Section 2.10(c).

                Section 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding."

                Section 1.03. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with accounting
principles generally accepted in the United States of America, except that if
there has been a material change in an accounting principle affecting the
definition of an accounting term as compared to that applied in the preparation
of the financial statements of Kraft as of and for the quarter ended March 31,
2004, then such new accounting principle shall not be used in the determination
of the amount associated with that accounting term. A material change in an
accounting principle is one that, in the year of its adoption, changes the
amount associated with the relevant accounting term for any quarter in such year
by more than 10%.

                                   ARTICLE II

                        AMOUNTS AND TERMS OF THE ADVANCES

                Section 2.01. THE PRO RATA ADVANCES. (a) OBLIGATION TO MAKE PRO
RATA ADVANCES. Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Pro Rata Advances to any Borrower from time to
time on any Business Day during the period from the Effective Date until the
Termination Date in an aggregate amount not to exceed at any time outstanding
such Lender's Commitment; PROVIDED, HOWEVER, that the aggregate amount of the
Commitments of the Lenders shall be deemed used from time to time to the extent
of the aggregate amount of the Competitive Bid Advances then outstanding and
such deemed use of the aggregate amount of the Commitments shall be allocated
among the Lenders ratably according to their respective Commitments (such deemed
use of the aggregate amount of the Commitments being a "COMPETITIVE BID
REDUCTION").


        (b)     AMOUNT OF PRO RATA BORROWINGS. Except for Pro Rata Borrowings
pursuant to Sections 2.10(b)(iii)(B) and (C), each Pro Rata Borrowing shall be
in an aggregate amount of no less than $50,000,000 or an integral multiple of
$1,000,000 in excess thereof.



        (c)     TYPE OF PRO RATA ADVANCES. Each Pro Rata Borrowing shall consist
of Pro Rata Advances of the same Type made on the same day by the Lenders
ratably according to their respective Commitments. Within the limits of each
Lender's Commitment and subject to this Section 2.01, any Borrower may borrow
under this Section 2.01, prepay pursuant to Section 2.11 or repay pursuant to
Section 2.03 and reborrow under this Section 2.01.

                Section 2.02. MAKING THE PRO RATA ADVANCES. (a) NOTICE OF PRO
RATA BORROWING. Each Pro Rata Borrowing shall be made on notice, given not later
than (x) 11:00 A.M. (New York City time) on the third Business Day prior to the
date of the proposed Pro Rata Borrowing in the case of a Pro Rata Borrowing
consisting of LIBO Rate Advances, or (y) 9:00 A.M. (New York City time) on the
date of the proposed Pro Rata Borrowing in the case of a Pro Rata Borrowing
consisting of Base Rate Advances, by the Borrower to JPMorgan Chase, as
Administrative Agent, which shall give to each Lender prompt notice thereof by
telecopier. Each such notice of a Pro Rata Borrowing (a "NOTICE OF PRO RATA
BORROWING") shall be by telephone, confirmed immediately in writing, by
registered mail or telecopier in substantially the form of Exhibit B-1 hereto,
specifying therein the requested:

                        (i)     date of such Pro Rata Borrowing,

                        (ii)    Type of Advances comprising such Pro Rata
        Borrowing,

                        (iii)   aggregate amount of such Pro Rata Borrowing, and

                        (iv)    in the case of a Pro Rata Borrowing consisting
        of LIBO Rate Advances, the initial Interest Period for each such Pro
        Rata Advance. Notwithstanding anything herein to the contrary, no
        Borrower may select LIBO Rate Advances for any Pro Rata Borrowing if the
        obligation of the Lenders to make LIBO Rate Advances shall then be
        suspended pursuant to Section 2.08(c) or 2.13.

        (b)     FUNDING PRO RATA ADVANCES. Each Lender shall, before 11:00 A.M.
(New York City time) on the date of such Pro Rata Borrowing, make available for
the account of its Applicable Lending Office to JPMorgan Chase, as
Administrative Agent, at JPMorgan Chase's Administrative Agent Account, in same
day funds, such Lender's ratable portion of such Pro Rata Borrowing. After
receipt of such funds by JPMorgan Chase, as Administrative Agent, and upon
fulfillment of the applicable conditions set forth in Article III, JPMorgan
Chase, as Administrative Agent, will make such funds available to the relevant
Borrower at the address of JPMorgan Chase, as Administrative Agent, referred to
in Section 9.02.

        (c)     IRREVOCABLE NOTICE. Each Notice of Pro Rata Borrowing of any
Borrower shall be irrevocable and binding on such Borrower. In the case of any
Pro Rata Borrowing that the related Notice of Pro Rata Borrowing specifies is to
be comprised of LIBO Rate Advances, the Borrower requesting such Pro Rata
Borrowing shall indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any failure to fulfill on or before the date



specified in such Notice of Pro Rata Borrowing for such Pro Rata Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (excluding loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund the Pro Rata Advance to be made by such Lender as part of
such Pro Rata Borrowing when such Pro Rata Advance, as a result of such failure,
is not made on such date.

        (d)     LENDER'S RATABLE PORTION. Unless JPMorgan Chase, as
Administrative Agent, shall have received notice from a Lender prior to 11:00
A.M. (New York City time) on the day of any Pro Rata Borrowing that such Lender
will not make available to JPMorgan Chase, as Administrative Agent, such
Lender's ratable portion of such Pro Rata Borrowing, JPMorgan Chase, as
Administrative Agent, may assume that such Lender has made such portion
available to JPMorgan Chase, as Administrative Agent, on the date of such Pro
Rata Borrowing in accordance with Section 2.02(b) and JPMorgan Chase, as
Administrative Agent, may, in reliance upon such assumption, make available to
the Borrower proposing such Pro Rata Borrowing on such date a corresponding
amount. If and to the extent that such Lender shall not have so made such
ratable portion available to JPMorgan Chase, as Administrative Agent, such
Lender and such Borrower severally agree to repay to JPMorgan Chase, as
Administrative Agent, forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to such Borrower until the date such amount is repaid to JPMorgan Chase, as
Administrative Agent, at:

                        (i)     in the case of such Borrower, the higher of (A)
        the interest rate applicable at the time to Pro Rata Advances comprising
        such Pro Rata Borrowing and (B) the cost of funds incurred by JPMorgan
        Chase, as Administrative Agent, in respect of such amount, and

                        (ii)    in the case of such Lender, the Federal Funds
        Effective Rate.

If such Lender shall repay to JPMorgan Chase, as Administrative Agent, such
corresponding amount, such amount so repaid shall constitute such Lender's Pro
Rata Advance as part of such Pro Rata Borrowing for purposes of this Agreement.

        (e)     INDEPENDENT LENDER OBLIGATIONS. The failure of any Lender to
make the Pro Rata Advance to be made by it as part of any Pro Rata Borrowing
shall not relieve any other Lender of its obligation, if any, hereunder to make
its Pro Rata Advance on the date of such Pro Rata Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Pro Rata Advance
to be made by such other Lender on the date of any Pro Rata Borrowing.

                Section 2.03. REPAYMENT OF PRO RATA ADVANCES. Subject to Section
2.10(c), each Borrower shall repay to JPMorgan Chase, as Administrative Agent,
for the ratable account of the Lenders on the Termination Date the unpaid
principal amount of the Pro Rata Advances then outstanding.



                Section 2.04. INTEREST ON PRO RATA ADVANCES. (a) SCHEDULED
INTEREST. Each Borrower shall pay interest on the unpaid principal amount of
each Pro Rata Advance owing by such Borrower to each Lender from the date of
such Pro Rata Advance until such principal amount shall be paid in full, at the
following rates per annum:

                        (i)     BASE RATE ADVANCES. During such periods as such
        Pro Rata Advance is a Base Rate Advance, a rate per annum equal at all
        times to the Base Rate in effect from time to time, payable in arrears
        monthly on the 20th day of each month and on the date such Base Rate
        Advance shall be Converted or paid in full.

                        (ii)    LIBO RATE ADVANCES. During such periods as such
        Pro Rata Advance is a LIBO Rate Advance, a rate per annum equal at all
        times during each Interest Period for such Pro Rata Advance to the sum
        of (x) the LIBO Rate for such Interest Period for such Pro Rata Advance
        PLUS (y) the Applicable Interest Rate Margin in effect from time to
        time, payable in arrears on the last day of such Interest Period and, if
        such Interest Period has a duration of more than three months, on each
        day that occurs during such Interest Period every three months from the
        first day of such Interest Period, and on the date such LIBO Rate
        Advance shall be Converted or paid in full.

        (b)     DEFAULT INTEREST. Upon the occurrence and during the continuance
of an Event of Default, each Borrower shall pay interest on the unpaid principal
amount of each Pro Rata Advance owing to each Lender, payable in arrears on the
dates referred to in Section 2.04(a)(i) or Section 2.04(a)(ii), at a rate per
annum equal at all times to 1% per annum above the rate per annum required to be
paid on such Pro Rata Advance.

                Section 2.05. ADDITIONAL INTEREST ON LIBO RATE ADVANCES. Each
Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board to maintain reserves with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities, additional
interest on the unpaid principal amount of each LIBO Rate Advance of such Lender
to such Borrower, from the date of such Advance until such principal amount is
paid in full, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the LIBO Rate for the Interest Period for such
Advance from (ii) the rate obtained by dividing such LIBO Rate by a percentage
equal to 100% minus the Eurocurrency Rate Reserve Percentage of such Lender for
such Interest Period, payable on each date on which interest is payable on such
Advance. Such additional interest shall be determined by such Lender and
notified to Kraft through JPMorgan Chase, as Administrative Agent.

                Section 2.06. CONVERSION OF PRO RATA ADVANCES. (a) CONVERSION
UPON ABSENCE OF INTEREST PERIOD. If any Borrower shall fail to select the
duration of any Interest Period for any LIBO Rate Advances in accordance with
the provisions contained in the definition of the term "Interest Period,"
JPMorgan Chase, as Administrative Agent, will forthwith so notify such Borrower
and the Lenders, and such Advances will automatically, on the last day of the
then existing Interest Period therefor, Convert into Base Rate Advances.



        (b)     CONVERSION UPON EVENT OF DEFAULT. Upon the occurrence and during
the continuance of any Event of Default under Section 6.01(a), JPMorgan Chase,
as Administrative Agent, or the Required Lenders may elect that (i) each LIBO
Rate Advance be, on the last day of the then existing Interest Period therefor,
Converted into Base Rate Advances and (ii) the obligation of the Lenders to
make, or to Convert Advances into, LIBO Rate Advances be suspended.

        (c)     VOLUNTARY CONVERSION. Subject to the provisions of
Sections 2.08(c) and 2.13, any Borrower may convert all such Borrower's Pro Rata
Advances of one Type constituting the same Pro Rata Borrowing into Advances of
the other Type on any Business Day, upon notice given to JPMorgan Chase, as
Administrative Agent, not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the date of the proposed Conversion; PROVIDED,
HOWEVER, that the Conversion of a LIBO Rate Advance into a Base Rate Advance may
be made on, and only on, the last day of an Interest Period for such LIBO Rate
Advance. Each such notice of a Conversion shall, within the restrictions
specified above, specify

                        (i)     the date of such Conversion;

                        (ii)    the Pro Rata Advances to be Converted; and

                        (iii)   if such Conversion is into LIBO Rate Advances,
        the duration of the Interest Period for each such Pro Rata Advance.

                Section 2.07. THE COMPETITIVE BID ADVANCES. (a) COMPETITIVE BID
ADVANCES' IMPACT ON COMMITMENTS. Each Lender severally agrees that any Borrower
may make Competitive Bid Borrowings under this Section 2.07 from time to time on
any Business Day during the period from the Effective Date until the Termination
Date in the manner set forth below; PROVIDED that, following the making of each
Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding
shall not exceed the aggregate amount of the Commitments of the Lenders. As
provided in Section 2.01, the aggregate amount of the Commitments of the Lenders
shall be deemed used from time to time to the extent of the aggregate amount of
the Competitive Bid Advances then outstanding, and such deemed use of the
aggregate amount of the Commitments shall be applied to the Lenders ratably
according to their respective Commitments; PROVIDED, HOWEVER, that any Lender's
Competitive Bid Advances shall not otherwise reduce that Lender's obligation to
lend its pro rata share of the remaining available Commitments.

        (b)     NOTICE OF COMPETITIVE BID BORROWING. Any Borrower may request a
Competitive Bid Borrowing under this Section 2.07 by delivering to JPMorgan
Chase, as Administrative Agent, by telecopier, a notice of a Competitive Bid
Borrowing (a "NOTICE OF COMPETITIVE BID BORROWING"), in substantially the form
of Exhibit B-2 hereto, specifying therein the following:

                        (i)     date of such proposed Competitive Bid Borrowing;



                        (ii)    aggregate amount of such proposed Competitive
        Bid Borrowing;

                        (iii)   interest rate basis and day count convention to
        be offered by the Lenders;

                        (iv)    in the case of a Competitive Bid Borrowing

        consisting of Floating Rate Bid Advances, Interest Period, or in the
        case of a Competitive Bid Borrowing consisting of Fixed Rate Bid
        Advances, maturity date for repayment of each Fixed Rate Bid Advance to
        be made as part of such Competitive Bid Borrowing (which maturity date
        may not be earlier than the date occurring seven days after the date of
        such Competitive Bid Borrowing or later than the earlier of (A) 360 days
        after the date of such Competitive Bid Borrowing and (B) the Termination
        Date);

                        (v)     interest payment date or dates relating thereto;

                        (vi)    location of such Borrower's account to which
        funds are to be advanced; and

                        (vii)   other terms (if any) to be applicable to such
        Competitive Bid Borrowing.

A Borrower requesting a Competitive Bid Borrowing shall deliver a Notice of
Competitive Bid Borrowing to JPMorgan Chase, as Administrative Agent, not later
than 10:00 A.M. (New York City time) (x) at least two Business Days prior to the
date of the proposed Competitive Bid Borrowing, if such Borrower shall specify
in the Notice of Competitive Bid Borrowing that the Competitive Bid Borrowing
shall be Fixed Rate Bid Advances, or (y) at least four Business Days prior to
the date of the proposed Competitive Bid Borrowing, if such Borrower shall
specify in the Notice of Competitive Bid Borrowing that the Competitive Bid
Borrowing shall be Floating Rate Bid Advances. Each Notice of Competitive Bid
Borrowing shall be irrevocable and binding on such Borrower. JPMorgan Chase, as
Administrative Agent, shall in turn promptly notify each Lender of each request
for a Competitive Bid Borrowing received by it from such Borrower by sending
such Lender a copy of the related Notice of Competitive Bid Borrowing.

        (c)     DISCRETION AS TO COMPETITIVE BID ADVANCES. Each Lender may, in
its sole discretion, elect to irrevocably offer to make one or more Competitive
Bid Advances to the applicable Borrower as part of such proposed Competitive Bid
Borrowing at a rate or rates of interest specified by such Lender in its sole
discretion, by notifying JPMorgan Chase, as Administrative Agent (which shall
give prompt notice thereof to such Borrower), before 9:30 A.M. (New York City
time) (A) on the Business Day prior to the date of such proposed Competitive Bid
Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate
Bid Advances, and (B) on the third Business Day prior to the date of such
proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing
consisting of Floating Rate Bid Advances; PROVIDED that, if JPMorgan Chase in
its capacity as a Lender shall, in its sole



discretion, elect to make any such offer, it shall notify such Borrower of such
offer at least 30 minutes before the time and on the date on which notice of
such election is to be given by any other Lender to JPMorgan Chase, as
Administrative Agent. In such notice, the Lender shall specify the following:

                        (i)     the minimum amount and maximum amount of each
        Competitive Bid Advance which such Lender would be willing to make as
        part of such proposed Competitive Bid Borrowing (which amounts may,
        subject to the proviso to the first sentence of Section 2.07(a), exceed
        such Lender's Commitment);

                        (ii)    the rate or rates of interest therefor; and

                        (iii)   such Lender's Applicable Lending Office with
        respect to such Competitive Bid Advance.

If any Lender shall elect not to make such an offer, such Lender shall so notify
JPMorgan Chase, as Administrative Agent, before 9:30 A.M. (New York City time)
on the date on which notice of such election is to be given to JPMorgan Chase,
as Administrative Agent, by the other Lenders, and such Lender shall not be
obligated to, and shall not, make any Competitive Bid Advance as part of such
Competitive Bid Borrowing; PROVIDED FURTHER that the failure by any Lender to
give such notice shall not cause such Lender to be obligated to make any
Competitive Bid Advance as part of such proposed Competitive Bid Borrowing.

        (d)     BORROWER SELECTION OF LENDER BIDS. The Borrower proposing the
Competitive Bid Borrowing shall, in turn, (A) before 12:00 noon (New York City
time) on the Business Day prior to the date of such proposed Competitive Bid
Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate
Bid Advances and (B) before 12:00 noon (New York City time) on the third
Business Day prior to the date of such proposed Competitive Bid Borrowing, in
the case of a Competitive Bid Borrowing consisting of Floating Rate Bid
Advances, either:

                        (i)     cancel such Competitive Bid Borrowing by giving
        JPMorgan Chase, as Administrative Agent, notice to that effect, or

                        (ii)    accept, in its sole discretion, one or more of
        the offers made by any Lender or Lenders pursuant to Section 2.07(c), by
        giving notice to JPMorgan Chase, as Administrative Agent, of the amount
        of each Competitive Bid Advance (which amount shall be equal to or
        greater than the minimum amount, and equal to or less than the maximum
        amount, notified to such Borrower by JPMorgan Chase, as Administrative
        Agent on behalf of such Lender, for such Competitive Bid Advance
        pursuant to Section 2.07(c) to be made by each Lender as part of such
        Competitive Bid Borrowing, and reject any remaining offers made by
        Lenders pursuant to Section 2.07(c) by giving JPMorgan Chase, as
        Administrative Agent, notice to that effect. Such Borrower shall accept
        the offers made by any Lender or Lenders to make Competitive Bid
        Advances in order of the



        lowest to the highest rates of interest offered by such Lenders. If two
        or more Lenders have offered the same interest rate, the amount to be
        borrowed at such interest rate will be allocated among such Lenders in
        proportion to the maximum amount that each such Lender offered at such
        interest rate.

