SEPARATION AGREEMENT

Exhibit 10.1

 

 

Execution Version

SEPARATION AGREEMENT

 

 

by and among

 

 

LOEWS CORPORATION,

 

 

LORILLARD, INC.,

 

 

LORILLARD TOBACCO COMPANY,

 

 

LORILLARD LICENSING COMPANY, LLC,

 

 

ONE PARK MEDIA SERVICES, INC.

 

 

and

 

 

PLISA S.A.

Dated as of May 7, 2008.

 

 

 

 

TABLE OF CONTENTS

Page

 

ARTICLE I

DEFINITIONS

Section 1.1	Certain Definitions	2
Section 1.2	Other Definitions	7
	ARTICLE II
	ALLOCATION OF COSTS AND EXPENSES
Section 2.1	Allocation of Costs and Expenses	8
	ARTICLE III
	RELEASE AND INDEMNIFICATION
Section 3.1	Release of Pre-Separation Claims	10
Section 3.2	General Cross Indemnification	12
Section 3.3	Registration Statement Indemnification	13
Section 3.4	Notice and Defense of Claims	15
Section 3.5	Contribution	17
Section 3.6	Subrogation	17
Section 3.7	Other Matters	18
Section 3.8	Covenant to Remove Indemnified Party	18
Section 3.9	Tax Matters	18
	ARTICLE IV
	TAX RELATED PROVISIONS
Section 4.1	Non-Taxable Transaction	19
Section 4.2	Tax Returns and Tax Payments	19
Section 4.3	Representations and Covenants	24
Section 4.4	Indemnity Obligations and Payments	27
Section 4.5	Tax Contests	28
Section 4.6	Cooperation; Retention of Records; Access; Confidentiality	29
Section 4.7	Further Assurances	31
Section 4.8	Dispute Resolution	31

 

 

 

 

	ARTICLE V
	CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER, DISPOSITION AND
	DIVESTITURE
Section 5.1	Consolidation, Merger, Conveyance, Transfer, Disposition and Divestiture	31
	ARTICLE VI
	DISPUTE RESOLUTION
Section 6.1	Negotiation	32
Section 6.2	Arbitration	33
Section 6.3	Costs and Expenses	34
Section 6.4	Confidentiality of Arbitration Proceedings	34
Section 6.5	Tax Matters	34
	ARTICLE VII
	OTHER PROVISIONS
Section 7.1	Treatment of Carolina Group 2002 Stock Option Plan	34
Section 7.2	Provision of Information	35
Section 7.3	Binding Effect	35
Section 7.4	No Assignment	35
Section 7.5	No Third Party Beneficiaries	36
Section 7.6	Notices	36
Section 7.7	Governing Law	36
Section 7.8	Counterparts	36
Section 7.9	Severability	36
Section 7.10	Amendment, Modification and Termination	36
Section 7.11	Entire Agreement	36
Section 7.12	No Circumvention	36
Section 7.13	Descriptive Headings	36
Section 7.14	Drafting of Language	36

 

 

 

SEPARATION AGREEMENT

 

 

SEPARATION AGREEMENT, dated as of May 7, 2008, by and among LOEWS CORPORATION, a Delaware corporation (“ Loews ”), LORILLARD, INC., a Delaware corporation (“ Lorillard ”), LORILLARD TOBACCO COMPANY, a Delaware corporation, LORILLARD LICENSING COMPANY, LLC, a North Carolina limited liability company, ONE PARK MEDIA SERVICES, INC., a Delaware corporation, and PLISA S.A., a Swiss société anonyme.

 

 

WHEREAS, Loews is and will remain the owner of all of the issued and outstanding shares of common stock of Lorillard until the Effective Date (as defined below); and

 

 

WHEREAS, in accordance with its certificate of incorporation and applicable law, the Board of Directors of Loews has determined to distribute Loews’s entire ownership interest in Lorillard to the holders of Loews’s Carolina Group stock (“ CG Stock ”) and Loews common stock in several integrated transactions by which Lorillard will become a separate public company; and

 

 

WHEREAS, Loews and Lorillard acknowledge and agree that the Separation will benefit both Loews and the Lorillard Group as more fully described in the Registration Statement; and

 

 

WHEREAS, Loews and Lorillard acknowledge and agree that Lorillard has always operated as an independent subsidiary of Loews, although from time to time plaintiffs have named Loews as a defendant in Actions allegedly arising out of the business and activities of Lorillard and other members of the Lorillard Group, and may do so in the future; and

 

 

WHEREAS, each member of the Lorillard Group acknowledges that Loews is not a proper party in any Action of the type referred to in the preceding clause, and is not responsible for any costs or damages which may arise from any such Action and, accordingly, it would be appropriate to indemnify the Loews Group in respect thereof; and

 

 

WHEREAS, Loews acknowledges that Lorillard, as an independent company, would not be a proper party to any Action based on the actions of Loews, and, accordingly, it would be appropriate to indemnify the Lorillard Group in respect thereof.

