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Exhibit 10.1
FORMATION AGREEMENT, dated as of July 30, 2004 (this
"Agreement"), among BROWN & WILLIAMSON TOBACCO
CORPORATION, a Delaware corporation ("B&W"), BROWN &
WILLIAMSON U.S.A., INC., a North Carolina corporation
("B&W Opco"), and REYNOLDS AMERICAN INC., a North
Carolina corporation ("Reynolds American").
WHEREAS the respective Boards of Directors of B&W, B&W Opco
and
Reynolds American have approved the
execution, delivery and performance of this
Agreement;
WHEREAS B&W and R.J. Reynolds Tobacco Holdings, Inc., a
Delaware
corporation ("RJR"), entered into the
Business Combination Agreement, dated as
of October 27, 2003, as amended (the
"Combination Agreement"), and each of B&W,
RJR, B&W Opco, Reynolds American and
certain of their affiliates will engage in
the Transactions (as defined in the
Combination Agreement);
WHEREAS B&W has agreed to contribute to B&W Opco, and
B&W Opco has
agreed to accept from B&W, all of the
assets, other than the Excluded Assets (as
defined below), of B&W in exchange for
all of the outstanding capital stock of
B&W Opco (the "Asset
Contribution");
WHEREAS B&W has agreed to assign to B&W Opco, and B&W
Opco has
agreed to assume from B&W, all of the
liabilities, other than the Excluded
Liabilities (as defined below), of B&W
(the "Assumption of Liabilities");
WHEREAS B&W and B&W Opco have agreed to certain
arrangements
regarding the employees of B&W; and
WHEREAS B&W and Reynolds American have agreed that the B&W
Opco
Stock Contribution (as defined in the
Combination Agreement) will occur
immediately following completion of the
Asset Contribution and the Assumption of
Liabilities.
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Agreement, the
following
terms shall have the following
meanings:
"Action" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding of any
nature (whether criminal, civil,
legislative, administrative, regulatory,
prosecutorial or otherwise) by or
before any court, arbitrator or
governmental entity or similar body.
An "affiliate" of any Person means another Person that directly
or
indirectly, through one or more
intermediaries, controls, is controlled by, or
is under common control with, such first
Person.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Asset Contribution" has the meaning set forth in the recitals
to
this Agreement.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales,
leases, transfers or dispositions) by
B&W Opco or any of its Subsidiaries
including any disposition by means of a
merger, consolidation or similar
transaction (each referred to for the purposes
of this definition as a "disposition") of
(a) any shares of capital stock of a
Subsidiary (other than directors'
qualifying shares or shares required by
applicable law to be held by a Person other
than B&W Opco or one of its
Subsidiaries), (b) all or substantially all
the assets of any division or line
of business of B&W Opco or any of its
Subsidiaries or (c) any other assets of
B&W Opco or any of its Subsidiaries
outside of the ordinary course of business
of B&W Opco or such Subsidiary, in each
case, other than (i) a disposition by a
Subsidiary of B&W Opco to B&W Opco
or by B&W Opco or any of its Subsidiaries to
a Subsidiary of B&W Opco, (ii) a
disposition by B&W Opco or any Subsidiary of
B&W Opco to Reynolds American or any of
its Subsidiaries (other than B&W Opco
and its
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Subsidiaries) if the transferee agrees to
jointly and severally assume the
obligations of B&W Opco under this
Agreement, such assumption to be in form and
substance reasonably satisfactory to
B&W (provided that the obligations of B&W
Opco under this Agreement shall not be
terminated as a result of such
assumption), (iii) a disposition that
constitutes a Restricted Payment but that
is not otherwise prohibited by Section
5.05(c) or (iv) any sale or disposition
deemed to occur in connection with creating
or granting any liens to a third
party that is not an affiliate of Reynolds
American in connection with a bona
fide financing or that arise as a matter of
law.
"Assumed Liabilities" means all the Liabilities (other than the
Excluded Liabilities) of B&W or any of
the Included Subsidiaries or otherwise to
the extent related to the B&W Business
(including (a) all Liabilities of B&W and
the Included Subsidiaries arising out of
the operation or conduct of their
respective businesses prior to the Asset
Contribution, (b) all Liabilities of
B&W and its affiliates under the State
Settlements and (c) all Liabilities of
B&W and the Included Subsidiaries
arising out of or in connection with any
Action to the extent relating to the
development, manufacture, packaging,
labeling, production, delivery, sale,
resale, distribution, marketing,
promotion, use or consumption of, or
exposure to tobacco products, including
smoking and health-related and
safety-related claims).