If the Borrower proposing the Competitive Bid Borrowing notifies JPMorgan Chase,
as Administrative Agent, that such Competitive Bid Borrowing is canceled
pursuant to Section 2.07(d)(i), or if such Borrower fails to give timely notice
in accordance with Section 2.07(d), JPMorgan Chase, as Administrative Agent,
shall give prompt notice thereof to the Lenders and such Competitive Bid
Borrowing shall not be made.

        (e)     COMPETITIVE BID BORROWING. If the Borrower proposing the
Competitive Bid Borrowing accepts one or more of the offers made by any Lender
or Lenders pursuant to Section 2.07(d)(ii), JPMorgan Chase, as Administrative
Agent, shall in turn promptly notify:

                        (i)     each Lender that has made an offer as described
        in Section 2.07(c), whether or not any offer or offers made by such
        Lender pursuant to Section 2.07(c) have been accepted by such Borrower;

                        (ii)    each Lender that is to make a Competitive Bid
        Advance as part of such Competitive Bid Borrowing, of the date and
        amount of each Competitive Bid Advance to be made by such Lender as part
        of such Competitive Bid Borrowing; and

                        (iii)   each Lender that is to make a Competitive Bid
        Advance as part of such Competitive Bid Borrowing, upon receipt, that
        JPMorgan Chase, as Administrative Agent, has received forms of documents
        appearing to fulfill the applicable conditions set forth in Article III.

When each Lender that is to make a Competitive Bid Advance as part of such
Competitive Bid Borrowing has received notice pursuant to Section 2.07(e)(iii),
such Lender shall, before 11:00 A.M. (New York City time), on the date of such
Competitive Bid Borrowing specified in the notice received from JPMorgan Chase,
as Administrative Agent, pursuant to Section 2.07(e)(i), make available for the
account of its Applicable Lending Office to JPMorgan Chase, as Administrative
Agent, at its address referred to in Section 9.02, in same day funds, such
Lender's portion of such Competitive Bid Borrowing. Upon fulfillment of the
applicable conditions set forth in Article III and after receipt by JPMorgan
Chase, as Administrative Agent, of such funds, JPMorgan Chase, as Administrative
Agent, will make such funds available to such Borrower at the location specified
by such Borrower in its Notice of Competitive Bid Borrowing. Promptly after each
Competitive Bid Borrowing, JPMorgan Chase, as Administrative Agent, will notify
each Lender of the amount of the Competitive Bid Borrowing, the consequent
Competitive Bid Reduction and the dates upon which such Competitive Bid
Reduction commenced and will terminate.



        (f)     IRREVOCABLE NOTICE. If the Borrower proposing the Competitive
Bid Borrowing notifies JPMorgan Chase, as Administrative Agent, that it accepts
one or more of the offers made by any Lender or Lenders pursuant to Section
2.07(c), such notice of acceptance shall be irrevocable and binding on such
Borrower. Such Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill on or
before the date specified in the related Notice of Competitive Bid Borrowing for
such Competitive Bid Borrowing the applicable conditions set forth in Article
III, including, without limitation, any loss (excluding loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund the Competitive Bid
Advance to be made by such Lender as part of such Competitive Bid Borrowing when
such Competitive Bid Advance, as a result of such failure, is not made on such
date.

        (g)     AMOUNT OF COMPETITIVE BID BORROWINGS; COMPETITIVE BID NOTES.
Each Competitive Bid Borrowing shall be in an aggregate amount of $50,000,000 or
an integral multiple of $1,000,000 in excess thereof and, following the making
of each Competitive Bid Borrowing, the aggregate amount of Advances then
outstanding shall not exceed the aggregate amount of the Commitments of the
Lenders. Within the limits and on the conditions set forth in this Section 2.07,
any Borrower may from time to time borrow under this Section 2.07, prepay
pursuant to Section 2.11 or repay pursuant to Section 2.07(h), and reborrow
under this Section 2.07; PROVIDED that a Competitive Bid Borrowing shall not be
made within two Business Days of the date of any other Competitive Bid
Borrowing. The indebtedness of any Borrower resulting from each Competitive Bid
Advance made to such Borrower as part of a Competitive Bid Borrowing shall be
evidenced by a separate Competitive Bid Note of such Borrower payable to the
order of the Lender making such Competitive Bid Advance.

        (h)     REPAYMENT OF COMPETITIVE BID ADVANCES. On the maturity date of
each Competitive Bid Advance provided in the Competitive Bid Note evidencing
such Competitive Bid Advance, the Borrower shall repay to JPMorgan Chase, as
Administrative Agent, for the account of each Lender that has made a Competitive
Bid Advance the then unpaid principal amount of such Competitive Bid Advance. No
Borrower shall have any right to prepay any principal amount of any Competitive
Bid Advance unless, and then only on the terms set forth in the Competitive Bid
Note evidencing such Competitive Bid Advance.

        (i)     INTEREST ON COMPETITIVE BID ADVANCES. Each Borrower that has
borrowed through a Competitive Bid Borrowing shall pay interest on the unpaid
principal amount of each Competitive Bid Advance from the date of such
Competitive Bid Advance to the date the principal amount of such Competitive Bid
Advance is repaid in full, at the rate of interest for such Competitive Bid
Advance and on the interest payment date or dates set forth in the Competitive
Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during
the continuance of an Event of Default, such Borrower shall pay interest on the
amount of unpaid principal of each Competitive Bid Advance owing to a Lender,
payable in arrears on the date or dates interest is payable thereon, at a rate
per annum equal at all times to 1% per annum above the rate per annum required
to be paid on such Competitive Bid Advance under the terms



of the Competitive Bid Note evidencing such Competitive Bid Advance unless
otherwise agreed in such Competitive Bid Note.

                Section 2.08. LIBO RATE DETERMINATION. (a) METHODS TO DETERMINE
LIBO RATE. JPMorgan Chase, as Administrative Agent, shall determine the LIBO
Rate by using the methods described in the definition of the term "LIBO Rate,"
and shall give prompt notice to the Borrower and Lenders of each such LIBO Rate.

        (b)     ROLE OF REFERENCE BANKS. In the event that the LIBO Rate cannot
be determined by the method described in clause (a) of the definition of "LIBO
Rate," each Reference Bank agrees to furnish to JPMorgan Chase, as
Administrative Agent, timely information for the purpose of determining the LIBO
Rate in accordance with the method described in clause (b) of the definition
thereof. If any one or more of the Reference Banks shall not furnish such timely
information to JPMorgan Chase, as Administrative Agent, for the purpose of
determining a LIBO Rate, JPMorgan Chase, as Administrative Agent, shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks. If fewer than two Reference Banks furnish timely
information to JPMorgan Chase, as Administrative Agent, for determining the LIBO
Rate for any LIBO Rate Advances or Floating Rate Bid Advances, as the case may
be, then:

                        (i)     JPMorgan Chase, as Administrative Agent, shall
        forthwith notify Kraft and the Lenders that the interest rate cannot be
        determined for such LIBO Rate Advance or Floating Rate Bid Advances, as
        the case may be;

                        (ii)    with respect to each LIBO Rate Advance, such
        Advance will, on the last day of the then existing Interest Period
        therefor, be prepaid by the Borrower or be automatically Converted into
        a Base Rate Advance; and

                        (iii)   the obligation of the Lenders to make LIBO Rate
        Advances or Floating Rate Bid Advances or to Convert Base Rate Advances
        into LIBO Rate Advances shall be suspended until JPMorgan Chase, as
        Administrative Agent, shall notify Kraft and the Lenders that the
        circumstances causing such suspension no longer exist.

JPMorgan Chase, as Administrative Agent, shall give prompt notice to Kraft and
the Lenders of the applicable interest rate determined by JPMorgan Chase, as
Administrative Agent, for purposes of Section 2.04(a)(i) or (ii), and the rate,
if any, furnished by each Reference Bank for the purpose of determining the
interest rate under Section 2.04(a)(ii) or the applicable LIBO Rate.

        (c)     INADEQUATE LIBO RATE. If, with respect to any LIBO Rate
Advances, the Required Lenders notify JPMorgan Chase, as Administrative Agent,
that (i) they are unable to obtain matching deposits in the London interbank
market at or about 11:00 A.M. (London time)



on the second Business Day before the making of a Borrowing in sufficient
amounts to fund their respective LIBO Rate Advances as a part of such Borrowing
during the Interest Period therefor or (ii) the LIBO Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Required
Lenders of making, funding or maintaining their respective LIBO Rate Advances
for such Interest Period, JPMorgan Chase, as Administrative Agent, shall
forthwith so notify Kraft and the Lenders, whereupon (A) the Borrower of such
LIBO Rate Advances will, on the last day of the then existing Interest Period
therefor, either (x) prepay such Advances or (y) Convert such Advances into Base
Rate Advances and (B) the obligation of the Lenders to make, or to Convert Base
Rate Advances into, LIBO Rate Advances shall be suspended until JPMorgan Chase,
as Administrative Agent, shall notify Kraft and the Lenders that the
circumstances causing such suspension no longer exist. In the case of clause
(ii) above, each Lender shall certify its cost of funds for each Interest Period
to JPMorgan Chase, as Administrative Agent, and Kraft as soon as practicable
(but in any event not later than 10 Business Days after the last day of such
Interest Period).

                Section 2.09. FEES. (a) FACILITY FEE. Kraft agrees to pay to
JPMorgan Chase, as Administrative Agent, for the account of each Lender a
facility fee on the aggregate amount of such Lender's Commitment (whether or not
used and without giving effect to any Competitive Bid Reduction) from the date
hereof in the case of each Initial Lender and from the effective date specified
in the Assignment and Acceptance or New Lender Supplement pursuant to which it
became a Lender in the case of each other Lender until the Termination Date at
the Applicable Facility Fee Rate, in each case payable on the last day of each
March, June, September and December until the Termination Date and on the
Termination Date.

        (b)     AGENT'S FEES.  Kraft shall pay to JPMorgan Chase, as
Administrative Agent, for its own account such fees as may from time to time be
agreed between Kraft and such Agent.

                Section 2.10. OPTIONAL TERMINATION, REDUCTION OR INCREASE OF THE
COMMITMENTS AND TERM-OUT OPTION.

        (a)     OPTIONAL TERMINATION OR REDUCTION OF THE COMMITMENTS. Kraft
shall have the right, upon at least three Business Days' notice to JPMorgan
Chase, as Administrative Agent, to terminate in whole or reduce ratably in part
the unused portions of the respective Commitments of the Lenders; PROVIDED that
each partial reduction shall be in the aggregate amount of no less than
$50,000,000; and PROVIDED FURTHER that the aggregate amount of the Commitments
of the Lenders shall not be reduced to an amount that is less than the aggregate
principal amount of the Competitive Bid Advances then outstanding

        (b)     OPTIONAL INCREASE OF THE COMMITMENTS.

                        (i)     Notwithstanding anything herein to the contrary,
        so long as no Default or Event of Default has occurred and is
        continuing, Kraft and any one or more Lenders or additional banks,
        financial institutions or other entities that are Eligible



        Assignees (each, a "NEW LENDER") may, at any time after the Effective
        Date and prior to the Termination Date, agree that such Lenders shall
        increase the amount of their Commitments or such New Lenders shall
        provide additional Commitments. In connection therewith, Kraft shall
        deliver to JPMorgan Chase, as Administrative Agent, for entry in the
        Register, a notice specifying (A) the amount of such increase, (B) the
        names of any participating Lenders and New Lenders and their respective
        allocations of such increase, and (C) the applicable date such increase
        shall become effective (the "INCREASED FACILITY CLOSING DATE").
        Notwithstanding the foregoing, (x) the aggregate Commitments may not be
        increased by more than $500,000,000, (y) each increase effected pursuant
        to this Section 2.10(b) shall be in an amount of at least $100,000,000
        and (z) no more than two Increased Facility Closing Dates may be
        selected by Kraft during the term of this Agreement. No Lender shall
        have any obligation to participate in any increase described in this
        Section 2.10(b) unless it agrees to do so in its sole discretion.

                        (ii)    Any New Lender which, with the consent of Kraft,
        agrees to become a "Lender" under this Agreement in connection with any
        transaction described in clause (i) above shall enter into a supplement
        to this Agreement (each, a "NEW LENDER SUPPLEMENT"), substantially in
        the form of Exhibit H, whereupon such New Lender shall become a Lender
        and shall be bound by and entitled to the benefits of this Agreement as
        of the date of execution of such New Lender Supplement.

                        (iii)   (A) Except as set forth in subsections (B) and
        (C) of this clause (iii), if any bank, financial institution or other
        entity becomes a New Lender or any Lender's Commitment is increased
        pursuant to this Section 2.10(b), Pro Rata Advances made on or after the
        applicable Increased Facility Closing Date shall be made in accordance
        with the pro rata provisions of Section 2.01 based on the respective
        Commitments in effect on and after such Increased Facility Closing Date
        (except to the extent that any such Pro Rata Borrowing would result in
        any Lender making an aggregate principal amount of Pro Rata Advances in
        excess of its Commitment, in which case such excess amount will be
        allocated to and made by, any New Lenders and Lenders with increased
        Commitments pursuant to clause (i) above, pro rata in accordance with
        their respective Commitments).

                                (B) In the event that on any Increased Facility
                Closing Date there are Base Rate Advances outstanding, the
                relevant Borrower shall make prepayments of and borrowings of
                additional Base Rate Advances so that, after giving effect
                thereto, the resulting Base Rate Advances outstanding are
                allocated among the Lenders as nearly as may be in accordance
                with the pro rata provisions of Section 2.01 based on such
                Lenders' respective Commitments in effect on and after such
                Increased Facility Closing Date, and such allocations shall be
                effected on such Increased Facility Closing Date by JPMorgan
                Chase, as Administrative Agent, through appropriate entries in
                the Register.



                                (C) In the event that on any Increased Facility
                Closing Date there are LIBO Rate Advances outstanding, such LIBO
                Rate Advances shall remain outstanding with the respective
                Lenders thereof until the expiration of their respective
                Interest Periods (unless the relevant Borrower elects to prepay
                any thereof in accordance with the applicable provisions of this
                Agreement) and the continuations, if any, of any LIBO Rate
                Advances outstanding on such Increased Facility Closing Date
                shall be effected by repayment of such LIBO Rate Advances on the
                last day of the Interest Period applicable thereto and the
                borrowing of new LIBO Rate Advances to be allocated among the
                Lenders in accordance with the pro rata provisions of Section
                2.01 based on such Lenders' respective Commitments in effect on
                and after such Increased Facility Closing Date.

                        (iv)    For purposes of Section 9.01, no consent of any
        Lender other than a Lender that has agreed to participate in the
        increase described in this Section 2.10(b) shall be required in
        connection with the transactions under this Section 2.10(b).

        (c)     TERM-OUT OPTION. The Company may, by written notice to JPMorgan
Chase, as Administrative Agent, which shall promptly notify the Lenders, not
later than 15 Business Days prior to the Termination Date (the "TERM NOTICE"),
extend the maturity date for all Pro Rata Advances outstanding at the close of
business New York time on the Termination Date to the date, specified in the
Term Notice, no later than the first anniversary of the Termination Date;
PROVIDED that, on the date of the Term Notice and on the Termination Date, (i)
no event has occurred and is continuing that constitutes a Default or Event of
Default and (ii) the representations contained in Section 4.01 (except the
representations set forth in the last sentence of subsection (e) and in
subsection (f) thereof (other than clause (i) thereof)) are correct; and
PROVIDED, FURTHER, that the option provided for in this Section 2.10(c) may be
exercised only once. If a Term Notice is given, each Borrower shall repay to
JPMorgan Chase, as Administrative Agent, for the ratable account of the Lenders
on the maturity date set forth in such Term Notice, the unpaid principal amount
of the Pro Rata Advances then outstanding. Upon the effectiveness of the
extension provided for in this Section 2.10(c), all terms of this Agreement
shall remain in full force and effect, EXCEPT that the right of any Borrower to
borrow under Section 2.01 shall terminate. The Borrower agrees that it will,
upon the request of any Lender through JPMorgan Chase, as Administrative Agent,
issue a new Pro Rata Note in favor of such Lender reflecting the extended
maturity date, in exchange for the Pro Rata Note held by such Lender, which
shall be promptly returned to the Borrower and marked "cancelled".

                Section 2.11. OPTIONAL PREPAYMENTS OF PRO RATA ADVANCES. Each
Borrower may, in the case of any LIBO Rate Advance, upon at least three Business
Days' notice to JPMorgan Chase, as Administrative Agent, or, in the case of any
Base Rate Advance, upon notice given to JPMorgan Chase, as Administrative Agent,
not later than 9:00 A.M. (New York City time) on the date of the proposed
prepayment, in each case stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given such Borrower shall,
prepay the



outstanding principal amount of the Pro Rata Advances comprising part of the
same Pro Rata Borrowing in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid;
PROVIDED, HOWEVER, that (x) each partial prepayment other than partial
prepayments pursuant to Section 2.10(b)(iii)(B) shall be in an aggregate
principal amount of no less than $50,000,000 and (y) in the event of any such
prepayment of a LIBO Rate Advance, such Borrower shall be obligated to reimburse
the Lenders in respect thereof pursuant to Section 9.04(b).

