UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 28, 2008
ALTRIA GROUP, INC.
(Exact name of registrant as specified in its charter)
Virginia | 1-8940 | 13-3260245 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
6601 West Broad Street, Richmond, Virginia | 23230 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (804) 274-2200
120 Park Avenue, New York, New York 10017
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. Entry into a Material Definitive Agreement.
Effective as of the close of business on March 28, 2008, the separation of Philip Morris International Inc. (PMI) from Altria Group, Inc. (Altria) and the distribution of 100% of the shares of PMI to Altrias shareholders was completed (the Distribution). In connection with the Distribution, Altria entered into certain agreements with PMI to define responsibility for obligations arising before and after the Distribution, including, among others, obligations relating to transition services, employees, taxes and intellectual property.
On March 28, 2008, Altria Corporate Services, Inc., a subsidiary of Altria (ALCS), entered into a Transition Services Agreement (the Transition Services Agreement) with PMI pursuant to which ALCS will provide a variety of services to PMI for a period of time following the Distribution not to exceed twenty-four months. The transition services include consulting services related to risk management, benefit administration and information technology as well as the transfer of transaction processing (accounts payable and expense reports) for certain Latin American markets.
On March 28, 2008, Altria entered into an Employee Matters Agreement (the Employee Matters Agreement) with PMI. The Employee Matters Agreement governs Altrias and PMIs respective obligations with respect to employees, compensation plans, treatment of holders of Altria stock options, restricted stock and deferred stock with respect to PMI, and cooperation between the companies in the sharing of employee information and maintenance of confidentiality.
On March 28, 2008, Altria entered into a Tax Sharing Agreement (the Tax Sharing Agreement) with PMI. The Tax Sharing Agreement generally governs Altrias and PMIs respective rights, responsibilities and obligations for pre-distribution periods and for potential taxes on the Distribution. With respect to any potential taxes resulting from the Distribution, responsibility for such tax will be allocated to the party that acted (or failed to act) in a manner which resulted in such tax.
Effective as of January 1, 2008, Philip Morris USA Inc., a subsidiary of Altria (PM USA), entered into an Intellectual Property Agreement (the Intellectual Property Agreement) with PMI. The Intellectual Property Agreement governs the ownership of intellectual property between PMI and PM USA. Ownership of the jointly funded intellectual property has been allocated as follows: (i) PMI owns all rights to the jointly funded intellectual property outside the United States, its territories and possessions and (ii) PM USA owns all rights to the jointly funded intellectual property in the United States, its territories and possessions. Ownership of intellectual property related to patent applications and resulting patents based solely on the jointly funded intellectual property, regardless when filed or issued, will be exclusive to PM USA in the United States, its territories and possessions and exclusive to PMI everywhere else in the world. Additionally, the Intellectual Property Agreement contains provisions concerning intellectual property that is independently developed by PMI or PM USA following the Distribution.
The foregoing descriptions of the Transition Services Agreement, the Employee Matters Agreement, the Tax Sharing Agreement and the Intellectual Property Agreement are qualified in their entirety by reference to the complete terms and conditions of these agreements which are attached as Exhibits 10.110.4 to this Current Report on Form 8-K and are incorporated herein by reference in their entirety.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Resignation and Appointment of Directors
In connection with the Distribution, on March 27, 2008, the following directors resigned from the Board of Directors of Altria: Harold Brown, Mathis Cabiallavetta, Louis C. Camilleri, J. Dudley Fishburn, Lucio A. Noto, John Reed and Stephen M. Wolf.
Immediately following resignation of the foregoing directors, the Board of Directors of Altria appointed Gerald L. Baliles, Dinyar S. Devitre, Thomas F. Farrell II and Michael E. Szymanczyk to fill vacancies created on the Board of Directors.
There are no arrangements or understandings pursuant to which these individuals were selected as directors, and there are no related party transactions between these individuals and Altria.
Appointment of Directors to the Committees
Audit Committee . The following directors were appointed to the Audit Committee: Dr. Elizabeth E. Bailey, Thomas F. Farrell II, Robert E. R. Huntley, Thomas W. Jones and George Muñoz. Mr. Muñoz was appointed Committee Chair.
Compensation Committee . The following directors were appointed to the Compensation Committee: Dr. Elizabeth E. Bailey, Gerald L. Baliles, Thomas F. Farrell II, Robert E. R. Huntley and Thomas W. Jones. Mr. Huntley was appointed Committee Chair.
Executive Committee . The following directors were appointed to the Executive Committee: Dr. Elizabeth E. Bailey, Robert E. R. Huntley, Thomas W. Jones, George Muñoz and Michael E. Szymanczyk. Mr. Szymanczyk was appointed Committee Chair.
Finance Committee . The following directors were appointed to the Finance Committee: Dr. Elizabeth E. Bailey, Gerald L. Baliles, Dinyar S. Devitre, Robert E. R. Huntley, Thomas W. Jones and George Muñoz. Mr. Jones was appointed Committee Chair.
Nominating, Corporate Governance and Social Responsibility Committee . The following directors were appointed to the Nominating, Corporate Governance and Social Responsibility Committee: Dr. Elizabeth E. Bailey, Gerald L. Baliles, Thomas F. Farrell II, Robert E. R. Huntley and George Muñoz. Dr. Bailey was appointed Committee Chair.
Resignation and Appointment of Officers
In connection with the Distribution, the following individuals resigned from the positions listed below effective as of 4:59 p.m. on March 28, 2008:
Louis C. Camilleri |
Chairman and Chief Executive Officer | |
Dinyar S. Devitre |
Senior Vice President and Chief Financial Officer | |
Steven C. Parrish |
Senior Vice President, Corporate Affairs | |
Joseph A. Tiesi |
Vice President and Controller | |
Charles R. Wall |
Senior Vice President and General Counsel |
Also, as previously disclosed, in connection with the Distribution, André Calantzopoulos, who has served as Chief Executive Officer of PMI, will continue to serve PMI as Chief Operating Officer, and will no longer be an executive officer of Altria as of March 28, 2008.
The following individuals were appointed to serve Altria in the positions listed below effective as of 5:00 p.m. on March 28, 2008:
Michael E. Szymanczyk , age 59, Chairman and Chief Executive Officer. Mr. Szymanczyk serves as Chairman and Chief Executive Officer of Altria and Chairman, President and Chief Executive Officer of PM USA. He was named as Altrias Chairman and Chief Executive Officer in March 2008. Mr. Szymanczyk has been the Chief Executive Officer of PM USA since 1997 and joined the company in 1990 as Senior Vice President of Sales.
David Beran , age 53, Executive Vice President and Chief Financial Officer. Mr. Beran serves as Executive Vice President and Chief Financial Officer of Altria. He served as Executive Vice President and Chief Financial Officer for Philip Morris USA beginning in July 2007. From June 2005 to July 2007, he served as Executive Vice President of Finance, Planning & Information for Philip Morris USA. From 2002 through 2005, he served as Philip Morris USAs Executive Vice President, Strategy, Communication and Consumer Contact.
Linda M. Warren, age 59, Vice President and Controller. Ms. Warren serves Altria as Vice President and Controller. Previously, she served as Vice President and Controller of Philip Morris USA beginning in 2005, and prior to that as Assistant Controller, Accounting and Administration, beginning in 1998.
Compensatory Arrangements of Certain Officers
In connection with his appointment as the Chairman and Chief Executive Officer of Altria effective March 28, 2008, the Compensation Committee of Altria promoted Mr. Szymanczyk to Salary Band A. His base salary for 2008 remained unchanged at $1,200,000. Mr. Szymanczyks Annual Incentive Award target for 2008 was set at 150% of base salary and Long-Term Incentive Plan target at 250% of cumulative base salary over a three-year period in accordance with his promotion to Salary Band A. The Committee also decided to limit the total pension that Mr. Szymanczyk might receive upon his future retirement from the Company to a maximum of $30 million. No annual equity target was set for Mr. Szymanczyk.
In connection with his appointment as Executive Vice President and Chief Financial Officer of Altria effective March 28, 2008, Mr. Berans annual base salary for 2008 was set at $735,000. His Annual Incentive Award target for 2008 was set at 90% of base salary and his Long-Term Incentive Plan target was set at 200% of cumulative base salary over a three-year period. His annual equity target was set at $1,475,000.
In connection with her appointment as Vice President and Controller of Altria effective March 28, 2008, Linda Warrens base salary for 2008 was set at $320,000. Her Annual Incentive Award target for 2008 was set at 55% of base salary and her Long-Term Incentive Plan target was set at 60% of cumulative base salary over a three-year period. Her annual equity target was set at $250,000.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
In connection with the Distribution, on March 27, 2008, the Board of Directors of Altria amended Article II, Section 2 of its By-laws, as amended, in order to reduce the size of the Board from eleven (11) to eight (8) directors. The text of the Amended and Restated By-laws is attached hereto as Exhibit 3.1 and incorporated herein by reference.
Item 8.01. Other Events.
On March 28, 2008, Altria issued a press release announcing that the distribution of 100% of the common stock of PMI to Altrias shareholders was made to shareholders of record as of 5:00 p.m. New York City Time on March 19, 2008 (the record date). Altria shareholders received one share of PMI common stock for every share of Altria common stock outstanding as of the record date.
A copy of the press release issued by Altria is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.
Following the spin-off, the address of Altria Group, Inc.s corporate headquarters will be 6601 West Broad Street, Richmond, Virginia 23230.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
3.1 | Amended and Restated By-laws of Altria Group, Inc. | |
10.1 | Transition Services Agreement by and between Altria Corporate Services, Inc. and Philip Morris International Inc. dated as of March 28, 2008. | |
10.2 | Employee Matters Agreement by and between Altria Group, Inc. and Philip Morris International Inc. dated as of March 28, 2008. | |
10.3 | Tax Sharing Agreement by and between Altria Group, Inc. and Philip Morris International Inc. dated as of March 28, 2008. | |
10.4 | Intellectual Property Agreement by and between Philip Morris USA Inc. and Philip Morris International Inc. dated as of January 1, 2008. | |
99.1 | Altria Group, Inc. Press Release dated March 28, 2008. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ALTRIA GROUP, INC. | ||||
By: | /s/ Sean X. McKessy | |||
Name: | Sean X. McKessy | |||
Title: | Corporate Secretary |
DATE: March 28, 2008
INDEX TO EXHIBITS
Exhibit No. |
Description |
|
3.1 | Amended and Restated By-laws of Altria Group, Inc. | |
10.1 | Transition Services Agreement by and between Altria Corporate Services, Inc. and Philip Morris International Inc. dated as of March 28, 2008. | |
10.2 | Employee Matters Agreement by and between Altria Group, Inc. and Philip Morris International Inc. dated as of March 28, 2008. | |
10.3 | Tax Sharing Agreement by and between Altria Group, Inc. and Philip Morris International Inc. dated as of March 28, 2008. | |
10.4 | Intellectual Property Agreement by and between Philip Morris USA Inc. and Philip Morris International Inc. dated as of January 1, 2008. | |
99.1 | Altria Group, Inc. Press Release dated March 28, 2008. |
Exhibit 3.1
BY-LAWS
of
ALTRIA GROUP, INC.
ARTICLE I
Meetings of Stockholders
Section 1. Annual Meetings. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting, and any postponement or adjournment thereof, shall be held on such date and at such time as the Board of Directors may in its discretion determine.
Section 2. Special Meetings. Unless otherwise provided by law, special meetings of the stockholders may be called by the chairman of the Board of Directors, or in the chairmans absence, the deputy chairman of the Board of Directors (if any), the vice chairman of the Board of Directors (if any), the president (if one shall have been elected by the Board of Directors) or, in the absence of all of the foregoing, an executive vice president or by order of the Board of Directors, whenever deemed necessary.
Section 3. Place of Meetings. All meetings of the stockholders shall be held at such place as from time to time may be fixed by the Board of Directors.
Section 4. Notice of Meetings. Notice, stating the place, day and hour and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting (except as a different time is specified herein or by law), to each stockholder of record having voting power in respect of the business to be transacted thereat.
Notice of a stockholders meeting to act on an amendment of the Articles of Incorporation, a plan of merger or share exchange, a proposed sale of all, or substantially all of the Corporations assets, otherwise than in the usual and regular course of business, or the dissolution of the Corporation shall be given not less than twenty-five nor more than sixty days before the date of the meeting and shall be accompanied, as appropriate, by a copy of the proposed amendment, plan of merger or share exchange or sale agreement.
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Notwithstanding the foregoing, a written waiver of notice signed by the person or persons entitled to such notice, either before or after the time stated therein, shall be equivalent to the giving of such notice. A stockholder who attends a meeting shall be deemed to have (i) waived objection to lack of notice or defective notice of the meeting, unless at the beginning of the meeting he or she objects to holding the meeting or transacting business at the meeting, and (ii) waived objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless he or she objects to considering the matter when it is presented.
Section 5. Quorum. At all meetings of the stockholders, unless a greater number or voting by classes is required by law, a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum. If a quorum is present, action on a matter is approved if the votes cast favoring the action exceed the votes cast opposing the action, unless the vote of a greater number or voting by classes is required by law or the Articles of Incorporation, and except that in elections of directors those receiving the greatest number of votes shall be deemed elected even though not receiving a majority. Less than a quorum may adjourn.
Section 6. Organization and Order of Business. At all meetings of the stockholders, the chairman of the Board of Directors or, in the chairmans absence, the deputy chairman of the Board of Directors (if any), the vice chairman of the Board of Directors (if any), the president (if one shall have been elected by the Board of Directors) or, in the absence of all of the foregoing, the most senior executive vice president, shall act as chairman. In the absence of all of the foregoing officers or, if present, with their consent, a majority of the shares entitled to vote at such meeting, may appoint any person to act as chairman. The secretary of the Corporation or, in the secretarys absence, an assistant secretary, shall act as secretary at all meetings of the stockholders. In the event that neither the secretary nor any assistant secretary is present, the chairman may appoint any person to act as secretary of the meeting.
The chairman shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the dismissal of business not properly presented, the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls.
At each annual meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who shall be entitled to
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vote at such meeting and who complies with the notice procedures set forth in this Section 6. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholders notice must be given, either by personal delivery or by United States certified mail, postage prepaid, and received at the principal executive offices of the Corporation (i) not less than 120 days nor more than 150 days before the first anniversary of the date of the Corporations proxy statement in connection with the last annual meeting of stockholders or (ii) if no annual meeting was held in the previous year or the date of the applicable annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous years proxy statement, not less than 60 days before the date of the applicable annual meeting. A stockholders notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, including the complete text of any resolutions to be presented at the annual meeting, and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporations stock transfer books, of such stockholder proposing such business, (c) a representation that such stockholder is a stockholder of record and intends to appear in person or by proxy at such meeting to bring the business before the meeting specified in the notice, (d) the class and number of shares of stock of the Corporation beneficially owned by the stockholder and (e) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 6. The chairman of an annual meeting shall, if the facts warrant, determine that the business was not brought before the meeting in accordance with the procedures prescribed by this Section 6 . If the chairman should so determine, he or she shall so declare to the meeting and the business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 6, a stockholder seeking to have a proposal included in the Corporations proxy statement shall comply with the requirements of Regulation 14A under the Securities Exchange Act of 1934, as amended (including, but not limited to, Rule 14a-8 or its successor provision). The secretary of the Corporation shall deliver each such stockholders notice that has been timely received to the Board of Directors or a committee designated by the Board of Directors for review.
Section 7. Voting. A stockholder may vote his or her shares in person or by proxy. Any proxy shall be delivered to the secretary of the meeting at or prior to the time designated by the chairman or in the order of business for so delivering such proxies. No proxy shall be valid after eleven months from its date, unless otherwise provided in the proxy. Each holder of record of stock of any class shall, as to all matters in respect of which stock of such class has voting power, be entitled to such vote as is provided in the Articles of Incorporation for each share of stock of such class standing
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in the holders name on the books of the Corporation. Unless required by statute or determined by the chairman to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting or by such stockholders proxy, if there be such proxy.
Section 8. Written Authorization. A stockholder or a stockholders duly authorized attorney-in-fact may execute a writing authorizing another person or persons to act for him or her as proxy. Execution may be accomplished by the stockholder or such stockholders duly authorized attorney-in-fact or authorized officer, director, employee or agent signing such writing or causing such stockholders signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature.
Section 9. Electronic Authorization. The secretary or any vice president may approve procedures to enable a stockholder or a stockholders duly authorized attorney-in-fact to authorize another person or persons to act for him or her as proxy by transmitting or authorizing the transmission of a telegram, cablegram, internet transmission, telephone transmission or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such transmission must either set forth or be submitted with information from which the inspectors of election can determine that the transmission was authorized by the stockholder or the stockholders duly authorized attorney-in-fact. If it is determined that such transmissions are valid, the inspectors shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section 9 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
Section 10. Inspectors. At every meeting of the stockholders for election of directors, the proxies shall be received and taken in charge, all ballots shall be received and counted and all questions concerning the qualifications of voters, the validity of proxies, and the acceptance or rejection of votes shall be decided, by two or more inspectors. Such inspectors shall be appointed by the chairman of the meeting. They shall be sworn faithfully to perform their duties and shall in writing certify to the returns. No candidate for election as director shall be appointed or act as inspector.
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ARTICLE II
Board of Directors
Section 1. General Powers. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors.
Section 2. Number. The number of directors shall be eight (8).
Section 3. Term of Office and Qualification. Each director shall serve for the term for which he or she shall have been elected and until a successor shall have been duly elected.
Section 4. Nomination and Election of Directors.
(a) Except as provided in subsection (b) of this Section 4, each director shall be elected by a vote of the majority of the votes cast with respect to that director-nominees election at a meeting for the election of directors at which a quorum is present. For purposes of this Section 4, a majority of the votes cast means that the number of shares voted for a director must exceed the number of shares voted against that director.
(b) Subsection (a) shall not apply to any election of directors if there are more nominees for election than the number of directors to be elected, one or more of whom are properly proposed by shareholders. A nominee for director in an election to which this subsection (b) applies shall be elected by a plurality of the votes cast in such election.
(c) No person shall be eligible for election as a director unless nominated in accordance with the procedures set forth in this Section 4. Nominations of persons for election to the Board of Directors may be made by the Board of Directors or any committee designated by the Board of Directors or by any stockholder entitled to vote for the election of directors at the applicable meeting of stockholders who complies with the notice procedures set forth in this Section 4. Such nominations, other than those made by the Board of Directors or any committee designated by the Board of Directors, may be made only if written notice of a stockholders intent to nominate one or more persons for election as directors at the applicable meeting of stockholders has been given, either by personal delivery or by United States certified mail, postage prepaid, to the secretary of the Corporation and received (i) not less than 120 days nor more than 150 days before the first anniversary of the date of the Corporations proxy statement in connection with the last annual meeting of stockholders, or (ii) if no annual meeting was held in the previous year or the date of the applicable annual meeting has been changed by more than 30 days from the date contemplated at the time of the
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previous years proxy statement, not less than 60 days before the date of the applicable annual meeting, or (iii) with respect to any special meeting of stockholders called for the election of directors, not later than the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders. Each such stockholders notice shall set forth (a) as to the stockholder giving the notice, (i) the name and address, as they appear on the Corporations stock transfer books, of such stockholder, (ii) a representation that such stockholder is a stockholder of record and intends to appear in person or by proxy at such meeting to nominate the person or persons specified in the notice, (iii) the class and number of shares of stock of the Corporation beneficially owned by such stockholder, and (iv) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such stockholder; and (b) as to each person whom the stockholder proposes to nominate for election as a director, (i) the name, age, business address and, if known, residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of stock of the Corporation which are beneficially owned by such person, (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or is otherwise required by the rules and regulations of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended, and (v) the written consent of such person to be named in the proxy statement as a nominee and to serve as a director if elected. The secretary of the Corporation shall deliver each such stockholders notice that has been timely received to the Board of Directors or a committee designated by the Board of Directors for review. Any person nominated for election as director by the Board of Directors or any committee designated by the Board of Directors shall, upon the request of the Board of Directors or such committee, furnish to the secretary of the Corporation all such information pertaining to such person that is required to be set forth in a stockholders notice of nomination. The chairman of the meeting of stockholders shall, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by this Section 4 . If the chairman should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.
Section 5. Organization. At all meetings of the Board of Directors, the chairman of the Board of Directors or, in the chairmans absence, the deputy chairman of the Board of Directors (if any), the vice chairman of the Board of Directors (if any), the president (if one shall have been elected by the Board of Directors) or, in the absence of all of the foregoing, the senior most executive vice president, shall act as chairman of the meeting. The secretary of the Corporation or, in the secretarys absence, an assistant secretary, shall act as secretary of meetings of the Board of Directors. In the event that neither the secretary nor any assistant secretary shall be present at such meeting, the chairman of the meeting shall appoint any person to act as secretary of the meeting.
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Section 6. Vacancies. Any vacancy occurring in the Board of Directors, including a vacancy resulting from amending these By-Laws to increase the number of directors by thirty percent or less, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors.
Section 7. Place of Meeting. Meetings of the Board of Directors, regular or special, may be held either within or without the Commonwealth of Virginia.
Section 8. Organizational Meeting. The annual organizational meeting of the Board of Directors shall be held immediately following adjournment of the annual meeting of stockholders and at the same place, without the requirement of any notice other than this provision of the By-Laws.
Section 9. Regular Meetings: Notice. Regular meetings of the Board of Directors shall be held at such times and places as it may from time to time determine. Notice of such meetings need not be given if the time and place have been fixed at a previous meeting.
Section 10. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by order of the chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), the vice chairman of the Board of Directors (if any), the president (if any) or two of the directors. Notice of each such meeting, which need not specify the business to be transacted thereat, shall be mailed to each director, addressed to his or her residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent to such place by telegraph, telex or telecopy or be delivered personally or by telephone, not later than the day before the day on which the meeting is to be held.
Section 11. Waiver of Notice. Whenever any notice is required to be given to a director of any meeting for any purpose under the provisions of law, the Articles of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to such notice, either before or after the time stated therein, shall be equivalent to the giving of such notice. A directors attendance at or participation in a meeting waives any required notice to him or her of the meeting unless at the beginning of the meeting or promptly upon the directors arrival, he or she objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.
Section 12. Quorum and Manner of Acting. Except where otherwise provided by law, a majority of the directors fixed by these By-Laws at the time of any regular or special meeting shall constitute a quorum for the transaction of business at such meeting, and the act of a majority of the directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a
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quorum, a majority of those present may adjourn the meeting from time to time until a quorum be had. Notice of any such adjourned meeting need not be given.
Section 13. Order of Business. At all meetings of the Board of Directors business may be transacted in such order as from time to time the Board of Directors may determine.
Section 14. Committees. In addition to the executive committee authorized by Article III of these By-Laws, other committees, consisting of two or more directors, may be designated by the Board of Directors by a resolution adopted by the greater number of (i) a majority of all directors in office at the time the action is being taken or (ii) the number of directors required to take action under Article II, Section 12 hereof. Any such committee, to the extent provided in the resolution of the Board of Directors designating the committee, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, except as limited by law.
ARTICLE III
Executive Committee
Section 1. How Constituted and Powers. The Board of Directors, by resolution adopted pursuant to Article II, Section 14 hereof, may designate, in addition to the chairman of the Board of Directors, one or more directors to constitute an executive committee, who shall serve during the pleasure of the Board of Directors. The executive committee, to the extent provided in such resolution and permitted by law, shall have and may exercise all of the authority of the Board of Directors.
Section 2. Organization, Etc. The executive committee may choose a chairman and secretary. The executive committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors.
Section 3. Meetings. Meetings of the executive committee may be called by any member of the committee. Notice of each such meeting, which need not specify the business to be transacted thereat, shall be mailed to each member of the committee, addressed to his or her residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such place by telegraph, telex or telecopy or be delivered personally or by telephone, not later than the day before the day on which the meeting is to be held.
Section 4. Quorum and Manner of Acting. A majority of the executive committee shall constitute a quorum for transaction of business, and the act of a
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majority of those present at a meeting at which a quorum is present shall be the act of the executive committee. The members of the executive committee shall act only as a committee, and the individual members shall have no powers as such.
Section 5. Removal. Any member of the executive committee may be removed, with or without cause, at any time, by the Board of Directors.
Section 6. Vacancies. Any vacancy in the executive committee shall be filled by the Board of Directors.
ARTICLE IV
Officers
Section 1. Number. The officers of the Corporation shall be a chairman of the Board of Directors, a deputy chairman of the Board of Directors (if elected by the Board of Directors), a president (if elected by the Board of Directors), one or more vice chairmen of the Board of Directors (if elected by the Board of Directors), a chief operating officer (if elected by the Board of Directors), one or more vice presidents (one or more of whom may be designated executive vice president or senior vice president), a treasurer, a controller, a secretary, one or more assistant treasurers, assistant controllers and assistant secretaries and such other officers as may from time to time be chosen by the Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election, Term of Office and Qualifications. All officers of the Corporation shall be chosen annually by the Board of Directors, and each officer shall hold office until a successor shall have been duly chosen and qualified or until the officer resigns or is removed in the manner hereinafter provided. The chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), the president (if any) and the vice chairmen of the Board of Directors (if any) shall be chosen from among the directors.
Section 3. Vacancies. If any vacancy shall occur among the officers of the Corporation, such vacancy shall be filled by the Board of Directors.
Section 4. Other Officers, Agents and Employees Their Powers and Duties. The Board of Directors may from time to time appoint such other officers as the Board of Directors may deem necessary, to hold office for such time as may be designated by it or during its pleasure, and the Board of Directors or the chairman of the Board of Directors may appoint, from time to time, such agents and employees of the
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Corporation as may be deemed proper, and may authorize any officers to appoint and remove agents and employees. The Board of Directors or the chairman of the Board of Directors may from time to time prescribe the powers and duties of such other officers, agents and employees of the Corporation.
Section 5. Removal. Any officer, agent or employee of the Corporation may be removed, either with or without cause, by a vote of a majority of the Board of Directors or, in the case of any agent or employee not appointed by the Board of Directors, by a superior officer upon whom such power of removal may be conferred by the Board of Directors or the chairman of the Board of Directors.
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Section 6. Chairman of the Board of Directors and Chief Executive Officer. The chairman of the Board of Directors shall preside at meetings of the stockholders and of the Board of Directors and shall be a member of the executive committee. The chairman shall be the Chief Executive Officer of the Corporation and shall be responsible to the Board of Directors. He or she shall be responsible for the general management and control of the business and affairs of the Corporation and shall see to it that all orders and resolutions of the Board of Directors are implemented. The chairman shall, from time to time, report to the Board of Directors on matters within his or her knowledge which the interests of the Corporation may require be brought to its notice. The chairman shall do and perform such other duties as from time to time the Board of Directors may prescribe .
