Exhibit 10.20
PURCHASE AGREEMENT
dated as of
March 9, 1999
among
▇. ▇. ▇▇▇▇▇▇▇▇ TOBACCO COMPANY
RJR NABISCO, INC.
and
JAPAN TOBACCO INC.
TABLE OF CONTENTS
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ARTICLE 1DEFINITIONS
SECTION 1.01. DEFINITIONS......................................................2
ARTICLE 2PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE................................................8
SECTION 2.02. PURCHASE PRICE...................................................9
SECTION 2.03. CLOSING..........................................................9
SECTION 2.04. CLOSING BALANCE SHEET............................................9
SECTION 2.05. ADJUSTMENT OF PURCHASE PRICE....................................11
SECTION 2.06. ALLOCATION OF PURCHASE PRICE....................................12
ARTICLE 3REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 3.01. CORPORATE EXISTENCE AND POWER...................................13
SECTION 3.02. CORPORATE AUTHORIZATION.........................................13
SECTION 3.03. GOVERNMENTAL AUTHORIZATION......................................13
SECTION 3.04. NONCONTRAVENTION................................................14
SECTION 3.05. CAPITALIZATION..................................................14
SECTION 3.06. OWNERSHIP OF SHARES.............................................14
SECTION 3.07. SUBSIDIARIES....................................................15
SECTION 3.08. FINANCIAL STATEMENTS............................................15
SECTION 3.09. ABSENCE OF CERTAIN CHANGES......................................16
SECTION 3.10. NO UNDISCLOSED MATERIAL LIABILITIES.............................17
SECTION 3.11. INTERCOMPANY ACCOUNTS...........................................18
SECTION 3.12. MATERIAL CONTRACTS..............................................18
SECTION 3.13. LITIGATION......................................................19
SECTION 3.14. COMPLIANCE WITH LAWS AND COURT ORDERS...........................20
SECTION 3.15. INTELLECTUAL PROPERTY...........................................20
SECTION 3.16. INSURANCE COVERAGE..............................................20
SECTION 3.17. FINDERS'FEES....................................................20
SECTION 3.18. ENVIRONMENTAL MATTERS...........................................21
SECTION 3.19. YEAR 2000 COMPLIANCE............................................21
SECTION 3.20. NECESSARY PROPERTY..............................................22
SECTION 3.21. SELLERS'GROUP...................................................22
ARTICLE 4REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. CORPORATE EXISTENCE AND POWER...................................22
SECTION 4.02. CORPORATE AUTHORIZATION.........................................22
SECTION 4.03. GOVERNMENTAL AUTHORIZATION......................................23
SECTION 4.04. NONCONTRAVENTION................................................23
SECTION 4.05. FINANCING.......................................................23
SECTION 4.06. PURCHASE FOR INVESTMENT.........................................23
SECTION 4.07. LITIGATION......................................................24
SECTION 4.08. FINDERS'FEES....................................................24
SECTION 4.09. INSPECTIONS; NO OTHER REPRESENTATIONS...........................24
ARTICLE 5COVENANTS OF SELLERS
SECTION 5.01. CONDUCT OF THE RJRI COMPANIES...................................25
SECTION 5.02. ACCESS TO INFORMATION...........................................26
SECTION 5.03. RESIGNATIONS....................................................27
SECTION 5.04. RELATED AGREEMENTS..............................................27
SECTION 5.05. DELIVERY OF DIRECTOR QUALIFYING SHARES..........................27
ARTICLE 6COVENANTS OF BUYER
SECTION 6.01. CONFIDENTIALITY.................................................27
SECTION 6.02. RELATED AGREEMENTS..............................................28
SECTION 6.03. GUARANTEES OF RJRI GROUP INDEBTEDNESS...........................28
SECTION 6.04. TRANSFER AND ASSIGNMENT OF PURCHASED IPRS.......................28
ARTICLE 7COVENANTS OF BUYER AND SELLERS
SECTION 7.01. BEST EFFORTS; FURTHER ASSURANCES................................28
SECTION 7.02. CERTAIN FILINGS.................................................29
SECTION 7.03. PUBLIC ANNOUNCEMENTS............................................29
SECTION 7.04. INTERCOMPANY ACCOUNTS...........................................29
SECTION 7.05. NOTICES OF CERTAIN EVENTS.......................................29
ARTICLE 8TAX MATTERS
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SECTION 8.01. TAX DEFINITIONS.................................................30
SECTION 8.02. TAX REPRESENTATIONS.............................................31
SECTION 8.03. TAX COVENANTS...................................................31
SECTION 8.04. COOPERATION ON TAX MATTERS......................................32
SECTION 8.05. INDEMNIFICATION BY SELLERS......................................33
ARTICLE 9EMPLOYEE BENEFIT
SECTION 9.01. DEFINITIONS.....................................................34
SECTION 9.02. REPRESENTATIONS.................................................36
SECTION 9.03. RJRI EMPLOYEES..................................................37
SECTION 9.04. SELLERS'U.S. PENSION PLANS......................................39
SECTION 9.05. SELLERS'U.S. INDIVIDUAL ACCOUNT PLANS...........................39
SECTIO N9.06. PERFORMANCE APPRECIATION RIGHTS.................................40
ARTICLE 10CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS.................40
SECTION 10.02. CONDITIONS TO OBLIGATIONS OF BUYER.............................41
SECTION 10.03. CONDITIONS TO OBLIGATIONS OF SELLERS...........................41
ARTICLE 11SURVIVAL; INDEMNIFICATION
SECTION 11.01. SURVIVAL.......................................................42
SECTION 11.02. INDEMNIFICATION................................................43
SECTION 11.03. PROCEDURES.....................................................44
SECTION 11.04. CALCULATION OF DAMAGES.........................................45
SECTION 11.05. ASSIGNMENT OF CLAIMS...........................................45
SECTION 11.06. EXCLUSIVITY OF REMEDIES........................................46
ARTICLE 12TERMINATION
SECTION 12.01. GROUNDS FOR TERMINATION........................................46
SECTION 12.02. EFFECT OF TERMINATION..........................................47
ARTICLE 13MISCELLANEOUS
SECTION 13.01. NOTICES........................................................47
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SECTION 13.02. AMENDMENTS AND WAIVERS.........................................48
SECTION 13.03. EXPENSES.......................................................49
SECTION 13.04. SUCCESSORS AND ASSIGNS.........................................49
SECTION 13.05. GOVERNING LAW..................................................49
SECTION 13.06. JURISDICTION...................................................49
SECTION 13.07. WAIVER OF JURY TRIAL...........................................50
SECTION 13.08. COUNTERPARTS; THIRD PARTY BENEFICIARIES........................50
SECTION 13.09. ENTIRE AGREEMENT...............................................50
SECTION 13.10. CAPTIONS.......................................................50
SECTION 13.11. DISCLOSURE LETTER..............................................50
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PURCHASE AGREEMENT
PURCHASE AGREEMENT dated as of ▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.,
a Japanese corporation ("BUYER"), ▇. ▇. ▇▇▇▇▇▇▇▇ TOBACCO COMPANY, a New Jersey
corporation ("RJRT"), and RJR NABISCO, INC., a Delaware corporation ("RJRN" and,
together with RJRT, the "SELLERS").
W I T N E S S E T H :
WHEREAS, Sellers (and certain of their direct or indirect subsidiaries)
are the record and beneficial owners of the Shares (as defined below) of each of
the RJRI Companies (as defined below) and desire to sell the Shares and the
Purchased Assets (as defined below) to Buyer, and Buyer desires to (or to have
one or more of its direct or indirect subsidiaries) purchase the Shares of each
of the RJRI Companies and the Purchased Assets from Sellers (or their direct or
indirect subsidiaries), upon the terms and subject to the conditions set forth
below;
WHEREAS, it is contemplated that Sellers and Buyer will enter into
agreements on and as of the Closing Date providing for the sale, conveyance,
transfer, assignment and delivery of (i) the Purchased IPRs (as defined below),
substantially in the form attached hereto as Exhibit A (the "IPR AGREEMENT") and
(ii) the Puerto Rico Plant (as defined below) pursuant to an agreement (the
"TRANSFER AGREEMENT") containing terms and conditions reasonably acceptable to
Sellers and Buyer providing for the transfer of all of the assets and assumption
of all of the liabilities, in each case relating to the Puerto Rico Plant and
reflected on the Closing Balance Sheet (as defined below);
WHEREAS, the RJRI Companies conduct an international business involving
(i) the manufacture, marketing, sale and distribution of tobacco products for
sale outside of the United States (as defined below), (ii) the manufacture of
tobacco products in Puerto Rico for export outside of the United States and
(iii) a brand diversification business outside the United States (collectively,
the "BUSINESS");
WHEREAS, it is contemplated that Buyer and Sellers (and/or their
Affiliates, as appropriate) will enter into a Production Agreement on and as of
the Closing Date having terms and conditions substantially similar to those set
forth on the term sheet attached as Exhibit B hereto (the "PRODUCTION
AGREEMENT") for the supply of tobacco products by Sellers' Group (as defined
below) to Buyer, its
Affiliates (as defined below) or the RJRI Group (as defined below) for use in
the Business following the Closing; and
WHEREAS, it is contemplated that Buyer and Sellers (and/or their
Affiliates, as appropriate) will enter into a Transitional Services Agreement on
and as of the Closing Date having terms and conditions substantially similar to
those set forth on the term sheet attached as Exhibit C hereto (the
"TRANSITIONAL SERVICES AGREEMENT") relating to certain services to be performed
by members of Sellers' Group for the benefit of Buyer, its Affiliates or the
RJRI Group following the Closing to permit an orderly transition of ownership of
the Business.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. (a) The following terms, as used herein, have
the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; PROVIDED that none of the RJRI Companies or any Subsidiary shall be
considered an Affiliate of Sellers or Buyer, but shall be considered an
Affiliate of Buyer immediately after the Closing Date and FURTHER PROVIDED that
the Government of Japan shall not be considered an Affiliate of Buyer. For
purposes of this definition, the term "CONTROL" (including the correlative terms
"CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
"BALANCE SHEET" means the audited combined balance sheet of the RJRI
Group as of December 31, 1998.
"BALANCE SHEET DATE" means December 31, 1998.
"BUSINESS DAY" means any day other than a Saturday, Sunday or one on
which banks are authorized or required by law to close in New York, New York or
in Tokyo, Japan.
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"CAPITAL STOCK" means the capital stock of each of the RJRI Companies
set forth on Exhibit D hereto.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986.
"CONFIDENTIALITY AGREEMENT" means the confidentiality agreement between
RJRN and Buyer dated December 14, 1998.
"DISCLOSURE LETTER" means the letter from Sellers to Buyer that is
identified as the disclosure letter and that is dated the date of this
Agreement, as such letter may be revised after the date hereof in the manner
contemplated by Section 13.11.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or any agreement with any Governmental Entity relating to the
environment, the effect of the environment on human health and safety or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities arising in
connection with or in any way relating to the Business (as currently or
previously conducted), the RJRI Group or any activities or operations occurring
or conducted at the real property used or held for use in the conduct of the
Business (together with all buildings, fixtures and improvements thereon and,
also including, without limitation, offsite disposal), whether accrued,
contingent, absolute, determined, determinable or otherwise, which arise under
or relate to any Environmental Law, whether now or hereinafter in effect,
(including, without limitation, any matter disclosed or required to be disclosed
in the Disclosure Letter pursuant to Section 3.18).
"EXCLUDED LIABILITIES" means any and all liabilities, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising out of or
related to the matters described in paragraphs 22, 23 or 24 of Section 3.13 of
the Disclosure Letter or otherwise arising out of or related to activities of
Northern Brands International, Inc. or its employees.
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"GAAP" means generally accepted accounting principles in the United
States.
"GOVERNMENTAL ENTITY" means any government or any state, department or
other political subdivision thereof, or any governmental body, agency, authority
(including, without limitation, any central bank or taxing authority) or
instrumentality (including, without limitation, any court or tribunal) in any
jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant or any toxic,
radioactive or otherwise hazardous substance, as such terms are defined in, or
identified pursuant to, any Environmental Law.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976.
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service ▇▇▇▇, trade
name, trade dress, invention, patent, trade secret, copyright, rights in
designs, know-how (including any registrations or applications for registration
of any of the foregoing) or any other similar type of proprietary intellectual
property right.
"KNOWLEDGE OF SELLERS", "SELLERS' KNOWLEDGE" or any other similar
knowledge qualification in this Agreement means to the actual knowledge of any
senior vice president or more senior executive officer of ▇. ▇. ▇▇▇▇▇▇▇▇
International B.V. (Hilversum), ▇▇▇▇▇▇ ▇▇▇▇▇▇.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest or encumbrance in respect of such
property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition, business, assets, liabilities or results of operations of
the Business taken as a whole, except any such effect resulting from or arising
in connection with (i) any of the Transaction Documents, the transactions
contemplated by the Transaction Documents or the announcement thereof, (ii)
changes or conditions (including changes in GAAP, law, regulation or judicial or
other interpretation) affecting the tobacco industry generally or any particular
markets in which the Business is operated, (iii) changes in economic, financial
market, regulatory or political conditions generally or in particular markets in
which the Business is operated or (iv) any matters disclosed in the Disclosure
Letter.
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"1934 ACT" means the Securities Exchange Act of 1934.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof
(or any equivalent in any jurisdiction).
"PUERTO RICO PLANT" means the real property, and personal property
appurtenant thereto, located in Puerto Rico currently used in the operation of
the Business primarily in connection with (i) the manufacture of tobacco
products and (ii) the sale, marketing and distribution of tobacco products
outside the United States, but shall exclude the real property, and personal
property appurtenant thereto, located in Puerto Rico currently used by the
Sellers' Group or the RJRI Group exclusively in connection with the sale,
marketing and distribution of tobacco products in the United States.
"PURCHASED ASSETS" means the Purchased IPRs and the Puerto Rico Plant.
"PURCHASED IPRS" means the Intellectual Property Rights identified on
Schedule 1.01(a).
"RJRI COMPANIES" means the companies listed on Exhibit D hereto.
"RJRI GROUP" means the RJRI Companies and their Subsidiaries.