                Section 2.12. INCREASED COSTS. (a) COSTS FROM CHANGE IN LAW OR
AUTHORITIES. If, due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements to the
extent such change is included in the Eurocurrency Rate Reserve Percentage) in
or in the interpretation of any law or regulation or (ii) the compliance with
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or maintaining LIBO
Rate Advances or Floating Rate Bid Advances (excluding for purposes of this
Section 2.12 any such increased costs resulting from (i) Taxes or Other Taxes
(as to which Section 2.15 shall govern) and (ii) changes in the basis of
taxation of overall net income or overall gross income by the United States or
by the foreign jurisdiction or state under the laws of which such Lender is
organized or has its Applicable Lending Office or any political subdivision
thereof), then the Borrower of the affected Advances shall from time to time,
upon demand by such Lender (with a copy of such demand to JPMorgan Chase, as
Administrative Agent), pay to JPMorgan Chase, as Administrative Agent, for the
account of such Lender additional amounts sufficient to compensate such Lender
for such increased cost; PROVIDED, HOWEVER, that before making any such demand,
each Lender agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to designate a different
Applicable Lending Office if the making of such a designation would avoid the
need for, or reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
A certificate as to the amount of such increased cost, submitted to Kraft, such
Borrower and JPMorgan Chase, as Administrative Agent, by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.

        (b)     REDUCTION IN LENDER'S RATE OF RETURN. In the event that, after
the date hereof, the implementation of or any change in any law or regulation,
or any guideline or directive (whether or not having the force of law) or the
interpretation or administration thereof by any central bank or other authority
charged with the administration thereof, imposes, modifies or deems applicable
any capital adequacy or similar requirement (including, without limitation, a
request or requirement which affects the manner in which any Lender allocates
capital resources to its commitments, including its obligations hereunder) and
as a result thereof, in the sole opinion of such Lender, the rate of return on
such Lender's capital as a consequence of its obligations hereunder is reduced
to a level below that which such Lender could have achieved but for such
circumstances, but reduced to the extent that Borrowings are outstanding from
time to time, then in each such case, upon demand from time to time Kraft shall
pay to such Lender such additional amount or amounts as shall compensate such
Lender for such reduction in rate of return;



PROVIDED that, in the case of each Lender, such additional amount or amounts
shall not exceed 0.15 of 1% per annum of such Lender's Commitment. A certificate
of such Lender as to any such additional amount or amounts shall be conclusive
and binding for all purposes, absent manifest error. Except as provided below,
in determining any such amount or amounts each Lender may use any reasonable
averaging and attribution methods. Notwithstanding the foregoing, each Lender
shall take all reasonable actions to avoid the imposition of, or reduce the
amounts of, such increased costs, provided that such actions, in the reasonable
judgment of such Lender, will not be otherwise disadvantageous to such Lender,
and, to the extent possible, each Lender will calculate such increased costs
based upon the capital requirements for its Commitment hereunder and not upon
the average or general capital requirements imposed upon such Lender.

                Section 2.13. ILLEGALITY. Notwithstanding any other provision of
this Agreement, if any Lender shall notify JPMorgan Chase, as Administrative
Agent, that the introduction of or any change in, or in the interpretation of,
any law or regulation makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for any Lender or its
Eurocurrency Lending Office to perform its obligations hereunder to make LIBO
Rate Advances or Floating Rate Bid Advances or to fund or maintain LIBO Rate
Advances or Floating Rate Bid Advances, (a) each LIBO Rate Advance or Floating
Rate Bid Advances, as the case may be, will automatically, upon such demand, be
Converted into a Base Rate Advance or an Advance that bears interest at the rate
set forth in Section 2.04(a)(i), as the case may be, and (b) the obligation of
the Lenders to make LIBO Rate Advances or Floating Rate Bid Advances or to
Convert Base Rate Advances into LIBO Rate Advances shall be suspended, in each
case, until JPMorgan Chase, as Administrative Agent, shall notify Kraft and the
Lenders that the circumstances causing such suspension no longer exist;
PROVIDED, HOWEVER, that before making any such demand, each Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Eurocurrency Lending Office if the making
of such a designation would allow such Lender or its Eurocurrency Lending Office
to continue to perform its obligations to make LIBO Rate Advances or Floating
Rate Bid Advances or to continue to fund or maintain LIBO Rate Advances or
Floating Rate Bid Advances, as the case may be, and would not, in the judgment
of such Lender, be otherwise disadvantageous to such Lender.

                Section 2.14. PAYMENTS AND COMPUTATIONS. (a) TIME AND
DISTRIBUTION OF PAYMENTS. Kraft and each Borrower shall make each payment
hereunder, not later than 11:00 A.M. (New York City time) on the day when due to
JPMorgan Chase, as Administrative Agent, at JPMorgan Chase's Administrative
Agent Account in same day funds. JPMorgan Chase, as Administrative Agent, will
promptly thereafter cause to be distributed like funds relating to the payment
of principal or interest or facility fees ratably (other than amounts payable
pursuant to Section 2.07, 2.12, 2.15 or 9.04(b)) to the Lenders for the account
of their respective Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Lender to such Lender for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement. From and after the effective date of an



Assignment and Acceptance pursuant to Section 9.07, JPMorgan Chase, as
Administrative Agent, shall make all payments hereunder in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.

        (b)     COMPUTATION OF INTEREST AND FEES. All computations of interest
based on JPMorgan Chase's prime rate shall be made by JPMorgan Chase, as
Administrative Agent, on the basis of a year of 365 or 366 days, as the case may
be. All computations of interest based on the LIBO Rate or the Federal Funds
Effective Rate and of facility fees shall be made by JPMorgan Chase, as
Administrative Agent, and all computations of interest pursuant to Section 2.05
shall be made by a Lender, on the basis of a year of 360 days, and all
computations of interest in respect of Competitive Bid Advances shall be made by
JPMorgan Chase, as Administrative Agent, as specified in the applicable Notice
of Competitive Bid Notice, in each case for the actual number of days (including
the first day but excluding the last day) occurring in the period for which such
interest or facility fees are payable. Each determination by JPMorgan Chase, as
Administrative Agent (or, in the case of Section 2.05 by a Lender), of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.

        (c)     PAYMENT DUE DATES. Whenever any payment hereunder shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fee, as
the case may be; PROVIDED, HOWEVER, that if such extension would cause payment
of interest on or principal of LIBO Rate Advances or Floating Rate Bid Advances
to be made in the next following calendar month, such payment shall be made on
the immediately preceding Business Day.

        (d)     PRESUMPTION OF BORROWER PAYMENT. Unless JPMorgan Chase, as
Administrative Agent, receives notice from any Borrower prior to the date on
which any payment is due to the Lenders hereunder that such Borrower will not
make such payment in full, JPMorgan Chase, as Administrative Agent, may assume
that such Borrower has made such payment in full to JPMorgan Chase, as
Administrative Agent, on such date and JPMorgan Chase, as Administrative Agent,
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent such Borrower has not made such payment in full to JPMorgan Chase, as
Administrative Agent, each Lender shall repay to JPMorgan Chase, as
Administrative Agent, forthwith on demand such amount distributed to such Lender
together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to
JPMorgan Chase, as Administrative Agent, at the Federal Funds Effective Rate.

                Section 2.15. TAXES. (a) Any and all payments by each Borrower
and Kraft hereunder shall be made, in accordance with Section 2.14, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or



withholdings, and all liabilities with respect thereto, EXCLUDING, (i) in the
case of each Lender and JPMorgan Chase, as Administrative Agent, taxes imposed
on its net income, and franchise taxes imposed on it, by the jurisdiction under
the laws of which such Lender or JPMorgan Chase, as Administrative Agent (as the
case may be), is organized or any political subdivision thereof, (ii) in the
case of each Lender, taxes imposed on its net income, and franchise taxes
imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or
any political subdivision thereof, (iii) in the case of each Lender and JPMorgan
Chase, as Administrative Agent, taxes imposed on its net income, franchise taxes
imposed on it, and any tax imposed by means of withholding to the extent such
tax is imposed solely as a result of a present or former connection (other than
the execution, delivery and performance of this Agreement or a Note) between the
Lender or JPMorgan Chase, as Administrative Agent, as the case may be, and the
taxing jurisdiction, and (iv) in the case of each Lender and JPMorgan Chase, as
Administrative Agent, taxes imposed by the United States by means of withholding
tax if and to the extent that such taxes shall be in effect and shall be
applicable on the date hereof to payments to be made to such Lender's Applicable
Lending Office or to JPMorgan Chase, as Administrative Agent (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder being hereinafter referred to as
"TAXES"). If any Borrower or Kraft shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder to any Lender or JPMorgan Chase,
as Administrative Agent, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.15) such Lender or
JPMorgan Chase, as Administrative Agent (as the case may be), receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
such Borrower or Kraft shall make such deductions and (iii) such Borrower or
Kraft shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law.

        (b)     In addition, each Borrower or Kraft shall pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement (hereinafter referred to as "OTHER TAXES").

        (c)     Each Borrower and Kraft shall indemnify each Lender and JPMorgan
Chase, as Administrative Agent, for and hold it harmless against the full amount
of Taxes or Other Taxes (including, without limitation, Taxes and Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.15) paid by
such Lender or JPMorgan Chase, as Administrative Agent (as the case may be), and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Lender or JPMorgan Chase, as Administrative Agent (as the case may
be), makes written demand therefor.

        (d)     Within 30 days after the date of any payment of Taxes, each
Borrower and Kraft shall furnish to JPMorgan Chase, as Administrative Agent, at
its address referred to in Section



9.02, the original or a certified copy of a receipt evidencing such payment. If
any Borrower or Kraft determines that no Taxes are payable in respect thereof,
such Borrower or Kraft shall, at the request of JPMorgan Chase, as
Administrative Agent, furnish or cause the payor to furnish, JPMorgan Chase, as
Administrative Agent, and each Lender an opinion of counsel reasonably
acceptable to JPMorgan Chase, as Administrative Agent, stating that such payment
is exempt from Taxes.

        (e)     Each Lender, on or prior to the date of its execution and
delivery of this Agreement in the case of each Initial Lender and on the date of
the Assignment and Acceptance or New Lender Supplement pursuant to which it
becomes a Lender in the case of each other Lender, shall provide each of
JPMorgan Chase, as Administrative Agent, Kraft and such Borrower with any form
or certificate that is required by any taxing authority (including, if
applicable, two original Internal Revenue Service Forms W-9, W-8BEN or W-8ECI,
as appropriate, or any successor or other form prescribed by the Internal
Revenue Service), certifying that such Lender is exempt from or entitled to a
reduced rate of Home Jurisdiction Withholding Taxes on payments pursuant to this
Agreement. Thereafter, each such Lender shall provide additional forms or
certificates (i) to the extent a form or certificate previously provided has
become inaccurate or invalid or otherwise ceased to be effective or (ii) as
requested in writing by any Borrower, Kraft or JPMorgan Chase, as Administrative
Agent. Unless the Borrowers, Kraft and JPMorgan Chase, as Administrative Agent,
have received forms or other documents satisfactory to them indicating that
payments hereunder are not subject to Home Jurisdiction Withholding Taxes or are
subject to Home Jurisdiction Witholding Taxes at a rate reduced by an applicable
tax treaty, such Borrower, Kraft or JPMorgan Chase, as Administrative Agent,
shall withhold taxes from such payments at the applicable statutory rate in the
case of payments to or for any Lender.

        (f)     Any Lender claiming any additional amounts payable pursuant to
this Section 2.15 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to select or change the
jurisdiction of its Applicable Lending Office if the making of such a selection
or change would avoid the need for, or reduce the amount of, any such additional
amounts that may thereafter accrue and would not, in the reasonable judgment of
such Lender, be otherwise economically disadvantageous to such Lender.

        (g)     No additional amounts will be payable pursuant to this
Section 2.15 with respect to (i) any Home Jurisdiction Withholding Taxes that
would not have been payable had the Lender provided the relevant forms or other
documents pursuant to Section 2.15(e); or (ii) in the case of an Assignment and
Acceptance by a Lender to an Eligible Assignee, any Home Jurisdiction
Withholding Taxes that exceed the amount of such Home Jurisdiction Withholding
Taxes that are imposed prior to such Assignment and Acceptance, unless such
Assignment and Acceptance resulted from the demand of Kraft.

        (h)     If any Lender or JPMorgan Chase, as Administrative Agent, as the
case may be, obtains a refund of any Tax for which payment has been made
pursuant to this Section 2.15,



which refund in the good faith judgment of such Lender or JPMorgan Chase, as
Administrative Agent, as the case may be, (and without any obligation to
disclose its tax records) is allocable to such payment made under this Section
2.15, the amount of such refund (together with any interest received thereon and
reduced by reasonable costs incurred in obtaining such refund) promptly shall be
paid to the Borrower to the extent payment has been made in full by the Borrower
pursuant to this Section 2.15.

                Section 2.16. SHARING OF PAYMENTS, ETC. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Pro Rata Advances owing to it
(other than pursuant to Section 2.12, 2.15 or 9.04(b)) in excess of its ratable
share of payments on account of the Pro Rata Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Pro Rata Advances made by them as shall be necessary to
cause such purchasing Lender to share the excess payment ratably with each of
them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. Each Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.16 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of
such Borrower in the amount of such participation.

                Section 2.17. EVIDENCE OF DEBT. (a) LENDER RECORDS; PRO RATA
NOTES. Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of each Borrower to such Lender
resulting from each Pro Rata Advance owing to such Lender from time to time,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder in respect of Pro Rata Advances. Each Borrower
shall, upon notice by any Lender to such Borrower (with a copy of such notice to
JPMorgan Chase, as Administrative Agent) to the effect that a Pro Rata Note is
required or appropriate in order for such Lender to evidence (whether for
purposes of pledge, enforcement or otherwise) the Pro Rata Advances owing to, or
to be made by, such Lender, such Borrower shall promptly execute and deliver to
such Lender a Pro Rata Note payable to the order of such Lender in a principal
amount up to the Commitment of such Lender.

        (b)     RECORD OF BORROWINGS, PAYABLES AND PAYMENTS. The Register
maintained by JPMorgan Chase, as Administrative Agent, pursuant to Section
9.07(d) shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded as follows:



                        (i)     the date and amount of each Borrowing made
        hereunder, the Type of Advances comprising such Borrowing and, if
        appropriate, the Interest Period applicable thereto;

                        (ii)    the terms of each Assignment and Acceptance
        delivered to and accepted by it and information provided to it by Kraft
        pursuant to Section 2.10(b);

                        (iii)   the amount of any principal or interest due and
        payable or to become due and payable from each Borrower to each Lender
        hereunder; and

                        (iv)    the amount of any sum received by JPMorgan
        Chase, as Administrative Agent, from the Borrowers hereunder and each
        Lender's share thereof.

        (c)     EVIDENCE OF PAYMENT OBLIGATIONS. Entries made in good faith by
JPMorgan Chase, as Administrative Agent, in the Register pursuant to Section
2.17(b), and by each Lender in its account or accounts pursuant to Section
2.17(a), shall be PRIMA FACIE evidence of the amount of principal and interest
due and payable or to become due and payable from each Borrower to, in the case
of the Register, each Lender and, in the case of such account or accounts, such
Lender, under this Agreement, absent manifest error; PROVIDED, HOWEVER, that the
failure of JPMorgan Chase, as Administrative Agent, or such Lender to make an
entry, or any finding that an entry is incorrect, in the Register or such
account or accounts shall not limit or otherwise affect the obligations of any
Borrower under this Agreement.

                Section 2.18. USE OF PROCEEDS. The proceeds of the Advances
shall be available (and each Borrower agrees that it shall use such proceeds)
for general corporate purposes of Kraft and its Subsidiaries.

                                   ARTICLE III

                     CONDITIONS TO EFFECTIVENESS AND LENDING

                Section 3.01. CONDITIONS PRECEDENT TO EFFECTIVENESS. This
Agreement shall become effective on and as of the first date (the "EFFECTIVE
DATE") on which the following conditions precedent have been satisfied:

        (a)     Kraft shall have notified each Lender and JPMorgan Chase, as
Administrative Agent, in writing as to the proposed Effective Date.

        (b)     On the Effective Date, the following statements shall be true
and JPMorgan Chase, as Administrative Agent, shall have received for the account
of each Lender a certificate signed by a duly authorized officer of Kraft, dated
the Effective Date, stating that:

                        (i)     the representations and warranties contained in
        Section 4.01 are correct on and as of the Effective Date, and



                        (ii)    no event has occurred and is continuing that
        constitutes a Default or Event of Default.

        (c)     JPMorgan Chase, as Administrative Agent, shall have received on
        or before the Effective Date copies of the letter from Kraft dated on or
        before such day, terminating in whole the commitments of the banks party
        to the Existing Loan Agreement.

        (d)     Prior to or simultaneously with the Effective Date, Kraft shall
have satisfied all of its obligations under the Existing Loan Agreement
including, without limitation, the payment of all loans, accrued interest and
fees under the Existing Loan Agreement.

        (e)     JPMorgan Chase, as Administrative Agent, shall have received on
or before the Effective Date the following, each dated such day, in form and
substance satisfactory to JPMorgan Chase, as Administrative Agent:

                        (i)     Certified copies of the resolutions of the Board
        of Directors of Kraft approving this Agreement, and of all documents
        evidencing other necessary corporate action and governmental approvals,
        if any, with respect to this Agreement.

                        (ii)    A certificate of the Secretary or an Assistant
        Secretary of Kraft certifying the names and true signatures of the
        officers of Kraft authorized to sign this Agreement and the other
        documents to be delivered hereunder.

                        (iii)   Favorable opinions of counsel (which may be
        in-house counsel) for Kraft, substantially in the form of Exhibits E-1
        and E-2 hereto.

                        (iv)    A favorable opinion of Simpson Thacher &
        Bartlett LLP, counsel for JPMorgan Chase, as Administrative Agent,
        substantially in the form of Exhibit G hereto.

