Reynolds American Inc.

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

401 North Main Street,
Winston-Salem, NC 27102-2990
(Address of Principal Executive Offices) (Zip Code)

Pursuant to the terms of the Business Combination Agreement executed on October 27, 2003, and subsequently amended, R.J. Reynolds Tobacco Holdings, Inc., referred to as RJR, on July 30, 2004, completed its acquisition and combination of the U.S. assets, liabilities and operations of Brown & Williamson Tobacco Corporation, referred to as B&W, a subsidiary of British American Tobacco p.l.c, referred to as BAT, with R. J. Reynolds Tobacco Company, referred to as RJR Tobacco. The combination transactions were accomplished through a new publicly traded holding company, Reynolds American Inc., referred to as RAI, with approximately 148 million shares outstanding, to hold the combined businesses.

RAI was incorporated in the state of North Carolina on January 5, 2004, for the purpose of facilitating the transactions to combine RJR Tobacco with the U.S. cigarette and tobacco business of B&W. As of January 20, 2004, RJR and B&W each had paid $6,500 to acquire a 50% ownership in RAI, and each had contributed additional capital of $195,500.

Coincident with completion of the combination transactions, B&W contributed a number of previously held shares to RAI, sufficient to reduce its ownership to 61,952,762 shares, or approximately 42%, of RAI’s common stock. The shares of RAI previously owned by RJR were cancelled, eliminating RJR’s 50% ownership of RAI. Previous RJR stockholders were issued common shares of RAI in exchange for their existing RJR shares, on a one-for-one basis, resulting in ownership of approximately 58% of RAI’s common stock outstanding at the closing. No indebtedness for borrowed money of B&W was assumed by RAI.

As part of the combination transactions, B&W, along with its U.S. operations, transferred approximately $600 million in cash, an amount equal to its pre-closing accrued liabilities under the MSA. The RJR Tobacco and B&W U.S. tobacco operations were combined in an indirect subsidiary of RAI, referred to as New RJR Tobacco, and New RJR Tobacco, and in certain instances, RAI, have agreed to indemnify B&W and its affiliates for, among other things, all liabilities arising before or after the closing that relate to B&W’s U.S. cigarette and tobacco business. These liabilities include B&W’s historic and future tobacco-related litigation liabilities and all liabilities under the MSA and other state settlement agreements. B&W has agreed to indemnify RAI and its subsidiaries to the extent the pre-closing MSA liabilities paid by RAI exceed the cash amount contributed by B&W to RAI at closing in respect of its MSA liabilities.

As part of the combination transactions, RAI paid $400 million in cash to acquire from an indirect subsidiary of BAT, the capital stock of Cigarette Manufacturers Supplies Inc., which owns all of the capital stock of Lane Limited. Lane manufactures or distributes cigars, roll-your-own, cigarette and pipe tobacco brands, including DUNHILL and CAPTAIN BLACK tobacco products. BAT will retain the rights to use the BAT trademarks outside the United States.

As part of the combination transactions, RJR contributed all of the capital stock of Santa Fe Natural Tobacco Company, Inc., a direct, wholly owned subsidiary of RJR and manufacturer and distributor of cigarette and other tobacco products under the NATURAL AMERICAN SPIRIT brand, to RAI in exchange for shares of Series B Preferred Stock of RAI. Upon completion of the combination transactions, Santa Fe became a direct, wholly owned subsidiary of RAI. Both Santa Fe and Lane operate as independent subsidiaries of RAI.

The transactions are expected to be tax-free to RJR stockholders, and is being treated as a purchase of B&W by RAI for financial accounting purposes. In determining the purchase price for the transactions, RJR considered the historical and expected earnings and cash flows of the net assets, as well

as comparable transactions and the market for such assets generally. RAI intends to use these acquired assets for the same purpose for which they were used by B&W and BAT. The headquarters and operations of RAI will be consolidated in Winston-Salem, North Carolina.

Financial statements of the business acquired were previously furnished in the Registrant’s registration statement on From S-4, Amendment No. 4, filed June 23, 2004.

Pro forma financial information was previously furnished in the Registrant’s registration statement on Form S-4, Amendment No. 4, filed June 23, 2004.


Exhibit
Number		Description
2.1		Business Combination Agreement, dated as of October 27, 2003, by and between R.J. Reynolds Tobacco Holdings, Inc. and Brown & Williamson Tobacco Corporation (incorporated by reference to Exhibit 99.2 to R.J. Reynolds Tobacco Holdings, Inc.’s Form 8-K dated October 29, 2003).

2.2		Amendment No. 1, dated as of January 9, 2004, to the Business Combination Agreement dated as of October 27, 2003, by and between R.J. Reynolds Tobacco Holdings, Inc. and Brown & Williamson Tobacco Corporation (incorporated by reference to Exhibit 2.2 to R.J. Reynolds Tobacco Holdings, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003, filed March 5, 2004).

2.3		Amendment No. 2, dated as of June 15, 2004, to the Business Combination Agreement, dated as of October 27, 2003, as amended, by and between R.J. Reynolds Tobacco Holdings, Inc. and Brown & Williamson Tobacco Corporation.

2.4		Amendment to Business Combination Agreement and Disclosure Schedule, dated July 30, 2004, by Brown & Williamson Tobacco Corporation, and accepted and agreed to by R.J. Reynolds Tobacco Holdings, Inc.

2.5		Joinder Agreement, dated as of January 9, 2004, among Reynolds American Inc., Brown & Williamson Tobacco Corporation and R.J. Reynolds Tobacco Holdings, Inc.

2.6		Lane Stock Purchase Agreement, dated as of October 27, 2003, by and among R.J. Reynolds Tobacco Holdings, Inc., American Cigarette Company Overseas B.V., Cigarette Manufacturers Supplies Inc. and Brown & Williamson Tobacco Corporation (incorporated by reference to Exhibit 99.3 to R.J. Reynolds Tobacco Holdings, Inc.’s Form 8-K dated October 29, 2003).

2.7		Amendment No. 1, dated as of January 9, 2004, to Lane Stock Purchase Agreement dated as of October 27, 2003, by and among R.J. Reynolds Tobacco Holdings, Inc., American Cigarette Company Overseas B.V., Cigarette Manufacturers Supplies Inc. and Brown & Williamson Tobacco Corporation (incorporated by reference to Exhibit 2.4 to R.J. Reynolds Tobacco Holdings, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003, filed March 5, 2004).

2.8		Joinder Agreement, dated as of January 9, 2004, among American Cigarette Company Overseas B.V., Cigarette Manufacturers Supplies Inc., R.J. Reynolds Tobacco Holdings, Inc. and Reynolds American Inc.


Exhibit
Number		Description
3.1		Amended and Restated Certificate of Incorporation of Reynolds American Inc. (incorporated by reference to Exhibit 1 to Registrant’s Form 8-A filed July 29, 2004).

3.2		Amended and Restated Bylaws of Reynolds American Inc. (incorporated by reference to Exhibit 2 to Registrant’s Form 8-A filed July 29, 2004).

4.1		Rights Agreement, between Reynolds American Inc. and The Bank of New York, as rights agent (incorporated by reference to Exhibit 3 to Registrant’s Form 8-A filed July 29, 2004).

4.2		Third Supplemental Indenture, dated as of July 30, 2004, among R.J. Reynolds Tobacco Holdings, Inc., Reynolds American Inc., R. J. Reynolds Tobacco Company, RJR Acquisition Corp., GMB, Inc., FHS, Inc., R. J. Reynolds Tobacco Co., RJR Packaging, LLC, BWT Brands, Inc. and The Bank of New York, as Trustee, to the Indenture dated May 15, 1999, among RJR Nabisco, Inc., R. J. Reynolds Tobacco Company and The Bank of New York, as Trustee.

4.3		Second Supplemental Indenture, dated as of July 30, 2004, among R.J. Reynolds Tobacco Holdings, Inc., Reynolds American Inc., R. J. Reynolds Tobacco Company, RJR Acquisition, GMB, Inc., FSH, Inc., R. J. Reynolds Tobacco Co., RJR Packaging, LLC, BWT Brands, Inc. and The Bank of New York, as Trustee, to the Indenture dated May 20, 2002, among R. J. Reynolds Tobacco Holdings, Inc., R. J. Reynolds Tobacco Company, RJR Acquisition Corp. and The Bank of New York.

10.1		Formation Agreement, dated as of July 30, 2004, among Brown & Williamson Tobacco Corporation, Brown & Williamson U.S.A., Inc. (nka R. J. Reynolds Tobacco Company) and Reynolds American Inc.

10.2		Governance Agreement, dated as of July 30, 2004, among British American Tobacco p.l.c., Brown & Williamson Tobacco Corporation and Reynolds American Inc.

10.3		Non-Competition Agreement, dated as of July 30, 2004, between Reynolds American Inc. and British American Tobacco p.l.c.

10.4		Contract Manufacturing Agreement, dated as of July 30, 2004, by and between R. J. Reynolds Tobacco Company and BATUS Japan, Inc.

10.5		Contract Manufacturing Agreement, dated as of July 30, 2004, by and between R. J. Reynolds Tobacco Company and B.A.T. (U.K. & Export) Limited.

10.6		Third Amended and Restated Credit Agreement, dated as of July 30, 2004, among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc. and the lending institutions listed and to be listed from time to time on Annex I thereto.

10.7		Fourth Amended and Restated Subsidiary Guaranty, by R. J. Reynolds Tobacco Company, RJR Acquisition Corp., GMB, Inc., FHS, Inc., R. J. Reynolds Tobacco Co., RJR Packaging, LLC and BWT Brands, Inc. to the creditors defined therein, issued in connection with the Third Amended and Restated Credit Agreement dated as of July 30, 2004, among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc. and the lending institutions listed and to be listed from time to time on Annex I thereto.


Exhibit
Number		Description
10.8		Amended and Restated Security Agreement, dated as of July 30, 2004, among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., various subsidiaries of Reynolds American Inc. and JPMorgan Chase Bank, as Collateral Agent.

10.9		Amended and Restated Pledge Agreement, dated as of July 30, 2004, among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., various subsidiaries of Reynolds American Inc. and JPMorgan Chase Bank, as Collateral Agent.

10.10		Mortgage, Security Agreement, Assignment of Leases, Rents and Rights, Financing Statement and Fixture Filing (South Carolina), made by R. J. Reynolds Tobacco Company, as the Mortgagor, to JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Mortgagee.

10.11		Deed to Secure Debt, Security Agreement and Assignment of Leases, Rents and Rights (Georgia), made by R. J. Reynolds Tobacco Company, as the Grantor, to JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Grantee.

10.12		First Amendment to Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing (Davie County) made by R. J. Reynolds Tobacco Company, as the Trustor, to The Fidelity Company, as Trustee, and JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Beneficiary.

10.13		First Amendment to Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing (Forsyth County) made by R. J. Reynolds Tobacco Company, as the Trustor, to The Fidelity Company, as Trustee, and JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Beneficiary.

10.14		First Amendment to Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing (Stokes County) made by R. J. Reynolds Tobacco Company, as the Trustor, to The Fidelity Company, as Trustee, and JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Beneficiary.

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.


Exhibit
Number		Description
2.1		Business Combination Agreement, dated as of October 27, 2003, by and between R.J. Reynolds Tobacco Holdings, Inc. and Brown & Williamson Tobacco Corporation (incorporated by reference to Exhibit 99.2 to R.J. Reynolds Tobacco Holdings, Inc.’s Form 8-K dated October 29, 2003).
2.2		Amendment No. 1, dated as of January 9, 2004, to the Business Combination Agreement dated as of October 27, 2003, by and between R.J. Reynolds Tobacco Holdings, Inc. and Brown & Williamson Tobacco Corporation (incorporated by reference to Exhibit 2.2 to R.J. Reynolds Tobacco Holdings, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003, filed March 5, 2004).
2.3		Amendment No. 2, dated as of June 15, 2004, to the Business Combination Agreement, dated as of October 27, 2003, as amended, by and between R.J. Reynolds Tobacco Holdings, Inc. and Brown & Williamson Tobacco Corporation.
2.4		Amendment to Business Combination Agreement and Disclosure Schedule, dated July 30, 2004, by Brown & Williamson Tobacco Corporation, and accepted and agreed to by R.J. Reynolds Tobacco Holdings, Inc.
2.5		Joinder Agreement, dated as of January 9, 2004, among Reynolds American Inc., Brown & Williamson Tobacco Corporation and R.J. Reynolds Tobacco Holdings, Inc.
2.6		Lane Stock Purchase Agreement, dated as of October 27, 2003, by and among R.J. Reynolds Tobacco Holdings, Inc., American Cigarette Company Overseas B.V., Cigarette Manufacturers Supplies Inc. and Brown & Williamson Tobacco Corporation (incorporated by reference to Exhibit 99.3 to R.J. Reynolds Tobacco Holdings, Inc.’s Form 8-K dated October 29, 2003).
2.7		Amendment No. 1, dated as of January 9, 2004, to Lane Stock Purchase Agreement dated as of October 27, 2003, by and among R.J. Reynolds Tobacco Holdings, Inc., American Cigarette Company Overseas B.V., Cigarette Manufacturers Supplies Inc. and Brown & Williamson Tobacco Corporation (incorporated by reference to Exhibit 2.4 to R.J. Reynolds Tobacco Holdings, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003, filed March 5, 2004).
2.8		Joinder Agreement, dated as of January 9, 2004, among American Cigarette Company Overseas B.V., Cigarette Manufacturers Supplies Inc., R.J. Reynolds Tobacco Holdings, Inc. and Reynolds American Inc.
3.1		Amended and Restated Certificate of Incorporation of Reynolds American Inc. (incorporated by reference to Exhibit 1 to Registrant’s Form 8-A filed July 29, 2004).
3.2		Amended and Restated Bylaws of Reynolds American Inc. (incorporated by reference to Exhibit 2 to Registrant’s Form 8-A filed July 29, 2004).
4.1		Rights Agreement, between Reynolds American Inc. and The Bank of New York, as rights agent (incorporated by reference to Exhibit 3 to Registrant’s Form 8-A filed July 29, 2004).
4.2		Third Supplemental Indenture, dated as of July 30, 2004, among R.J. Reynolds Tobacco Holdings, Inc., Reynolds American Inc., R. J. Reynolds Tobacco Company, RJR Acquisition Corp., GMB, Inc., FHS, Inc., R. J. Reynolds Tobacco Co., RJR Packaging, LLC, BWT Brands, Inc. and The Bank of New York, as Trustee, to the Indenture dated May 15, 1999, among RJR Nabisco, Inc., R. J. Reynolds Tobacco Company and The Bank of New York, as Trustee.
4.3		Second Supplemental Indenture, dated as of July 30, 2004, among R.J. Reynolds Tobacco Holdings, Inc., Reynolds American Inc., R. J. Reynolds Tobacco Company, RJR Acquisition, GMB, Inc., FSH, Inc., R. J. Reynolds Tobacco Co., RJR Packaging, LLC, BWT Brands, Inc. and The Bank of New York, as Trustee, to the Indenture dated May 20, 2002, among R. J. Reynolds Tobacco Holdings, Inc., R. J. Reynolds Tobacco Company, RJR Acquisition Corp. and The Bank of New York.


Exhibit
Number		Description
10.1		Formation Agreement, dated as of July 30, 2004, among Brown & Williamson Tobacco Corporation, Brown & Williamson U.S.A., Inc. (nka R. J. Reynolds Tobacco Company) and Reynolds American Inc.
10.2		Governance Agreement, dated as of July 30, 2004, among British American Tobacco p.l.c., Brown & Williamson Tobacco Corporation and Reynolds American Inc..
10.3		Non-Competition Agreement, dated as of July 30, 2004, between Reynolds American Inc. and British American Tobacco p.l.c.
10.4		Contract Manufacturing Agreement, dated as of July 30, 2004, by and between R. J. Reynolds Tobacco Company and BATUS Japan, Inc.
10.5		Contract Manufacturing Agreement, dated as of July 30, 2004, by and between R. J. Reynolds Tobacco Company and B.A.T. (U.K. & Export) Limited.
10.6		Third Amended and Restated Credit Agreement, dated as of July 30, 2004, among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc. and the lending institutions listed and to be listed from time to time on Annex I thereto.
10.7		Fourth Amended and Restated Subsidiary Guaranty, by R. J. Reynolds Tobacco Company, RJR Acquisition Corp., GMB, Inc., FHS, Inc., R. J. Reynolds Tobacco Co., RJR Packaging, LLC and BWT Brands, Inc. to the creditors defined therein, issued in connection with the Third Amended and Restated Credit Agreement dated as of July 30, 2004, among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc. and the lending institutions listed and to be listed from time to time on Annex I thereto.
10.8		Amended and Restated Security Agreement, dated as of July 30, 2004, among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., various subsidiaries of Reynolds American Inc. and JPMorgan Chase Bank, as Collateral Agent.
10.9		Amended and Restated Pledge Agreement, dated as of July 30, 2004, among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., various subsidiaries of Reynolds American Inc. and JPMorgan Chase Bank, as Collateral Agent.
10.10		Mortgage, Security Agreement, Assignment of Leases, Rents and Rights, Financing Statement and Fixture Filing (South Carolina), made by R. J. Reynolds Tobacco Company, as the Mortgagor, to JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Mortgagee.
10.11		Deed to Secure Debt, Security Agreement and Assignment of Leases, Rents and Rights (Georgia), made by R. J. Reynolds Tobacco Company, as the Grantor, to JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Grantee.
10.12		First Amendment to Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing (Davie County) made by R. J. Reynolds Tobacco Company, as the Trustor, to The Fidelity Company, as Trustee, and JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Beneficiary.
10.13		First Amendment to Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing (Forsyth County) made by R. J. Reynolds Tobacco Company, as the Trustor, to The Fidelity Company, as Trustee, and JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Beneficiary.
10.14		First Amendment to Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing (Stokes County) made by R. J. Reynolds Tobacco Company, as the Trustor, to The Fidelity Company, as Trustee, and JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for various lending institutions, as the Beneficiary.