"RJRI LIABILITIES" means all debts, obligations, contracts and
liabilities of any member of either the RJRI Group or the Sellers' Group (or any
predecessor of any member of either the RJRI Group or the Sellers' Group or any
prior owner of all or part of their businesses or assets) of any kind, character
or description (whether known or unknown, accrued, absolute, contingent,
indirect or derivative, or otherwise) in any way relating to or arising out of
the conduct of the Business, in whole or in part, including without limitation,
(i) all liabilities set forth on the Closing Balance Sheet; (ii) all liabilities
relating to any Sellers' Group Guarantee remaining outstanding after the
Closing; (iii) all Environmental Liabilities; (iv) all liabilities and
obligations arising out of any action, suit, investigation or proceeding before
any arbitrator or Governmental Entity listed in the Disclosure Letter; (v) all
liabilities and obligations arising out of any action, suit, investigation or
proceedings before any arbitrator or Governmental Entity which may at any time
(whether past, present or future) be made, commenced, asserted or pursued that
in any way are based upon or arise from tobacco products of any description
consumed or intended to be consumed outside of the United States, including,
without limitation, all such liabilities and obligations relating to or arising
in any way from (A) the manufacture, marketing, development,
5
advertising, research, distribution or sale of such products on or before the
Closing Date and (B) any statement or other actions or omissions of any member
of either the RJRI Group or the Sellers' Group (or any predecessor of any member
of either the RJRI Group or the Sellers' Group or any prior owner of all or part
of their businesses or assets) made or occurring on or before the Closing Date
relating to such products, (vi) all liabilities and obligations relating to any
products manufactured or sold by the Business at any time, including without
limitation all warranty obligations and product liabilities and any liability or
obligation relating to the health effects of, or exposure to, any products
manufactured or sold by the Business at any time and (vii) except as expressly
provided in Article 9, all liabilities or obligations relating to employee
benefits or compensation arrangements existing on or prior to the Closing Date
with respect to any employee or former employee of the Business. Notwithstanding
the foregoing, "RJRI LIABILITIES" shall exclude the liabilities for which Buyer
or its Affiliates are expressly indemnified by Sellers pursuant to this
Agreement.
"SELLERS' GROUP" means Sellers and their respective Affiliates
(exclusive of any member of the RJRI Group).
"SELLERS' GROUP GUARANTEES" means the guarantees by members of Sellers'
Group of indebtedness of any member of the RJRI Group listed on Schedule 6.03.
"SELLERS PRODUCT LIABILITIES" means all liabilities and obligations of
any member of either the RJRI Group or the Sellers' Group (or any predecessor of
any member of either the RJRI Group or the Sellers' Group or any prior owner of
all or part of their businesses or assets) of any kind, character or description
(whether known or unknown, accrued, absolute, contingent, indirect or
derivative, or otherwise) arising out of any action, suit, investigation or
proceeding before any arbitrator or Governmental Entity which may at any time
(whether past, present or future) be made, commenced, asserted or pursued that
are in any way based upon or arise from tobacco products of any description
consumed or intended to be consumed in the United States (exclusive of any such
liabilities and obligations in any way based upon or arising from the
manufacture, marketing, development, advertising, research, distribution or sale
of tobacco products by Buyer or its Affiliates on or before the Closing Date),
including, without limitation, all such liabilities and obligations relating to
or arising in any way from (A) the manufacture, marketing, development,
advertising, research, distribution or sale of such products on or before the
Closing Date and (B) any statement or other actions or omissions of any member
of either the RJRI Group or the Sellers' Group (or any predecessor of any member
of either the RJRI Group or the Sellers'
6
Group or any prior owner of all or part of their businesses or assets) made or
occurring on or before the Closing Date.
"SHARES" means the shares of Capital Stock referred to in Exhibit D
hereto.
"SPECIAL PURPOSE ACCOUNTING BASIS" means the basis of accounting and
reporting for special purpose financial presentations. The Special Purpose
Accounting Basis shall conform with GAAP, applied on a basis consistent with
those used in preparing the Pro Forma Balance Sheet (except as may be indicated
in the notes thereto), except that: (i) accounting standards which become
effective after December 31, 1998 will not be adopted; (ii) intangible assets
(including, without limitation, goodwill, patents, trademarks, deferred expenses
and unamortized debt discount) will not be amortized or otherwise adjusted
subsequent to December 31, 1998 and (iii) any currency translation adjustments
recorded on the Pro Forma Balance Sheet will not be adjusted subsequent to
December 31, 1998.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by any of the RJRI Companies.
"TRANSACTION DOCUMENTS" means, this Agreement, the Production
Agreement, the Transitional Services Agreement, the IPR Agreement, the Transfer
Agreement and the documents referred to in Sections 2.03(b) and (c).
"UNITED STATES" means the United States of America and each of its
territories, commonwealths and possessions (including, without limitation,
Puerto Rico) but shall not include U.S. embassies and consulates, U.S. military
installations located outside the United States and worldwide duty-free sales.
Any reference in this Agreement to a statute shall be to such statute,
as in effect on the date of this Agreement, and to the rules and regulations
promulgated thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
Applicable Tax Rate 8.05
Base Stockholder's Equity 2.05
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TERM SECTION
Business Recitals
Buyer Preamble
Claim 11.03
Closing 2.03
Closing Balance Sheet 2.04
Closing Stockholder's Equity 2.04
Company Intellectual Property Rights 3.15
Company Securities 3.05
Damages 11.02
Final Stockholder's Equity 2.05
Indemnified Party 11.03
Indemnifying Party 11.03
Loss 8.05
Post-Closing Tax Period 8.01
Potential Contributor 11.05
Pre-Closing Tax Period 8.01
Production Agreement Recitals
Pro Forma Balance Sheet 3.08
Purchase Price 2.01
Returns 8.02
RJRI Company Securities 3.05
RJRN Preamble
RJRT Preamble
Sellers Preamble
Subsidiary Securities 3.07
Tax 8.01
Tax Benefit 8.05
Taxing Authority 8.01
Third Party Claim 11.03
Trademark Agreement Recitals
Transitional Services Agreement Recitals
ARTICLE 2
PURCHASE AND SALE
8
SECTION 2.1. PURCHASE AND SALE. Except as otherwise provided below,
upon the terms and subject to the conditions of this Agreement, at Closing, (i)
Sellers agree to sell, or to cause one or more of their direct or indirect
subsidiaries to sell to Buyer, and Buyer agrees to purchase (or to cause one or
more of its direct or indirect subsidiaries to purchase) from Sellers or such
subsidiary or subsidiaries, the Shares free from all Liens and together with all
rights attaching thereto and (ii) Buyer agrees to acquire or to cause one or
more of its direct or indirect subsidiaries to acquire, and Sellers agree to
sell, convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to Buyer free and clear of all Liens
(except as indicated in Section 3.15 of the Disclosure Letter) (x) all of the
right, title and interest in, to and under the Purchased IPRs contemplated to be
transferred pursuant to the IPR Agreement and (y) all of the right, title and
interest of any member of the Sellers' Group in and to the Puerto Rico Plant
pursuant to the Transfer Agreement.
SECTION 2.2. PURCHASE PRICE. The purchase price for the Shares and
Purchased Assets (the "PURCHASE PRICE") is $7,832,539,000.00 in cash. The
Purchase Price shall be paid as provided in Section 2.03 and shall be subject to
adjustment as provided in Section 2.05.
SECTION 2.3. CLOSING. The closing (the "CLOSING") of the purchase and
sale of the Shares and the Purchased Assets shall take place at the offices of
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (or such other
location as mutually agreed), as soon as possible, but in no event later than
eight Business Days, after satisfaction of the conditions set forth in Article
10, or at such other time or place as Buyer and Sellers may agree. At the
Closing:
(a) Buyer shall deliver to Sellers $7,832,539,000.00 in
immediately available funds by wire transfer to an account of Sellers
or one or more of their Affiliates with a bank in New York City
designated by Sellers. Sellers shall designate this bank by notice to
Buyer, not later than five Business Days prior to the Closing Date.
(b) Sellers shall deliver to Buyer certificates for the Shares
duly endorsed or accompanied by stock powers duly endorsed in blank or
such other documents as may be required to effect transfer thereof in
any applicable jurisdiction.
(c) Sellers and Buyer (or their respective Affiliates) shall
enter into, or have previously entered into, each of the Transaction
Documents, and, subject to the provisions hereof, Sellers shall deliver
to Buyer such deeds, bills of sale, endorsements, consents, assignments
and other good
9
and sufficient instruments of conveyance and assignment as the parties
and their respective counsel shall deem reasonably necessary to vest in
Buyer all right, title and interest in, to and under the Purchased
Assets.
SECTION 2.4. CLOSING BALANCE SHEET. (a) As promptly as practicable, but
no later than 60 days after the Closing Date, Sellers will cause to be prepared
and delivered to Buyer the Closing Balance Sheet and a certificate based on such
Closing Balance Sheet setting forth Sellers' calculation of Closing
Stockholder's Equity. The Closing Balance Sheet (the "CLOSING BALANCE SHEET")
shall (x) fairly present the pro forma combined financial position of the RJRI
Group as at the close of business on the Closing Date in accordance with the
Special Purpose Accounting Basis and assumptions, adjustments and accounting
policies and practices otherwise consistent with those used in preparing the Pro
Forma Balance Sheet (as defined in Section 3.08) and (y) include line items
consistent with those in the Pro Forma Balance Sheet. "CLOSING STOCKHOLDER'S
EQUITY" means the combined stockholder's equity of the RJRI Group as shown on
the Closing Balance Sheet, including the effect of the cancellation of
intercompany accounts pursuant to Section 7.04 but excluding (A) the effect
(including the tax effect) of any act, event or transaction occurring on or
after the Closing Date and not in the ordinary course of the operation of the
Business, (B) any accounting for deferred income tax assets or liabilities, (C)
any write up or write down of assets (other than current assets) from their
historic depreciated or amortized carrying cost to reflect any higher or lower
market value and (D) any reserves established on or after the Closing Date for
any contingent liabilities that are reflected in the Disclosure Letter or that
were otherwise previously disclosed to Buyer. The parties acknowledge and agree
that the Purchase Price takes into account the stockholders' equity reflected on
the RJRI Pro Forma Balance Sheet and that the sole adjustment contemplated by
Section 2.05 is to reflect the change in stockholders' equity of the RJRI
Companies solely as a result of operations of the Business from the Balance
Sheet Date to the Closing Date inclusive of all transactions and all changes in
facts and circumstances actually occurring between the two dates.
(b) If Buyer disagrees with Sellers' calculation of Closing
Stockholder's Equity delivered pursuant to Section 2.04(a), Buyer may, within 20
days after delivery of the documents referred to in Section 2.04(a), deliver a
notice to Sellers disagreeing with such calculation and setting forth Buyer's
calculation of such amount. Any such notice of disagreement shall specify those
items or amounts as to which Buyer disagrees, and Buyer shall be deemed to have
agreed with all other items and amounts contained in the Closing Balance Sheet
and the calculation of Closing Stockholder's Equity delivered pursuant to
Section 2.04(a).
10
(c) If a notice of disagreement is duly delivered pursuant to Section
2.04(b), Buyer and Sellers shall, during the 15 days following such delivery,
use their best efforts to reach agreement on the disputed items or amounts in
order to determine, as may be required, the amount of Closing Stockholder's
Equity, which amount shall not be more than the amount thereof shown in Sellers'
calculations delivered pursuant to Section 2.04(a) nor less than the amount
thereof shown in Buyer's calculation delivered pursuant to Section 2.04(b). If,
during such period, Buyer and Sellers are unable to reach such agreement, they
shall promptly thereafter cause independent accountants of internationally
recognized standing reasonably satisfactory to Buyer and Sellers (who shall not
have any material relationship with Buyer or Sellers), promptly to review this
Agreement and the disputed items or amounts for the purpose of calculating
Closing Stockholder's Equity. In making such calculation, such independent
accountants shall consider only those items or amounts in the Closing Balance
Sheet or Sellers' calculation of Closing Stockholder's Equity as to which Buyer
has disagreed. Such independent accountants shall deliver to Buyer and Sellers,
as promptly as practicable, a report setting forth such calculation. Such report
shall be final and binding upon Buyer and Sellers. The cost of such review and
report shall be borne (i) by Sellers if the difference between Final
Stockholder's Equity and Sellers' calculation of Closing Stockholder's Equity
delivered pursuant to Section 2.04(a) is greater than the difference between
Final Stockholder's Equity and Buyer's calculation of Closing Stockholder's
Equity delivered pursuant to Section 2.04(b), (ii) by Buyer if the first such
difference is less than the second such difference and (iii) otherwise equally
by Buyer and Sellers. If Buyer and Sellers are unable to agree on the selection
of independent accountants pursuant to this Section within five days of one or
both of the Buyer and Sellers having first nominated independent accountants for
this purpose, then either Buyer or Sellers may give written notice of intention
to submit the selection of such accountants to the American Arbitration
Association in New York City, it being understood that the American Arbitration
Association will be instructed to select independent accountants of
internationally recognized standing from among the "big five" internationally
recognized firms. The selection of independent accountants by the American
Arbitration Association shall be binding on the parties.
(d) Buyer and Sellers agree that they will, and agree to cause their
respective independent accountants and the members of the RJRI Group to,
cooperate and assist in the preparation of the Closing Balance Sheet and the
calculation of Closing Stockholder's Equity and in the conduct of the audits and
reviews referred to in this Section 2.04, including without limitation, the
making available to the extent necessary of books, records, work papers and
personnel.
11
SECTION 2.5. ADJUSTMENT OF PURCHASE PRICE. (a) If Base Stockholder's
Equity exceeds Final Stockholder's Equity, Sellers shall pay to Buyer, as an
adjustment to the Purchase Price, in the manner and with interest as provided in
Section 2.05(b), the amount of such excess. If Final Stockholder's Equity
exceeds Base Stockholder's Equity, Buyer shall pay to Sellers, in the manner and
with interest as provided in Section 2.05(b), the amount of such excess. "BASE
STOCKHOLDER'S EQUITY" means $2,338,627,000.00. "FINAL STOCKHOLDER'S EQUITY"
means the Closing Stockholder's Equity (i) as shown in Sellers' calculation
delivered pursuant to Section 2.04(a), if no notice of disagreement with respect
thereto is duly delivered pursuant to Section 2.04(b) or (ii) if such a notice
of disagreement is delivered, (A) as agreed by Buyer and Sellers pursuant to
Section 2.04(c) or (B) in the absence of such agreement, as shown in the
independent accountant's calculation delivered pursuant to Section 2.04(c);
PROVIDED that in no event shall Final Stockholder's Equity be more than Sellers'
calculation of Closing Stockholder's Equity delivered pursuant to Section
2.04(a) or less than Buyer's calculation of Closing Stockholder's Equity
delivered pursuant to Section 2.04(b). Any adjustment to the Purchase Price
shall be allocated PRO RATA among the Shares.
(b) Any payment pursuant to Section 2.05(a) shall be made at a
mutually convenient time and place within 10 days after the Final Stockholder's
Equity has been determined by delivery by Buyer or Sellers, as the case may be,
of a certified or official bank check payable in immediately available funds to
the other party or by causing such payments to be credited to such account of
such other party as may be designated by such other party. The amount of any
payment to be made pursuant to this Section 2.05 shall bear interest from and
including the Closing Date to but excluding the date of payment at a rate per
annum equal to the Prime Rate as published in the Wall Street Journal, Eastern
Edition in effect from time to time during the period from the Closing Date to
the date of payment. Such interest shall be payable at the same time as the
payment to which it relates and shall be calculated daily on the basis of a year
of 365 days and the actual number of days elapsed.