        (f)     This Agreement shall have been executed by Kraft, JPMorgan Chase
and Citibank, as Administrative Agents, Credit Suisse First Boston and Deutsche
Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP
Paribas, Dresdner Bank AG, New York and Grand Cayman Branches and HSBC Bank USA,
as Arrangers and Documentation Agents, and JPMorgan Chase, as Administrative
Agent, shall have been notified by each Initial Lender that such Initial Lender
has executed this Agreement.

JPMorgan Chase, as Administrative Agent, shall notify Kraft and the Initial
Lenders of the date which is the Effective Date upon satisfaction of all of the
conditions precedent set forth in this Section 3.01. For purposes of determining
compliance with the conditions specified in this Section 3.01, each Lender shall
be deemed to have consented to, approved or accepted or to be satisfied with
each document or other matter required thereunder to be consented to or approved
by or acceptable or satisfactory to the Lenders unless an officer of JPMorgan
Chase, as Administrative Agent, responsible for the transactions contemplated by
this Agreement shall



have received notice from such Lender prior to the date that Kraft, by notice to
the Lenders, designates as the proposed Effective Date, specifying its objection
thereto.

                Section 3.02. INITIAL ADVANCE TO EACH DESIGNATED SUBSIDIARY. The
obligation of each Lender to make an initial Advance to each Designated
Subsidiary following any designation of such Designated Subsidiary as a Borrower
hereunder pursuant to Section 9.08 is subject to the receipt by JPMorgan Chase,
as Administrative Agent, on or before the date of such initial Advance of each
of the following, in form and substance satisfactory to JPMorgan Chase, as
Administrative Agent, and dated such date, and in sufficient copies for each
Lender:

        (a)     Certified copies of the resolutions of the Board of Directors of
such Designated Subsidiary (with a certified English translation if the original
thereof is not in English) approving this Agreement, and of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement.

        (b)     A certificate of a proper officer of such Designated Subsidiary
certifying the names and true signatures of the officers of such Designated
Subsidiary authorized to sign this Agreement and the other documents to be
delivered hereunder.

        (c)     A certificate signed by a duly authorized officer of the
Designated Subsidiary, dated as of the date of such initial Advance, certifying
that such Designated Subsidiary shall have obtained all governmental and third
party authorizations, consents, approvals (including exchange control approvals)
and licenses required under applicable laws and regulations necessary for such
Designated Subsidiary to execute and deliver this Agreement and to perform its
obligations thereunder.

        (d)     The Designation Agreement of such Designated Subsidiary,
substantially in the form of Exhibit D hereto.

        (e)     A favorable opinion of counsel (which may be in-house counsel)
to such Designated Subsidiary, dated the date of such initial Advance, covering,
to the extent customary and appropriate for the relevant jurisdiction, the
opinions outlined on Exhibit F hereto.

        (f)     Such other approvals, opinions or documents as any Lender,
through JPMorgan Chase, as Administrative Agent, may reasonably request.

                Section 3.03. CONDITIONS PRECEDENT TO EACH PRO RATA BORROWING.
The obligation of each Lender to make a Pro Rata Advance on the occasion of each
Pro Rata Borrowing is subject to the conditions precedent that the Effective
Date shall have occurred and on the date of such Pro Rata Borrowing the
following statements shall be true, and the acceptance by the Borrower of the
proceeds of such Pro Rata Borrowing shall be a representation by such Borrower
or Kraft, as the case may be, that:



        (a)     the representations and warranties contained in Section 4.01
(except the representations set forth in the last sentence of subsection (e) and
in subsection (f) thereof (other than clause (i) thereof)) are correct on and as
of the date of such Pro Rata Borrowing, before and after giving effect to such
Pro Rata Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date, and, if such Pro Rata Borrowing shall have been
requested by a Designated Subsidiary, the representations and warranties of such
Designated Subsidiary contained in its Designation Agreement are correct on and
as of the date of such Pro Rata Borrowing, before and after giving effect to
such Pro Rata Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date;

        (b)     after giving effect to the application of the proceeds of all
Borrowings on such date (together with any other resources of the Borrower
applied together therewith) no event has occurred and is continuing, or would
result from such Pro Rata Borrowing, that constitutes a Default or Event of
Default; and

        (c)     if such Pro Rata Borrowing is in an aggregate principal amount
equal to or greater than $500,000,000 and is being made in connection with any
purchase of shares of such Borrower's or Kraft's capital stock or the capital
stock of any other Person, or any purchase of all or substantially all of the
assets of any Person (whether in one transaction or a series of transactions) or
any transaction of the type referred to in Section 5.02(b), the statement in (b)
above shall also be true on a pro forma basis as if such transaction or purchase
shall have been completed.

                Section 3.04. CONDITIONS PRECEDENT TO EACH COMPETITIVE BID
BORROWING. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing is subject to the
conditions precedent that (i) JPMorgan Chase, as Administrative Agent, shall
have received the written confirmatory Notice of Competitive Bid Borrowing with
respect thereto, (ii) on or before the date of such Competitive Bid Borrowing,
but prior to such Competitive Bid Borrowing, JPMorgan Chase, as Administrative
Agent, shall have received a Competitive Bid Note payable to the order of such
Lender for each of the one or more Competitive Bid Advances to be made by such
Lender as part of such Competitive Bid Borrowing, in a principal amount equal to
the principal amount of the Competitive Bid Advance to be evidenced thereby and
otherwise on such terms as were agreed to for such Competitive Bid Advance in
accordance with Section 2.07, and (iii) on the date of such Competitive Bid
Borrowing the following statements shall be true, and the acceptance by the
Borrower of the proceeds of such Competitive Bid Borrowing shall be a
representation by such Borrower or Kraft, as the case may be, that:

        (a)     the representations and warranties contained in Section 4.01 are
correct on and as of the date of such Competitive Bid Borrowing, before and
after giving effect to such Competitive Bid Borrowing and to the application of
the proceeds therefrom, as though made on and as of such date, and, if such
Competitive Bid Borrowing shall have been requested by a Designated Subsidiary,
the representations and warranties of such Designated Subsidiary



contained in its Designation Agreement are correct on and as of the date of such
Competitive Bid Borrowing, before and after giving effect to such Competitive
Bid Borrowing and to the application of the proceeds therefrom, as though made
on and as of such date, and

        (b)     after giving effect to the application of the proceeds of all
Borrowings on such date (together with any other resources of the Borrower
applied together therewith), no event has occurred and is continuing, or would
result from such Competitive Bid Borrowing that constitutes a Default or Event
of Default.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

                Section 4.01. REPRESENTATIONS AND WARRANTIES OF KRAFT. Kraft
represents and warrants as follows:

        (a)     It is a corporation duly organized, validly existing and in good
standing under the laws of Virginia.

        (b)     The execution, delivery and performance of this Agreement and
the Notes to be delivered by it are within its corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) its
charter or by-laws or (ii) in any material respect, any law, rule, regulation or
order of any court or governmental agency or any contractual restriction binding
on or affecting it.

        (c)     No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by it of this Agreement or the Notes
to be delivered by it.

        (d)     This Agreement is, and each of the Notes to be delivered by it
when delivered hereunder will be, a legal, valid and binding obligation of Kraft
enforceable against Kraft in accordance with its terms, subject to the effect of
any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws affecting creditors' rights generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.

        (e)     As reported in Kraft's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004, the unaudited condensed consolidated balance
sheets of Kraft and its Subsidiaries as of March 31, 2004 and the unaudited
condensed consolidated statements of earnings of Kraft and its Subsidiaries for
the quarter then ended fairly present, in all material respects and subject to
year-end audit adjustments, the consolidated financial position of Kraft and its



Subsidiaries as at such date and the consolidated results of the operations of
Kraft and its Subsidiaries for the quarter ended on such date, all in accordance
with accounting principles generally accepted in the United States. Except as
disclosed in Kraft's Quarterly Report on Form 10-Q for the quarter ended March
31, 2004, and in any Current Report on Form 8-K filed subsequent to March 31,
2004 but prior to July 13, 2004, since March 31, 2004 there has been no material
adverse change in such position or operations.

        (f)     There is no pending or threatened action or proceeding affecting
it or any of its Subsidiaries before any court, governmental agency or
arbitrator (a "PROCEEDING") (i) that purports to affect the legality, validity
or enforceability of this Agreement or (ii) except for Proceedings disclosed in
Kraft's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, its
Annual Report on Form 10-K for the year ended December 31, 2003, any Current
Report on Form 8-K filed subsequent to March 31, 2004 but prior to July 13, 2004
and, with respect to Proceedings commenced after the date of the most recent
such document but prior to July 13, 2004, a certificate delivered to the
Lenders, that may materially adversely affect the financial position or results
of operations of Kraft and its Subsidiaries taken as a whole.

        (g)     It owns directly or indirectly 100% of the capital stock of each
other Borrower.

        (h)     None of the proceeds of any Advance will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock or for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any Margin Stock or for any other purpose that
would constitute the Advances as a "purpose credit" within the meaning of
Regulation U and, in each case, would constitute a violation of Regulation U.

                                    ARTICLE V

                               COVENANTS OF KRAFT

                Section 5.01. AFFIRMATIVE COVENANTS.  So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, Kraft
will:

        (a)     COMPLIANCE WITH LAWS, ETC. Comply, and cause each Major
Subsidiary to comply, in all material respects, with all applicable laws, rules,
regulations and orders (such compliance to include, without limitation,
complying with ERISA and paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property except
to the extent contested in good faith), noncompliance with which would
materially adversely affect the financial condition or operations of Kraft and
its Subsidiaries taken as a whole.

        (b)     MAINTENANCE OF NET WORTH. Maintain total shareholders' equity on

the consolidated balance sheet of Kraft and its Subsidiaries of not less than
$18,200,000,000.

        (c)     REPORTING REQUIREMENTS. Furnish to the Lenders:



                        (i)     as soon as available and in any event within 60
        days after the end of each of the first three quarters of each fiscal
        year of Kraft, an unaudited interim condensed consolidated balance sheet
        of Kraft and its Subsidiaries as of the end of such quarter and
        unaudited interim condensed consolidated statements of earnings of Kraft
        and its Subsidiaries for the period commencing at the end of the
        previous fiscal year and ending with the end of such quarter, certified
        by the chief financial officer of Kraft;

                        (ii)    as soon as available and in any event within 100
        days after the end of each fiscal year of Kraft, a copy of the
        consolidated financial statements for such year for Kraft and its
        Subsidiaries, audited by PricewaterhouseCoopers LLP (or other
        independent auditors which, as of the date of this Agreement, are one of
        the "big four" accounting firms);

                        (iii)   all reports which Kraft sends to any of its
        shareholders, and copies of all reports on Form 8-K (or any successor
        forms adopted by the Securities and Exchange Commission) which Kraft
        files with the Securities and Exchange Commission;

                        (iv)    as soon as possible and in any event within five
        days after the occurrence of each Event of Default and each event which,
        with the giving of notice or lapse of time, or both, would constitute an
        Event of Default, continuing on the date of such statement, a statement
        of the chief financial officer or treasurer of Kraft setting forth
        details of such Event of Default or event and the action which Kraft has
        taken and proposes to take with respect thereto; and

                        (v)     such other information respecting the condition
        or operations, financial or otherwise, of Kraft or any Major Subsidiary
        as any Lender through JPMorgan Chase, as Administrative Agent, may from
        time to time reasonably request.

In lieu of furnishing the Lenders the items referred to in clauses (i), (ii) and
(iii) above, Kraft may make such items available on the internet at
www.kraft.com (which website includes an option to subscribe to a free service
alerting subscribers by e-mail of new Securities and Exchange Commission
filings) or any successor or replacement website thereof, or by similar
electronic means.

                Section 5.02. NEGATIVE COVENANTS. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, Kraft will not:

        (a)     LIENS, ETC. Create or suffer to exist, or permit any Major
Subsidiary to create or suffer to exist, any lien, security interest or other
charge or encumbrance (other than operating leases and licensed intellectual
property), or any other type of preferential arrangement ("LIENS"), upon or with
respect to any of its properties, whether now owned or hereafter acquired, or
assign, or permit any Major Subsidiary to assign, any right to receive income,
in each case to secure or provide for the payment of any Debt of any Person,
other than:



                        (i) Liens upon or in property acquired or held by it or
        any Major Subsidiary in the ordinary course of business to secure the
        purchase price of such property or to secure indebtedness incurred
        solely for the purpose of financing the acquisition of such property;

                        (ii)    Liens existing on property at the time of its
        acquisition (other than any such lien or security interest created in
        contemplation of such acquisition);

                        (iii)   Liens existing on the date hereof securing Debt;

                        (iv)    Liens on property financed through the issuance
        of industrial revenue bonds in favor of the holders of such bonds or any
        agent or trustee therefor;

                        (v)     Liens existing on property of any Person
        acquired by Kraft or any Major Subsidiary;

                        (vi)    Liens securing Debt in an aggregate amount not
        in excess of 15% of Consolidated Tangible Assets;

                        (vii)   Liens upon or with respect to "margin stock" as
        that term is defined in Regulation U;

                        (viii)  Liens in favor of Kraft or any Major Subsidiary;

                        (ix)    precautionary Liens provided by Kraft or any
        Major Subsidiary in connection with the sale, assignment, transfer or
        other disposition of assets by Kraft or such Major Subsidiary which
        transaction is determined by the Board of Directors of Kraft or such
        Major Subsidiary to constitute a "sale" under accounting principles
        generally accepted in the United States; or

                        (x)     any extension, renewal or replacement of the
        foregoing, PROVIDED that (A) such Lien does not extend to any additional
        assets (other than a substitution of like assets), and (B) the amount of
        Debt secured by any such Lien is not increased.

        (b)     MERGERS, ETC. Consolidate with or merge into, or convey or
transfer its properties and assets substantially as an entirety to, any Person,
or permit any Subsidiary directly or indirectly owned by it to do so, unless,
immediately after giving effect thereto, no Default or Event of Default would
exist and, in the case of any merger or consolidation to which it is a party,
the surviving corporation is Kraft or was a Subsidiary of Kraft immediately
prior to such merger or consolidation, which is organized and existing under the
laws of the United States of America or any State thereof, or the District of
Columbia. The surviving corporation of any merger or consolidation involving
Kraft or any other Borrower shall assume all of Kraft's or such Borrower's
obligations under this Agreement (including without limitation with respect to



Kraft's obligations, the covenants set forth in Article V) by the execution and
delivery of an instrument in form and substance satisfactory to the Required
Lenders.

                                   ARTICLE VI

                                EVENTS OF DEFAULT

                Section 6.01. EVENTS OF DEFAULT. Each of the following events
(each an "Event of Default") shall constitute an Event of Default:

        (a)     Any Borrower or Kraft shall fail to pay any principal of any
Advance when the same becomes due and payable; or any Borrower shall fail to pay
interest on any Advance, or Kraft shall fail to pay any fees payable under
Section 2.09, within ten days after the same becomes due and payable; or

        (b)     Any representation or warranty made or deemed to have been made
by any Borrower or Kraft herein or by any Borrower or Kraft (or any of their
respective officers) in connection with this Agreement shall prove to have been
incorrect in any material respect when made or deemed to have been made; or

        (c)     Any Borrower or Kraft shall fail to perform or observe (i) any
term, covenant or agreement contained in Section 5.01(b) or 5.02(b), (ii) any
term, covenant or agreement contained in Section 5.02(a) if such failure shall
remain unremedied for 15 days after written notice thereof shall have been given
to Kraft by JPMorgan Chase, as Administrative Agent, or any Lender or (iii) any
other term, covenant or agreement contained in this Agreement on its part to be
performed or observed if such failure shall remain unremedied for 30 days after
written notice thereof shall have been given to Kraft by JPMorgan Chase, as
Administrative Agent, or any Lender; or

        (d)     Any Borrower or Kraft or any Major Subsidiary shall fail to pay
any principal of or premium or interest on any Debt which is outstanding in a
principal amount of at least $100,000,000 in the aggregate (but excluding Debt
arising under this Agreement) of such Borrower or Kraft or such Major Subsidiary
(as the case may be), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt unless adequate provision
for any such payment has been made in form and substance satisfactory to the
Required Lenders; or any Debt of any Borrower or Kraft or any Major Subsidiary
which is outstanding in a principal amount of at least $100,000,000 in the
aggregate (but excluding Debt arising under this Agreement) shall be declared to
be due and payable, or required to be prepaid (other than by a scheduled
required prepayment), redeemed, purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Debt shall be required to be made, in each case
prior to the stated maturity thereof



unless adequate provision for the payment of such Debt has been made in form and
substance satisfactory to the Required Lenders; or

        (e)     Any Borrower or Kraft or any Major Subsidiary shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against any
Borrower or Kraft or any Major Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of its
property, and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 60 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against it or
the appointment of a receiver, trustee, custodian or other similar official for
it or for any of its property constituting a substantial part of the property of
Kraft and its Subsidiaries taken as a whole) shall occur; or any Borrower or
Kraft or any Major Subsidiary shall take any corporate action to authorize any
of the actions set forth above in this subsection (e); or

        (f)     Any judgment or order for the payment of money in excess of
$100,000,000 shall be rendered against any Borrower or Kraft or any Major
Subsidiary and there shall be any period of 60 consecutive days during which a
stay of enforcement of such unsatisfied judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or

        (g)     Any Borrower, Kraft or any ERISA Affiliate shall incur, or shall
be reasonably likely to incur, liability in excess of $500,000,000 in the
aggregate as a result of one or more of the following: (i) the occurrence of any
ERISA Event; (ii) the partial or complete withdrawal of any Borrower, Kraft or
any ERISA Affiliate from a Multiemployer Plan; or (iii) the reorganization or
termination of a Multiemployer Plan; PROVIDED, HOWEVER, that no Default or Event
of Default under this Section 6.01(g) shall be deemed to have occurred if the
Borrower, Kraft or any ERISA Affiliate shall have made arrangements satisfactory
to the PBGC or the Required Lenders to discharge or otherwise satisfy such
liability (including the posting of a bond or other security); or

        (h)     So long as any Subsidiary of Kraft is a Designated Subsidiary,
the guaranty provided by Kraft under Article VIII hereof shall for any reason
cease to be valid and binding on Kraft or Kraft shall so state in writing.

