Tax Sharing Agreement - Philip Morris Cos. Inc. and Kraft Foods Inc.


                             TAX SHARING AGREEMENT

     This Tax Sharing Agreement (the "Agreement") dated as of April 11, 2001 is
between Philip Morris Companies Inc., a Virginia corporation ("Companies"), and
Kraft Foods Inc., a Virginia corporation ("Kraft") (sometimes referred to herein
individually as "Party", or together, as "Parties").

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

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

     WHEREAS, the Companies Consolidated Return Group has filed and intends to
file consolidated income tax returns permitted by Section 1501 of the Code and
similar laws of other jurisdictions;

     WHEREAS, Companies and Kraft desire to agree upon a method of determining
the financial consequences to each Party resulting from the filing of
consolidated or combined income tax returns;

     WHEREAS, Kraft desires to be indemnified by Companies with respect to
certain tax liabilities and Companies is willing to so indemnify Kraft; and

     WHEREAS, Companies desires to be indemnified by Kraft with respect to
certain tax liabilities, and Kraft is willing to so indemnify Companies;

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

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

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

               "Federal Income Tax" means any tax imposed under Subtitle A of
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the Code.

 
               "Final Determination" shall mean (i) with respect to Federal 
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Income Taxes, a "determination" as defined in Section 1313(a) of the Code or
execution of an Internal Revenue Service Form 870-AD and, with respect to taxes
other than Federal Income Taxes, any final determination of liability in respect
of a tax that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise (including the expiration of a
statute of limitations or a period for the filing of claims for refunds, amended
returns or appeals from adverse determinations); or (ii) the payment of tax by
any member of the Companies Consolidated Return Group with respect to any item
disallowed or adjusted by a Taxing Authority (as hereinafter defined), provided
that Companies determines that no action should be taken to recoup such payment.

               "Kraft Combined State Tax Liability" shall mean, with respect to 
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any taxable year, an amount of Combined State Taxes, including any interest,
penalties and other additions to such taxes for such taxable year, other than
those attributable to Companies's negligence, determined by taking the total
separately computed state income or franchise tax liabilities of the Kraft Group
over the total separately computed state income or franchise tax liabilities of
the Companies Consolidated Return Group multiplied by the combined state income
or franchise tax liability of the Companies Consolidated Return Group.

               "Kraft Current Federal Income Tax Provision" shall mean, with 
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respect to any financial statement year, the sum of the Kraft Group's current
federal income tax provision determined in accordance with U.S. Generally
Accepted Accounting Principles ("GAAP"), recorded on the Kraft Group's books and
records and reported in the Kraft Group's published financial statements.

               "Kraft Federal Income Tax Liability" shall mean, with respect to 
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any taxable year, the sum of the Kraft Group's Federal Income Tax liability and
any interest, penalties and other additions to such taxes for such taxable year,
other than those attributable to Companies's negligence (as determined under the
applicable principles of agency law rather than Code Section 6662), computed as
if the Kraft Group were not and never were part of the Companies Consolidated
Return Group, but rather were a separate affiliated group of corporations filing
a consolidated United States Federal Income Tax return pursuant to Section 1501
of the Code (provided, however, that transactions with members of the PM
Companies Non-Food Group, as defined below, shall be reflected according to the
provisions of the consolidated return regulations promulgated under the Code
governing intercompany transactions). Such computation shall be made: (A)
without regard to the income, deductions (including net operating loss and
capital loss deductions) and credits in any year of any member of the Companies
Consolidated Return Group that is not a member of the Kraft Group, (B) by taking
account of any Tax Asset of the Kraft Group in accordance with Section 2(c)
hereof, (C) with regard to net operating loss and capital loss carryforwards and
carrybacks and minimum tax credits from earlier years of the Kraft Group, (D) as
though the highest rate of tax specified in Section 11(b) of the Code were the
only rate set forth in that subsection, and (E) reflecting the positions,
elections and accounting methods and periods used with respect to the Kraft
Group in preparing the Companies consolidated Federal Income Tax return.

               "Kraft Group" shall mean Kraft and any direct or indirect 
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corporate subsidiaries of Kraft that would be eligible, from time to time, to
join with Kraft, with respect to 

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Federal Income Taxes, in the filing of a consolidated United States Federal
Income Tax return and, with respect to Combined State Taxes, in the filing of a
consolidated, combined or unitary income or franchise tax return if Kraft were
not a member of the Companies Consolidated Return Group.