SECTION 2.6. ALLOCATION OF PURCHASE PRICE. Sellers and Buyer agree that
the Purchase Price shall be allocated as follows: (i) $5,065,069,000.00 to the
Shares, (ii) $2,600,000,000.00 to the Purchased IPRs owned by members of the
Sellers' Group, and (iii) $167,470,000.00 to certain other assets. Sellers and
Buyer agree to act in accordance with the foregoing allocation in the
preparation of financial statements and filing of all Tax returns. The
allocation of the Purchase Price among the Shares and certain other assets is
set forth on Exhibit E hereto.
12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the Disclosure Letter, Sellers jointly and
severally represent and warrant to Buyer as of the date hereof and as of the
Closing Date (unless and to the extent any such representation or warranty
speaks specifically as of an earlier date, in which case, as of such earlier
date) that:
SECTION 3.1. CORPORATE EXISTENCE AND POWER. Each Seller and each member
of the RJRI Group is a business entity duly organized, validly existing and
(with respect to those jurisdictions recognizing the concept of good standing)
in good standing under the laws of its jurisdiction of organization and has all
powers and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except for those
powers, licenses, authorizations, permits, consents and approvals the absence of
which would not have a Material Adverse Effect. Each member of the RJRI Group is
duly qualified to do business and is in good standing in each jurisdiction where
such qualification is necessary, except for those jurisdictions where failure to
be so qualified or in good standing would not, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 3.2. CORPORATE AUTHORIZATION. The execution, delivery and
performance by each Seller and each of its direct or indirect subsidiaries that
is selling Shares to the Buyer pursuant to Section 2.01 of the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby are within the corporate powers of that Seller and each of its direct or
indirect subsidiaries that is selling Shares to the Buyer pursuant to Section
2.01 and have been duly authorized by all necessary corporate action on the part
of that Seller or that subsidiary, as the case may be. The Transaction Documents
constitute valid and binding agreements of each Seller that is a party thereto.
SECTION 3.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each Seller and each of its direct or indirect subsidiaries that
is selling Shares to the Buyer pursuant to Section 2.01 of the Transaction
Documents and the consummation of the transactions contemplated thereby require
no action by or in respect of, or filing with, any Governmental Entity other
than (i) compliance with any applicable requirements of the HSR Act and Council
Regulation (EC) No. 4064/89 of the Council of the European Union (or the
requirements of any national authority within the European Community to whom
13
the acquisition of the Shares and the Purchased Assets (or any part thereof) is
referred pursuant to Article 9(3) of such regulation); (ii) compliance with any
applicable requirements of the 1934 Act; (iii) compliance with any applicable
requirements of the Investment Canada Act and the Competition Act of Canada;
(iv) compliance with any other similar law or measure under which any
Governmental Entity of competent jurisdiction regulates or controls the purchase
or sale of any entity or assets; (v) any such action or filing needed to effect
the transfer of the Purchased IPRs; (vi) any notice filing required by any
jurisdiction as a result of the transfer of ownership of any RJRI Company; (vii)
the filing of appropriate documents with the relevant stock exchange authorities
or other self-regulatory organizations in other jurisdictions in which any
member of the RJRI Group is qualified to do business; and (viii) any such action
or filing which, if not obtained or made, would not have a Material Adverse
Effect.
SECTION 3.4. NONCONTRAVENTION. The execution, delivery and performance
by each Seller, each of its direct or indirect subsidiaries that is selling
Shares to the Buyer pursuant to Section 2.01 or each member of the RJRI Group of
the Transaction Documents (to the extent that it is a party thereto) and the
consummation of the transactions contemplated hereby and thereby do not and will
not (i) violate the organizational documents of either Seller, each of its
direct or indirect subsidiaries that is selling Shares to the Buyer pursuant to
Section 2.01 or such member of the RJRI Group, (ii) assuming compliance with the
matters referred to in Section 3.03, violate any applicable law, rule,
regulation, judgment, injunction, order or decree, except for any such
violations as would not reasonably be expected to have a Material Adverse
Effect, (iii) except as to matters that would not reasonably be expected to have
a Material Adverse Effect, require any consent or other action by any Person
under, constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of such member of the
RJRI Group or to a loss of any benefit to which such member of the RJRI Group is
entitled under any provision of any agreement or other instrument binding upon
such member of the RJRI Group or (iv) result in the creation or imposition of
any Lien on any Purchased Asset or any asset of such member of the RJRI Group.
SECTION 3.5. CAPITALIZATION. The Disclosure Letter sets forth the
authorized capital stock of the RJRI Companies. All outstanding shares of
capital stock of each RJRI Company have been duly authorized and validly issued
and are fully paid and each outstanding share of capital stock of each RJRI
Company which is incorporated in a State of the United States is non-assessable.
The Disclosure Letter sets forth all outstanding (i) shares of capital stock or
voting securities of any RJRI Company, (ii) securities of any RJRI Company
convertible into or exchangeable for shares of capital stock or voting
securities of such ▇▇▇▇
▇▇
Company and (iii) options or other rights to acquire from any RJRI Company, or
other obligation of any RJRI Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of such RJRI Company (the items in clauses 3.05(i), 3.05(ii)
and 3.05(iii) being referred to collectively as the "RJRI COMPANY SECURITIES").
There are no outstanding obligations of any member of the RJRI Group to
repurchase, redeem or otherwise acquire any RJRI Company Securities.
SECTION 3.6. OWNERSHIP OF SHARES. Sellers, or one or more of their
direct or indirect subsidiaries, are the record and beneficial owner of the
Shares, free and clear of any Lien, and will transfer and deliver to Buyer at
the Closing valid title to the Shares free and clear of any Lien.
SECTION 3.7. SUBSIDIARIES. All Subsidiaries and their respective
jurisdictions of incorporation or organization are identified in the Disclosure
Letter. All of the outstanding capital stock or other voting securities of each
Subsidiary is owned by the RJRI Companies, directly or indirectly, free and
clear of any Lien. There are no outstanding (i) securities of any member of the
RJRI Group convertible into or exchangeable for shares of capital stock or
voting securities of any Subsidiary or (ii) options or other rights to acquire
from any member of the RJRI Group, or other obligation of any member of the RJRI
Group to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of any Subsidiary
(the items in clauses 3.07(a)(i) and 3.07(a)(ii) being referred to collectively
as the "SUBSIDIARY SECURITIES"). There are no outstanding obligations of any
member of the RJRI Group to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
SECTION 3.8. FINANCIAL STATEMENTS. (a The audited combined balance
sheet as of December 31, 1998 and the related audited combined statements of
income and cash flows for the year ended December 31, 1998 of ▇.▇. ▇▇▇▇▇▇▇▇
International and related companies fairly present, in conformity with GAAP
applied on a consistent basis (except as may be indicated in the notes thereto),
the combined financial position of the RJRI Group as of the date thereof and
their combined results of operations and cash flows for the period then ended
and are consistent with the books and records of the RJRI Group. The parties
understand and acknowledge that there are certain differences between, on the
one hand, the financial position and results of operations and cash flows of the
RJRI Group as presented in the audited financial statements as of and for the
period ended December 31, 1998 and, on the other hand, the pro forma financial
position and results of operations and cash flows of the RJRI Group reflecting
certain differences in the assets and liabilities being transferred pursuant to
this
15
Agreement, the principal differences being specified in the notes to the Pro
Forma Financial Statements.
(b The pro forma combined balance sheet as of December 31, 1998 (the
"PRO FORMA BALANCE SHEET") and the related combined statements of income and
cash flows for the year ended December 31, 1998 (together with the Pro Forma
Balance Sheet, the "PRO FORMA FINANCIAL STATEMENTS") of the RJRI Group fairly
present the combined pro forma financial position of the RJRI Group as of the
date thereof and their combined pro forma results of operations and cash flows
for the year then ended, in each case in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto) as modified
by the adjustments and assumptions specified in the notes thereto.
(c The historical entity financial statements of the RJRI Companies
for the period from 1996 to 1998 included in binders 1, 2, 4, 5, 6 and 7 of the
financial data contained in the data room and made available to Buyer are the
internal management basis financial statements of those entities prepared by
management and relied upon in conducting the Business in the ordinary course.
SECTION 3.9. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date,
the Business has been conducted in the ordinary course consistent with past
practices and there has not been:
(a) any event, occurrence or development that has had a
Material Adverse Effect;
(b any amendment of any material term of any outstanding
security of any member of the RJRI
Group;
(c any incurrence, assumption or guarantee by any member of
the RJRI Group of any indebtedness for borrowed money other than under
an existing credit facility (or any refinancing thereof) of any member
of the RJRI Group and in the ordinary course of business consistent
with past practices;
(d any making of any material loan, advance or capital
contributions to or investment in any Person other than intercompany
loans or advances and other than loans, advances or capital
contributions to or investments made in the ordinary course of business
consistent with past practices or pursuant to existing commitments or
agreements;
16
(e any transaction or commitment made, or any contract or
agreement entered into, by any member of the RJRI Group relating to its
assets or business, in either case, material to the Business, taken as
a whole, other than transactions and commitments in the ordinary course
of business consistent with past practices and those contemplated by
the Transaction Documents;
(f any material change in any method of accounting or
accounting practice by any member of the RJRI Group except for any such
change required by reason of a concurrent change in GAAP;
(g any (i) material employment, deferred compensation,
severance, retirement or other similar agreement entered into with any
director or executive officer of any member of the RJRI Group (or any
amendment to any such existing agreement), (ii) grant of any material
severance or termination pay to any director or executive officer of
any member of the RJRI Group that would be an obligation of Buyer or
any member of the RJRI Group after the Closing Date or (iii) material
change in compensation or other benefits payable to any director or
executive officer of the RJRI Group pursuant to any severance or
retirement plan or policies thereof, in each case other than (x) in the
ordinary course of business consistent with past practices, (y)
pursuant to agreements or policies existing on the date hereof or (z)
consistent in magnitude and character with terms of agreements or
policies with respect to individuals with comparable positions or
responsibilities;
(h lapse, abandonment, sale or other disposal of any
Intellectual Property Right of the Business, except (i) in accordance
with the terms thereof (other than as a result of breach thereof by any
member of the RJRI Group) or (ii) where the lapse, abandonment, sale or
other disposal thereof would not have a Material Adverse Effect; or
(i agreement or arrangement to take any of the actions
specified in this Section 3.09, except as expressly contemplated by any
of the Transaction Documents.
SECTION 3.10. NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities of the RJRI Group of any kind, other than:
(a liabilities provided for in the Balance Sheet or disclosed
in the notes thereto;
17
(b liabilities not required under GAAP to be shown or
disclosed on the Balance Sheet;
(c liabilities disclosed in, relating to or arising under any
agreements, instruments or other matters disclosed in the Disclosure
Letter;
(d liabilities incurred in the ordinary course of business
since the Balance Sheet Date;
(e liabilities arising from or related to matters affecting
the tobacco industry generally; or
(f other undisclosed liabilities that, individually or in the
aggregate, would not have a Material Adverse Effect.
SECTION 3.11. INTERCOMPANY ACCOUNTS. (ai The Disclosure Letter contains
a complete list of all intercompany balances of at least $1 million as of the
Balance Sheet Date between any member of the Sellers' Group, on the one hand,
and any member of the RJRI Group, on the other hand. Since the Balance Sheet
Date, there has not been any accrual of liability by any member of the RJRI
Group to any member of the Sellers' Group or other transaction between any
member of the RJRI Group and any member of the Sellers' Group, except in the
ordinary course of business of the RJRI Group consistent with past practice.
(b The intercompany accounts referred to in Section 7.04 of the
Disclosure Letter represent obligations for goods and services provided on terms
reasonably consistent with those that could be obtained on a reasonable
commercial basis from a third party, and those intercompany accounts are
reflected on the Pro Forma Balance Sheet. There were no other intercompany
accounts reflected as liabilities on the Pro Forma Balance Sheet that will be
capitalized on the Closing Balance Sheet.
SECTION 3.12. MATERIAL CONTRACTS. (ai No member of the RJRI Group is a
party to or bound by:
(i any lease (whether of real or personal property) providing
for annual rental payments of $1 million or more that cannot be
terminated on not more than one year's notice without payment by any
member of the RJRI Group of any material penalty;
18
(ii any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets providing for annual
payments by any member of the RJRI Group of $5 million or more that
cannot be terminated on not more than one year's notice without payment
by any member of the RJRI Group of any material penalty;
(iii any sales, distribution or other similar agreement
providing for the sale by any member of the RJRI Group of materials,
supplies, goods, services, equipment or other assets that provides for
annual payments to the RJRI Group of $5 million or more that cannot be
terminated on not more than one year's notice without payment by any
member of the RJRI Group of any material penalty;
(iv any material partnership, joint venture or other similar
agreement or arrangement;
(v any agreement relating to the acquisition or disposition
of any material business (whether by merger, sale of stock, sale of
assets or otherwise);
(vi any agreement relating to indebtedness for borrowed money
or the deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset), except any such
agreement (A0 with an aggregate outstanding principal amount not
exceeding $5 million or (B) entered into subsequent to the date of this
Agreement as permitted by Section 3.09(c);
(vii any material agreement that imposes a material limitation
on the freedom of any member of the RJRI Group to compete in the
tobacco products business;
(viii any material agreement (other than a Transaction Document)
with any member of the Sellers' Group that will continue to be in
effect following the Closing;
(ix any other agreement, commitment, arrangement or plan not
made in the ordinary course of business that is material to the RJRI
Group, taken as a whole; or
(x any derivative transaction, other than those in the
ordinary course of business.
19
(b Each agreement, contract, plan, lease, arrangement or commitment
required to be disclosed pursuant to this Section 3.12 is a valid and binding
agreement of the member of the RJRI Group which is a party thereto, and is in
full force and effect, and no member of the RJRI Group or, to the knowledge of
Sellers, any other party thereto is in default or breach in any respect under
the terms of any such agreement, contract, plan, lease, arrangement or
commitment, except for such defaults or breaches as would not have a Material
Adverse Effect.
SECTION 3.13. LITIGATION. To Sellers' knowledge, there is no action,
suit or proceeding pending against any member of the RJRI Group or any of their
respective properties or against any member of the Sellers' Group relating to
the Business before any arbitrator or Governmental Entity that is reasonably
likely to have a Material Adverse Effect or that, as of the date of this
Agreement, in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement and, to the
Sellers' knowledge, as of the date hereof, no such action, suit or proceeding is
threatened in writing against any member of the RJRI Group.