EX-2.3 2 g90345exv2w3.txt EX-2.3 EXHIBIT 2.3 EXECUTION COPY AMENDMENT No. 2, dated as of June 15, 2004 (this "Amendment") to the BUSINESS COMBINATION AGREEMENT, dated as of October 27, 2003 (as previously amended, the "BCA"), between BROWN & WILLIAMSON TOBACCO CORPORATION, a Delaware corporation, and R.J. REYNOLDS TOBACCO HOLDINGS, INC., a North Carolina corporation, with REYNOLDS AMERICAN INC. becoming a party to such agreement pursuant to a Joinder Agreement, dated as of January 9, 2004. WHEREAS, the parties hereto have previously entered into the BCA and, subject to the terms and conditions set forth in the BCA, have agreed to engage in the Transactions (such term and each other capitalized term used, but not defined in this Amendment having the meaning assigned to such term in the BCA); WHEREAS, Section 2.03 of the form of Formation Agreement attached as Exhibit A to the BCA provides, among other things, that if the assignment by B&W to B&W Opco of any Contributed Asset (as defined in the Formation Agreement) would require the consent of a third person and such consent shall not have been obtained prior to effectiveness of the Formation Agreement, such asset shall not be assigned unless and until such consent is obtained; WHEREAS, B&W is party to the Comprehensive Settlement Agreement and Release, dated as of January 16, 1998, among the State of Texas, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, B&W, Lorillard Tobacco Company and United States Tobacco Company, as amended by the Stipulation of Amendment to Settlement Agreement and For Entry of Consent Decree, dated as of July 24, 1998, and as further amended by the Agreement of Amendment to Settlement Agreement, dated as of June 8, 2001 (as so amended, the "Texas Settlement Agreement"); WHEREAS, it is the intent of the parties to the BCA that, consistent with Section 2.03 of the Formation Agreement, the Texas Settlement Agreement not be assigned by B&W to B&W Opco unless and until such time as all required consents under the Texas Settlement Agreement for such assignment shall have been obtained or as otherwise permitted by an order of the United States District Court for the Eastern District of Texas, Texarkana Division, or appellate courts thereof; WHEREAS, on May 27, 2004, the Office of the Attorney General of the State of Texas filed a motion in the United States District Court for the Eastern District of Texas, Texarkana Division, alleging that B&W has violated the Texas Settlement Agreement by agreeing to assign the Texas Settlement Agreement to B&W Opco without the State's consent; WHEREAS, the parties believe that the State of Texas's allegations reflect a misunderstanding of the terms of the BCA and of the parties' intent; and WHEREAS, to address the State of Texas's concerns and to confirm the parties' understanding, the parties desire to make the following amendments to Exhibit A to the BCA; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Amendment to the Formation Agreement. Article II of Exhibit A to the BCA is hereby amended by inserting the following new Section 2.08 at the end thereof: "SECTION 2.08. Texas Settlement Agreement. The parties hereto hereby acknowledge and agree that (a) consistent with Section 2.03, the Texas Settlement Agreement (as defined below) shall not be assigned by B&W to B&W Opco unless and until such time as all required consents under the Texas Settlement Agreement for such assignment shall have been obtained or as otherwise permitted by an order of the United States District Court for the Eastern District of Texas, Texarkana Division, or appellate courts thereof, (b) this Agreement shall not purport to release B&W from its obligations under the Texas Settlement Agreement to the State of Texas or any other party to the Texas Settlement Agreement except in accordance with the terms of the Texas Settlement Agreement or as otherwise permitted by an order of the United States District Court for the Eastern District of Texas, Texarkana Division, or appellate courts thereof, and (c) consistent with Section 3.01, upon effectiveness of this Agreement, B&W Opco shall assume, satisfy, perform, pay and discharge all Liabilities of B&W under the Texas Settlement Agreement, which are Assumed Liabilities, and such Assumed Liabilities shall be subject to the provisions of Article V. "Texas Settlement Agreement" means the Comprehensive Settlement Agreement and Release, dated as of January 16, 1998, among the State of Texas, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, B&W, Lorillard Tobacco Company and United States Tobacco Company, as amended by the Stipulation of Amendment to Settlement Agreement and For Entry of Consent Decree, dated as of July 24, 1998, and as further amended by the Agreement of Amendment to Settlement Agreement, dated as of June 8, 2001." SECTION 2. Amendment Part of the BCA. This Amendment shall be considered to be a part of the BCA and shall be subject to the provisions thereof, including Article IX thereof. Except as expressly set forth herein, the BCA shall continue in full force and effect without waiver, modification or amendment. IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the date first above written. BROWN & WILLIAMSON TOBACCO CORPORATION, by TIMOTHY J. HAZLETT -------------------------------- Name: Timothy J. Hazlett Title: VP, Secretary & Corporate General Counsel R.J. REYNOLDS TOBACCO HOLDINGS, INC., by McDARA P. FOLAN --------------------------------- Name: McDara P. Folan Title: VP, Deputy G.C. and Secretary by CHARLES A. BLIXT --------------------------------- Name: Charles A. Blixt Title: EVP G.C. and Secretary EX-2.4 3 g90345exv2w4.txt EX-2.4 EXHIBIT 2.4 July 30, 2004 R.J. Reynolds Tobacco Holdings, Inc. 401 North Main Street Winston-Salem, NC 27102 Attention: McDara P. Folan, III VP, Deputy General Counsel and Secretary RE: Amendment to Business Combination Agreement and Disclosure Schedule Dear McDara: This letter hereby sets forth our agreement to amend the Business Combination Agreement, dated as of October 27, 2003, between Brown & Williamson Tobacco Corporation and R.J. Reynolds Tobacco Holdings, Inc. (the "BCA") and the B&W Disclosure Letter (as defined in the BCA) as follows: 1. Section 6.05(b) of the BCA is hereby amended by adding the following at the end thereof: "With respect to Affected B&W Employees who do not receive an offer of ongoing regular employment with Reynolds American and its subsidiaries (the "Transitional Employees"), Reynolds American agrees that the benefits described in clause (i) of the preceding sentence (including welfare benefits but excluding any compensation or bonus plans, programs or policies) will be provided to the Transitional Employees during the entire period of their employment with Reynolds American and its subsidiaries, including any such period of employment that extends beyond the periods described in clauses (A) and (B) of the preceding sentence, as applicable." 2. Section 4.11(a) of the B&W Disclosure Letter is hereby amended by adding the following plan to the list of "B&W Welfare Plans" set forth thereon: "12. Group Hospitalization Insurance Plan for regular full time Hourly Employees and Salaried Employees of the Hanmer Division." This letter agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Except as otherwise modified hereby, the BCA and the B&W Disclosure Letter shall remain unaffected and in full force and effect. {SIGNATURE PAGE FOLLOWS} Very truly yours, BROWN & WILLIAMSON TOBACCO CORPORATION By: TIMOTHY J. HAZLETT ------------------------- Name: Timothy J. Hazlett Title: Vice President and Secretary Accepted and agreed: R.J. REYNOLDS TOBACCO HOLDINGS, INC. By: CHARLES A. BLIXT ------------------------------ Name: Charles A. Blixt Title: Executive Vice President and General Counsel EX-2.5 4 g90345exv2w5.txt EX-2.5 EXHIBIT 2.5 JOINDER AGREEMENT, dated as of January 9, 2004 (this "Agreement"), among REYNOLDS AMERICAN INC., a North Carolina corporation ("Reynolds American"), BROWN & WILLIAMSON TOBACCO CORPORATION, a Delaware corporation ("B&W"), and R.J. REYNOLDS TOBACCO HOLDINGS, INC., a Delaware corporation ("RJR"). WHEREAS Section 6.03(c) of the Business Combination Agreement, dated as of October 27, 2003 (the "Combination Agreement"), between B&W and RJR, contemplates that Reynolds American will become a party to the Combination Agreement; and WHEREAS Reynolds American, B&W and RJR have agreed that Reynolds American will become a party to the Combination Agreement. NOW, THEREFORE, Reynolds American hereby agrees with B&W and RJR as follows: SECTION 1. Reynolds American, by its signature, hereby becomes a party to the Combination Agreement with the same force and effect as if originally named as a party therein and hereby agrees to all the terms and provisions of the Combination Agreement applicable to it. SECTION 2. Reynolds American represents and warrants that this Agreement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Agreement shall for all purposes be deemed to be a part of the Combination Agreement and shall be subject to all of the provisions thereof. IN WITNESS WHEREOF, each of the parties hereto have duly executed this Agreement, all as of the date first written above. REYNOLDS AMERICAN INC., by McDARA P. FOLAN, III ------------------------------- Name: McDara P. Folan, III Title: Vice President, Deputy General Counsel and Secretary BROWN & WILLIAMSON TOBACCO CORPORATION, by Timothy J. Hazlett ------------------------------- Name: Timothy J. Hazlett Title: Vice President, Secretary and Corporate General Counsel R.J. REYNOLDS TOBACCO HOLDINGS, INC. , by McDARA P. FOLAN, III ------------------------------- Name: McDara P. Folan, III Title: Vice President, Deputy General Counsel and Secretary EX-2.8 5 g90345exv2w8.txt EX-2.8 EXHIBIT 2.8 JOINDER AGREEMENT, dated as of January 9, 2004 (this "Lane Joinder Agreement"), among American Cigarette Company Overseas B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands ("ACC"), Cigarette Manufacturers Supplies Inc., a Delaware corporation ("CMS"), R.J. Reynolds Tobacco Holdings, Inc., a Delaware corporation ("RJR"), and Reynolds American Inc., a North Carolina corporation ("Reynolds American"). WHEREAS Section 8.10 of the Stock Purchase Agreement, dated as of October 27, 2003 (the "Lane Agreement"), among ACC, CMS and RJR, contemplates that Reynolds American will become a party to the Lane Agreement; and WHEREAS ACC, CMS, RJR and Reynolds American have agreed that Reynolds American will become a party to the Lane Agreement. NOW, THEREFORE, Reynolds American hereby agrees with ACC, CMS, and RJR as follows: SECTION 1. Reynolds American, by its signature, hereby becomes a party to the Lane Agreement with the same force and effect as if originally named as a party therein and hereby agrees to all the terms and provisions of the Lane Agreement applicable to it. SECTION 2. RJR hereby assigns, conveys, transfers and delivers to Reynolds American, and Reynolds American hereby acquires and accepts from RJR, all right, title and interest of RJR in, under and to the Lane Agreement. SECTION 3. RJR hereby assigns to Reynolds American, and Reynolds American hereby assumes and agrees to satisfy, perform, pay and discharge all of the liabilities, covenants, agreements and other obligations of RJR under and pursuant to the Lane Agreement. SECTION 4. Reynolds American represents and warrants that this Lane Joinder Agreement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 5. This Lane Joinder Agreement shall for all purposes be deemed to be a part of the Lane Agreement and shall be subject to all of the provisions thereof. 2 IN WITNESS WHEREOF, each of the parties hereto have duly executed this Lane Joinder Agreement, all as of the date first written above. AMERICAN CIGARETTE COMPANY OVERSEAS B.V., by Timothy J. Hazlett -------------------------------- Name: Title: CIGARETTE MANUFACTURERS SUPPLIES INC., by George A. McGrath -------------------------------- Name: Title: Vice President -- Finance R.J. REYNOLDS TOBACCO HOLDINGS, INC., by McDARA P. FOLAN, III -------------------------------- Name: McDara P. Folan, III Title: Vice President, Deputy General Counsel and Secretary REYNOLDS AMERICAN INC., by MCDARA P. FOLAN, III -------------------------------- Name: McDara P. Folan, III Title: Vice President, Deputy General Counsel and Secretary EX-4.2 6 g90345exv4w2.txt EX-4.2 EXHIBIT 4.2 THIRD SUPPLEMENTAL INDENTURE This Third Supplemental Indenture, dated as of July 30, 2004 (this "Third Supplemental Indenture"), among R.J. Reynolds Tobacco Holdings, Inc., a Delaware corporation (together with its successors and assigns, the "Company"), Reynolds American Inc., a North Carolina corporation ("RAI"), R. J. Reynolds Tobacco Company, a North Carolina corporation ("Successor RJRT"), RJR Acquisition Corp., a Delaware corporation ("RJRA"), GMB, Inc., a North Carolina corporation ("GMB"), FHS, Inc., a Delaware corporation ("FHS"), R. J. Reynolds Tobacco Co., a Delaware corporation ("Reynolds Tobacco"), RJR Packaging, LLC, a Delaware limited liability company ("RJR Packaging"), BWT Brands, Inc., a Delaware corporation ("BWT") and The Bank of New York, as Trustee under the Indenture referred to below. WITNESSETH: WHEREAS, the Company, R. J. Reynolds Tobacco Company, a New Jersey corporation and a predecessor of Successor RJRT ("Old RJRT"), and the Trustee have heretofore executed and delivered an Indenture, dated as of May 15, 1999 (as amended, supplemented, waived or otherwise modified, the "Indenture"), providing for the issuance of an aggregate principal amount of $550,000,000 of the Company's 7 3/8% Notes due 2003, an aggregate principal amount of $500,000,000 of the Company's 7 3/4% Notes due 2006, and an aggregate principal amount of $200,000,000 of the Company's 7 7/8% Notes due 2009 of the Company (the "Notes"); WHEREAS, the Company has combined the business and operations of Old RJRT with those of another entity as a result of the structure of which, among other things, the Company became a direct, wholly owned subsidiary of RAI, Successor RJRT succeeded to Old RJRT and BWT became a direct, wholly owned subsidiary of Successor RJRT; WHEREAS, Section X.5 of the Indenture provides that the Company is required to cause each Subsidiary other than Old RJRT (whether previously existing or created or acquired by the Company) which becomes a Bank Credit Agreement Guarantor, to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary will unconditionally guarantee, on a joint and several basis with each other Guarantor, the full and prompt payment when due, whether at maturity, by acceleration, by redemption, by repurchase, or otherwise, of the principal of, premium, if any, and interest, including Additional Interest, on the Notes on an unsecured and unsubordinated basis, and all other Obligations of the Company under the Indenture, and become a party to the Indenture as a Guarantor for all purposes of the Indenture; WHEREAS, BWT, Successor RJRT, RJRA, GMB, FHS, Reynolds Tobacco and RJR Packaging are each a Bank Credit Agreement Guarantor; WHEREAS, the Company, Old RJRT, RJRA and the Trustee have heretofore executed and delivered a First Supplemental Indenture, dated as of December 12, 2000, pursuant to which RJRA became a party to the Indenture as a Guarantor and guaranteed the payment of the Obligations in accordance with Article X of the Indenture, and such parties, together with Reynolds Tobacco, RJR Packaging, FHS, GMB and Santa Fe Natural Tobacco Company, Inc. ("Santa Fe"), have heretofore executed and delivered a Second Supplemental Indenture, dated as of June 30, 2003, pursuant to which Reynolds Tobacco, RJR Packaging, FHS, GMB and Santa Fe each became a party to the Indenture as a Guarantor and guaranteed the payment of the Obligations in accordance with Article X of the Indenture; WHEREAS, RAI has determined that it is desirable and would be a direct benefit to RAI, along with the Company, Successor RJRT, RAI, Reynolds Tobacco, RJR Packaging, FHS, GMB and BWT, for RAI to similarly execute and deliver to the Trustee a supplemental indenture pursuant to which RAI will unconditionally guarantee, on a joint and several basis with the Guarantors, the full and prompt payment when due, whether at maturity, by acceleration, by redemption, by repurchase, or otherwise, of the principal of, premium, if any, and interest, including Additional Interest, on the Notes on an unsecured and unsubordinated basis, and all other Obligations of the Company under the Indenture, and become a party to the Indenture to the same extent as a Guarantor; and WHEREAS, pursuant to Section IX.1 of the Indenture, the Company, the Guarantors, RAI and the Trustee are authorized or permitted to execute and deliver this Third Supplemental Indenture to amend the Indenture, without the consent of any Noteholder. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows: ARTICLE I Definitions SECTION 1.1 Defined Terms. As used in this Third Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term "Holders" in this Third Supplemental Indenture shall refer to the term "Holders" as defined in the Indenture and the Trustee acting on behalf or for the benefit of such holders. The words "herein," "hereof" and "hereby" and other words of similar import used in this Third Supplemental Indenture refer to this Third Supplemental Indenture as a whole and not to any particular section hereof. ARTICLE II Agreement to be Bound; Guarantee SECTION 2.1 Agreement to be Bound. Successor RJRT and BWT each hereby becomes a party to the Indenture as a Guarantor, and RAI becomes a party to the Indenture to the same extent as if it were a Guarantor, and each such party will have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. Successor RJRT, BWT and RAI each agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture. SECTION 2.2 Guarantee. Successor RJRT, BWT and RAI each hereby fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, jointly and severally with each other Guarantor, to each Holder of the Securities and the Trustee, the full and 2 punctual payment when due, whether at maturity, by acceleration, by redemption, by repurchase or otherwise, of all of the Obligations of the Company under the Indenture in accordance with Article X of the Indenture. ARTICLE III Miscellaneous SECTION 3.1 Notices. All notices and other communications to a Guarantor or RAI shall be given as provided in the Indenture to the Guarantor or RAI, as the case may be, at its address set forth below, with a copy to the Company as provided in the Indenture for notices to the Company. SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Third Supplemental Indenture or the Indenture or any provision herein or therein contained. SECTION 3.3 Governing Law. This Third Supplemental Indenture shall be governed by the laws of the State of New York. SECTION 3.4 Severability Clause. In any case any provision in this Third Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability. SECTION 3.5 Ratification of Indenture; Third Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Third Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity of this Third Supplemental Indenture. SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Third Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement. SECTION 3.7 Headings. The headings of the Articles and the sections in this Third Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. SECTION 3.8 Trustee. The Trustee makes no representations as to the validity or sufficiency of this Third Supplemental Indenture. The recitals and statements herein are deemed to be those of the Company, the Guarantors and RAI and not of the Trustee. 3 IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed as of the date first above written. R.J. REYNOLDS TOBACCO HOLDINGS,INC. Address: 401 North Main Street Winston-Salem, NC 27102 By: /s/ McDara P. Folan, III --------------------------------------- Name: McDara P. Folan, III Title: Vice President and Secretary Address: REYNOLDS AMERICAN INC., 401 North Main Street as a guarantor Winston-Salem, NC 27102 By: /s/ McDara P. Folan, III --------------------------------------- Name: McDara P. Folan, III Title: Vice President, Deputy General Counsel and Secretary Address: RJR ACQUISITION CORP., 1007 N. Orange Street as a Guarantor Suite 1402 Wilmington, DE 19801 By: /s/ McDara P. Folan, III --------------------------------------- Name: McDara P. Folan, III Title: Vice President and Assistant Secretary Address: R.J. REYNOLDS TOBACCO COMPANY, 401 North Main Street as a Guarantor Winston-Salem, NC 27102 By: /s/ Lynn L. Lane --------------------------------------- Name: Lynn L. Lane Title: Senior Vice President and Treasurer Address: R.J. REYNOLDS TOBACCO CO., 401 North Main Street as a Guarantor Winston-Salem, NC 27102 By: /s/ Lynn L. Lane --------------------------------------- Name: Lynn L. Lane Title: Treasurer Address: RJR PACKAGING, LLC, 220 East Polo Road as a Guarantor Winston-Salem, NC 27102 By: /s/ McDara P. Folan, III -------------------------------------- Name: McDara P. Folan, III Title: Secretary Address: FHS, INC., 1007 N. Orange Street as a Guarantor Suite 1402 Wilmington, DE 19801 By: /s/ Caroline M. Price -------------------------------------- Name: Caroline M. Price Title: President Address: GMB, INC., 401 North Main Street as a Guarantor Winston-Salem, NC 27102 By: /s/ Daniel A. Fawley --------------------------------------- Name: Daniel A. Fawley Title: Treasurer Address: BWT BRANDS, INC., 401 North Main Street as a Guarantor Winston-Salem, NC 27102 By: /s/ Daniel A. Fawley -------------------------------------- Name: Daniel A. Fawley Title: Treasurer THE BANK OF NEW YORK, as Trustee By: /s/ Derek Kettel ------------------------------- Name: Derek Kettel Title: Agent EX-4.3 7 g90345exv4w3.txt EX-4.3 EXHIBIT 4.3 SECOND SUPPLEMENTAL INDENTURE This Second Supplemental Indenture, dated as of July 30, 2004 (this "Second Supplemental Indenture"), among R.J.Reynolds Tobacco Holdings, Inc., a Delaware corporation (together with its successors and assigns, the "Company"), Reynolds American Inc., a North Carolina corporation ("RAI"), R. J. Reynolds Tobacco Company, a North Carolina corporation ("Successor RJRT"), RJR Acquisition Corp., a Delaware corporation ("RJRA"), GMB, Inc., a North Carolina corporation ("GMB"), FHS, Inc., a Delaware corporation ("FHS"), R. J. Reynolds Tobacco Co., a Delaware corporation ("Reynolds Tobacco"), RJR Packaging, LLC, a Delaware limited liability company ("RJR Packaging"), BWT Brands, Inc., a Delaware corporation ("BWT") and The Bank of New York, as Trustee under the Indenture referred to below. WITNESSETH: WHEREAS, the Company, R. J. Reynolds Tobacco Company, a New Jersey corporation and a predecessor to Successor RJRT ("Old RJRT"), RJRA and the Trustee have heretofore executed and delivered an Indenture, dated as of May 20, 2002 (as amended, supplemented, waived or otherwise modified, the "Indenture"), providing for the issuance from time to time of the Company's unsecured debentures, notes or other evidences of its indebtedness to be issued in one or more series up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of the Indenture (the "Securities"); WHEREAS, the Company has combined the business and operations of Old RJRT with those of another entity as a result of the structure of which, among other things, the Company became a direct, wholly owned subsidiary of RAI, Successor RJRT succeeded to Old RJRT and BWT became a direct, wholly owned subsidiary of Successor RJRT; WHEREAS, Section 10.05 of the Indenture provides that the Company is required to cause each Subsidiary other than Old RJRT and RJRA (whether previously existing or created or acquired by the Company) which becomes a Bank Credit Agreement Guarantor, to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary will unconditionally guarantee, on a joint and several basis with each other Guarantor, the full and prompt payment of the principal of, premium, if any, and interest, on the Securities, on an unsecured and unsubordinated basis, and all other Obligations of the Company under the Indenture, and become a party to the Indenture as a Guarantor for all purposes of the Indenture; WHEREAS, BWT, Successor RJRT, RJRA, GMB, FHS, Reynolds Tobacco and RJR Packaging are each a Bank Credit Agreement Guarantor; WHEREAS, the Company, RJRA, Old RJRT, FHS, GMB, Reynolds Tobacco, RJR Packaging, Santa Fe Natural Tobacco Company, Inc. ("Santa Fe") and the Trustee, have heretofore executed and delivered a First Supplemental Indenture, dated as of June 30, 2003, pursuant to which FHS, GMB, Reynolds Tobacco, RJR Packaging and Santa Fe, each became a party to the Indenture as a Guarantor and guaranteed the payment of the Obligations in accordance with Article 10 of the Indenture; WHEREAS, RAI has determined that it is desirable and would be a direct benefit to RAI, along with the Company, Successor RJRT, RAI, Reynolds Tobacco, RJR Packaging, FHS, GMB and BWT, for RAI to similarly execute and deliver to the Trustee a supplemental indenture pursuant to which RAI will unconditionally guarantee, on a joint and several basis with the Guarantors, the full and prompt payment of the principal of, premium, if any, and interest, on the Securities, on an unsecured and unsubordinated basis, and all other Obligations of the Company under the Indenture, and become a party to the Indenture to the same extent as a Guarantor; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Company, RAI, the Guarantors and the Trustee are authorized or permitted to execute and deliver this Second Supplemental Indenture to amend the Indenture without the consent of any Securityholder. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: ARTICLE I Definitions SECTION 1.1 Defined Terms. As used in this Second Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term "Holders" in this Second Supplemental Indenture shall refer to the term "Holders" as defined in the Indenture and the Trustee acting on behalf or for the benefit of such holders. The words "herein," "hereof" and "hereby" and other words of similar import used in this Second Supplemental Indenture refer to this Second Supplemental Indenture as a whole and not to any particular section hereof. ARTICLE II Agreement to be Bound; Guarantee SECTION 2.1 Agreement to be Bound. Successor RJRT and BWT each hereby becomes a party to the Indenture as a Guarantor, and RAI becomes a party to the Indenture to the same extent as if it were a Guarantor, and each such party will have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. Successor RJRT, BWT and RAI each agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture. SECTION 2.2 Guarantee. Successor RJRT, BWT and RAI each hereby fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, jointly and severally with each other Guarantor, to each Holder of the Securities and the Trustee, the full and punctual payment when due, whether at maturity, by acceleration, by redemption, by repurchase or otherwise, of all of the Obligations of the Company under the Indenture in accordance with Article 10 of the Indenture. 2 ARTICLE III Miscellaneous SECTION 3.1 Notices. All notices and other communications to a Guarantor or RAI shall be given as provided in the Indenture to the Guarantor or RAI, as the case may be, at its address set forth below, with a copy to the Company as provided in the Indenture for notices to the Company. SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Second Supplemental Indenture or the Indenture or any provision herein or therein contained. SECTION 3.3 Governing Law. This Second Supplemental Indenture shall be governed by the laws of the State of New York. SECTION 3.4 Severability Clause. In any case any provision in this Second Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability. SECTION 3.5 Ratification of Indenture; Second Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Second Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity of this Second Supplemental Indenture. SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Second Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement. SECTION 3.7 Headings. The headings of the Articles and the sections in this Second Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. SECTION 3.8 Trustee. The Trustee makes no representations as to the validity or sufficiency of this Second Supplemental Indenture. The recitals and statements herein are deemed to be those of the Company, the Guarantors and RAI and not of the Trustee. 3 IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the date first above written. Address: R.J. REYNOLDS TOBACCO HOLDINGS,INC. 401 North Main Street Winston-Salem, NC 27102 By: /s/ McDara P. Folan, III ------------------------------------------ Name: McDara P. Folan, III Title: Vice President and Secretary Address: REYNOLDS AMERICAN INC., 401 North Main Street as a guarantor Winston-Salem, NC 27102 By: /s/ McDara P. Folan, III --------------------------------------- Name: McDara P. Folan, III Title: Vice President, Deputy General Counsel and Secretary Address: RJR ACQUISITION CORP., 1007 N. Orange Street as a Guarantor Suite 1402 Wilmington, DE 19801 By: /s/ McDara P. Folan, III ---------------------------------------- Name: McDara P. Folan, III Title: Vice President and Assistant Secretary Address: R.J. REYNOLDS TOBACCO COMPANY, 401 North Main Street as a Guarantor Winston-Salem, NC 27102 By: /s/ Lynn L. Lane ----------------------------------------- Name: Lynn L. Lane Title: Senior Vice President and Treasurer Address: R. J. REYNOLDS TOBACCO CO., 401 North Main Street as a Guarantor Winston-Salem, NC 27102 By: /s/ Lynn L. Lane ---------------------------------------- Name: Lynn L. Lane Title: Treasurer Address: RJR PACKAGING, LLC, 220 East Polo Road as a Guarantor Winston-Salem, NC 27102 By: /s/ McDara P. Folan, III ---------------------------------------- Name: McDara P. Folan, III Title: Secretary Address: FHS, INC., 1007 N. Orange Street as a Guarantor Suite 1402 Wilmington, DE 19801 By: /s/ Caroline M. Price ---------------------------------------- Name: Caroline M. Price Title: President Address: GMB, INC., 401 North Main Street as a Guarantor Winston-Salem, NC 27102 By: /s/ Daniel A. Fawley --------------------------------------- Name: Daniel A. Fawley Title: Treasurer Address: BWT BRANDS, INC., 401 North Main Street as a Guarantor Winston-Salem, NC 27102 By: /s/ Daniel A. Fawley ---------------------------------------- Name: Daniel A. Fawley Title: Treasurer THE BANK OF NEW YORK, as Trustee By: /s/ Derek Kettel ---------------------------- Name: Derek Kettel Title: Agent EX-10.1 8 g90345exv10w1.txt EX-10.1 Exhibit 10.1 FORMATION AGREEMENT, dated as of July 30, 2004 (this "Agreement"), among BROWN & WILLIAMSON TOBACCO CORPORATION, a Delaware corporation ("B&W"), BROWN & WILLIAMSON U.S.A., INC., a North Carolina corporation ("B&W Opco"), and REYNOLDS AMERICAN INC., a North Carolina corporation ("Reynolds American"). WHEREAS the respective Boards of Directors of B&W, B&W Opco and Reynolds American have approved the execution, delivery and performance of this Agreement; WHEREAS B&W and R.J. Reynolds Tobacco Holdings, Inc., a Delaware corporation ("RJR"), entered into the Business Combination Agreement, dated as of October 27, 2003, as amended (the "Combination Agreement"), and each of B&W, RJR, B&W Opco, Reynolds American and certain of their affiliates will engage in the Transactions (as defined in the Combination Agreement); WHEREAS B&W has agreed to contribute to B&W Opco, and B&W Opco has agreed to accept from B&W, all of the assets, other than the Excluded Assets (as defined below), of B&W in exchange for all of the outstanding capital stock of B&W Opco (the "Asset Contribution"); WHEREAS B&W has agreed to assign to B&W Opco, and B&W Opco has agreed to assume from B&W, all of the liabilities, other than the Excluded Liabilities (as defined below), of B&W (the "Assumption of Liabilities"); WHEREAS B&W and B&W Opco have agreed to certain arrangements regarding the employees of B&W; and WHEREAS B&W and Reynolds American have agreed that the B&W Opco Stock Contribution (as defined in the Combination Agreement) will occur immediately following completion of the Asset Contribution and the Assumption of Liabilities. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Action" means any claim, suit, action, arbitration, inquiry, investigation or other proceeding of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any court, arbitrator or governmental entity or similar body. An "affiliate" of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. "Agreement" has the meaning set forth in the preamble to this Agreement. "Asset Contribution" has the meaning set forth in the recitals to this Agreement. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by B&W Opco or any of its Subsidiaries including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition") of (a) any shares of capital stock of a Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than B&W Opco or one of its Subsidiaries), (b) all or substantially all the assets of any division or line of business of B&W Opco or any of its Subsidiaries or (c) any other assets of B&W Opco or any of its Subsidiaries outside of the ordinary course of business of B&W Opco or such Subsidiary, in each case, other than (i) a disposition by a Subsidiary of B&W Opco to B&W Opco or by B&W Opco or any of its Subsidiaries to a Subsidiary of B&W Opco, (ii) a disposition by B&W Opco or any Subsidiary of B&W Opco to Reynolds American or any of its Subsidiaries (other than B&W Opco and its Subsidiaries) if the transferee agrees to jointly and severally assume the obligations of B&W Opco under this Agreement, such assumption to be in form and substance reasonably satisfactory to B&W (provided that the obligations of B&W Opco under this Agreement shall not be terminated as a result of such assumption), (iii) a disposition that constitutes a Restricted Payment but that is not otherwise prohibited by Section 5.05(c) or (iv) any sale or disposition deemed to occur in connection with creating or granting any liens to a third party that is not an affiliate of Reynolds American in connection with a bona fide financing or that arise as a matter of law. "Assumed Liabilities" means all the Liabilities (other than the Excluded Liabilities) of B&W or any of the Included Subsidiaries or otherwise to the extent related to the B&W Business (including (a) all Liabilities of B&W and the Included Subsidiaries arising out of the operation or conduct of their respective businesses prior to the Asset Contribution, (b) all Liabilities of B&W and its affiliates under the State Settlements and (c) all Liabilities of B&W and the Included Subsidiaries arising out of or in connection with any Action to the extent relating to the development, manufacture, packaging, labeling, production, delivery, sale, resale, distribution, marketing, promotion, use or consumption of, or exposure to tobacco products, including smoking and health-related and safety-related claims). "Assumption of Liabilities" has the meaning set forth in the recitals to this Agreement. "B&W" has the meaning set forth in the preamble to this Agreement. "B&W Accounting Policies" has the meaning set forth in Section 2.04(a). "B&W Benefit Plans" has the meaning assigned to such term in the Combination Agreement. "B&W Business" means the tobacco businesses of B&W and the Included Subsidiaries as such businesses have been conducted in the United States and its territories and possessions on or prior to the date of this Agreement. "B&W Indemnitees" means B&W, each affiliate of B&W (other than Reynolds American, B&W Opco and their respective Subsidiaries following the Effective Time (as defined in the Combination Agreement)), each of their respective Representatives and each of the heirs, executors, successors and assigns of any of the foregoing. "B&W Opco" has the meaning set forth in the preamble to this Agreement. "B&W Opco Common Stock" means the common stock, par value $0.01 per share, of B&W Opco. "B&W Opco Indemnitees" means B&W Opco, Reynolds American and their respective Subsidiaries and Representatives and each of the heirs, executors, successors and assigns of any of the foregoing. "B&W Opco Services" has the meaning assigned to such term in Section 2.06(b). "B&W Opco Stock Contribution" has the meaning assigned to it in the Combination Agreement. "B&W Packaging" has the meaning assigned to such term in Section 2.05. "B&W Services" has the meaning assigned to such term in Section 2.06(a). "B&W Trademark" has the meaning assigned to such term in Section 2.05. "Code" means the Internal Revenue Code of 1986, as amended. "Combination Agreement" has the meaning set forth in the recitals to this Agreement. "Consent" has the meaning assigned to such term in Section 2.03. "Consolidated Net Worth" means, as at any date of determination, the total amount of shareholders' equity that would be shown on the balance sheet of B&W Opco and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of such date of determination; provided, however, that Consolidated Net Worth as so determined shall be adjusted by adding thereto the sum, without duplication, of (i) all consolidated non-cash impairment and amortization charges related to goodwill, trademarks and other intangible assets of B&W Opco and its Subsidiaries during the period from the date of this Agreement to such date of determination and (ii) all restructuring charges related to B&W Opco and its Subsidiaries that have been reflected in the consolidated financial statements of Reynolds American that have been filed with the SEC during the period from the date of this Agreement to such date of determination. "Contributed Assets" means (other than the Excluded Assets), without duplication, (a) all the capital stock of the Included Subsidiaries, (b) all the business, properties, assets, goodwill and rights of B&W and the Included Subsidiaries of whatever kind and nature, real or personal, tangible or intangible, that are owned by, leased or licensed to B&W or any of the Included Subsidiaries on the date of this Agreement (including any items arising under insurance policies and all guarantees, warranties, indemnities and similar rights in favor of B&W to the extent relating to any Contributed Asset or any Assumed Liability and all assets of the B&W Benefit Plans the sponsorship of which is transferred to B&W Opco in connection with this Agreement) and (c) an amount in cash equal to the Estimated MSA Liability Amount. "Employees" means all individuals employed immediately prior to the Asset Contribution by B&W and the Included Subsidiaries, whether employed within or outside the United States and whether or not subject to a labor or collective bargaining agreement, including active employees, employees on vacation, holiday, jury duty, bereavement leave or other leave of absence (including employees on short-term disability and long-term disability). "Employment Transfer Time" has the meaning assigned to such term in Section 4.01. "Estimated MSA Liability Amount" means the accrued MSA Liability Amount as of the date of this Agreement, as estimated in writing by B&W not less than two days nor more than five days prior to the date of this Agreement. "Excluded Assets" means: (a) all cash, cash equivalents and bank deposits of B&W and its Subsidiaries other than (1) any cash described in clause (c) of the definition of Contributed Assets or (2) any cash, cash equivalents, deposits or other assets securing the obligations of B&W and its Subsidiaries for workers' compensation, licenses, permits and other similar obligations required under law; (b) the capital stock of each of the Excluded Subsidiaries and all the business, properties, assets, goodwill, rights and Liabilities of the Excluded Subsidiaries; (c) all receivables, accounts and indebtedness (other than trade receivables) due to B&W from PLC or any of its Subsidiaries, other than from any Included Subsidiary; (d) any loan agreements, security documents and other contracts related to receivables, accounts and indebtedness described in clause (c) of this definition or clauses (i) and (j) of the definition of Excluded Liabilities; (e) the $100 million bond filed by B&W in connection with the appeal of Engle v. R.J. Reynolds Tobacco Co. class action litigation in Florida, collateral securing such bond and all interest and other proceeds thereof; (f) all other bonds, letters of credit or similar instruments provided by B&W or any of its Subsidiaries in connection with any tobacco-related litigation, collateral securing such bonds and all interest and other proceeds thereof, including those listed on Schedule 1.01(a); (g) all rights and interests of B&W and the Excluded Subsidiaries under this Agreement and any other Transaction Agreement; (h) all records prepared in connection with the Transactions; (i) any tax records and copies of all other records of B&W or any of its Subsidiaries; (j) any service marks and service mark applications, trademarks and trademark applications, trade dress, logos and slogans, whether registered or unregistered, and the right to use any such service marks and service mark applications, trademarks and trademark applications, trade dress, logos and slogans, in any jurisdiction other than the United States and its territories and its possessions; (k) any patents, patent applications, inventions, trade secrets, proprietary processes, databases, software and formulae, and the right to use any such patents, patent applications, inventions, trade secrets, proprietary processes, databases, software and formulae, to the extent registered or patented in, or otherwise protected by, any jurisdiction other than the United States and its territories and its possessions; (l) all rights, claims and credits of B&W or any of its Subsidiaries to the extent arising out of any other Excluded Asset or any Excluded Liability, including any such items arising under insurance policies and all guarantees, warranties, indemnities and similar rights in favor of B&W or any of its Subsidiaries in respect of any other Excluded Asset or any Excluded Liability; (m) any capital stock of Reynolds American owned by B&W or any of its Subsidiaries; (n) any rights in the assets of the trusts established pursuant to the Secular Trust Agreements by and among State Street Bank and Trust Company, B&W, and the individuals party thereto listed on Schedule 1.01(b) (the "SERP Trust Individuals"), to the extent held in an account thereunder for the purpose of providing a fund to pay benefits under the Supplemental Pension Plan for Executives of B&W (the "B&W SERP") (defined in the Secular Trust Agreement as the "SERP Account"); (o) any assets held in connection with the B&W Executive Life Insurance Plan (the "B&W ELP"); (p) all rights to refunds, credits or offsets of Taxes relating to the Contributed Assets or the Assumed Liabilities with respect to Pre-Closing Tax Periods; and (q) all assets identified on Schedule 1.01(c). "Excluded Liabilities" means: (a) any Liability of an Excluded Subsidiary or any other Liability to the extent arising out of the business of an Excluded Subsidiary; (b) all obligations of B&W and the Excluded Subsidiaries under this Agreement and any other Transaction Agreement; (c) any Liability under the B&W SERP, to the extent it pertains or relates to the service and/or accrued benefits of the SERP Trust Individuals prior to the Employment Transfer Time, calculated on the assumption that the SERP Trust Individual's employment terminated immediately prior to the Employment Transfer Time; (d) any liability under each Agreement Pertaining to Revisions to Benefit Plans and Programs (the "Revision Agreement") entered into at any time prior to the Employment Transfer Time between B&W and a SERP Trust Individual, to the extent it pertains or relates to the B&W SERP with respect to the period prior to the Employment Transfer Time; (e) any liability under the B&W ELP and any liability under any successor or substitute plan, program or arrangement in effect immediately prior to the Employment Transfer Time providing life insurance coverage to any person covered under the B&W ELP or any such successor or substitute plan, program or arrangement, other than any liability related to group term-life insurance payable in lieu of continued B&W ELP participation; (f) any liability under a Revision Agreement entered into at any time prior to the Employment Transfer Time, to the extent it pertains or relates to the B&W ELP or any successor or substitute plan, program or arrangement described in clause (e) above, other than any liability related to group term-life insurance payable to non-officers in lieu of continued B&W ELP participation; (g) any Liability to the extent such Liability relates to the Excluded Assets; (h) (i) all Taxes (other than U.S. federal and state excise Taxes) of each Included Subsidiary measured with respect to all Taxable periods ending on or before the date of this Agreement and the portion through the end of the date of this Agreement for any Taxable period that includes (but does not end on) the date of this Agreement, provided, that for purposes of this Agreement, (A) all real property Taxes, personal property Taxes and similar ad valorem obligations levied with respect to the Contributed Assets for a Tax period that includes (but does not end on) the date of this Agreement shall be apportioned between B&W and B&W Opco based upon the number of days of such period included in the Pre-Closing Tax Period and the number of days of such Tax period after the date of this Agreement (which period shall not include the date of this Agreement) and (B) all other Taxes (other than U.S. federal and state excise Taxes) for a Tax period that includes (but does not end on) the date of this Agreement shall be determined based upon an actual closing of the books as if such Tax period ended as of the close of business on the date of this Agreement, (ii) any and all Taxes (other than U.S. federal and state excise Taxes) of any member of an affiliated, consolidated, combined, or unitary group of which an Included Subsidiary (or any of their predecessors) is or was a member on or prior to the date of this Agreement, including pursuant to Treas. Reg.ss.1.1502-6 or any analogous or similar provision of Law, and (iii) all Taxes (other than U.S. federal or state excise Taxes) of an Included Subsidiary arising