"Assumption of Liabilities" has the meaning set forth in the
recitals to this Agreement.
"B&W" has the meaning set forth in the preamble to this
Agreement.
"B&W Accounting Policies" has the meaning set forth in
Section
2.04(a).
"B&W Benefit Plans" has the meaning assigned to such term in
the
Combination Agreement.
"B&W Business" means the tobacco businesses of B&W and the
Included
Subsidiaries as such businesses have been
conducted in the United States and its
territories and possessions on or prior to
the date of this Agreement.
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"B&W Indemnitees" means B&W, each affiliate of B&W
(other than
Reynolds American, B&W Opco and their
respective Subsidiaries following the
Effective Time (as defined in the
Combination Agreement)), each of their
respective Representatives and each of the
heirs, executors, successors and
assigns of any of the foregoing.
"B&W Opco" has the meaning set forth in the preamble to
this
Agreement.
"B&W Opco Common Stock" means the common stock, par value $0.01
per
share, of B&W Opco.
"B&W Opco Indemnitees" means B&W Opco, Reynolds American
and their
respective Subsidiaries and Representatives
and each of the heirs, executors,
successors and assigns of any of the
foregoing.
"B&W Opco Services" has the meaning assigned to such term in
Section
2.06(b).
"B&W Opco Stock Contribution" has the meaning assigned to it in
the
Combination Agreement.
"B&W Packaging" has the meaning assigned to such term in
Section
2.05.
"B&W Services" has the meaning assigned to such term in
Section
2.06(a).
"B&W Trademark" has the meaning assigned to such term in
Section
2.05.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combination Agreement" has the meaning set forth in the recitals
to
this Agreement.
"Consent" has the meaning assigned to such term in Section
2.03.
"Consolidated Net Worth" means, as at any date of determination,
the
total amount of shareholders' equity that
would be shown on the balance sheet of
B&W Opco and its Subsidiaries,
determined on a consolidated basis in
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accordance with GAAP, as of such date of
determination; provided, however, that
Consolidated Net Worth as so determined
shall be adjusted by adding thereto the
sum, without duplication, of (i) all
consolidated non-cash impairment and
amortization charges related to goodwill,
trademarks and other intangible assets
of B&W Opco and its Subsidiaries during
the period from the date of this
Agreement to such date of determination and
(ii) all restructuring charges
related to B&W Opco and its
Subsidiaries that have been reflected in the
consolidated financial statements of
Reynolds American that have been filed with
the SEC during the period from the date of
this Agreement to such date of
determination.
"Contributed Assets" means (other than the Excluded Assets),
without
duplication, (a) all the capital stock of
the Included Subsidiaries, (b) all the
business, properties, assets, goodwill and
rights of B&W and the Included
Subsidiaries of whatever kind and nature,
real or personal, tangible or
intangible, that are owned by, leased or
licensed to B&W or any of the Included
Subsidiaries on the date of this Agreement
(including any items arising under
insurance policies and all guarantees,
warranties, indemnities and similar
rights in favor of B&W to the extent
relating to any Contributed Asset or any
Assumed Liability and all assets of the
B&W Benefit Plans the sponsorship of
which is transferred to B&W Opco in
connection with this Agreement) and (c) an
amount in cash equal to the Estimated MSA
Liability Amount.
"Employees" means all individuals employed immediately prior to
the
Asset Contribution by B&W and the
Included Subsidiaries, whether employed within
or outside the United States and whether or
not subject to a labor or collective
bargaining agreement, including active
employees, employees on vacation,
holiday, jury duty, bereavement leave or
other leave of absence (including
employees on short-term disability and
long-term disability).
"Employment Transfer Time" has the meaning assigned to such term
in
Section 4.01.
"Estimated MSA Liability Amount" means the accrued MSA
Liability
Amount as of the date of this
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Agreement, as estimated in writing by
B&W not less than two days nor more than
five days prior to the date of this
Agreement.