Section 7. Deputy Chairman of the Board of Directors. In the absence of the chairman of the Board of Directors, the deputy chairman of the Board of Directors (if elected by the Board of Directors) shall preside at meetings of the stockholders and of the Board of Directors. The deputy chairman shall be responsible to the chairman of the Board of Directors and shall perform such duties as shall be assigned to him or her by the chairman of the Board of Directors. The deputy chairman shall from time to time report to the chairman of the Board of Directors on matters within the deputy chairmans knowledge which the interests of the Corporation may require be brought to the chairmans notice.
Section 8. President. In the absence of the chairman of the Board of Directors and the deputy chairman of the Board of Directors (if any), the president (if one shall have been elected by the Board of Directors) shall preside at meetings of the stockholders and of the Board of Directors. The president shall be responsible to the chairman of the Board of Directors. Subject to the authority of the chairman of the Board of Directors, the president shall be devoted to the Corporations business and affairs under the basic policies set by the Board of Directors and the chairman of the Board of Directors. He or she shall, from time to time, report to the chairman of the Board of Directors on matters within the presidents knowledge which the interests of the Corporation may require be brought to the chairmans notice. In the absence of the chairman of the Board of Directors and the deputy chairman of the Board of Directors (if any), the president (if any) shall, except as otherwise directed by the Board of Directors, have all of the powers and the duties of the chairman of the Board of Directors. The president (if any) shall do and perform such other duties as from time to time the Board of Directors or the chairman of the Board of Directors may prescribe.
Section 9. Vice Chairmen of the Board of Directors. In the absence of the chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any) and the president (if any), the vice chairman of the Board of Directors designated for such purpose by the chairman of the Board of Directors (if any) shall preside at meetings of the stockholders and of the Board of Directors. Each vice chairman of the Board of Directors shall be responsible to the chairman of the Board of Directors. Each vice chairman of the
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Board of Directors shall from time to time report to the chairman of the Board of Directors on matters within the vice chairmans knowledge which the interests of the Corporation may require be brought to the chairmans notice. In the absence or inability to act of the chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any) and the president (if any), such vice chairman of the Board of Directors as the chairman of the Board of Directors may designate for the purpose shall have the powers and discharge the duties of the chairman of the Board of Directors. In the event of the failure or inability of the chairman of the Board of Directors to so designate a vice chairman of the Board of Directors, the Board of Directors may designate a vice chairman of the Board of Directors who shall have the powers and discharge the duties of the chairman of the Board of Directors.
Section 10. Chief Operating Officer. The chief operating officer (if any) shall be responsible to the chairman of the Board of Directors for the principal operating businesses of the Corporation and shall perform those duties that may from time to time be assigned.
Section 11. Vice Presidents. The vice presidents of the Corporation shall assist the chairman of the Board of Directors, the deputy chairman of the Board of Directors, the president (if any) and the vice chairmen (if any) of the Board of Directors in carrying out their respective duties and shall perform those duties which may from time to time be assigned to them. The chief financial officer shall be a vice president of the Corporation (or more senior) and shall be responsible for the management and supervision of the financial affairs of the Corporation.
Section 12. Treasurer. The treasurer shall have charge of the funds, securities, receipts and disbursements of the Corporation. He or she shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositaries as the Board of Directors may from time to time designate. The treasurer shall render to the Board of Directors, the chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), the president (if any), the vice chairmen of the Board of Directors (if any), and the chief financial officer, whenever required by any of them, an account of all of his transactions as treasurer. If required, the treasurer shall give a bond in such sum as the Board of Directors may designate, conditioned upon the faithful performance of the duties of the treasurers office and the restoration to the Corporation at the expiration of his or her term of office or in case of death, resignation or removal from office, of all books, papers, vouchers, money or other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. The treasurer shall perform such other duties as from time to time may be assigned to him or her.
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Section 13. Assistant Treasurers. In the absence or disability of the treasurer, one or more assistant treasurers shall perform all the duties of the treasurer and, when so acting, shall have all the powers of, and be subject to all restrictions upon, the treasurer. Assistant treasurers shall also perform such other duties as from time to time may be assigned to them.
Section 14. Secretary. The secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors in a book or books kept for that purpose. He or she shall keep in safe custody the seal of the Corporation, and shall affix such seal to any instrument requiring it. The secretary shall have charge of such books and papers as the Board of Directors may direct. He or she shall attend to the giving and serving of all notices of the Corporation and shall also have such other powers and perform such other duties as pertain to the secretarys office, or as the Board of Directors, the chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), the president (if any) or any vice chairman of the Board of Directors may from time to time prescribe.
Section 15. Assistant Secretaries. In the absence or disability of the secretary, one or more assistant secretaries shall perform all of the duties of the secretary and, when so acting, shall have all of the powers of, and be subject to all the restrictions upon, the secretary. Assistant secretaries shall also perform such other duties as from time to time may be assigned to them.
Section 16. Controller. The controller shall be administrative head of the controllers department. He or she shall be in charge of all functions relating to accounting and the preparation and analysis of budgets and statistical reports and shall establish, through appropriate channels, recording and reporting procedures and standards pertaining to such matters. The controller shall report to the chief financial officer and shall aid in developing internal corporate policies whereby the business of the Corporation shall be conducted with the maximum safety, efficiency and economy. The controller shall be available to all departments of the Corporation for advice and guidance in the interpretation and application of policies that are within the scope of his or her authority. The controller shall perform such other duties as from time to time may be assigned to him or her.
Section 17. Assistant Controllers. In the absence or disability of the controller, one or more assistant controllers shall perform all of the duties of the controller and, when so acting, shall have all of the powers of, and be subject to all the restrictions upon, the controller. Assistant controllers shall also perform such other duties as from time to time may be assigned to them.
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ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
Section 1. Contracts. The chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), the president (if any), any vice chairman of the Board of Directors (if any), any vice president, the treasurer and such other persons as the chairman of the Board of Directors may authorize shall have the power to execute any contract or other instrument on behalf of the Corporation; no other officer, agent or employee shall, unless otherwise in these By-Laws provided, have any power or authority to bind the Corporation by any contract or acknowledgement, or pledge its credit or render it liable pecuniarily for any purpose or to any amount.
Section 2. Loans. The chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), the president (if any), any vice chairman of the Board of Directors (if any), any vice president, the treasurer and such other persons as the Board of Directors may authorize shall have the power to effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any corporation, firm or individual, and for such loans and advances may make, execute and deliver promissory notes or other evidences of indebtedness of the Corporation, and, as security for the payment of any and all loans, advances, indebtedness and liability of the Corporation, may pledge, hypothecate or transfer any and all stocks, securities and other personal property at any time held by the Corporation, and to that end endorse, assign and deliver the same.
Section 3. Voting of Stock Held. The chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), the president (if any), any vice chairman of the Board of Directors (if any), any vice president or the secretary may from time to time appoint an attorney or attorneys or agent or agents of the Corporation to cast the votes that the Corporation may be entitled to cast as a stockholder or otherwise in any other corporation, any of whose stock or securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing to any action by any other such corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed on behalf of the Corporation such written proxies, consents, waivers or other instruments as such officer may deem necessary or proper in the premises; or the chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), the president (if any), any vice chairman of the Board of Directors (if any), any vice president or the secretary may attend in person any meeting of the holders of stock or other securities of such other corporation and thereat vote or exercise any and all powers of the Corporation as the holder of such stock or other securities of such other corporation.
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ARTICLE VI
Certificates Representing Shares
Certificates representing shares of the Corporation shall be signed by the chairman of the Board of Directors, the deputy chairman of the Board of Directors (if any), or the vice chairman of the Board of Directors (if any), or the president of the Corporation (if any) and the secretary or an assistant secretary. Any and all signatures on such certificates, including signatures of officers, transfer agents and registrars, may be facsimile.
ARTICLE VII
Dividends
The Board of Directors may declare dividends from funds of the Corporation legally available therefor.
ARTICLE VIII
Seal
The Board of Directors shall provide a suitable seal or seals, which shall be in the form of a circle, and shall bear around the circumference the words Altria Group, Inc. and in the center the word and figures Virginia, 1985.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be the calendar year.
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ARTICLE X
Amendment
The power to alter, amend or repeal the By-Laws of the Corporation or to adopt new By-Laws shall be vested in the Board of Directors, but By-Laws made by the Board of Directors may be repealed or changed by the stockholders, or new By-Laws may be adopted by the stockholders, and the stockholders may prescribe that any By-Laws made by them shall not be altered, amended or repealed by the directors.
ARTICLE XI
Emergency By-Laws
If a quorum of the Board of Directors cannot be readily assembled because of some catastrophic event, and only in such event, these By-Laws shall, without further action by the Board of Directors, be deemed to have been amended for the duration of such emergency, as follows:
Section 1. Section 6 of Article II shall read as follows:
Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the directors present at a meeting of the Board of Directors called in accordance with these By-Laws.
Section 2. The first sentence of Section 10 of Article II shall read as follows:
Special meetings of the Board of Directors shall be held whenever called by order of the chairman of the Board of Directors or a deputy chairman (if any), or of the president (if any) or any vice chairman of the Board of Directors (if any) or any director or of any person having the powers and duties of the chairman of the Board of Directors, the deputy chairman, the president or any vice chairman of the Board of Directors.
Section 3. Section 12 of Article II shall read as follows:
The directors present at any regular or special meeting called in accordance with these By-Laws shall constitute a quorum for the transaction of business at such meeting, and the action of a majority of such directors shall be the act of the Board of Directors, provided, however, that in the event that only one director is present at any such meeting no action except the election of directors shall be taken until at least two additional directors have been elected and are in attendance.
March 27, 2008
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Exhibit 10.1
TRANSITION SERVICES AGREEMENT
BY AND BETWEEN
ALTRIA CORPORATE SERVICES, INC.
AND
PHILIP MORRIS INTERNATIONAL INC.
DATED AS OF MARCH 28, 2008
TABLE OF CONTENTS
Page | ||||
ARTICLE I | DEFINITIONS | 1 | ||
ARTICLE II | SERVICES TO BE PROVIDED | 4 | ||
2.1. Exhibits. |
4 | |||
2.2. Independent Contractors. |
4 | |||
2.3. Standard of Care. |
4 | |||
2.4. Records. |
4 | |||
ARTICLE III | FEES | 5 | ||
3.1. General. |
5 | |||
3.2. Payments. |
5 | |||
ARTICLE IV | REPRESENTATIVES | 5 | ||
4.1. Representatives. |
5 | |||
ARTICLE V | THIRD PARTY AGREEMENTS | 5 | ||
ARTICLE VI | AUTHORITY; INFORMATION; COOPERATION; CONSENTS | 6 | ||
6.1. Authority. |
6 | |||
6.2. Information Regarding Transition Services. |
6 | |||
6.3. Cooperation. |
6 | |||
6.4. Further Assurances. |
7 | |||
ARTICLE VII | AUTHORITY AS AGENT | 7 | ||
ARTICLE VIII | CONFIDENTIAL INFORMATION | 7 | ||
8.1. Definition. |
7 | |||
8.2. Nondisclosure. |
7 | |||
8.3. Permitted Disclosure. |
7 | |||
8.4. Ownership of Confidential Information. |
8 | |||
ARTICLE IX | TERM AND TERMINATION | 8 | ||
9.1. Term. |
8 | |||
9.2. Termination. |
8 | |||
9.3. Termination Assistance Services. |
8 |
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ARTICLE X | LIMITATION OF LIABILITY; INDEMNIFICATION | 9 | ||
10.1. Limitation of Liability. |
9 | |||
10.2. Indemnification. |
9 | |||
ARTICLE XI | DISPUTE RESOLUTION | 9 | ||
ARTICLE XII | MISCELLANEOUS | 10 | ||
12.1. Original Services Agreement. |
10 | |||
12.2. Incorporation of Distribution Agreement Provisions. |
10 | |||
12.3. Governing Law. |
10 | |||
12.4. References. |
10 | |||
12.5. Notices. |
10 |
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TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT , dated as of March 28, 2008 (as amended and supplemented pursuant to the terms hereof, this Agreement), is entered into by and between Altria Corporate Services, Inc., a New York corporation (ALCS), and Philip Morris International Inc., a Virginia corporation (PMI).
WITNESSETH:
WHEREAS , ALCS currently provides certain services to PMI and its wholly-owned subsidiaries pursuant to a Services Agreement, dated as of January 1, 2004, as amended (the Original Services Agreement); and
WHEREAS , Altria Group Inc., a Virginia corporation (Altria), and PMI have entered into a Distribution Agreement, dated as of January 30, 2008 (the Distribution Agreement), providing for, among other things, the distribution by Altria of its entire ownership interest in PMI through a pro-rata distribution of all of the outstanding shares of PMI Common Stock owned by Altria on the Distribution Date to the holders of Altria Common Stock pursuant to the terms and subject to the conditions of the Distribution Agreement (the Distribution); and
WHEREAS , ALCS and PMI desire to enter into this Agreement to supercede the Original Services Agreement and to set forth the roles and responsibilities with regard to services to be provided by ALCS to PMI for certain transition periods not to exceed twenty-four months following the Distribution.
NOW, THEREFORE , the parties agree as follows:
ARTICLE I
DEFINITIONS
Affiliate : with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided, however, that for purposes of this Agreement, no member of either Group and no officer or director of any member of either Group shall be deemed to be an Affiliate of any member of the other Group.
ALCS : as defined in the preamble to this Agreement.
Altria : as defined in the recitals to this Agreement.
Altria Common Stock : the common stock, par value $0.33 1 / 3 per share, of Altria.
Altria Group : Altria and the Subsidiaries of Altria other than members of the PMI Group.
Arbitration Act : the United States Arbitration Act, 9 U.S.C. §§ 1-16, as the same may be amended from time to time.
Business Day : any day other than a Saturday, a Sunday or a day on which banking institutions located in the Commonwealth of Virginia or the State of New York are authorized or obligated by Law or executive order to close.
Confidential Information : as defined in Section 8.1 hereof.
Distribution : as defined in the recitals to this Agreement.
Distribution Agreement : as defined in the recitals to this Agreement.
Distribution Date : the date on which the Distribution becomes effective.
Employee Costs : for each employee of ALCS performing the Transition Services, the salaries, fringe benefits, executive compensation benefits (if applicable) and depreciation/amortization of office equipment and software (if applicable) attributable to the employee, based on the ratio of ALCSs estimate of the time spent by the employee on behalf of PMI divided by the total time spent by the employee.
Employee Matters Agreement : as defined in Section 3.1 hereof.
Exhibits : as defined in Section 2.1 hereof.
Fees : as defined in Section 3.1 hereof.
Governmental Authority : any federal, national, state, provincial, local, foreign, international or other court, government, department, commission, board, bureau or agency, authority (including, but not limited to, any central bank or taxing authority) or instrumentality (including, but not limited to, any court, tribunal or grand jury).
Group : the Altria Group or the PMI Group, as the context requires.
Law : any federal, national, state, provincial, local or foreign statute, ordinance, regulation, code, license, permit, authorization, approval, consent, common law, legal doctrine, order, judgment, decree, injunction or requirement of any Governmental Authority or any order or award of any arbitrator, now or hereafter in effect. Law shall specifically include, but shall not be limited to, any state, federal, or foreign statute or common law for deceptive and unfair trade practices, unfair and fraudulent business practices, fraud, or violation of the Racketeer Influenced and Corrupt Practices Act (RICO) or similar statute.
Liabilities : means any and all claims, debts, Losses, liabilities, assessments, guarantees, assurances, commitments and obligations, of any kind, character or description (whether absolute, contingent, matured, not matured, liquidated, unliquidated, accrued, known, unknown, direct, indirect, derivative or otherwise or whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise) whenever arising, including, but not limited to, those arising under or in connection with any Law, and those arising under any contract, guarantee, commitment or undertaking.
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Losses : with respect to any Person, all losses, damages (whether compensatory, punitive, consequential, multiple or other), judgments, settlements, equitable or injunctive relief or disgorgements, including, where applicable, all punitive damages and criminal and civil fines and penalties, but excluding damages in respect of actual or alleged lost profits, suffered by such Person, and including all costs, expenses and interest relating thereto (including, but not limited to, all expenses of investigation, all accountant or attorneys fees and all other out-of-pocket expenses), regardless of whether any such losses, damages, judgments, settlements, costs, expenses, fines and penalties relate to or arise out of such Persons own alleged or actual negligent, grossly negligent, reckless or intentional misconduct.
Original Services Agreement : as defined in the preamble to this Agreement.
Parties : ALCS and PMI (Party means either ALCS or PMI).
PMI : as defined in the preamble to this Agreement.
PMI Common Stock : the common stock, no par value, of PMI.
PMI Group : PMI and the PMI Subsidiaries.
Person : an individual, a partnership, a joint venture, a corporation, a trust, a limited liability company, an unincorporated organization, or any government or any department or agency thereof.
Records : as defined in Section 2.4 hereof.
Representatives : as defined in Section 4.1 hereof.
Subsidiary : with respect to any specified Person, any corporation or other legal or other entity of which such Person or any of its Subsidiaries controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of members to the board of directors or similar governing body; provided, however, that for purposes of this Agreement, (1) the PMI Subsidiaries shall be deemed to be Subsidiaries of PMI and (2) no member of the PMI Group shall be deemed to be a Subsidiary of any member of the Altria Group.
Transition Services (or Services) : as defined in Section 2.1 hereof.
Transition Period : as defined for each Service in the appropriate Exhibit.
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ARTICLE II
SERVICES TO BE PROVIDED
2.1. | Exhibits . |
(a) Exhibits 1 through 9 (collectively, the Exhibits) attached to and made a part of this Agreement describe the services to be provided by ALCS to PMI and one or more members of the PMI Group, as designated from time to time by PMI (the Transition Services or Services). The Parties have made a good faith effort as of the date hereof to identify each Transition Service and to complete the content of the Exhibits accurately. It is anticipated that the Parties will modify the Transition Services from time to time. In that case or to the extent that any Exhibit is incomplete, the Parties will use good faith efforts to modify the Exhibits. There are certain terms that are specifically addressed in the Exhibits attached hereto that may differ from the terms provided hereunder. In those cases, the specific terms described in the Exhibits shall govern that Transition Service.
(b) The Parties may also identify additional Services that they wish to incorporate into this Agreement. The Parties will create additional Exhibits setting forth the description of such Services, the Fees for such Services and any other applicable terms.
2.2. | Independent Contractors . |
ALCS will provide the Transition Services either through its own resources, through the resources of its subsidiaries or Affiliates, or by contracting with independent contractors as agreed hereunder. To the extent that ALCS decides to provide a Transition Service through an independent contractor in the future, ALCS shall consult with and obtain the prior approval of PMI, which approval shall not be unreasonably withheld.
2.3. | Standard of Care . |
In providing the Transition Services hereunder, ALCS will exercise the same degree of care as it has historically exercised in providing such Transition Services to its Affiliates prior to the date hereof, including at least the same level of quality, responsiveness and timeliness as has been exercised by ALCS with respect to such Transition Services.
2.4. | Records . |
ALCS shall keep full and detailed records dealing with all aspects of the Transition Services performed by it hereunder (the Records) and:
(a) shall provide access to the Records to PMI at all reasonable times; and
(b) shall maintain the Records in accordance with good record management practices and with at least the same degree of completeness and care as it maintains for its other similar business interests.
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ARTICLE III
FEES
3.1. | General . |
PMI will pay to ALCS a fixed fee for each Transition Service as set forth in the attached Exhibits (collectively, the Fees). The Fees constitute full compensation to ALCS for all charges, costs and expenses incurred by ALCS on behalf of PMI in providing the Services, unless otherwise specifically provided in the Exhibits. Notwithstanding the terms of any of the Exhibits, the Fees for each Transition Service shall be reduced by any amounts PMI is required to pay pursuant to Section 4.1(c) of the Employee Matters Agreement (the Employee Matters Agreement), dated as of even date herewith, between PMI and Altria, with respect to any person who provides Services under this Agreement and thereafter becomes a PMI Transferee (as defined in the Employee Matters Agreement). Except as specifically provided herein or in the Exhibits, or as subsequently agreed by PMI and ALCS, PMI will not be responsible to ALCS or any independent contractor retained by ALCS, for any additional fees, charges, costs or expenses relating to the Services, unless such additional fees, charges, costs or expenses are a direct result of PMIs unilateral deviation from the scope of the services defined in the Exhibits.
3.2. | Payments . |
ALCS will deliver to PMI, no later than five days following the last day of each month, an invoice for the aggregate Fees incurred for that month. PMI will pay to ALCS monthly no later than the third Wednesday of the following month, the aggregate Fees incurred during the previous month.
ARTICLE IV
REPRESENTATIVES
4.1. | Representatives . |
(a) The Controller of Altria and the ControllerFinancial Reporting of PMI will serve as administrative representatives (Representative(s)) of ALCS and PMI, respectively, to facilitate day-to-day communications and performance under this Agreement. Each Party may treat an act of a Representative of the other Party as being authorized by such other Party. Each Party may replace its Representative by giving written notice of the replacement to the other Party.
(b) No additional Exhibits, modifications to existing Exhibits, or amendments to this Agreement shall be effective unless and until executed by the Representatives of each of ALCS and PMI.
ARTICLE V
THIRD PARTY AGREEMENTS
To the extent that it is not practicable to have PMI as the contracting Party for a third party obligation, ALCS, with respect to all Services supplied by ALCS or contracted for by ALCS on behalf of PMI, shall use commercially reasonable efforts to cause all such third party
5
contracts to extend to and be enforceable by PMI, or to assign such contracts to PMI. In the event that such contracts are not extendable or assignable, ALCS shall act as agent for PMI in the pursuit of any claims, issues, demands or actions against such third party provider at PMIs expense. PMI will indemnify ALCS for any liability under third party contracts arising directly out of the acts or omissions of PMI.
ARTICLE VI
AUTHORITY; INFORMATION; COOPERATION; CONSENTS
6.1. | Authority . |
Each Party represents to the other Party that:
(a) it has the requisite corporate authority to enter into and perform this Agreement;
(b) its execution, delivery and performance of this Agreement have been duly authorized by all requisite corporate action on its behalf;
(c) this Agreement is enforceable against it; and
(d) it has obtained all consents or approvals of Governmental Authorities and other Persons that are conditions to its entering into this Agreement.
6.2. | Information Regarding Transition Services . |
Each Party shall make available to the other Party any information required or reasonably requested by that other Party regarding the performance of any Service and shall be responsible for providing that information on a timely basis and for ensuring the accuracy and completeness of that information; provided , however , that a Party shall not be liable for not providing any information that is subject to a confidentiality obligation owed by it to a Person other than an Affiliate of it or the other Party. ALCS shall not be liable for any impairment of any Service caused by ALCS not receiving information from PMI, either timely or at all, or by its receiving inaccurate or incomplete information from PMI, in each case that is required or reasonably requested regarding that Service.
6.3. | Cooperation . |
The Parties will use good faith efforts to cooperate with each other in all matters relating to the provision and receipt of Services. Such good faith cooperation will include providing electronic access to systems used in connection with Services and using commercially reasonable efforts to obtain all consents, licenses, sublicenses or approvals necessary to permit each Party to perform its obligations. The Parties will cooperate with each other in making such information available as needed in the event of any and all internal or external audits, whether in the United States or any other country. If this Agreement is terminated in whole or in part, the Parties will cooperate with each other in all reasonable respects in order to effect an efficient transition and to minimize the disruption to the business of both Parties, including the assignment or transfer of the rights and obligations under any contracts.
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6.4. | Further Assurances . |
Each Party shall take such actions, upon request of the other Party and in addition to the actions specified in this Agreement, as may be necessary or reasonably appropriate to implement or give effect to this Agreement.
ARTICLE VII
AUTHORITY AS AGENT
ALCS is hereby authorized to act as agent for PMI for the purpose of performing Services hereunder and as is necessary or desirable to perform such Services. PMI will execute and deliver or cause the appropriate member of the PMI Group to execute and deliver to ALCS any document or other evidence which may be reasonably required by ALCS to demonstrate to third parties the authority of ALCS described in this Article VII .
ARTICLE VIII
CONFIDENTIAL INFORMATION
8.1. | Definition . |
For the purposes of this Agreement, Confidential Information means non-public information about the disclosing Partys or any of its Affiliates business or activities that is proprietary and confidential, which shall include, without limitation, all business, financial, technical and other information, including software (source and object code) and programming code, of a Party or its Affiliates marked or designated confidential or proprietary or by its nature or the circumstances surrounding its disclosure should reasonably be regarded as confidential. Confidential Information includes not only written or other tangible information, but also information transferred orally, visually or electronically or by any other means. Confidential Information will not include information that (i) is in or enters the public domain without breach of this Agreement, or (ii) the receiving Party lawfully receives from a third party without restriction on disclosure and, to the receiving Partys knowledge without breach of a nondisclosure obligation.
8.2. | Nondisclosure . |
Each of ALCS and PMI agree that (i) it will not disclose to any third party or use any Confidential Information disclosed to it by the other except as expressly permitted in this Agreement, and (ii) it will take all reasonable measures to maintain the confidentiality of all Confidential Information of the other Party in its possession or control, which will in no event be less than the measures it uses to maintain the confidentiality of its own information of similar type and importance.
8.3. | Permitted Disclosure . |
Notwithstanding the foregoing, each Party may disclose Confidential Information (i) to the extent required by a court of competent jurisdiction or other Governmental Authority or otherwise as required by Law, including without limitation disclosure obligations imposed under the federal securities laws, provided that such Party has given the other Party prior notice of such
7
requirement when legally permissible to permit the other Party to take such legal action to prevent the disclosure as it deems reasonable, appropriate or necessary, or (ii) on a need-to-know basis under an obligation of confidentiality to its consultants, legal counsel, Affiliates, accountants, banks and other financing sources and their advisors.
8.4. | Ownership of Confidential Information . |
All Confidential Information supplied or developed by either Party shall be and remain the sole and exclusive property of the Party who supplied or developed it.
ARTICLE IX
TERM AND TERMINATION
9.1. | Term . |
This Agreement shall remain in effect until such time as it has been terminated as to all Transition Services in accordance with Section 9.2 hereof.
9.2. | Termination . |
Either Party may terminate this Agreement without cause with respect to one or more Services under this Agreement by providing three months written notice to the other Party or as otherwise agreed between the Parties hereto; provided that the Services set forth in Exhibits 1 through 9 shall terminate not later than two years following the Distribution.