from or related to the Transactions; (i) all Liabilities of B&W or any of the Included Subsidiaries in respect of (i) borrowed money, (ii) bonds, debentures, notes or similar instruments issued in connection with borrowed money, (iii) conditional sale or other title retention agreements related to property or assets purchased by B&W or any of the Included Subsidiaries, (iv) the deferred purchase price of property or services (other than trade payables and other accounts payable generated in the ordinary course), (v) interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements and (vi) guarantees given by B&W or any Included Subsidiary in respect of any of the foregoing (other than any letters of credit); and (j) all payables, accounts and indebtedness (other than trade payables) owed by B&W to PLC or any of its Subsidiaries, other than to any Included Subsidiary. "Excluded Subsidiaries" means, collectively, the Subsidiaries of B&W listed on Schedule 1.01(d) and the Subsidiaries of such listed Subsidiaries. "Filings" means Reynolds American's Form S-4 initially filed with the SEC on January 16, 2004 and any other document filed or required to be filed with the SEC by Reynolds American or RJR in connection with the Transactions (including any preliminary or final form thereof or any amendment or supplement thereto). "Final Determination" means the final resolution of Liability for any Tax for any taxable period by or as a result of (a) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction, (b) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code or a comparable agreement under the laws of other jurisdictions, in each case which resolves the entire Tax Liability for any taxable period, (c) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered by the jurisdiction imposing the Tax, or (d) any other final disposition, including, without limitation, by reason of the expiration of the applicable statute of limitations. "GAAP" means U.S. generally accepted accounting principles, consistently applied by the applicable party (except to the extent relating to a change in GAAP). "Included Subsidiaries" means, collectively, the Subsidiaries of B&W that are not Excluded Subsidiaries. "Indemnifiable Losses" means all losses, Liabilities, damages (including compensatory damages, punitive damages, exemplary damages, penalties, sanctions and restitution), deficiencies, fines, expenses, Actions, demands, judgments, orders, decrees or settlements, whether or not resulting from Third Party Claims, including interest and penalties recovered by a third party with respect thereto and out-of-pocket expenses and reasonable attorneys' and accountants' fees and expenses incurred in the investigation or defense of any of the same or in asserting, preserving or enforcing any of an Indemnitee's rights hereunder, suffered or incurred by an Indemnitee. "Indemnifying Party" has the meaning assigned to such term in Section 5.03(a). "Indemnitee" means any of the B&W Indemnitees or the B&W Opco Indemnitees, as the case may be. "Independent Firm" has the meaning set forth in Section 2.04(c). "IRS" means the United States Internal Revenue Service. "Liabilities" means any and all debts, liabilities, commitments and obligations, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, whenever or however arising and whether or not the same would be required by GAAP to be reflected in financial statements or disclosed in the notes thereto. "Measurement Time" has the meaning set forth in Section 2.04(a). "Minimum Required Working Capital Amount" means, with respect to any date, the amount set forth on Schedule 1.01(e) with respect to such date. "MSA" means the Master Settlement Agreement, dated as of November 23, 1998, among the 46 states and five U.S. territories listed on the signature pages thereto, the District of Columbia, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, B&W and Lorillard Tobacco Company, as amended, supplemented or replaced. "MSA Liability Amount" means, with respect to any period, the total of all amounts due by B&W for such period pursuant to (a) the State Settlements and (b) attorney fee payment agreements adopted pursuant to any of the State Settlements. "Negotiation Period" has the meaning set forth in Section 2.04(b). "Non-Assignable Assets" has the meaning set forth in Section 2.03. "Notice of Dispute" has the meaning set forth in Section 2.04(b). "Person" means any individual, firm, corporation, partnership, company, limited liability company, trust, joint venture, association, governmental entity, unincorporated organization or other entity. "PLC" means British American Tobacco p.l.c., a public limited company incorporated under the laws of England and Wales. "Pre-Closing Tax Period" means all taxable periods ending on or before the day of this Agreement and the portion ending on the day of this Agreement of any taxable period that includes (but does not end on) such day. "RJR" has the meaning set forth in the recitals to this Agreement. "Representative" of any Person means any officer, director, manager, employee, consultant, attorney or other advisor or representative of such Person. "Restricted Payments" means, with respect to B&W Opco or any of its Subsidiaries, (a) the declaration or payment of any dividends or any other distributions of any sort in respect of its capital stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its capital stock (other than dividends or distributions payable solely in its capital stock and dividends or distributions payable solely to B&W Opco or one of its Subsidiaries), (b) the purchase, redemption or other acquisition or retirement for value of any capital stock of B&W Opco held by any Person or of any capital stock of a Subsidiary of B&W Opco held by any affiliate of Reynolds American (other than B&W Opco or a Subsidiary of B&W Opco), including in connection with any merger or consolidation and including the exercise of any option to exchange any capital stock, or (c) the making of any investment in Reynolds American or any of its Subsidiaries (other than B&W Opco or one of its Subsidiaries); provided, however, that, with respect to any calendar year, Restricted Payments shall not include the declaration or payment of any dividends (other than extraordinary dividends or liquidating dividends) or any other distributions of any sort by B&W Opco in respect of its capital stock in an aggregate amount equal to the sum, without duplication, of (i) (A) the aggregate amount of dividends (other than extraordinary dividends or liquidating dividends) paid by Reynolds American to the holders of Reynolds American common stock during such calendar year and (B) the aggregate amount of cash required by Reynolds American to repurchase Reynolds American common stock pursuant to Section 2.04(d) of the Governance Agreement (as defined in the Combination Agreement) and (ii) the aggregate amount of interest, indebtedness and corporate overhead expenses paid by Reynolds American or R.J. Reynolds Tobacco Holdings, Inc. during such calendar year (including amounts paid in respect of payroll and other compensation expenses (including pensions) and other post-retirement benefits, but excluding amounts paid by Reynolds American in respect of the $400 million loan to Reynolds American from FHS, Inc.), Taxes, insurance, SEC, NYSE and other administrative fees and expenses, banking fees and expenses and other types of corporate overhead and administrative costs and expenses associated with being a public holding company); provided, further, however, that, in the event Reynolds American owns any "significant subsidiary" (as defined in Regulation S-X of the SEC) that is not a Subsidiary of B&W Opco, the amount determined in clause (i) and (ii) above will be reduced by the amount of such payments allocated to such significant subsidiary by Reynolds American as determined by Reynolds American in good faith consistent with past practice. "Reynolds American" has the meaning set forth in the preamble to this Agreement. "SEC" means the Securities and Exchange Commission. "State Settlements" means (a) the MSA and (b) the Settlement Agreement, dated as of August 25, 1997, among the State of Florida, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, B&W, Lorillard Tobacco Company and United States Tobacco Company, as amended by the Stipulation of Amendment to Settlement Agreement and For Entry of Consent Decree, dated as of September 11, 1998, (c) the Settlement Agreement and Stipulation for Entry of Consent Decree, dated as of May 8, 1998, among the State of Minnesota, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, B&W and Lorillard Tobacco Company, (d) the Comprehensive Settlement Agreement and Release, dated as of October 17, 1997, among the State of Mississippi, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, B&W and Lorillard Tobacco Company, as amended by the Stipulation of Amendment to Settlement Agreement and For Entry of Agreed Order, dated as of July 2, 1998, (e) the Comprehensive Settlement Agreement and Release, dated as of January 16, 1998, among the State of Texas, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, B&W, Lorillard Tobacco Company and United States Tobacco Company, as amended by the Stipulation of Amendment to Settlement Agreement and For Entry of Consent Decree, dated as of July 24, 1998, in each case, as amended, supplemented or replaced, and (f) the Trust Agreement, dated July 19, 1999 among Philip Morris Incorporated, B&W, Lorillard Tobacco Company and R.J. Reynolds Tobacco Company, as settlors, The Chase Manhattan Bank, as trustee, and the Grower States listed therein, as amended, supplemented or replaced. "Submission Notice" has the meaning set forth in Section 2.04(c). A "Subsidiary" of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person. "Successor Company" has the meaning assigned to such term in Section 5.05(a). "Taxes" means all (a) domestic or foreign (whether national, Federal, state, provincial, local or otherwise) taxes, assessments, duties or similar charges of any kind whatsoever, including all corporate franchise, income, sales, use, ad valorem, receipts, value added, profits, license, withholding, payroll, employment, excise, property, net worth, capital gains, transfer, stamp, documentary, payroll, alternative minimum, recapture and other taxes, including any interest, fines, penalties and additions imposed with respect to such amounts; (b) Liability for the payment of any amounts of the type described in clause (a) as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group and (c) Liability for the payment of any amounts as a result of an express or implied obligation to indemnify any other person with respect to the payment of any amounts of the type described in clause (a) or (b). "Texas Settlement Agreement" means the Comprehensive Settlement Agreement and Release, dated as of January 16, 1998, among the State of Texas, Philip Morris Incorporated, R.J. Reynolds Tobacco Company, B&W, Lorillard Tobacco Company and United States Tobacco Company, as amended by the Stipulation of Amendment to Settlement Agreement and For Entry of Consent Decree, dated as of July 24, 1998, and as further amended by the Agreement of Amendment to Settlement Agreement, dated as of June 8, 2001. "Third Party Claim" has the meaning set forth in Section 5.03(a). "Transaction Agreements" has the meaning assigned to such term in the Combination Agreement. "Transactions" has the meaning assigned to such term in the Combination Agreement. "Working Capital" means, as of any time, (a) the sum of (i) Inventories - FIFO basis (including leaf, finished goods, wrapping materials, spare parts and miscellaneous), (ii) Accounts Receivable External (including domestic accounts receivable, leaf (ELT) accounts receivable and miscellaneous accounts receivable), (iii) Due from Affiliates - Trading and (iv) Other Debtors (including salesforce contingent funds, sundry unidentified items, unamortized strike/wage concessions, prepaid insurance, prepaid legal fees, etc. but excluding LIC, home escrows and the Star note) less (b) the sum of, (i) Excise Tax Payable (Federal and state), (ii) Accrued Liabilities (including marketing accruals, provisions for payroll, vacation pay, profit sharing, etc.), (iii) Accounts Payable and (iv) Due to Affiliates - Trading. For the avoidance of doubt, Working Capital shall not include any accruals relating to the MSA Liability Amount. "Working Capital Statement" has the meaning set forth in Section 2.04(a). ARTICLE II Asset Contribution SECTION 2.01. The Asset Contribution. Upon the effectiveness of this Agreement, B&W shall contribute, assign, convey, transfer and deliver to B&W Opco, and B&W Opco shall acquire and accept from B&W, all right, title and interest of B&W in and to the Contributed Assets. B&W Opco has previously issued to B&W 100 fully paid and nonassessable shares of B&W Opco Common Stock, representing all of the outstanding capital stock of B&W Opco. SECTION 2.02. Retention of Copies; Access. Notwithstanding anything to the contrary contained in this Agreement and subject to Section 6.10, (a) B&W may retain, at its expense, archival copies of contracts, books and records or other documents or materials conveyed by this Agreement, and (b) B&W Opco will permit B&W to have reasonable access to such contracts, books, records, documents and materials on and after the date of this Agreement to make such copies. B&W Opco will give B&W at least 30 calendar days' prior written notice of B&W Opco's intention to dispose of any books, records or other documentation which constitute Contributed Assets. B&W will have the opportunity to obtain possession, at its own expense, of any such books, records or documentation as B&W may reasonably require prior to B&W Opco's disposition thereof. In the absence of bad faith or wilful misconduct, neither B&W nor B&W Opco will have any liability arising out of or in connection with its retention and handling of such records. SECTION 2.03. Consents. Notwithstanding anything to the contrary contained in this Agreement, if the contribution, assignment, conveyance, transfer or delivery or attempted contribution, assignment, conveyance, transfer or delivery to B&W Opco of any Contributed Asset is (a) prohibited by any applicable Law or (b) would require any authorization, approval, consent or waiver (each a "Consent") from a third Person and such Consent shall not have been obtained prior to the effectiveness of this Agreement (each, a "Non-Assignable Asset"), in either case, the Asset Contribution shall proceed, but the Asset Contribution shall not constitute the contribution, assignment, conveyance, transfer or delivery of such Non-Assignable Asset, and this Agreement shall not constitute a contribution, assignment, conveyance, transfer or delivery of such Non-Assignable Asset unless and until such Consent is obtained. After the Asset Contribution, B&W and B&W Opco shall continue to use reasonable best efforts to obtain any necessary Consent. The cost of obtaining any such Consent shall be borne solely by B&W and shall constitute an Excluded Liability hereunder. During the period between the date of this Agreement and the consummation of the contribution, assignment, conveyance, transfer or delivery of such Non-Assignable Asset, B&W will operate such Non-Assignable Assets pursuant to written instructions from B&W Opco and all benefits of, and risks arising out of or related to, the ownership and operation of such Non-Assignable Asset will be for the account of B&W Opco, except as set forth in Section 5.01(b) or 5.02(b). At or as soon as reasonably practicable after the date of this Agreement, B&W and B&W Opco will enter into such agreements as may be reasonably required to carry out the intent of the immediately preceding sentence in order to provide such further specific assurances as B&W or B&W Opco may reasonably request. SECTION 2.04. Working Capital Adjustment. (a) As soon as reasonably practicable after the date of this Agreement (but in no event later than 60 calendar days after the date of this Agreement), B&W Opco will cause to be prepared and delivered to B&W an unaudited consolidated balance sheet of B&W Opco and its Subsidiaries as of the date of this Agreement, after giving effect to the Asset Contribution and the Assumption of Liabilities but prior to giving effect to the B&W Opco Stock Contribution (such time being referred to as the "Measurement Time"), together with a statement of each component of Working Capital of B&W Opco as of the Measurement Time (the "Working Capital Statement"). The Working Capital Statement will be prepared in accordance with the same accounting principles, policies, practices and procedures used to prepare the amounts set forth on Schedule 1.01(e), which are the same accounting principles, policies, practices and procedures used to prepare the B&W Audited Historical Financial Statements (as defined in the Combination Agreement), except that inventory is valued on a FIFO basis (the "B&W Accounting Policies"). B&W will have the right to audit the worksheets, examine underlying records and review any work papers relating to the Working Capital Statement. (b) If B&W disagrees with the Working Capital Statement, B&W must, within 20 business days after delivery of the Working Capital Statement to B&W, notify B&W Opco in writing as to whether B&W accepts the Working Capital Statement. If B&W notifies B&W Opco that it does not accept the Working Capital Statement (the "Notice of Dispute"), B&W will set out each disputed item, the amount in dispute and its reasons for such dispute in reasonable detail, including any adjustments which, in B&W's opinion, should be made to the Working Capital Statement in order to comply with the requirements of this Section 2.04. After delivery of the Notice of Dispute, B&W may not introduce additional disagreements with respect to any item in the Working Capital Statement. If a Notice of Dispute is received by B&W Opco in accordance with this Section 2.04(b), B&W and B&W Opco will use all reasonable efforts to meet and resolve the objections of B&W to the Working Capital Statement within 60 calendar days of B&W Opco's receipt of the Notice of Dispute (the "Negotiation Period"). (c) If B&W and B&W Opco do not reach agreement prior to expiration of the Negotiation Period, then B&W and B&W Opco will each deliver to the Atlanta office of Ernst & Young LLP or such other accounting firm as the parties shall jointly agree (the "Independent Firm") a written notice (a "Submission Notice") specifying the nature and value of all items remaining in dispute within ten calendar days following the expiration of the Negotiation Period. B&W and B&W Opco will be deemed to have agreed with all items and amounts contained in the Working Capital Statement other than the disputed items in each Submission Notice. (d) The Independent Firm will (i) make an examination of the Working Capital Statement, (ii) inspect and examine each party's working papers, (iii) schedule meetings at which each party may present supporting data and arguments to substantiate its position and (iv) after giving each party an opportunity to rebut the other party's data and arguments, decide all disputed items set forth in each Submission Notice. B&W Opco and B&W will instruct, and will use their reasonable best efforts to cause, the Independent Firm to determine and report to B&W and B&W Opco in writing upon all disputed items included in the Submission Notices within 90 calendar days following the delivery of such Submission Notices to the Independent Firm in accordance with this Section 2.04, and such report will be final, binding and conclusive on B&W and B&W Opco. The Independent Firm's determination will be accompanied by a certificate of the Independent Firm that it reached its decision in accordance with the provisions of this Section 2.04. The Independent Firm will not have the authority to review or make a determination with respect to any matter except the disputed items included in each Submission Notice, it being understood that the Independent Firm will not conduct its own independent audit or review, but rather will only resolve specific differences between B&W and B&W Opco and make a determination within the range of such differences as set forth in each Submission Notice. In resolving such differences, the Independent Firm may not assign a value to an item greater than the greatest value claimed by any party or less than the smallest value for such item claimed by any party in the Submission Notice. The fees and disbursements of the Independent Firm will be allocated equally between B&W and B&W Opco. In acting under this Agreement, the Independent Firm will be entitled to the privileges and immunities of arbitrators. The Working Capital Statement will be deemed final, binding and conclusive on the parties hereto for the purposes of this Section 2.04 upon the earliest of (A) the failure of B&W to deliver a Notice of Dispute to B&W Opco pursuant to Section 2.04(b) within 20 business days of B&W Opco's delivery of the Working Capital Statement to B&W, (B) the resolution of all disputes by B&W and B&W Opco in accordance with this Section 2.04, (C) the failure by B&W to deliver a Submission Notice to the Independent Firm in accordance with Section 2.04(c) (provided B&W Opco has delivered a Submission Notice in accordance with Section 2.04(c)) or (D) the resolution of all the disputed items set forth in the Submission Notice by the Independent Firm. The Working Capital Statement, as modified by all adjustments provided for in the Notice of Dispute, will be deemed final, binding and conclusive on the parties hereto for the purpose of this Section 2.04 upon failure of B&W Opco to deliver a Submission Notice to the Independent Firm in accordance with Section 2.04(c) (provided B&W has delivered a Submission Notice in accordance with Section 2.04(c)). B&W and B&W Opco will each permit the other party, its agents and the Independent Firm reasonable access during normal business hours, and on reasonable notice, to all relevant books and records, computer files, premises and personnel involved in the preparation of the underlying records and operating systems which generated the information used in the preparation of the Working Capital Statement, the Notice of Dispute and the Submission Notice and will permit them to take copies of such accounts, documents and records at their own expense. (e) Within five business days of the Working Capital Statement being deemed final, if the Working Capital of B&W Opco as of the Measurement Time (as finally determined) is less than the Minimum Required Working Capital Amount as of the Measurement Time, B&W shall pay to B&W Opco an amount equal to (i) such Minimum Required Working Capital Amount less such Working Capital plus (ii) interest on such difference from the date of this Agreement to the date of such payment at a rate per annum equal to (A) three-month LIBOR (as reported in The Wall Street Journal (Northeast edition) or, if not reported therein, in another authoritative source acceptable to B&W and B&W Opco) on the date of this Agreement (or if no quotation for three-month LIBOR is available for such date, on