"Excluded Assets" means:
(a) all cash, cash equivalents and bank deposits of B&W and
its
Subsidiaries other than (1) any cash described in clause (c) of
the
definition
of Contributed Assets or (2) any cash, cash equivalents,
deposits
or other assets securing the obligations of B&W and its
Subsidiaries for workers' compensation, licenses, permits and
other
similar
obligations required under law;
(b) the capital stock of each of the Excluded Subsidiaries and
all
the
business, properties, assets, goodwill, rights and Liabilities of
the
Excluded
Subsidiaries;
(c) all receivables, accounts and indebtedness (other than
trade
receivables) due to B&W from PLC or any of its Subsidiaries,
other than
from any
Included Subsidiary;
(d) any loan agreements, security documents and other contracts
related to
receivables, accounts and indebtedness described in clause (c)
of this
definition or clauses (i) and (j) of the definition of Excluded
Liabilities;
(e) the $100 million bond filed by B&W in connection with the
appeal
of Engle
v. R.J. Reynolds Tobacco Co. class action litigation in
Florida,
collateral
securing such bond and all interest and other proceeds thereof;
(f) all other bonds, letters of credit or similar instruments
provided by B&W or
any of its Subsidiaries in connection with any
tobacco-related litigation, collateral securing such bonds and
all
interest
and other proceeds thereof, including those listed on Schedule
1.01(a);
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(g) all rights and interests of B&W and the Excluded
Subsidiaries
under this
Agreement and any other Transaction Agreement;
(h) all records prepared in connection with the Transactions;
(i) any tax records and copies of all other records of B&W or
any of
its
Subsidiaries;
(j) any service marks and service mark applications, trademarks
and
trademark
applications, trade dress, logos and slogans, whether
registered
or
unregistered, and the right to use any such service marks and
service
mark
applications, trademarks and trademark applications, trade
dress,
logos and
slogans, in any jurisdiction other than the United States and
its
territories and its possessions;
(k) any patents, patent applications, inventions, trade
secrets,
proprietary processes, databases, software and formulae, and the
right to
use any
such patents, patent applications, inventions, trade secrets,
proprietary processes, databases, software and formulae, to the
extent
registered
or patented in, or otherwise protected by, any jurisdiction
other than
the United States and its territories and its possessions;
(l) all rights, claims and credits of B&W or any of its
Subsidiaries
to the
extent arising out of any other Excluded Asset or any Excluded
Liability,
including any such items arising under insurance policies and
all
guarantees, warranties, indemnities and similar rights in favor of
B&W
or any of its Subsidiaries
in respect of any other Excluded Asset or any
Excluded
Liability;
(m) any capital stock of Reynolds American owned by B&W or any
of
its
Subsidiaries;
(n) any rights in the assets of the trusts established pursuant
to
the
Secular Trust Agreements by and among State Street Bank and
Trust
Company,
B&W, and the individuals party thereto listed on Schedule
<PAGE>
1.01(b)
(the "SERP Trust Individuals"), to the extent held in an
account
thereunder
for the purpose of providing a fund to pay benefits under the
Supplemental Pension Plan for Executives of B&W (the "B&W
SERP") (defined
in the
Secular Trust Agreement as the "SERP Account");
(o) any assets held in connection with the B&W Executive
Life
Insurance
Plan (the "B&W ELP");
(p) all rights to refunds, credits or offsets of Taxes relating
to
the
Contributed Assets or the Assumed Liabilities with respect to
Pre-Closing Tax Periods; and
(q) all assets identified on Schedule 1.01(c).