SECTION 3.14. COMPLIANCE WITH LAWS AND COURT ORDERS. To Sellers'
knowledge, no member of the RJRI Group is in violation of any applicable law,
rule, regulation, judgment, injunction, order or decree, except for violations
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
SECTION 3.15. INTELLECTUAL PROPERTY. (ai The Disclosure Letter contains
a list of all material Intellectual Property Rights owned or licensed and used
or held for use by any member of the RJRI Group, and Schedule 1.01(a) contains a
list of all Purchased IPRs (collectively, the "BUSINESS IPRS"). To the knowledge
of Sellers, members of the Sellers' Group or the RJRI Group own the entire
right, title and interest in and to each of the Business IPRs, free and clear of
any outstanding judgment, injunction, order, decree or Liens, including, without
limitation, licenses, registered user agreements and covenants by Sellers not to
▇▇▇ third Persons, except in each case for such matters as would not,
individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of Sellers, each of the Business IPRs is subsisting and has not been
adjudged invalid, unregistrable or unenforceable, in whole or in part.
(b To the knowledge of Sellers, neither Seller has received notice of
any claims, either asserted or threatened, that the use, sale, testing,
promotion or distribution of any of the Business IPRs infringes or otherwise
violates the rights of any third Person, except in each case for such matters as
would not, individually or in the aggregate, have a Material Adverse Effect.
Sellers make no
20
warranty that they have carried out any search to attempt to determine whether
any such third Person rights exist.
(c Buyer agrees that Sellers shall not be liable to Buyer as a result
of Buyer's use of the Business IPRs for any damage or costs incurred or paid by
Buyer to any third Person for any claims, judgments or settlements that are
asserted or notified after the Closing.
SECTION 3.16. INSURANCE COVERAGE. Sellers have made available to Buyer
a list and summary of all insurance policies and fidelity bonds relating to the
assets, business, operations, employees, officers or directors of any member of
the RJRI Group. There are no material claims by any member of the RJRI Group
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds or
in respect of which such underwriters have reserved their rights.
SECTION 3.17. FINDERS' FEES. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated and ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, whose fees
will be paid by Sellers, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Sellers or the RJRI Group who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.18. ENVIRONMENTAL MATTERS. Except as to matters that would
not reasonably be expected to have a Material Adverse Effect, to the knowledge
of Sellers:
(a no written notice, request for information, order,
complaint or penalty has been received by any Seller or member of the
RJRI Group, and there are no judicial, administrative or other actions,
suits or proceedings pending or threatened which allege a violation of
any Environmental Law, in each case relating to any member of the RJRI
Group, the Puerto Rico Plant or the Business and arising out of any
Environmental Law;
(b each member of the RJRI Group and the Puerto Rico Plant
has all environmental permits necessary for its operations to comply
with all applicable Environmental Laws and is in compliance with the
terms of such permits and with all other applicable Environmental Laws;
and
(c there has been no written environmental audit conducted
within the past five years by Sellers or any member of the RJRI Group
of any property currently owned or leased by any member of the RJRI
Group
21
or of the Puerto Rico Plant that has not been delivered to Buyer prior
to the date hereof.
SECTION 3.19. YEAR 2000 COMPLIANCE. (ai To the knowledge of Sellers,
there is no failure to be Year 2000 Compliant of any system (including any
system belonging to any of the RJRI Group's material suppliers) that would have,
or be reasonably expected to have, a Material Adverse Effect. "YEAR 2000
COMPLIANT" means the ability of the applicable system or item to (i) receive,
record, store, provide, recognize and process all date and time data from
during, into and between the twentieth and twenty-first centuries, the years
1999 and 2000 and (ii) accurately perform all date-dependent calculations and
operations (including, without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years.
(b Any reprogramming required to make Year 2000 Compliant all of the
RJRI Group's internal systems that are material to the business or operations of
the RJRI Group, including, without limitation, computer hardware systems,
software applications, firmware, equipment containing embedded microchips and
other embedded systems, and the testing of all such systems and items, as so
reprogrammed, is currently expected to be completed by September 30, 1999.
SECTION 3.20. NECESSARY PROPERTY. The Purchased Assets and the assets
of, and the real property leased by, the members of the RJRI Group constitute
all of the assets and properties, now used, usable or otherwise necessary or
appropriate for the conduct of the Business after the Closing by Buyer in the
manner and to the extent that the Business is presently conducted. A member of
the RJRI Group (or a member of the Sellers' Group in the case of the Puerto Rico
Plant) has the necessary legal rights to use the real property used or held for
use in the Business and the buildings, structures, fixtures and improvements
situated thereon, in each case free and clear of all Liens except as would not
materially interfere with the use thereof in the conduct of the Business in
accordance with past practice. The RJRI Group has the benefit of all necessary
rights to enable the full enjoyment of all such assets and property and to
utilize each such asset and property for the purposes of the Business as
currently conducted, except for such rights the absence of which will not have a
Material Adverse Effect.
SECTION 3.21. SELLERS' GROUP. All of the representations and warranties
set forth in this Article 3 concerning the debts, obligations, contracts and
liabilities of the RJRI Group are also made as to Sellers' Group (or any
predecessor of any member of the Sellers' Group or the RJRI Group or any prior
owner of all or part of their businesses or assets) to the extent (and only to
the
22
extent) such debts, obligations, contracts and liabilities relate to or arise
out of conduct of the Business, in whole or in part.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as of the date hereof and as
of the Closing Date that:
SECTION 4.1. CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Japan and
has all corporate powers and all material governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted.
SECTION 4.2. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Buyer of the Transaction Documents and the consummation of the
transactions contemplated thereby are within the corporate powers of Buyer and
have been duly authorized by all necessary corporate action on the part of
Buyer. The Transaction Documents constitute valid and binding agreements of
Buyer.
SECTION 4.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of the Transaction Documents and the consummation of the
transactions contemplated thereby require no material action by or in respect
of, or material filing with, any Governmental Entity other than (i) compliance
with any applicable requirements of the HSR Act and Council Regulation (EC) No.
4064/89 of the Council of the European Union (or the requirements of any
national authority within the European Community to whom the acquisition of the
Shares and the Purchased Assets (or any part thereof) is referred pursuant to
Article 9(3) of such regulation); (ii) compliance with any applicable
requirements of the Investment Canada Act and the Competition Act of Canada;
(iii) compliance with any other similar law or other measure under which any
Governmental Entity of competent jurisdiction regulates or controls the purchase
or sale of any entity or assets; (iv) compliance with Japanese antitrust
regulations and the Japanese Foreign Exchange and Foreign Trade Law and (v) the
filing of appropriate documents with the relevant stock exchange authorities or
other self-regulatory organizations in other jurisdictions in which any member
of the RJRI Group is qualified to do business.
23
SECTION 4.4. NONCONTRAVENTION. The execution, delivery and performance
by Buyer of the Transaction Documents and the consummation of the transactions
contemplated thereby do not and will not (i) violate the certificate of
incorporation or bylaws of Buyer, (ii) assuming compliance with the matters
referred to in Section 4.03, violate any applicable law, rule, regulation,
judgment, injunction, order or decree, (iii) require any consent or other action
by any Person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Buyer or
to a loss of any benefit to which Buyer is entitled under any provision of any
agreement or other instrument binding upon Buyer or (iv) result in the creation
or imposition of any material Lien on any asset of Buyer.
SECTION 4.5. FINANCING. Buyer has, or will have prior to the Closing,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make payment of the Purchase Price and any other
amounts to be paid by it hereunder.
SECTION 4.6. PURCHASE FOR INVESTMENT. Buyer is purchasing the Shares
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Buyer (either alone or together with
its advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and is capable of bearing the economic risks of such investment.
SECTION 4.7. LITIGATION. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any arbitrator or Governmental Entity which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by the Transaction Documents.
SECTION 4.8. FINDERS' FEES. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., whose
fees will be paid by Buyer, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Sellers or any of
its Affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 4.9. INSPECTIONS; NO OTHER REPRESENTATIONS. Buyer is
knowledgeable about the tobacco products industry, is an informed and
sophisticated purchaser, and has engaged expert advisors, experienced in the
evaluation and purchase of companies such as members of the RJRI Group as
contemplated hereunder. Buyer has undertaken such investigation and has been
provided with and has evaluated such documents and information as it has
24
deemed necessary to enable it to make an informed and intelligent decision with
respect to the execution, delivery and performance of the Transaction Documents.
Buyer acknowledges that Sellers have given Buyer sufficient access to the key
employees, documents and facilities of the RJRI Group. Buyer will undertake
prior to Closing such further investigation and request such additional
documents and information as it deems necessary. Buyer agrees to accept the
Shares and the Purchased Assets in the condition they are in on the Closing Date
based upon its own inspection, examination and determination with respect
thereto as to all matters, and without reliance upon any express or implied
representations or warranties of any nature made by or on behalf of or imputed
to Sellers, except as expressly set forth in the Transaction Documents. Without
limiting the generality of the foregoing, Buyer acknowledges that Sellers make
no representation or warranty with respect to (i) any projections, estimates or
budgets delivered to or made available to Buyer of future revenues, future
results of operations (or any component thereof), future cash flows or future
financial condition (or any component thereof) of the Business or the future
business and operations of the Business or (ii) any other information or
documents made available to Buyer or its counsel, accountants or advisors with
respect to the RJRI Companies or the Subsidiaries or their respective businesses
or operations, except as expressly set forth in this Agreement.
ARTICLE 5
COVENANTS OF SELLERS
Each Seller agrees that:
SECTION 5.1. CONDUCT OF THE RJRI COMPANIES. Except as set forth in
Section 3.09 of the Disclosure Letter delivered on and as of the date hereof
(without regard to any changes made to the Disclosure Letter pursuant to Section
13.11), from the date hereof until the Closing Date, Sellers shall cause the
members of the RJRI Group to conduct their businesses in the ordinary course
consistent with past practice and to use reasonable efforts to (x) preserve
intact their business organizations and relationships with third parties and to
keep available the services of their present officers and employees and (y)
maintain satisfactory relations with suppliers, contractors, distributors,
licensors, licensees, customers and others having business relationships with
it. Without limiting the generality of the foregoing, from the date hereof until
the Closing Date, Sellers will not permit any member of the RJRI Group to:
(a except as provided in the Transaction Documents, adopt or
propose any change in its organizational documents;
25
(b merge or consolidate with any Person (other than with
another member of the RJRI Group) or acquire a material amount of
assets from any other Person other than in the ordinary course of
business consistent with past practice;
(c sell, lease, license or otherwise dispose of any material
assets or property except (i) pursuant to existing contracts or
commitments, (ii) to or with another member of the RJRI Group or (iii)
in the ordinary course consistent with past practice;
(d incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any
debt securities of others, other than in the ordinary course of
business consistent with past practice;
(e other than in the ordinary course of business consistent
with past practice, enter into any material contract or modify,
terminate or waive any right under any material contract;
(f increase the compensation payable to its directors,
executive officers or employees, except for increases in accordance
with past practices, or grant any severance or termination pay (other
than pursuant to existing agreements) to any director, executive
officer or other employee, or establish, adopt, enter into or amend any
plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, executive officer or employee; PROVIDED that the
foregoing will not apply to actions taken in respect of non-executive
officers and employees in the ordinary course of business consistent
with past practice; or
(g agree or commit to do any of the foregoing.
Each Seller will not take, and will not permit any member of the RJRI Group to
take, any action that would make any representation or warranty of Sellers
hereunder inaccurate in any material respect at the Closing Date such that the
closing condition set forth in Section 10.02(a)(ii) would not be satisfied as of
such date. Notwithstanding anything to the contrary herein, the parties
acknowledge that Sellers may cause RJR Macdonald Inc. to be (i) contributed to a
new Dutch B.V. (the stock of which will be sold to Buyer at Closing) and (ii)
redomiciled as a Nova Scotia unlimited liability company prior to the Closing.
26
SECTION 5.2. ACCESS TO INFORMATION. (ai From the date hereof until the
Closing Date, Sellers will (i) give, and will cause members of the RJRI Group to
give, Buyer, its counsel, financial advisors, auditors and other authorized
representatives reasonable access to the offices, properties, books and records
of members of the RJRI Group and to the books and records of Sellers relating to
members of the RJRI Group, (ii) furnish, and will cause members of the RJRI
Group to furnish, to Buyer, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to members of the RJRI Group as such Persons may reasonably
request and (iii) instruct the employees, counsel and financial advisors of
Sellers and members of the RJRI Group to cooperate with Buyer in its
investigation of members of the RJRI Group. Any investigation pursuant to this
Section shall be conducted in such manner as not to interfere unreasonably with
the conduct of the business of Sellers or members of the RJRI Group.
Notwithstanding the foregoing, Buyer shall not have access to personnel records
of members of the RJRI Group relating to individual performance or evaluation
records, medical histories or other information that in Sellers' good faith
opinion is sensitive or the disclosure of which could subject any member of the
RJRI Group to risk of liability.
(b On and after the Closing Date, each Seller will afford promptly to
Buyer and its agents reasonable access to its books of account, financial and
other records (including, without limitation, accountant's work papers),
information, employees and auditors to the extent necessary or useful for Buyer
in connection with any audit, investigation, dispute or litigation or any other
reasonable business purpose relating to the RJRI Group; PROVIDED that any such
access by Buyer shall not unreasonably interfere with the conduct of the
business of Sellers or any member of the RJRI Group. Buyer shall bear all of the
out-of-pocket costs and expenses (including, without limitation, attorneys'
fees, but excluding reimbursement for general overhead, salaries and employee
benefits) reasonably incurred in connection with the foregoing.
SECTION 5.3. RESIGNATIONS. Sellers will deliver to Buyer the
resignations of all officers and directors of the RJRI Group who will be
officers or directors of either Seller or any of their respective Affiliates
after the Closing Date from their positions with each member of the RJRI Group
at or prior to the Closing Date.
SECTION 5.4. RELATED AGREEMENTS. At or prior to the Closing, Seller
(and/or its Affiliates) will execute and deliver to Buyer each of the
Transaction Documents.
27
SECTION 5.5. DELIVERY OF DIRECTOR QUALIFYING SHARES. As soon as
reasonably practicable after the Closing, Sellers shall transfer (or cause to be
transferred) to nominees designated by Buyer all nominee director qualifying or
similar shares of capital stock of the RJRI Companies or Subsidiaries (or any
other Persons in which members of the RJRI Group are investors) that are held by
an employee or director of a member of the RJRI Group as of the Closing Date.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.1. CONFIDENTIALITY. Prior to the Closing Date and after any
termination of this Agreement, Buyer and its Affiliates will hold, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning
members of the RJRI Group furnished to Buyer or its Affiliates in connection
with the transactions contemplated by this Agreement, except to the extent that
such information can be shown to have been (i) previously known on a
nonconfidential basis by Buyer, (ii) in the public domain through no fault of
Buyer or (iii) later lawfully acquired by Buyer from sources other than Sellers
or the RJRI Group; PROVIDED that Buyer may disclose such information to its
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by this Agreement so
long as such Persons are informed by Buyer of the confidential nature of such
information and are directed by Buyer to treat such information confidentially.