9.3. | Termination Assistance Services . |
ALCS agrees that, upon termination of this Agreement or any of the Services set forth in the Exhibits, ALCS will cooperate in good faith with PMI to provide PMI (or its designee) with reasonable assistance to make an orderly transition from ALCS to another supplier of the Services. If requested by PMI, ALCS will provide transition assistance services, including the following:
(a) developing a transition plan with assistance from PMI or its designee;
(b) providing training to PMI personnel or its designees personnel to perform the Services; and
(c) organizing and delivering to PMI records and documents necessary to allow continuation of the Services, including delivering such materials in electronic forms and versions as requested by PMI.
8
ARTICLE X
LIMITATION OF LIABILITY; INDEMNIFICATION
10.1. | Limitation of Liability . |
Except as may be provided in Section 10.2 below and Article V above, ALCS and its Affiliates (each, an ALCS Party) shall not be liable to any member of the PMI Group and its respective Affiliates (each, a PMI Party) and each PMI Party shall not be liable to any ALCS Party, in each case, for any Liabilities of a PMI Party or an ALCS Party arising in connection with this Agreement and the Services provided hereunder.
10.2. | Indemnification . |
(a) ALCS shall indemnify, defend and hold harmless each of the PMI Parties from and against all Liabilities, of any kind or nature, (i) incurred by a PMI Party or (ii) of third parties unrelated to any PMI Party, in each case caused by or arising in connection with the gross negligence or willful misconduct of any employee of ALCS in connection with the performance of the Services, except to the extent that the Liabilities were caused directly or indirectly by acts or omissions of any PMI Party. Notwithstanding the foregoing, ALCS shall not be liable for any special, indirect, incidental, or consequential damages relating to such claims. Any Liability incurred by ALCS pursuant to this Agreement on or after the Distribution Date shall be deemed to be an Altria Group Liability for purposes of Article III of the Distribution Agreement.
(b) PMI shall indemnify, defend and hold harmless each of the ALCS Parties from and against all Liabilities of any kind or nature, (i) incurred by an ALCS Party or (ii) of third parties unrelated to any ALCS Party, in each case caused by or arising in connection with the gross negligence or willful misconduct of any employee of PMI in connection with PMIs performance under this Agreement, except to the extent that Liabilities were caused directly or indirectly by acts or omissions of any ALCS Party. Notwithstanding the foregoing, PMI shall not be liable for any special, indirect, incidental, or consequential damages relating to such claims. Any Liability incurred by PMI pursuant to this Agreement on or after the Distribution Date shall be deemed to be a PMI Group Liability for purposes of Article III of the Distribution Agreement.
ARTICLE XI
DISPUTE RESOLUTION
If the Parties are unable to resolve any service or performance issues or if there is a material breach of this Agreement that has not been corrected within thirty (30) days of receipt of notice of such breach, the ControllerFinancial Reporting and CFO of PMI, on behalf of PMI, and the Controller and CFO of Altria, on behalf of ALCS, will meet promptly to review and resolve those issues in good faith.
9
ARTICLE XII
MISCELLANEOUS
12.1. | Original Services Agreement . |
This Agreement terminates and supersedes the Original Services Agreement, which shall have no further force and effect following the effectiveness of this Agreement.
12.2. | Incorporation of Distribution Agreement Provisions . |
The following provisions of the Distribution Agreement are hereby incorporated herein by reference, and unless otherwise expressly specified herein, such provisions shall apply as if fully set forth herein (references in this Section 12.2 to an Article or Section shall mean Articles and Sections of the Distribution Agreement, and except as expressly set forth below, references in the material incorporated herein by reference shall be references to the Distribution Agreement): Article III (relating to Mutual Releases and Indemnification); Article IV (relating to certain Additional Covenants); Article V (relating to Access to Information); and Article IX (relating to Miscellaneous).
12.3. | Governing Law . |
This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Virginia (other than the laws regarding the choice of laws and conflict of laws) as to all matters, including matters of validity, construction, effect, performance and remedies provided , however , that the Arbitration Act shall govern the matters described in Article X.
12.4. | References . |
Except as provided in Section 12.2 hereof all references to Sections, Articles or Exhibits contained herein mean Sections, Articles or Exhibits of or to this Agreement, as the case may be, unless otherwise stated.
12.5. | Notices . |
All notices, requests, claims, demands and other communications hereunder (collectively, Notices) shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram, facsimile, electronic mail or other standard form of telecommunications (provided confirmation is delivered to the recipient the next Business Day in the case of facsimile, electronic mail or other standard form of telecommunications) or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to ALCS:
Controller, Altria Group, Inc.
P.O. Box 26603
Richmond, VA 23261
10
If to PMI:
ControllerFinancial Reporting, Philip Morris International Inc.
120 Park Avenue
New York, NY 10017
or to such other address as any party hereto may have furnished to the other parties by a notice in writing in accordance with this Section 12.5 .
11
IN WITNESS WHEREOF , the Parties have signed this Agreement on the date first set forth above.
ALTRIA CORPORATE SERVICES, INC. |
||
By: |
/s/ Sean X. McKessy |
|
Name: |
Sean X. McKessy |
|
Title: |
Secretary and Treasurer |
|
PHILIP MORRIS INTERNATIONAL INC. |
||
By: |
/s/ André Calantzopoulos |
|
Name: |
André Calantzopoulos |
|
Title: |
President and Chief Executive Officer |
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EXHIBIT 1
CORPORATE TAX SERVICES
I | SPECIFIC TRANSITION SERVICES |
|
Provide assistance in filing 2007 U.S. Federal and state income tax returns pertaining to PMI until these functions are fully absorbed by PMI, estimated by December 31, 2008 |
II | SERVICE FEES |
The Fee payable for Corporate Tax services for 2008 shall include: (i) the relevant Employee Costs associated with the filing assistance provided; (ii) a management fee equal to 5% of the aggregate amount calculated pursuant to (i); and (iii) third-party expenses, including travel and entertainment, consulting fees and printing costs incurred on behalf of PMI by ALCS.
1.1
EXHIBIT 2
FINANCIAL SERVICES
I | SPECIFIC TRANSITION SERVICES |
A. U.S. Offices of PMI
|
Provide Travel and Expense Statement and Accounts Payable processing until PMI can transfer these functions to its shared service center in Krakow, Poland, expected in the third quarter of 2008. |
|
Provide payroll services under Altrias existing contract with ADP until PMI completes its own contract with ADP, expected in the second quarter of 2008. |
B. Latin America Markets
|
Transition of Travel and Expense Statement and Accounts Payable processing back to local markets along timeline developed in 2007 with PMI. |
|
Consulting and transaction resolution until September 30, 2008 to ensure smooth transition to local markets. |
II | SERVICE FEES |
The Fee payable for the financial services for 2008 shall include: (i) the relevant Employee Costs associated with the processing of accounts payable, time and expense reports and ADP payroll submissions/reconciliations; (ii) the pro rata share of infrastructure and fixed costs (stationery, depreciation, amortization of software) in the San Antonio shared service center based on the number of employees performing PMI work divided by the total number of San Antonio employees times the previously mentioned infrastructure and fixed costs; (iii) a management fee equal to 5% of the aggregate amount calculated pursuant to (i) and (ii); and (iv) third-party expenses, including ADP fees, travel and entertainment, consulting fees and printing costs incurred on behalf of PMI by ALCS.
2.1
EXHIBIT 3
INTERNAL AUDIT SERVICES
I | SPECIFIC TRANSITION SERVICES |
|
Provide temporary staffing to support PMI Latin America audit requirements until these functions are filled by PMI, estimated by June 30, 2008. |
II | SERVICE FEES |
The Fee payable for the Internal Auditing services for 2008 shall include: (i) the relevant Employee Costs associated with PMIs Latin America Audit functions; (ii) a management fee equal to 5% of the aggregate amount calculated pursuant to (i); and (iii) third-party expenses, including travel and entertainment, consulting fees and printing costs incurred on behalf of PMI by ALCS.
3.1
EXHIBIT 4
INFORMATION TECHNOLOGY SERVICES
I | SPECIFIC TRANSITION SERVICES |
Applications required by PMI for business continuity and Global Network Services will continue normal operations and provide current services until the completion of PMIs migration of these applications. The estimated completion date for transition of all services is no later than December 31, 2008.
The systems & services in scope include but are not limited to:
| Human Resource & Benefits applications required for business continuity of PMI headquarters location and other US-based PMI, including but not limited to: |
|
Payroll services & related ALCS SAP Business Warehouse reporting services for PMIs US-based employees using ALCS ADP & SAP BW solutions |
|
Retirement services for PMIs US-based employees using ALCS ADP/Fidelity solution |
|
Profit Sharing services for PMIs US-based employees using ALCS ADP/Fidelity solution |
|
Health & Welfare Plans for PMIs US-based employees using ALCS Fidelity solution |
|
Employee Stock Plans for all eligible PMI employees using the ALCS UBS solution |
| Legal Administration support applications. The systems & services in scope include but are not limited to: |
|
Law Manager Matter Management & related e-Invoicing, My Legal Zone, and Brio Reporting systems |
|
Investor Relations service support |
| Global and shared network infrastructure, including but not limited to: |
|
Moorefield, VA to PMI Network |
|
San Antonio, TX to PMI Network |
|
Tobacco Farmers Network |
|
PMI data center & systems management support services |
|
PMI servers in Rye Brook |
4.1
|
Network connectivity to Westchester Airport |
|
Network connectivity between PMI systems (e.g. HR2U) and ALCS systems (e.g. SHARP) that are in scope of the transition services agreement |
|
Network, data and telephone services to (PMI Inc Headquarters) either through ALCSs own resources or by contracting with other independent contractors. The services will include network telephone access, move, add and change services, system administration, and invoice processing |
| ALCS contracts consulting services related to negotiation of separate enterprise contracts between PMI and major information technology vendors, including but not limited to IBM, Oracle, Microsoft and SAP, including the following actions: |
|
Continue to communicate to suppliers Altrias intent to separate global contracts and subsequently receive written consents from the suppliers. |
|
Track progress and inform PMI management of any potential service issues, cost impact or major contractual challenges. |
|
Coordinate with PMI to assign a copy of, or have PMI negotiate, a new master contract. |
II | SERVICE FEES |
| The Fee payable for the information technology transition services for 2008 shall be based on the following: |
|
Global Applications & Network Services . The Fee will include: (i) the relevant Employee Costs associated with the requested services; (ii) a management fee equal to 5% of the aggregate amount calculated pursuant to (i); and (iii) third-party expenses, including travel and entertainment and printing costs, incurred on behalf of PMI by ALCS. Direct pass through on any direct charges (i.e. circuit charges, routers or monitoring) that are currently provided by ALCS or its contracted third party. This would also include any maintenance and license fee required to maintain PMI operations until appropriate separation can be achieved. |
4.2
|
Information Technology Contracts Consulting . The Fee will include: (i) PMIs charges under each information technology contract (primarily AT&T, IBM, Oracle, Microsoft and SAP contracts), (collectively, the IT Contracts), allocated by usage under the IT Contracts as provided by the service provider; (ii) the relevant Employee costs; (iii) a management fee of 5% of the aggregate amount calculated pursuant to (ii); and (iv) third-party expenses, including travel and entertainment and printing costs, incurred on behalf of PMI by ALCS. |
|
In the event that Altria and PMI do not complete all required negotiations by May 31, 2008 and PMI is still operating certain software under an ALCS licensee, any third party fee incurred by Altria for this continuation of service will be passed on to PMI for appropriate settlement. |
4.3
EXHIBIT 5
HUMAN RESOURCES SERVICES
I | SPECIFIC TRANSITION SERVICES |
|
Provide Health and Welfare programs to PMIs US employees through December 31, 2008. |
II | SERVICE FEES |
The Fee payable for the Health and Welfare programs for 2008 shall include: (i) the relevant Employee Costs associated with administering the program for PMIs US employees; (ii) a management fee equal to 5% of the aggregate amount calculated pursuant to (i); and (iii) third-party expenses, including travel and entertainment, administrative and consulting fees incurred on behalf of PMI by ALCS.
5.1
EXHIBIT 6
RISK MANAGEMENT
I | SPECIFIC TRANSITION SERVICES |
|
Consultation as requested by PMI, on insurance renewals through November 1, 2008. |
II | SERVICE FEES |
The Fee payable for 2008 shall include: (i) the relevant Employee Costs associated with consultation time requested; (ii) a management fee equal to 5% of the aggregate amount calculated pursuant to (i); and (iii) third-party expenses, including travel and entertainment, and consulting fees incurred on behalf of PMI by ALCS.
6.1
EXHIBIT 7
LEGAL SERVICES
I | SPECIFIC TRANSITION SERVICES |
|
Provide legal services in connection with Corporate Affairs, Government Affairs and Facilities to PMI as needed through December 31, 2008. |
|
Provide legal support for Information Services contract group and records management as needed through December 31, 2008. |
II | SERVICE FEES |
The Fee payable for the legal services for 2008 shall include: (i) the relevant Employee Costs associated with providing the services; (ii) a management fee equal to 5% of the aggregate amount calculated pursuant to (i); and (iii) third-party expenses, including travel and entertainment, administrative and consulting fees incurred on behalf of PMI by ALCS.
7.1
EXHIBIT 8
AVIATION SERVICES
I | SPECIFIC TRANSITION SERVICES |
|
Provide hangar and office space at Westchester County Airport until Westchester County authorizes transfer of lease to PMI. |
II | SERVICE FEES |
The Fee payable shall be monthly rent under the existing lease until the date that the lease is transferred to PMI.
8.1
EXHIBIT 9
CORPORATE AFFAIRS SERVICES
I | SPECIFIC TRANSITION SERVICES |
A. | GOVERNMENT AFFAIRS |
|
Lease of office space for Government Affairs in the Washington DC location for no more than three months from March 28, 2008. |
II | SERVICE FEES |
|
The Fee payable for corporate affairs transition services shall include the monthly rent of $17,939 based upon the ratio of the number of PMI employees utilizing the leased space divided by total occupants of the leased space times the monthly rent and expenses. |
9.1
Exhibit 10.2
EMPLOYEE MATTERS AGREEMENT
BY AND BETWEEN
ALTRIA GROUP, INC.
AND
PHILIP MORRIS INTERNATIONAL INC.
DATED AS OF MARCH 28, 2008
TABLE OF CONTENTS
Page | ||||
ARTICLE I |
DEFINITIONS | 1 | ||
1.1 |
General | 1 | ||
1.2 |
References to Time | 9 | ||
ARTICLE II |
GENERAL PRINCIPLES | 9 | ||
2.1 |
Altria Group Employees | 9 | ||
2.2 |
PMI Group Employees | 10 | ||
ARTICLE III |
PMI Group Plans | 10 | ||
3.1 |
PMI Group Plans | 10 | ||
ARTICLE IV |
EMPLOYEE TRANSFERS | 13 | ||
4.1 |
PMI Transferees | 13 | ||
4.2 |
Altria Transferees | 14 | ||
4.3 |
Payments | 15 | ||
ARTICLE V |
EQUITY COMPENSATION | 15 | ||
5.1 |
Altria Options | 15 | ||
5.2 |
Kraft SARs Issued by Altria | 17 | ||
5.3 |
Restricted Stock and pre-January 31, 2007 Deferred Stock | 17 | ||
5.4 |
Deferred Stock | 18 | ||
5.5 |
Existing Kraft Equity Compensation | 19 | ||
5.6 |
Payments Previously Made By PMI | 20 | ||
5.7 |
Other | 20 | ||
ARTICLE VI |
PROFIT-SHARING PLANS | 23 | ||
6.1 |
Maintenance of Stock Investment Options | 23 | ||
ARTICLE VII |
ALTRIA STOCK PURCHASE PLAN | 24 | ||
7.1 |
Termination of Participation | 24 | ||
ARTICLE VIII |
GENERAL AND ADMINISTRATIVE | 24 | ||
8.1 |
Sharing of Participant Information | 24 | ||
8.2 |
No Third-Party Beneficiaries | 24 | ||
8.3 |
Audit Rights with Respect to Information Provided | 25 | ||
8.4 |
Fiduciary Matters | 25 | ||
8.5 |
Collective Bargaining | 25 | ||
8.6 |
Consent of Third Parties | 26 | ||
ARTICLE IX |
INDEMNIFICATION | 26 | ||
9.1 |
Indemnification | 26 | ||
ARTICLE X |
MISCELLANEOUS | 26 | ||
10.1 |
Relationship of Parties | 26 | ||
10.2 |
Affiliates | 26 |
i
10.3 |
Employee Communications | 26 | ||
10.4 |
Incorporation of Distribution Agreement Provisions | 26 | ||
10.5 |
Governing Law | 27 | ||
10.6 |
References | 27 |
-ii-
EMPLOYEE MATTERS AGREEMENT
THIS EMPLOYEE MATTERS AGREEMENT , dated as of March 28, 2008 (as amended and supplemented pursuant to the terms hereof, this Agreement), is entered into by and between Altria Group, Inc., a Virginia corporation (Altria), and Philip Morris International Inc., a Virginia corporation (PMI).
WITNESSETH:
WHEREAS , Altria and PMI have entered into a Distribution Agreement, dated as of January 30, 2008 (the Distribution Agreement), providing for, among other things, the distribution by Altria of its entire ownership interest in PMI through a pro-rata distribution of all of the outstanding shares of PMI Common Stock owned by Altria on the Distribution Date to the holders of Altria Common Stock pursuant to the terms and subject to the conditions of the Distribution Agreement (the Distribution); and
WHEREAS , Altria and PMI wish to set forth their agreement as to certain matters regarding the treatment of, and the compensation and employee benefits provided to, employees and former employees of the Altria Group and the PMI Group (as hereinafter defined).
NOW, THEREFORE , in consideration of the premises and the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 General . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
Adjusted Altria Option : an Altria Option as adjusted pursuant to Section 5.1 hereof.
Affiliate : with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided , however , that for purposes of this Agreement, no member of either Group and no officer or director of any member of either Group shall be deemed to be an Affiliate of any member of the other Group.
Altria : as defined in the preamble to this Agreement.
Altria Benefit Liabilities : as defined in Section 2.1 hereof.
Altria Common Stock : the common stock, par value $0.33 1 / 3 per share, of Altria.
Altria Deferred Stock : a deferred stock obligation relating to Altria Common Stock granted by Altria before the Distribution Date under an Altria Performance Incentive Plan.
Altria Group : Altria and the Subsidiaries of Altria other than members of the PMI Group.
Altria Group Employee : any individual, excluding a PMI Transferee, who (i), as of the close of business on the Distribution Date, is either employed by, or on a leave of absence (as defined by the personnel policies of the Altria Group) from, a member of the Altria Group; (ii) is a Former Altria Group Employee; or (iii) is or becomes an Altria Transferee.
Altria Group Plans :
(i) the Altria Pension Plans;
(ii) the Altria Profit-Sharing Plans;
(iii) the Altria Welfare and Other Plans; and
(iv) the Altria Performance Incentive Plans.
Altria Option : an option to acquire Altria Common Stock granted by Altria under an Altria Performance Incentive Plan before the Distribution Date.
Altria Participating Company : any company of the Altria Group whose eligible employees participate in the Altria Pension Plans and Altria Profit-Sharing Plans.
Altria Pension Plan : any of the Retirement Plan for Salaried Employees, the Retirement Plan for Hourly Employees, the Benefit Equalization Plan, the Supplemental Management Employees Retirement Plan, the Retirement Plan for Employees of Philip Morris de Puerto Rico and any other qualified or non-qualified defined benefit plan or program that is identified by Altria before the Distribution Date as providing retirement income to Altria Group Employees, all as in effect as of the time relevant to the applicable provisions of this Agreement.
Altria Performance Incentive Plans : any of the 1992 Incentive Compensation and Stock Option Plan, the 1997 Performance Incentive Plan, the 2000 Performance Incentive Plan or the 2005 Performance Incentive Plan, or any stock-based or other incentive plan for Altria Group Employees that is identified by Altria before the Distribution Date, all as in effect as of the time relevant to the applicable provisions of this Agreement.
Altria Post-Adjustment Price : the Altria Pre-Adjustment Price multiplied by a fraction, the numerator of which is the closing price of Altria Common Stock on the NYSE on the Distribution Date (as traded on the when issued market) and the denominator of which is the sum of the numerator plus the closing price of PMI Common Stock on the NYSE on the Distribution Date (as traded on the when issued market).
2
Altria Pre-Adjustment Price : the closing price of Altria Common Stock on the NYSE on the Distribution Date (as traded on the regular way market).
Altria Profit-Sharing Plan : any of the Deferred Profit-Sharing Plan for Salaried Employees, the Deferred Profit-Sharing Plan for Tobacco Workers, the Deferred Profit-Sharing Plan for Craft Employees, the Benefit Equalization Plan, the Supplemental Management Employees Retirement Plan, the Savings Plan for Employees of Philip Morris de Puerto Rico and any other qualified or non-qualified defined contribution plan or program for Altria Group Employees that is identified by Altria before the Distribution Date, all as in effect as of the time relevant to the applicable provisions of this Agreement.
Altria Restricted Stock : restricted Altria Common Stock granted by Altria before the Distribution Date under an Altria Performance Incentive Plan.
Altria Stock Investment Option : the investment option offered under the following Altria Profit-Sharing Plans: the Deferred Profit-Sharing Plan for Salaried Employees, the Deferred Profit-Sharing Plan for Tobacco Workers, the Deferred Profit-Sharing Plan for Craft Employees; and the investment option offered under the PMI Deferred Profit-Sharing Plan whose value in each case is based on the value of Altria Common Stock.
Altria Stock Purchase Plan : the Plan sponsored by Altria and administered by Computershare Trust Company, N.A., that allows eligible employees of Altria and its subsidiaries to purchase shares of Altria Common Stock through automatic payroll deductions, additional cash contributions and dividend reinvestment without incurring any brokerage commissions or other costs.
Altria Transferee : any employee of a member of the PMI Group who will transfer employment to a member of the Altria Group on or after the Distribution Date, but on or prior to December 31, 2008.
Altria Welfare and Other Plans : any plan, fund or program that provides health, medical, surgical, hospital or dental care, severance, survivor income, long-term disability, cafeteria, flexible benefits or other welfare benefits or benefits in the event of sickness, accident or disability, or death benefits to Altria Group Employees, all as in effect as of the time relevant to the applicable provisions of this Agreement.
Arbitration Act : the United States Arbitration Act, 9 U.S.C. §§ 1-16, as the same may be amended from time to time.
Auditing Party : as defined in Section 8.3(a) hereof.
Business Day : any day other than a Saturday, a Sunday or a day on which banking institutions located in the Commonwealth of Virginia or the State of New York are authorized or obligated by law or executive order to close.
Code : the Internal Revenue Code of 1986, as amended.
Distribution : as defined in the recitals to this Agreement.
Distribution Agreement : as defined in the recitals to this Agreement.
3
Distribution Date : the date on which the Distribution becomes effective.
Equity Compensation : Altria Options, Adjusted Altria Options, PMI Options, Kraft SARs, Altria Restricted Stock, PMI Restricted Stock, Altria Deferred Stock and PMI Deferred Stock.
ERISA : Employee Retirement Income Security Act of 1974, as amended.
Existing Kraft Deferred Stock : a deferred stock obligation relating to Kraft Class A Common Stock granted by Kraft as of or before March 30, 2007 under a Kraft Performance Incentive Plan.
Existing Kraft Options : an option to acquire Kraft Class A Common Stock, granted by Kraft as of or before March 30, 2007 under a Kraft Performance Incentive Plan.
Existing Kraft Restricted Stock : restricted Kraft Class A Common Stock granted by Kraft as of or before March 30, 2007 under a Kraft Performance Incentive Plan.
Fair Value : in the case of PMI Options and Adjusted Altria Options, the anticipated value of the options, determined using the Modified Black-Scholes option pricing model used by Altria in the preparation of its most recent annual or quarterly financial reporting prepared before the Distribution Date with such modifications as may be determined before the Distribution Date by Altria.
In the case of Existing Kraft Options, the Fair Value shall be the Fair Value used for such options pursuant to the Employee Matters Agreement By and Between Altria Group, Inc. and Kraft Foods Inc.
Former Altria Group Employee : any individual who: (i) before the Distribution Date has retired from or otherwise separated from service from a member of the Altria Group and has not been re-employed by a member of the PMI Group before the Distribution Date; or (ii) has transferred from a member of the Altria Group or Former Altria Group that was an Altria Participating Company to a member of the Former Altria Group that was not an Altria Participating Company and thereafter separated from service from a member of the Former Altria Group and has not been re-employed by a member of the PMI Group before the Distribution Date; and, in all cases participates in, receives, or is entitled to receive, benefits under, any Altria Group Plan; provided , however , that a Former Altria Group Employee shall not include a PMI Group Transferee.
Former Altria Group : shall mean the Altria Group as in existence on and prior to March 30, 2007 and shall include Altria and the then Subsidiaries of Altria other than members of the PMI Group.
Former PMI Group Employee : any individual who: (i) before the Distribution Date has retired from or otherwise separated from service from a member of the PMI Group and has not been re-employed by a member of the Altria Group before the Distribution Date; or (ii) has transferred from a member of the PMI Group to a member
4
of the Former Altria Group that was not an Altria Participating Company and thereafter is separated from service from a member of the Former Altria Group that was not an Altria Participating Company and has not been re-employed by a member of the Altria Group before the Distribution Date; and, in each such case, participates in, receives or is entitled to receive, benefits under, any PMI Group Plan; or (iii) was employed by a PMI Participating Company, died before the Distribution Date while so employed and whose spouse and/or child are in receipt of a survivor income benefit allowance from the Survivor Income Benefit Plan for Salaried Employees on the Distribution Date; or (iv) was employed by a PMI Participating Company, suffered a disability (as defined in the Long-Term Disability Plan for Salaried Employees) before the Distribution Date while so employed and is in receipt of a disability allowance from the Long-Term Disability Plan for Salaried Employees on the Distribution Date; provided , however , that a Former PMI Group Employee shall not include an Altria Transferee.
Governmental Authority : any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, authority (including, but not limited to, any central bank or taxing authority) or instrumentality (including, but not limited to, any court, tribunal or grand jury) exercising executive, prosecutorial, legislative, judicial, regulatory or administrative functions of or pertaining to government or any other regulatory, administrative or governmental authority, including the NYSE or any other exchange on which Altria or PMI Common Stock may be listed.
Group : the Altria Group or the PMI Group, as the context requires.
Information : all records, books, contracts, instruments, computer data and other data and information.