"Excluded Liabilities" means:
(a) any Liability of an Excluded Subsidiary or any other
Liability
to the extent arising out of the business of an Excluded
Subsidiary;
(b) all obligations of B&W and the Excluded Subsidiaries
under
this
Agreement and any other Transaction Agreement;
(c) any Liability under the B&W SERP, to the extent it
pertains
or relates to the service and/or accrued benefits of the SERP
Trust
Individuals prior to the Employment Transfer Time, calculated on
the
assumption
that the SERP Trust Individual's employment terminated
immediately prior to the Employment Transfer Time;
(d) any liability under each Agreement Pertaining to Revisions
to Benefit
Plans and Programs (the "Revision Agreement") entered into at
any time
prior to the Employment Transfer Time between B&W and a
SERP
Trust
Individual, to the extent it pertains or relates to the B&W
SERP
with
respect to the period prior to the Employment Transfer Time;
(e) any liability under the B&W ELP and any liability under
any
successor or substitute plan, program or arrangement in effect
immediately prior to
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the
Employment Transfer Time providing life insurance coverage to
any
person
covered under the B&W ELP or any such successor or substitute
plan,
program or
arrangement, other than any liability related to group
term-life
insurance payable in lieu of continued B&W ELP
participation;
(f) any liability under a Revision Agreement entered into at
any time
prior to the Employment Transfer Time, to the extent it
pertains
or relates
to the B&W ELP or any successor or substitute plan, program
or
arrangement described in clause (e) above, other than any
liability
related to
group term-life insurance payable to non-officers in lieu of
continued
B&W ELP participation;
(g) any Liability to the extent such Liability relates to the
Excluded
Assets;
(h) (i) all Taxes (other than U.S. federal and state excise
Taxes) of
each Included Subsidiary measured with respect to all Taxable
periods
ending on or before the date of this Agreement and the portion
through
the end of the date of this Agreement for any Taxable period
that
includes
(but does not end on) the date of this Agreement, provided,
that
for
purposes of this Agreement, (A) all real property Taxes,
personal
property
Taxes and similar ad valorem obligations levied with respect to
the
Contributed Assets for a Tax period that includes (but does not
end
on) the
date of this Agreement shall be apportioned between B&W and
B&W
Opco based
upon the number of days of such period included in the
Pre-Closing Tax Period and the number of days of such Tax period
after the
date of
this Agreement (which period shall not include the date of this
Agreement)
and (B) all other Taxes (other than U.S. federal and state
excise
Taxes) for a Tax period that includes (but does not end on) the
date of
this Agreement shall be determined based upon an actual closing
of
the books
as if such Tax period ended as of the close of business on the
date of
this Agreement, (ii) any and all Taxes (other than U.S. federal
and state
excise Taxes) of any member of an affiliated, consolidated,
combined,
or unitary group of which an Included Subsidiary (or any of
their
<PAGE>
predecessors) is or was a member on or prior to the date of
this
Agreement,
including pursuant to Treas. Reg.ss.1.1502-6 or any analogous
or similar
provision of Law, and (iii) all Taxes (other than U.S. federal
or state
excise Taxes) of an Included Subsidiary arising from or related
to the
Transactions;
(i) all Liabilities of B&W or any of the Included
Subsidiaries
in respect
of (i) borrowed money, (ii) bonds, debentures, notes or similar
instruments issued in connection with borrowed money, (iii)
conditional
sale or
other title retention agreements related to property or assets
purchased
by B&W or any of the Included Subsidiaries, (iv) the
deferred
purchase
price of property or services (other than trade payables and
other
accounts payable generated in the ordinary course), (v)
interest
rate
protection agreements, foreign currency exchange agreements or
other
interest
or exchange rate hedging arrangements and (vi) guarantees given
by B&W
or any Included Subsidiary in respect of any of the foregoing
(other
than any letters of credit); and
(j) all payables, accounts and indebtedness (other than trade
payables)
owed by B&W to PLC or any of its Subsidiaries, other than to
any
Included
Subsidiary.
"Excluded Subsidiaries" means, collectively, the Subsidiaries of
B&W
listed on Schedule 1.01(d) and the
Subsidiaries of such listed Subsidiaries.
"Filings" means Reynolds American's Form S-4 initially filed
with
the SEC on January 16, 2004 and any other
document filed or required to be filed
with the SEC by Reynolds American or RJR in
connection with the Transactions
(including any preliminary or final form
thereof or any amendment or supplement
thereto).
"Final Determination" means the final resolution of Liability
for
any Tax for any taxable period by or as a
result of (a) a final and unappealable
decision, judgment, decree or other order
by any court of competent
jurisdiction, (b) a final settlement with
the IRS, a closing agreement or
accepted offer in compromise under
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Sections 7121 or 7122 of the Code or a
comparable agreement under the laws of
other jurisdictions, in each case which
resolves the entire Tax Liability for
any taxable period, (c) any allowance of a
refund or credit in respect of an
overpayment of Tax, but only after the
expiration of all periods during which
such refund may be recovered by the
jurisdiction imposing the Tax, or (d) any
other final disposition, including, without
limitation, by reason of the
expiration of the applicable statute of
limitations.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied by the applicable
party (except to the extent relating to a
change in GAAP).
"Included Subsidiaries" means, collectively, the Subsidiaries of
B&W
that are not Excluded Subsidiaries.