Buyer shall be responsible for any failure to treat such information
confidentially by such Persons. If this Agreement is terminated, Buyer and its
Affiliates will, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to, destroy or deliver to Sellers, upon request, all documents and other
materials, and all copies thereof, obtained by Buyer or its Affiliates or on
their behalf from Sellers or any member of the RJRI Group in connection with
this Agreement that are subject to such confidence.
28
SECTION 6.2. RELATED AGREEMENTS. At or prior to the Closing, Buyer
(and/or its Affiliates) will execute and deliver to Sellers each of the
Transaction Documents.
SECTION 6.3. GUARANTEES OF RJRI GROUP INDEBTEDNESS. Buyer shall use
commercially reasonable efforts to effect the release of all members of Sellers'
Group from all obligations under or liability with respect to the Sellers' Group
Guarantees of RJRI Group indebtedness.
SECTION 6.4. TRANSFER AND ASSIGNMENT OF PURCHASED IPRS. Buyer shall pay
all costs and expenses payable (other than any Taxes based on the income or
gains arising to a Seller, member of the Sellers Group or any member of the RJRI
Group) necessary to effect the sale, conveyance, transfer, assignment and
delivery of the Purchased IPRs to Buyer. To the extent that Buyer requests the
assistance of any member of Sellers' Group to effect the foregoing, Buyer shall
reimburse such member of Sellers' Group for the cost or expense of rendering
such assistance.
ARTICLE 7
COVENANTS OF BUYER AND SELLERS
Buyer and Sellers agree that:
SECTION 7.1. BEST EFFORTS; FURTHER ASSURANCES. Subject to the terms and
conditions of this Agreement, Buyer and Sellers will use their best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by the Transaction Documents,
including, without limitation, the taking of any and all steps necessary to
avoid or eliminate any impediment under any antitrust, competition or trade
regulation law that may be asserted by any Governmental Entity with respect to
the transactions contemplated by the Transaction Documents so as to enable
consummation thereof to occur as soon as reasonably possible, including, without
limitation, the sale, divestiture or disposition of such assets of Buyer, its
Affiliates or the RJRI Group as may be required in order to avoid the entry of,
or to effect the dissolution of, any injunction, temporary restraining order or
other order in any suit or proceeding which would otherwise have the effect of
preventing or delaying the consummation of the transactions contemplated by the
Transaction Documents. Sellers, prior to the Closing, and Buyer, after the
Closing, agree to cause each member of the RJRI Group, to execute and deliver
such other documents,
29
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by the Transaction Documents.
SECTION 7.2. CERTAIN FILINGS. Sellers and Buyer shall cooperate (i) in
determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by the
Transaction Documents and (ii) in taking such actions or making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers.
SECTION 7.3. PUBLIC ANNOUNCEMENTS. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to the Transaction Documents or the transactions contemplated thereby
and, except as may be required by applicable law or any listing agreement with
any national securities exchange, will not issue any such press release or make
any such public statement prior to such consultation.
SECTION 7.4. INTERCOMPANY ACCOUNTS. Except as provided in Schedule
7.04, all intercompany account balances between a member of Sellers' Group, on
the one hand, and a member of the RJRI Group, on the other hand, outstanding at
the Closing shall be canceled.
SECTION 7.5. NOTICES OF CERTAIN EVENTS. Each party hereto shall
promptly notify each of the other parties hereto of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by any of the Transaction Documents;
(b) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by any of the
Transaction Documents; and
(c) any actions, suits, claims, investigations or proceedings
before any arbitrator or Governmental Entity commenced relating to (i)
such party or any of its Affiliates that, (A) if pending on the date of
this Agreement, would have been required to have been disclosed
pursuant to Section 3.13 (in the case of either Seller) or Section 4.07
(in the case of Buyer) or (B) in any manner challenges or seeks to
prevent, enjoin, alter or
30
materially delay the transactions contemplated by this Agreement, or
(ii) the Business that is reasonably likely to have a Material Adverse
Effect.
ARTICLE 8
TAX MATTERS
SECTION 8.1. TAX DEFINITIONS. The following terms, as used herein, have
the following meanings:
"POST-CLOSING TAX PERIOD" means any Tax period beginning after the
Closing Date and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period beginning after
the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the
Closing Date and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period ending on the
Closing Date.
"TAX" means any U.S. or non-U.S. federal, state or local tax including,
but not limited to, tax on or measured by income or estimated income,
alternative or add-on minimum tax, gross receipts, sales, use, ad valorem,
franchise, capital stock, transfer, gains, profit, license, withholding,
employees' withholding, foreign person withholding, backup withholding, social
security, occupation, unemployment, disability, excise, severance, stamp,
premium, value added, services, real property, personal property, production,
inventory and merchandise, business privilege, windfall profit, customs duty or
other tax or other like assessment or charge, together with any interest,
penalty, addition to tax or additional amount due from, or in respect of, the
RJRI Group imposed by any governmental authority (domestic or foreign)
responsible for the imposition collection or administration of any such tax (a
"TAXING AUTHORITY").
SECTION 8.2. TAX REPRESENTATIONS. Sellers jointly and severally
represent and warrant to Buyer as of the date hereof and as of the Closing Date
that, except as set forth in the Balance Sheet (including the notes thereto) or
in the Disclosure Letter, (i) all material computations, notices, information,
Tax returns, statements, reports and forms (collectively, the "RETURNS") filed
or required to be filed with any Taxing Authority on or before the Closing Date
with respect to any Pre-Closing Tax Period by, or with respect to, the members
of the RJRI Group have been filed (or properly extended) or will be filed on or
before the due date
31
(including extensions) and in all cases were and are, to Sellers' knowledge,
materially accurate; (ii) all other Returns required to be filed with respect to
the members of the RJRI Group for any Pre-Closing Tax Period (except in relation
to any tax period that begins on or before the Closing Date and ends thereafter)
will be filed by Sellers when due (taking into account any extension of a
required filing date) and will when filed be, to Sellers' knowledge, materially
accurate; (iii) the members of the RJRI Group have timely paid or will timely
pay all Taxes shown as due and payable on the Returns that have been filed; and
(iv) there is no material action, suit, proceeding, investigation, audit or
claim now proposed, pending, outstanding or unresolved against or with respect
to the members of the RJRI Group in respect of any Tax.
SECTION 8.3. TAX COVENANTS. (a) With respect to the stock of any
foreign corporation that is being sold pursuant to this Agreement, Buyer
covenants that it will not cause or permit such corporation or any subsidiary or
any Affiliate thereof to make any election under Section 338 of the Code with
respect to any transaction described in this Agreement without the prior written
consent of Sellers.
(b) Buyer covenants that it will not cause or permit any member of the
RJRI Group or any Affiliate thereof to take or omit to take any action that
would, prior to January 1, 2000, (i) result in the sale or deemed sale for U.S.
tax purposes by any member of the RJRI Group, or any subsidiary of such member,
that constitutes a certain foreign entity within the meaning of U.S. Treasury
Regulations Section 301.7701-2(b)(8), of any stock in a corporation which it
owns, (ii) result in the distribution or deemed distribution for U.S. tax
purposes, of any amounts with respect to the stock of any member of the RJRI
Group that constitutes a certain foreign entity within the meaning of U.S.
Treasury Regulations Section 301.7701-2(b)(8), or (iii) at any time, increase
Sellers' indemnification obligations under Section 8.05 of this Agreement.
(c) Buyer shall promptly pay or shall cause prompt payment to be made
to Sellers of all refunds of Taxes and interest thereon received by Buyer, any
Affiliate of Buyer, or any member of the RJRI Group attributable to Taxes paid
by Sellers, or any member of the RJRI Group (or any predecessor or Affiliate of
Sellers) with respect to any Pre-Closing Tax Period.
(d) All transfer, documentary, sales, use, stamp, registration and
other similar taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any real property transfer tax and any
similar tax) shall be borne and paid by Buyer (other than penalties or interest
attributable to the delay or default of a Seller or a subsidiary of a Seller),
and Buyer will, at its
32
own expense, file all necessary tax returns and other documentation with respect
to all similar taxes and fees, and, if required by applicable law, Sellers will,
and will cause their Affiliates to, join in the execution of any such tax
returns and other documentation.
SECTION 8.4. COOPERATION ON TAX MATTERS. (a) Buyer and Sellers agree to
furnish or cause to be furnished to each other, upon request, as promptly as
practicable, such information (including access to books and records) and
assistance (including access to officers, directors, employees and agents)
relating to the RJRI Group as is reasonably requested for the filing of any
return, for the preparation for any audit, and for the prosecution or defense of
any claim, suit or proceeding relating to any proposed adjustment. Buyer and
Sellers agree to retain or cause to be retained all books and records pertinent
to members of the RJRI Group until the applicable period for assessment under
applicable law (giving effect to any and all extensions or waivers) has expired,
and to abide by or cause the abidance with all record retention agreements
entered into with any Taxing Authority. The RJRI Companies agree to give Sellers
reasonable notice prior to transferring, discarding or destroying any such books
and records relating to Tax matters and, if any Sellers so requests, the RJRI
Companies shall allow Sellers to take possession of such books and records.
Buyer and Sellers shall cooperate with each other in the conduct of any audit or
other proceedings involving the RJRI Companies for any Tax purposes and each
shall execute and deliver such powers of attorney and other documents as are
necessary to carry out the intent of this subsection.
(b) Buyer and Sellers further agree, upon request, to provide the
other party with all information that either party may be required to report
pursuant to the Code and all Treasury Department Regulations promulgated
thereunder. Prior to a Seller filing any Return for any Pre-Closing Tax Period,
such Seller shall permit Buyer or Buyer's advisors to review the Return, and
will as far as possible take into account any reasonable comments made by Buyer
or Buyer's advisors before filing the Return.
SECTION 8.5. INDEMNIFICATION BY SELLERS. (a) Sellers hereby jointly and
severally indemnify Buyer and its Affiliates against and agree to hold them
harmless from any (i) Tax of or imposed on any member of the RJRI Group (except
to the extent such Tax was reflected as a liability on the Closing Balance
Sheet) and (ii) liabilities, costs and expenses (including, without limitation,
reasonable expenses of investigation and attorneys' fees and expenses), arising
out of or incident to the imposition, assessment or assertion of any Tax,
including those incurred in the contest in good faith in appropriate proceedings
relating to the imposition, assessment or assertion of any Tax, in each case
with respect to
33
any Pre-Closing Tax Period and in each case incurred or suffered by Buyer, any
of its Affiliates or, effective upon the Closing, any member of the RJRI Group
(the sum of 8.05(a)(i) and 8.05(a)(ii) being referred to as a "LOSS").
(b) For purposes of this Section 8.05, in the case of any Taxes that
are imposed on a periodic basis and are payable for a Tax period that includes
(but does not end on) the Closing Date, the portion of the Tax related to the
portion of the Tax period ending on and including the Closing Date shall be
deemed equal to the amount that would be payable if the relevant Tax period
ended on and included the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the RJRI Group.
(c) If Sellers' indemnification obligation under this Section 8.05
arises in respect of an adjustment that makes allowable to Buyer, any of its
Affiliates or, effective upon the Closing, any member of the RJRI Group any
deduction, amortization, exclusion from income or other allowance (a "TAX
BENEFIT") which would not, but for such adjustment, be allowable, then any
payment by Sellers to Buyer shall be an amount equal to (x) the amount otherwise
due but for this subsection 8.05(c), minus (y) the Tax Benefit actually realized
multiplied (i) by the maximum federal or state, as the case may be, corporate
tax rate in effect at the time such Tax Benefit is actually realized by Buyer,
any of its Affiliates, or any member of the RJRI Group (as the case may be) or
(ii) in the case of a credit, by 100 percent.
(d) Any payment by Sellers pursuant to this Section 8.05 shall be made
not later than 30 days after receipt by Sellers of written notice from Buyer
stating that any Loss has been paid by Buyer, any of its Affiliates or,
effective upon the Closing, any member of the RJRI Group and the amount thereof
and of the indemnity payment requested.
(e) If any claim or demand for Taxes in respect of which indemnity may
be sought pursuant to this Section 8.05 is asserted in writing against Buyer,
any of its Affiliates or, effective upon the Closing, any member of the RJRI
Group, Buyer shall notify Sellers of such claim or demand within 10 days of
receipt thereof, or such earlier time as would allow Sellers to respond to Buyer
in a timely manner with respect to such claim or demand, and shall give Sellers
such information with respect thereto as Sellers may reasonably request. Sellers
may discharge, at any time, their indemnification obligation under this Section
8.05 by paying to Buyer the amount of the applicable Loss, calculated on the
date of such payment. Sellers may, at their own expense, participate in and,
upon notice to Buyer, assume the defense of any such claim, suit, action,
litigation or proceeding
34
(including any Tax audit). If Sellers assume such defense, Buyer shall have the
right (but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by Sellers.
Whether or not Sellers choose to defend or prosecute any claim, all of the
parties hereto shall cooperate in the defense or prosecution thereof.
(f) Sellers shall not be liable under this Section 8.05 for (i) any
Tax the payment of which was made without Sellers' prior written consent or (ii)
any settlements effected without the consent of Sellers, which consent shall not
in either case be unreasonably withheld or delayed, or resulting from any claim,
suit, action, litigation or proceeding in which Sellers were not given an
opportunity to participate.
ARTICLE 9
EMPLOYEE BENEFIT
SECTION 9.1. DEFINITIONS. (a) The following terms, as used herein, have
the following meanings:
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"EMPLOYEE PLAN" means any written employment, severance, international
expatriate allowance and expense reimbursement programs, perquisite plan, or
similar contract or arrangement or any plan, policy, fund, program or contract
or arrangement providing for compensation, bonus, profit-sharing, stock option,
or other stock related rights or other forms of incentive or deferred
compensation, vacation benefits, holiday pay benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits, sick or
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other benefits) that
(i) is not a Seller Plan, (ii) is entered into, maintained, administered or
contributed to, as the case may be, by any member of the RJRI Group and (iii)
covers any current or former employee of any member of the ▇▇▇▇
▇▇
Group; PROVIDED, HOWEVER, that the Puerto Rico Pension Plan shall be deemed an
Employee Plan for purposes of this Agreement.
"PUERTO RICO PENSION PLAN" means the Retirement Plan for Hourly Rated
Employees of ▇▇ ▇▇▇▇▇▇▇▇ Tobacco Company (a Delaware corporation), at Yabucoa,
Puerto Rico.
"RJRI EMPLOYEE" means (i) each individual primarily employed by any
member of the RJRI Group as of the Closing Date, (ii) each individual whose last
employer prior to the Closing Date was a member of the RJRI Group and (iii) the
U.S. RJRI Employees.