Intrinsic Value : with respect to the relevant options, the product of (i) the number of such options and (ii) the difference between the exercise price of such options and, for Altria Options, the Altria Pre-Adjustment Price, for Adjusted Altria Options, the Altria Post-Adjustment Price, and for PMI Options, the PMI Price, as applicable.
Kraft : Kraft Foods Inc., a Virginia corporation.
Kraft Class A Common Stock : the Class A common stock, no par value, of Kraft.
Kraft Group : Kraft and the Kraft Subsidiaries.
Kraft Price : the closing price of Kraft Class A Common Stock on the NYSE on the Distribution Date.
Kraft Performance Incentive Plan : the 2001 Kraft Foods Inc. Performance Incentive Plan or the Kraft Foods Inc. 2005 Performance Incentive Plan.
Kraft SAR : a cash-settled stock appreciation right based on the value of Kraft Class A Common Stock resulting from an option to acquire Kraft Class A Common Stock originally granted by Altria as of June 12, 2001.
5
Kraft Stock Investment Option : the investment option offered under the PMI Deferred Profit-Sharing Plan whose value is based on the value of Kraft Class A Common Stock.
Kraft Subsidiaries : all of the Subsidiaries of Kraft as of March 30, 2007.
Law : any federal, state or local statute, ordinance, regulation, code, license, permit, authorization, approval, consent, common law, legal doctrine, order, judgment, decree, injunction or requirement of any Governmental Authority or any order or award of any arbitrator, now or hereafter in effect.
Liabilities : any and all claims, debts, liabilities, assessments, guarantees, assurances, commitments, obligations, fines, excise taxes, penalties, damages (whether compensatory, punitive, consequential, multiple or other), losses, disgorgements and obligations, of any kind, character or description (whether absolute, contingent, matured, not matured, liquidated, unliquidated, accrued, known, unknown, direct, indirect, derivative or otherwise) whenever arising, including, but not limited to, those arising under or in connection with any Law, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by any Governmental Authority or arbitrator, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including all costs, expenses and interest relating thereto (including, but not limited to, all expenses of investigation, all attorneys fees and all out-of-pocket expenses in connection with any action or threatened action).
Losses : with respect to any Person, all losses, Liabilities, damages, claims, demands, judgments or settlements of any nature or kind, known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, including all costs and expenses (legal, accounting or otherwise as such costs are incurred) relating thereto, including punitive damages and criminal fines and penalties, but excluding damages in respect of actual or alleged lost profits, suffered by such Person, regardless of whether any such losses, Liabilities, damages, claims, demands, judgments, settlements, costs, expenses, fines and penalties relate to or arise out of such Persons own alleged or actual negligent, grossly negligent, reckless or intentional misconduct or the capacity in which such Person was acting.
Non-parties : as defined in Section 8.3(b) hereof.
Non-PMI Group : the Altria Group, the Kraft Group, and SABMiller.
NYSE : the New York Stock Exchange, Inc.
Option Conversion Ratio : the ratio of the pre-adjustment exercise price of the applicable Altria Options to the Altria Pre-Adjustment Price.
Permissible Offset : with respect to an Altria Pension Plan, any benefit earned under a PMI Pension Plan (including, for this purpose, any defined benefit plan or program that provides retirement income for PMI Group Employees, regardless of
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whether such PMI Group Employee is a U.S. payroll-based PMI Group Employee) that may be used to offset a benefit earned under an Altria Pension Plan, but only if such benefit is attributable to a period of service used to determine the amount of his or her benefit under the Altria Pension Plan; and with respect to a PMI Pension Plan, any benefit earned under an Altria Pension Plan that may be used to offset a benefit earned under a PMI Pension Plan, but only if such benefit is attributable to a period of service used to determine the amount of his benefit under the PMI Pension Plan.
Person : an individual, a committee, a partnership, a joint venture, a corporation, a trust, a limited liability company, an unincorporated organization, or a government or any department or agency thereof.
Personal Data : as defined in Section 8.1 hereof.
PMI : as defined in the preamble to this Agreement.
PMI Benefit Liabilities : as defined in Section 2.2 hereof.
PMI Common Stock : the common stock, no par value, of PMI.
PMI Deferred Stock : a deferred stock obligation relating to PMI Common Stock granted by PMI as of the Distribution Date under a PMI Performance Incentive Plan pursuant to Section 5.3(a) and Section 5.4(a) hereof.
PMI Group : PMI and the PMI Subsidiaries; provided, however, that solely for the purpose of determining whether a former employee of the PMI Group is a Former PMI Group Employee, PMI Group shall include PM Duty Free, Inc.
PMI Group Employee : any individual, excluding an Altria Transferee, who (i), as of the close of business on the Distribution Date, is either employed by, or on leave of absence (as defined by the personnel policies of the PMI Group) from, a member of the PMI Group; (ii) is a Former PMI Group Employee; or (iii) is or becomes a PMI Transferee.
PMI Group Plans :
(i) the PMI Pension Plans;
(ii) the PMI Profit-Sharing Plans;
(iii) the PMI Welfare and Other Plans; and
(iv) the PMI Performance Incentive Plans.
PMI Option : an option to acquire PMI Common Stock granted by PMI as of the Distribution Date under the PMI Performance Incentive Plan in partial substitution for the Altria Options.
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PMI Participating Company : any company of the PMI Group whose eligible employees participated in the Altria Pension Plans and Altria Profit-Sharing Plans prior to January 1, 2008.
PMI Pension Plans : any of PMI Retirement Plan, the PMI Benefit Equalization Plan, the PMI Supplemental Management Plan for Salaried Employees, and any other qualified or non-qualified defined benefit plan or program that provides retirement income for U.S. payroll-based PMI Group Employees that is identified by PMI no later than the Distribution Date, all as in effect as of the time relevant to the applicable provisions of this Agreement.
PMI Performance Incentive Plans : the PMI 2008 Performance Incentive Plan, or any other stock-based or other incentive plan for PMI Group Employees that is identified by PMI before the Distribution Date, all as in effect as of the time relevant to the applicable provisions of this Agreement.
PMI Price : the Altria Pre-Adjustment Price multiplied by a fraction, the numerator of which is the closing price of PMI Common Stock on the NYSE on the Distribution Date (as traded on the when issued market) and the denominator of which is the sum of the numerator plus the closing price of Altria Common Stock on the NYSE on the Distribution Date (as traded on the when issued market).
PMI Profit-Sharing Plans : any of the PMI Deferred Profit-Sharing Plan, the PMI Benefit Equalization Plan, the PMI Supplemental Management Plan for Salaried Employees, the Philip Morris Products Inc. 401(k) Savings Plan and any other qualified or non-qualified defined contribution plan or program that provides retirement income for U.S. payroll-based PMI Group Employees that is identified by PMI before the Distribution Date, all as in effect as of the time relevant to the applicable provisions of this Agreement.
PMI Restricted Stock : restricted PMI Common Stock distributed as of the Distribution Date and subject to terms and conditions pursuant to Section 5.3(b) hereof.
PMI Stock Investment Option : the investment option to be offered under the following Altria Profit-Sharing Plans: the Deferred Profit-Sharing Plan for Salaried Employees, the Deferred Profit-Sharing Plan for Tobacco Workers, the Deferred Profit-Sharing Plan for Craft Employees and the investment option to be offered under the PMI Deferred Profit-Sharing Plan whose value in each case is based on the value of PMI Common Stock.
PMI Subsidiaries : all of the Subsidiaries of PMI.
PMI Transferee : any employee of a member of the Altria Group who will transfer employment to a member of the PMI Group on or after the Distribution Date, but on or prior to December 31, 2008.
PMI Welfare and Other Plans : any plan, fund or program that provides health, medical, surgical, hospital or dental care, severance, survivor income, long-term
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disability, cafeteria, flexible benefits or other welfare benefits or benefits in the event of sickness, accident or disability, or death benefits to PMI Group Employees, all as in effect as of the time relevant to the applicable provisions of this Agreement.
Record Date : the close of business on the date to be determined by Altrias Board of Directors as the record date for determining the holders of Altria Common Stock entitled to receive shares of PMI Common Stock pursuant to the Distribution.
SEC : the United States Securities and Exchange Commission.
Securities Act : the Securities Act of 1933, as amended, or any successor statute.
Securities Exchange Act : the Securities Exchange Act of 1934, as amended, or any successor statute.
Subsidiary : with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of members to the board of directors or similar governing body; provided , however , that for purposes of this Agreement, (1) the PMI Subsidiaries shall be deemed to be Subsidiaries of PMI; and (2) no member of the PMI Group shall be deemed to be a Subsidiary of any member of the Altria Group.
1.2 References to Time . All references in this Agreement to times of the day shall be to Richmond, Virginia time, except as otherwise specifically provided herein.
ARTICLE II
GENERAL PRINCIPLES
2.1 Altria Group Employees .
(a) Obligations . Except as specifically provided in this Agreement, to the exclusion of the PMI Group, the appropriate member of the Altria Group shall continue to be responsible for and pay, perform and discharge each and every of the employment, compensation and employee benefits Liabilities relating to the Altria Group Employees and Former PMI Group Employees described in clauses (iii) and (iv) of the definition of Former PMI Group Employees that arise from employment with the Altria Group, the Former Altria Group and the PMI Group before the Distribution Date and that arise with respect to Altria Group Employees from employment with the Altria Group on or after the Distribution Date, including each and every Liability arising under an Altria Group Plan or assumed pursuant to the terms of this Agreement (collectively, the Altria Benefit Liabilities); provided, however, that nothing shall preclude any Altria Pension Plan to reduce or eliminate any such Altria Benefit Liability by a Permissible Offset.
(b) Reimbursement . As soon as practicable following the Distribution Date, PMI shall reimburse Altria in an amount equal to the present value of the
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Altria Benefit Liabilities retained by Altria with respect to Former PMI Group Employees described in clauses (iii) and (iv) of the definition of Former PMI Group Employees.
(c) Crediting Service . As of the Distribution Date, the service used to determine the eligibility for, the vested portion of and the amount of, any benefit under any Altria Group Plan of each Altria Group Employee shall not be less than the service that such Altria Group Employee earned with the Altria Group, the Former Altria Group and the PMI Group with respect to such Altria Group Plan to such date.
2.2 PMI Group Employees .
(a) Obligations . Except as specifically provided in this Agreement, to the exclusion of the Altria Group, the appropriate member of the PMI Group shall continue to be responsible for and pay, perform and discharge each and every of the employment, compensation and employee benefits Liabilities relating to PMI Group Employees (other than Former PMI Group Employees described in clauses (iii) and (iv) of the definition of Former PMI Group Employees) that arise from employment with the PMI Group, the Altria Group and the Former Altria Group before the Distribution Date and that arise with respect to PMI Group Employees from employment with the PMI Group on or after the Distribution Date, including each and every Liability arising under a PMI Group Plan or assumed pursuant to the terms of this Agreement (collectively, the PMI Benefit Liabilities); provided, however, that nothing shall preclude any PMI Pension Plan to reduce or eliminate any such PMI Benefit Liability by a Permissible Offset.
(b) Crediting of Service . As of the Distribution Date, the service used to determine the eligibility for, the vested portion of and the amount of, any benefit under any PMI Group Plan (including, for purposes of this subparagraph (b), any PMI Group employee benefit plan that provides retirement income, regardless of whether it covers only U.S. payroll-based PMI Group Employees) of each PMI Group Employee (including, for purposes of this subparagraph (b), any PMI Group employee, regardless of whether such employee is a U.S. payroll-based PMI Group Employee) shall not be less than the service that such PMI Group Employee earned with the Altria Group, the Former Altria Group and the PMI Group with respect to such PMI Group Plan to such date.
ARTICLE III
PMI GROUP PLANS
3.1 PMI Group Plans . The following principles shall apply.
(a) PMI Pension Plans . A member of the PMI Group has previously adopted and established the PMI Pension Plans for the benefit of eligible PMI Group Employees. PMI shall timely take all actions necessary to obtain a favorable determination letter from the Internal Revenue Service that the PMI
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Retirement Plan is qualified under Section 401(a) of the Code and the related trust forms part of a qualified plan and is therefore exempt from tax under Section 501(a) of the Code.
(b) Transfer of Assets .
(i) Prior Asset Transfer . At or about the time of the establishment of the PMI Retirement Plan by a member of the PMI Group, Altria caused the trust under the Retirement Plan for Salaried Employees to make a direct transfer of assets to the trust established under the PMI Retirement Plan. The value of the assets transferred and to be transferred from the Retirement Plan for Salaried Employees to the trust under the PMI Retirement Plan was and will be the amount required to be transferred pursuant to Section 414( l ) of the Code. Such amount was determined by the actuary for the Retirement Plan for Salaried Employees and the PMI Retirement Plan. Any amount required to be transferred pursuant to this section shall be adjusted for (i) allocable gains and/or losses of the trust under the Retirement Plan for Salaried Employees, (ii) benefit payments on behalf of the PMI Retirement Plan, and (iii) allocable expenses.
(ii) Subsequent Asset Transfer .
(A) As soon as practicable after December 31, 2008, or such earlier date that may be agreed upon by the Altria Group and the PMI Group, but in no event earlier than 30 days following the filing of Form 5310-A with the Internal Revenue Service, if required, Altria agrees to cause the trust under the Retirement Plan for Salaried Employees to make a direct transfer (or transfers) of assets to the trust established under the PMI Retirement Plan in an amount determined by the actuary for the Retirement Plan for Salaried Employees and agreed to by the actuary for the PMI Retirement Plan, equal to the amount required to be transferred pursuant to Section 414( l ) of the Code with respect to those PMI Group Employees who were participants in the Retirement Plan for Salaried Employees and for whom assets were not transferred pursuant to clause (i) hereof. The value of the assets to be transferred from the trust under the Retirement Plan for Salaried Employees to the trust under the PMI Retirement Plan will be determined in accordance with Section 414( l ) of the Code without regard to Section 414( l )(2) of the Code. The PMI Group similarly agrees to cause the trust under the Philip Morris International Retirement Plan to make a direct transfer (or transfers) of assets to the trust established under the Retirement Plan for Salaried Employees in an amount determined by the actuary for the Philip Morris International Retirement Plan and agreed to by the actuary for the Retirement Plan for Salaried Employees, equal to the amount required to be transferred pursuant to Section 414( l ) of the Code with respect to those Altria Transferees who were participants in the Philip Morris International Retirement Plan and who transferred after the Distribution Date.
(B) Altria and PMI shall reasonably cooperate with each other in order to facilitate the foregoing provisions of this clause (ii).
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(c) Credit for Service with the Altria Group . The PMI Pension Plans shall provide that each PMI Group Employee (regardless of the date of employment with the PMI Group) shall be credited with eligibility and vesting service that is not less than the eligibility and vesting service that the PMI Group Employee had earned under the comparable or equivalent Altria Group Pension Plan.
(d) Credit under all other PMI Group Plans . No later than as of the Distribution Date, each PMI Group Plan shall provide that each PMI Group Employee (regardless of the date of employment with the PMI Group) shall be credited with eligibility and vesting service that is not less than the eligibility and vesting service that the PMI Group Employee had earned under the comparable or equivalent Altria Group Plan.
(e) PMI Profit-Sharing Plans .
(i) Creation and Qualification of Plans . PMI has previously adopted and established the PMI Profit-Sharing Plans with respect to eligible PMI Group Employees. PMI shall take all actions necessary to timely obtain a favorable determination letter from the Internal Revenue Service that the PMI Deferred Profit-Sharing Plan is qualified under Section 401(a) of the Code and the related trust forms part of a qualified plan and is therefore exempt from tax under Section 501(a) of the Code.
(f) Transfer of Assets .
(i) Prior Asset Transfer . Contemporaneously with the establishment of the PMI Profit-Sharing Plan, Altria caused the Deferred Profit-Sharing Plan for Salaried Employees to make a direct transfer of assets from such plan to the trust established under the PMI Deferred Profit-Sharing Plan. The value of the assets transferred from the trust under the Deferred Profit-Sharing Plan for Salaried Employees to the trust under the PMI Deferred Profit-Sharing Plan was determined in accordance with Section 414( l ) of the Code, to be equal to the value of the accounts of the then identified PMI Group Employees.
(ii) Subsequent Asset Transfer .
(A) On or before April 30, 2008, but in no event earlier than 30 days following the filing of Form 5310-A with the Internal Revenue Service, if required, Altria agrees to cause the trust under the Deferred Profit-Sharing Plan for Salaried Employees to make a direct transfer (or transfers) of assets to the trust established under the PMI Deferred Profit-Sharing Plan in an amount equal to the accounts of the PMI Group Employees for whom assets were not transferred pursuant to clause (i) hereof, except that Altria shall not cause the transfer of assets with respect to PMI Transferees who
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have transferred to a member of the PMI Group after the Distribution Date, such assets to be retained in the trust under the Deferred Profit-Sharing Plan for Salaried Employees pending further direction from the PMI Transferee. The value of the assets to be transferred will be determined in accordance with Section 414(l) of the Code.
(B) Altria and PMI shall reasonably cooperate with each other in order to facilitate the foregoing provisions of clause (ii).
(g) PMI Welfare and Other Benefits . PMI Group Employees shall be entitled to participate in the PMI Welfare and Other Plans in accordance with the Altria Group practices in effect as of the Distribution Date, provided, however, that nothing herein shall preclude PMI Group Employees from continuing to participate in Altria Group Welfare and Other Plans for the calendar year of the Distribution if mutually agreed to by PMI and Altria.
(h) PMI Directors Plans . PMI has adopted the PMI Deferred Fee Plan for Non-Employee Directors and the PMI Stock Compensation Plan for Non-Employee Directors effective as of January 29, 2008. Effective as of the Distribution Date, PMI shall assume, under the PMI directors plans, the liability for deferred amounts under the Altria Group, Inc. Deferred Fee Plan for Non-Employee Directors, the Altria Group, Inc. Stock Compensation Plan for Non-Employee Directors, and the Altria Group, Inc. Unit Plan for Incumbent Non-Employee Directors with respect to each individual who is a member of the Board of Directors of Altria in 2008 before the Distribution Date and who is a member of the Board of Directors of PMI on the Distribution Date. As soon as practicable following the Distribution Date, Altria shall pay to PMI an amount equal to such liability determined as of the close of business on the Distribution Date.
ARTICLE IV
EMPLOYEE TRANSFERS
4.1 PMI Transferees . The following principles shall apply to any PMI Transferee. Except as specifically noted in this Agreement as otherwise agreed in writing by the parties, each PMI Transferee will become, or continue to be, eligible upon transfer for the rights and benefits of similarly situated PMI Group Employees.
(a) Amendments . No member of the PMI Group shall cause any amendments to be made to the PMI Group Plans or any policies regarding the PMI Group Plans (other than amendments to provide for Permissible Offsets) to be implemented that have the direct or indirect effect of treating the PMI Transferees less favorably than the other PMI Group Employees similarly situated in seniority and job responsibilities.
(b) Profit-Sharing Plans .
(i) Participation . As soon as administratively practicable following the date on which the PMI Transferee transfers, the PMI Transferee shall be eligible to commence participation in the appropriate PMI Profit-Sharing Plan. Any service requirements contained in such PMI Profit-Sharing Plan with respect to eligibility to participate generally or eligibility to share in any employer contributions thereunder shall be waived for the PMI Transferee.
(c) Company Contribution for PMI Transferee . If any PMI Transferee is transferred to the PMI Group after the Distribution Date but on or prior to December 31 st of the calendar year in which the Distribution Date occurs and would otherwise be eligible for a company contribution (within the meaning of the Deferred Profit-Sharing Plan for Salaried Employees) under the Deferred Profit-Sharing Plan for Salaried Employees for that calendar year, the appropriate member of the Altria Group will contribute (or credit, as applicable) to each such PMI Transferees account in the Altria
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Profit-Sharing Plans the pro-rated amount of any employer contribution to which the PMI Transferee is entitled based on his compensation (as defined in the Deferred Profit-Sharing Plan for Salaried Employees) received from an Altria Participating Company through the date of transfer and irrespective of whether such PMI Transferee is employed by the PMI Group on the last day of the calendar year in which he or she transferred. Any PMI Transferee who has an outstanding loan from the Deferred Profit-Sharing Plan for Salaried Employees as of the date of transfer to PMI may continue to repay such loan in accordance with the terms of such Deferred Profit-Sharing Plan for Salaried Employees.
4.2 Altria Transferees . The following principles shall apply to any Altria Transferee. Except as specifically noted in this Agreement as otherwise agreed in writing by the parties, each Altria Transferee will become, or continue to be, eligible upon transfer for the rights and benefits of similarly situated Altria Group Employees.
(a) Amendments . No member of the Altria Group shall cause any amendments to be made to the Altria Group Plans or any policies regarding the Altria Group Plans (other than amendments to provide for Permissible Offsets) to be implemented that have the direct or indirect effect of treating the Altria Transferees less favorably than the other Altria Group Employees similarly situated in seniority and job responsibilities.
(b) Profit-Sharing Plan .
(i) Participation . As soon as administratively practicable following the date on which the Altria Transferee transfers, the Altria Transferee shall be eligible to commence participation in the appropriate Altria Profit-Sharing Plan. Any service requirements contained in such Altria Profit-Sharing Plan with respect to eligibility to participate generally to share in any employer contributions thereunder shall be waived for the Altria Transferee.
(c) Company Contribution for Altria Transferee . If any Altria Transferee is transferred to the Altria Group after the Distribution Date but on or prior to December 31 st of the calendar year in which the Distribution Date occurs and would otherwise be eligible for a company contribution (within the meaning of the PMI Deferred Profit-Sharing Plan) under the PMI Deferred Profit-Sharing Plan for that calendar year, the appropriate member of the PMI Group will contribute (or credit, as applicable) to each such Altria Transferees account in the PMI Profit-Sharing Plans the pro-rated amount of any employer contribution to which the Altria Transferee is entitled based on his compensation (as defined in the PMI Deferred Profit-Sharing Plan) received from a Participating Company (as defined in the PMI Deferred Profit-Sharing Plan) through the date of transfer and irrespective of whether such Altria Transferee is employed by the Altria Group on the last day of the calendar year in which he transferred. Any Altria Transferee who has an outstanding loan from the PMI Deferred Profit-Sharing Plan as of the date of transfer to the Altria Group may continue to repay such loan in accordance with the terms of such PMI Deferred Profit-Sharing Plan.
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4.3 Payments . As soon as practicable following the Distribution Date, Altria shall pay to PMI an amount representing the excess of the reasonably estimated present values of (a), with respect to certain employees of the Altria Group scheduled to transfer to the PMI Group, (i) liabilities accrued for financial reporting purposes for post-retirement medical and life insurance benefits and certain other agreed post-employment benefits as of December 31, 2007, (ii) defined benefit obligations under Altrias Benefit Equalization Plan and Altrias Supplemental Management Employees Retirement Plan as of December 31, 2007 (less relevant offsets for amounts previously paid pursuant to the Altria Secular Trust Program and the Altria Executive Trust Arrangement) plus (iii) those target payments that would reasonably be anticipated to be earned, assuming continued payment of target payments, during such employees service with PMI no later than December 31, 2012 that are in lieu of the increase in the value of benefits with respect to service before January 1, 2008 to which the transferees would have become entitled (assuming continued employment) as a result of attaining early retirement eligibility, had they been covered by Altrias Benefit Equalization Plan and Altrias Supplemental Management Employees Retirement Plan, over (b) the results of similar calculations for post-retirement medical, life insurance and other post-employment benefit liabilities, defined benefit obligations and anticipated target payments to be paid by Altria with respect to an employee of the PMI Group who transferred to the Altria Group in anticipation of the Distribution and any other mutually agreed employees of the PMI Group scheduled to transfer to the Altria Group.
ARTICLE V
EQUITY COMPENSATION
5.1 Altria Options .
(a) Adjustment Methodology . Each Altria Option shall be adjusted in the manner described below, effective as of the time of the Distribution, so that each Altria Option holder shall hold Adjusted Altria Options and PMI Options in lieu of the Altria Options previously held. The following procedure shall be applied to each grant of Altria Options with the same grant date and exercise price held by each Altria Option holder. For the avoidance of doubt, the term exercise price refers to the amount payable by an option holder in order to acquire shares pursuant to a stock option award.
(i) The Adjusted Altria Options shall have an exercise price equal to the Altria Post-Adjustment Price multiplied by the Option Conversion Ratio. The number of Adjusted Altria Options shall equal the number of Altria Options.
(ii) The PMI Options shall have an exercise price equal to the PMI Price multiplied by the Option Conversion Ratio. The number of PMI Options shall equal the number of Altria Options. If the resulting aggregate Intrinsic Value of the Adjusted Altria Options and PMI Options is less than the Intrinsic Value of the Altria Options, then the difference shall be paid to the option holder in cash as soon as practicable following the Distribution Date. If the resulting aggregate Intrinsic Value of the Adjusted Altria Options and PMI Options is greater than the Intrinsic Value of the Altria Options, then the number of PMI Options shall be reduced until the aggregate Intrinsic Value of the Adjusted Altria
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Options and PMI Options is less than or equal to the Intrinsic Value of the Altria Options, and any difference shall be paid to the option holder in cash as soon as practicable following the Distribution Date. Notwithstanding the foregoing, if the Intrinsic Value of the Altria Options is negative, only the first two sentences of this Section 5.1(a)(ii) shall be applied. The cash payment described above shall be made by Altria to individuals who are Non-PMI Group employees on the Distribution Date (or individuals no longer performing services for the Non-PMI Group or the PMI Group but whose last employment was with the Non-PMI Group), and by PMI to individuals who are PMI Group employees on the Distribution Date (or individuals no longer performing services for the Non-PMI Group or the PMI Group but whose last employment was with the PMI Group).
(iii) The calculation described in the preceding sentence shall be applied using the rounding conventions determined by Altria to carry out the purpose of this Section 5.1 .
(b) Issuing Entity and Settlement . Altria will adjust the exercise price of the Altria Options to become Adjusted Altria Options pursuant to the Altria Performance Incentive Plan. After the Distribution Date, Adjusted Altria Options, regardless of by whom held, shall be settled by Altria pursuant to the Altria Performance Incentive Plan. PMI will issue the PMI Options pursuant to the PMI Performance Incentive Plan. After the Distribution Date, PMI Options, regardless of by whom held, shall be settled by PMI pursuant to the PMI Performance Incentive Plan.