"Indemnifiable Losses" means all losses, Liabilities, damages
(including compensatory damages, punitive
damages, exemplary damages, penalties,
sanctions and restitution), deficiencies,
fines, expenses, Actions, demands,
judgments, orders, decrees or settlements,
whether or not resulting from Third
Party Claims, including interest and
penalties recovered by a third party with
respect thereto and out-of-pocket expenses
and reasonable attorneys' and
accountants' fees and expenses incurred in
the investigation or defense of any
of the same or in asserting, preserving or
enforcing any of an Indemnitee's
rights hereunder, suffered or incurred by
an Indemnitee.
"Indemnifying Party" has the meaning assigned to such term in
Section 5.03(a).
"Indemnitee" means any of the B&W Indemnitees or the B&W
Opco
Indemnitees, as the case may be.
"Independent Firm" has the meaning set forth in Section
2.04(c).
"IRS" means the United States Internal Revenue Service.
"Liabilities" means any and all debts, liabilities, commitments
and
obligations, whether fixed, contingent or
absolute, matured or unmatured,
liquidated or
<PAGE>
unliquidated, accrued or not accrued, known
or unknown, whenever or however
arising and whether or not the same would
be required by GAAP to be reflected in
financial statements or disclosed in the
notes thereto.
"Measurement Time" has the meaning set forth in Section
2.04(a).
"Minimum Required Working Capital Amount" means, with respect to
any
date, the amount set forth on Schedule
1.01(e) with respect to such date.
"MSA" means the Master Settlement Agreement, dated as of
November
23, 1998, among the 46 states and five U.S.
territories listed on the signature
pages thereto, the District of Columbia,
Philip Morris Incorporated, R.J.
Reynolds Tobacco Company, B&W and
Lorillard Tobacco Company, as amended,
supplemented or replaced.
"MSA Liability Amount" means, with respect to any period, the
total
of all amounts due by B&W for such
period pursuant to (a) the State Settlements
and (b) attorney fee payment agreements
adopted pursuant to any of the State
Settlements.
"Negotiation Period" has the meaning set forth in Section
2.04(b).
"Non-Assignable Assets" has the meaning set forth in Section
2.03.
"Notice of Dispute" has the meaning set forth in Section
2.04(b).
"Person" means any individual, firm, corporation, partnership,
company, limited liability company, trust,
joint venture, association,
governmental entity, unincorporated
organization or other entity.
"PLC" means British American Tobacco p.l.c., a public limited
company incorporated under the laws of
England and Wales.
"Pre-Closing Tax Period" means all taxable periods ending on or
before the day of this Agreement and the
portion ending on the day of this
Agreement of any
<PAGE>
taxable period that includes (but does not
end on) such day.
"RJR" has the meaning set forth in the recitals to this
Agreement.
"Representative" of any Person means any officer, director,
manager,
employee, consultant, attorney or other
advisor or representative of such
Person.
"Restricted Payments" means, with respect to B&W Opco or any of
its
Subsidiaries, (a) the declaration or
payment of any dividends or any other
distributions of any sort in respect of its
capital stock (including any payment
in connection with any merger or
consolidation involving such Person) or similar
payment to the direct or indirect holders
of its capital stock (other than
dividends or distributions payable solely
in its capital stock and dividends or
distributions payable solely to B&W
Opco or one of its Subsidiaries), (b) the
purchase, redemption or other acquisition
or retirement for value of any capital
stock of B&W Opco held by any Person or
of any capital stock of a Subsidiary of
B&W Opco held by any affiliate of
Reynolds American (other than B&W Opco or a
Subsidiary of B&W Opco), including in
connection with any merger or
consolidation and including the exercise of
any option to exchange any capital
stock, or (c) the making of any investment
in Reynolds American or any of its
Subsidiaries (other than B&W Opco or
one of its Subsidiaries); provided,
however, that, with respect to any calendar
year, Restricted Payments shall not
include the declaration or payment of any
dividends (other than extraordinary
dividends or liquidating dividends) or any
other distributions of any sort by
B&W Opco in respect of its capital
stock in an aggregate amount equal to the
sum, without duplication, of (i) (A) the
aggregate amount of dividends (other
than extraordinary dividends or liquidating
dividends) paid by Reynolds American
to the holders of Reynolds American common
stock during such calendar year and
(B) the aggregate amount of cash required
by Reynolds American to repurchase
Reynolds American common stock pursuant to
Section 2.04(d) of the Governance
Agreement (as defined in the Combination
Agreement) and (ii) the aggregate
amount of interest, indebtedness and
corporate overhead expenses paid by
Reynolds American or
<PAGE>
R.J. Reynolds Tobacco Holdings, Inc. during
such calendar year (including
amounts paid in respect of payroll and
other compensation expenses (including
pensions) and other post-retirement
benefits, but excluding amounts paid by
Reynolds American in respect of the $400
million loan to Reynolds American from
FHS, Inc.), Taxes, insurance, SEC, NYSE and
other administrative fees and
expenses, banking fees and expenses and
other types of corporate overhead and
administrative costs and expenses
associated with being a public holding
company); provided, further, however, that,
in the event Reynolds American owns
any "significant subsidiary" (as defined in
Regulation S-X of the SEC) that is
not a Subsidiary of B&W Opco, the
amount determined in clause (i) and (ii) above
will be reduced by the amount of such
payments allocated to such significant
subsidiary by Reynolds American as
determined by Reynolds American in good faith
consistent with past practice.