               "Kraft Group Tax" means (i) Kraft Federal Income Tax Liability;
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(ii) Kraft Combined State Tax Liability; (iii) any other tax imposed on any
member of the Kraft Group with respect to any taxable year, or, with respect to
any taxable year, any other tax imposed on any direct or indirect subsidiary or
affiliate of Kraft that is not a member of the Kraft Group, including any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, withholding
on amounts paid to or by any member of the Kraft Group, payroll, employment,
excise, severance, stamp, capital stock, occupation, property, real property
gains, environmental or windfall profit tax, premium, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(United States or non-United States); and (iv) liability of any member of the
Kraft Group for the payment of any amounts of the type described in (i), (ii) or
(iii) as a result of any express or implied obligation to indemnify any other
person.

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

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

               "PM Companies Non-Food Group" means Companies and any direct or
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indirect corporate subsidiaries or affiliates of Companies other than the Kraft
Group.

               "PM Companies Non-Food Group Tax" means (i) the Federal Income 
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Tax liability of the Companies Consolidated Return Group less the Kraft Federal
Income Tax Liability; (ii) the Companies Combined State Tax liability less the
Kraft Combined State Tax Liability; (iii) any other tax imposed on any member of
the PM Companies Non-Food Group, including any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding on amounts paid to or by any
member of the PM Companies Non-Food Group, payroll, employment, excise,
severance, stamp, capital stock, occupation, property, real property gains,
environmental or windfall profit tax, premium, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(United States or non-United States); and (iv) liability of any member of the PM
Companies Non-Food Group for the payment of any amounts of the type described in
(i), (ii) or (iii) as a result of any express or implied obligation to indemnify
any other person.

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

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

2.   Tax Sharing.
     ----------- 

     (a)  General.  As specifically provided for in Sections 2(b) through 2(e)
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of this Agreement, for each financial statement year of the Companies
Consolidated Return Group ending after the effective date of this Agreement,
during which income, loss or credits against tax of the Kraft Group are
includible in the United States consolidated Federal Income Tax return of the
Companies Consolidated Return Group, Kraft shall pay to Companies an amount
equal to the sum of the Kraft Federal Income Tax Liability for such taxable year
as shown on a Kraft Pro Forma Federal Return plus a net amount reasonably
determined by Companies to cover Kraft Federal Income Tax Liabilities
attributable to current or prior years that is not otherwise reflected in the
Kraft Pro Forma Federal Returns for such years. For each taxable year of the
Companies Consolidated Return Group, ending after the effective date of this
Agreement, during which income, loss or credits against tax of the Kraft Group
are includible in a Combined State Tax Return of Companies Consolidated Return
Group, Kraft shall pay to Companies an amount equal to the Kraft Combined State
Tax Liability for such taxable year as shown on a Kraft Pro Forma Combined State
Return.

     (b)  Payment of Taxes.
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          (i)  Quarterly Payments.  Not later than fifteen days after the end of
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each quarter, or in the case of the last quarter of Kraft's financial statement
year, immediately prior to the closing of the books for such financial
statement, Kraft shall identify the Kraft Current Federal Income Tax Provision
for such quarter, determined in accordance with United States GAAP, on its books
and immediately thereafter transfer such amount, by way of an intercompany
transfer, to the books of Companies.

          (ii) Preparation and Delivery of Estimated Pro Formas.  On the date
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that is five business days prior to the due date for the Companies Consolidated
Return Group's consolidated Federal Income Tax return, Companies shall deliver
to Kraft a Kraft Pro Forma Federal Return reflecting the Kraft Federal Income
Tax Liability on an estimated basis. On the date that is five business days
prior to the due date for each Combined State Tax return, Companies shall
deliver to Kraft a Kraft Pro Forma Combined State Return (together with the
Kraft Pro Forma Federal Return, the "Kraft Pro Forma Returns") reflecting the
relevant Kraft Combined State Tax Liability on an estimated basis. Companies's
preparation and delivery of the Kraft Pro Forma Federal Return shall include
related schedules and returns, including, but not limited to, preparation of
Form 1118 or in the alternative, a schedule reflecting what is on

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Form 1118, for purposes of computing any separate foreign tax credit limitation
under Section 904(d) of the Code.

          (iii)  Preparation and Delivery of Final Pro Formas.  On or before
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November 1 following the end of the taxable year of any year for which payments
are to be made under this Agreement, Companies shall deliver to Kraft a Kraft
Pro Forma Federal Return reflecting the Kraft Federal Income Tax Liability.  On
or before December 15 following the end of the taxable year of any year for
which payments are to be made under this Agreement, Companies shall deliver to
Kraft a Kraft Pro Forma Combined State Return reflecting the relevant Kraft
Combined State Tax Liability.  As with the estimated Kraft Pro Forma Federal
Return delivered by Companies under Section 2(b)(ii) of this Agreement,
Companies's preparation and delivery of the Kraft Pro Forma Federal Return
hereunder shall include related schedules and returns, including, but not
limited to, preparation of Form 1118 or in the alternative, a schedule
reflecting what is on Form 1118, for purposes of computing any separate foreign
tax credit limitation under Section 904(d) of the Code.