(c) Option Agreement Terms . The Adjusted Altria Options and the PMI Options shall have terms that are substantially identical to the terms of the Altria Options, provided , however , that (i) the Adjusted Altria Options shall provide that individuals who are employees of the PMI Group on the Distribution Date or who are PMI Transferees shall continue while employed by the PMI Group to be treated as employees of an Altria Affiliate solely for purposes of determining the exercise period under the option agreements; (ii) the PMI Options shall provide that individuals who are employees of the Non-PMI Group on the Distribution Date or who are Altria Transferees shall continue while employed by the Non-PMI Group to be treated as employees of a PMI Affiliate solely for purposes of determining the exercise period under the option agreements; and (iii) the PMI Options shall refer to both PMI and members of the Non-PMI Group as appropriate to effectuate the intent of this Section 5.1 including references to the Non-PMI Group disability and retirement plans.
(d) Consideration . As soon as practicable following the Distribution Date, Altria shall pay to PMI the Fair Value of the PMI Options held by individuals who are Non-PMI Group employees on the Distribution Date (or individuals no longer performing services for the Non-PMI Group or the PMI Group but whose last employment was with the Non-PMI Group) and PMI shall pay to Altria the Fair Value of the Adjusted Altria Options held by individuals who are PMI Group employees on the Distribution Date (or individuals no longer performing services for the Non-PMI Group or the PMI Group but whose last employment was with the PMI Group). The parties shall settle the obligations of the preceding sentence in cash on a net basis such that the party required to pay the greater amount to the other shall pay the difference between the two amounts to the other.
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5.2 Kraft SARs Issued by Altria . Upon the Distribution Date, PMI shall assume the liability for Kraft SARs held by individuals who are employees of the PMI Group on the Distribution Date (or individuals no longer performing services for the Non-PMI Group or the PMI Group but whose last employment was with the PMI Group). PMI shall settle such Kraft SARs upon exercise and assume all other obligations under such Kraft SARs. Altria and PMI shall amend such Kraft SARs effective as of the Distribution Date to replace references to Altria with references to PMI and otherwise as appropriate to effectuate the intent of this Section 5.2.
5.3 Restricted Stock and pre-January 31, 2007 Deferred Stock .
(a) Adjustment . Pursuant to the Distribution, each holder of Altria Restricted Stock will receive from Altria as of the time of the Distribution shares of PMI Common Stock in the same manner and based on the same ratio as other shareholders of Altria Common Stock. Such PMI Common Stock shall be subject to the same vesting requirements and dates and other terms and conditions as the Altria Restricted Stock to which it relates (including the right to receive all dividends or other distributions paid on PMI Common Stock). Effective at the time of the Distribution, each holder of Altria Deferred Stock that was granted before January 31, 2007 shall receive a number of PMI Deferred Stock shares based on the same ratio as shareholders of Altria Common Stock. Such PMI Deferred Stock shall be subject to the provisions of Section 5.4(b) through Section 5.4(e).
(b) Restricted Stock Agreement Terms . The PMI Restricted Stock shall have the same terms as the Altria Restricted Stock; provided , however , that (i) the Altria Restricted Stock shall provide that individuals who are employees of the PMI Group on the Distribution Date or who are PMI Transferees shall continue to be treated while so employed as employees of an Altria Affiliate for purposes of continued vesting in the restricted stock; (ii) the PMI Restricted Stock shall provide that individuals who are employees of the Non-PMI Group on the Distribution Date or who are Altria Transferees shall continue to be treated while so employed as employees of a PMI Affiliate for purposes of continued vesting in the restricted stock; and (iii) the PMI Restricted Stock shall refer to both PMI and members of the Non-PMI Group as appropriate to effectuate the intent of this Section 5.3 .
(c) Forfeiture of PMI Stock and Consideration . If a holder of PMI Restricted Stock forfeits such stock under the terms of the PMI Restricted Stock, the forfeited stock shall be returned to PMI, not Altria. In consideration of the anticipated receipt of such forfeitures, PMI shall pay in cash to Altria as soon as practicable following the Distribution Date the anticipated value of forfeitures attributable to PMI Restricted Stock held by individuals who are Non-PMI Group employees on the Distribution Date. In addition, PMI shall pay in cash to Altria as soon as practicable following the Distribution Date the value of the Altria Restricted Stock held by the PMI Group employees on the
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Distribution Date. The anticipated value of the PMI Restricted Stock that may be forfeited by holders and returned to PMI shall be determined using the PMI Price and the forfeiture assumption used for Statement of Financial Accounting Standards 123(R) purposes in Altrias most recent quarterly or annual financial reporting prepared before the Distribution Date for forfeitures of Altria Restricted Stock. The value of the Altria Restricted Stock shall be equal to the Altria Pre-Adjustment Price of the underlying Altria shares, reduced by assumed forfeitures based on the assumptions used for Statement of Financial Accounting Standards 123(R) purposes in Altrias most recent quarterly or annual financial reporting prepared before the Distribution Date for forfeitures of Altria Restricted Stock.
5.4 Deferred Stock .
(a) Adjustment . Effective at the time of the Distribution, each holder of Altria Deferred Stock that was granted on or after January 31, 2007 and before January 30, 2008 shall receive a number of PMI Deferred Stock shares based on the same ratio as holders of Altria Common Stock. Effective at the time of the Distribution, each holder of Altria Deferred Stock that was granted on or after January 30, 2008 shall receive (i) in the case of a holder who is an employee of the Non-PMI Group on the Distribution Date, additional Altria Deferred Stock, such that following the Distribution Date the holder will have the number of shares of Altria Deferred Stock equal to the number of shares of Altria Deferred Stock held before the Distribution multiplied by the ratio of the Altria Pre-Adjustment Price to the Altria Post-Adjustment Price; and (ii) in the case of a holder who is a PMI Group Employee on the Distribution Date, PMI Deferred Stock in substitution for such holders Altria Deferred Stock, such that following the Distribution Date the holder will have the number of shares of PMI Deferred Stock equal to the number of shares of Altria Deferred Stock held before the Distribution multiplied by the ratio of the Altria Pre-Adjustment Price to the PMI Price. Any fractional shares of Altria or PMI Deferred Stock resulting from the adjustment in the preceding sentence shall be paid to the holder in cash as soon as practicable following the Distribution Date; provided , however , that with respect to any individual holding Deferred Stock that is subject to Code Section 409A, any fractional shares of Altria or PMI Deferred Stock shall instead be rounded up to a whole share of Altria or PMI Deferred Stock. The cash payment described above shall be made by Altria to individuals who are Non-PMI Group employees on the Distribution Date, and by PMI to individuals who are PMI Group employees on the Distribution Date.
(b) Issuing Entity and Settlement . After the Distribution Date, Altria shall be responsible for any cash payments in lieu of dividends required pursuant to the terms of the Altria Deferred Stock, and such Altria Deferred Stock, regardless of by whom held, shall be settled by Altria pursuant to the Altria Performance Incentive Plan. PMI will issue PMI Deferred Stock pursuant to the PMI Performance Incentive Plan. After the Distribution Date, PMI shall be responsible for any cash payments in lieu of dividends required pursuant to the terms of the PMI Deferred Stock, and such deferred stock, regardless of by whom held, shall be settled by PMI pursuant to the PMI Performance Incentive Plan.
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(c) Deferred Stock Agreement Terms . The PMI Deferred Stock shall have the same terms as the Altria Deferred Stock, provided , however , that (i) the Altria Deferred Stock shall provide that individuals who are employees of the PMI Group on the Distribution Date or who are PMI Transferees shall continue to be treated while so employed as employees of an Altria Affiliate for purposes of continued vesting in the deferred stock; (ii) the PMI Deferred Stock shall provide that individuals who are employees of the Non-PMI Group on the Distribution Date or who are Altria Transferees shall continue to be treated while so employed as employees of a PMI Affiliate for purposes of continued vesting in the deferred stock; and (iii) the PMI Deferred Stock shall refer to both PMI and members of the Non-PMI Group as appropriate to effectuate the intent of this Section 5.4 .
(d) Consideration . As soon as practicable following the Distribution Date, Altria shall pay to PMI the value of the PMI Deferred Stock held by individuals who are Non-PMI Group employees on the Distribution Date and PMI shall pay to Altria the value of the Altria Deferred Stock held by individuals who are PMI Group employees on the Distribution Date. The parties shall settle the obligations of the preceding sentence in cash on a net basis such that the party required to pay the greater amount to the other shall pay the difference between the two amounts to the other. For purposes of this Section 5.4(d) , the value of the Altria Deferred Stock or PMI Deferred Stock shall be determined based on the Altria Post-Adjustment Price and the PMI Price, respectively, reduced by assumed forfeitures based on the assumptions used for Statement of Financial Accounting Standards 123(R) purposes in Altrias most recent quarterly or annual financial reporting prepared before the Distribution Date for forfeitures of Altria Deferred Stock.
(e) Taxes . Altria shall reimburse any Altria Group employee, and PMI shall reimburse any PMI Group employee, who becomes liable for income taxes with respect to Altria or PMI Deferred Stock earlier or in an amount greater than would have been the case absent the implementation of Section 5.3(a) or Section 5.4(a) in an amount equal to the excess of (i) any income taxes to which such employee becomes liable over (ii) the present value of such income taxes had such income taxes been paid at such time as the Altria or PMI Deferred Stock would otherwise have been subject to income taxes, assuming, for purposes of determining present value, the same value for Deferred Stock used for purposes of clause (i) of this sentence and a discount rate equal to the weighted average discount rate used for Altrias domestic pension plans at December 31, 2007, which was 6.2%. Any such reimbursement shall be further adjusted to hold the employee harmless from all additional taxes on the reimbursement payment itself. The amounts payable pursuant to this Section 5.4(e) shall be calculated using reasonable assumptions (in addition to those specified above) as may be determined by the third-party accounting firm or firms selected by the party responsible for the reimbursement.
5.5 Existing Kraft Equity Compensation .
(a) Consideration . As soon as practicable following the Distribution Date, PMI shall pay to Altria the Fair Value of the Existing Kraft Options held by individuals who are PMI Group employees on the Distribution Date (or individuals no longer
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performing services for the Non-PMI Group or the PMI Group, but whose last employment was with PMI Group). As soon as practicable following the Distribution Date, PMI shall also pay to Altria the value of Existing Kraft Restricted Stock and the Existing Kraft Deferred Stock held by individuals who are PMI Group employees on the Distribution Date (or individuals no longer performing services for the Non-PMI Group or the PMI Group but whose last employment was with the PMI Group). The value of the Existing Kraft Restricted Stock and Existing Kraft Deferred Stock shall be determined based on a Kraft stock price of $31.66, and reduced by assumed forfeitures based on the assumptions used for purposes of Section 4.4(d) of the Employees Matters Agreement by and between Altria Group, Inc. and Kraft with respect to Kraft Deferred Stock held by Altria Group Employees.
(b) Employment Treatment . Equity compensation issued by Kraft before the Distribution Date shall provide that individuals who are PMI Group Employees on the Distribution Date shall continue while employed by the PMI Group to be treated as employees of a member of the Kraft Group for purposes of determining the exercise period of Existing Kraft Options and continued vesting in Existing Kraft Restricted Stock and Deferred Stock.
5.6 Payments Previously Made By PMI . Any payments to be made by PMI to Altria under this Article V with respect to Equity Compensation shall be reduced by payments previously made by PMI to Altria with respect to such Equity Compensation in the normal course of business before the Distribution Date.
5.7 Other .
(a) Administration and Withholding .
(i) Altria and PMI agree that UBS Financial Services Inc. shall be the administrator and recordkeeper for the Adjusted Altria Options, PMI Options, Kraft SARs, Altria Restricted Stock, PMI Restricted Stock, Altria Deferred Stock and PMI Deferred Stock for the life of the options, restricted stock and deferred stock, unless the parties mutually agree otherwise.
(ii) Altria will be responsible for all payroll taxes, withholding and reporting with respect to Equity Compensation of Altria Group employees (or individuals no longer performing services for the Non-PMI Group or PMI Group but whose last employment was with the Altria Group). PMI will be responsible for all payroll taxes, withholding and reporting with respect to Equity Compensation of PMI Group employees (or individuals no longer performing services for the Non-PMI Group or the PMI Group but whose last employment was with the PMI Group). Altria and PMI agree to designate the other party as an agent for withholding pursuant to IRS Revenue Procedure 70-6 and to accept such designation to effectuate the intent of this Section 5.7(a) .
(iii) Upon the exercise of an Adjusted Altria Option or PMI Option held by Altria Group or PMI Group employees (or individuals no longer
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performing services for the Non-PMI Group or PMI Group but whose last employment was with the Altria Group or PMI Group), the exercise price shall be remitted in cash by the option administrator to the issuer of the option (Altria or PMI, as applicable) and the applicable withholding shall be remitted in cash by the option administrator to the entity (Altria or PMI, as applicable) responsible for payroll taxes, withholding and reporting with respect to the option. Upon vesting or payment, as applicable, of Altria and PMI Restricted Stock, Altria and PMI Deferred Stock and Kraft SARs held by Altria Group or PMI Group employees (or individuals no longer performing services for the Non-PMI Group or PMI Group but whose last employment was with the Altria Group or PMI Group), the applicable withholding shall be remitted in cash by the administrator to the entity (Altria or PMI, as applicable) responsible for payroll taxes, withholding and reporting with respect to the Restricted or Deferred Stock or Kraft SARs. To the extent necessary to provide the withholding amount in cash to the entity responsible for payroll taxes, withholding, and reporting, the issuer of the applicable Equity Compensation shall provide the withholding amount in cash.
(iv) With respect to dividends on PMI Restricted Stock or dividend equivalents on PMI Deferred Stock payable by PMI to an Altria Group employee, PMI shall make such payments to Altria, and Altria, as an agent for PMI, shall make such payments to its employees and former employees and shall be responsible for payroll taxes, withholding and reporting in accordance with this Section 5.7(a) . With respect to dividends on Altria Restricted Stock or dividend equivalents on Altria Deferred Stock payable by Altria to a PMI Group employee, Altria shall make such payments to PMI, and PMI, as an agent for Altria, shall make such payments to its employees and former employees and shall be responsible for payroll taxes, withholding and reporting in accordance with this Section 5.7(a) .
(v) PMI will cooperate with Kraft to establish appropriate procedures consistent with this Section 5.7(a) for tax withholding, remitting withholding taxes, payroll taxes, dividends, dividend equivalents, fractional shares and exercise prices to the appropriate party, and tax reporting, including, to the extent necessary, withholding agency designations pursuant to IRS Revenue Procedure 70-6, with respect to (A) PMI Options, PMI Restricted Stock and PMI Deferred Stock of employees of the Kraft Group (or individuals no longer performing services for the Kraft Group, the Non-PMI Group or the PMI Group but whose last employment was with the Kraft Group) and (B) Existing Kraft Options, Existing Kraft Restricted Stock and Existing Kraft Deferred Stock of PMI Group employees (or individuals no longer performing services for the Kraft Group, the Non-PMI Group or the PMI Group but whose last employment was with the PMI Group).
(vi) If, after the Distribution Date, Altria or PMI identify an administrative error in the individuals identified as holding Equity Compensation, the amount of Equity Compensation so held, the vesting level of such Equity Compensation, or any other similar error, Altria and PMI shall mutually cooperate
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in taking such actions as are necessary or appropriate to place, as nearly as reasonable practicable, the individual and Altria and PMI in the position in which they would have been had the error not occurred.
(b) Scheduled Transfers . For purposes of this Article V only, if an individual is, by mutual agreement between the parties, scheduled to transfer employment shortly after the Distribution Date between the PMI Group and the Altria Group, such individual shall be treated as employed on the Distribution Date by the entity to which he or she is scheduled to transfer.
(c) Tax Deductions . With respect to the Equity Compensation held by individuals who are Altria Group employees at the time the Equity Compensation becomes taxable and individuals who are not employees of the PMI Group or Non-PMI Group at such time but were last employees of the Altria Group, Altria shall claim any federal, state and/or local tax deductions after the Distribution Date, and PMI shall not claim such deductions. With respect to the Equity Compensation held by individuals who are employees of the PMI Group at the time the Equity Compensation becomes taxable and individuals who are not employees of the PMI Group or Non-PMI Group at such time but were last employees of the PMI Group, PMI shall claim any federal, state and/or local tax deductions after the Distribution Date, and Altria shall not claim such deductions. If either Altria or PMI determines in its reasonable judgment that there is a substantial likelihood that a tax deduction that was assigned to Altria or PMI pursuant to this Section 5.7(c) will instead be available only to the other party (whether as a result of a determination by the Internal Revenue Service, a change in the Code or the regulations or guidance thereunder, or otherwise), it will notify the other party and both parties will negotiate in good faith to resolve the issue in accordance with the following principle: the party entitled to the deduction shall pay to the other party an amount that places the other party in a financial position equivalent to the financial position the party would have been in had the party received the deduction as intended under this Section 5.7(c) . Such amount shall be paid within 90 days of filing the last tax return necessary to make the determination described in the preceding sentence.
(d) Intended Results; Tax Benefit . If Altria determines in its reasonable judgment that any action required under this Article IV will not achieve the intended tax, accounting and legal results, including, without limitation, the intended results under Code Section 409A and Statement of Financial Accounting Standards 123(R), then at the request of Altria, PMI and Altria shall mutually cooperate in taking such actions as are necessary or appropriate to achieve such results, or most nearly achieve such results if the originally-intended results are not fully attainable.
(e) Registration . PMI shall register the PMI Common Stock relating to the PMI Options and PMI Deferred Stock and make any necessary filings with the appropriate Governmental Authorities as required under U.S. and foreign securities Laws.
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ARTICLE VI
PROFIT-SHARING PLANS
6.1 Maintenance of Stock Investment Options .
(a) PMI Deferred Profit-Sharing Plan . The PMI Deferred Profit-Sharing Plan will be amended as of the Distribution Date:
(i) to provide that no new amounts may be contributed to the Altria Stock Investment Option whether through employee contribution, employer contribution, dividend payment or intra-plan transfers. PMI further will cause the Altria Stock Investment Option in the PMI Deferred Profit-Sharing Plan to be maintained until the fiduciary for the PMI Deferred Profit-Sharing Plan in determines that the maintenance of such Altria Stock Investment Option is no longer consistent with ERISA.
(ii) to provide that the Kraft Stock Investment Option in the PMI Deferred Profit-Sharing Plan will be maintained until the fiduciary for the Plan determines that the maintenance of such Kraft Stock Investment Option is no longer consistent with ERISA.
(iii) (A) to create a PMI Stock Investment Option; (B) to enable the PMI Stock Investment Option to receive shares of PMI Common Stock to be distributed in the Distribution on behalf of PMI Deferred Profit-Sharing Plan participants; (C) to provide that, following the Distribution, new purchases of PMI Common Stock via an investment in the PMI Stock Investment Option will be permitted, whether through employee contribution, employer contribution, reinvestment of dividends on shares of PMI Common Stock or intra-plan transfer; and (D) to permit eligible employees to have any dividends on shares of PMI Common Stock paid to the eligible employee in accordance with Section 404(k) of the Code or paid to the PMI Deferred Profit-Sharing Plan and reinvested in PMI Common Stock. PMI further will cause the PMI Stock Investment Option in the PMI Deferred Profit-Sharing Plan to be maintained until the fiduciary for the Plan determines that the maintenance of such PMI Stock Investment Option is no longer consistent with ERISA.
(b) Altria Profit-Sharing Plans . Each of the Altria Profit-Sharing Plans that offer Altria Stock in the Altria Stock Investment Option as of the Distribution Date will be amended as of the Distribution Date: (A) to create a PMI Stock Investment Option; (B) to enable the PMI Stock Investment Option to receive shares of PMI Common Stock to be distributed in the Distribution on behalf of Altria Profit-Sharing Plan participants; and (C) to provide that, following the Distribution, no new amounts may be contributed to a PMI Stock Investment Option whether through employee contribution, employer contribution, dividend payment or intra-plan transfer. Altria further will cause the PMI Stock Investment Option in each of the Altria Profit-Sharing Plans that offer Altria Stock in the Altria Stock Investment Option as of the Distribution Date to be maintained until the fiduciary for the Altria Profit-Sharing Plan determines that the maintenance of such PMI Stock Investment Option is no longer consistent with ERISA.
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ARTICLE VII
ALTRIA STOCK PURCHASE PLAN
7.1 Termination of Participation . As of the Distribution Date, the PMI Group Employees shall cease to be eligible to participate in the Altria Stock Purchase Plan, in accordance with the terms of such plan.
ARTICLE VIII
GENERAL AND ADMINISTRATIVE
8.1 Sharing of Participant Information . Altria and PMI shall share, Altria shall cause each applicable member of the Altria Group to share, and PMI shall cause each applicable member of the PMI Group to share, with each other and their respective agents and vendors (without obtaining releases), all participant information necessary for the efficient and accurate administration of each of the Altria Group Plans and the PMI Group Plans, as well as the performance of their respective obligations under this Agreement. Altria and PMI and their respective authorized agents shall, subject to applicable Laws on confidentiality, data protection and labor, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other party, to the extent necessary for such administration. All participant information shall be provided in a manner and medium that is compatible with the data processing systems of Altria as in effect as of the Distribution Date, unless otherwise agreed to by Altria and PMI. Altria and PMI shall ensure that they each have in place appropriate technical and organizational security measures to protect the personal data of the transferring participants (Personal Data). Each of Altria and PMI shall comply fully with its obligations under applicable Laws as controller of any Personal Data and shall do all such things as may be necessary to discharge such obligations.
8.2 No Third-Party Beneficiaries . No provision of this Agreement or the Distribution Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any Person (other than parties thereto and their respective successors and permitted assigns), including any PMI Transferee, any Altria Transferee or other future, present, or former employee of Altria, a member of the Altria Group, PMI or a member of the PMI Group under any Altria Group Plan or PMI Group Plan or otherwise. Without limiting the generality of the foregoing: (i) except as expressly provided in this Agreement, nothing in this Agreement shall preclude PMI or any member of the PMI Group, at any time after the Distribution Date, from amending, merging, modifying, terminating, eliminating, reducing or otherwise altering in any respect any PMI Group Plan, any benefit under any plan or any trust, insurance policy or funding vehicle related to any PMI Group Plan; and (ii) except as expressly provided in this Agreement, nothing in this Agreement shall preclude Altria or any member of the Altria Group, at any time after the Distribution modifying, terminating, eliminating, reducing or otherwise altering in any respect any Altria Group
24
Plan, any benefit under any plan or any trust, insurance policy or funding vehicle related to any Altria Group Plan. In no event shall any provision of this Agreement be deemed to amend any Altria Group Plan or PMI Group Plan.
8.3 Audit Rights with Respect to Information Provided .
(a) Each of Altria and PMI, and their duly authorized representatives, shall have the right to conduct audits with respect to all information provided to it by the other party. The party conducting the audit (the Auditing Party) shall have the sole discretion to determine the procedures and guidelines for conducting audits and the selection of audit representatives under this Section 8.3(a) . The Auditing Party shall have the right to make copies of any records at its expense, subject to the confidentiality provisions set forth in the Distribution Agreement, which are incorporated by reference herein. The party being audited shall provide the Auditing Partys representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. After any audit is completed, the party being audited shall have the right to review a draft of the audit findings and to comment on those findings in writing within five business days after receiving such draft.
(b) The Auditing Partys audit rights under this Section 8.3(b) shall include the right to audit, or participate in an audit facilitated by the party being audited, any Subsidiaries and Affiliates of the party being audited and any benefit providers and third parties with whom the party being audited has a relationship, or agents of such party, to the extent any such persons are affected by or addressed in this Agreement (collectively, the Non-parties). The party being audited shall, upon written request from the Auditing Party, provide an individual (at the Auditing Partys expense) to supervise any audit of a Non-party. The Auditing Party shall be responsible for supplying, at the Auditing Partys expense, additional personnel sufficient to complete the audit in a reasonably timely manner. The responsibility of the party being audited shall be limited to providing, at the Auditing Partys expense, a single individual at each audited site for purposes of facilitating the audit.
8.4 Fiduciary Matters . Altria and PMI each acknowledge that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable law, and no party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination that to do so would violate such a fiduciary duty or standard. Each party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities.
8.5 Collective Bargaining . To the extent any provision of this Agreement is contrary to the provisions of any collective bargaining agreement to which Altria or PMI or their respective Affiliates is a party, the terms of such collective bargaining agreement shall prevail. Should any provisions of this Agreement be deemed to relate to a topic determined by an appropriate authority to be a mandatory subject of collective bargaining, Altria or PMI may be obligated to bargain with the union representing affected employees concerning those subjects.
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8.6 Consent of Third Parties . If any provision of this Agreement is dependent on the consent of any third party (such as a vendor or a union) and such consent is withheld, Altria and PMI shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, Altria and PMI shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase reasonable best efforts as used herein shall not be construed to require the incurrence of any non-routine or unreasonable expense or Liability or the waiver of any right.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification . All Liabilities retained or assumed by or allocated to Altria or the Altria Group pursuant to this Agreement shall be deemed to be Altria Group Liabilities for purposes of Article III of the Distribution Agreement, and all Liabilities retained or assumed by or allocated to PMI or the PMI Group pursuant to this Agreement shall be deemed to be PMI Group Liabilities for the purposes of Article III of the Distribution Agreement.
ARTICLE X
MISCELLANEOUS
10.1 Relationship of Parties . Nothing in this Agreement shall be deemed or construed by the parties or any third party as creating the relationship of principal and agent, partnership or joint venture between or among the parties, it being understood and agreed that no provision contained herein, and no act of the parties, shall be deemed to create any relationship between the parties other than the relationship set forth herein.
10.2 Affiliates . Each of Altria and PMI shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by a member of the Altria Group or a member of the PMI Group.
10.3 Employee Communications . PMI will coordinate with Altria all written and electronic communications to the PMI Group employees regarding the terms of this Employee Matters Agreement to assure that all such communications are uniform, consistent and accurate.
10.4 Incorporation of Distribution Agreement Provisions . The following provisions of the Distribution Agreement are hereby incorporated herein by reference, and unless otherwise expressly specified herein, such provisions shall apply as if fully set forth herein (references in this Section 10.4 to an Article or Section shall mean Articles or Sections of the Distribution Agreement, and, except as expressly set forth below, references in the material incorporated herein by reference shall be references to
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the Distribution Agreement): Article III (relating to Mutual Releases and Indemnification); Article IV (relating to certain Additional Covenants); Article V (relating to Access to Information); Article VI (relating to Dispute Resolution); and Article IX (relating to Miscellaneous).
10.5 Governing Law . To the extent not preempted by applicable federal law, this Agreement shall be governed by, construed and interpreted in accordance with the laws of the Commonwealth of Virginia (other than the laws regarding the choice of laws and conflict of laws as to all matters), including matters of validity, construction, effect, performance and remedies provided , however , that the Arbitration Act shall govern the matter described in Article IX.