"SELLERS' PLAN" means any written employment, severance or similar
contract or arrangement or any plan, policy, fund, program or contract or
arrangement providing for compensation, bonus, profit-sharing, stock option, or
other stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, workers' compensation,
supplemental unemployment benefits, severance benefits and post-employment or
retirement benefits (including compensation, pension, health, medical or life
insurance or other benefits) that (i) is entered into, maintained, administered
or contributed to, as the case may be, by Sellers or any of their Affiliates and
(ii) covers any current or former employee of Sellers or any of their
Affiliates; PROVIDED, HOWEVER, that the Puerto Rico Pension Plan shall not be
deemed a Sellers' Plan for purposes of this Agreement.
"SELLERS' BONUS PLANS" means the RJR Nabisco, Inc. Annual Incentive
Award Plan, which is also referred to as the Profit Sharing Incentive Plan.
"SELLERS' U.S. INDIVIDUAL ACCOUNT PLANS" means the RJR Nabisco Capital
Investment Plan, the Savings and Investment Plan for Employees of R.J.R.
▇▇▇▇▇▇▇▇ Tobacco Company in Puerto Rico and any successor plans thereto.
"SELLERS' U.S. PENSION PLANS" mean any tax-qualified defined benefit
plans subject to Title IV of ERISA maintained or contributed to at any time by
Sellers or any of their Affiliates, other than the Puerto Rico Pension Plan, and
any successor plans thereto.
"U.S. RJRI EMPLOYEES" means the employees performing services for the
Business who are located in United States or Puerto Rico and are set forth as
such in the Disclosure Letter.
36
(b) Each of the following terms is defined in the section set forth
opposite such term:
TERM SECTION
Bonus Year 9.06
Buyer Individual Account Plan 9.05
Direct Rollover 9.05
LTIP 9.06
Target Amount 9.06
SECTION 9.2. REPRESENTATIONS. (a) The Disclosure Letter identifies each
material Employee Plan and Sellers' Plan in which any RJRI Employees
participate. Sellers have made available to Buyer details of such Employee Plans
and Sellers' Plans reasonably sufficient to enable Buyer to determine the
material liabilities under them. With such exceptions as would not have a
Material Adverse Effect and except as set forth in the Disclosure Letter:
(i) each such Employee Plan is in compliance with the
provisions of the applicable laws of each applicable jurisdiction;
(ii) all contributions to, and payments from and with respect
to (including, without limitation, insurance premiums), such Employee
Plan that may have been required to be made in accordance with the
terms of any such Employee Plan and, when applicable, the law of the
jurisdiction in which such Plan is maintained, have been timely made;
(iii) no such Employee Plan will require the payment to any RJRI
Employee of any money or other property or rights or accelerate or
provide any other material rights or benefits to any RJRI Employee
solely as a result of the transactions contemplated by this Agreement;
(iv) each such Employee Plan has been administered at all times
in accordance with its terms and there are no pending investigations by
any governmental agency involving any such Employee Plan, no claims
pending or threatened in writing (except for claims for benefits
payable in the normal operation of such Employee Plan), nor are there
any suits or proceedings against such Employee Plan asserting any
rights or claims to benefits under such Employee Plan which will give
rise to any material liability;
37
(v) no Employee Plan is (A) a Multiemployer Plan (as defined
in Section 3(37) of ERISA) subject to Title IV of ERISA, (B), other
than the Puerto Rico Pension Plan, a pension plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA or (C) maintained
in connection with any trust described in Section 501(c)(9) of the
Code; and
(vi) the Puerto Rico Pension Plan and any other Employee Plan
which covers any current or former employees of any member of the RJRI
Group which, as a matter of current Sellers' or Affiliate or RJRI Group
practice, is funded or which is required to be so funded by law (and
whether by means of a book reserve or otherwise) has been funded to the
extent required to comply with the currently applicable local statutes
or regulations.
(b) None of Sellers or any of their Affiliates has incurred, or
reasonably expects to incur prior to the Closing Date, (i) any material
liability under Title IV of ERISA arising in connection with the termination of,
or a complete or partial withdrawal from, any Sellers' Plan covered or
previously covered by Title IV of ERISA or (ii) any material liability under
Section 4971 of the Code that in either case could reasonably be expected to
become a liability of any member of the RJRI Group or Buyer or any of its ERISA
Affiliates after the Closing Date.
SECTION 9.3. RJRI EMPLOYEES. (a) Except as otherwise provided in this
Section 9.03, for a period of not less than 12 months from the Closing Date,
Buyer agrees to make employee benefits available to each RJRI Employee while
such employee remains an employee of Buyer or any member of the RJRI Group. Such
employee benefits shall include, without limitation, benefits of the types
provided under Employee Plans and Sellers' Plans comparable in the aggregate to
such benefits made available to such RJRI Employees immediately prior to the
Closing Date, PROVIDED, HOWEVER, that Buyer shall make available for such period
post-employment welfare benefits to all RJRI Employees and all other individuals
who were receiving such benefits from any member of the RJRI Group immediately
prior to the Closing Date comparable to such benefits made available to such
individuals immediately prior to such date.
(b) Buyer agrees that each RJRI Employee shall be treated for purposes
of participation and vesting under Buyer's pension or retirement plans, and for
all purposes, under any other plan or arrangement, including, without
limitation, any international assignment, severance or vacation plan, maintained
by Buyer on or after the Closing Date, as having service with Buyer for the
entire period of such RJRI Employee's period of employment with Sellers, or any
of their Affiliates or any member of the RJRI Group.
38
(c) Buyer shall provide coverage for all U.S. RJRI Employees working
at least 20 hours per week under a group health plan or plans fulfilling the
requirements of Section 4980B(f)(2)(B)(iv)(I) of the Code. Any and all waiting
periods and pre-existing condition limitations in Buyer's health insurance plans
shall be waived for all RJRI Employees, except to the extent they apply at the
Closing Date under the applicable Sellers' Plan or Employee Plan. Expenses
incurred by RJRI Employees under Sellers' medical and dental plans during the
year that includes the Closing Date shall be taken into account for purposes of
satisfying the deductible, coinsurance and out-of-pocket provisions of Buyer's
medical and dental plans for such year. Sellers shall retain liability for all
medical or dental claims incurred prior to the Closing Date by any U.S. RJRI
Employee (or his or her beneficiary) and Buyer and the RJRI Group shall be
responsible for all medical or dental claims incurred on and after the Closing
Date by any RJRI Employee (or his or her beneficiary) to the extent that Sellers
would have been liable for such claims. For purposes of this Section 9.03(c), a
medical or dental claim shall be deemed "incurred" when the relevant service is
provided or item is purchased.
(d) Buyer shall cause the RJRI Companies to fulfill all obligations,
and to assume all obligations of Sellers, under the employee agreements between
Sellers or any member of the RJRI Group and the RJRI Employees listed in
Schedule 9.03(d) in accordance with their terms.
(e) Each RJRI Employee who ceases to be employed by Buyer within the
twelve-month period beginning on the Closing Date shall be entitled to a
severance benefit to be paid by Buyer and determined in accordance with the
rules of the applicable Employee Plan or Sellers' Plan, taking into account the
past service recognition provisions of Section 9.03(b); provided that this
Section 9.03(c) shall not apply to the RJRI Employees referred to in Section
9.03(d).
(f) Buyer shall assume, or shall cause a member of the RJRI Group to
assume, on and effective as of the Closing Date, all assets and liabilities of
the Puerto Rico Pension Plan.
(g) Buyer shall indemnify Sellers against any Damages (as defined in
Section 11.02 hereof) attributable to Buyer on or after the Closing Date and
which Sellers may incur in relation to any act or omission of Buyer in relation
to an RJRI Employee occurring after the Closing Date which gives rise to a claim
against Sellers (whether statutory, contractual or otherwise).
(h) Sellers shall indemnify Buyer against any Damages, except to the
extent assumed by Buyer or any member of the RJRI Group pursuant to this
39
Article 9, that any member of the RJRI Group or Buyer or any of its ERISA
Affiliates may incur after the Closing Date in respect of any Sellers' Plan. The
indemnification obligation set forth herein shall not be subject to the amount
set forth in Section 11.02(a)(x) hereof.
(i) Sellers and Buyer shall give each other such assistance as either
may reasonably require to comply with any applicable laws or regulations in
relation to the RJRI Employees. In particular, Buyer and Sellers shall make
available to each other such information as will enable each to carry out their
duties under such applicable laws or regulations.
SECTION 9.4. SELLERS' U.S. PENSION PLANS. Sellers shall retain (or a
designated Affiliate of Sellers shall retain or assume) all liabilities and
obligations in respect of benefits accrued by RJRI Employees under Sellers' U.S.
Pension Plans. Effective as of the Closing Date, each RJRI Employee shall cease
to accrue any benefits under Sellers' U.S. Pension Plans. No assets of Sellers'
U.S. Pension Plans shall be transferred to Buyer or any member of the RJRI Group
or to any plan of Buyer or of any member of the RJRI Group.
SECTION 9.5. SELLERS' U.S. INDIVIDUAL ACCOUNT PLANS. On or promptly
following the Closing Date, Sellers shall take such action as may be necessary,
if any, to permit each RJRI Employee to exercise his or her rights to
distribution of such RJRI Employee's vested account balances under Sellers' U.S.
Individual Account Plans, if any, or to effect at any time a tax-free rollover
of the taxable portion of the account balances (to the extent permitted by law)
into an eligible retirement plan (within the meaning of Section 401(a)(31) of
the Code) (a "DIRECT ROLLOVER") maintained by Buyer (the "BUYER INDIVIDUAL
ACCOUNT PLAN") or to an individual retirement account. Sellers and Buyer shall
cooperate to facilitate any such distribution or rollover and to effect a Direct
Rollover for those participants who elect to roll over their account balances
directly into the Buyer Individual Account Plan; PROVIDED that nothing in this
Section 9.05 shall obligate the Buyer Individual Account Plan to accept a Direct
Rollover unless Buyer is satisfied that any such Direct Rollover is described in
Section 401(k)(10)(A) of the Code.
SECTION 9.6. PERFORMANCE APPRECIATION RIGHTS. (a) Buyer shall cause
each member of the RJRI Group that is, on the Closing Date, an employer of an
RJRI Employee who immediately prior to the Closing Date is a participant in
Sellers' Bonus Plans in respect to the fiscal year in which the Closing Date
occurs (the "BONUS YEAR"), to pay to such RJRI Employee a bonus in respect of
such Bonus Year in an amount equal to the amount ("TARGET AMOUNT"), which amount
shall be deemed not to exceed $25 million, that would be payable for such year
assuming 100% attainment of relevant target performance. Such payments shall
40
be made not later than 30 days after the end of the Bonus Year. An amount equal
to the Target Amount multiplied by a fraction, the numerator of which is the
number of full or partial calendar months in the Bonus Year prior to the Closing
Date and the denominator of which is 12, shall be accrued on the Closing Balance
Sheet.
(b) Sellers shall retain all obligations and liabilities under the RJR
Nabisco Holdings, Corp. 1990 Long-Term Incentive Plan ("LTIP"). Buyer shall
provide Sellers with such information relating to RJRI Employees as Sellers
shall reasonably request relating to the LTIP and Sellers' obligations
thereunder.
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.1. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS. The
obligations of Buyer and Sellers to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) (i) Any applicable waiting period under the HSR Act relating to
the transactions contemplated hereby shall have expired or been terminated, the
Commission of the European Communities shall have declared the transactions
contemplated hereby compatible with the common market under Council Regulation
(EC) No. 4064/89, or such approval shall have been deemed to have been granted
(and any national authority within the European Community to whom such
transactions (or any part thereof) have been referred pursuant to Article 9(3)
of such regulation shall have granted any clearance or given any consent
required) and (iii) any applicable requirements of the Investment Canada Act and
the Competition Act of Canada shall have been satisfied.
(b) No provision of any applicable law or regulation and no judgment,
or preliminary or permanent injunction, order or decree shall prohibit the
consummation of the Closing or shall in any way materially limit, restrict,
burden or otherwise impede the use of the Purchase Price by Sellers or their
Affiliates.
(c) All material actions by or in respect of, material filings with,
and any applicable requirements of, any Governmental Entity required to permit
the consummation of the Closing shall have been taken, made, obtained or
satisfied, except for any such actions or filings the failure to take, make or
obtain which would not have a Material Adverse Effect.
41
(d) Each of the Transaction Documents shall have been duly executed
and delivered by the parties thereto and such agreements shall be in full force
and effect upon Closing.
SECTION 10.2. CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Sellers shall have performed in all material respects all of
their obligations under the Transaction Documents required to be performed by
them on or prior to the Closing Date, (ii) the representations and warranties of
Sellers contained in the Transaction Documents and in any certificate or other
writing delivered by Sellers pursuant hereto that are qualified by materiality
or Material Adverse Effect shall be true and all other such representations and
warranties of Sellers shall be true in all material respects, in each case at
and as of the Closing Date (unless and to the extent that any such
representation or warranty speaks specifically as of an earlier date, in which
case, at and as of such earlier date) as if made at and as of the Closing Date
(or such earlier date) and Buyer shall have received a certificate signed by the
General Counsel of RJRN to the foregoing effect.
(b) Buyer shall have received all documents it may reasonably request
relating to the existence of Sellers, the RJRI Companies and the Subsidiaries
and the authority of Sellers for the Transaction Documents, all in form and
substance reasonably satisfactory to Buyer.
SECTION 10.3. CONDITIONS TO OBLIGATIONS OF SELLERS. The obligation of
Sellers to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) Buyer shall have performed in all material respects all of its
obligations under the Transaction Documents required to be performed by it at or
prior to the Closing Date, the representations and warranties of Buyer contained
in the Transaction Documents and in any certificate or other writing delivered
by Buyer pursuant thereto shall be true in all material respects at and as of
the Closing Date (unless and to the extent that any such representation or
warranty speaks specifically as of an earlier date, in which case, at and as of
such earlier date) as if made at and as of the Closing Date (or such earlier
date) and Sellers shall have received a certificate signed by the General
Counsel of Buyer to the foregoing effect.
42
(b) Sellers shall have received all documents they may reasonably
request relating to the existence of Buyer and the authority of Buyer for the
Transaction Documents, all in form and substance reasonably satisfactory to
Sellers.
(c) RJRN shall have completed a consent solicitation on commercially
reasonable terms and conditions pursuant to which RJRN shall have obtained
consent for amendments or waivers under the debt instruments listed on Schedule
10.03(c) permitting the transactions contemplated hereby together with the
proposed separation of RJRN's food business from its tobacco business, as
contemplated in RJRN's press release dated March 9, 1999.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.1. SURVIVAL. The covenants, agreements, representations and
warranties contained in Articles 8 and 9 shall survive until expiration of the
statute of limitations applicable to the matters covered thereby (giving effect
to any waiver, mitigation or extension thereof). The representations and
warranties in Sections 3.01, 3.02, 3.06, 3.07, 3.15, 3.18, 3.20 and 4.09 shall
survive for three years after the Closing Date, and all other representations
and warranties contained herein (except for those contained in Articles 8 and 9)
shall survive for one year after the Closing Date. The covenants and agreements
contained herein (except for those contained in Articles 8 and 9) shall survive
for the period indicated therein or, if not so indicated, indefinitely.