                Section 6.02. LENDERS' RIGHTS UPON EVENT OF DEFAULT. If an
Event of Default occurs or is continuing, then JPMorgan Chase, as Administrative
Agent, shall at the request, or may with the consent, of the Required Lenders,
by notice to Kraft and the Borrowers:



        (a)     declare the obligation of each Lender to make further Advances
to be terminated, whereupon the same shall forthwith terminate, and

        (b)     declare all the Advances then outstanding, all interest thereon
and all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Advances then outstanding, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrowers;

PROVIDED, HOWEVER, that in the event of an actual or deemed entry of an order
for relief with respect to any Borrower under the Federal Bankruptcy Code, (i)
the obligation of each Lender to make Advances shall automatically be terminated
and (ii) the Advances then outstanding, all such interest and all such amounts
shall automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrowers.

                                   ARTICLE VII

                            THE ADMINISTRATIVE AGENTS

                Section 7.01. AUTHORIZATION AND ACTION. Each Lender hereby
appoints and authorizes the Administrative Agents to take such action as agent
on its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Administrative Agents by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes), the Administrative Agents
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding upon all Lenders and all holders of
Notes; PROVIDED, HOWEVER, that no Administrative Agent shall be required to take
any action that exposes such Administrative Agent to personal liability or that
is contrary to this Agreement or applicable law. Each of the Administrative
Agents agrees to give to each Lender prompt notice of each notice given to it by
Kraft or any Borrower as required by the terms of this Agreement or at the
request of Kraft or such Borrower, and any notice provided pursuant to Section
5.01(c)(iv).

                Section 7.02. ADMINISTRATIVE AGENTS' RELIANCE, ETC. Neither the
Administrative Agents nor any of their directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agents:



        (a)     may treat the Lender that made any Advance as the holder of the
Debt resulting therefrom until JPMorgan Chase, as Administrative Agent, receives
and accepts an Assignment and Acceptance entered into by such Lender, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;

        (b)     may consult with legal counsel (including counsel for Kraft or
any Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts;

        (c)     make no warranty or representation to any Lender and shall not
be responsible to any Lender for any statements, warranties or representations
(whether written or oral) made in or in connection with this Agreement;

        (d)     shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of Kraft or any Borrower or to inspect the property
(including the books and records) of Kraft or such Borrower;

        (e)     shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; and

        (f)     shall incur no liability under or in respect of this Agreement
by acting upon any notice, consent, certificate or other instrument or writing
(which may be by telecopier, telegram or telex) believed by it to be genuine and
signed or sent by the proper party or parties.

                Section 7.03. JPMORGAN CHASE, CITIBANK AND AFFILIATES. With
respect to its Commitment and the Advances made by it, each of JPMorgan Chase
and Citibank shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not an Administrative
Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include JPMorgan Chase and Citibank in their individual capacities.
JPMorgan Chase and Citibank and their affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, Kraft, any
Borrower, any of its Subsidiaries and any Person who may do business with or own
securities of Kraft, any Borrower or any such Subsidiary, all as if JPMorgan
Chase and Citibank were not Administrative Agents and without any duty to
account therefor to the Lenders.

                Section 7.04. LENDER CREDIT DECISION. Each Lender acknowledges
that it has, independently and without reliance upon either Administrative
Agent, either Syndication Agent, any Arranger and Documentation Agent, or any
other Lender and based on the financial statements referred to in Section 4.01
and such other documents and information as it has



deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon any Administrative Agent, Syndication Agent, Arranger and
Documentation Agent, or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.

                Section 7.05. INDEMNIFICATION. The Lenders agree to indemnify
each Administrative Agent (to the extent not reimbursed by Kraft or the
Borrowers), ratably according to the respective principal amounts of the Pro
Rata Advances then owing to each of them (or if no Pro Rata Advances are at the
time outstanding, ratably according to the respective amounts of their
Commitments), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by, or
asserted against such Administrative Agent in any way relating to or arising out
of this Agreement or any action taken or omitted by such Administrative Agent
under this Agreement (collectively, the "INDEMNIFIED COSTS"), PROVIDED that no
Lender shall be liable for any portion of the Indemnified Costs resulting from
such Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse such Administrative
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by such Administrative Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, to the extent that such Administrative Agent is not reimbursed
for such expenses by Kraft or the Borrowers. In the case of any investigation,
litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05
applies whether any such investigation, litigation or proceeding is brought by
any Administrative Agent, any Lender or a third party.

                Section 7.06. SUCCESSOR ADMINISTRATIVE AGENTS. An Administrative
Agent may resign at any time by giving written notice thereof to the Lenders and
Kraft and may be removed at any time with or without cause by the Required
Lenders. Upon the resignation or removal of JPMorgan Chase, as Administrative
Agent, Citibank, as Administrative Agent, shall succeed to and become vested
with all the rights, powers, discretion, privileges and duties of JPMorgan
Chase, as Administrative Agent, and JPMorgan Chase, as Administrative Agent
shall be discharged from its duties and obligations under this Agreement. Upon
any other such resignation or removal which results in there being no
Administrative Agent hereunder, the Required Lenders shall have the right to
appoint a successor Administrative Agent. If no successor Administrative Agent
shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within 30 days after the retiring Administrative Agent's
giving of notice of resignation or the Required Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be a
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a



successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement.

                Section 7.07. SYNDICATION AGENTS AND ARRANGERS AND DOCUMENTATION
AGENTS. Credit Suisse First Boston and Deutsche Bank Securities Inc. have been
designated as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, Dresdner
Bank AG, New York and Grand Cayman Branches and HSBC Bank USA, have been
designated as Arrangers and Documentation Agents, under this Agreement, but the
use of such titles does not impose on any of them any duties or obligations
greater than those of any other Lender.

                                  ARTICLE VIII

                                    GUARANTY

                Section 8.01. GUARANTY. Kraft hereby unconditionally and
irrevocably guarantees (the undertaking of Kraft contained in this Article VIII
being the "GUARANTY") the punctual payment when due, whether at stated maturity,
by acceleration or otherwise, of all obligations of each Borrower now or
hereafter existing under this Agreement, whether for principal, interest, fees,
expenses or otherwise (such obligations being the "OBLIGATIONS"), and any and
all expenses (including counsel fees and expenses) incurred by JPMorgan Chase,
as Administrative Agent, or the Lenders in enforcing any rights under the
Guaranty.

                Section 8.02. GUARANTY ABSOLUTE. Kraft guarantees that the
Obligations will be paid strictly in accordance with the terms of this
Agreement, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of JPMorgan Chase,
as Administrative Agent, or the Lenders with respect thereto. The liability of
Kraft under this Guaranty shall be absolute and unconditional irrespective of:

        (a)     any lack of validity, enforceability or genuineness of any
provision of this Agreement or any other agreement or instrument relating
thereto;

        (b)     any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to departure from this Agreement;

        (c)     any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Obligations; or



        (d)     any other circumstance which might otherwise constitute a
defense available to, or a discharge of, a Borrower or Kraft.

                This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Obligations is
rescinded or must otherwise be returned by JPMorgan Chase, as Administrative
Agent, or any Lender upon the insolvency, bankruptcy or reorganization of a
Borrower or otherwise, all as though such payment had not been made.

                Section 8.03. WAIVERS. (a) Kraft hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and any requirement that JPMorgan Chase, as
Administrative Agent, or any Lender protect, secure, perfect or insure any
security interest or lien or any property subject thereto or exhaust any right
or take any action against a Borrower or any other Person or any collateral.

        (b)     Kraft hereby irrevocably waives any claims or other rights that
it may now or hereafter acquire against any Borrower that arise from the
existence, payment, performance or enforcement of Kraft's obligations under this
Guaranty or this Agreement, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of JPMorgan Chase, as Administrative
Agent, or any Lender against such Borrower or any collateral, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from
such Borrower, directly or indirectly, in cash or other property or by set-off
or in any other manner, payment or security on account of such claim, remedy or
right. If any amount shall be paid to Kraft in violation of the preceding
sentence at any time prior to the later of the cash payment in full of the
Obligations and all other amounts payable under this Guaranty and the
Termination Date, such amount shall be held in trust for the benefit of JPMorgan
Chase, as Administrative Agent, and the Lenders and shall forthwith be paid to
JPMorgan Chase, as Administrative Agent, to be credited and applied to the
Obligations and all other amounts payable under this Guaranty, whether matured
or unmatured, in accordance with the terms of this Agreement and this Guaranty,
or to be held as collateral for any Obligations or other amounts payable under
this Guaranty thereafter arising. Kraft acknowledges that it will receive direct
and indirect benefits from the financing arrangements contemplated by this
Agreement and this Guaranty and that the waiver set forth in this Section
8.03(b) is knowingly made in contemplation of such benefits.

                Section 8.04. CONTINUING GUARANTY. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until payment in full
(after the Termination Date) of the Obligations and all other amounts payable
under this Guaranty, (b) be binding upon Kraft, its successors and assigns, and
(c) inure to the benefit of and be enforceable by the Lenders, JPMorgan Chase,
as Administrative Agent, and their respective successors, transferees and
assigns.





                                   ARTICLE IX

                                  MISCELLANEOUS

                Section 9.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any Borrower or
Kraft therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; PROVIDED, HOWEVER, that no amendment, waiver or consent shall,
unless in writing and signed by all the Lenders, do any of the following: (a)
waive any of the conditions specified in Sections 3.01 and 3.02, (b) increase
the Commitments of the Lenders other than pursuant to Section 2.10(b), or
subject the Lenders to any additional obligations, (c) reduce the principal of,
or interest on, the Pro Rata Advances or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Pro Rata Advances other than pursuant to Section 2.10(c), or
any fees or other amounts payable hereunder, (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Pro Rata
Advances, or the number of Lenders, that shall be required for the Lenders or
any of them to take any action hereunder, (f) release Kraft from any of its
obligations under Article VIII or (g) amend this Section 9.01; PROVIDED FURTHER
that no waiver of the conditions specified in Section 3.04 in connection with
any Competitive Bid Borrowing shall be effective unless consented to by all
Lenders making Competitive Bid Advances as part of such Competitive Bid
Borrowing; and PROVIDED FURTHER that no amendment, waiver or consent shall,
unless in writing and signed by JPMorgan Chase, as Administrative Agent, in
addition to the Lenders required above to take such action, affect the rights or
duties of JPMorgan Chase, as Administrative Agent, under this Agreement or any
Pro Rata Advance.

                Section 9.02. NOTICES, ETC. (a) ADDRESSES. All notices and other
communications provided for hereunder shall be in writing (including telecopier
communication) and mailed, telecopied, or delivered, as follows:

        if to any Borrower:

        c/o Kraft Foods Inc.
        Three Lakes Drive
        Northfield, Illinois 60093
        Attention: Executive Vice President and Chief Financial Officer
        Fax number: (847) 646-7759;

        with a copy to:

        Altria Corporate Services, Inc.
        120 Park Avenue
        New York, New York  10017



        Attention: Treasury Department - Debt Administration
        Fax number: (917) 663-5310;

        if to Kraft, as guarantor:
        Kraft Foods Inc.
        Three Lakes Drive
        Northfield, Illinois 60093
        Attention:  Secretary
        Fax number:  (847) 646-2950;

        if to any Initial Lender, at its Domestic Lending Office specified
        opposite its name on Schedule I hereto;

        if to any other Lender, at its Domestic Lending Office specified in the
        Assignment and Acceptance or New Lender Supplement pursuant to which it
        became a Lender;

        if to JPMorgan Chase, as Administrative Agent:

        c/o JPMorgan Chase Bank
        270 Park Avenue, 4th Floor
        New York, New York 10017
        Attention: Robert Sacks
        Fax number: (212) 270-6637;

        with a copy to:

        JPMorgan Chase Bank
        Loan and Agency
        1111 Fannin
        10th Floor
        Houston, Texas 77002
        Attention: Leah Hughes
        Fax number:  (713) 750-2932
        and Michael Mekuria
        Fax number: (713) 750-2452; or

as to any Borrower, Kraft or JPMorgan Chase, as Administrative Agent, at such
other address as shall be designated by such party in a written notice to the
other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to Kraft and JPMorgan Chase, as
Administrative Agent.

        (b)     EFFECTIVENESS OF NOTICES. All such notices and communications
shall, when mailed or telecopied, be effective when deposited in the mail or
telecopied, respectively, except



that notices and communications to JPMorgan Chase, as Administrative Agent,
pursuant to Article II, III or VII shall not be effective until received by
JPMorgan Chase, as Administrative Agent. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or of
any Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.

                Section 9.03. NO WAIVER; REMEDIES. No failure on the part of any
Lender or JPMorgan Chase, as Administrative Agent, to exercise, and no delay in
exercising, any right hereunder or under any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

                Section 9.04. COSTS AND EXPENSES. (a) ADMINISTRATIVE AGENT;
ENFORCEMENT. Kraft agrees to pay on demand all reasonable costs and expenses in
connection with the preparation, execution, delivery, administration (excluding
any cost or expenses for administration related to the overhead of JPMorgan
Chase, as Administrative Agent), modification and amendment of this Agreement
and the documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for JPMorgan Chase, as
Administrative Agent, with respect thereto and with respect to advising JPMorgan
Chase, as Administrative Agent, as to its rights and responsibilities under this
Agreement, and all costs and expenses of the Lenders and JPMorgan Chase, as
Administrative Agent, if any (including, without limitation, reasonable counsel
fees and expenses of the Lenders and JPMorgan Chase, as Administrative Agent),
in connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement and the other documents to be
delivered hereunder.

        (b)     PREPAYMENT OF LIBO RATE ADVANCES OR FLOATING RATE BID ADVANCES.
If any payment of principal of LIBO Rate Advance or Floating Rate Bid Advance is
made other than on the last day of the Interest Period for such Advance or at
its maturity, as a result of a payment pursuant to Section 2.11, acceleration of
the maturity of the Advances pursuant to Section 6.02, an assignment made as a
result of a demand by Kraft pursuant to Section 9.07(a) or for any other reason,
Kraft shall, upon demand by any Lender (with a copy of such demand to JPMorgan
Chase, as Administrative Agent), pay to JPMorgan Chase, as Administrative Agent,
for the account of such Lender any amounts required to compensate such Lender
for any additional losses, costs or expenses which it may reasonably incur as a
result of such payment, including, without limitation, any loss (excluding loss
of anticipated profits), cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Advance. Without prejudice to the survival of any other agreement
of any Borrower or Kraft hereunder, the agreements and obligations of each
Borrower and Kraft contained in Section 2.02(c), 2.05, 2.12, 2.15 and this
Section 9.04(b) shall survive the payment in full of principal and interest
hereunder.



        (c)     INDEMNIFICATION. Each Borrower and Kraft jointly and severally
agree to indemnify and hold harmless the Administrative Agents and each Lender
and each of their respective affiliates, control persons, directors, officers,
employees, attorneys and agents (each, an "INDEMNIFIED PARTY") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and disbursements of counsel) which may be
incurred by or asserted against any Indemnified Party, in each case in
connection with or arising out of, or in connection with the preparation for or
defense of, any investigation, litigation, or proceeding (i) related to any
transaction or proposed transaction (whether or not consummated) in which any
proceeds of any Borrowing are applied or proposed to be applied, directly or
indirectly, by any Borrower, whether or not such Indemnified Party is a party to
such transaction or (ii) related to any Borrower's or Kraft's entering into this
Agreement, or to any actions or omissions of any Borrower or Kraft, any of their
respective Subsidiaries or affiliates (other than Altria Group, Inc. and its
non-Kraft Subsidiaries or affiliates) or any of its or their respective
officers, directors, employees or agents in connection therewith, in each case
whether or not an Indemnified Party is a party thereto and whether or not such
investigation, litigation or proceeding is brought by Kraft or any Borrower or
any other Person; PROVIDED, HOWEVER, that neither any Borrower nor Kraft shall
be required to indemnify any such Indemnified Party from or against any portion
of such claims, damages, losses, liabilities or expenses that is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Indemnified
Party.

                Section 9.05. RIGHT OF SET-OFF. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.02 to authorize
JPMorgan Chase, as Administrative Agent, to declare the Advances due and payable
pursuant to the provisions of Section 6.02, each Lender is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of Kraft or any Borrower
against any and all of the obligations of any Borrower or Kraft now or hereafter
existing under this Agreement, whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. Each
Lender shall promptly notify the appropriate Borrower or Kraft, as the case may
be, after any such set-off and application, PROVIDED that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Lender and its affiliates under this Section 9.05 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender and its affiliates may have.

                Section 9.06. BINDING EFFECT. This Agreement shall be binding
upon and inure to the benefit of Kraft, JPMorgan Chase, as Administrative Agent,
Citibank, as Administrative Agent and each Lender and their respective
successors and assigns, except that neither any Borrower nor Kraft shall have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lenders.