10.6 References . Except as provided in Section 10.4 hereof, all references to Sections, Articles or Schedules contained herein mean Sections, Articles or Schedules of or to this Agreement, as the case may be, unless otherwise stated.
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IN WITNESS WHEREOF , the parties have caused this Employee Matters Agreement to be duly executed as of the day and year first above written.
ALTRIA GROUP, INC. | ||
By: |
/s/ L OUIS C. C AMILLERI |
|
Name: | Louis C. Camilleri | |
Title: | Chairman and Chief Executive Officer | |
PHILIP MORRIS INTERNATIONAL INC. | ||
By: |
/s/ A NDRÉ C ALANTZOPOULOS |
|
Name: | André Calantzopoulos | |
Title: | President and Chief Executive Officer |
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Exhibit 10.3
TAX SHARING AGREEMENT
BY AND BETWEEN
ALTRIA GROUP, INC.
AND
PHILIP MORRIS INTERNATIONAL INC.
DATED AS OF MARCH 28, 2008
TABLE OF CONTENTS
Page | ||||
ARTICLE I DEFINITIONS |
1 | |||
1.01 | General | 1 | ||
ARTICLE II TAX SHARING |
6 | |||
2.01 | General | 6 | ||
2.02 | Payment of Taxes | 7 | ||
2.03 | Carrybacks from Post-Distribution Period | 8 | ||
2.04 | Preparation of Returns | 9 | ||
ARTICLE III REFUNDS | 9 | |||
3.01 | Refunds | 9 | ||
ARTICLE IV INDEMNIFICATION | 10 | |||
4.01 | General Indemnification | 10 | ||
4.02 | Indemnification for Distribution Taxes | 11 | ||
4.03 | Indemnification Payments | 11 | ||
ARTICLE V REPRESENTATIONS | 11 | |||
5.01 | Altria and PMI Representations | 11 | ||
ARTICLE VI COVENANTS | 12 | |||
6.01 | Altria and PMI Covenants | 12 | ||
6.02 | Specific PMI Covenants | 12 | ||
ARTICLE VII TAX CONTESTS | 13 | |||
7.01 | Representation with Respect to Tax Contests | 13 | ||
ARTICLE VIII PAYMENTS | 14 | |||
8.01 | Method of Payment | 14 | ||
8.02 | Interest | 14 |
i
8.03 | Characterization of Payments | 14 | ||
ARTICLE IX MISCELLANEOUS |
15 | |||
9.01 | Allocation | 15 | ||
9.02 | Payment of Reserves | 15 | ||
9.03 | Cooperation and Exchange of Information | 15 | ||
9.04 | Retention of Records | 16 | ||
9.05 | Dispute Resolution | 16 | ||
9.06 | Changes in Law | 16 | ||
9.07 | Confidentiality | 17 | ||
9.08 | Successors | 17 | ||
9.09 | Authorization | 17 | ||
9.10 | Notices | 17 | ||
9.11 | Entire Agreement | 18 | ||
9.12 | Section Captions | 18 | ||
9.13 | Governing Law | 18 | ||
9.14 | Counterparts | 18 | ||
9.15 | Waiver and Amendments | 18 | ||
9.16 | Effective Date | 19 | ||
9.17 | Termination | 19 |
ii
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT dated as of March 28, 2008 (the Agreement) is between Altria Group, Inc., a Virginia corporation (Altria), and Philip Morris International Inc., a Virginia corporation (PMI) (sometimes referred to herein individually as Party, or together, as Parties).
W I T N E S S E T H:
WHEREAS, Altria is the common parent corporation of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the Code);
WHEREAS, PMI is a member of the affiliated group of corporations with respect to which Altria is the common parent corporation;
WHEREAS, as set forth in the Distribution Agreement by and between Altria and PMI, dated as of January 30, 2008 (the Distribution Agreement), and subject to the terms and conditions thereof, Altria will distribute on a pro rata basis to the holders of Altria common stock all of the outstanding shares of PMI common stock then owned by Altria (the Distribution);
WHEREAS, the Distribution is intended to qualify as a tax-free distribution to Altria and its shareholders under Section 355 of the Code; and
WHEREAS, in contemplation of the Distribution, pursuant to which PMI (and its direct and indirect Subsidiaries) will cease to be a member of the affiliated group of corporations with respect to which Altria is the common parent corporation, the Parties hereto have determined to enter into this Agreement, setting forth their agreement with respect to certain tax matters;
NOW, THEREFORE in consideration of the premises and mutual covenants herein contained, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01 General . For the purposes of this Agreement, the terms set forth below shall have the following meanings.
Altria Consolidated Return Group means Altria and any direct or indirect Subsidiary of Altria that is, from time to time, a member of the affiliated group of corporations with respect to which Altria is the common parent corporation. For the avoidance of doubt, the Altria Consolidated Return Group includes, but is not limited to, any company that for any period prior to the execution of this Agreement was a direct or indirect Subsidiary of Altria and that during such period was eligible to join with Altria, with respect to Federal Income Taxes, in the filing of a consolidated United States Federal Income Tax return.
Altria U.S. Group means Altria and any direct or indirect Subsidiary of Altria that is not also a member of the PMI Group or otherwise a direct or indirect Subsidiary of PMI and that would be eligible, from time to time, to join with Altria, with respect to Federal Income Taxes, in the filing of a consolidated United States Federal Income Tax return and/or, with respect to Combined State Taxes, in the filing of a consolidated, combined or unitary income or franchise tax return. For the avoidance of doubt, the Altria U.S. Group includes, but is not limited to, any company that for any period prior to the execution of this Agreement was a direct or indirect Subsidiary of Altria and that during such period was eligible to join with Altria, with respect to Federal Income Taxes, in the filing of a consolidated United States Federal Income Tax return and, with respect to Combined State Taxes, in the filing of a consolidated, combined or unitary income or franchise tax return, but only if and to the extent that such company was not a member of the PMI Group during such period.
Altria U.S. Group Tax means with respect to any taxable period (or portion thereof) (i) the Federal Income Tax liability of the Altria Consolidated Return Group less the PMI Federal Income Tax Liability; (ii) the Altria Combined State Tax liability less the PMI Combined State Tax Liability; (iii) any other Tax imposed on any member of the Altria U.S. Group or, with respect to any taxable year, any other Tax imposed on any direct or indirect Subsidiary of Altria (excluding, however, the PMI Group and any direct or indirect Subsidiary of PMI) that is not a member of the Altria U.S. Group; and (iv) liability of any member of the Altria U.S. Group for the payment of any amounts of the type described in (i), (ii) or (iii) as a result of any express or implied obligation to indemnify any other person.
Combined State Tax means, with respect to each state or local taxing jurisdiction, any income or franchise tax payable to such state or local taxing jurisdiction in which a member of the PMI Group files tax returns with a member of the Altria U.S. Group on a consolidated, combined or unitary basis for purposes of such income or franchise tax.
Distribution Date shall mean the date on which the Distribution becomes effective.
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Distribution Taxes shall mean any Taxes imposed on, increase in Taxes incurred by, or reduction of a Tax Asset of Altria, and any Taxes of an Altria shareholder that are paid or reimbursed by Altria, together with any fines or penalties, pursuant to a Final Determination resulting from, or arising in connection with, the failure of the Distribution to qualify as a tax-free transaction under Section 355 of the Code (including, without limitation, any Tax resulting from the application of Section 355(d) or Section 355(e) to the Distribution) or corresponding provisions of the laws of any other jurisdictions. Any Tax referred to in the immediately preceding sentence shall be determined using the highest applicable statutory corporate income tax rate for the relevant taxable period (or portion thereof).
Effective Realization (and the correlative term Effectively Realized) means, with respect to a tax saving or tax benefit, including from the use of any Tax Asset, the earliest to occur of (i) the receipt by Altria or PMI (or any other member of Altria U.S. Group or PMI Group) of cash from a Taxing Authority reflecting such tax saving or tax benefit, or (ii) the application of such tax saving or tax benefit to reduce any payments, including estimated tax payments, with respect to (A) the tax liability on a return of any of such entities or of any consolidated group of which any of such entities is a member, or (B) any other outstanding tax liability of any of such entities or of any such consolidated group, provided that any reference in this definition to tax shall include, without limitation, a reference to a recovery of statutory interest.
Federal Income Tax means any Tax imposed under Subtitle A of the Code and any related interest and any penalties, additions to such Tax, or additional amounts imposed with respect thereto.
Final Determination shall mean (i) with respect to Federal Income Taxes, a determination as defined in Section 1313(a) of the Code or execution of an Internal Revenue Service Form 870-AD and, with respect to taxes other than Federal Income Taxes, any decision, judgment, decree or other order by a court of competent jurisdiction that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise; (ii) a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of a State, local, or foreign taxing jurisdiction; (iii) the payment of tax by any member of the Altria Consolidated Return Group with respect to any item disallowed or adjusted by a Taxing Authority, provided that Altria determines that no action should be taken to recoup such payment; or (iv) any other final disposition, by mutual agreement of the Parties or by reason of the expiration of a statute of limitations or period for the filing of claims for refunds, amended returns, or appeals from adverse determinations.
PMI Combined State Tax Liability shall mean, with respect to any taxable period (or portion thereof) in the Pre-Distribution Period, an amount of Combined State Taxes, including any interest, penalties and other additions to such taxes for such taxable year except to the extent attributable to Altrias negligence, determined by taking
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the total separately computed state income or franchise tax liabilities of the PMI Group over the total separately computed state income or franchise tax liabilities of the Altria Consolidated Return Group multiplied by the combined state income or franchise tax liability of the Altria Consolidated Return Group.
PMI Current Federal Income Tax Provision shall mean, with respect to any financial statement year (or portion thereof) in the Pre-Distribution Period, the sum of the PMI Groups current federal income tax provision determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) recorded on the PMI Groups books and records and reported in the PMI Groups published financial statements.
PMI Federal Income Tax Liability shall mean, with respect to any taxable period (or portion thereof) in the Pre-Distribution Period, the sum of the PMI Groups Federal Income Tax liability and other additions to such Taxes except to the extent attributable to Altrias negligence (as determined under the applicable principles of agency law rather than Section 6662 of the Code) for such taxable period (or portion thereof), computed as if the PMI Group were not and never were part of the Altria Consolidated Return Group, but rather were a separate affiliated group of corporations filing a consolidated United States Federal Income Tax return pursuant to Section 1501 of the Code (provided, however, that transactions with members of the Altria U.S. Group or between members of the PMI Group shall be reflected according to the provisions of the consolidated return regulations promulgated under the Code governing intercompany transactions). Such computation shall be made: (A) without regard to the income, deductions (including net operating loss and capital loss deductions) and credits in any year of any member of the Altria Consolidated Return Group that is not a member of the PMI Group, (B) by taking account of any Tax Asset of the PMI Group in accordance with Section 2.02(e) hereof, (C) with regard to net operating loss and capital loss carryforwards and carrybacks and minimum tax credits from earlier years of the PMI Group, (D) as though the highest rate of tax specified in Section 11(b) of the Code were the only rate set forth in that subsection, and (E) reflecting the positions, elections and accounting methods and periods used with respect to the PMI Group in preparing the Altria consolidated Federal Income Tax return.
PMI Group shall mean PMI and any direct or indirect Subsidiary of PMI that would be eligible, from time to time, to join with PMI, with respect to Federal Income Taxes, in the filing of a consolidated United States Federal Income Tax return and, with respect to Combined State Taxes, in the filing of a consolidated, combined or unitary income or franchise tax return if PMI were not a member of the Altria Consolidated Return Group. For the avoidance of doubt, the PMI Group includes, but is not limited to, any company that for any period prior to the execution of this Agreement was a direct or indirect Subsidiary of PMI and that during such period would have been eligible to join with PMI, with respect to Federal Income Taxes, in the filing of a consolidated United States Federal Income Tax return and, with respect to Combined
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State Taxes, in the filing of a consolidated, combined or unitary income or franchise tax return if PMI were not a member of the Altria Consolidated Return Group, but only if and to the extent that such company was not a member of the Altria U.S. Group during such period.
PMI Group Tax means (i) PMI Federal Income Tax Liability; (ii) PMI Combined State Tax Liability; (iii) any other Tax imposed on any member of the PMI Group or, with respect to any taxable year, any other Tax imposed on any direct or indirect Subsidiary of PMI that is not a member of the PMI Group; and (iv) liability of any member of the PMI Group for the payment of any amounts of the type described in (i), (ii) or (iii) as a result of any express or implied obligation to indemnify any other person.
PMI Pro Forma Combined State Return means, for each state in which a combined state income tax return may be filed, either a formal combined state income tax return, or, in the alternative, a schedule on which the PMI Combined State Tax Liability is reflected.
PMI Pro Forma Federal Return means either a formal Form 1120, or, in the alternative, a schedule on which the PMI Federal Income Tax Liability is reflected.
Post-Distribution Period means any taxable period (or portion thereof) beginning after the close of business on the Distribution Date.
Pre-Distribution Period means any taxable period (or portion thereof) ending on or before the close of business on the Distribution Date.
Ruling and Tax Opinion Documents means (i) the private letter ruling received from the Internal Revenue Service regarding certain tax consequences of the Distribution, (ii) the request for private letter ruling submitted to the Internal Revenue Service in connection with the Distribution (including all supplemental submissions) and (iii) the tax opinion related to the Distribution delivered by Sutherland Asbill & Brennan LLP (Tax Advisor), including all exhibits to each, which contain, inter alia, information and representations provided by Altria and PMI in connection with the Distribution.
Subsidiary means any corporation or other legal entity (or any successor thereto) directly or indirectly controlled, where control means the ownership of 50% or more of the ownership interests (by vote or value) of such corporation or other legal entity (or any successor thereto) or the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such corporation or other legal entity.
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Tax or Taxes shall mean all national, federal, state (including, but not limited to the Ohio Commercial Activities tax or the Texas Margin tax), county, local, foreign or other taxes, levies, or imposts, including any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, capital stock, occupation, property, real property gains, social security or disability, environmental or windfall profit tax, premium, custom duty or other tax, governmental fee, or other like assessment or charge of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any Taxing Authority responsible for the imposition of any such tax (United States or non-United States).
Tax Asset means any federal or state net operating loss, net capital loss, general business credit, foreign tax credit, charitable deduction, or any other loss, credit, deduction, or tax attribute which could reduce any Tax (including, without limitation, deductions, credits, alternative minimum net operating loss carryforwards related to alternative minimum taxes or additions to the basis of property).
Taxing Authority means any governmental authority (whether United States or non-United States, and including, without limitation, any state, municipality, political subdivision or governmental agency) responsible for the imposition of any Tax.
Tax Contest means any audit, review, examination, assessment, notice of deficiency or any other administrative or judicial proceeding with the purpose or effect of redetermining any Taxes (including any administrative or judicial review of any claim for refund).
Tax-Free Status means qualification of the Distribution as tax-free under Section 355 of the Code.
ARTICLE II
TAX SHARING
2.01 General . For each taxable year of the Altria Consolidated Return Group for which a United States consolidated Federal Income Tax return is filed that includes any Pre-Distribution Period of the PMI Group, PMI shall pay to Altria an amount equal to the sum of the PMI Federal Income Tax Liability for such taxable year as shown on a PMI Pro Forma Federal Return. For each taxable year of the Altria Consolidated Return Group for which a Combined State Tax return is filed that includes any Pre-Distribution Period of the PMI Group, PMI shall pay to Altria an amount equal to the PMI Combined State Tax Liability for such taxable year as shown on a PMI Pro Forma Combined State Return.
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2.02 Payment of Taxes .
(a) Estimated Payments . Not later than thirty days after the Distribution Date, PMI shall identify on its books the PMI Current Federal Income Tax Provision for that portion of the current quarter that ends on the Distribution Date, determined in accordance with United States GAAP, and shall transfer such amount to Altria within thirty days after the Distribution Date.
(b) Preparation and Delivery of Estimated Pro Formas . On a date that is at least thirty days prior to the due date for the Altria Consolidated Return Groups consolidated Federal Income Tax return for a taxable year to which Section 2.01 of this Agreement applies, PMI shall deliver to Altria a PMI Pro Forma Federal Return reflecting the PMI Federal Income Tax Liability on an estimated basis. On a date that is at least ten days prior to the due date for each Combined State Tax return for a taxable year to which Section 2.01 of this Agreement applies, PMI shall deliver to Altria a PMI Pro Forma Combined State Return (together with the PMI Pro Forma Federal Return, the PMI Pro Forma Returns) reflecting the relevant PMI Combined State Tax Liability on an estimated basis. PMIs preparation and delivery of the PMI Pro Forma Federal Return shall include related schedules and returns, including, but not limited to, preparation of Form 1118 or in the alternative, a schedule reflecting what is on Form 1118, for purposes of computing any separate foreign tax credit limitation under Section 904(d) of the Code.
(c) Preparation and Delivery of Final Pro Formas . On or before November 1 following the end of any taxable year to which Section 2.01 of this Agreement applies, Altria shall deliver to PMI a PMI Pro Forma Federal Return reflecting the PMI Federal Income Tax Liability. On or before December 15 following the end of any taxable year to which Section 2.01 of this Agreement applies, Altria shall deliver to PMI a PMI Pro Forma Combined State Return reflecting the relevant PMI Combined State Tax Liability. Altrias preparation and delivery of the PMI Pro Forma Federal Return hereunder shall include related schedules and returns, including, but not limited to, preparation of Form 1118 or in the alternative, a schedule reflecting what is on Form 1118, for purposes of computing any separate foreign tax credit limitation under Section 904(d) of the Code.
(d) Reconciliation of Payments . On or before November 1 following the end of any taxable year to which Section 2.01 of this Agreement applies, PMI shall pay to Altria, or Altria shall pay to PMI, as appropriate, an amount equal to the difference, if any, between: (x) the PMI Federal Income Tax Liability reflected on the PMI Pro Forma Federal Return for such year; and (y) the aggregate amount of the payments of the PMI Current Federal Income Tax Provision for such year made pursuant to Section 2.02(a) of this Agreement. On or before December 15 following the end of any taxable year to which Section 2.01 of this Agreement applies, PMI shall pay to Altria the PMI Combined State Tax Liability as reflected on the PMI Pro Forma Combined State Return.
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(e) Use of Tax Assets . If a PMI Pro Forma Return reflects a Tax Asset that may under applicable law be used to reduce a Federal Income Tax or Combined State Tax liability of the Altria U.S. Group for any taxable period, Altria shall pay to PMI, or shall reduce the amount owed by PMI to Altria by, an amount equal to the actual tax saving produced by such Tax Asset within thirty days after such tax saving has been Effectively Realized by the Altria U.S. Group. The amount of any such tax saving for any taxable period shall be the amount of the reduction in Taxes payable to a Taxing Authority with respect to such tax period, including with respect to any estimated Tax payments, as compared to the Taxes that would have been payable to a Taxing Authority by the Altria U.S. Group with respect to such tax period in the absence of such Tax Asset. To the extent PMI has been compensated for any Tax Asset prior to the filing of a final tax return for any year, including with respect to any estimated payments for such year, Altria shall pay to PMI, or PMI shall pay to Altria, as appropriate, the difference between the amount Effectively Realized with respect to each Tax Asset with respect to such interim payments and the amount Effectively Realized with respect to the filing of the final tax return.
2.03 Carrybacks from Post-Distribution Period .
(a) Within thirty days after Effective Realization by the Altria Consolidated Return Group, Altria agrees to pay to PMI the actual tax benefit from the carryback of any Tax Asset of the PMI Group from a Post-Distribution Period. Such benefit shall be equal to (i) the amount of Federal Income Taxes or Combined State Taxes, as the case may be, that would have been payable (or of the Federal Income Tax or Combined State Tax refund actually receivable) by the Altria Consolidated Return Group for such period in the absence of such carryback, minus (ii) the amount of Federal Income Taxes or Combined State Taxes, as the case may be, actually payable for such period (or of the Federal Income Tax or Combined State Tax refund that would have been receivable) by the Altria Consolidated Return Group.
(b) If, subsequent to the payment by Altria to PMI of any amount pursuant to (or in accordance with the principles of) Section 2.03(a), there shall be a Final Determination that results in a disallowance or a reduction of the Tax Asset of the PMI Group so carried back, PMI shall repay to Altria, within thirty days after such Final Determination, any amount that would not have been payable to PMI pursuant to (or in accordance with the principles of) Section 2.03(a) of this Agreement had the amount of the tax benefit been determined in light of the Final Determination. In addition, PMI shall hold each member of the Altria U.S. Group harmless from any penalty or interest payable by any member of the Altria U.S. Group as a result of any such Final Determination. Any such amount shall be paid by PMI within thirty days of the payment by the Altria U.S. Group of any such penalty or interest.
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2.04 Preparation of Returns .
(a) For each taxable year to which Section 2.01 of this Agreement applies that the Altria Consolidated Return Group elects to file a consolidated Federal Income Tax return as permitted by Section 1501 of the Code or any Combined State Tax return, Altria shall prepare and file such return and any other returns, documents or statements required to be filed with the Internal Revenue Service with respect to the determination of the Federal Income Tax liability of the Altria Consolidated Return Group and with the appropriate Taxing Authorities with respect to the determination of the Combined State Tax liability of the Altria Consolidated Return Group. With respect to such return preparation, Altria shall not discriminate among any members of the Altria Consolidated Return Group. Altria shall have the right with respect to any consolidated Federal Income Tax returns or Combined State Tax returns that it has filed or will file to determine (i) the manner in which such returns, documents or statements shall be prepared and filed, including, without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported; (ii) whether any extensions should be requested; and (iii) the elections that will be made by any member of the Altria Consolidated Return Group. Each member of the PMI Group hereby irrevocably appoints Altria as its agent and attorney-in-fact to take any action (including the execution of documents) Altria may deem necessary or appropriate to implement this Section 2.04.
(b) With respect to any Tax return other than a United States consolidated Federal Income Tax return that includes any Pre-Distribution Period of the PMI Group or any Combined State Tax return, the Party that bears indemnification responsibility under Article IV of this Agreement shall be responsible for the preparation and filing of such Tax return; provided, however, that in the preparation and filing of such Tax return, such Party shall not take any position (or make any election) that is inconsistent with any position or election made by Altria in connection with the preparation and filing of any United States consolidated Federal Income Tax return that includes any Pre-Distribution Period of the PMI Group or any Combined State Tax return.
ARTICLE III
REFUNDS
3.01 Refunds .
(a) If, with respect to any PMI Group Tax, Altria receives a refund, offset or credit, Altria shall remit to PMI within thirty days of Effective Realization the amount of such refund, offset or credit, together with any interest received thereon.
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(b) If, with respect to any Altria U.S. Group Tax, PMI receives a refund, offset or credit, PMI shall remit to Altria within thirty days of Effective Realization the amount of such refund, offset or credit, together with any interest received thereon.
(c) Any payments required to be made by Sections 3.01(a) or 3.01(b) of this Agreement shall be paid net of any Tax liability to a Party resulting from such Partys receipt of such refund from the Taxing Authority.
ARTICLE IV
INDEMNIFICATION
4.01 General Indemnification .
(a) Altria will indemnify each member of the PMI Group or any other direct or indirect Subsidiary of PMI against and hold it harmless from (1) any Altria U.S. Group Tax or any adjustments made by a Taxing Authority that would result in an increase in any Altria U.S. Group Tax; and (2) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and attorneys fees and expenses), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any Tax or adjustment described in this subsection. Notwithstanding any other provision of this Agreement to the contrary, Altrias indemnification responsibility for Distribution Taxes, if any, shall be determined solely under Section 4.02(a) of this Agreement.
(b) PMI will indemnify each member of the Altria U.S. Group or any other direct or indirect Subsidiary of Altria other than a member of the PMI Group or any other direct or indirect Subsidiary of PMI against and hold it harmless from (1) any PMI Group Tax, or any adjustments made by a Taxing Authority that would result in an increase in any PMI Group Tax, or any adjustments by a Taxing Authority that result in a disallowance or reduction of any Tax Asset of the PMI Group that was used to reduce any Altria U.S. Group Tax; and (2) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and attorneys fees and expenses), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any Tax or adjustment described in this subsection. Notwithstanding any other provision of this Agreement to the contrary, PMIs indemnification responsibility for Distribution Taxes, if any, shall be determined solely under Section 4.02(b) of this Agreement.
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4.02 Indemnification for Distribution Taxes .
(a) Notwithstanding any other provision of this Agreement to the contrary, Altria shall indemnify and hold harmless each member of the PMI Group or any other direct or indirect Subsidiary of PMI from and against (1) any and all Distribution Taxes that are not the responsibility of PMI pursuant to Section 4.02(b) of this Agreement and (2) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and attorneys fees and expenses), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any Tax or adjustment described in this subsection.
(b) Notwithstanding any other provision of this Agreement to the contrary, PMI agrees to indemnify and hold harmless each member of the Altria U.S. Group or any other direct or indirect Subsidiary of Altria other than a member of the PMI Group or any other direct or indirect Subsidiary of PMI from and against (1) any and all Distribution Taxes resulting from or attributable to (i) any act or failure to act on the part of PMI (or any member of the PMI Group or any other direct or indirect Subsidiary of PMI) following the Distribution; or (ii) any breach by PMI (or any other member of PMI Group or any other direct or indirect Subsidiary of PMI) of any of the representations or covenants set forth in Articles V and VI of this Agreement or any representations with respect to PMI in the Ruling and Tax Opinion Documents and (2) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and attorneys fees and expenses), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any Tax or adjustment described in this subsection.
4.03 Indemnification Payments . In the event that a Party is entitled to receive indemnification under this Article IV with respect to any Tax for which there has been a Final Determination, such Party (Indemnified Party) shall send to the other Party (Indemnifying Party) an invoice requesting payment accompanied by a statement describing in reasonable detail the amount owed and the particulars relating thereto. The Indemnifying Party shall pay to the Indemnified Party any payment owed under this Article IV within thirty days (or within another time period mutually agreed to by the Parties) after the receipt of the invoice for such payment.
ARTICLE V
REPRESENTATIONS
5.01 Altria and PMI Representations . Altria and PMI each represent that the information and representations with respect to Altria or PMI, as the case may be, that are included in the Ruling and Tax Opinion Documents are accurate and complete as of the date hereof.
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ARTICLE VI
COVENANTS
6.01 Altria and PMI Covenants . Altria and PMI each covenant (1) to use their best efforts to verify that the foregoing representations made by it in Article V are accurate and complete as of the Distribution Date and (2) if, after the date hereof, either obtains information indicating, or otherwise becomes aware, that any such representations are or may be inaccurate or incomplete, promptly to inform Altria or PMI, as the case may be.
