FORMATION AGREEMENT

 

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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

 

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      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

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      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

 

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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

 

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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

 

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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

 

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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 Combin