                Section 9.07. ASSIGNMENTS AND PARTICIPATIONS. (a) ASSIGNMENT OF
LENDER OBLIGATIONS. Each Lender may and, if demanded by Kraft upon at least five
Business Days' notice to such Lender and JPMorgan Chase, as Administrative
Agent, will assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and the Pro Rata Advances owing to it), SUBJECT to the
following:

                        (i)     each such assignment shall be of a constant, and
        not a varying, percentage of all rights and obligations under this
        Agreement (other than, except in the case of an assignment made as a
        result of a demand by Kraft pursuant to this Section 9.07(a), any
        Competitive Bid Advances owing to such Lender or any Competitive Bid
        Notes held by it);

                        (ii)    the amount of the Commitment of the assigning
        Lender being assigned pursuant to each such assignment (determined as of
        the date of the Assignment and Acceptance with respect to such
        assignment) shall in no event be less than $10,000,000 (subject to
        reduction at the sole discretion of Kraft) and shall be an integral
        multiple of $1,000,000;

                        (iii)   each such assignment shall be to an Eligible
        Assignee;

                        (iv)    each such assignment made as a result of a
        demand by Kraft pursuant to this Section 9.07(a) shall be arranged by
        Kraft after consultation with JPMorgan Chase, as Administrative Agent,
        and shall be either an assignment of all of the rights and obligations
        of the assigning Lender under this Agreement or an assignment of a
        portion of such rights and obligations made concurrently with another
        such assignment or other such assignments which together cover all of
        the rights and obligations of the assigning Lender under this Agreement;

                        (v)     no Lender shall be obligated to make any such
        assignment as a result of a demand by Kraft pursuant to this Section
        9.07(a) unless and until such Lender shall have received one or more
        payments from either the Borrowers to which it has outstanding Advances
        or one or more Eligible Assignees in an aggregate amount at least equal
        to the aggregate outstanding principal amount of the Advances owing to
        such Lender, together with accrued interest thereon to the date of
        payment of such principal amount and all other amounts payable to such
        Lender under this Agreement; and

                        (vi)    the parties to each such assignment shall
        execute and deliver to JPMorgan Chase, as Administrative Agent, for its
        acceptance and recording in the Register, an Assignment and Acceptance,
        together with a processing and recordation fee of $3,500, PROVIDED that,
        if such assignment is made as a result of a demand by Kraft under this
        Section 9.07(a), Kraft shall pay or cause to be paid such $3,500 fee.



Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (other than those provided under Section 9.04) and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).

        (b)     ASSIGNMENT AND ACCEPTANCE. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; (ii) such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower or Kraft or the performance
or observance by any Borrower or Kraft of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon JPMorgan Chase, as
Administrative Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee represents that (A) the source of any funds it is using to acquire
the assigning Lender's interest or to make any Advance is not and will not be
plan assets as defined under the regulations of the Department of Labor of any
Plan subject to Title I of ERISA or Section 4975 of the Code or (B) the
assignment or Advance is not and will not be a non-exempt prohibited transaction
as defined in Section 406 of ERISA; (vii) such assignee appoints and authorizes
JPMorgan Chase, as Administrative Agent, to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement as are
delegated to JPMorgan Chase, as Administrative Agent, by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (viii) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Agreement are required to
be performed by it as a Lender.

        (c)     AGENT'S ACCEPTANCE. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an assignee representing that it
is an Eligible Assignee, together with



any Pro Rata Note or Notes subject to such assignment, JPMorgan Chase, as
Administrative Agent, shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to Kraft.

        (d)     REGISTER. JPMorgan Chase, as Administrative Agent, shall
maintain at its address referred to in Section 9.02 a copy of each Assignment
and Acceptance delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the Commitment of, and
principal amount of the Advances owing to, each Lender from time to time (the
"REGISTER"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and Kraft, the Borrowers, JPMorgan Chase, as
Administrative Agent, and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by Kraft, any Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.

        (e)     SALE OF PARTICIPATION. Each Lender may sell participations to
one or more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and any Note or Notes held
by it), SUBJECT to the following:

                        (i)     such Lender's obligations under this Agreement
        (including, without limitation, its Commitment to Kraft hereunder) shall
        remain unchanged,

                        (ii)    such Lender shall remain solely responsible to
        the other parties hereto for the performance of such obligations,

                        (iii)   Kraft, the other Borrowers, JPMorgan Chase, as
        Administrative Agent, and the other Lenders shall continue to deal
        solely and directly with such Lender in connection with such Lender's
        rights and obligations under this Agreement, and

                        (iv)    no participant under any such participation
        shall have any right to approve any amendment or waiver of any provision
        of this Agreement, or any consent to any departure by any Borrower or
        Kraft therefrom, except to the extent that such amendment, waiver or
        consent would reduce the principal of, or interest on, the Advances or
        any fees or other amounts payable hereunder, in each case to the extent
        subject to such participation, or postpone any date fixed for any
        payment of principal of, or interest on, the Advances or any fees or
        other amounts payable hereunder, in each case to the extent subject to
        such participation.

        (f)     DISCLOSURE OF INFORMATION. Any Lender may, in connection with
any assignment or participation or proposed assignment or participation pursuant
to this Section 9.07, disclose to the assignee or participant or proposed
assignee or participant, any information relating to Kraft



or any Borrower furnished to such Lender by or on behalf of Kraft or any
Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to Kraft received by it
from such Lender.

        (g)     REGULATION A SECURITY INTEREST. Notwithstanding any other
provision set forth in this Agreement, any Lender may at any time create a
security interest in all or any portion of its rights under this Agreement
(including, without limitation, the Advances owing to it and any Note or Notes
held by it) in favor of any Federal Reserve Bank in accordance with Regulation
A.

                Section 9.08. DESIGNATED SUBSIDIARIES. (a) DESIGNATION. Kraft
may at any time, and from time to time, by delivery to JPMorgan Chase, as
Administrative Agent, of a Designation Agreement duly executed by Kraft and the
respective Subsidiary and substantially in the form of Exhibit D hereto,
designate such Subsidiary as a "Designated Subsidiary" for purposes of this
Agreement and such Subsidiary shall thereupon become a "Designated Subsidiary"
for purposes of this Agreement and, as such, shall have all of the rights and
obligations of a Borrower hereunder. JPMorgan Chase, as Administrative Agent,
shall promptly notify each Lender of each such designation by Kraft and the
identity of the respective Subsidiary.

        (b)     TERMINATION. Upon the payment and performance in full of all of
the indebtedness, liabilities and obligations under this Agreement of any
Designated Subsidiary then, so long as at the time no Notice of Pro Rata
Borrowing or Notice of Competitive Bid Borrowing in respect of such Designated
Subsidiary is outstanding, such Subsidiary's status as a "Designated Subsidiary"
shall terminate upon notice to such effect from JPMorgan Chase, as
Administrative Agent, to the Lenders (which notice JPMorgan Chase, as
Administrative Agent, shall give promptly, and only upon its receipt of a
request therefor from Kraft). Thereafter, the Lenders shall be under no further
obligation to make any Advance hereunder to such former Designated Subsidiary
until such time as it has been redesignated a Designated Subsidiary by Kraft
pursuant to Section 9.08(a).

                Section 9.09. GOVERNING LAW. This Agreement and the Notes shall
be governed by, and construed in accordance with, the laws of the State of New
York.

                Section 9.10. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.

                Section 9.11. JURISDICTION, ETC. (a) SUBMISSION TO JURISDICTION;
SERVICE OF PROCESS. Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and



its property, to the nonexclusive jurisdiction of any New York state court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York state court or, to the extent permitted by law,
in such Federal court. Kraft and each Borrower hereby agree that service of
process in any such action or proceeding brought in any such New York state
court or in such Federal court may be made upon the process agent appointed
pursuant to Section 9.11(b) (the "PROCESS AGENT") and each Designated Subsidiary
hereby irrevocably appoints the Process Agent its authorized agent to accept
such service of process, and agrees that the failure of the Process Agent to
give any notice of any such service shall not impair or affect the validity of
such service or of any judgment rendered in any action or proceeding based
thereon. Each Borrower hereby further irrevocably consents to the service of
process in any action or proceeding in such courts by the mailing thereof by any
parties hereto by registered or certified mail, postage prepaid, to such
Borrower at its address specified pursuant to Section 9.02. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any party may otherwise have to serve legal process in any other
manner permitted by law or to bring any action or proceeding relating to this
Agreement or the Notes in the courts of any jurisdiction.

        (b)     APPOINTMENT OF PROCESS AGENT. Kraft agrees to appoint a Process
Agent from the Effective Date through the Termination Date or, if applicable,
the date set forth in the Term Notice (i) to receive on behalf of Kraft, each
Borrower and each Designated Subsidiary and their respective property service of
copies of the summons and complaint and any other process which may be served in
any action or proceeding in any New York State or Federal court sitting in New
York City arising out of or relating to this Agreement and (ii) to forward
forthwith to Kraft, each Borrower and each Designated Subsidiary at their
respective addresses copies of any summons, complaint and other process which
such Process Agent receives in connection with its appointment. Kraft will give
JPMorgan Chase, as Administrative Agent, prompt notice of such Process Agent's
address.

        (c)     WAIVERS. Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the Notes in any New York state or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

                Section 9.12. CONFIDENTIALITY. None of the Agents nor any Lender
shall disclose any confidential information relating to Kraft or any Borrower to
any other Person without the consent of Kraft, other than (a) to such Agent's or
such Lender's affiliates and their officers,



directors, employees, agents and advisors and, as contemplated by Section
9.07(f), to actual or prospective assignees and participants, and then, in each
such case, only on a confidential basis; PROVIDED, HOWEVER, that such actual or
prospective assignee or participant shall have been made aware of this Section
9.12 and shall have agreed to be bound by its provisions as if it were a party
to this Agreement, (b) as required by any law, rule or regulation or judicial
process, and (c) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.

                Section 9.13. INTEGRATION. This Agreement and the Notes
represent the agreement of Kraft, the other Borrowers, the Administrative Agents
and the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agents, Kraft, the other Borrowers or any Lender relative to the subject matter
hereof not expressly set forth or referred to herein or in the Notes other than
the matters referred to in Sections 2.09(b) and 9.04(a) and except for
Confidentiality Agreements entered into between Kraft and each Lender in
connection with this Agreement.

                            [signature pages omitted]



                                                           EXHIBIT A-1 - FORM OF
                                                                   PRO RATA NOTE

                                                    Dated: _______________, 200_


U.S.$_________________


     FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a __________
corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of __________
(the "LENDER") for the account of its Applicable Lending Office on the
Termination Date1 (each as defined in the Credit Agreement referred to below)
the principal sum of U.S.$[amount of the Lender's Commitment in figures] or, if
less, the aggregate principal amount of the Pro Rata Advances outstanding on the
Termination Date(1) made by the Lender to the Borrower pursuant to the 364-Day
Revolving Credit Agreement, dated as of July 13, 2004 among Kraft Foods Inc.,
the Lender and certain other lenders parties thereto, JPMorgan Chase Bank, as
Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse
First Boston and Deutsche Bank Securities Inc., as Syndication Agents, and ABN
AMRO Bank N.V., BNP Paribas, Dresdner Bank AG, New York and Grand Cayman
Branches and HSBC Bank USA, as Arrangers and Documentation Agents for the Lender
and such other lenders (as amended or modified from time to time, the "CREDIT
AGREEMENT;" the terms defined therein being used herein as therein defined).

     The Borrower promises to pay interest on the unpaid principal amount of
each Pro Rata Advance from the date of such Pro Rata Advance until such
principal amount is paid in full, at such interest rate, and payable at such
times, as are specified in the Credit Agreement.

     Both principal and interest in respect of each Pro Rata Advance are payable
in Dollars to JPMorgan Chase Bank, as Administrative Agent, for the account of
the Lender at the office of JPMorgan Chase Bank located at 270 Park Avenue, New
York, New York 10017 in same day funds. Each Pro Rata Advance owing to the
Lender by the Borrower pursuant to the Credit Agreement, and all payments made
on account of principal thereof, shall be recorded by the Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Promissory Note.

     This Promissory Note is one of the Pro Rata Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of Pro Rata Advances by the Lender to
the Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the Dollar amount first above mentioned, the indebtedness of the
Borrower resulting from each such Pro Rata Advance being evidenced by this
Promissory Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.

- ----------
        (1)    Revise if Term-Out Option exercised.



     This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.

                                        [NAME OF BORROWER]


                                        By
                                           -------------------------
                                           Name:
                                           Title:

                                        2


                         LOANS AND PAYMENTS OF PRINCIPAL



                                                           Amount of
                                                           Principal        Unpaid
                Type of        Amount of      Interest       Paid          Principal        Notation
   Date         Advance         Advance         Rate      or Prepaid        Balance          Made By
- -----------------------------------------------------------------------------------------------------
                                                                          


                                        3


                                                           EXHIBIT A-2 - FORM OF
                                                            COMPETITIVE BID NOTE
                                                    Dated: _______________, 200_

U.S.$_______________

     FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________________________ corporation (the "BORROWER"), HEREBY PROMISES TO PAY
to the order of _________________________ (the "LENDER") for the account of its
Applicable Lending Office (as defined in the 364-Day Revolving Credit Agreement,
dated as of July 13, 2004 among Kraft Foods Inc., the Lender and certain other
lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent, Citibank,
N.A., as Administrative Agent, Credit Suisse First Boston and Deutsche Bank
Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas,
Dresdner Bank AG, New York and Grand Cayman Branches and HSBC Bank USA, as
Arrangers and Documentation Agents for the Lender and such other lenders (as
amended or modified from time to time, the "CREDIT AGREEMENT;" the terms defined
therein being used herein as therein defined)), on _______________, 200_, the
principal amount of U.S.$[_______________].

     The Borrower promises to pay interest on the unpaid principal amount hereof
from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:

     Interest Rate Basis: ____________________.

     Day Count Convention:_________________.

     Interest Payment Date(s):________________.

     Both principal and interest are payable in Dollars to JPMorgan Chase Bank,
as Administrative Agent, for the account of the Lender at the office of JPMorgan
Chase Bank, located at 270 Park Avenue, New York, New York 10017, in same day
funds.

     This Promissory Note is one of the Competitive Bid Notes referred to in,
and is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events.

     The Borrower hereby waives presentment, demand, protest and notice of any
kind. No failure to exercise, and no delay in exercising, any rights hereunder
on the part of the holder hereof shall operate as a waiver of such rights.

     This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.

                                        [NAME OF BORROWER]


                                        By
                                          -----------------------
                                          Name:
                                          Title:




                                                                   3

                                                 EXHIBIT B-1 - FORM OF NOTICE OF
                                                              PRO RATA BORROWING


                                                    [Date]


JPMorgan Chase Bank, as Administrative Agent
   for the Lenders parties
   to the Credit Agreement
   referred to below

     Attention:  _______________

Ladies and Gentlemen:

     [NAME OF BORROWER], refers to the 364-Day Revolving Credit Agreement, dated
as of July 13, 2004 (as amended or modified from time to time, the "CREDIT
AGREEMENT," the terms defined therein being used herein as therein defined),
among Kraft Foods Inc., the Lenders parties thereto and JPMorgan Chase Bank, as
Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse
First Boston and Deutsche Bank Securities Inc., as Syndication Agents, and ABN
AMRO Bank N.V., BNP Paribas, Dresdner Bank AG, New York and Grand Cayman
Branches and HSBC Bank USA, as Arrangers and Documentation Agents for such
Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of
the Credit Agreement that the undersigned hereby requests a Pro Rata Borrowing
under the Credit Agreement, and in that connection sets forth below the
information relating to such Pro Rata Borrowing (the "PROPOSED PRO RATA
BORROWING") as required by Section 2.02(a) of the Credit Agreement:

            (i)   The date of the Proposed Pro Rata Borrowing is
     _______________, 200_.

            (ii)  The Type of Advances comprising the Proposed Pro Rata
     Borrowing is [Base Rate Advances] [LIBO Rate Advances].

            (iii) The aggregate amount of the Proposed Pro Rata Borrowing is
     U.S.$[_______________].

            [(iv) The initial Interest Period for each LIBO Rate Advance made as
     part of the Proposed Pro Rata Borrowing is ______ month(s).]

     The undersigned, as applicable, hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
Proposed Pro Rata Borrowing:

          (A)  the representations and warranties contained in Section 4.01 of
     the Credit Agreement (except the representations set forth in the last
     sentence of subsection (e) thereof and in subsection (f) thereof (other
     than clause (i) thereof)) are correct, before and after giving effect to
     the Proposed Pro Rata Borrowing and to the application of the proceeds
     therefrom, as though made on and as of such date;



          [if the Borrower is a Designated Subsidiary: the representations and
     warranties of such Designated Subsidiary contained in its Designation
     Agreement are correct, before and after giving effect to the Proposed Pro
     Rata Borrowing and to the application of the proceeds therefrom, as though
     made on and as of such date;]

          (B)  after giving effect to the application of the proceeds of all
     Borrowings on the date of such Pro Rata Borrowing (together with any other
     resources of the Borrower applied together therewith), no event has
     occurred and is continuing, or would result from such Pro Rata Borrowing,
     that constitutes a Default or Event of Default;

          (C)  if such Proposed Pro Rata Borrowing is in an aggregate principal
     amount equal to or greater than $500,000,000 and is being made in
     connection with any purchase of shares of the Borrower's capital stock or
     the capital stock of any other Person, or any purchase of all or
     substantially all of the assets of any Person (whether in one transaction
     or a series of transactions) or any transaction of the type referred to in
     Section 5.02(b) of the Credit Agreement, the statement in clause (B) above
     will be true on a PRO FORMA basis as if such transaction or purchase shall
     have been completed; and

          (D)  the aggregate principal amount of the Proposed Pro Rata Borrowing
     and all other Borrowings to be made on the same day under the Credit
     Agreement is within the aggregate unused Commitments of the Lenders.

                                        Very truly yours,

                                        KRAFT FOODS INC.