6.02 Specific PMI Covenants . PMI may take actions inconsistent with the representations in Section 5.01 of this Agreement and covenants in this Section 6.02 only if, prior to taking such action, PMI (1) provides notification, upon determining that it shall pursue such action, to Altria of its plans with respect to such action, and promptly responds to any inquiries made by Altria following such notification, and (2) obtains Altrias written consent to such action (such consent not to be unreasonably withheld). Notwithstanding the foregoing, any Altria consent shall not relieve PMI of any of its liabilities or obligations under this Agreement, including, but not limited to, any PMI indemnity obligation arising under Section 4.02(b) of this Agreement. PMI covenants to Altria that:
(a) During the two-year period following the Distribution Date, PMI will not liquidate or merge or consolidate with any other person in one or more transactions pursuant to which the shareholders of the other person(s) in such transaction(s) hold directly or indirectly a forty percent or greater interest (by vote or value) in the combined company.
(b) During the two-year period following the Distribution Date, PMI and each of its Subsidiaries will not transfer all or substantially all of its assets in a transaction, including all or substantially all of the assets of PMIs active trade or business used to satisfy Section 355(b) of the Code.
(c) During the two-year period following the Distribution Date, PMI will continue the active conduct of its trade or business used to satisfy Section 355(b) of the Code.
(d) PMI will not redeem or repurchase PMI stock in a manner contrary to the requirements of Revenue Procedure 96-30 or in any other manner contrary to the representations made in the Ruling and Tax Opinion Documents.
(e) During the two-year period following the Distribution Date, PMI will not issue, in one or more transactions, PMI stock (or any instrument that is convertible or exchangeable into such PMI stock) that in the aggregate represents more than a forty percent interest (by vote or value) of PMI.
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(f) During the two-year period following the Distribution Date, PMI will not enter into any negotiations, agreements, understandings, or arrangements with respect to transactions or events (including, without limitation, stock issuances, pursuant to the exercise of options or otherwise, option grants, capital contributions or acquisitions or a series of such transactions or events, but excluding the Distribution) that may alone or in the aggregate cause the Distribution to be treated as part of a plan (i) pursuant to which one or more persons would acquire directly or indirectly stock of PMI representing a forty percent or greater interest (by vote or value); or (ii) which would result in a transaction described in Section 6.02(a) above.
(g) PMI will not otherwise take any action or fail to take any other action, which action or failure to act may result in Distribution Taxes.
(h) For purposes of paragraphs (a), (e) and (f) of Section 6.02, whether a forty percent or greater ownership change is or would be involved in one or more transactions shall be determined under multiple methods that reflect the differing number of PMI shares outstanding at various times (e.g., on the Distribution Date, immediately prior to each transaction, etc.) and the method chosen shall be the one that results in the largest potential ownership change. For the avoidance of doubt, for purposes of paragraphs (a), (e) and (f) of Section 6.02, whether a forty percent or greater ownership change is or would be involved in one or more transactions shall be measured by aggregating the ownership change attributable to all transactions of the types described in (a), (e) and (f).
ARTICLE VII
TAX CONTESTS
7.01 Representation with Respect to Tax Contests . Altria shall have the right to (i) contest, compromise, or settle any adjustment or deficiency proposed, asserted or assessed as a result of any audit of any consolidated or combined return filed by the Altria Consolidated Return Group; (ii) file, prosecute, compromise or settle any claim for refund; and (iii) determine whether any refunds to which the Altria Consolidated Return Group may be entitled shall be received by way of refund or credited against the tax liability of the Altria Consolidated Return Group; provided, however, that Altria shall be obligated to act in good faith with respect to any Tax Contest of any consolidated or combined return filed by the Altria Consolidated Return Group which involves a Tax or adjustment for which PMI is liable pursuant to this Agreement (PMI Tax Contest). Specifically, Altria shall, in good faith, (i) consult with PMI regarding its comments with respect to any such PMI Tax Contest, including any correspondence or filings submitted
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in connection therewith; (ii) consult with PMI as to strategy and settlement decisions with respect to any PMI Tax Contest, including any correspondence or filings submitted in connection therewith; and (iii) use its best efforts to arrive at a settlement of any such PMI Tax Contest that reflects the ultimate merits of the issues without taking into account the fact that PMI is liable for the Tax or adjustment under this Agreement.
(a) With respect to any PMI Tax Contest, Altria shall (i) keep PMI informed in a timely manner of all actions taken or proposed to be taken by Altria and (ii) timely provide PMI with copies of any correspondence or filings submitted to any Taxing Authority in connection with any contest, litigation, compromise or settlement relating to any such adjustment in any such Tax Contest. In addition, with respect to any Tax Contest in which a Taxing Authority has asserted a position that may result in a PMI indemnification obligation arising under Section 4.02(b) of this Agreement, PMI shall have the right, at its own expense, to attend and participate in any such Tax Contest.
(b) The failure of Altria timely to forward notification in accordance with Section 7.01(a) shall not relieve PMI of any obligation to pay such Tax or adjustment or indemnify Altria, except to the extent PMI was actually materially prejudiced by such failure, and in no event shall such failure relieve PMI from any other liability or obligation which it may have to Altria.
ARTICLE VIII
PAYMENTS
8.01 Method of Payment . All payments required by this Agreement shall be made by (1) wire transfer to the appropriate bank account as may from time to time be designated by the Parties for such purpose, or (2) any other method agreed to by the Parties. All payments due under this Agreement shall be deemed to be paid when available funds are actually received by the payee.
8.02 Interest . Any payment required by this Agreement that is not made on or before the date required hereunder shall bear interest, from and after such date through the date of payment, calculated at the rate determined under Section 6621(a)(2) of the Code as modified by Section 6621(c) of the Code or as otherwise determined by any relevant Taxing Authority.
8.03 Characterization of Payments . For all Tax purposes, the Parties hereto agree to treat, and to cause their respective affiliates to treat, (1) any payment required by this Agreement (to the extent not otherwise treated as a payment in respect of an existing intercompany account) either as a contribution by Altria to PMI or a distribution by PMI to Altria, as the case may be, occurring immediately prior to the Distribution and (2) any payment of interest or non-Federal Income Taxes by or to a Tax Authority, as taxable or deductible, as the case may be, to the Parties entitled under this Agreement to retain such
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payment or required under this Agreement to make such payment, in either case, except as otherwise mandated by applicable law or a Final Determination; provided that in the event it is determined (i) pursuant to applicable law that it is more likely than not, or (ii) pursuant to a Final Determination, that any such treatment is not permissible (or that an Indemnified Party nevertheless suffers an income Tax or other Tax detriment as a result of such payment), the payment in question shall be adjusted to place the Indemnified Party in the same after-tax position it would have enjoyed absent such applicable law or Final Determination.
ARTICLE IX
MISCELLANEOUS
9.01 Allocation . Altria may, at its option, elect, and the PMI Group shall join it in electing (if necessary), to ratably allocate items (other than extraordinary items) of the PMI Group in accordance with relevant provisions of Treasury Regulations Section 1.1502-76. If Altria makes such an election, the members of the PMI Group shall provide to Altria such statements as are required under the regulations and other appropriate assistance.
9.02 Payment of Reserves . Within thirty days after the Distribution Date, Altria shall pay to PMI an amount equal to the Federal Income Tax reserve for uncertain Tax positions attributable to the PMI Group and recorded on the books and records of Altria as of the Distribution Date.
9.03 Cooperation and Exchange of Information .
(a) Altria and PMI shall each cooperate fully with all reasonable requests from the other Party in connection with the preparation and filing of Tax returns, claims for refund, and audits concerning issues or other matters covered by this Agreement (including, without limitation, cooperating in meeting those deadlines as established and reasonably determined by Altria to be necessary to facilitate the timely filing of any United States consolidated Federal Income Tax return of the Altria Consolidated Return Group). Such cooperation shall include, without limitation:
(i) the retention until the expiration of the applicable statute of limitations, and the provision upon request, of Tax returns, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to the Tax returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities;
(ii) the execution of any document that may be necessary or reasonably helpful in connection with any audit, or the filing of a Tax return or refund claim by a member of the Altria U.S. Group or the PMI Group, including certification, to the best of a Partys knowledge, of the accuracy and completeness of the information it has supplied;
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(iii) for each taxable year of the Altria Consolidated Return Group for which a United States consolidated Federal Income Tax return is filed that includes any Pre-Distribution Period of the PMI Group, the use of the same tax preparation software required to facilitate the filing of the Altria Group Consolidated Return;
(iv) the use of the Partys best efforts to obtain any documentation that may be necessary or reasonably helpful in connection with any of the foregoing. Each Party shall make its employees and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters; and
(v) the participation in regularly scheduled meetings between the Parties to further the purposes of this Agreement.
(b) If a Party fails to comply with any of its obligations set forth in Section 9.03(a) of this Agreement upon reasonable request and notice by the other Party, and such failure results in the imposition of additional Taxes, the nonperforming Party shall be liable in full for such additional Taxes.
9.04 Retention of Records . A Party intending to dispose of documentation of Altria (or any other member of the Altria U.S. Group) or PMI (or any other member of the PMI Group), including without limitation, books, records, Tax returns and all supporting schedules and information relating thereto (after the expiration of the applicable statute of limitations), which relates to Tax returns described in Section 2.04 (to the extent it affects the separate Tax liability of PMI (or any other member of the PMI Group) or Altria (or any other member of the Altria U.S. Group)) shall provide written notice to the other Party describing the documentation to be destroyed or disposed of at least sixty days prior to taking such action. The other Party may arrange to take delivery of the documentation described in the notice at its expense during the succeeding sixty day period. The documentation described in the notice will not be disposed of without the affirmative written consent of an officer of the notified Party.
9.05 Dispute Resolution . Any and all disputes between the Parties relating to this Agreement, including the interpretation or application thereof, shall be resolved through the procedures provided in Article VI of the Distribution Agreement.
9.06 Changes in Law . Any reference to a provision of the Code or a law of another jurisdiction shall include a reference to any applicable successor provision or law. If, due to any change in applicable law or regulations or their interpretation by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated thereby shall become unlawful, impracticable or impossible, the Parties
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hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision.
9.07 Confidentiality . Each Party shall hold and cause its directors, officers, employees, advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such Party) concerning the other Party hereto furnished to it by such other Party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) in the public domain through no fault of such Party, (2) later lawfully acquired from other sources not known to be under a duty of confidentiality by the Party to which it was furnished, or (3) independently developed), and each Party shall not release or disclose such information to any other person, except its directors, officers, employees, auditors, attorneys, financial advisors, bankers and other consultants who shall be advised of and agree to be bound by the provisions of this Section 9.07. Each Party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other Party if it exercises the same care as it takes to preserve confidentiality for its own similar information.
9.08 Successors . This agreement shall be binding on and inure to the benefit of any successor, by merger, acquisition of assets or otherwise, to any of the Parties hereto (including, but not limited to, any successor of Altria and PMI succeeding to the tax attributes of such Party under Section 381 of the Code), to the same extent as if such successor had been an original Party hereto.
9.09 Authorization, etc. Each of the Parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement; that this Agreement has been duly authorized by all necessary corporate action on the part of such Party; that this Agreement constitutes a legal, valid and binding obligation of each such Party; and that the execution, delivery and performance of this Agreement by such Party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding on such Party.
9.10 Notices . All notices, requests, and other communications to any Party hereunder shall be in writing (including electronic mail and facsimile transmission) and shall be given to:
If to Altria, to:
Altria Group, Inc.
6601 W. Broad Street
Richmond, Virginia 23261
Attn: Vice President, Taxes
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If to PMI, to:
c/o Philip Morris International Management SA
Avenue de Rhodanie
1001 Lausanne, Switzerland
Attn: Vice President, Taxes
9.11 Entire Agreement . This Agreement contains the entire agreement among the Parties hereto with respect to the subject matter hereof and supersedes any prior tax sharing agreements, and such prior tax sharing agreements shall have no further force and effect. If and to the extent that the provisions of this Agreement conflict with the Distribution Agreement or any other agreement entered into in connection with the Distribution, the provisions of this Agreement shall control. If and to the extent that the rights and obligations with respect to Philip Morris Duty Free Inc. (as a direct or indirect Subsidiary of Altria or PMI, respectively) provided for in this Agreement conflict with the rights and obligations with respect to Philip Morris Duty Free Inc. provided for in the Indemnification Agreement dated as of August 1, 2007 between Philip Morris USA Inc. and PMI, the provisions of this Agreement shall control.
9.12 Section Captions . Section captions used in this Agreement are for convenience and reference only and shall not affect the construction of this Agreement.
9.13 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia (other than the laws regarding choice of laws and conflicts of laws) as to all matters, including matters of validity, construction, effect, performance and remedies; provided, however, that the United States Arbitration Act, 9 U.S.C. §§ 1-16 (as may be amended from time to time) shall govern the matters described in Section 9.05 of this Agreement.
9.14 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.
9.15 Waivers and Amendments . This Agreement shall not be waived, amended or otherwise modified except in writing, duly executed by all of the Parties hereto.
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9.16 Effective Date . This Agreement shall be effective as of the Distribution Date.
9.17 Termination . The Agreement shall remain in force and be binding so long as the applicable period of assessments (including extensions) remains unexpired for any taxes contemplated by the Agreement.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed by a duly authorized officer as of the date first above written.
ALTRIA GROUP, INC. | ||
By: |
/ S / D INYAR S. D EVITRE |
|
Name: | Dinyar S. Devitre | |
Title: | Chief Financial Officer | |
PHILIP MORRIS INTERNATIONAL INC. | ||
By: |
/ S / H ERMANN W ALDEMER |
|
Name: | Hermann Waldemer | |
Title: | Chief Financial Officer |
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Exhibit 10.4
INTELLECTUAL PROPERTY AGREEMENT
BY AND BETWEEN
PHILIP MORRIS INTERNATIONAL INC.
AND
PHILIP MORRIS USA INC.
DATED AS OF JANUARY 1, 2008
TABLE OF CONTENTS
Page | ||||
ARTICLE I |
DEFINITIONS | 1 | ||
1.01 |
General | 1 | ||
1.02 |
References to Time | 6 | ||
ARTICLE II |
ALLOCATION OF INTELLECTUAL PROPERTY RIGHTS | 6 | ||
2.01 |
General Allocation | 6 | ||
2.02 |
Chrysalis Technologies | 6 | ||
2.03 |
Trade Secrets | 6 | ||
ARTICLE III |
TRANSFER OF PATENTS, PATENT APPLICATIONS AND IDFS | 7 | ||
3.01 |
Patent Documents | 7 | ||
3.02 |
IDFs | 7 | ||
ARTICLE IV |
COMPLETED INTERNALLY AND EXTERNALLY CONDUCTED PROJECTS | 7 | ||
ARTICLE V |
INTERNALLY AND EXTERNALLY CONDUCTED PROJECTS IN PROGRESS | 7 | ||
ARTICLE VI |
REQUESTS FOR ATI | 8 | ||
6.01 |
During the Transition Period | 8 | ||
6.02 |
After the Transition Period | 8 | ||
6.03 |
ATI Delivery | 8 | ||
6.04 |
Cooperation | 8 | ||
ARTICLE VII |
INDEPENDENT INVENTIONS | 9 | ||
7.01 |
Presumption | 9 | ||
7.02 |
Patented Independent Inventions Transition Period | 9 | ||
7.03 |
Patented Independent Inventions Option Period | 10 | ||
7.04 |
Independent Inventions Not Patented | 12 | ||
7.05 |
ATI | 12 | ||
ARTICLE VIII |
CERTAIN ADDITIONAL COVENANTS | 12 | ||
8.01 |
General Obligations of the Parties | 12 | ||
8.02 |
Special Situations | 12 | ||
8.03 |
PMT | 13 | ||
8.04 |
Further Assurances | 13 | ||
8.05 |
Confidentiality | 13 | ||
ARTICLE IX |
DISPUTE RESOLUTION | 14 | ||
9.01 |
Step Process | 14 | ||
9.02 |
PMT Negotiation | 14 | ||
9.03 |
Management Negotiation and Mediation | 14 | ||
9.04 |
Arbitration. | 14 | ||
9.05 |
Injunctive Relief | 15 |
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9.06 |
Remedies | 15 | ||
9.07 |
Expenses | 15 | ||
ARTICLE X |
MISCELLANEOUS | 15 | ||
10.01 |
Complete Agreement | 15 | ||
10.02 |
Governing Law | 15 | ||
10.03 |
Notices | 16 | ||
10.04 |
Amendment and Modification | 16 | ||
10.05 |
Successors and Assigns; No Third-Party Beneficiaries | 16 | ||
10.06 |
Counterparts | 16 | ||
10.07 |
Interpretation | 17 | ||
10.08 |
Legal Enforceability | 17 | ||
10.09 |
Construction | 17 |
EXHIBITS
Exhibit A-1 | Ownership Rights Licensed to One Another | |
Exhibit A-2 | Chrysalis Ownership Rights Licensed to Third Parties | |
Exhibit B | Projects Jointly Funded After Effective Date |
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INTELLECTUAL PROPERTY AGREEMENT
THIS INTELLECTUAL PROPERTY AGREEMENT, dated as of January 1, 2008 (as amended and supplemented pursuant to the terms hereof, this Agreement), is entered into by and between Philip Morris International Inc., a Virginia corporation (PMI), and Philip Morris USA Inc., a Virginia corporation (PM USA and, together with PMI, the Parties).
WITNESSETH:
WHEREAS, Altria Group, Inc., a Virginia corporation (Altria), currently owns all of the issued and outstanding shares of capital stock of PMI and PM USA; and
WHEREAS, Altria has announced that it is considering a pro-rata distribution of all of the outstanding shares of capital stock of PMI owned by Altria on the Distribution Date to the holders of shares of common stock of Altria (the Distribution); and
WHEREAS, PM USA and the Affiliates of PMI have a long history of close collaboration on their research and development work; and
WHEREAS, subsequent to 1987, PM USA and Affiliates of PMI have entered into a series of Cost Sharing Agreements pursuant to which they have continued to collaborate in extensive jointly funded research and development work and created a significant body of Jointly Funded IP; and
WHEREAS, the R&D Agreement, which constitutes the most recent Cost Sharing Agreement, is expiring in accordance with its terms on December 31, 2007; and
WHEREAS, the Parties intend to enter into this Agreement to set forth the principal arrangements regarding Intellectual Property and related matters effective as of the Effective Date; and
WHEREAS, the Parties previously created the PMT to prepare for the expiration of the R&D Agreement and address related issues;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 General . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
AAA : American Arbitration Association.
Affiliate : with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided , however , that for purposes of this Agreement none of Altria, the Subsidiaries of Altria (other than PMI and its Subsidiaries) and the officers and directors of Altria and of such Altria Subsidiaries shall be deemed to be an Affiliate of PMI; and none of PMI, the Subsidiaries of PMI and the officers and directors of PMI and its Subsidiaries shall be deemed to be an Affiliate of PM USA.
Altria : as defined in the recitals to this Agreement.
Arbitration Act : the United States Arbitration Act, 9 U.S.C. ss.ss 1-16, as the same may be amended from time to time.
ATI : any additional technological information related to Intellectual Property that is inscribed on, or exists in, a tangible medium or that is stored in an electronic or other medium and is retrievable, including (i) laboratory notebooks, (ii) research plans, reports or analyses, (iii) databases or other test results, (iv) scientific articles or other presentations or (v) samples.
Business Day : any day other than a Saturday, a Sunday or a day on which banking institutions located in the Commonwealth of Virginia, or the State of New York or the city of Lausanne, Switzerland are authorized or obligated by Law or executive order to close.
Chrysalis Technologies : all Intellectual Property (i) transferred to Chrysalis Technologies Incorporated, a Virginia corporation (CTI), by Affiliates of PMI and by PM USA and its Affiliates as of April 2, 2000; (ii) created by CTI between April 2, 2000 and January 1, 2005; or (iii) created by the Chrysalis division of PM USA between January 1, 2005 and the Effective Date, in all instances in the following Fields of Use: (a) aerosol generation, including but not limited to, capillary aerosol generation and fuels and pharmaceutical and medical device applications and (b) intermetallic alloys and processing.
Confidential Information : as defined in Section 8.05 hereof.
Cost Sharing Agreements : the R&D Agreement, together with all previous cost sharing arrangements related to research and development in the Fields of Use between PM USA and Affiliates of PMI.
Delivery Format : the format in which the Parties will deliver information to one another pursuant to this Agreement, which format may be paper copy, computer disks or other electronic media, as agreed by the PMT, except that the Delivery Format of the information shall be at least as accessible as the format in which such information is currently maintained by the Parties for their respective own use.
Dispute : as defined in Section 9.01 hereof.
Distribution : as defined in the recitals to this Agreement.
Distribution Date : the date on which the Distribution becomes effective.
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Effective Date : January 1, 2008.
Fields of Use : use of Intellectual Property in the following fields:
(i) | tobacco and tobacco-related, including, but not limited to, smokeable and smokeless tobacco products and tobacco growing, curing and blending; |
(ii) | smoking and smoking-related, including, but not limited to, smoking products, articles and devices; |
(iii) | non-tobacco convenient oral sensorial products; |
(iv) | distillation products; |
(v) | all products and processes designed to reduce risk exposure caused by tobacco; |
(vi) | sensorial and flavor technologies and know-how used to manufacture or in the manufacture of (i) through (v) above; |
(vii) | aerosol generation, including, but not limited to, capillary aerosol generation and fuels and pharmaceutical and medical device applications; |
(viii) | intermetallic alloys; |
(ix) | technology for diagnosis, treatment or mitigation of tobacco-related disease(s) or condition(s); |
(x) | smoke constituent exposure and risk assessment technologies, including, but not limited to, smoke chemistry methods, biomarkers and clinical studies; |
(xi) | brand protection and anti-counterfeiting technologies; and |
(xii) | machinery, apparatus, processes, methodologies, know-how, direct materials, components or packaging used to manufacture or in the manufacture of (i) through (xi) above. |
Filing Party : as defined in Section 7.02(a) hereof.
Governmental Authority : any federal, national, state, provincial, local, foreign, international or other court, government, department, commission, board, bureau or agency, authority (including any central bank or taxing authority) or instrumentality (including any court, tribunal or grand jury).
IDF : invention disclosure forms.
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Independent Invention : an invention or other Intellectual Property made by or on behalf of either Party or one of its respective Affiliates after the Effective Date and not made by or on behalf of either Party or one of its respective Affiliates in connection with a Project conducted jointly after the Effective Date pursuant to Article V hereof.
Information Exchange Date : January 1, 2000, unless otherwise agreed by the PMT before the Effective Date.
Intellectual Property : any and all intellectual property except rights relating to trademarks and trade dress. Such Intellectual Property includes inventions, works of authorship, other copyrighted works, trade secrets, developments, know-how (including improvements made to any of the preceding), patents, patent applications, related divisional, continuation, continuation-in-part patents and patent applications, reissues, reexaminations, renewals, extensions, substitutions, foreign counterparts, inventors certificates, utility models, design patents, plant patents, certificates of plant variety protection, and the right to claim priority to any of the preceding.
Jointly Funded IP : Intellectual Property that arose or arises out of the research, development and developmental engineering activities conducted (i) by PM USA prior to January 1, 1988; or (ii) by or on behalf of either Party or any of their respective Affiliates (A) in accordance with the terms of such Cost Sharing Agreements as were in effect between January 1, 1988 and the Effective Date; or (B) pursuant to Article V hereof after the Effective Date, regardless of whether such Intellectual Property was created directly by a Party or an Affiliate of such Party or obtained through a grant of rights by a third party; including, for the avoidance of doubt, the Chrysalis Technologies.
Law : any federal, national, state, provincial, local or foreign statute, ordinance, regulation, code, license, permit, authorization, approval, consent, common law, legal doctrine, order, judgment, decree, injunction or requirement of any Governmental Authority or any order or award of any arbitrator, now or hereafter in effect.
Negotiation Notice : as defined in Section 9.03 hereof.
Non-Severable : characterization of an Independent Invention that cannot be exploited commercially without the use of Jointly Funded IP.
Notices : as defined in Section 10.03 hereof.
Notice Date : either (i) the later of the date 30 days after filing of a patent application or upon receipt of a U.S. Patent Office foreign filing license with respect to an Independent Invention or (ii) the date 30 days after the date of commencement of test marketing of a new product in a Field of Use that includes, is made by or uses an unpatented Independent Invention.
Option Period: the period commencing on the Effective Date and ending 10 years after the later of (i) the Distribution Date or (ii) the Effective Date.
Parties : as defined in the preamble to this Agreement.
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Patent Documents : pending, allowed, abandoned and non-continued patent applications and patents and assignments related thereto.
Person : an individual, a partnership, a joint venture, a corporation, a trust, a limited liability company, an unincorporated organization, or a government or any department or agency thereof.
PMI : as defined in the preamble to this Agreement.
PMT : Project Management Team, as further defined in Section 8.03 hereof, with representatives from each of the Parties or their Affiliates, established prior to the Effective Date.
PM USA : as defined in the preamble to the Agreement.
Projects : projects, research initiatives, technologies and research and development support activities in which PMI and PM USA or their Affiliates have collaborated under a Cost Sharing Agreement or will be collaborating under this Agreement.
R&D Agreement : the Research and Development Agreement between Philip Morris Products S.A., a wholly-owned Subsidiary of PMI, and PM USA (f/k/a Philip Morris Incorporated), dated as of January 1, 2002, as extended by the Extension Agreement, dated as of November 15, 2006.
Receiving Party : as defined in Section 7.03(b) hereof.
Representative : with respect to any Person, any of such Persons directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives.
Rules : as defined in Section 9.04 hereof.
Severable : characterization of an Independent Invention that can be exploited commercially without Jointly Funded IP.
Subsidiary : with respect to any specified Person, any corporation or other legal or other entity of which such Person controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of members to the board of directors or similar governing body.
Territory or Territories : with respect to PM USA, the U.S.; with respect to PMI, outside the U.S.
Third-Party Offer : as defined in Section 7.03 hereof.
Third Party : a Person other than Altria or a Party hereto or a Subsidiary thereof.
Transition Period : the period commencing on the Effective Date and ending two years after the later of (i) the Distribution Date or (ii) the Effective Date.
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U.S. : the United States of America and its territories and possessions, including the Commonwealth of Puerto Rico, Guam, the Virgin Islands, American Samoa and the Northern Marianas.
Ultra Trade Secrets : as defined in Section 8.05 hereof.
1.02 References to Time . All references in this Agreement to times of the day shall be to Richmond, Virginia time, except as otherwise specifically provided herein.