the next preceding date for which such a quotation is available) plus (B) 1.5%. SECTION 2.05. License of B&W Trademark. From the date of this Agreement until the second anniversary of the date of this Agreement, B&W hereby grants to B&W Opco and its Subsidiaries a non-exclusive, non-assignable, royalty-free license to use the Brown & Williamson(R) trademark (the "B&W Trademark") on purchase orders, product labels, packaging materials and all other Contributed Assets on which the B&W Trademark appears as of the date of this Agreement ("B&W Packaging"). During such period, Reynolds American will use the B&W Trademark in the form and style in which it was used on the B&W Packaging as of the date of this Agreement (whether alone or in combination with other trademarks) on B&W Packaging, provided that any such products manufactured by B&W Opco are manufactured, in all material respects, at the same quality standards maintained by B&W prior to the Effective Time. Any B&W Packaging not used within the aforesaid license period shall not thereafter be used by B&W Opco and will be destroyed at B&W Opco's sole expense unless otherwise agreed to by B&W in writing. SECTION 2.06. Transition Support Services. (a) B&W and its affiliates shall provide B&W Opco with the services described on Schedule 2.06(a) (the "B&W Services") for the transitional period set forth on such Schedule; provided, however, B&W and its affiliates shall not be obligated to perform any such B&W Service if and to the extent that such B&W Service (i) has not historically been provided by B&W in the ordinary course with respect to the B&W Business, or in a volume substantially greater than that which has been historically provided to the B&W Business by B&W or such affiliate, (ii) would require B&W to hire any additional personnel or make any capital expenditures, (iii) is for any operations of B&W Opco other than in respect of the B&W Business or (iv) would breach any contract to which B&W is a party or violate any applicable law to which B&W is subject. B&W Opco will reimburse B&W for the B&W Services at B&W's fully-allocated costs. During the period in which the B&W Services are being provided, B&W Opco shall furnish B&W with such information and other reasonable assistance as is necessary to enable B&W to perform the B&W Services. Any such information shall be provided by B&W Opco at the same times and in the same format as previously supplied to B&W by the B&W Business. B&W Opco shall be responsible for assuring that such information is accurate and complete. B&W's performance of any B&W Service may be suspended during any period that B&W Opco fails to provide such information and assistance to the extent such failure renders performance of such B&W Service by B&W unduly burdensome. B&W shall not be liable to B&W Opco for any Indemnifiable Losses in respect of providing any B&W Service absent gross negligence or wilful misconduct. (b) B&W Opco and its Subsidiaries shall provide B&W and its affiliates with the services described on Schedule 2.06(b) (the "B&W Opco Services") for the transitional period set forth on such Schedule; provided, however, B&W Opco and its Subsidiaries shall not be obligated to perform any such B&W Opco Service if and to the extent that such B&W Opco Service (i) has not been historically provided to B&W in the ordinary course of the B&W Business, or in a volume substantially greater than that which has been historically provided to B&W and its affiliates prior to the date of this Agreement, (ii) would require B&W Opco to hire any additional personnel or make any capital expenditures, (iii) is for any operations of a person other than B&W or any of its affiliates or (iv) would breach any contract to which B&W Opco is a party or violate any applicable law to which B&W Opco is subject. B&W will reimburse B&W Opco for the B&W Opco Services at B&W Opco's fully-allocated costs. During the period in which the B&W Opco Services are being provided, B&W shall furnish B&W Opco with such information and other reasonable assistance as is necessary to enable B&W Opco to perform the B&W Opco Services. Any such information shall be provided by B&W at the same times and in the same format as previously supplied. B&W shall be responsible for assuring that such information is accurate and complete. B&W Opco's performance of any B&W Opco Service may be suspended during any period that B&W fails to provide such information and assistance to the extent such failure renders performance of such B&W Opco Service by B&W Opco unduly burdensome. B&W Opco shall not be liable to B&W for any Indemnifiable Losses in respect of providing any B&W Opco Service absent gross negligence or wilful misconduct. SECTION 2.07. Further Assurances. On and after the effectiveness of this Agreement, B&W shall from time to time, at the request of B&W Opco and at B&W's expense, execute and deliver, or cause to be executed and delivered, such other instruments of conveyance and transfer and take such other actions as B&W Opco may reasonably request, in order to more effectively consummate the transactions contemplated hereby and to vest in B&W Opco title to the Contributed Assets. SECTION 2.08. Texas Settlement Agreement. The parties hereto hereby acknowledge and agree that (a) consistent with Section 2.03, the Texas Settlement Agreement shall not be assigned by B&W to B&W Opco unless and until such time as all required consents under the Texas Settlement Agreement for such assignment shall have been obtained or as otherwise permitted by an order of the United States District Court for the Eastern District of Texas, Texarkana Division, or appellate courts thereof, (b) this Agreement shall not purport to release B&W from its obligations under the Texas Settlement Agreement to the State of Texas or any other party to the Texas Settlement Agreement except in accordance with the terms of the Texas Settlement Agreement or as otherwise permitted by an order of the United States District Court for the Eastern District of Texas, Texarkana Division, or appellate courts thereof, and (c) consistent with Section 3.01, upon effectiveness of this Agreement, B&W Opco shall assume, satisfy, perform, pay and discharge all Liabilities of B&W under the Texas Settlement Agreement, which are Assumed Liabilities, and such Assumed Liabilities shall be subject to the provisions of Article V. ARTICLE III Assumption of Liabilities SECTION 3.01. Assumption of Liabilities. Upon the effectiveness of this Agreement, B&W Opco agrees to assume, satisfy, perform, pay and discharge each of the Assumed Liabilities. SECTION 3.02. Further Assurances. (a) On and after the effectiveness of this Agreement, B&W Opco shall from time to time, at the request of B&W, take such actions as B&W may reasonably request, in order to more effectively consummate the transactions contemplated hereby, including the assumption of the Assumed Liabilities by B&W Opco. The parties intend that any payment or accrual by B&W Opco of any Assumed Liabilities shall be deductible by B&W Opco for all Tax purposes to the extent provided by applicable law. If B&W Opco receives a refund or credit or accrues an offset to Tax relating to Pre-Closing Tax Periods, B&W Opco shall pay to B&W within 20 days of such receipt or accrual the amount of such refund, credit or offset to Tax. (b) B&W and B&W Opco shall cooperate in good faith, and shall cause their respective officers, directors, affiliates, employees, agents, auditors and representatives to cooperate in good faith, in all matters relating to Taxes, including by maintaining and making available to each other all books and records necessary in connection with Taxes. ARTICLE IV Employee Matters SECTION 4.01. Transfer of Employment to B&W Opco. (a) Upon the effectiveness of this Agreement, (i) B&W Opco shall assume and honor all terms and conditions of employment (including under any applicable labor or collective bargaining agreement) in respect of the Employees to the extent required to accomplish the transfer of employment of the Employees to B&W Opco in connection with the Asset Contribution and Assumption of Liabilities and (ii) B&W and B&W Opco agree to take or cause to be taken such actions as are reasonably practicable (including the assumption, if necessary, of Liabilities relating to the employment of Employees) such that the employment of the Employees will transfer to B&W Opco at such time (the "Employment Transfer Time"). B&W Opco shall offer to employ and continue the employment of each Employee at the same salary and wages payable by B&W and the Included Subsidiaries to such Employee immediately prior to the Employment Transfer Time and shall maintain terms and conditions of employment which replicate those provided by B&W and the Included Subsidiaries immediately prior to the Employment Transfer Time as and to the extent required by applicable Law or as a result of negotiation with applicable unions. (b) If any Employee requires a work permit or employment pass or other approval for his or her employment to continue with B&W Opco following the Employment Transfer Time, B&W Opco shall use its reasonable best efforts to ensure that any necessary applications are promptly made and to secure the necessary permit, pass or other approval. (c) B&W and B&W Opco intend that (i) for purposes of any severance or termination benefit plan, program, policy, agreement or arrangement of B&W or any Included Subsidiary, the Transactions shall not constitute a severance of employment of any Employee prior to or upon the consummation of the Transactions and (ii) Employees will have continuous and uninterrupted employment immediately before and immediately after the Employment Transfer Time. B&W Opco shall assume all Liabilities in respect of claims made by any Employees for severance or other termination benefits (including claims for wrongful dismissal, notice of termination of employment or pay in lieu of notice) arising out of, relating to or in connection with B&W Opco's failure to offer employment to, or continue the employment of, any Employee, or failure to offer or continue employment on terms and conditions which would preclude any claims of constructive dismissal or similar claims under any applicable Law or other failure to comply with the terms of this Agreement, or where any such severance or termination benefits are automatically required to be paid under applicable Law. SECTION 4.02. Transfer of Benefit Plans. As of the Employment Transfer Time, B&W Opco shall adopt as the successor plan sponsor, all B&W Benefit Plans (and, as applicable, any related trusts) and shall assume all of B&W's rights under such related trusts and all of B&W's Liabilities under the B&W Benefit Plans (other than Excluded Liabilities), and B&W and B&W Opco shall take all action reasonably required to effect such adoption and assumption as of the Employment Transfer Time. Following such adoption and assumption, PLC and its Subsidiaries shall have no further Liabilities of any kind or description under the B&W Benefit Plans or their related trusts (except for Excluded Liabilities). ARTICLE V Indemnification; Covenants SECTION 5.01. Indemnification by B&W Opco and Reynolds American. Subject to the provisions of this Article V, from and after the effectiveness of the Asset Contribution and the Assumption of Liabilities, B&W Opco and Reynolds American (but, in the case of Reynolds American, only with respect to clause (c) below) shall jointly and severally indemnify, defend and hold harmless the B&W Indemnitees from and against, and pay or reimburse the B&W Indemnitees for, all Indemnifiable Losses, as incurred, to the extent: (a) relating to or arising from the Contributed Assets or the Assumed Liabilities (including the failure by B&W Opco to pay, perform or otherwise discharge any of the Assumed Liabilities in accordance with their terms), whether such Indemnifiable Losses relate to or arise from events, occurrences, actions, omissions, facts or circumstances occurring, existing or asserted before, at or after the Asset Contribution and Assumption of Liabilities; (b) relating to or arising from the Non-Assignable Assets, whether such Indemnifiable Losses relate to or arise from events, occurrences, actions, omissions, facts or circumstances occurring, existing or asserted before, at or after the Asset Contribution and Assumption of Liabilities; provided, however, that with respect to Indemnifiable Losses relating to or arising from events, occurrences, facts or circumstances relating to or arising from actions or omissions by any B&W Indemnitee occurring after the Asset Contribution and Assumption of Liabilities, B&W Opco shall not be liable to the extent such Indemnifiable Losses directly relate to or arise from (i) actions or omissions by any B&W Indemnitee that are in conflict with any written instruction from B&W Opco with respect to such Non-Assignable Asset or (ii) any action taken by B&W with respect to such Non-Assignable Assets outside the ordinary course of business or that is finally determined by a court of competent jurisdiction to result from the gross negligence or wilful misconduct of B & W; (c) relating to or arising from any untrue or allegedly untrue statement of a material fact contained in, or incorporated by reference to, any of the Filings or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case not with respect to statements made therein or incorporated by reference therein based upon information supplied in writing by B&W specifically for inclusion or incorporation by reference therein; provided, however, that the indemnification provided for in this clause (c) shall only apply to Third Party Claims; or (d) the aggregate MSA Liability Amount due and payable with respect to any period prior to the date of this Agreement and paid by a B&W Opco Indemnitee on or after such time is less than the Estimated MSA Liability Amount, with any such payment or payments being made promptly following the finalization of the various components thereof; provided, however, that any reduction in such MSA Liability Amount resulting from any Non-Participating Manufacturer's adjustment shall not be considered for purposes of this Section 5.01(d). SECTION 5.02. Indemnification by B&W. Subject to the provisions of this Article V, from and after the effectiveness of the Asset Contribution and the Assumption of Liabilities, B&W shall indemnify, defend and hold harmless the B&W Opco Indemnitees from and against, and pay or reimburse the B&W Opco Indemnitees for, all Indemnifiable Losses, as incurred, to the extent: (a) relating to or arising from the Excluded Assets or the Excluded Liabilities (including the failure by B&W to pay, perform or otherwise discharge any of the Excluded Liabilities in accordance with their terms), whether such Indemnifiable Losses relate to or arise from events, occurrences, actions, omissions, facts or circumstances occurring, existing or asserted before, at or after the Asset Contribution and Assumption of Liabilities (other than Indemnifiable Losses that relate to or arise from the Non-Assignable Assets); (b) relating to or arising from the Non-Assignable Assets with respect to such Indemnifiable Losses relating to or arising from events, occurrences, facts or circumstances relating to or arising from actions or omissions by B&W occurring after the Asset Contribution and Assumption of Liabilities that (i) are in conflict with any written instruction from B&W Opco with respect to such Non-Assignable Asset or (ii) are taken outside the ordinary course of business or are finally determined by a court of competent jurisdiction to result from the gross negligence or wilful misconduct of B & W; (c) relating to or arising from any untrue statement of a material fact contained in, or incorporated by reference to, any of the Filings or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but only with respect to statements made therein or incorporated by reference therein based upon information supplied in writing by B&W specifically for inclusion or incorporation by reference therein; provided, however, that the indemnification provided for in this clause (c) shall only apply to Third Party Claims; or (d) the aggregate MSA Liability Amount due and payable with respect to any period prior to the date of this Agreement and paid by a B&W Opco Indemnitee on or after the date of this Agreement is greater than the Estimated MSA Liability Amount, with any such payment or payments being made promptly following the finalization of the various components thereof. SECTION 5.03. Procedures Relating to Indemnification. (a) In order for an Indemnitee to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim made by any Person who is not an Indemnitee against such Indemnitee (a "Third Party Claim"), such Indemnitee must notify the party who may become obligated to provide indemnification hereunder (the "Indemnifying Party") in writing, and in reasonable detail, of the Third Party Claim reasonably promptly, and in any event within 20 days after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure; provided, further, however, that no such notice shall need to be given by any B&W Indemnitee with respect to Third Party Claims arising as a result of any Action pending as of the date of this Agreement. After any required notification (if applicable), the Indemnitee shall deliver to the Indemnifying Party, promptly after the Indemnitee's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim. (b) If a Third Party Claim is made against an Indemnitee, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof (at the expense of the Indemnifying Party) with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnitee; provided, however, that (i) the Indemnifying Party shall not be entitled to assume such defense unless it first acknowledges in writing its obligation hereunder to indemnify the Indemnitee with respect to all material elements of such Third Party Claim and (ii) the Indemnifying Party shall not be entitled to assume the defense of a Third Party Claim if (but only to the extent that) the Indemnitee reasonably determines that it has defenses, claims or positions that are unique, separate or distinct from the defenses, claims or positions that might be available to other Persons relating to such Third Party Claim (such as jurisdictional defenses). Except as set forth below, should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party will not be liable to the Indemnitee for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof. If the Indemnifying Party assumes such defense, the Indemnitee shall have the right to participate, at its own expense, in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense; provided, however, that an Indemnitee may reassume control of any defense if the Indemnitee reasonably believes that the Indemnifying Party does not have the financial capability to fully indemnify the Indemnitee for the Indemnifiable Losses that may be incurred by the Indemnitee as a result of the applicable Third Party Claim or if the Indemnifying Party fails to diligently prosecute the defense of such Third Party Claim within 20 calendar days after receipt of written notice of such failure to prosecute by the Indemnitee. The Indemnifying Party shall be liable for the reasonable fees and expenses of counsel employed by the Indemnitee (i) for any period during which the Indemnifying Party has not assumed the defense thereof, (ii) as a result of the retention of control pursuant to the proviso to the first sentence of this Section 5.03(b) or (iii) following the reassumption of control of any defense pursuant to the proviso to the preceding sentence. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines cannot be separated from any related claim for money damages. If such equitable or other relief portion of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages and, in such event, the Indemnifying Party shall continue to be liable for the reasonable fees and expenses of counsel employed by the Indemnitee with respect to the portion of the defense of such Third Party Claim that the Indemnifying Party has not assumed. The indemnification required by Section 5.01 or 5.02, as the case may be, shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when invoices are received or the Indemnifiable Loss is incurred. If the Indemnifying Party chooses to defend or prosecute a Third Party Claim (i) all the parties hereto reasonably necessary or appropriate for such defense or prosecution shall cooperate in the defense or prosecution thereof, which cooperation shall include the retention and (upon the Indemnifying Party's request) the provision to the Indemnifying Party of records and information which are reasonably relevant to such Third Party Claim, (ii) the Indemnifying Party shall keep the Indemnitee reasonably informed of all significant developments in connection with the defense or prosecution of such Third Party Claim and (iii) the Indemnitee shall agree to any settlement, compromise or discharge of such Third Party Claim which the Indemnifying Party may recommend (after representing to the Indemnitee that such settlement is reasonably likely to be acceptable to the parties to the Third Party Claim) and which by its terms obligates the Indemnifying Party to pay the full amount of Liability of the Indemnitee in connection with such Third Party Claim; provided, however, that, unless the Indemnitee in its sole discretion otherwise consents in writing, the Indemnifying Party shall not consent to entry of any Judgment or enter into any settlement (x) that provides for injunctive or other nonmonetary relief affecting the Indemnitee or any of its affiliates (other than the Indemnifying Party and its Subsidiaries) or their respective properties or (y) that does not include as an unconditional term thereof the giving by each claimant or plaintiff to such Indemnitee of a release from all Liability with respect to such claim. If the Indemnifying Party shall have assumed the defense of a Third Party Claim, the Indemnitee shall not admit any Liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnifying Party's prior written consent. (c) In order for an Indemnitee to be entitled to any indemnification provided for under this Agreement in respect of a claim that does not involve a Third Party Claim, the Indemnitee shall deliver notice of such claim (in reasonably sufficient detail to enable the Indemnifying Party to evaluate such claim) with reasonable promptness to the Indemnifying Party. The failure by any Indemnitee to give such notification shall not affect the indemnification provided hereunder except to the extent that the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure. If the Indemnifying Party has disputed its Liability with respect to such claim the Indemnifying Party and the Indemnitee shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by litigation, subject to the provisions of Section 6.09, in an appropriate court of competent jurisdiction. SECTION 5.04. Certain Limitations. (a) The amount of any Indemnifiable Losses or other Liability for which indemnification is provided under this Agreement shall be net of any amounts actually recovered by the