 

 

NOW, THEREFORE, in contemplation of Lorillard ceasing to be wholly-owned by Loews and for good and valuable consideration, the receipt and adequacy of which are acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

 

 

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1       Certain Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings:

 

“ Action ” means any claim, action, cause of action, suit, proceeding, demand or investigation, whether civil, criminal, administrative, investigative or other.

 

 

“ Agreement ” and “ hereof ” and “ herein ” means this Separation Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and refers to the Agreement as the same may be in effect at the time such reference becomes operative.

 

 

“ Business Day ” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are authorized or obligated by law or executive order to close.

 

 

“ Carryback Item ” means any net operating loss, net capital loss, excess tax credit or other similar Tax item which may or must be carried from one taxable period to another taxable period under the Code or other applicable Tax law.

 

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

 

“ Contingent Dividend ” shall have the meaning ascribed to such term in the Registration Statement.

 

 

“ Deconsolidation Date ” means the date of the Deconsolidation Event.

 

 

“ Deconsolidation Event ” means any event or transaction occurring on or after the Effective Date, including the Separation or any component thereof, that causes Lorillard to no longer be eligible to be included in the Loews Consolidated Group for Federal Income Tax purposes.

 

 

“ Effective Date ” shall mean the closing date of the Redemption.

 

 

“ Exchange Act ” means the Securities Exchange Act of 1934.

 

 

 

 

“ Exchange Offer ” shall have the meaning ascribed to such term in the Registration Statement.

 

 

“ Federal Income Tax ” means any Tax imposed under Subtitle A of the Code and any related interest and any penalties, additions to such Tax, or additional amounts imposed with respect thereto.

 

 

“ Filings ” means annual audited financial statements, annual reports to stockholders, annual, quarterly and current reports issued or filed pursuant to or under the Exchange Act and any registration statements, prospectuses and other filings made with the SEC prior to, on or after the Effective Date, other than the Registration Statement.

 

 

“ Final Determination ” means a determination within the meaning of Section 1313(a) of the Code or any similar provision of state or local Tax law.

 

 

“ Governmental Entity ” means any federal, national, state, provincial, local, foreign, international or other court, government, department, commission, board, bureau or agency, authority (including, but not limited to, any central bank or taxing authority) or instrumentality (including, but not limited to, any court, tribunal or grand jury).

 

 

“ Group ” means either the Loews Group or the Lorillard Group, as applicable.

 

 

 “ IRS ” means the Internal Revenue Service.

 

 

“ Keepwell ” means any guaranty, keepwell, net worth or financial condition maintenance agreement of or by any member of the Loews Group provided to any Person with respect to any actual or contingent obligation of any member of the Lorillard Group.

 

 

“ Liabilities ” means any and all debts, liabilities, costs, expenses and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, reserved or unreserved, known or unknown, or determined or determinable, including those arising under any law, claim, demand or Action (whether asserted or unasserted), or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any governmental entity, and those arising under any contract, in tort or otherwise, or any fines, damages or equitable relief which may be imposed, and including all costs and expenses related thereto.

 

 

 

 

“ Loews Consolidated Group ” means an affiliated group of corporations within the meaning of Section 1504(a) of the Code, of which Loews is the common parent corporation, that has filed consolidated Federal Income Tax Returns.

 

 

“ Loews Group ” means, collectively, Loews and all of its direct and indirect Subsidiaries now or hereafter existing and their respective successors, other than members of the Lorillard Group.

 

 

“ Lorillard Group ” means, collectively, Lorillard, Lorillard Tobacco Company, Lorillard Licensing Company, LLC, One Park Media Services, Inc., Plisa S.A., all of Lorillard’s other direct and indirect Subsidiaries now or hereafter existing and each of their respective predecessors and successors.