          (iv)   Reconciliation of Payments.  On or before November 1 following
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the end of the taxable year of any year for which payments are to be made under
this Agreement, Kraft shall pay to Companies, or Companies shall pay to Kraft,
as appropriate, an amount equal to the difference, if any, between: (x) the
Kraft Federal Income Tax Liability reflected on the Kraft Pro Forma Federal
Return for such year, plus a net amount reasonably determined by Companies to
cover Kraft Federal Income Tax Liabilities attributable to current or prior
taxable years that is not otherwise reflected in the Kraft Pro Forma Federal
Return for such years; and (y) the aggregate amount of the quarterly payments of
the Kraft Current Federal Income Tax Provision for such year made pursuant to
Section 2(b)(i) of this Agreement.  On or before December 15 following the end
of the taxable year of any year for which payments are to be made under this
Agreement, Kraft shall pay to Companies the Kraft Combined State Tax Liability
as reflected on the Kraft Pro Forma Combined State Return.

     (c)  Use of Tax Assets.  If a Kraft Pro Forma Return reflects a Tax Asset
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that may under applicable law be used to reduce a Federal Income Tax or Combined
State Tax liability of the PM Companies Non-Food Group for any taxable period,
Companies shall pay to Kraft an amount equal to the actual tax saving produced
by such Tax Asset at the time such saving is realized by the PM Companies Non-
Food Group.  The amount of any such tax saving for any taxable period shall be
the amount of the reduction in taxes payable to a Taxing Authority with respect
to such tax period as compared to the taxes that would have been payable to a
Taxing Authority by the PM Companies Non-Food Group with respect to such tax
period in the absence of such Tax Asset.

     (d)  Treatment of Adjustments.  Except as provided in Section 3(a) below, 
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if any adjustment (including any adjustment affecting the use of a Tax Asset,
but not including any adjustment resulting in a refund under Section 4 below) is
made in a tax return of the Companies Consolidated Return Group, after the
filing thereof, in which income or loss of the Kraft Group is included, then at
the time of a Final Determination of the adjustment, Kraft shall pay to
Companies or Companies shall pay to Kraft (or Companies shall apply against
amounts due from Kraft under Section 2(b)(iv) of this Agreement), as the case
may be: (i) the difference between

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(x) all net payments actually made under Section 2 with respect to the taxable
year covered by such tax return, and (y) all payments that would have been made
under Section 2 taking such adjustment into account, together with any penalties
actually paid, plus (ii) interest on such difference for each day, beginning on
the due date of such return without regard to extensions and ending on the date
of Final Determination, calculated at the rate determined, in the case of a
payment by Kraft, under Section 6621(a)(2) of the Code as modified by Section
6621(c) of the Code and, in the case of a payment by Companies, at the
intercompany rate utilized between Companies and Kraft from the date(s) of
payment determined on the basis of the most recent payments and ending on the
date of Final Determination.

     (e)  Preparation of Returns.  So long as the Companies Consolidated Return
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Group elects to file consolidated Federal Income Tax returns as permitted by
Section 1501 of the Code or any Combined State Tax return, Companies shall
prepare and file such returns and any other returns, documents or statements
required to be filed with the Internal Revenue Service with respect to the
determination of the Federal Income Tax liability of the Companies Consolidated
Return Group and with the appropriate Taxing Authorities with respect to the
determination of the Combined State Tax liability of the Companies Consolidated
Return Group.  With respect to such return preparation, Companies shall not
discriminate among any members of the Companies Consolidated Return Group.
Companies shall have the right with respect to any consolidated Federal Income
Tax returns or Combined State Tax returns that it has filed or will file to
determine (i) the manner in which such returns, documents or statements shall be
prepared and filed, including, without limitation, the manner in which any item
of income, gain, loss, deduction or credit shall be reported; (ii) whether any
extensions should be requested; and (iii) the elections that will be made by any
member of the Companies Consolidated Return Group.  Companies shall not take any
unreasonable position in preparing the Kraft Pro Forma Returns; however, any
dispute with respect to the filing of such consolidated Federal Income Tax
return or Combined State Tax return shall be resolved pursuant to Section 7 of
this Agreement.  In addition, Companies shall have the right to (i) contest,
compromise, or settle any adjustment or deficiency proposed, asserted or
assessed as a result of any audit of any consolidated or combined return filed
by the Companies Consolidated Return Group; (ii) file, prosecute, compromise or
settle any claim for refund; and (iii) determine whether any refunds to which
the Companies Consolidated Return Group may be entitled shall be received by way
of refund or credited against the tax liability of the Companies Consolidated
Return Group; provided, however, that Companies shall be obligated to act in
good faith with regard to all members of the Companies Consolidated Return Group
included in the applicable returns.  Each member of the Kraft Group hereby
irrevocably appoints Companies as its agent and attorney-in-fact to take any
action (including the execution of documents) Companies may deem necessary or
appropriate to implement this Section 2(e).