"Reynolds American" has the meaning set forth in the preamble
to
this Agreement.
"SEC" means the Securities and Exchange Commission.
"State Settlements" means (a) the MSA and (b) the Settlement
Agreement, dated as of August 25, 1997,
among the State of Florida, Philip
Morris Incorporated, R.J. Reynolds Tobacco
Company, B&W, Lorillard Tobacco
Company and United States Tobacco Company,
as amended by the Stipulation of
Amendment to Settlement Agreement and For
Entry of Consent Decree, dated as of
September 11, 1998, (c) the Settlement
Agreement and Stipulation for Entry of
Consent Decree, dated as of May 8, 1998,
among the State of Minnesota, Philip
Morris Incorporated, R.J. Reynolds Tobacco
Company, B&W and Lorillard Tobacco
Company, (d) the Comprehensive Settlement
Agreement and Release, dated as of
October 17, 1997, among the State of
Mississippi, Philip Morris Incorporated,
R.J. Reynolds Tobacco Company, B&W and
Lorillard Tobacco Company, as amended by
the Stipulation of Amendment to Settlement
Agreement and For Entry of Agreed
Order, dated as of July 2, 1998, (e) the
Comprehensive Settlement Agreement and
Release, dated as of January 16, 1998,
among the State of Texas, Philip Morris
Incorporated, R.J. Reynolds Tobacco
Company, B&W, Lorillard Tobacco Company and
United States Tobacco Company, as amended
by
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the Stipulation of Amendment to Settlement
Agreement and For Entry of Consent
Decree, dated as of July 24, 1998, in each
case, as amended, supplemented or
replaced, and (f) the Trust Agreement,
dated July 19, 1999 among Philip Morris
Incorporated, B&W, Lorillard Tobacco
Company and R.J. Reynolds Tobacco Company,
as settlors, The Chase Manhattan Bank, as
trustee, and the Grower States listed
therein, as amended, supplemented or
replaced.
"Submission Notice" has the meaning set forth in Section
2.04(c).
A "Subsidiary" of any Person means another Person, an amount of
the
voting securities, other voting ownership
or voting partnership interests of
which is sufficient to elect at least a
majority of its board of directors or
other governing body (or, if there are no
such voting interests, 50% or more of
the equity interests of which) is owned
directly or indirectly by such first
Person.
"Successor Company" has the meaning assigned to such term in
Section
5.05(a).
"Taxes" means all (a) domestic or foreign (whether national,
Federal, state, provincial, local or
otherwise) taxes, assessments, duties or
similar charges of any kind whatsoever,
including all corporate franchise,
income, sales, use, ad valorem, receipts,
value added, profits, license,
withholding, payroll, employment, excise,
property, net worth, capital gains,
transfer, stamp, documentary, payroll,
alternative minimum, recapture and other
taxes, including any interest, fines,
penalties and additions imposed with
respect to such amounts; (b) Liability for
the payment of any amounts of the
type described in clause (a) as a result of
being a member of an affiliated,
consolidated, combined, unitary or
aggregate group and (c) Liability for the
payment of any amounts as a result of an
express or implied obligation to
indemnify any other person with respect to
the payment of any amounts of the
type described in clause (a) or (b).