Indemnitee from third parties (including amounts actually recovered under insurance policies) with respect to such Indemnifiable Losses. The Indemnitee shall use its reasonable best efforts to seek to obtain recovery in respect of any Indemnifiable Loss or such other Liability under any available insurance policy. (b) Any indemnification payments made pursuant to this Agreement shall be treated for all Tax purposes (i) as to the Indemnitee, as nontaxable reimbursements or capital contributions, as the case may be, and (ii) as to the Indemnifying Party, as deductible payments to the extent provided by applicable law, unless, and then only to the extent, otherwise required by a Final Determination. If an indemnification payment made pursuant to this Agreement is treated as a taxable payment as a result of a Final Determination, such indemnification payment shall be (i) reduced to take account of the present value of any net Tax benefit actually realized by the Indemnitee in connection with or otherwise arising from the incurrence of the applicable Indemnifiable Loss and (ii) increased to take account of any net Tax cost incurred by the Indemnitee as a result of the receipt of such indemnification payment (grossed up for such increase). SECTION 5.05. Limitation on Transfer of B&W Opco Assets. (a) B&W Opco shall not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, directly or indirectly, all or substantially all its assets to, any Person, unless the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not B&W Opco) shall expressly assume all the obligations of B&W Opco under this Agreement. Any such assumption shall be in writing and in form and substance reasonably satisfactory to B&W. For purposes of this Section 5.05(a), the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of B&W Opco, which properties and assets, if held by B&W Opco instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of B&W Opco on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of B&W Opco. Notwithstanding the foregoing, the obligations of B&W Opco under this Agreement shall not be terminated as a result of any such assumption. (b) B&W Opco shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, consummate any Asset Disposition unless B&W Opco or such Subsidiary receives consideration at the time of such Asset Disposition that has a fair market value at least equal to the fair market value (including as to the value of all non-cash consideration) of the shares and assets subject to such Asset Disposition. In the event that the value of the shares and assets subject to such Asset Disposition exceeds $20,000,000, the fair market value of such shares and assets shall be determined in good faith by the Board of Directors of Reynolds American. (c) B&W Opco shall not, and shall not permit any of its Subsidiaries, directly or indirectly, to make a Restricted Payment if at the time B&W Opco or such Subsidiary makes such Restricted Payment the Consolidated Net Worth (adjusted to give effect to any such Restricted Payment) would be less than $5.9 billion (or if different, 75% of the Consolidated Net Worth of B&W Opco and its Subsidiaries as reflected on the balance sheet of B&W Opco and its Subsidiaries on August 1, 2004, after giving effect to the Transactions (including the merger of R. J. Reynolds Tobacco Company into B&W Opco and the distribution of Santa Fe Natural Tobacco Company, Inc. by RJR to Reynolds American)). (d) The limitations set forth in this Section 5.05 shall terminate in the event that Reynolds American has expressly assumed all of the obligations of B&W Opco under this Agreement. Any such assumption shall be in writing and in form and substance reasonably satisfactory to B&W. Notwithstanding the foregoing, the obligations of B&W Opco under this Agreement (other than under this Section 5.05) shall not be terminated as a result of any such assumption. ARTICLE VI Miscellaneous SECTION 6.01. Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to B&W or B&W Opco (prior to completion of the B&W Opco Stock Contribution), to 401 South 4th Avenue Louisville, KY 40232 Fax: (502) 217-7297 Attention: General Counsel with a copy to: Cravath, Swaine & Moore LLP 825 Eighth Avenue New York, NY 10019 Fax: 212-474-3700 Phone: 212-474-1000 Attention: Philip A. Gelston, Esq. Sarkis Jebejian, Esq. (b) if to Reynolds American or B&W Opco (after the completion of the B&W Opco Stock Contribution), to 401 North Main Street Winston-Salem, NC 27102-2990 Fax: (336) 741-2998 Attention: General Counsel with a copy to: Jones Day 222 East 41st Street New York, NY 10017 Fax: 212-755-7306 Phone: 212-326-3939 Attention: Jere R. Thomson, Esq. SECTION 6.02. Amendments; Waivers. (a) No provision of this Agreement may be amended or waived unless such amendment or waiver is in writing and signed, in the case of an amendment, by the parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights nor shall any single or partial exercise by any party to this Agreement of any of its rights under this Agreement preclude any other or further exercise of such rights or any other rights under this Agreement. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law or otherwise. SECTION 6.03. Interpretation. When a reference is made in this Agreement to a Section, Subsection, Schedule or Exhibit, such reference shall be to a Section or Subsection of, or a Schedule or an Exhibit to, this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The words "hereof", "herein", "hereby" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words "date hereof" shall refer to the date of this Agreement. The term "or" is not exclusive. The word "extent" in the phrase "to the extent" shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply "if". The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. Any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented. References to a Person are also to its permitted successors and assigns. This Agreement, including the provisions of Article V, shall not be strictly construed against any Indemnitee seeking to enforce any indemnification rights under this Agreement. SECTION 6.04. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the Transactions contemplated hereby are fulfilled to the extent possible. SECTION 6.05. Counterparts; Effectiveness. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties; provided, however, that the rights and obligations of Reynolds American under this Agreement shall not become effective until the completion of the B&W Opco Stock Contribution. This Agreement and the obligations set forth herein shall remain in effect following consummation of the Transactions and shall not terminate unless and until each of the parties hereto has agreed to such termination in writing. SECTION 6.06. Entire Agreement; No Third-Party Beneficiaries. This Agreement and the other Transaction Agreements constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof and, except for Article V, are not intended to confer upon any Person other than the parties any rights or remedies. SECTION 6.07. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 6.08. Assignment. Except as set forth in Section 5.05(a), neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties without the prior written consent of the other parties hereto, except that B&W may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to PLC or any of its Subsidiaries that agrees in writing to be bound by the provisions hereof (provided that any such assignment shall not relieve B&W from its obligations under this Agreement). Any purported assignment without such prior written consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns. SECTION 6.09. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal court located in the State of Delaware or in the Chancery Court of the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or Chancery Court of the State of Delaware in the event any dispute arises out of this Agreement or any Transaction, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) irrevocably and unconditionally waives (and agrees not to plead or claim) any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or any Transaction, (d) agrees that it will not bring any action relating to this Agreement or any Transaction in any court other than any Federal court sitting in the State of Delaware or Chancery Court of the State of Delaware (provided that this Section 6.09(d) shall not apply in respect of any claim for indemnification in respect of any Third Party Claim that is brought in any other court, in which case, such an action may be brought in such other court) and (e) waives any right to trial by jury with respect to any action related to or arising out of this Agreement or any Transaction. SECTION 6.10. Confidentiality. (a) B&W agrees to maintain, and B&W shall cause its directors, officers, employees and other representatives to maintain, the confidentiality of all material non-public information obtained by B&W from Reynolds American or any of its Subsidiaries or their respective directors, officers, employees or agents in connection with this Agreement. (b) Notwithstanding the foregoing, the confidentiality obligations of Section 6.10(a) will not apply to information obtained other than in violation of this Agreement: (i) which B&W or any of its directors, officers, employees or other representatives is required to disclose by judicial or administrative process, or by other requirements of applicable law or regulation or any governmental authority; provided, however, that, where and to the extent practicable, B&W (A) will give B&W Opco and Reynolds American reasonable notice of any such requirement and, to the extent protective measures consistent with such requirement are available, the opportunity to seek appropriate protective measures and (B) will cooperate with B&W Opco and Reynolds American in attempting to obtain such protective measures; (ii) which becomes available to the public other than as a result of a breach of Section 6.10(a); or (iii) which has been provided to B&W or any of its officers, employees or other representatives by a third party other than from Reynolds American or any of its Subsidiaries or their respective directors, officers, employees or agents whom B&W reasonably believes obtained such information in breach of a contractual or fiduciary obligation to B&W Opco. (c) Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative or other agent of such party) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure, except that (i) this provision shall not permit disclosure until the earliest of (A) the date of the public announcement of discussions relating to the transaction, (B) the date of the public announcement of the transaction or (C) the date of the execution of an agreement (with or without conditions) to enter into the transaction, (ii) tax treatment and tax structure shall not include the identity of any existing or future party (or any affiliate of such party) to this Agreement and (iii) this provision shall not permit disclosure to the extent that nondisclosure is necessary in order to comply with applicable securities laws. Nothing in this Agreement shall in any way limit any party's ability to consult any tax advisor (including a tax advisor independent from all other entities involved in the transactions contemplated by this Agreement) regarding the tax treatment or tax structure of the transactions contemplated by this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Formation Agreement as of the day and year first above written. BROWN & WILLIAMSON TOBACCO CORPORATION By______________________________________________ Name: Title: BROWN & WILLIAMSON U.S.A., INC. By______________________________________________ Name: Title: REYNOLDS AMERICAN INC. By______________________________________________ Name: Charles A. Blixt Title: Executive Vice President and General Counsel EX-10.2 9 g90345exv10w2.txt EX-10.2 Exhibit 10.2 GOVERNANCE AGREEMENT, dated as of July 30, 2004 (this "Agreement"), among BRITISH AMERICAN TOBACCO p.l.c., a public limited company incorporated under the laws of England and Wales ("BAT"), BROWN & WILLIAMSON TOBACCO CORPORATION, a Delaware corporation ("B&W"), and REYNOLDS AMERICAN INC., a North Carolina corporation ("Reynolds American"). WHEREAS the respective Boards of Directors of BAT, B&W and Reynolds American have approved the execution, delivery and performance of this Agreement; WHEREAS B&W and R.J. Reynolds Tobacco Holdings, Inc., a Delaware corporation ("RJR"), entered into the Business Combination Agreement dated as of October 27, 2003 (the "Combination Agreement"), and each of B&W, RJR, Reynolds American and certain of their affiliates will engage in the Transactions (as defined in the Combination Agreement); WHEREAS B&W will own approximately 42% of the outstanding shares of common stock, par value $0.01 per share, of Reynolds American (the "Common Stock") immediately following the completion of the Transactions; and WHEREAS BAT, B&W and Reynolds American desire to establish in this Agreement certain terms and conditions concerning the corporate governance of Reynolds American, the acquisition and disposition of securities of Reynolds American by BAT, B&W and their respective affiliates and other matters. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I. Definitions SECTION 1.01. Definitions. As used in this Agreement, the following terms shall have the following meanings: An "affiliate" of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. "Approval Termination Event" means (i) any wilful and deliberate action, or failure to take action, by Reynolds American or the Board of Directors that results in B&W failing to receive a material right provided for in Section 2.04(a), (b) or (d) or (ii) any wilful and deliberate action, or failure to take action, by Reynolds American or the Board of Directors relating to Section 2.04(c) that materially increases the likelihood of an adverse tax event or consequence to any Investor Party as a result of such action or failure to take action. "B&W" has the meaning set forth above. "B&W Counteroffer" means an offer by any Investor Party to acquire any and all of the outstanding Common Stock not beneficially owned by an Investor Party at the time of the offer (or such lesser number or percentage of shares of Common Stock (a) equal to (i) the percentage of Common Stock that is subject to acquisition pursuant to a Third Party Offer giving rise to B&W's ability to make such B&W Counteroffer (if the Board of Directors has approved, consented to or recommended (other than a negative recommendation) such Third Party Offer) less (ii) B&W's Percentage Interest at such time or (b) as may be approved by a majority of the Other Directors). Unless otherwise approved by a majority of the Other Directors prior to the acquisition of shares of Common Stock pursuant to a B&W Counteroffer, any B&W Counteroffer structured as a tender offer or other share purchase shall include a binding commitment (subject to any mandatory legal restrictions and requirements) by the offering party to acquire within one year of the closing of such tender offer or share purchase any Common Stock that remains outstanding at the time of such closing for consideration equal to or greater than the 2 consideration paid in such tender offer or share purchase for the same class of Common Stock less the percentage of Common Stock, if any, that B&W was not required to acquire pursuant to clause (a) above. "B&W Opco" means Brown & Williamson U.S.A., Inc., a North Carolina corporation. "B&W's Percentage Interest" means, as of any date of determination, the percentage of Voting Power (determined on the basis of the number of outstanding shares of Voting Stock, as set forth in the most recent SEC filing of Reynolds American prior to such date that contained such information) that is beneficially owned by the Investor Parties as of such date. For purposes of determining whether and to what extent an Investor Party is entitled to any right under this Agreement, Voting Stock acquired by any of them in breach of this Agreement will be excluded from any calculation of B&W's Percentage Interest. "BAT" has the meaning set forth above. "beneficial owner" and words of similar import have the meaning assigned to such terms in Rule 13d-3 promulgated of the Exchange Act as in effect on the date of this Agreement. "Board" or "Board of Directors" means the Board of Directors of Reynolds American, except where the context requires otherwise. "Board Provisions" means Sections 2.01, 2.02, 2.03 and 2.06. "Closing" has the meaning assigned to such term in the Combination Agreement. "Combination Agreement" has the meaning set forth above. "Common Stock" has the meaning set forth above and, as the context may require, any other common stock of Reynolds American that may be issued from time to time. "Core Committee" has the meaning assigned to such term in Section 2.03(b). 3 "Corporate Governance and Nominating Committee" shall mean the Corporate Governance and Nominating Committee of the Board of Directors or any successor committee thereto. "Deferral Period" has the meaning assigned to such term in Section 3.06. "Demand Registration" has the meaning assigned to such term in Section 3.01(a). "Director" means a member of the Board of Directors. "Discriminatory Transaction" means any corporate action (other than those taken pursuant to the express terms of this Agreement) that would (a) impose material limitations on the legal rights of any Investor Party as a holder of a class of Voting Stock, including any action that would impose material restrictions without lawful exemption for the Investor Parties that are based upon the size of security holding, nationality of a security holder, the business in which a security holder is engaged or other considerations applicable to any Investor Party and not to holders of the same class of Voting Stock generally or (b) deny any material benefit to any Investor Party proportionately as a holder of any class of Voting Stock that is made available to other holders of that same class of Voting Stock generally. "Equity Security" means (a) any Common Stock or other Voting Stock, (b) any securities of Reynolds American convertible into or exchangeable for Common Stock or other Voting Stock or (c) any options, rights or warrants (or any similar securities) issued by Reynolds American to acquire Common Stock or other Voting Stock. "Exchange Act" means the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, as amended. "GAAP" means U.S. generally accepted accounting principles, as in effect at the time such term is relevant. 4 "Independent Director" means a Director of Reynolds American who qualifies as an "independent director" of Reynolds American under (a) (i) NYSE Rule 303A(2), as such rule may be amended, supplemented or replaced from time to time, or (ii) if Reynolds American is not listed on the NYSE, any comparable rule or regulation of the primary securities exchange or quotation system on which the Common Stock is listed or quoted (whether by final rule or otherwise) and (b) any other applicable law, rule or regulation mandating, or imposing as a condition to any material benefit to Reynolds American or any of its Subsidiaries, the independence of one or more members of the Board of Directors, excluding, in each case, requirements that relate to "independence" only for members of a particular Board committee or directors fulfilling a particular function. In addition, in order for a Director to be deemed to be an "Independent Director", (A) such Director shall not be, or at any time during the previous three years have been, a director, officer or employee of BAT or any of its subsidiaries (other than Reynolds American and its subsidiaries, if applicable) and (B) assuming for this purpose that such Director were a director of BAT (whether or not such Director actually is or has been a director of BAT), such Director would be considered to be an "independent director" of BAT under NYSE Rule 303A(2), as such rule may be amended, supplemented or replaced from time to time (provided that, with respect to this clause (B), (x) BAT shall be deemed to be a NYSE listed company, (y) any permitted delays for compliance or exceptions for foreign issuers under the NYSE rules shall be inapplicable and (z) the fact that such Director is serving as a Director of Reynolds American shall be disregarded). The fact that a Person has been designated by B&W for nomination as an Investor Director pursuant to this Agreement will not, by itself, disqualify that person as an Independent Director if that person otherwise meets the criteria of an Independent Director. "Inspectors" has the meaning assigned to such term in Section 3.04(f). "Investor Director" means a Director who is designated for such position by B&W in accordance with Section 2.01. 5 "Investor Parties" means BAT and its Subsidiaries (other than, if Reynolds American is a Subsidiary of BAT, Reynolds American and its Subsidiaries). "Management Director" means a Director who is also an executive officer of Reynolds American. "Nominee Calculation Date" has the meaning assigned to such term in Section 2.01(d). "NYSE" means the New York Stock Exchange, Inc. "Other Director" means an Independent Director that is not an Investor Director. In no event, however, will Andrew J. Schindler be deemed to be an Other Director. "Person" means any individual, firm, corporation, partnership, company, limited liability company, trust, joint venture, association, governmental entity, unincorporated organization or other entity. "Piggyback Registration" has the meaning assigned to such term in Section 3.02. "Prior Year Net Income" means, as of any date of determination, Reynolds American's consolidated net income, prepared in accordance with GAAP, for the fiscal year immediately preceding such date for which financial statements have been made publicly available. "Records" has the meaning assigned to such term in Section 3.04(f). "Registrable Securities" means (a) all shares of Common Stock issued to B&W pursuant to the Combination Agreement or purchased by any Investor Party without breach of Article IV of this Agreement and held at any time by any Investor Party and (b) any securities issued or issuable with respect to any such shares of Common Stock by way of a stock dividend or other similar distribution or stock split, or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise; provided, however, that such securities shall cease to be Registrable Securities when (i) a Registration Statement relating to such securities shall have been declared effective by the SEC and such 6 securities shall have been disposed of by an Investor Party pursuant to such Registration Statement; (ii) such securities have been disposed of by an Investor Party pursuant to Rule 144 promulgated under the Securities Act or (iii) such securities may be disposed of within the next three months without registration under the Securities Act by the applicable Investor Party pursuant to Rule 144(k) promulgated under the Securities Act in an orderly manner without materially adversely affecting the price at which such securities can be sold, as reasonably determined by such Investor Party. "Registration Statement" has the meaning assigned to such term in Section 3.01(a). "Reynolds American" has the meaning set forth above. "RJR" has the meaning set forth above. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933 and the rules and regulations promulgated thereunder, as amended. "Significant Transaction" means any sale, merger, acquisition (including by way of tender offer or exchange offer), consolidation, dissolution, recapitalization or other business combination involving Reynolds American or any of its Subsidiaries pursuant to which more than 30% of the Voting Power or the consolidated total assets of Reynolds American would be acquired or received by any Person or 13D Group (other than Reynolds American or its Subsidiaries). "Standstill Percentage" means B&W's Percentage Interest immediately following the Closing (assuming the conversion of all shares of RJR common stock outstanding immediately prior to the Closing into the number of shares of Common Stock issuable upon surrender of the related certificates). 7 "Standstill Period" means the period from the date of this Agreement until the Standstill Termination Date. "Standstill Termination Date" means the earliest to occur of: (i) the date that is the tenth anniversary of the date of this Agreement or (ii) the date on which a Significant Transaction is consummated or occurs. A "Subsidiary" of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person. "Third Party Offer" means a bona fide written offer to enter into a Significant Transaction by a Person other than an Investor Party or any other Person acting on behalf of, or who is part of a 13D Group with, any Investor Party, which offer is (a) reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such offer and (b) has not expired or been withdrawn. "13D Group" means any group of Persons formed for the purpose of acquiring, holding, voting or disposing of Voting Stock that would be required under Section 13(d) of the Exchange Act, and the rules and regulations thereunder (as in effect on, and based on legal interpretations thereof existing on, the date hereof), to file a statement on Schedule 13D with the SEC as a "person" within the meaning of Section 13(d)(3) of the Exchange Act if such group beneficially owned Voting Stock representing more than 5% of any class of Voting Stock then outstanding. "Transaction Agreements" has the meaning assigned to such term in the Combination Agreement. "Unaffiliated Equity Holders" means holders of Equity Securities other than any Investor Party. 8 "Underwriter" means a securities dealer who purchases any Registrable Securities as a principal in connection with a distribution of such Registrable Securities and not as part of such dealer's market-making activities. "Voting Power" means the ability to vote or to control, directly or indirectly, by proxy or otherwise, the vote of any Voting Stock at the time such determination is made; provided, however, that a Person will not be deemed to have Voting Power as a result of an agreement, arrangement or understanding to vote such Voting Stock if such agreement, arrangement or understanding (a) arises solely from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act and (b) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report). "Voting Stock" means securities having the right to vote generally in any election of Directors of Reynolds American. ARTICLE II. Corporate Governance SECTION 2.01. Composition of the Board of Directors. The composition of the Board of Directors and manner of selecting members thereof shall be as follows: (a) The Board of Directors shall be composed of 13 Directors. The number of such Directors may be increased only in accordance with Section 2.01(g). (b) Immediately following the Closing, the Directors shall be those individuals designated in accordance with Section 1.09 of the Combination Agreement and Exhibit H thereto and shall be classified as set forth on such Exhibit H. (c) Except as otherwise provided herein, the Directors shall be nominated as follows (it being understood that such nomination shall include any nomination of any incumbent Director for reelection to the Board of Directors): 9 (i) the Corporate Governance and Nominating Committee shall nominate for election one Management Director, who shall be the Chief Executive Officer or equivalent senior executive of Reynolds American; (ii) B&W shall have the right to designate for nomination by the Corporate Governance and Nominating Committee five Investor Directors, at least three of whom shall be Independent Directors and two of whom may be executive employees of any Investor Party, and each of whom shall be nominated for election by the Corporate Governance and Nominating Committee; and (iii) the Corporate Governance and Nominating Committee shall nominate for election the remaining Directors, each of whom shall be an Independent Director; provided, however, that the Corporate Governance and Nominating Committee may re-nominate Andrew J. Schindler for election to the Board of Directors without regard to whether he is an Independent Director. (d) Notwithstanding anything in Section 2.01(c) to the contrary, (i) if B&W's Percentage Interest, calculated as of the close of business on the last NYSE trading day of the month prior to the meeting in which the Corporate Governance and Nominating Committee selects Director nominees (the "Nominee Calculation Date"), falls below 32% but remains at least 27%, the Directors shall be nominated as set forth in Section 2.01(c) except B&W shall have the right to designate for nomination four Investor Directors, at least two of whom shall be Independent Directors and two of whom may be executive officers of any Investor Party; (ii) if B&W's Percentage Interest, calculated as of the Nominee Calculation Date, falls below 27% but remains at least 22%, the Directors shall be nominated as set forth in Section 2.01(c) except B&W shall have the right to designate for nomination three Investor Directors, at least two of whom shall be Independent Directors and one of whom may be an executive officer of any Investor Party; 10 (iii) if B&W's Percentage Interest, calculated as of the Nominee Calculation Date, falls below 22% but remains at least 15%, the Directors shall be nominated as set forth in Section 2.01(c) except B&W shall have the right to designate for nomination two Investor Directors, at least one of whom shall be an Independent Director and one of whom may be an executive officer of any Investor Party; and (iv) if B&W's Percentage Interest, calculated as of the Nominee Calculation Date, falls below 15%, B&W shall no longer have the right to designate for nomination any Investor Director. (e) In connection with each meeting of the shareholders of Reynolds American in which Directors shall be elected, B&W shall have the right to designate for nomination a number of nominees for Director that together with the persons designated for nomination by B&W who are Directors in the classes not standing for election at such meeting equals the number of Investor Directors that B&W is entitled to designate for nomination pursuant to this Section 2.01 as of the date of such meeting. Reynolds American shall cause each person designated for election in accordance with this Section 2.01 to be included in management's slate of nominees for such meeting. (f) B&W and the Board of Directors, respectively, shall have the right to designate any replacement for a Director designated for nomination or nominated, as the case may be, in accordance with this Section 2.01 by B&W or the Board of Directors, respectively, upon the death, resignation, retirement, disqualification or removal from office for other cause of such Director. Such replacement for any Independent Director shall also be an Independent Director. The Board of Directors shall elect each person so designated. (g) Without limiting the generality of Section 2.01(c), in the event that the number of Investor Directors on the Board of Directors differs from the number that B&W has the right (and wishes) to designate pursuant to this Section 2.01, (i) if the number of Investor Directors exceeds such number, B&W shall promptly take all appropriate action to cause to resign that number of 11 Investor Directors as is required to make the remaining number of such Investor Directors conform to this Section 2.01 or (ii) if the number of Investor Directors otherwise is less than such number, the Board of Directors shall take all necessary action to create sufficient vacancies on the Board of Directors to permit B&W to designate the full number of Investor Directors that it is entitled (and wishes) to designate pursuant to this Section 2.01 (such action to include expanding the size of the Board of Directors, seeking the resignation of Directors or, at the request of B&W, calling a special meeting of the shareholders of Reynolds American for the purpose of removing Directors to create such vacancies to the extent permitted by applicable law). Upon the creation of any vacancy pursuant to the preceding sentence, B&W shall designate the person to fill such vacancy in accordance with this Section 2.01, and the Board of Directors shall elect each person so designated. In the event that the number of Directors is increased pursuant to this Section 2.01(g), the Board of Directors shall cause the number of Directors to be reduced at the first available opportunity to comply with the number of Directors otherwise specified by Section 2.01(a). (h) Notwithstanding anything to the contrary in the foregoing, in no event will (i) the number of Investor Directors divided by the total number of Directors then comprising the Board exceed (ii) the number of Investor Directors which B&W is then entitled to designate pursuant to Sections 2.01(c) and (d) divided by 12, rounded up to the nearest whole number. (i) In the event that the Corporate Governance and Nominating Committee or the Board of Directors relies on Section 2.08 to exclude an Investor Director nominee from management's slate of nominees (or otherwise take adverse action with respect to any such Investor Director nominee, including failing to recommend the election of such Investor Director nominee), the Corporate Governance and Nominating Committee and the Board of Directors shall afford B&W a reasonable opportunity to select a replacement Investor Director nominee for inclusion, subject to Section 2.08, on management's slate of nominees. 12 SECTION 2.02. Solicitation and Voting of Shares. (a) Reynolds American shall use its reasonable best efforts to solicit from its shareholders eligible to vote for the election of Directors proxies in favor of the nominees selected in accordance with Section 2.01. (b) In any election of Directors or any meeting of the shareholders of Reynolds American called expressly for the removal of Directors, so long as the Board of Directors will include after such meeting (assuming for this calculation that management's entire slate of nominees is elected at such meeting) the number of Investor Directors contemplated by Section 2.01, each Investor Party shall attend in person or by proxy for purposes of establishing a quorum and shall vote all their shares of Voting Stock (i) in favor of any nominee or Director selected in accordance with Section 2.01 and(ii) otherwise against the removal of any Director designated in accordance with Section 2.01; provided, however, that the Investor Parties will have no obligation under this sentence with respect to the election of Directors at a meeting of Reynolds American shareholders where a Person (other than Reynolds American, an Investor Party, a Person that is part of a 13D Group with any Investor Party or any Person on the behalf of any of them) has made a material effort to solicit proxies in favor of a different slate of nominees for election to the Board at such meeting. In any other matter submitted to a vote of the shareholders of Reynolds American, the Investor Parties may vote any or all of their shares in their sole discretion; provided, however, that in the event the approval of B&W shall be required with respect to such matter pursuant to Section 2.04(b) or 2.04(c) and such approval shall have been given, the Investor Parties shall vote to approve such matter at any meeting of shareholders held in connection therewith. (c) Each Investor Party hereby appoints Reynolds American and any designee of Reynolds American, each of them individually, its proxy and attorney-in-fact, with full power of substitution and resubstitution (i) to vote or act by written consent with respect to all of B&W's Voting Stock which it has the right to vote pursuant to the first sentence of Section 2.02(b) or the proviso to the second sentence of Section 2.02(b) and (ii) to sign its name (as shareholder) to any consent, certificate or other 13 document relating to Reynolds American that the law of the State of North Carolina may permit or require in connection with any matter referred to in clause (i). This proxy is given to secure the performance of the duties of each Investor Party under this Agreement, and its existence will not be deemed to relieve any Investor Party of its obligations under Section 2.02(b). Each Investor Party affirms that this proxy is coupled with an interest and is irrevocable until termination of this Agreement pursuant to Section 6.11, whereupon such proxy and power of attorney shall automatically terminate. Each Investor Party shall take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy. For Voting Stock as to which any Investor Party is the beneficial but not the record owner, each Investor Party will cause any record owner of such Voting Stock to grant Reynolds American a proxy to the same effect as that contained herein. Each Investor Party represents that any proxy heretofore given in respect of such Voting Stock is not irrevocable, and hereby revokes any and all such proxies. This Section 2.02(c) shall not limit any Investor Party's right to vote pursuant to the second sentence of Section 2.02(b) (other than pursuant to the proviso thereof) or pursuant to the proviso to the first sentence of Section 2.02(b) and shall not operate to grant any proxy to any Person in connection therewith. (d) B&W agrees that it will take all action as a shareholder of Reynolds American, or as is otherwise reasonably within its control, as necessary to effect the provisions of this Agreement. SECTION 2.03. Committees. (a) Subject to the general oversight and authority of the Board of Directors under applicable law, the Board of Directors shall establish, empower and maintain the committees of the Board of Directors contemplated by this Section 2.03. (b) The following committees shall be established, empowered and maintained by the Board of Directors at all times during the term of this Agreement: (i) an Audit Committee, (ii) a Corporate Governance and Nominating Committee and (iii) a Compensation Committee (collectively, the "Core Committees"). Each of the Audit Committee, the Nomination and Governance Committee and the 14 Compensation Committee shall consist solely of Independent Directors. Investor Directors shall serve on each committee of the Board of Directors, and the number of Investor Directors on a committee of the Board of Directors shall be not less than (x) the number of Investor Directors at such time divided by (y) the total number of Directors at such time multiplied by (z) the number of Directors serving on such committee, rounded to the nearest whole number, with B&W selecting the Investor Directors that will serve on each committee of the Board, subject to the requirements set forth herein; provided, however, that (i) each of the committees named in this Section 2.03(b) shall have not less than five Directors on such committee and (ii) so long as there are any Investor Directors serving on the Board of Directors, at least one Investor Director shall serve on each committee of the Board of Directors. Notwithstanding the foregoing, an Investor Director shall not serve on any committee if such service would violate mandatory legal or listing requirements (or law, rule or regulation requiring committee member independence as a condition to a material benefit to Reynolds American or any of its Subsidiaries) concerning the independence of directors; provided, however, that Reynolds American shall take all reasonable efforts to avoid any such disqualification. (c) The Board of Directors may establish such other committees as it deems necessary or desirable, provided that such committees are established in compliance with the terms of this Agreement (including the proportionality requirement set forth in Section 2.03(b)). (d) The Board of Directors shall designate an Investor Director or an Other Director to replace any disqualified Investor Director member or Other Director member, respectively, of any committee. In the event that any Investor Director or Other Director ceases to serve on any committee of the Board of Directors and, after a reasonable time, no successor to such Director is designated in accordance with the terms hereof to serve on such committee, the number of members of such committee may be temporarily reduced if such reduction does not (and no such reduction is intended to) result in a change of the relative authorities and representation within such 15 committee among the Investor Directors (taken as a group) and the Other Directors (taken as a group). (e) In the event that the Board of Directors or any committee thereof relies on Section 2.08 to exclude an Investor Director from serving on a committee on which such Investor Director is qualified to serve, the Board of Directors and any such committee shall permit B&W to designate another Investor Director, subject to Section 2.08, to serve as a member of such committee. SECTION 2.04. Approval Required for Certain Actions. (a) The approval of a majority of the Investor Directors shall be required for the Board of Directors to approve or authorize, and for Reynolds American or any of its Subsidiaries to do, any of the following (in addition to any other Board or shareholder approval required by any law, rule or regulation or the constituent documents of Reynolds American): (i) if, at the time of such approval, authorization or action, B&W's Percentage Interest has not fallen below 32%, issue any Equity Securities, or any securities convertible into or exercisable for Equity Securities, in any transaction or series of related transactions if such issuance would require the approval of Reynolds American's shareholders under NYSE Rule 312.03(c) as in effect of the date of this Agreement (assuming the "20 percent" threshold set forth therein were, instead, "5 percent" and disregarding the exceptions set forth therein); or (ii) if, at the time of such approval, authorization or action, B&W's Percentage Interest has not fallen below 25%, repurchase Common Stock pursuant to self-tender offers, stock repurchase programs, open market transactions or otherwise; provided, however, that Reynolds American and its Subsidiaries may (x) repurchase Common Stock from employees or former employees pursuant to the terms and conditions of Reynolds American's employee stock plans, (y) on or after the first anniversary of the Closing, repurchase Common Stock if the dividends declared (and, to the extent the payment date has occurred, paid) on Common Stock during each of the preceding four fiscal 16 quarters has equaled or exceeded 18.75% of the Prior Year Net Income applicable at the time that any such dividend was declared and (z) repurchase Common Stock to comply with the requirements of Section 2.04(d). (b) The approval of B&W, as shareholder, such approval, if given, not to be unreasonably delayed, shall be required for Reynolds American or any of its Subsidiaries to do or effect any of the following (in addition to any other Board or shareholder approval required by any law, rule, regulation or the constituent documents of Reynolds American): (i) the entry by Reynolds American or any of its Subsidiaries into any Discriminatory Transaction; (ii) any sale, asset exchange, lease, exchange, mortgage, pledge, transfer or other disposition (by merger or otherwise) (collectively, a "disposition") by Reynolds American or any of its Subsidiaries (in one transaction or a series of transactions) of any of Reynolds American's intellectual property relating to the brands set forth on Schedule 2.04, other than any disposition to a wholly-owned Subsidiary of Reynolds American or any disposition that (A) occurs in connection with creating or granting any liens to a third party that is not an affiliate of Reynolds American in connection with a bona fide financing, (B) arises as a matter of law or occurs pursuant to a court order, (C) occurs as a result of the acquisition of all outstanding Equity Securities by any Person (including by way of merger, tender or exchange offer or any similar transaction) or all or virtually all of the assets of Reynolds American and its Subsidiaries or (D) if B&W's Percentage Interest has fallen below 32%, occurs as a result of the acquisition of a majority of the Voting Power of all outstanding Voting Stock by any Person (including by way of merger, tender or exchange offer or similar transaction); (iii) any amendment to the Articles of Incorporation or By-Laws of Reynolds American or to the charter of any committee of the Board of Directors, in each case which amendment would conflict in any material respect with the provisions of this Agreement, or any 17 amendment or repeal of Section 2.03 of the By-Laws of Reynolds American or Article Eighth, Section 8 of the Articles of Incorporation of Reynolds American, in each case as in effect as of the Closing; or (iv) the adoption or implementation of any takeover defense measures (including a rights plan) that would apply to the acquisition of beneficial ownership of any Equity Securities by any Investor Party; provided, however, that Reynolds American may enter into a Rights Agreement in the form of Exhibit C to the Combination Agreement and may enter into any replacement or extension thereof in the form of such Exhibit C. (c) The approval of B&W, as shareholder, such approval, if given, not to be unreasonably delayed, shall be required for Reynolds American or any of its Subsidiaries to do or effect any of the following prior to the fifth anniversary of the date of this Agreement(in addition to any other Board or shareholder approval required by any law, rule, regulation or the constituent documents of Reynolds American): (i) effect any transaction or take any action that is reasonably likely to be inconsistent with the representations, facts or assumptions set forth in the B&W Tax Ruling (as defined in the Combination Agreement) or materially inconsistent with the representations, facts or assumptions set forth in the materials submitted to the Internal Revenue Service in seeking the B&W Tax Ruling; provided, however, that for purposes of this Section 2.04(c)(i), if a representation, fact or assumption set forth in the B&W Tax Ruling or the materials submitted to the Internal Revenue Service in seeking the B&W Tax Ruling indicated that a party