                                        By
                                          -------------------------
                                          Name:
                                          Title:

                                        [NAME OF BORROWER]


                                        By
                                          -------------------------
                                          Name:
                                          Title:

                                        2


                                                 EXHIBIT B-2 - FORM OF NOTICE OF
                                                       COMPETITIVE BID BORROWING


                                            [Date]


JPMorgan Chase Bank, as Administrative Agent
     for the Lenders parties to the Credit Agreement
     referred to below

     Attention:  _______________

Ladies and Gentlemen:

     [NAME OF BORROWER], refers to the 364-Day Revolving Credit Agreement, dated
as of July 13, 2004 (as amended or modified from time to time, the "CREDIT
AGREEMENT," the terms defined therein being used herein as therein defined),
among Kraft Foods Inc., the Lenders parties thereto and JPMorgan Chase Bank, as
Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse
First Boston and Deutsche Bank Securities Inc., as Syndication Agents, and ABN
AMRO Bank N.V., BNP Paribas, Dresdner Bank AG, New York and Grand Cayman
Branches and HSBC Bank USA, as Arrangers and Documentation Agents for such
Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.07 of
the Credit Agreement that the undersigned hereby requests a Competitive Bid
Borrowing under the Credit Agreement, and in that connection sets forth the
terms on which such Competitive Bid Borrowing (the "PROPOSED COMPETITIVE BID
BORROWING") is requested to be made:

     (A)   Date of Competitive Bid Borrowing;
     (B)   Amount of Competitive Bid Borrowing;
     (C)   Interest rate basis;
     (D)   Day count convention;
     (E)   [Interest Period] [Maturity date];
     (F)   Interest payment date(s);
     (G)   Borrower's account location;
     (H)   [other terms (if any)].

     The undersigned, as applicable, hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
Proposed Competitive Bid Borrowing:

          (a) the representations and warranties contained in Section 4.01 of
     the Credit Agreement are correct, before and after giving effect to the
     Proposed Competitive Bid Borrowing and to the application of the proceeds
     therefrom, as though made on and as of such date;



          [if the Borrower is a Designated Subsidiary: the representations and
     warranties of such Designated Subsidiary contained in its Designation
     Agreement are correct, before and after giving effect to the Proposed
     Competitive Bid Borrowing and to the application of the proceeds therefrom,
     as though made on and as of such date;]

          (b) after giving effect to the application of the proceeds of all
     Borrowings on the date of such Competitive Bid Borrowing (together with any
     other resources of the Borrower applied together therewith), no event has
     occurred and is continuing, or would result from such Proposed Competitive
     Bid Borrowing, that constitutes a Default or Event of Default; and

          (c) the aggregate principal amount of the Proposed Competitive Bid
     Borrowing and all other Borrowings to be made on the same day under the
     Credit Agreement is within the aggregate unused Commitments of the Lenders.

     The undersigned hereby confirms that the Proposed Competitive Bid Borrowing
is to be made available to it in accordance with Section 2.07(e) of the Credit
Agreement.

                                        Very truly yours,

                                        KRAFT FOODS INC.


                                        By
                                          -------------------------

                                          Name:
                                          Title:

                                        [NAME OF BORROWER]

                                        By
                                          -------------------------

                                          Name:
                                          Title:

                                        2


                                                             EXHIBIT C - FORM OF
                                                       ASSIGNMENT AND ACCEPTANCE

     Reference is made to the 364-Day Revolving Credit Agreement, dated as of
July 13, 2004 (as amended or modified from time to time, the "CREDIT AGREEMENT,"
the terms defined therein being used herein as therein defined), among Kraft
Foods Inc., a Virginia corporation, the Lenders parties thereto and JPMorgan
Chase Bank, as Administrative Agent, Citibank, N.A., as Administrative Agent,
Credit Suisse First Boston and Deutsche Bank Securities Inc., as Syndication
Agents, and ABN AMRO Bank N.V., BNP Paribas, Dresdner Bank AG, New York and
Grand Cayman Branches and HSBC Bank USA, as Arrangers and Documentation Agents
for such Lenders.

     The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as
follows:

          1.   The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof (other than in respect of Competitive Bid Advances and Competitive Bid
Notes) equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement (other than in
respect of Competitive Bid Advances and Competitive Bid Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Pro Rata Advances owing to the Assignee will be as set forth on Schedule 1
hereto. Each of the Assignor and the Assignee represents and warrants that it is
authorized to execute and deliver this Assignment and Acceptance.

          2.   The Assignor (i) represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower or Kraft or the performance or observance by
any Borrower or Kraft of any of its obligations under the Credit Agreement or
any other instrument or document furnished pursuant thereto.

          3.   The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon JPMorgan Chase, as Administrative Agent, any other Agent,
the Assignor or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agreement; (iii) confirms that
it is an Eligible Assignee; (iv) represents that (A) the source of any funds it
is using to acquire the Assignor's interest or to make any Advance is not and
will not be plan assets as defined under the regulations of the Department of
Labor of any Plan subject to Title I of ERISA or Section 4975 of the Code or (B)
the assignment or Advance is not and will be not be a non-exempt prohibited
transaction as



defined in Section 406 of ERISA; (v) appoints and authorizes
JPMorgan Chase, as Administrative Agent, to take such action as agent on its
behalf and to exercise such powers and discretion under the Credit Agreement as
are delegated to JPMorgan Chase, as Administrative Agent, by the terms thereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vi) agrees that it will perform in accordance with their terms all of the
obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender.

          4.   This Assignment and Acceptance will be delivered to JPMorgan
Chase, as Administrative Agent, for acceptance and recording by JPMorgan Chase,
as Administrative Agent following its execution. The effective date for this
Assignment and Acceptance (the "EFFECTIVE DATE") shall be the date of acceptance
hereof by JPMorgan Chase, as Administrative Agent, unless otherwise specified on
Schedule 1 hereto.

          5.   Upon such acceptance and recording by JPMorgan Chase, as
Administrative Agent, as of the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.

          6.   Upon such acceptance and recording by JPMorgan Chase, as
Administrative Agent, from and after the Effective Date, JPMorgan Chase, as
Administrative Agent, shall make all payments under the Credit Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and facility fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement for periods prior to the Effective Date
directly between themselves.

          7.   This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.

          8.   This Assignment and Acceptance may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.

     IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.

                                        2


                                   Schedule 1
                                       to
                            Assignment and Acceptance

     Percentage interest assigned: _____%

     Assignee's Commitment:    U.S.$__________

     Aggregate outstanding principal amount of Pro Rata Advances assigned:
     U.S.$__________

     Effective Date(1):      _______________, 200_

                                        [NAME OF ASSIGNOR], as Assignor

                                        By
                                           -------------------------------------
                                           Title:

                                                   Dated
                                                        __________________, 200_

                                             [NAME OF ASSIGNEE], as Assignee

                                        By
                                           -------------------------------------
                                           Title:

                                                   Dated
                                                        __________________, 200_

                                        Domestic Lending Office:
                                          [Address]

Accepted this __________ day of _______________, 200_
JPMORGAN CHASE BANK, as Administrative Agent

By
   Title:

[Approved this __________ day of _______________, 200_]

[NAME OF BORROWER](2)

By
  ------------------------
  Title:


- ----------
     (1)    This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to JPMorgan Chase, as
Administrative Agent.

     (2)    Required if the Assignee is an Eligible Assignee solely by reason of
clause (viii) of the definition of "Eligible Assignee."



                                                             EXHIBIT D - FORM OF
                                                           DESIGNATION AGREEMENT


                                                         [Date]


JPMorgan Chase Bank, as Administrative Agent
   for the Lenders parties to the Credit Agreement
   referred to below

Ladies and Gentlemen:

     Reference is made to the 364-Day Revolving Credit Agreement, dated as of
July 13, 2004 (as amended or modified from time to time, the "CREDIT AGREEMENT,"
the terms defined therein being used herein as therein defined), among Kraft
Foods Inc., [certain other borrowers parties thereto], the Lenders parties
thereto and JPMorgan Chase Bank, as Administrative Agent, Citibank, N.A., as
Administrative Agent, Credit Suisse First Boston and Deutsche Bank Securities
Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, Dresdner Bank
AG, New York and Grand Cayman Branches and HSBC Bank USA, as Arrangers and
Documentation Agents for such Lenders.

     Please be advised that Kraft hereby designates its undersigned wholly-owned
Subsidiary, ____________ ("DESIGNATED SUBSIDIARY"), as a "Designated Subsidiary"
under and for all purposes of the Credit Agreement.

     The Designated Subsidiary, in consideration of each Lender's agreement to
extend credit to it under and on the terms and conditions set forth in the
Credit Agreement, does hereby assume each of the obligations imposed upon a
"Designated Subsidiary" and a "Borrower" under the Credit Agreement and agrees
to be bound by the terms and conditions of the Credit Agreement. In furtherance
of the foregoing, the Designated Subsidiary hereby represents and warrants to
each Lender as follows:

          (a)  The Designated Subsidiary is a corporation duly organized,
     validly existing and in good standing under the laws of _________________.

          (b)  The execution, delivery and performance by the Designated
     Subsidiary of this Designation Agreement, the Credit Agreement and the
     Notes to be delivered by it are within the Designated Subsidiary's
     corporate powers, have been duly authorized by all necessary corporate
     action and do not contravene (i) the Designated Subsidiary's charter or
     by-laws or (ii) in any material respect, any law, rule, regulation or order
     of any court or governmental agency or contractual restriction binding on
     or affecting it.

          (c)  No authorization or approval or other action by, and no notice to
     or filing with, any governmental authority or regulatory body is required
     for the due execution, delivery and performance by the Designated
     Subsidiary of this Designation Agreement, the Credit Agreement or the Notes
     to be delivered by it.



          (d)  This Designation Agreement is, and the Notes to be delivered by
     the Designated Subsidiary when delivered will be, legal, valid and binding
     obligations of the Designated Subsidiary enforceable against the Designated
     Subsidiary in accordance with their respective terms, subject to the effect
     of any applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium or other laws affecting creditors' rights
     generally and subject, as to enforceability, to general principles of
     equity (regardless of whether such enforceability is sought in a proceeding
     in equity or at law) and an implied covenant of good faith and fair
     dealing.

          (e)  There is no pending or threatened action or proceeding affecting
     the Designated Subsidiary or any of its Subsidiaries before any court,
     governmental agency or arbitrator that purports to affect the legality,
     validity or enforceability of this Designation Agreement, the Credit
     Agreement or any Note of the Designated Subsidiary.

                                        Very truly yours,

                                        KRAFT FOODS INC.

                                        By
                                          -------------------------
                                          Name:
                                          Title:

                                        [DESIGNATED SUBSIDIARY]

                                        By
                                          -------------------------
                                          Name:
                                          Title:

                                        2


                                                           EXHIBIT E-1 - FORM OF
                                                              OPINION OF COUNSEL
                                                                       FOR KRAFT

                      [Letterhead of Hunton & Williams LLP]

                                           [Effective Date]

To each of the Lenders party
     to the Credit Agreement referred to below


                                KRAFT FOODS INC.

Ladies and Gentlemen:

     This opinion is furnished to you pursuant to Section 3.01(e)(iii) of the
364-Day Revolving Credit Agreement, dated as of July 13, 2004 (the "CREDIT
AGREEMENT"), among Kraft Foods Inc., the Lenders parties thereto and JPMorgan
Chase Bank, as Administrative Agent, Citibank, N.A., as Administrative Agent,
Credit Suisse First Boston and Deutsche Bank Securities Inc., as Syndication
Agents, and ABN AMRO Bank N.V., BNP Paribas, Dresdner Bank AG, New York and
Grand Cayman Branches and HSBC Bank USA, as Arrangers and Documentation Agents
for such Lenders. Terms defined in the Credit Agreement are used herein as
therein defined.

     We have acted as counsel for Kraft in connection with the preparation,
execution and delivery of the Credit Agreement.

     In that connection, we have examined the following documents:

          (1)  The Credit Agreement.

          (2)  The documents furnished by Kraft pursuant to Article III of the
     Credit Agreement.

          (3)  The Articles of Incorporation of Kraft and all amendments thereto
     (the "CHARTER").


          (4)  The by-laws of Kraft and all amendments thereto (the "BY-LAWS").


     We have also examined the originals, or copies certified to our
satisfaction, of such corporate records of Kraft, certificates of public
officials and of officers of Kraft, and agreements, instruments and other
documents, as we have deemed relevant and necessary as a basis for the opinions
expressed below. As to questions of fact material to such opinions, we have,
when relevant facts were not independently established by us, relied upon
certificates of Kraft or its officers or of public officials. We have assumed
the due execution and delivery, pursuant to due authorization, of the Credit
Agreement by the Initial Lenders and JPMorgan Chase, as Administrative Agent,
Citibank, N.A., as Administrative Agent, Credit Suisse First Boston and Deutsche
Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V.,



BNP Paribas, Dresdner Bank AG, New York and Grand Cayman Branches and HSBC Bank
USA, as Arrangers and Documentation Agents.

     Our opinions expressed below are limited to the law of the State of New
York, the Commonwealth of Virginia and the Federal law of the United States.

     Based upon the foregoing and upon such investigation as we have deemed
necessary, we are of the following opinion:

          1.   Kraft is a corporation duly organized, validly existing and in
     good standing under the laws of the Commonwealth of Virginia.

          2.   The execution, delivery and performance by Kraft of the Credit
     Agreement and the Notes, and the consummation of the transactions
     contemplated thereby, are within Kraft's corporate powers, have been duly
     authorized by all necessary corporate action, and do not contravene (i) the
     Charter or the By-laws or (ii) any law, rule or regulation applicable to
     Kraft (including, without limitation, Regulation X of the Board of
     Governors of the Federal Reserve System) or (iii) to our knowledge, any
     contractual restriction binding on or affecting Kraft. The Credit Agreement
     and any Notes delivered on the date hereof have been duly executed and
     delivered on behalf of Kraft.

          3.   No authorization, approval or other action by, and no notice to
     or filing with, any governmental authority or regulatory body or any other
     third party is required for the due execution, delivery and performance by
     Kraft of the Credit Agreement and the Notes.

          4.   The Credit Agreement is the legal, valid and binding obligation
     of Kraft enforceable against Kraft in accordance with its terms. The Notes
     issued on the date hereof, if any, are the legal, valid and binding
     obligations of Kraft, enforceable against Kraft in accordance with their
     respective terms.

     The opinion set forth in paragraph 4 above as to enforceability is subject
to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

     We express no opinion with respect to:

          (A)  The effect of any provision of the Credit Agreement which is
intended to permit modification thereof only by means of an agreement in writing
by the parties thereto;

          (B)  The effect of any provision of the Credit Agreement insofar as
it provides that any Person purchasing a participation from a Lender or other
Person may exercise set-off or similar rights with respect to such participation
or that any Lender or other Person may exercise set-off or similar rights other
than in accordance with applicable law;

                                        2


          (C)  The effect of any provision of the Credit Agreement imposing
penalties or forfeitures;

          (D)  The enforceability of any provision of the Credit Agreement to
the extent that such provision constitutes a waiver of illegality as a defense
to performance of contract obligations; or

          (E)  The effect of any provision of the Credit Agreement relating
to indemnification or exculpation in connection with violations of any
securities laws or relating to indemnification, contribution or exculpation in
connection with willful, reckless or criminal acts or gross negligence of the
indemnified or exculpated Person or the Person receiving contribution.

          In connection with the provisions of the Credit Agreement which relate
to forum selection (including, without limitation, any waiver of any objection
to venue or any objection that a court is an inconvenient forum), we note that
under NYCPLR Section 510, a New York State court may have discretion to transfer
the place of trial, and under 28 U.S.C. Section 1404(a), a United States
District Court has discretion to transfer an action from one Federal court to
another.

     This opinion is being furnished to you pursuant to Section 3.01(e)(iii) of
the Credit Agreement, is solely for the benefit of you and your counsel, and is
not intended for, and may not be relied upon by, any other person or entity
without our prior written consent. We undertake no duty to inform you of events
occurring subsequent to the date hereof.

                                        Very truly yours,

                                        3


                                                           EXHIBIT E-2 - FORM OF
                                                              OPINION OF COUNSEL
                                                                       FOR KRAFT

                                            [Effective Date]

To each of the Lenders party
     to the Credit Agreement referred to below


                                KRAFT FOODS INC.

Ladies and Gentlemen:

     This opinion is furnished to you pursuant to Section 3.01(e)(iii) of the
364-Day Revolving Credit Agreement, dated as of July 13, 2004 (the "CREDIT
AGREEMENT"), among Kraft Foods Inc. ("KRAFT"), the Lenders parties thereto and
JPMorgan Chase Bank, as Administrative Agent, Citibank, N.A., as Administrative
Agent, Credit Suisse First Boston and Deutsche Bank Securities Inc., as
Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, Dresdner Bank AG, New
York and Grand Cayman Branches and HSBC Bank USA, as Arrangers and Documentation
Agents for such Lenders. Terms defined in the Credit Agreement are used herein
as therein defined.

     I have acted as counsel for Kraft in connection with the preparation,
execution and delivery of the Credit Agreement.

     In that connection, I have examined originals, or copies certified to my
satisfaction, of such corporate records of Kraft, certificates of public
officials and of officers of Kraft, and agreements, instruments and other
documents, as I have deemed relevant and necessary as a basis for the opinions
expressed below. As to questions of fact material to such opinions, I have, when
relevant facts were not independently established by me, relied upon
certificates of Kraft or its officers or of public officials.

     Based upon the foregoing and upon such investigation as I have deemed
necessary, I am of the opinion that, to the best of my knowledge, (i) there is
no pending or threatened action or proceeding against Kraft or any of its
Subsidiaries before any court, governmental agency or arbitrator (a
"PROCEEDING") that purports to affect the legality, validity, binding effect or
enforceability of the Credit Agreement or the Notes, if any, or the consummation
of the transactions contemplated thereby, and (ii) except for Proceedings
disclosed in the Annual Report on Form 10-K of Kraft for the fiscal year ended
December 31, 2003, its Quarterly Report on Form 10-Q for the quarter ended March
31, 2004, any Current Reports on Form 8-K filed subsequent to March 31, 2004 but
prior to July 13, 2004, or, with respect to Proceedings commenced after the date
of the most recent such document but prior to July 13, 2004, a certificate
delivered to the Lenders and attached hereto, there are no Proceedings that are
likely to have a materially adverse effect upon the financial position or
results of operations of Kraft and its Subsidiaries taken as a whole.