 

 

“ Losses ” means with respect to any Person, all losses, damages (whether compensatory, punitive, consequential, multiple or other), judgments, settlements, assessments, equitable or injunctive relief or disgorgements, Taxes and, to the extent incurred, other Liabilities, including all punitive damages and criminal and civil fines and penalties suffered by such Person, and including all costs, expenses and interest relating thereto (including, but not limited to, all expenses of investigation and preparation for defense, all accountant or attorneys’ fees and all other out-of-pocket expenses incurred), regardless of whether any such Losses relate to or arise out of such Person’s own alleged or actual negligent or grossly negligent conduct, reckless conduct or intentional misconduct.

 

 

“ Person ” means any individual, corporation, partnership, joint venture, limited liability company, association or other entity and any trust, unincorporated organization or government or any agency or political subdivision thereof or any other Governmental Entity.

 

 

“ Post-Deconsolidation Period ” means any taxable year or other taxable period beginning after the Deconsolidation Date and, in the case of any taxable year or other taxable period that begins on or before and ends after the Deconsolidation Date, that part of the taxable year or other taxable period that begins after the Deconsolidation Date.

 

 

“ Pre-Deconsolidation Period ” means any taxable year or other taxable period that ends on or before the Deconsolidation Date and, in the case of any taxable year or other taxable period that begins on or before and ends after the Deconsolidation Date, that part of the taxable year or other taxable period that ends on the Deconsolidation Date.

 

 

“ Prime Rate ” means the rate of interest per annum published in The Wall Street Journal as the Prime Rate, as in effect from time to time.

 

 

 

 

“ Proposed Acquisition Transaction ” means a transaction or series of related transactions (or any agreement, understanding, arrangement or substantial negotiations, within the meaning of Section 355(e) of the Code and Regulations, to enter into a transaction or series of related transactions), as a result of which (i) Lorillard would merge or consolidate with any other Person or (ii) any Person or group of Persons would (directly or indirectly) acquire, or have the right to acquire (through an option or otherwise) from Lorillard and/or one or more of its stockholders, respectively, any amount of stock of Lorillard, that would, when combined with any other changes in ownership of the stock of Lorillard pertinent for purposes of Section 355(e) of the Code and Regulations, comprise more than 35% of the total combined voting power or total value of all outstanding stock of Lorillard as of the date of such transaction or, in the case of a series of transactions, the date of the last transaction of such series.   In determining whether a transaction constitutes an indirect acquisition for purposes of the preceding sentence, any recapitalization resulting in a shift of voting power or any redemption of shares of stock (including any redemption of Lorillard equity pursuant to the exception in Section 4.3(b)(iii) ) shall be treated as an indirect acquisition of stock by the non-exchanging stockholders.   This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and Regulations and shall be interpreted accordingly by Loews, in its sole and absolute discretion, which discretion shall be exercised in good faith.

 

 

“ Prospectus ” means, collectively, the prospectuses included in the Registration Statement, and in the form filed with the SEC pursuant to Rule 424 under the Securities Act, as amended or supplemented by any prospectus supplement and by all other amendments and supplements to such prospectuses, including post-effective amendments and all material incorporated by reference in such prospectuses.

 

 

“ Redemption ” shall have the meaning ascribed to such term in the Registration Statement.

 

 

“ Registration Statement ” means the registration statement on Form S-4 of Lorillard (No. 333-149051) filed with the SEC under the Securities Act, including the Prospectus relating thereto, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement and Prospectus.

 

 

“ Regulations ” means the regulations promulgated from time to time under the Code as in effect for the relevant taxable year or other taxable period.

 

 

“ Regulation S-K ” means Regulation S-K of the General Rules and Regulations under the Securities Act.

 

 

 

 

“ Regulation S-X ” means Regulation S-X of the General Rules and Regulations under the Securities Act.

 

 

“ Ruling Request ” means the request for rulings submitted by Loews to the IRS related to the Separation, including the exhibits attached thereto, and all related supplements.

 

 

“ SEC ” means the Securities and Exchange Commission.

 

 

“ Securities Act ” means the Securities Act of 1933.

 

 

“ Separation ” has the meaning set forth in the Registration Statement.

 

 

“ Separation Date ” shall mean the latest of (i) the Effective Date, (ii) the day of the closing of the Exchange Offer, or (iii) the day of the distribution of the Contingent Dividend.