ARTICLE II
ALLOCATION OF INTELLECTUAL PROPERTY RIGHTS
2.01 General Allocation . The Parties hereby acknowledge and confirm that in accordance with the terms of (i) the Plan of Spinoff of the International Business of Philip Morris Incorporated, dated November 4, 1987, and (ii) the Cost-Sharing Agreements:
(a) PM USA owns all Intellectual Property rights to the Jointly Funded IP in the U.S.; and
(b) Affiliates of PMI own all Intellectual Property rights to the Jointly Funded IP outside the U.S.,
subject in the case of subparagraph (b) to the rights previously licensed to PM USA and its Affiliates and described in Exhibit A-1 hereto.
2.02 Chrysalis Technologies . The Parties hereby acknowledge and confirm specifically that:
(a) PM USA owns all Intellectual Property rights to the Chrysalis Technologies in the U.S.; and
(b) Affiliates of PMI own all Intellectual Property rights to the Chrysalis Technologies outside the U.S.,
subject in both instances to the rights previously licensed to Third Parties and described in Exhibit A-2 hereto.
2.03 Trade Secrets . For the avoidance of doubt, ownership by a Party or its Affiliates of Intellectual Property rights in a trade secret (including Ultra Trade Secrets) that is Jointly Funded IP shall mean the sole right to use the trade secret, including the right to make, use, sell or offer for sale products in that Partys respective Territory.
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ARTICLE III
TRANSFER OF PATENTS, PATENT APPLICATIONS AND IDFS
3.01 Patent Documents . Unless exchanged through the work of the PMT prior to the Effective Date, no later than 60 days after the Effective Date, each Party shall, or shall cause its Affiliates to, deliver to the other a copy in Delivery Format of all of the Patent Documents identified and requested by the other Party that it or any of its Affiliates owns that are dated before the Effective Date.
3.02 IDFs . Unless exchanged through the work of the PMT prior to the Effective Date, no later than 60 days after the Effective Date, each Party shall, or shall cause its Affiliates to, deliver to the other a copy in Delivery Format of all IDFs that it or any of its Affiliates owns that are dated before the Effective Date but after the Information Exchange Date.
ARTICLE IV
COMPLETED INTERNALLY AND EXTERNALLY CONDUCTED PROJECTS
Unless earlier exchanged through the work of the PMT, no later than 60 days after the Effective Date, each Party shall deliver to the other in Delivery Format:
(a) lists and summaries of the Projects that were:
(i) jointly funded by the Parties or any of their respective Affiliates;
(ii) completed after the Information Exchange Date; and
(iii) completed before the Effective Date;
(b) a copy of any lists in the possession of a Party or any of their respective Affiliates on the Effective Date of jointly funded Projects that were completed prior to the Information Exchange Date, provided that neither Party shall be obligated to create such lists if they did not exist as of August 1, 2007; and
(c) a list of formulas and ingredient lists and product specifications in the possession of a Party as of the Effective Date.
ARTICLE V
INTERNALLY AND EXTERNALLY CONDUCTED PROJECTS IN PROGRESS
Exhibit B hereto lists all internally and externally conducted Projects in progress as of the Effective Date that the Parties have agreed that the Parties or their Affiliates will fund jointly after the Effective Date on the same basis as joint funding has occurred under the R&D Agreement. All Intellectual Property obtained or created in jointly funded Projects after the
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Effective Date shall constitute Jointly Funded IP and be subject to all applicable provisions of this Agreement with regard to exchange of ATI, ownership of Jointly Funded IP in the respective Territories and confidentiality.
ARTICLE VI
REQUESTS FOR ATI
6.01 During the Transition Period .
(a) At any time during the Transition Period, either Party shall be entitled to request ATI from the other Party or its Affiliates regarding:
(i) the Patent Documents or the IDFs delivered before the Effective Date or pursuant to Article III of this Agreement;
(ii) any Project included on a list delivered pursuant to Article IV hereof;
(iii) any other Project completed prior to the Information Exchange Date; or
(iv) any of the formulas, ingredient lists or product specifications included on a list delivered pursuant to Article IV hereof.
(b) At any time during the Transition Period, a Party that has elected not to continue joint funding of a Project after the Effective Date shall be entitled to request ATI regarding that Project obtained or created before the Effective Date.
6.02 After the Transition Period . At any time after the Transition Period, either Party shall be entitled to request ATI from the other Party or its Affiliates with respect to the Patent Documents or the IDFs delivered before the Effective Date or hereunder. Any request pursuant to this Section 6.02 shall include the identification of the specific Patent Document or IDF with respect to which ATI is requested.
6.03 ATI Delivery . The Party from which ATI is requested pursuant to this Article VI shall, or shall cause its Affiliates to, deliver the requested ATI in Delivery Format to the requesting Party promptly, and in any event no later than 30 days, after receipt of the request therefor.
6.04 Cooperation . The obligations set forth in this Article VI shall be subject to the general provision on further cooperation and good faith dealing between the Parties as to the Jointly Funded IP, as set forth in Section 8.01 hereof.
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ARTICLE VII
INDEPENDENT INVENTIONS
7.01 Presumption . The Parties have reviewed the long historical experience with the Cost Sharing Agreements, including:
(a) the time typically required to analyze research and development results and conceive of an invention;
(b) the time that typically elapses between the conception of an invention, its actual reduction to practice and the filing of a patent application for that invention or the inclusion of that invention in a new product; and
(c) the expenditure by the Parties or their Affiliates of considerable resources and millions of dollars in the course of their long-standing and close research and development cooperation and collaboration.
Based on that review, in the judgment of those persons at both Parties (and their Affiliates) who have worked most closely on the creation of the Jointly Funded IP, the Parties have concluded that it is highly probable that any Independent Invention in a Field of Use:
(i) for which a Party or an Affiliate of that Party files a patent application during the Transition Period; or
(ii) that the Party or an Affiliate of that Party incorporates into a new product during the Transition Period
will be Non-Severable and will substantially arise from the Jointly Funded IP.
7.02 Patented Independent Inventions Transition Period .
(a) If, during the Transition Period, either Party or an Affiliate of a Party (collectively, the filing Party) files, or a Third Party files on behalf of a filing Party, a patent application on an Independent Invention that is within a Field of Use, then the filing Party shall notify the other Party in writing no later than the Notice Date. With respect to all Intellectual Property that is included in such Independent Invention and is described or claimed in such patent application:
(i) PM USA shall own all such Intellectual Property rights in the U.S.; and
(ii) PMI or an Affiliate of PMI shall own all such Intellectual Property rights outside the U.S.,
unless the filing Party is able to demonstrate to the reasonable satisfaction of the other Party that the Independent Invention is Severable or does not substantially arise from the Jointly Funded IP. If the Parties are unable to agree, they shall submit the matter for resolution under Article IX hereof.
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(b) If the Parties agree, or the mediator or the arbitrator pursuant to Section 9.03 or 9.04 hereof determines, that the Independent Invention for which a patent application is filed during the Transition Period either:
(i) is not within a Field of Use; or
(ii) does not substantially arise from the Jointly Funded IP;
then this Agreement shall not apply to such Independent Invention.
(c) If the Parties agree, or the mediator or the arbitrator pursuant to Section 9.03 or 9.04 hereof determines, that the Independent Invention for which a patent application is filed during the Transition Period:
(i) is within a Field of Use; and
(ii) substantially arises from the Jointly Funded IP; but
(iii) is Severable;
then the terms of subparagraph (b) of Section 7.03 hereof shall apply.
7.03 Patented Independent Inventions Option Period .
(a) If, during the Option Period but after the expiration of the Transition Period, a filing Party, or a Third Party on behalf of a filing Party, files a patent application on an Independent Invention that:
(i) is within a Field of Use; and
(ii) substantially arises from Jointly Funded IP;
then the filing Party shall notify the other Party in writing no later than the Notice Date of the filing of such patent application and the terms of subparagraph (b) of this Section 7.03 shall apply.
(b) After final agreement or determination pursuant to subparagraph (c) of Section 7.02 hereof or receipt of notice pursuant to subparagraph (a) of this Section 7.03 , the receiving Party shall have 30 days to notify the filing Party in writing as to whether the receiving Party elects to enter into negotiations pursuant to which the receiving Party or its Affiliates (collectively, the receiving Party) will obtain ownership or license rights in the receiving Partys Territory with respect to such Independent Invention. Such written notice shall include a summary of the terms upon which the receiving Party proposes to acquire such ownership or license rights for the Independent Invention, including acquisition or license fees or royalties, length and country or countries of ownership or license, exclusivity and covenants of use.
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(c) If the receiving Party elects to make an offer and enter into negotiations pursuant to subparagraph (b) of this Section 7.03 , then the Parties or their respective Affiliates shall engage in good faith negotiations on an arms length basis with respect to the terms of an agreement regarding the Independent Invention. The Persons engaged in the negotiations may structure any such agreement in any manner that they shall determine. If any legal deadlines occur with respect to filing of corresponding patent applications on the Independent Invention in the receiving Partys Territory during such negotiations, then, if the receiving Party so requests, the filing Party shall file such corresponding patent applications at the sole expense of the receiving Party, subject to the option rights set forth in subsection (d) of this Section 7.03 .
(d) If:
(i) the receiving Party elects not to make an offer;
(ii) the receiving Party breaks off negotiations by written notice; or
(iii) no agreement is reached by the Parties within three months from the Notice Date (unless extended by mutual agreement of the Parties);
then the filing Party shall retain sole and exclusive ownership of Intellectual Property rights in the Independent Invention world-wide or may solicit offers from one or more Third Parties regarding ownership or license of the Independent Invention (each, a Third-Party Offer). Before accepting the Third-Party Offer, the filing Party shall deliver to the receiving Party in writing a summary of those terms of the Third-Party Offer that, the filing Party, considering all aspects of the offers taken as a whole, and acting reasonably and in good faith, believes improve upon the offer of the receiving Party; provided that if such summary contains competitively sensitive information ( e.g. , marketing information), the filing Party will deliver such information to an arbitrator chosen in accordance with Section 9.04 hereof in anticipation of seeking assistance in resolving the matter. The receiving Party shall have 30 days to offer in writing to match or improve upon the disclosed terms of the Third-Party Offer. If the filing Party, acting reasonably and in good faith, concludes that the receiving Partys offer matches or improves upon the Third-Party Offer, the filing Party shall accept the receiving Partys offer. If the filing Party, acting reasonably and in good faith, concludes that the receiving Partys offer does not match or improve upon the Third-Party Offer, the filing Party shall so inform the receiving Party in writing within 10 days of receipt of the filing Partys offer. If the receiving Party believes that the filing Party has not acted reasonably and in good faith, the receiving Party shall so inform the filing Party in writing within 10 days of receipt of the filing Partys written notice and the Parties shall submit the matter promptly for resolution with the assistance of an arbitrator chosen in accordance with Section 9.04 hereof, which assistance shall be restricted to a determination whether the filing Party has acted reasonably and in good faith in concluding that the receiving Partys offer does not match or improve upon the Third-Party Offer. If the receiving Party agrees with the filing Partys conclusion that the receiving Partys offer does not match or improve upon the Third-Party Offer or if the matter is resolved in accordance with Section 9.04 hereof in favor of the filing Partys conclusion, the filing Party shall be free to accept the Third-Party Offer.
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7.04 Independent Inventions Not Patented . If at anytime during the Option Period, either Party or an Affiliate of a Party begins test marketing of a new product anywhere in its respective Territory that includes an unpatented Independent Invention that is within a Field of Use , all of the terms of Sections 7.01 , 7.02 and 7.03 hereof shall apply to the unpatented Independent Invention used in such product on the same basis as such terms apply to a patent application filed within the Transition Period or Option Period, as appropriate. For purposes of calculating deadlines pursuant to Sections, 7.01 , 7.02 and 7.03 hereof, in conjunction with this Section 7.04 , the date of commencement of such test marketing shall have the same effect as the filing of a patent application.
7.05 ATI . Any grant of rights during the Transition Period shall include the transfer of such ATI in Delivery Format as normally accompanies a patent license. With respect to all other grants of rights under Section 7.02(c) , 7.03 or 7.04 hereof in the Option Period, the Parties shall negotiate in good faith as to what ATI will be transferred to the receiving Party or its Affiliates.
ARTICLE VIII
CERTAIN ADDITIONAL COVENANTS
8.01 General Obligations of the Parties . During the life of this Agreement, the Parties shall, and shall cause their respective Affiliates to, cooperate generally with each other in a reasonable manner and in good faith and in compliance with applicable Law concerning the subject matter hereof, such as the prosecution of patents relating to the Jointly Funded IP (including the provision of witnesses and documents as may be required in connection with patent prosecution or enforcement, with all reasonable expenses in connection therewith to be reimbursed by the Party requesting assistance promptly upon written request by the Party providing assistance). Among other things, the Parties agree that the first patent for each invention shall be filed in the country in which the invention was created. In addition, all equipment or tangible materials that may be owned by one Party or its Affiliates and used by the other Party or its Affiliates on the Effective Date shall be promptly returned after the Effective Date upon the written request of the Party in ownership at the sole expense of the requesting Party.
8.02 Special Situations .
(a) The Parties hereby grant, and shall cause their respective Affiliates to grant, each other, or their Affiliates, perpetual, royalty-free licenses to the Jointly Funded IP and the patented or unpatented Independent Inventions for which ownership is allocated by Section 7.02 hereof for the limited purposes of: (i) securing the production of equipment and materials (including tobacco) used in the manufacture of products in the Fields of Use; and (ii) conducting research, development or product assessment activities by or on behalf of a Party or its Affiliates.
(b) The Parties will, or will cause their respective Affiliates to, negotiate separate agreements for their respective Territories with Schweizer-Maudit with regard to banded cigarette paper.
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8.03 PMT .
(a) Subsequent to the Effective Date, the PMT shall meet quarterly during the life of this Agreement to initiate, review or terminate jointly funded Projects, to consider Intellectual Property issues or to otherwise manage research and development relations pursuant to this Agreement.
(b) The Parties will determine the size and membership of the PMT from time to time as necessary and appropriate to fulfill the PMTs purposes under this Agreement; provided that each Party will have an equal number of representatives on the PMT. Each Party will designate its own Representatives to serve on the PMT. The PMT will act by unanimous decision.
8.04 Further Assurances . In addition to the actions specifically provided for in this Agreement and unless otherwise expressly provided in this Agreement, each of the Parties hereto shall use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement. The Parties recognize that issues may arise that the Parties did not anticipate and plan for. In addressing those issues, the Parties agree to act in good faith, on an arms length basis and with flexibility, subject to their respective legal obligations.
8.05 Confidentiality .
(a) In performing their respective obligations under the Cost Sharing Agreements and this Agreement, the Parties have exchanged, and will exchange, as part of the Jointly Funded IP:
(i) trade secrets regarding product specifications, casings and flavorings, formulas for blends or other trade secret information of a similarly high proprietary nature (Ultra Trade Secrets); and
(ii) other trade secrets, know-how and confidential information (together with Ultra Trade Secrets, the Confidential Information).
Each of PMI and PM USA shall hold, and shall use its best efforts to cause its employees, Affiliates and Representatives to hold, in strict confidence all the Ultra Trade Secrets and shall not release or disclose the Ultra Trade Secrets to any other Person, except its Representatives who shall be bound by the provisions of this Section 8.05 ; provided , however , that PMI and PM USA and their respective employees, Affiliates and Representatives may disclose such Ultra Trade Secrets:
(i) to vendors that must have access to the Ultra Trade Secrets for purposes of providing services to a Party; provided that agreements are executed with such vendors requiring them to maintain the Ultra Trade Secrets in strict confidence and to use the Ultra Trade Secrets only for the purposes of providing the contracted services; and
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(ii) if disclosure is, or is reasonably likely to be, required by Law or for legal proceedings in any country; provided that the Party being required to make the disclosure has used its best efforts to obtain undertakings from the relevant Governmental Authority or in such legal proceedings that the Ultra Trade Secrets will not be made public and, in the event the Party is unable to obtain such an undertaking such Party delivers prompt written notice of the proposed disclosure to the other Party.
(b) Each of PMI and PM USA and their respective Representatives shall exercise the same care with regard to Confidential Information other than Ultra Trade Secrets as it takes to preserve confidentiality for its own similar Confidential Information.
ARTICLE IX
DISPUTE RESOLUTION
9.01 Step Process . Any controversy or claim arising out of or relating to this Agreement or the breach thereof (a Dispute), shall be resolved by a series of three steps in the following sequence: (i) negotiation between members of the PMT; (ii) negotiation between senior executives with the possibility of mediation; and (iii) then binding arbitration. Each Party agrees on behalf of itself and its respective Affiliates that the procedures set forth in this Article IX shall be the exclusive means for resolution of any Dispute.
9.02 PMT Negotiation . The Parties agree that the PMT shall first attempt to resolve any Dispute.
9.03 Management Negotiation and Mediation . In the event that the Dispute is not settled by the PMT within 30 days from the time any Party first raises such Dispute in writing to the PMT, then any Party may request in writing (a Negotiation Notice) that the Parties attempt to resolve the Dispute by the direct discussions and negotiations, including if either Party so elects, negotiation among senior executives of PM USA and PMI. If all Parties to the Dispute agree, the Parties may also attempt to settle the Dispute by a mediation administered by the AAA under its Commercial Mediation Procedures. The Parties agree that any applicable statute of limitations shall be tolled from the submission of a Negotiation Notice until the conclusion of the dispute resolution process outlined in this Article IX .
9.04 Arbitration .
(a) If a Dispute is not resolved within 30 days after the Negotiation Notice, any Party shall have the right to commence arbitration. In that event, the Dispute shall be resolved by final and binding arbitration administered by the AAA in accordance with its International Arbitration Rules (the Rules). The place of arbitration shall be New York, New York. Any Dispute concerning the propriety of the commencement of the arbitration shall be finally settled by such arbitration. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof or having jurisdiction over the relevant party or its assets.
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(b) The number of arbitrators shall be one if the claims in such Dispute aggregate less than $100 million, and three if the claims in such Dispute aggregate $100 million or more. If the Parties are unable to agree on the amount of the claims, there shall be three arbitrators.
(c) If one arbitrator is to be chosen, the Parties agree to seek to reach agreement on the identity of the sole arbitrator within 30 days after the initiation of arbitration. If the parties do not reach agreement on the sole arbitrator within that time period, then the AAA shall appoint the sole arbitrator.
(d) If three arbitrators are to be chosen, the claimant shall appoint an arbitrator in its request for arbitration. The respondent shall appoint an arbitrator within 20 days of the receipt of the request for arbitration. The two arbitrators shall appoint a third arbitrator who shall serve as chair of the tribunal, within 30 days after the appointment of the second arbitrator. If any of the three arbitrators is not appointed within the time prescribed above, then the AAA shall appoint that arbitrator.
9.05 Injunctive Relief . At any time during the resolution of a Dispute between the parties, including the PMT negotiation, either Party has the right to apply to any court of competent jurisdiction for interim relief, including pre-arbitration attachments or injunctions, necessary to preserve the Parties rights or to maintain the Parties relative positions until such time as the arbitration award is rendered or the Dispute is otherwise resolved.
9.06 Remedies . The arbitrator(s) shall have no authority or power to limit, expand, alter, amend, modify, revoke or suspend any condition or provision of this Agreement nor any right or power to award punitive or treble (or other multiple) damages.
9.07 Expenses . Each Party shall bear its own expenses and attorneys fees in pursuit and resolution of any Dispute. The Parties shall share equally the costs and expenses (including the fees of any neutral mediator or arbitrator) of any mediation or arbitration hereunder.
ARTICLE X
MISCELLANEOUS
10.01 Complete Agreement . This Agreement and the Exhibits hereto shall constitute the entire agreement between the Parties hereto with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter provided , that Section 2.8.2(a) of the R&D Agreement shall remain in full force and effect.
10.02 Governing Law . This Agreement shall be governed by, construed and interpreted in accordance with the laws of the Commonwealth of Virginia, U.S.A. (other than the laws regarding choice of laws and conflicts of laws) as to all matters, including matters of validity, construction, effect, performance and remedies; provided , however , that the Arbitration Act shall govern the matters described in Section 9.04 hereof.
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10.03 Notices . All notices, requests, claims, demands and other communications hereunder (collectively, Notices) shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram, facsimile, electronic mail or other standard form of telecommunications (provided confirmation is delivered to the recipient the next Business Day in the case of facsimile, electronic mail or other standard form of telecommunications) or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to PMI: | Philip Morris International Inc. | |||
120 Park Avenue | ||||
New York, New York 10017 | ||||
c/o Corporate Secretary | ||||
with a copy to: | Philip Morris International Management SA | |||
Avenue de Rhodanie 50 | ||||
1001 Lausanne, Switzerland | ||||
c/o General Counsel | ||||
If to PM USA: | Philip Morris USA Inc. | |||
6601 W. Broad Street | ||||
Richmond, Virginia 23261 | ||||
c/o Associate General Counsel, Business Counselling | ||||
with a copy to: | Altria Group, Inc. | |||
120 Park Avenue | ||||
New York, New York 10017 | ||||
c/o Corporate Secretary |
or to such other address as any Party hereto may have furnished to the other Parties by a notice in writing in accordance with this Section 10.03 .
10.04 Amendment and Modification . This Agreement may be amended, modified or supplemented only by a written agreement signed by both of the Parties hereto.
10.05 Successors and Assigns; No Third-Party Beneficiaries . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties hereto and their successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by any Party hereto without the prior written consent of the other Party (which consent shall not be unreasonably withheld or delayed). This Agreement is solely for the benefit of the Parties hereto and their Subsidiaries and Affiliates and is not intended to confer upon any other Persons any rights or remedies hereunder.
10.06 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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10.07 Interpretation . The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties hereto and shall not in any way affect the meaning or interpretation of this Agreement.
10.08 Legal Enforceability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Each Party acknowledges that money damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the Parties hereunder shall be specifically enforceable.
10.09 Construction . Unless otherwise expressly stated, clauses beginning with the term including or words of similar import set forth examples only and in no way limit the generality of the matters thus exemplified.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the date first above written.
PHILIP MORRIS INTERNATIONAL INC. | ||
By: |
/s/ Ann Marie Kaczorowski |
|
Name: | Ann Marie Kaczorowski | |
Title: | Vice President and Secretary | |
PHILIP MORRIS USA INC. | ||
By: |
/s/ John R. Nelson |
|
Name: | John R. Nelson | |
Title: | President, Operations and Technology |
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EXHIBITS
Exhibit A-1 | Ownership Rights Licensed to One Another | |
Exhibit A-2 | Chrysalis Ownership Rights Licensed to Third Parties | |
Exhibit B | Projects Jointly Funded After Effective Date |
EXHIBIT A-1
An affiliate of PMI has granted to PM USA and each of its Affiliates a non-exclusive, royalty-free, paid-up license under the Jointly Funded IP solely for the purpose of, or in connection with the sale, use or importation by the U.S. military and its agents in or into PMIs Territory of products that are sold to the U.S. military by PM USA or any of its Affiliates, without PM USA or any of its Affiliates having the right to sublicense hereunder. This license shall extend to all further transferees of the U.S. military and its agents.
A-1-1
EXHIBIT A-2
(1) Strategic Alliance Agreement by and between Discovery Laboratories, Inc. (Discovery) and Philip Morris USA Inc., d/b/a Chrysalis Technologies (Chrysalis)
(2) License and Assignment Agreement by and between TIAX LLC (TIAX) and Chrysalis Technologies, a division of Philip Morris USA Inc. (Chrysalis)
(3) Development and License Agreement by and between Respironics, Inc. and Philip Morris USA Inc., Chrysalis Technologies Division.
A-2-1
EXHIBIT B
None
B-1
Exhibit 99.1
ALTRIA GROUP, INC. COMPLETES SPIN-OFF OF
PHILIP MORRIS INTERNATIONAL INC.
NEW YORK, March 28, 2008 Altria Group, Inc. (NYSE: MO) today completed the spin-off of Philip Morris International Inc. (PMI) to shareholders of Altria Group, Inc. (Altria).
The distribution of 100% of the shares of PMI was made today to Altrias shareholders of record as of 5:00 p.m. New York City Time on March 19, 2008 (the record date).
Altria shareholders received one share of PMI stock for every share of Altria common stock outstanding at 5:00 p.m. New York City Time on the record date.
As previously announced, Altria is moving its corporate headquarters to Richmond, Virginia.
PMI has mailed an Information Statement containing details of the PMI spin-off to shareholders as of the record date. The Information Statement and answers to frequently-asked questions (FAQs) are available on Altrias investor website at www.altria.com/pmispinoff .
PMI shares will begin regular way trading on the New York Stock Exchange (NYSE) under the symbol PM, as well as the NYSE Euronext Paris and SWX Swiss exchanges, on March 31, 2008. Altria shares will continue to trade under the symbol MO on the NYSE. Both Altria and PMI will be constituents of the Standard & Poors 100 and 500 Indices, effective the same day.
Registered Altria shareholders in the U.S. and Canada will receive a statement from Computershare Trust Company (Computershare), the distribution agent, reflecting their ownership of shares of Altria and PMI. For additional information, registered shareholders in the U.S. and Canada should contact Computershare by e-mail at altria@computershare.com or by phone at 1-866-538-5172. Registered shareholders outside the U.S. and Canada should call 1-781-575-3572.
Holders of Altria shares through a broker, bank or other nominee will have their brokerage account electronically credited with PMI shares. For additional information, these holders should contact their financial institution directly or call D.F. King & Co. at 1-800-290-6431.
In connection with the listing of PMI on NYSE Euronext Paris, the French Autorité des marchés financiers (AMF) granted visa number 08-047 dated March 7, 2008 on the listing prospectus. French shareholders may obtain copies of this prospectus (including the translation in French of its summary) free of charge from PMI at 120 Park Avenue, New York, New York 10017, U.S.A. and from its paying agent in France, CACEIS Corporate Trust (14, rue Rouget de Lisle, 92130 Issy-les-Moulineaux, postal address: 92862 Issy-les-Moulineaux Cedex 9, Telephone +33 1 57 78 00 00). The prospectus is
also available on Altrias investor website indicated above and on the AMFs website, www.amf-france.org .
Swiss shareholders may order the Form 10 filed with the United States Securities and Exchange Commission, which includes the Information Statement, free of charge from Credit Suisse, Zurich (phone 044 333 43 85, fax 044 333 23 88 or e-mail equity.prospectus@credit-suisse.com ).
Contacts: |
Nicholas M. Rolli | |
PMI Investor Relations | ||
(917) 663-3460 | ||
Clifford B. Fleet | ||
Altria Investor Relations | ||
(804) 484-8222 |
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