"Texas Settlement Agreement" means the Comprehensive Settlement
Agreement and Release, dated as of January
16, 1998, among the State of Texas,
Philip Morris
<PAGE>
Incorporated, R.J. Reynolds Tobacco
Company, B&W, Lorillard Tobacco Company and
United States Tobacco Company, as amended
by the Stipulation of Amendment to
Settlement Agreement and For Entry of
Consent Decree, dated as of July 24, 1998,
and as further amended by the Agreement of
Amendment to Settlement Agreement,
dated as of June 8, 2001.
"Third Party Claim" has the meaning set forth in Section
5.03(a).
"Transaction Agreements" has the meaning assigned to such term
in
the Combination Agreement.
"Transactions" has the meaning assigned to such term in the
Combination Agreement.
"Working Capital" means, as of any time, (a) the sum of (i)
Inventories - FIFO basis (including leaf,
finished goods, wrapping materials,
spare parts and miscellaneous), (ii)
Accounts Receivable External (including
domestic accounts receivable, leaf (ELT)
accounts receivable and miscellaneous
accounts receivable), (iii) Due from
Affiliates - Trading and (iv) Other Debtors
(including salesforce contingent funds,
sundry unidentified items, unamortized
strike/wage concessions, prepaid insurance,
prepaid legal fees, etc. but
excluding LIC, home escrows and the Star
note) less (b) the sum of, (i) Excise
Tax Payable (Federal and state), (ii)
Accrued Liabilities (including marketing
accruals, provisions for payroll, vacation
pay, profit sharing, etc.), (iii)
Accounts Payable and (iv) Due to Affiliates
- Trading. For the avoidance of
doubt, Working Capital shall not include
any accruals relating to the MSA
Liability Amount.
"Working Capital Statement" has the meaning set forth in
Section
2.04(a).
ARTICLE II
Asset Contribution
SECTION 2.01. The Asset Contribution. Upon the effectiveness of
this
Agreement, B&W shall contribute,
assign, convey, transfer and deliver to B&W
Opco, and B&W
<PAGE>
Opco shall acquire and accept from B&W,
all right, title and interest of B&W in
and to the Contributed Assets. B&W Opco
has previously issued to B&W 100 fully
paid and nonassessable shares of B&W
Opco Common Stock, representing all of the
outstanding capital stock of B&W
Opco.
SECTION 2.02. Retention of Copies; Access. Notwithstanding
anything
to the contrary contained in this Agreement
and subject to Section 6.10, (a) B&W
may retain, at its expense, archival copies
of contracts, books and records or
other documents or materials conveyed by
this Agreement, and (b) B&W Opco will
permit B&W to have reasonable access to
such contracts, books, records,
documents and materials on and after the
date of this Agreement to make such
copies. B&W Opco will give B&W at
least 30 calendar days' prior written notice
of B&W Opco's intention to dispose of
any books, records or other documentation
which constitute Contributed Assets.
B&W will have the opportunity to obtain
possession, at its own expense, of any such
books, records or documentation as
B&W may reasonably require prior to
B&W Opco's disposition thereof. In the
absence of bad faith or wilful misconduct,
neither B&W nor B&W Opco will have
any liability arising out of or in
connection with its retention and handling of
such records.
SECTION 2.03. Consents. Notwithstanding anything to the
contrary
contained in this Agreement, if the
contribution, assignment, conveyance,
transfer or delivery or attempted
contribution, assignment, conveyance, transfer
or delivery to B&W Opco of any
Contributed Asset is (a) prohibited by any
applicable Law or (b) would require any
authorization, approval, consent or
waiver (each a "Consent") from a third
Person and such Consent shall not have
been obtained prior to the effectiveness of
this Agreement (each, a
"Non-Assignable Asset"), in either case,
the Asset Contribution shall proceed,
but the Asset Contribution shall not
constitute the contribution, assignment,
conveyance, transfer or delivery of such
Non-Assignable Asset, and this
Agreement shall not constitute a
contribution, assignment, conveyance, transfer
or delivery of such Non-Assignable Asset
unless and until such Consent is
obtained. After the Asset Contribution,
B&W and B&W Opco shall continue to use
reasonable best efforts to obtain any
necessary Consent. The cost of obtaining
any
<PAGE>
such Consent shall be borne solely by
B&W and shall constitute an Excluded
Liability hereunder. During the period
between the date of this Agreement and
the consummation of the contribution,
assignment, conveyance, transfer or
delivery of such Non-Assignable Asset,
B&W will operate such Non-Assignable
Assets pursuant to written instructio