 

 

“ Separation Tax Liability ” shall mean (i) any Taxes imposed on, increase in Taxes incurred by, or reduction of a Tax Asset of any member of the Loews Group, pursuant to a Final Determination resulting from, or arising in connection with, the failure of the Separation to qualify as tax-free under Section 355 of the Code (including, without limitation, any Tax resulting from the application of Section 355(d) or Section 355(e) of the Code to the Separation) or any corresponding provisions of any successor statute and any similar provision of state or local Tax law, and (ii) any and all Losses of any member of the Loews Group resulting from, based upon, arising out of or otherwise in respect of the failure of the Separation to qualify as tax-free under the Code (or any similar provision of state or local Tax law).

 

 

“ Subsidiary ” means with respect to any Person (i) a corporation, 50% or more of the voting or capital stock of which is, as of the time in question, directly or indirectly owned by such Person, (ii) any partnership, joint venture, association, limited liability company, joint stock company, trust, unincorporated organization or other entity in which such Person, directly or indirectly, owns 50% or more of the equity thereof or economic interest therein or has the power to elect or direct the election of 50% or more of the members of the governing body of such entity or otherwise has control (including shared control) over such entity ( e.g. , as a general partner of a partnership or a managing member of a limited liability company), or (iii) any other Person which would be considered a subsidiary of such Person within the meaning of Regulation S-K or Regulation S-X.

 

 

“ Tax ” or “ Taxes ” means all taxes, charges, fees, duties, levies, imposts, rates or other assessments or governmental charges of any kind imposed by any Governmental Entity, including, without limitation, income, gross receipts, employment, excise, severance, stamp,

 

 

 

 

occupation, premium, windfall profits, environmental, estimated, custom duties, property, sales, use, license, capital stock, transfer, franchise, registration, payroll, withholding, social security, unemployment, disability, value added, alternative or add-on minimum or other taxes, and including any interest, penalties, charges or additions attributable thereto.

 

 

“ Tax Asset ” means any Tax item of loss, deduction or credit, or other attribute that has not been used during a taxable period and that could reduce a Tax in another taxable period, including a net operating loss, net capital loss, unused investment tax credit, unused foreign tax credit, research and experimentation credit, excess charitable deduction, credit related to alternative minimum tax, or any other unused Tax credit.

 

 

“ Tax Certificate ” means the officer’s certificate of Loews, dated as of May 5, 2008, provided to Skadden, Arps, Slate, Meagher & Flom LLP (“ Skadden ”) in connection with the Tax Opinion.

 

 

“ Tax Contest ” means an audit (including the Compliance Assurance Process), claim, dispute, suit, action, proposed assessment, review, examination, or other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund).

 

 

“ Tax Opinion ” means the written opinion to be delivered by Skadden to Loews in connection with the Separation to the effect that the Separation will qualify as tax-free under Section 355 of the Code to Loews and Loews’s stockholders (except with respect to cash received by Loews’s stockholders in lieu of fractional shares of Lorillard common stock).

 

 

“ Tax Return ” means any return, report, certificate, form or similar statement or document (including any related supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) required to be supplied to, or filed with, a Governmental Entity, or any bill for or notice related to ad valorem or other similar Taxes received from a Governmental Entity, in each case, in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

 

 

“ Third Party Claim ” means any Action made against any member of either the Loews Group or the Lorillard Group by any Person that is not a member of either Group.

 

Section 1.2       Other Definitions .

 

 

 

 

ARTICLE II

 

ALLOCATION OF COSTS AND EXPENSES

 

Section 2.1       Allocation of Costs and Expenses .

 

(a)      Lorillard shall pay (or, to the extent incurred by and paid for by any member of the Loews Group, will promptly reimburse such member of the Loews Group for any and all amounts so paid) for:

 

 

 

 

 

(c)      Except as otherwise provided in Section 2.1(a) and Section 2.1(b) , Lorillard and Loews shall each pay 50% of the aggregate fees, costs and expenses (including fees and

 

 

 

 

expenses of counsel) incurred by them and their Subsidiaries in connection with the Separation, including, but not limited to:

 

 

To the extent that Loews or Lorillard previously shall have paid an amount in excess of its 50% share of the fees, costs and expenses referred to in this Section 2.1(c) , Lorillard or Loews, as the case may be, shall reimburse the other for such excess payment.

 

 

                (d)       The allocations provided for in this Section 2.1 shall not apply to the extent that Article III , Article IV or Article VI otherwise address the responsibilities of any party with respect to any fees, costs or expenses.

