Kraft 2005 Annual Report Download - page 18

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MERRILL CORPORATION MBLOUNT// 9-MAR-06 12:40 DISK126:[06CHI5.06CHI1135]DG1135A.;12
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DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;51
KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DG1135A.;12
Merrill Corporation/Chicago (312) 786-6300 Page Dim: 8.250X 10.750Copy Dim: 38. X 54.3
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 Kraft Foods International, Inc.
from Mr. Berrada in 2001. In June 2003, the court issued a preliminary judgment against Kraft Foods
Maroc and Mr. Berrada holding that the Gaouars are 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 appealed this judgment, and in July 2005, the Court of
Appeal gave judgment in favor of Kraft Foods Maroc confirming the decision rendered by the
Commercial Court. On November 29, 2005, the Gaouars filed their further appeal to the Moroccan
Supreme Court. A court hearing has not been scheduled yet. Mr. Berrada did not disclose the existence
of the claims of Mr. Gaouar at the time of the Kraft Foods International, Inc. 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 former production facility
in Farmdale, Ohio. In December 2004, the Company finalized a monetary settlement with the State,
which was approved by the Court of Common Pleas for Trumball County on January 3, 2005. The
settlement amount is not material to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
17
6 C Cs: 22414