                                        Very truly yours,



                                                             EXHIBIT F - FORM OF
                                                              OPINION OF COUNSEL
                                                       FOR DESIGNATED SUBSIDIARY

                                            [Effective Date]

To each of the Lenders parties
     to the Credit Agreement referred to below


                                KRAFT FOODS INC.

Ladies and Gentlemen:

     This opinion is furnished to you pursuant to Section 3.02(e) of the 364-Day
Revolving Credit Agreement, dated as of July 13, 2004 (the "CREDIT AGREEMENT"),
among Kraft Foods Inc. ("KRAFT"), the Lenders parties thereto and JPMorgan Chase
Bank, as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit
Suisse First Boston and Deutsche Bank Securities Inc., as Syndication Agents and
ABN AMRO Bank N.V., BNP Paribas, Dresdner Bank AG, New York and Grand Cayman
Branches and HSBC Bank USA, as Arrangers and Documentation Agents for such
Lenders. Terms defined in the Credit Agreement are used herein as therein
defined.

     We have acted as counsel for __________ (the "DESIGNATED SUBSIDIARY") in
connection with the preparation, execution and delivery of the Designation
Agreement.

     In that connection, we have examined the following documents:

          (1)  The Designation Agreement.

          (2)  The Credit Agreement.

          (3)  The documents furnished by the Designated Subsidiary pursuant to
     Article III of the Credit Agreement.

          (4)  The [Articles] [Certificate] of Incorporation of the Designated
     Subsidiary and all amendments thereto (the "Charter").

          (5)  The by-laws of the Designated Subsidiary and all amendments
     thereto (the "BY-LAWS").

     We have also examined the originals, or copies certified to our
satisfaction, of such corporate records of the Designated Subsidiary,
certificates of public officials and of officers of the Designated Subsidiary,
and agreements, instruments and other documents, as we have deemed relevant and
necessary as a basis for the opinions expressed below. As to questions of fact
material to such opinions, we have, when relevant facts were not independently
established by us, relied upon certificates of the Designated Subsidiary or its
officers or of public officials. We have assumed the due execution and delivery,
pursuant to due authorization, of the Credit Agreement by the Initial Lenders
and JPMorgan Chase, as Administrative Agent, Citibank, N.A.,



as Administrative Agent, Credit Suisse First Boston and Deutsche Bank Securities
Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, Dresdner Bank
AG, New York and Grand Cayman Branches and HSBC Bank USA, as Arrangers and
Documentation Agents.

     Based upon the foregoing and upon such investigation as we have deemed
necessary, we are of the following opinion:

          1.   The Designated Subsidiary is a corporation duly organized,
     validly existing and in good standing under the laws of_____________.

          2.   The execution, delivery and performance by the Designated
     Subsidiary of the Designation Agreement, the Credit Agreement and the Notes
     to be delivered by it, and the consummation of the transactions
     contemplated thereby, are within the Designated Subsidiary's corporate
     powers, have been duly authorized by all necessary corporate action, and do
     not contravene (i) the Charter or the By-laws or (ii) any law, rule or
     regulation applicable to the Designated Subsidiary (including, without
     limitation, Regulation X of the Board of Governors of the Federal Reserve
     System) or (iii) to our knowledge, any contractual restriction binding on
     or affecting the Designated Subsidiary. The Designation Agreement, the
     Credit Agreement and the Notes delivered by the Designated Subsidiary on
     the date hereof have been duly executed and delivered on behalf of the
     Designated Subsidiary.

          3.   No authorization, approval or other action by, and no notice to
     or filing with, any governmental authority or regulatory body or any other
     third party is required for the due execution, delivery and performance by
     the Designated Subsidiary of the Designation Agreement, the Credit
     Agreement and the Notes delivered by the Designated Subsidiary.

          4.   The Designation Agreement and the Credit Agreement are the legal,
     valid and binding obligations of the Designated Subsidiary enforceable
     against the Designated Subsidiary in accordance with their respective
     terms. The Notes issued on the date hereof, if any, by the Designated
     Subsidiary are the legal, valid and binding obligations of the Designated
     Subsidiary, enforceable against the Designated Subsidiary in accordance
     with their respective terms.

          5.   There is, to the best of my knowledge, no pending or threatened
     action or proceeding against the Designated Subsidiary or any of its
     Subsidiaries before any court, governmental agency or arbitrator that
     purport to affect the legality, validity, binding effect or enforceability
     of the Designation Agreement, the Credit Agreement or any of the Notes
     delivered by the Designated Subsidiary or the consummation of the
     transactions contemplated thereby.

                                        2


     The opinion set forth in paragraph 4 above as to enforceability is subject
to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.


                                        Very truly yours,

                                        3


                                                                       EXHIBIT G
                                                      FORM OF OPINION OF COUNSEL
                                                             FOR JPMORGAN CHASE,
                                                         AS ADMINISTRATIVE AGENT


                 [Letterhead of Simpson Thacher & Bartlett LLP]


                                                   [Effective Date]


   JPMorgan Chase Bank and Citibank, N.A.,
     as Adminstrative Agents

   The Lenders listed on Schedule I hereto which are parties to the Credit
     Agreement on the date hereof

   Re: 364-Day Revolving Credit Agreement dated as
       of July 13, 2004 (the "Credit Agreement")
       among Kraft Foods Inc. (the "Company"), and
       Credit Suisse First Boston and Deutsche Bank
       Securities Inc., as Syndication Agents, and
       ABN AMRO Bank N.V., BNP Paribas,
       Dresdner Bank AG, New York and Grand
       Cayman Branches and HSBC Bank USA as
       Arrangers and Documentation Agents

Ladies and Gentlemen:

     We have acted as counsel to JPMorgan Chase Bank, as Administrative Agent,
in connection with the preparation, execution and delivery of the Credit
Agreement.

     This opinion is delivered to you pursuant to Section 3.01(e)(iv) of the
Credit Agreement. Terms used herein which are defined in the Credit Agreement
shall have the respective meanings set forth in the Credit Agreement, unless
otherwise defined herein.

     In connection with this opinion, we have examined a copy of the Credit
Agreement signed by the Company and by the Administrative Agents and the
Lenders.

     We also have examined the originals, or duplicates or certified or
conformed copies, of such records, agreements, instruments and other documents
and have made such other investigations as we have deemed relevant and necessary
in connection with the opinions expressed herein. As to questions of fact
material to this opinion, we have relied upon certificates of public officials
and of officers and representatives of the Company. In addition,



we have examined, and have relied as to matters of fact upon, the
representations made in the Credit Agreement.

     In rendering the opinion set forth below, we have assumed the genuineness
of all signatures, the legal capacity of natural persons, the authenticity of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as duplicates or certified or conformed copies,
and the authenticity of the originals of such latter documents.

     In rendering the opinion set forth below we have assumed that (1) the
Credit Agreement is a valid and legally binding obligation of each of the
Lenders parties thereto, (2) the Company is duly organized and validly existing
and in good standing under the laws of the jurisdiction in which it is organized
and of each other jurisdiction in which the conduct of its business or ownership
of its property makes such qualification necessary, has the corporate power and
authority to execute, deliver and perform its obligations under the Credit
Agreement and has duly authorized, executed and delivered the Credit Agreement
in accordance with its Articles of Incorporation and By-laws or other similar
organizational documents, and (3)(a) execution, delivery and performance by the
Company of the Credit Agreement do not contravene its Articles of Incorporation
or By-laws or other similar organizational documents, (b) execution, delivery
and performance by the Company of the Credit Agreement do not violate, or
require any consent not obtained under, the laws of the jurisdiction in which it
is organized or any other applicable laws or regulations or any order, writ,
injunction or decree of any court or other governmental authority binding on the
Company, and (c) execution, delivery and performance by the Company of the
Credit Agreement do not constitute a breach or violation of, or require any
consent not obtained under, any agreement or instrument which is binding upon
the Company.

     Based upon and subject to the foregoing, and subject to the qualifications
and limitations set forth herein, we are of the opinion that the Credit
Agreement constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms.

     Our opinion set forth above is subject to (i) the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, (ii) general
equitable principles (whether considered in a proceeding in equity or at law)
and (iii) an implied covenant of good faith and fair dealing.

     We express no opinion with respect to:

          (A)  the effect of any provision of the Credit Agreement which is
intended to permit modification thereof only by means of an agreement in writing
by the parties thereto;

          (B)  the effect of any provision of the Credit Agreement insofar as
it provides that any Person purchasing a participation from a Lender or other
Person may exercise set-off or similar rights with respect to such participation
or that any Lender or other Person may exercise set-off or similar rights other
than in accordance with applicable law;

          (C)  the effect of any provision of the Credit Agreement imposing
penalties or forfeitures;

                                        2


          (D)  the enforceability of any provision of the Credit Agreement to
the extent that such provision constitutes a waiver of illegality as a defense
to performance of contract obligations; or

          (E)  the effect of any provision of the Credit Agreement relating to
indemnification or exculpation in connection with violations of any securities
laws or relating to indemnification, contribution or exculpation in connection
with willful, reckless or criminal acts or gross negligence of the indemnified
or exculpated Person or the Person receiving contribution.

          In connection with the provisions of the Credit Agreement which relate
to forum selection (including, without limitation, any waiver of any objection
to venue or any objection that a court is an inconvenient forum), we note that
under NYCPLR Section 510, a New York State court may have discretion to transfer
the place of trial, and under 28 U.S.C. Section 1404(a), a United States
District Court has discretion to transfer an action from one Federal court to
another.

          We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the Federal law of the United States.

          This opinion letter is rendered to you in connection with the
above-described transaction. This opinion letter may not be relied upon by you
for any other purpose, or relied upon by, or furnished to, any other person,
firm or corporation without our prior written consent. This opinion letter may
be furnished to, but may not be relied upon by, a regulatory authority entitled
to receive it.


                                        Very truly yours,

                                        3


                                                             EXHIBIT H - FORM OF
                                                           NEW LENDER SUPPLEMENT


          NEW LENDER SUPPLEMENT, dated _____ __, 200__ to the 364-Day Revolving
Credit Agreement, dated as of July 13, 2004 (as amended or modified from time to
time, the "CREDIT AGREEMENT," the terms defined therein being used herein as
therein defined unless otherwise defined herein), among Kraft Foods Inc.
("KRAFT"), the Lenders parties thereto and JPMorgan Chase Bank, as
Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse
First Boston and Deutsche Bank Securities Inc., as Syndication Agents, and ABN
AMRO Bank N.V., BNP Paribas, Dresdner Bank AG, New York and Grand Cayman
Branches and HSBC Bank USA as Arrangers and Documentation Agents for such
Lenders.

                              W I T N E S S E T H :

          WHEREAS, the undersigned desires to become a party to the Credit
     Agreement pursuant to Section 2.10(b) thereof;

          NOW, THEREFORE, the undersigned hereby agrees as follows:

          1.   The undersigned agrees to provide Kraft with a Commitment in the
     amount of U.S.$_________ , and to become a Lender to be bound by and
     entitled to the benefits of the Credit Agreement as of the Effective Date
     (as defined below).

          2.   The undersigned (i) represents and warrants that it is legally
     authorized to enter into this New Lender Supplement; (ii) confirms that it
     has received a copy of the Credit Agreement, together with copies of the
     financial statements referred to in Section 4.01 thereof and such other
     documents and information as it has deemed appropriate to make its own
     credit analysis and decision to enter into this New Lender Supplement;
     (iii) agrees that it has made and will, independently and without reliance
     upon JPMorgan Chase, as Administrative Agent, any other Agent or any other
     Lender and based on such documents and information as it shall deem
     appropriate at the time, continue to make its own credit decisions in
     taking or not taking action under the Credit Agreement; (iv) confirms that
     it is an Eligible Assignee; (v) represents that (A) the source of any funds
     it is using to make any Advance is not and will not be plan assets as
     defined under the regulations of the Department of Labor of any plan
     subject to Title I of ERISA or Section 4975 of the Code or (B) its
     Commitment or any Advance is not and will not be a non-exempt prohibited
     transaction as defined in Section 406 of ERISA; (vi) appoints and
     authorizes JPMorgan Chase, as Administrative Agent, to take such action as
     agent on its behalf and to exercise such powers and discretion under the
     Credit Agreement as are delegated to JPMorgan Chase, as Administrative
     Agent, by the terms thereof, together with such powers and discretion as
     are reasonably incidental thereto; and (vii) agrees that it will perform in
     accordance with its terms all the obligations which by the terms of the
     Credit Agreement are required to be performed by it as a Lender.

          3.   The undersigned's Domestic Lending Office for the purposes of the
     Credit Agreement is as follows:



                    [Name of New Lender]
                    [Address of Lending Office]
                    [Name of Contact]
                    [Telephone number]
                    [Fax number]

          4.   This New Lender Supplement will be delivered to JPMorgan Chase,
     as Administrative Agent, by Kraft for recording by JPMorgan Chase, as
     Administrative Agent, following its execution. The effective date for this
     New Lender Supplement (the "EFFECTIVE DATE"), shall be the date of
     acceptance hereof by Kraft.

          5.   Upon such recording by JPMorgan Chase, as Administrative Agent,
     as of the Effective Date, the undersigned shall be a party to the Credit
     Agreement and, to the extent provided in this New Lender Supplement, have
     the rights and obligations of a Lender thereunder.

          6.   This New Lender Supplement shall be governed by, and construed in
     accordance with, the laws of the State of New York.

          7.   This New Lender Supplement may be executed in any number of
     counterparts and by different parties hereto in separate counterparts, each
     of which when so executed shall be deemed to be an original and all of
     which taken together shall constitute one and the same agreement. Delivery
     of an executed counterpart to this New Lender Supplement by telecopier
     shall be effective as delivery of a manually executed counterpart of this
     New Lender Supplement.

          IN WITNESS WHEREOF, the undersigned has caused this New Lender
Supplement to be executed and delivered by a duly authorized officer on the date
first above written.

                                        [INSERT NAME OF NEW LENDER]


                                        By:
                                           ----------------------------------
                                           Name:
                                           Title:

Accepted and agreed this _____ day of
 ______________, 200_.

KRAFT FOODS INC.


By:
   ----------------------------------
   Name:
   Title:

                                        2

EXHIBIT 12

KRAFT FOODS INC. AND SUBSIDIARIES
Computation of Ratios of Earnings to Fixed Charges
(in millions of dollars)

		Six Months Ended June 30, 2004			Three Months Ended June 30, 2004
Earnings before income taxes and minority interest		$	1,907		$	1,083
Add (Deduct):
	Equity in net earnings of less than 50% owned affiliates		(25	)		(13	)
	Dividends from less than 50% owned affiliates		42			2
	Fixed charges		405			199

Earnings available for fixed charges		$	2,329		$	1,271

Fixed charges:
Interest incurred:
	Interest expense	$	328		$	160
	Capitalized interest		2			1

			330			161
Portion of rent expense deemed to represent interest factor			75			38

Fixed charges		$	405		$	199

Ratio of earnings to fixed charges			5.8			6.4

EXHIBIT 12

KRAFT FOODS INC. AND SUBSIDIARIES
Computation of Ratios of Earnings to Fixed Charges
(in millions of dollars)

		Years Ended December 31,
		2003			2002			2001			2000			1999
Earnings before income taxes and minority interest		$	5,346		$	5,267		$	3,447		$	3,415		$	3,040
Add (Deduct):
	Equity in net earnings of less than 50% owned affiliates		(53	)		(51	)		(41	)		(50	)		(51	)
	Dividends from less than 50% owned affiliates		41			28			21			12			10
	Fixed charges		832			1,003			1,581			710			646
Interest capitalized, net of amortization			(1	)		(1	)		(3	)		—			(2	)

Earnings available for fixed charges		$	6,165		$	6,246		$	5,005		$	4,087		$	3,643

Fixed charges:
Interest incurred:
	Interest expense	$	678		$	854		$	1,452		$	615		$	547
	Capitalized interest		3			4			5			3			4

			681			858			1,457			618			551
Portion of rent expense deemed to represent interest factor			151			145			124			92			95

Fixed charges		$	832		$	1,003		$	1,581		$	710		$	646

Ratio of earnings to fixed charges			7.4			6.2			3.2			5.8			5.6

EXHIBIT 31.1

Certifications

I, Roger K. Deromedi, Chief Executive Officer of Kraft Foods Inc., certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Kraft Foods Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a): Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b): [Omitted in reliance on SEC Release No. 33-8392; 34-49313.]
(c): Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d): Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a): All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b): Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 6, 2004

/s/ ROGER K. DEROMEDI

Roger K. Deromedi
Chief Executive Officer

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EXHIBIT 31.2

Certifications

I, James P. Dollive, Executive Vice President and Chief Financial Officer of Kraft Foods Inc., certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Kraft Foods Inc.;

2.

3.

4.

(a): Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b): [Omitted in reliance on SEC Release No. 33-8392; 34-49313.]
(c): Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d): Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

(a): All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b): Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 6, 2004

/s/ JAMES P. DOLLIVE

James P. Dollive
Executive Vice President and
Chief Financial Officer

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Certifications

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kraft Foods Inc. (the "Company") on Form 10-Q for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Roger K. Deromedi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ROGER K. DEROMEDI
Roger K. Deromedi
Chief Executive Officer
August 6, 2004

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Kraft Foods Inc. and will be retained by Kraft Foods Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kraft Foods Inc. (the "Company") on Form 10-Q for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James P. Dollive, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JAMES P. DOLLIVE
James P. Dollive
Executive Vice President and
Chief Financial Officer
August 6, 2004