 

 

ARTICLE III

RELEASE AND INDEMNIFICATION

 

 

Section 3.1       Release of Pre-Separation Claims .

 

 

(a)      Except as otherwise provided in this Agreement, each member of the Lorillard Group remises, releases and forever discharges Loews and all Persons who at any time prior to the Effective Date have been stockholders, directors, officers, or employees of Loews (in their respective capacities as such) (the “Loews Releasees”), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities owed by Loews or any of the Loews Releasees to any member of the Lorillard Group, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed

 

 

 

 

on or before the Effective Date, including in connection with all activities to implement the Separation.

 

 

(b)      Except as otherwise provided in this Agreement, Loews remises, releases and forever discharges each member of the Lorillard Group and all Persons who at any time prior to the Effective Date have been directors, officers, or employees of any member of the Lorillard Group (in each case, in their respective capacities as such)(the “Lorillard Releasees”), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities owed by any member of the Lorillard Group or any of the Lorillard Releasees to Loews, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Date, including in connection with all activities to implement the Separation.

 

 

(c)      Lorillard shall not make, and shall not permit any member of the Lorillard Group to make, any claim or demand or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Loews or any other Person released pursuant to Section 3.1(a) with respect to any Liabilities released pursuant to Section 3.1(a) . Loews shall not make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Lorillard or any member of the Lorillard Group, or any other Person released pursuant to Section 3.1(b) , with respect to any Liabilities released pursuant to Section 3.1(b) .

 

 

(d)         It is the intent of each of Loews and Lorillard by virtue of the provisions of this Section 3.1 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Effective Date between or among Lorillard or any member of the Lorillard Group, on the one hand, and Loews, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Effective Date), except as expressly set forth in Section 3.1(e) . At any time, at the request of Loews or Lorillard, as the case may be, any party shall execute and deliver a release reflecting the provisions of this Section 3.1 .

 

 

(e)      Notwithstanding the foregoing, nothing contained in this Section 3.1 shall impair any right of any Person to enforce this Agreement in accordance with its terms.

 

 

(f)      This Section 3.1 shall not apply to any matters to which Article IV applies.

 

 

 

 

Section 3.2       General Cross Indemnification .

 

 

(a)      Each member of the Lorillard Group, jointly and severally, shall indemnify and hold harmless each member of the Loews Group and each of its officers, directors, and employees against any and all Losses arising out of Actions, including, without limitation, Losses arising out of, resulting from or in connection with any Action, whether grounded in tort, contract, statute or otherwise, whether now pending or hereafter asserted, which may arise out of, pertain to or be in connection with any of the following, and whether occurring before, on or after the Effective Date:

 

 

 

 

 

(b)      Loews shall indemnify and hold harmless each member of the Lorillard Group and each of its officers, directors, and employees against any and all Losses arising out of Actions, including, without limitation, Losses arising out of, resulting from or in connection with any Action, whether grounded in tort, contract, statute or otherwise, whether now pending or hereafter asserted, which may arise out of, pertain to or be in connection with any of the following, and whether occurring before, on or after the Effective Date:

 

 

(c)      The indemnification obligations contained in this Section 3.2 shall be applicable whether or not any Action or the facts or transactions giving rise to such Action arose prior to, on or subsequent to the Effective Date and whether or not the Action giving rise to any claim for indemnification is valid.

 

 

Section 3.3       Registration Statement Indemnification .

 

 

(a)      Each member of the Lorillard Group, jointly and severally, shall indemnify and hold harmless each member of the Loews Group and each of its directors, officers, and employees from and against any and all Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus, or any omission or alleged omission to state therein a material fact required to be

 

 

 

 

stated therein or necessary to make the statements therein not misleading, except insofar as such untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with information relating to Loews and furnished in writing by Loews expressly for use in the Registration Statement or Prospectus.

 

 

(b)      Loews shall indemnify and hold harmless Lorillard and each of its directors, officers, and employees from and against any and all Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only insofar as such untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with information relating to Loews and furnished in writing by Loews expressly for use in the Registration Statement or Prospectus.