Notwithstanding the foregoing, any covenant, agreement, representation or
warranty in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the
foregoing, if BONA FIDE notice of such inaccuracy or breach giving rise to such
right of indemnity specifying with particularity (x) the covenant, agreement,
representation or warranty in this Agreement in respect of which indemnity may
be sought and (y) the facts and circumstances giving rise to such right shall
have been given to the party against whom such indemnity may be sought prior to
such time.
SECTION 11.2. INDEMNIFICATION. (a) Sellers hereby jointly and severally
indemnify Buyer, its Affiliates and the members of the RJRI Group and, if
applicable, their respective directors, officers, agents, employees, successors
and assigns against and agree to hold each of them harmless from any and all
assessments, penalties, fines, damages, losses, liabilities and expenses
(including,
43
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding)
("DAMAGES") incurred or suffered by Buyer, any of its Affiliates or any member
of the RJRI Group or their respective directors, officers, agents, employees,
successors and assigns arising out of:
(i) any misrepresentation or breach of warranty made by the
Sellers' Group to Buyer or any of its Affiliates pursuant to the
Transaction Documents, or breach of warranty, made by the Sellers'
Group pursuant to the Transaction Documents (other than pursuant to
Article 8 of this Agreement), PROVIDED that, with respect to any
Damages incurred or suffered by Buyer or any of its Affiliates or any
member of the RJRI Group arising out of any misrepresentation or breach
of warranty, Sellers shall not be liable under this Section 11.02(a)(i)
unless the aggregate amount of Damages exceeds $50,000,000 (and then
only to the extent of such excess);
(ii) any breach of covenant or agreement made or to be
performed by the Sellers' Group pursuant to the Transaction Documents
(other than pursuant to Article 8 of this Agreement);
(iii) Sellers Product Liabilities; or
(iv) Excluded Liabilities.
(b) Buyer hereby indemnifies each member of the Sellers' Group and, if
applicable, their respective directors, officers, agents, employees, successors
and assigns against and agrees to hold each of them harmless from any and all
Damages incurred or suffered by any member of the Sellers' Group or their
respective directors, officers, agents, employees, successors and assigns
arising out of:
(i) any misrepresentation or breach of warranty made or to be
performed by Buyer or its Affiliates pursuant to the Transaction
Documents (other than pursuant to Article 8 of this Agreement),
PROVIDED that, with respect to any Damages incurred or suffered by the
Sellers' Group arising out of any misrepresentations or breach of
warranty, Buyer shall not be liable under this Section 11.02(b)(i)
unless the aggregate amount of Damages exceeds $50,000,000 (and then
only to the extent of such excess);
44
(ii) any breach of covenant or agreement made or to be
performed by Buyer or its Affiliates pursuant to the Transaction
Documents (other than pursuant to Article 8 of this Agreement); or
(iii) any RJRI Liabilities.
; PROVIDED that it is understood that Sellers will first pursue any claims under
this Section 11.02(b) against members of the RJRI Group before making claims
against Buyer, and that Buyer will only be secondarily liable for such claims.
(c) The monetary thresholds set forth in this Section 11.02 have been
negotiated for the special purpose of the provision to which they relate and are
not to be taken as evidence of the level of "materiality" for purposes of any
statutory or common law which may be applicable to the transactions contemplated
by this Agreement under which a level of materiality might be an issue.
SECTION 11.3. PROCEDURES. (a) The party seeking indemnification under
Article 8 or 9 or Section 11.02 (the "INDEMNIFIED PARTY") agrees to give prompt
notice to the party against whom indemnity is sought (the "INDEMNIFYING PARTY")
of the assertion of any claim, or the commencement of any suit, action or
proceeding ("Claim") in respect of which indemnity may be sought under such
Section or Article and will provide the Indemnifying Party such information with
respect thereto as the Indemnifying Party may reasonably request. The failure so
to notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligations hereunder, except to the extent such failure shall have materially
prejudiced the Indemnifying Party.
(b) The Indemnifying Party shall be entitled to participate in the
defense of any Claim asserted by any third party ("THIRD PARTY CLAIM") and,
subject to the limitations set forth in this Section, shall be entitled to (and
at the request of the Indemnifying Party shall) control and appoint lead counsel
for such defense, in each case at its expense. The Indemnified Party shall
obtain the written consent of the Indemnifying Party before entering into any
settlement of any Third Party Claim.
(c) If the Indemnifying Party shall assume the control of the defense
of any Third Party Claim in accordance with the provisions of this Section
11.03, the Indemnifying Party shall obtain the prior written consent of the
Indemnified Party before entering into any settlement of such Third Party Claim,
if the settlement does not release the Indemnified Party from all liabilities
and obligations with respect to such Third Party Claim or the settlement imposes
injunctive or other equitable relief against the Indemnified Party and the
45
Indemnified Party shall be entitled to participate in the defense of such Third
Party Claim and to employ separate counsel of its choice for such purpose. The
fees and expenses of such separate counsel shall be paid by the Indemnified
Party.
(d) Each party shall cooperate, and cause their respective Affiliates
to cooperate, in the defense or prosecution of any Third Party Claim (and any
Excluded Liability) and shall furnish or cause to be furnished such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials or appeals, as may be reasonably requested in connection
therewith to the same extent as if no indemnification were provided hereunder.
The Indemnifying Party shall bear the reasonable out-of-pocket expenses of such
cooperation.
SECTION 11.4. CALCULATION OF DAMAGES. (a) The amount of any Damages
payable under Article 8 or 9 or Section 11.02 by the Indemnifying Party shall be
net of any amounts recovered or recoverable by the Indemnified Party under
applicable insurance policies and any Tax Benefit realized by the Indemnified
Party arising from the incurrence or payment of any such Damages. In computing
the amount of any such Tax Benefit, the Indemnified Party shall be deemed fully
to utilize, at the highest marginal tax rate then in effect, all Tax items
arising from the incurrence or payment of any indemnified Damages.
(b) The Indemnifying Party shall not be liable under Article 8 or 9 or
Section 11.02 for any (i) Damages relating to any matter to the extent that (A)
there is included in the Closing Balance Sheet a specific liability or reserve
relating to such matter or the Indemnified Party has otherwise been compensated
for such matter pursuant to the Purchase Price adjustment under Section 2.05,
consequential Damages or Damages for lost profits. For the purposes of this
Agreement, Damages shall not be determined through any multiple of earnings
approach or variant thereof and shall take account of the time value of money.
(c) Notwithstanding any other provision of this Agreement to the
contrary, if on the Closing Date the Indemnified Party knows of any information
that would cause one or more of the representations and warranties made by the
Indemnifying Party to be inaccurate, the Indemnified Party shall have no right
or remedy after the Closing with respect to such inaccuracy and shall be deemed
to have waived its rights to indemnification in respect thereof.
SECTION 11.5. ASSIGNMENT OF CLAIMS. If the Indemnified Party receives
any payment from an Indemnifying Party in respect of any Damages pursuant to
Section 11.02 and the Indemnified Party could have recovered all or a part of
such Damages from a third party (a "POTENTIAL CONTRIBUTOR") based on the
underlying
46
Claim asserted against the Indemnifying Party, the Indemnified Party shall
assign such of its rights to proceed against the Potential Contributor as are
necessary to permit the Indemnifying Party to recover from the Potential
Contributor the amount of such payment.
SECTION 11.6. EXCLUSIVITY OF REMEDIES. Except as specifically set forth
in this Agreement, effective as of the Closing, each party (on behalf of itself
and its Affiliates) waives any rights and claims it (or its Affiliates) may have
against the other party or its Affiliates, whether in law or in equity, relating
to the Business or the Shares or the transactions contemplated by the
Transaction Documents. The rights and claims waived include, without limitation,
claims for contribution or other rights of recovery arising out of or relating
to any Environmental Law, claims for breach of contract, breach of
representation or warranty, negligent misrepresentation and all other claims for
breach of duty. After the Closing, Articles 8 and 9 and Section 11.02 will
provide the exclusive remedy for any misrepresentation, breach of warranty,
covenant or other agreement or other claim arising out of the Transaction
Documents or the transactions contemplated thereby.
ARTICLE 12
TERMINATION
SECTION 12.1. GROUNDS FOR TERMINATION. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written agreement of Sellers and Buyer;
(b) by either Sellers or Buyer if the Closing shall not have been
consummated on or before December 31, 1999; or
(c) by either Sellers or Buyer if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any Governmental Entity having competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses
12.01(b) or 12.01(c) shall give notice of such termination to the other party.
If all conditions to consummation of the Closing are satisfied other
than the condition set forth in Section 10.03(c), and this Agreement is
terminated due solely to the failure to satisfy or waive the condition set forth
in Section 10.03(c),
47
then if one or both Sellers enter into an agreement within 6 months after
termination of this Agreement providing for the sale of the Business to another
buyer and such sale is subsequently consummated (the "ALTERNATIVE SALE"), the
Sellers will pay to Buyer an amount equal to the net after-tax excess of the
gross purchase price received by Sellers in the Alternative Sale (assuming no
assumption of debt) over $8,000,000,000.
SECTION 12.2. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 12.01 or 13.11, such termination shall be without liability
of any party (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to the other parties to this Agreement;
PROVIDED that if such termination shall result from the (i) willful failure of
any party to fulfill a condition to the performance of the obligations of the
other parties or (ii) failure to perform a covenant of this Agreement, such
party shall be fully liable for any and all Damages incurred or suffered by the
other parties as a result of such failure or breach. The provisions of Sections
6.01, 13.03, 13.05, 13.06 and 13.07 shall survive any termination hereof
pursuant to Section 12.01 or 13.11.
ARTICLE 13
MISCELLANEOUS
SECTION 13.1. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Buyer, to:
Japan Tobacco Inc.
▇-▇-▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
48
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: ▇▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
if to Sellers, to:
RJR Nabisco, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
49
SECTION 13.2. AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 13.3. EXPENSES. Except as expressly provided in this Agreement,
all costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense.
SECTION 13.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Buyer may assign any
or all of its rights or delegate any or all of its obligations hereunder to an
Affiliate of Buyer without the prior written consent of any of Sellers PROVIDED,
HOWEVER, that such Affiliate shall agree in writing to be bound by the terms and
conditions of this Agreement. Such assignment or delegation shall in no way
limit or relieve Buyer of any of its obligations hereunder. Nothing in this
Agreement, expressed or implied, is intended to confer upon any Person
(including any employee or former employee) other than Buyer, Sellers and, to
the extent provided herein, their respective Affiliates, any rights or remedies
under or by reason of this Agreement. Further, no provision of this Agreement
shall create any such rights in any such Persons in respect of any benefit
plans, programs, policies and arrangements (to include fringe benefits) or any
plan or arrangement which may be established by Buyer or any of its Affiliates.
SECTION 13.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 13.6. JURISDICTION. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
50
brought exclusively in the United States District Court for the Southern
District of New York or any other New York State court sitting in the Borough of
Manhattan, New York City, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 13.01
shall be deemed effective service of process on such party.
SECTION 13.7. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 13.8. COUNTERPARTS; THIRD PARTY BENEFICIARIES. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
SECTION 13.9. ENTIRE AGREEMENT. The Transaction Documents constitute
the entire agreement among the parties with respect to the subject matter of
this Agreement and supersede all prior agreements including the Confidentiality
Agreement and understandings, both oral and written, among the parties with
respect to the subject matter of this Agreement.
SECTION 13.10. CAPTIONS. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 13.11. DISCLOSURE LETTER. (a) Sellers may revise the Disclosure
Letter with respect to matters arising (or that become known to Sellers) after
February 1, 1999 by delivering a revised Disclosure Letter to Buyer at any time
prior to the fifth Business Day before the Closing Date. Buyer shall have the
right to review the revised Disclosure Letter for a period of five Business Days
after
51
receipt thereof. At any time within such five-Business Day time period, Buyer
shall have the right to terminate this Agreement by delivery of a notice to
Sellers if the revised information (x) reflects a Material Adverse Effect as
compared with the comparable information contained in the original Disclosure
Letter and (y) could not reasonably have been expected to result from any
condition, event, document or other matter disclosed in the original Disclosure
Letter. This notice, if given, shall specify the information forming the basis
for the decision to terminate. Sellers shall have five Business Days after
receipt of such notice to review with Buyer the information forming the basis
for the decision to terminate and to attempt to agree on corrective measures, if
any. If the parties cannot agree on corrective measures within such
five-Business Day period, then this Agreement shall terminate. If this Agreement
is not terminated as permitted by this Section, Buyer shall be deemed to have
accepted such revisions, and the Disclosure Letter attached to this Agreement as
of the date hereof shall be deemed to be amended by the revised Disclosure
Letter.
(b) The parties acknowledge and agree that the Disclosure Letter may
include certain items and information solely for informational purposes for the
convenience of Buyer and the disclosure by Sellers of any matter in the
Disclosure Letter shall not be deemed to constitute an acknowledgment by Sellers
that the matter is required to be disclosed by the terms of this Agreement or
that the matter is material.
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
JAPAN TOBACCO INC.
By:
--------------------------------------
Name: Katsuhiko Honda
Title: Senior Executive Vice President
RJR NABISCO, INC.
By:
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
▇. ▇. ▇▇▇▇▇▇▇▇ TOBACCO COMPANY
By:
--------------------------------------
Name:
Title:
EXHIBIT A
[FORM OF IPR AGREEMENT]
EXHIBIT B
PRODUCTION AGREEMENT TERM SHEET
SUBJECT MATTER
RJRT will produce finished and packaged cigarettes, ready for distribution and
sale to customers of RJRI and blended tobacco in accordance with the
specifications provided by Buyer and will supply packaging materials to RJRI
manufacturing facilities; provided that such specifications shall not require
RJRT to replace or reconfigure its currently used machinery and equipment. RJRT
will also provide related servicing and scheduling services.
TERM
The agreement will be in effect until December 31, 2001 and will continue
thereafter unless terminated by either party on one-year's notice.
QUANTITIES
The quantities to be produced by RJRT for the period from the Closing to the end
of 1999 will be substantially the same as the quantities the current plan
provides for that period. (The current plan for the full 1999 year provides for
a total of approximately 21,848,000,000 cigarettes and approximately 31,593,000
lb. of blended tobacco.) The quantities in each succeeding year shall be
projected by Buyer pursuant to an agreed forecasting schedule. Unless otherwise
agreed by the parties, the quantity to be produced in any succeeding year shall
not vary by more 10% from the quantities produced in the next preceding year,
subject to further adjustment to reflect changes in consumer market demand.