3.   Indemnification.
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     (a)  Companies will indemnify the Kraft Group against and hold it harmless
from (i) any adjustments by a Taxing Authority to any and all Kraft Federal
Income Taxes to the extent of the amounts previously transferred from Kraft to
Companies with respect to any Kraft Federal Income Tax Liability; (ii) any
adjustments by a Taxing Authority to any and all PM Companies Non-Food Group
Taxes; and (iii) all liabilities, costs, expenses (including, without
limitation,

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reasonable expenses of investigation and attorney's fees and expenses), losses,
damages, assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Federal Income Tax described in (i)
or (ii).

     (b)  To the extent not already provided for in Section 2(d) hereof, Kraft
will indemnify Companies against and hold it harmless from (i) any adjustments
by a Taxing Authority to any and all Kraft Group Taxes, other than amounts for
Kraft Federal Income Taxes to the extent of the amounts previously transferred
from Kraft to Companies; and (ii) all liabilities, costs, expenses (including,
without limitation, reasonable expenses of investigation and attorney's fees and
expenses), losses, damages, assessments, settlements or judgments arising out of
or incident to the imposition, assessment or assertion of any Tax described in
(i).

4.   Refunds.
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     (a)  If, with respect to any tax indemnifiable by Kraft pursuant to Section
3(b) of this Agreement, Companies receives a refund, offset or credit, Companies
shall promptly remit to Kraft the amount of such refund, offset or credit,
together with any interest received thereon.

     (b)  If, with respect to any tax indemnifiable by Companies pursuant to
Section 3(a) of this Agreement, Kraft receives a refund, offset or credit, Kraft
shall promptly remit to Companies the amount of such refund, offset or credit,
together with any interest received thereon.

     (c)  Companies or Kraft, as the case may be, will be entitled to a payment
equal to any refunds, offsets or credits only after the party which has received
an offset, credit or refund has actually secured the cash benefit of such
refund, offset or credit. For purposes of this Section 4(c), the Party entitled
to a refund, offset or credit shall be considered to use any other losses,
deductions, amortization, exclusions from income, offsets, credits, other
allowances or any carryforwards or carrybacks of such items prior to securing
the benefit of such refund, offset or credit. No indemnification payment due
pursuant to Section 3 of this Agreement will be reduced by any amount
attributable to a refund, offset or credit unless and until the cash benefit of
such refund, offset or credit has been actually secured in accordance with this
Section 4(c).

5.   Term.  This Agreement shall expire in the event that the Kraft Group is no
     ----                                                                      
longer eligible to join with the Companies Consolidated Return Group in the
filing of a consolidated Federal Income Tax return; provided, however, that all
rights and obligations arising hereunder shall survive until they are fully
effectuated or performed unless superseded by mutual agreement of the Parties.

6.   Successors.  This agreement shall be binding on and inure to the benefit of
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any successor, by merger, acquisition of assets or otherwise, to any of the
Parties hereto (including but not limited to any successor of Companies and
Kraft succeeding to the tax attributes of such party under Section 381 of the
Code), to the same extent as if such successor had been an original party
hereto.

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7.   Dispute Resolution.  If the Parties hereto are unable to resolve any
     ------------------                                                  
disagreement or dispute relating to this Agreement, including the interpretation
or application thereof, within 20 days, Companies shall resolve such
disagreement or dispute.  Any such resolution shall be binding on the Parties to
this Agreement without further recourse.

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

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

10.  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
     -------------
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT GIVING EFFECT
TO LAWS AND PRINCIPLES RELATING TO CONFLICTS OF LAW.

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

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

13.  Effective Date.  This Agreement shall be effective as of January 1, 2001.
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     IN WITNESS WHEREOF, each of the parties hereto has caused this agreement to
be executed by a duly authorized officer as of the date first above written.

                                        PHILIP MORRIS COMPANIES INC.

                                        By: /s/ Bruce S. Brown
                                            -----------------------

                                        Name:  Bruce S. Brown

                                        Title: Vice President, Taxes



                                        KRAFT FOODS INC.



                                        By: /s/ James P. Dollive
                                            -----------------------

                                        Name:  James P. Dollive

                                        Title: Chief Financial Officer

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