 

 

(c)      The parties agree that the statements set forth in the Registration Statement and Prospectus under the following captions constitute the only information relating to Loews furnished in writing by Loews expressly for use in the Registration Statement or Prospectus:

 

(i)		“Summary—Loews”,—The Carolina Group” and “The Redemption”;
(ii)		“Transaction Background”;
(iii)		“The Redemption”, excluding “-Listing and Trading of Lorillard Common Stock”;
(iv)		“Market Price of and Dividends on Common Equity and Related Matters—Historical Market
		Value of Loews Common Stock”, “—Historical Market Value of Carolina Group Stock” and “—Holders”;
(v)		“Documents Incorporated by Reference”;
(vi)		“Loews Corporation and Subsidiaries Pro Forma Financial Information”;
(vii)		the cover page of the Offer to Exchange;
(viii)		“Questions and Answers About the Exchange Offer”;
(ix)		“Summary—The Exchange Offer”, “—Effects of the Separation on Loews” and “—Summary Pro
		Forma Financial Information of Loews”;
(x)		“Risk Factors Relating to the Exchange Offer”;
(xi)		“Terms of the Exchange Offer”;
(xii)		“Contingent Dividend Distribution”;
(xiii)		“Transactions Concerning Loews Common Stock”;

 

 

 

 

(xiv)		“Comparison of Rights of Holders of Loews Common Stock and Lorillard Common Stock”, except for the
		description of Lorillard common stock;
(xv)		“Capitalization of Loews” and,
(xvi)		“Certain U.S. Federal Income Tax Consequences”.

 

 

Section 3.4       Notice and Defense of Claims .

 

 

(a)      If any Action shall be brought against any Person entitled to indemnification pursuant to this Agreement (each, an “ Indemnified Party ”) in respect of which indemnity may be sought, such Indemnified Party shall promptly notify the applicable party or parties obligated under this Agreement to indemnify such Indemnified Party (each, an “ Indemnifying Party ”), and such Indemnifying Party shall assume the defense thereof, including employment of counsel and payment of all fees and expenses.  The failure of the Indemnified Party to give notice as provided in this Section 3.4 shall not relieve the Indemnifying Party of its obligations under this Agreement, except to the extent that the Indemnifying Party is materially prejudiced by the failure to give notice.

 

 

(b)      When an Indemnified Party reasonably determines that an Action is likely to proceed to trial or that it is otherwise appropriate that the Indemnified Party be separately represented, such Indemnified Party shall have the right to employ separate counsel in such Action and to participate in the defense thereof at the expense of the Indemnifying Party.  Prior to employing separate counsel, the Indemnified Party shall provide notice to the Indemnifying Party of its intention to employ separate counsel.  It is understood, however, that Indemnifying Party shall, in connection with any one such Action or separate but substantially similar or related Actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified parties not having actual or potential differing interests among themselves.

 

 

(c)      The Indemnified Party shall submit to the Indemnifying Party not less frequently than quarterly, copies of invoices from separate counsel, and the Indemnifying Party shall reimburse the Indemnified Party for uncontested fees and expenses within thirty (30) days of the receipt of such invoices.  Any fees and expenses objected to by the Indemnifying Party as not reasonable shall be subject to the dispute resolution provisions of Article VI of this Agreement.

 

 

(d)      All indemnification payments due under this Agreement shall be made by wire transfer of immediately available funds to a bank account of the Indemnified Party.  Late payments shall be subject to interest at a rate per annum equal to the then effective Prime Rate

 

 

 

 

plus two hundred (200) basis points (or the maximum legal rate, whichever is lower), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.

 

 

(e)      An Indemnified Party shall not settle or compromise any Action for which indemnification hereunder has been sought by the Indemnified Party without first providing notice to the Indemnifying Party, unless the Indemnifying Party has failed to assume and prosecute the defense of such Action in accordance with this Agreement.  Such notice to be provided by the Indemnified Party will include a reasonable opportunity for the Indemnifying Party to consent to the settlement or compromise, or to object on the basis that the settlement or compromise will materially impair the rights or defenses of the Indemnifying Party in the same or similar Actions.

 

 

(f)      

 

 

 

         (g)      The provisions of this Article III shall determine the respective indemnification obligations and rights of the parties to this Agreement, but shall not be deemed to prevent or impair the absolute right of any member of the Loews Group or the Lorillard Group from assuming the defense of, or effecting any settlement or compromise of, any Action to which it is a party, which rights are expressly permitted hereunder.

Section 3.5       Contribution .

 

 

(a)      If the indemnification provided for in this Article III is unavailable to an Indemnified Party under Section 3.3 in respect of any Losses referred to therein, or if such indemnification is insufficient to hold the Indemnified Party harmless, then an I