PRICE
Buyer will pay RJRT its fully-allocated cost incurred in the manufacturing of
the cigarettes, blended tobacco and packaging materials (collectively,
"PRODUCTS") plus an agreed profit margin.
WARRANTIES
RJRT will warrant that the Products will be manufactured in accordance with
specifications supplied by Buyer. However, RJRT will not be required to make any
other warranties, express or implied, and Buyer will indemnify RJRT for all
liabilities related to the Products or the use of or exposure to the Products.
55
RAW MATERIALS
If requested by Buyer, RJRT will (i) buy all raw materials necessary to
manufacture the Products on behalf of Buyer and ▇▇▇▇ Buyer for the cost of such
materials in accordance with normal billing procedures, (ii) continue current
arrangements pursuant to which RJRT buys raw materials for itself and RJRI and
allocates to RJRI the applicable percentage of the raw materials, or (iii)
utilize raw materials furnished to it by Buyer.
GOVERNING LAW
New York
56
EXHIBIT C
TRANSITIONAL SERVICES AGREEMENT TERM SHEET
SUBJECT MATTER
RJRT (or, if specifically indicated, RJRN or ▇.▇. ▇▇▇▇▇▇▇▇ Tobacco
International, Inc., a Delaware corporation ("RJRTI")) is prepared to supply the
following services to Buyer:
LEGAL
(i) Trademark registration and application maintenance services and patent
registration and application services.
(ii) Continued product liability defense assistance.
MANUFACTURING/OPERATIONAL/LEAF SUPPLY.
(i) Engineering support (provision of services by the engineering group in
Winston-Salem to RJRI on a project basis).
(ii) Dedicated packaging support (ensuring that various RJRI packaging graphics
are maintained).
(iii) Quality assurance (making available a QA group for the international
production).
RESEARCH & DEVELOPMENT
Services would involve chemical analysis, biological testing, and toxicological
testing of some current and proposed products.
SCIENCE & REGULATORY AFFAIRS
Services would be provided by a group at RJRT that analyzes scientific and
regulatory activities as they pertain to tobacco products worldwide and would
include substantiation of data as well as analysis of compliance with various
regulatory schemes.
FINANCE/TAX
(i) Provision of tax service to RJRI in connection with RJRI's obtaining the
duty drawback on cigarettes produced by RJRI in the U.S.
(ii) Collection of duty free receivables.
(iii) Development and maintenance of standard production costs.
INSURANCE
Provision of insurance services by RJRN (see the Disclosure Letter).
INFORMATION SYSTEMS (IS)
(i) Provision of support and services related to mainframe applications and
technical support and allowing continuing usage of some of the mainframes in
Winston-Salem (Winton-Salem is one of the IS hubs that services the RJRI IS
network).
(ii) Processing of certain payments on behalf of RJRI and maintenance of export
billing system.
HUMAN RESOURCES (HR)
Provision by RJRTI of support services in Winston-Salem to service the needs of
RJRI employees who receive their benefits and pensions as well as some of their
salary in the U.S.
SUCH OTHER SERVICES AS ARE CURRENTLY PROVIDED BY RJRT TO RJRI (SUBJECT TO
FURTHER DISCUSSION)
RJRT is prepared to purchase the following from Buyer:
(i) Cigarettes manufactured by the Puerto Rico plant for the Puerto Rico
domestic tax-paid market for six months after the Closing;
(ii) The number of "Export A" cigarettes manufactured by RJR-Macdonald, Inc.
that is substantially the same as the number of such cigarettes currently
purchased by RJRT; and
(iii) Cast sheet from the Trier factory.
TERM
Buyer will have the right to terminate any service on three months' notice.
Sellers will have the right to terminate any service on three months' notice at
any time after the first anniversary of the Purchase Agreement.
PRICE
Each party will pay to the other its fully-allocated cost incurred in the
provision of goods or services described above plus an agreed profit margin.
3
WARRANTIES
RJRT will warrant that the services covered by this Agreement will be provided
in accordance with the specifications supplied by Buyer. However, RJRT will not
be required to make any other warranties, express or implied, and Buyer will
indemnify RJRT for all liabilities related to such services.
GOVERNING LAW
New York
4
EXHIBIT D
----------- -------------
JURISDICTION OF
CORPORATION INCORPORATION
Bisco Services B.V. Netherlands
Bisco Services SA Switzerland
CGM-Cooperation Gesellschaft Germany
Markendiversifikation GmbH
GEM: Global Event Management, Ltd. England
▇.▇. ▇▇▇▇▇▇▇▇ Berhad Malaysia
▇.▇. ▇▇▇▇▇▇▇▇ Consults Ltd. Cyprus
▇.▇. ▇▇▇▇▇▇▇▇ (Cyprus) Limited Cyprus
▇.▇. ▇▇▇▇▇▇▇▇ Espana, S.L. Spain
▇.▇. ▇▇▇▇▇▇▇▇ Finance S.A. Switzerland
▇.▇. ▇▇▇▇▇▇▇▇ Iberia, S.L. Spain
▇.▇. ▇▇▇▇▇▇▇▇ International B.V. Netherlands
▇.▇. ▇▇▇▇▇▇▇▇ Italia S.r.l. Italy
▇.▇. ▇▇▇▇▇▇▇▇/M.C. Tobacco Company, Limited Japan
▇.▇. ▇▇▇▇▇▇▇▇ Overseas Finance Co. N.V. Netherlands Antilles
▇.▇. ▇▇▇▇▇▇▇▇ Scandinavia A.B. Sweden
▇.▇. ▇▇▇▇▇▇▇▇ (SEA) Sdn. Bhd. Malaysia
▇.▇. ▇▇▇▇▇▇▇▇ (Thailand), Inc. Delaware
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco AG Dagmersellen Switzerland
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco B.V. Netherlands
----------- -------------
JURISDICTION OF
CORPORATION INCORPORATION
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco Company (Hong Kong) Limited Hong Kong
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco Company (Taiwan), Inc. Delaware
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco Holdings II B.V. Netherlands
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco International B.V. Netherlands
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco International (Korea), Inc. Delaware
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco International (Mexico), Delaware
Inc.
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco International OY Finland
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco International (Pty) Ltd. South Africa
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco-Kremenchuk Ukraine
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco Limited (N.Z.) New Zealand
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco-LVIV JSC Ukraine
▇.▇. ▇▇▇▇▇▇▇▇ Tobacco Poland Sp. Zo.o (Ltd.) Poland
▇.▇. ▇▇▇▇▇▇▇▇ Verwaltungsgesellschaft GmbH Germany
Reyben Reinsurance Limited Ireland
▇▇▇▇▇▇▇▇ Manufacturing (Bulgaria) Ltd. Bulgaria
RJR-Armavirtabak, OAO Russia
----------- -------------
JURISDICTION OF
CORPORATION INCORPORATION
RJR-Macdonald Inc.(1) Federal, Canada
RJR Nabisco (Cyprus) Ltd. Cyprus
RJR Tobacco Yelets OAO Russia
SIA Marketing and Sales Latvia
Tanzania Cigarette Company Limited Tanzania
Transnational Services, Inc. Delaware
Worldwide Brands, Inc. Delaware
NOTE: The capitalization and share ownership data for the foregoing companies
are set forth in Section 3.05 of the Disclosure Letter.
----------
(1) Subject to the reorganization described in Section 5.01.
EXHIBIT E
PURCHASE PRICE ALLOCATION
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT
APPEAR IN THE TARGET PULL-DOWN LIST.
(This list is for the use of the wordprocessor only, is not a part
of this document and may be discarded.)
ARTICLE/SECTION TARGET NAME
=================================
1.....................Definitions
1.01...................def.in.sec
1.01(a)..............def.in.sec.a
2..................▇▇▇▇▇.▇▇▇▇.▇▇▇
2.01...............purch.sale.sec
2.02..................purch.price
2.03......................closing
2.03....................closing.a
2.03(a).................closing.b
2.03(c).................closing.c
2.04............closing.bal.sheet
2.04(a).......closing.bal.sheet.a
2.04(b).......closing.bal.sheet.b
2.04(c).......closing.bal.sheet.c
2.04(d).......closing.bal.sheet.d
2.05.......................adj.pp
2.05(a)..................adj.pp.a
2.05(b)..................adj.pp.b
2.06.......................all.pp
3....................rep.warr.sel
3.01......................corp.ex
3.02....................corp.auth
3.03.....................gov.auth
3.04......................noncont
3.05..........................cap
3.06.......................▇▇▇.▇▇
3.07..........................sub
3.08.......................▇▇▇.▇▇
3.08(a)..................fin.st.a
3.08(b)..................fin.st.b
3.08(c)..................fin.st.c
3.09..................▇▇▇.▇▇▇▇.▇▇
3.09(a).............abs.cert.ch.a
3.09(b).............abs.cert.ch.b
3.09(c).............abs.cert.ch.c
3.09(d).............abs.cert.ch.d
3.09(e).............abs.cert.ch.e
3.09(f).............abs.cert.ch.f
3.09(g).............abs.cert.ch.g
3.09(h).............abs.cert.ch.h
3.09(i).............abs.cert.ch.i
3.11..................inter.accts
3.12.....................mat.cont
3.12(a)................mat.cont.a
3.12(a)(i)...........mat.cont.a.i
3.12(a)(ii).........mat.cont.a.ii
3.12(a)(iii).......mat.cont.a.iii
3.12(a)(iv).........mat.cont.a.iv
3.12(a)(ix).........mat.cont.a.ix
3.12(a)(v)...........mat.cont.a.v
3.12(a)(vi).........▇▇▇.▇▇▇▇.▇.▇▇
3.12(a)(vii).......mat.cont.a.vii
3.12(a)(viii).....mat.cont.a.viii
3.12(a)(x)...........mat.cont.a.x
3.12(b)................mat.cont.b
3.13..........................lit
3.14.....................▇▇▇▇.▇▇▇
3.15...........................ip
3.15(a)......................ip.a
3.15(b)......................ip.b
3.15(c)......................ip.c
3.16......................ins.cov
3.17.........................ffee
3.18.......................en.mat
3.18(a)..................en.mat.a
3.18(b)..................en.mat.b
3.18(c)..................en.mat.c
3.19..........................y2k
3.19(a).....................y2k.a
3.19(b).....................y2k.b
3.20.....................nec.prop
4....................▇▇▇.▇▇▇▇.▇▇▇
4.01.......................cor.ex
4.02.......................cor.au
4.03.......................▇▇▇.▇▇
4.04.........................nonc
4.05..........................fin
4.06.......................▇▇▇.▇▇
4.07........................litig
4.08......................find.fe
4.09....................in.no.rep
5........................cov.sell
5.01.......................▇▇▇.▇▇
5.01(a)..................con.co.a
5.01(b)..................con.co.b
5.01(c)..................con.co.c
5.01(d)..................con.co.d
5.01(e)..................con.co.e
5.01(f)..................con.co.f
5.01(g)..................con.co.g
5.02..........................acc
5.02(a).....................acc.a
5.02(b).....................acc.b
5.03........................resig
5.04.......................▇▇▇.▇▇
5.05..........................del
6.........................▇▇▇.▇▇▇
6.01.............................
6.02.......................re.agt
6.03.....................gar.ind
6.04.......................transf
7.......................cov.buyer
7.01.....................best.eff
7.02......................▇▇▇▇.▇▇
7.03..........................pub
7.04.........................iact
7.05........................not.c
7.05(a)...................not.c.a
7.05(b)...................not.c.b
7.05(c)...................not.c.c
8.........................tax.mat
8.01......................tax.def
8.02.....................tax.reps
8.03.....................tax.covs
8.03(a)................tax.covs.a
8.03(b)................tax.covs.b
8.03(c)................tax.covs.c
8.03(d)................tax.covs.d
8.04.........................coop
8.04(a)....................coop.a
8.04(b)....................coop.b
8.05.......................▇▇▇.▇▇
8.05(a)..................ind.se.a
8.05(b)..................ind.se.b
8.05(c)..................ind.se.c
8.05(d)..................ind.se.d
8.05(e)..................ind.se.e
8.05(f)..................ind.se.f
9...........................▇▇.▇▇
9.01...................ee.be.defs
9.01(a)..............ee.be.defs.a
9.01(b)..............ee.be.defs.b
9.02.......................repres
9.02(a)..................repres.a
9.02(a)(i).............repres.a.i
9.02(a)(ii)...........repres.a.ii
9.02(a)(iii)........represe.a.iii
9.02(a)(iv)...........repres.a.iv
9.02(a)(v).............repres.a.v
9.02(a)(vi)...........▇▇▇▇▇▇.▇.▇▇
9.02(b)..................repres.b
9.03........................▇▇.▇▇
9.03(a)...................rj.ee.a
9.03(b)...................rj.ee.b
9.03(c)...................rj.ee.c
9.03(d)...................rj.ee.d
9.03(e)...................rj.ee.e
9.03(f)...................rj.ee.f
9.03(g)...................rj.ee.g
9.03(h)...................rj.ee.h
9.03(i)...................rj.ee.i
9.04........................se.pp
?.........................se.pp.a
?.........................se.pp.b
9.05......................se.ac.p
9.06......................perf.ri
10.......................cond.clo
10.01.....................cond.ob
10.01(a)................cond.ob.a
10.01(a)(i)...........cond.ob.a.i
10.01(b)................cond.ob.b
10.01(c)................cond.ob.c
10.01(d)................cond.ob.d
10.02......................con.ob
10.02(a).................con.ob.a
10.02(a)(i)............con.ob.a.i
10.02(b).................con.ob.b
10.03.......................▇▇.▇▇
10.03(a)..................co.se.a
10.03(b)..................co.se.b
10.03(c)..................co.se.c
11...................▇▇▇▇▇▇▇▇.▇▇▇
11.01................survival.sec
11.02..........................in
11.02(a).....................in.a
11.02(b).....................in.b
11.02(c).....................in.c
11.03.........................pro
11.03(a)....................pro.a
11.03(b)....................pro.b
11.03(c)....................pro.c
11.03(d)....................pro.d
11.04.....................cal.dam
11.04(a)................cal.dam.a
11.04(b)................cal.dam.b
11.04(c)................cal.dam.c
11.05......................▇▇▇.▇▇
11.06.......................▇▇.▇▇
12...........................term
12.01.....................grounds
12.01(a)................grounds.a
12.01(b)................grounds.b
12.01(c)................grounds.c
12.02....................eff.term
13...........................misc
13.01.........................not
13.02....................amend.wa
13.02(a)...............amend.wa.a
13.02(b)...............amend.wa.b
13.03....................expenses
13.04.....................▇▇▇▇.▇▇
13.05......................gov.lw
13.06.......................juris
13.07.....................waiv.jr
13.08........................cnpt
13.09......................entire
13.10....................captions
13.11......................▇▇▇.▇▇
13.11(a).................dis.lt.a
13.11(b).................dis.lt.b