had no plan or intention to effect a particular transaction or take a particular action, effecting such transaction or taking such action after the Closing (as defined in the Combination Agreement) will be deemed to be inconsistent with such plan or intention representation, fact or assumption; or 18 (ii) effect any other transaction or take any other action that, in the opinion of Cravath, Swaine & Moore LLP or other nationally recognized B&W tax counsel, had such transaction or action been effected at Closing, would more likely than not have prevented the Asset Contribution and Assumption of Liabilities, on the one hand, or the B&W Opco Stock Contribution and the Merger (as those terms are defined in the Combination Agreement), on the other hand, from qualifying as exchanges within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended. In addition, B&W and Reynolds American shall cooperate in good faith, and shall cause their respective officers, directors, affiliates, employees, agents, auditors and representatives to cooperate in good faith, in all matters relating to Taxes (as defined in the Combination Agreement), including by maintaining and making available to each other all books and records necessary in connection with Taxes. (d) If, on or prior to June 30, 2005, Reynolds American issues Common Stock upon exercise of any option, warrant or other security relating to Common Stock or otherwise issues Common Stock (restricted or otherwise) to any of its directors, officers, employees or consultants, then prior to or within a reasonable period after such issuance (but in any event not later than the end of such fiscal quarter in which such issuance occurs), Reynolds American will repurchase a number of shares of outstanding Common Stock so that the number of outstanding shares of Common Stock are not increased by such issuance; provided, however, that (i) Reynolds American will not be required to repurchase such shares, if, at the time of such issuance, B&W's Percentage Interest has fallen below 25% and (ii) Reynolds American will not be required to repurchase the first 241,414 shares that are so issued. SECTION 2.05. Financial Statements. As soon as reasonably practicable following the end of each fiscal quarter and fiscal year, Reynolds American shall furnish to B&W and BAT the consolidated financial statements of Reynolds American (including providing draft statements as such statements become available and, with respect to fiscal years, audit reports as such reports become 19 available). Each of Reynolds American, B&W and BAT shall use its reasonable best efforts to assist the other party with respect to the timeliness of filing, releasing or posting the other party's respective financial disclosure documents. Reynolds American shall cooperate with and assist BAT and B&W in the translation of Reynolds American's financial statements in order to conform such financial statements to applicable international accounting standards and shall otherwise provide BAT and B&W with access to information necessary in connection with such financial statements. SECTION 2.06. Articles of Incorporation and By-Laws. The Board of Directors of Reynolds American shall take or cause to be taken all lawful action necessary to ensure at all times that Reynolds American's Articles of Incorporation and By-Laws are not at any time inconsistent in any material respect with the provisions of this Agreement. SECTION 2.07. Interested Transactions. The approval by a majority of the Other Directors shall be required (in addition to any other Board or shareholder approval required by any law, rule or regulation) for Reynolds American or any of its Subsidiaries to enter into or effect, or agree to enter into or effect, any material contract or transaction between or involving Reynolds American or any of its Subsidiaries, on the one hand, and any Investor Party, on the other hand, the terms of which are not governed by a pre-existing agreement to which Reynolds American or any of its Subsidiaries is a party or a provision of Reynolds American's Articles of Incorporation or By-Laws. SECTION 2.08. Fiduciary Duties. Nothing in Section 2.01, 2.02, 2.03 or 2.06 shall be deemed to require the Board of Directors or any committee or member thereof to take any action or refrain from taking any action, or result in a breach of Sections 2.01, 2.02, 2.03 or 2.06 by reason of the failure to take such action or the failure to refrain from taking such action, as the case may be, if the Board of Directors, such committee or Director determines in good faith (after consideration of specific written advice of outside legal counsel, which advice will be provided to B&W) that taking such action or refraining from 20 taking such action, as the case may be, would cause a violation of his or her fiduciary duties to shareholders, including B&W and its affiliates, under applicable law. This Section 2.08 shall not be interpreted to create any fiduciary obligation that would not exist in the absence of this Section 2.08. SECTION 2.09. Change in Law. In the event any law, rule or regulation comes into force or effect (including by amendment) which conflicts with the terms and conditions of this Agreement, the parties shall negotiate in good faith to revise the Agreement to achieve the parties' intention set forth herein. SECTION 2.10. Changes in B&W's Percentage Interest Attributable to Issuances of Common Stock. To the extent that any decrease in B&W's Percentage Interest is attributable to issuances of Equity Securities by Reynolds American (as opposed to dispositions of Equity Securities by any Investor Party), such decrease will not be taken into account in determining whether B&W's Percentage Interest has fallen below any of the thresholds for B&W's Percentage Interest set forth in this Article II. ARTICLE III. Registration Rights SECTION 3.01. Registration. (a) At any time and from time to time following the first anniversary of the date of this Agreement, Reynolds American agrees that upon the written request of any Investor Party holding Registrable Securities (a "Demand Registration"), it will as promptly as reasonably practical prepare and file a registration statement (a "Registration Statement") under the Securities Act as to the number of shares of Registrable Securities specified in such request; provided, however, that (i) Reynolds American shall not be obligated to effect more than two Demand Registrations in any eighteen-month period, (ii) the Registrable Securities for which a Demand Registration has been requested by any Investor Party holding Registrable Securities shall have a value (based on the average closing price per share of Common Stock for the ten trading days preceding the delivery of B&W's request for such Demand Registration) of not less than $100,000,000 and (iii) Reynolds American shall not be required to file a shelf Registration 21 Statement pursuant to Rule 415 of the Securities Act under this Section 3.01. Each such request for a Demand Registration shall specify the number of shares of Registrable Securities proposed to be offered for sale and shall also specify the intended method of distribution thereof; provided, however, that the Investor Parties may change such number if such change shall not materially adversely affect the timing or success of the offering, so long as such change does not result in less than $100,000,000 of Registrable Securities being included in the Registration Statement. (b) Reynolds American agrees to use its reasonable best efforts (i) to cause any Registration Statement to be declared effective as promptly as reasonably practicable after the filing thereof and (ii) to keep such Registration Statement effective for a period of not less than 90 days, or, if earlier, the period sufficient to complete the distribution of the Registrable Securities. Reynolds American further agrees to supplement or make amendments to the Registration Statement as may be necessary to keep such Registration Statement effective for the period set forth in clause (ii) above, including (A) to respond to the comments of the SEC, if any, (B) as may be required by the registration form utilized by Reynolds American for such Registration Statement or by the instructions applicable to such registration form, (C) as may be required by the Securities Act or the rules and regulations thereunder or (D) as may be reasonably requested in writing by B&W or any Underwriter for B&W. Reynolds American agrees to furnish to B&W copies of any such supplement or amendment prior to its being used or filed with the SEC. Upon the expiration of the time period set forth in clause (ii) above, a Demand Registration Statement shall count as a Demand Registration Statement for purposes of determining when future Demand Registrations which can be requested pursuant to this Section 3.01, except to the extent set forth in paragraph (e) below. (c) In the event an offering of shares of Registrable Securities involves one or more Underwriters, B&W shall select the lead Underwriter and any additional Underwriters in connection with the offering from a list of 22 nationally-recognized investment banks reasonably agreed to between Reynolds American and B&W. (d) Notwithstanding the foregoing provisions of this Section 3.01, B&W may not request a Demand Registration within the 90-day period after a Registration Statement for Common Stock has been filed by Reynolds American (for its own account or for any other security holders) with and declared effective by the SEC, unless such Registration Statement has been withdrawn; provided, however, the forgoing limitation will not apply if an Investor Party holding Registrable Securities was not given the opportunity, in accordance with Section 3.02, to include its Registrable Securities in the Registration Statement described in this Section 3.01(d). (e) Any Investor Party holding Registrable Securities included in a Registration Statement shall be permitted to remove all or any part of the Registrable Securities held by it from any Registration Statement at any time prior to the effective date of the Registration Statement covering such Registrable Securities; provided, however, that such Demand Registration shall nonetheless count as a Demand Registration for purposes of determining when future Demand Registrations can be requested pursuant to this Section 3.01, unless B&W reimburses Reynolds American for all Registration Expenses incurred by Reynolds American in connection with such withdrawn Demand Registration. SECTION 3.02. Piggyback Registration. If Reynolds American proposes to file a Registration Statement under the Securities Act with respect to an offering of Common Stock for (a) Reynolds American's own account (other than a Registration Statement on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC)) or (b) the account of any of its holders of Common Stock pursuant to a demand registration requested by such holders, then Reynolds American shall give written notice of such proposed filing to B&W as soon as practicable (but in no event less than twenty days before the anticipated filing date), and such notice shall offer any Investor Party holding Registrable Securities the opportunity to register such number of shares of Registrable Securities as B&W and its affiliates may request on the same terms and conditions 23 as Reynolds American's or such holder's Common Stock (a "Piggyback Registration"). Reynolds American shall control the determination of the form of any offering contemplated by this Section 3.02, including whether any such offering shall be in the form of an underwritten offering and, if any such offering is in the form of an underwritten offering, Reynolds American shall select the lead Underwriter and any additional Underwriters in connection with such offering. SECTION 3.03. Reduction of Offering. Notwithstanding anything contained herein, if the lead Underwriter of an underwritten offering described in Section 3.01 or Section 3.02 delivers a written opinion to Reynolds American that the number of shares of Common Stock (including all Registrable Securities) that B&W, Reynolds American and any other Persons intend to include in any Registration Statement is such that the success of any such offering would be materially and adversely affected, including the price at which the securities can be sold, then the number of shares of Common Stock to be included in the Registration Statement for the account of B&W, Reynolds American and any other Persons shall be reduced pro rata to the extent necessary to reduce the total amount of securities to be included in any such Registration Statement to the amount recommended by such lead Underwriter; provided, however, that (a) priority in the case of a Demand Registration pursuant to Section 3.01 shall be (i) first, the Registrable Securities requested to be included in the Registration Statement for the account of the Investor Parties, allocated pro rata among them in accordance with the number of Registrable Securities held by each of them so that the total number of Registrable Securities to be included in any such offering for the account of all such Persons will not exceed the number recommended by such lead Underwriter, (ii) second, securities initially proposed to be offered by Reynolds American for its own account and (iii) third, pro rata among any other securities of Reynolds American requested to be registered by the holders thereof pursuant to a contractual right of registration so that the total number of registrable securities to be included in any such offering for the account of all such Persons will not exceed the number recommended by such lead Underwriter, (b) priority in the case of a Piggyback Registration 24 initiated by Reynolds American for its own account pursuant to Section 3.02 shall be (i) first, securities initially proposed to be offered by Reynolds American for its own account, (ii) second, the Registrable Securities requested to be included in the Registration Statement for the account of the Investor Parties, allocated pro rata among them in accordance with the number of registrable securities held by each of them so that the total number of Registrable Securities to be included in any such offering for the account of all such Persons will not exceed the number recommended by such lead Underwriter, and (iii) third, pro rata among any other securities of Reynolds American requested to be registered pursuant to a contractual right of registration and (c) priority with respect to inclusion of securities in a Registration Statement initiated by Reynolds American for the account of holders other than any Investor Party pursuant to demand registration rights afforded such holders shall be (i) first, securities offered for the account of such holders so that the total number of registrable securities to be included in any such offering for the account of all such Persons will not exceed the number recommended by such lead Underwriter, (ii) second, securities offered by Reynolds American for its own account, (iii) third, the Registrable Securities offered for the account of the Investor Parties and (iv) fourth, pro rata among any other securities of Reynolds American requested to be registered pursuant to a contractual right of registration. Until such time as B&W owns less than 15% of the outstanding Common Stock of Reynolds American, Reynolds American shall not enter into any contractual arrangements that would conflict with the priorities set forth in the proviso to the preceding sentence. SECTION 3.04. Registration Procedures. Subject to the provisions of Section 3.01 hereof, in connection with the registration of the sale of Registrable Securities hereunder, Reynolds American will as promptly as reasonably practicable: (a) furnish to B&W, if requested, prior to the filing of a Registration Statement, copies of such Registration Statement as is proposed to be filed, and thereafter such number of copies of such Registration Statement, each amendment and supplement thereto (in 25 each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), copies of any and all transmittal letters or other correspondence with the SEC relating to the Registration Statement and such other documents in such quantities as B&W may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities; (b) use its reasonable best efforts to register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions as B&W reasonably requests and do any and all other acts and things as may be reasonably necessary or advisable to enable B&W to consummate the disposition of the Registrable Securities in such jurisdictions; provided, however, that Reynolds American will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.04(b), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction; (c) notify B&W, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such Registration Statement or amendment contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and Reynolds American will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 26 (d) use its reasonable best efforts to cause the Registrable Securities covered by any Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of Reynolds American to enable B&W to consummate the disposition of the Registrable Securities; provided, however, that Reynolds American will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.04(d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction; (e) enter into customary agreements (including an underwriting agreement in customary form that is reasonably satisfactory to Reynolds American) and use commercially reasonable efforts to take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities; (f) make available for inspection by B&W, any Underwriter participating in any disposition pursuant to such Registration Statement, and any attorney for B&W and the Underwriter and any accountant or other agent retained by B&W or any such Underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of Reynolds American (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the officers, directors and employees of Reynolds American and its Subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; provided, however, that (i) Records and information obtained hereunder shall be used by such Inspector only to exercise their due diligence responsibility, (ii) Records or information that Reynolds American determines, in good faith, to be confidential shall not be disclosed by the Inspectors unless (x) the disclosure of such Records or information is necessary to avoid or correct a material misstatement or 27 omission in the Registration Statement or (y) the release of such Records or information is ordered pursuant to a subpoena or other order from a court or governmental authority of competent jurisdiction and (iii) Reynolds American may require, as a condition to the provision to any Inspector of any Records, that such Inspector execute and deliver to Reynolds American a written agreement, in form and substance reasonably satisfactory to Reynolds American, pursuant to which such Inspector agrees to the confidential treatment of such Records; (g) use its reasonable best efforts to obtain and deliver to the Underwriters and the Investor Parties a comfort letter from the independent public accountants for Reynolds American in customary form and covering such matters of the type customarily covered by comfort letters as such Underwriters and the Investor Parties may reasonably request; (h) use its reasonable best efforts to obtain and deliver to the Underwriters and the Investor Parties a 10b-5 statement and legal opinions from Reynolds American's counsel in customary form and covering such matters as customarily covered by 10b-5 statements and legal opinions as such Underwriters and the Investor Parties may reasonably request; (i) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, within the required time period, an earnings statement covering a period of twelve months, beginning with the first fiscal quarter after the effective date of the Registration Statement (as the term "effective date" is defined in Rule 158(c) under the Securities Act), which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder or any successor provisions thereto; and (j) use its reasonable best efforts to cause all Registrable Securities to be listed or quoted on the NYSE and each other securities exchange or automated 28 quotation system on which similar securities issued by Reynolds American are listed or quoted. SECTION 3.05. Conditions to Offerings. The obligations of Reynolds American to take the actions contemplated by Sections 3.01, 3.02 and 3.04 with respect to an offering of Registrable Securities shall be subject to the following conditions: (a) the Investor Parties shall conform to all applicable requirements of the Securities Act and the Exchange Act with respect to the offering and sale of securities; (b) B&W shall advise each Underwriter through which any of the Registrable Securities are offered that the Registrable Securities are part of a distribution that is subject to the prospectus delivery requirements of the Securities Act; (c) Reynolds American may require B&W to furnish to Reynolds American such information regarding B&W or the distribution of the Registrable Securities as Reynolds American may from time to time reasonably request in writing, in each case only as required by the Securities Act or the rules and regulations thereunder or under state securities or blue sky laws; and (d) in any underwritten offering pursuant to Section 3.01 or Section 3.02 hereof, any Investor Party including Registrable Securities in a Registration Statement, together with Reynolds American, shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting, as well as such other documents customary in similar offerings, including, custody agreements, powers of attorney and indemnification provisions relating to information provided in writing by an Investor Party. Any Investor Party holding Registrable Securities agrees that, upon receipt of any notice from Reynolds American of the happening of any event of the kind described in 29 Section 3.04(c) hereof or a condition described in Section 3.06 hereof, B&W will forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering the sale of such shares of Registrable Securities until B&W's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.04(c) hereof or notice from Reynolds American of the termination of the Deferral Period and, if so directed by Reynolds American, will promptly deliver to Reynolds American all copies (other than any permanent file copies then in B&W's possession) of the most recent prospectus covering such Registrable Securities that was current at the time of receipt of such notice. SECTION 3.06. Black-out Period. Reynolds American's obligations pursuant to Sections 3.01 and 3.02 hereof shall be suspended if compliance with such obligations would (a) violate applicable law or (b) require Reynolds American to disclose a material financing, acquisition or other corporate development, and the proper officers of Reynolds American have determined, in the good faith exercise of their reasonable business judgment, that such disclosure is not in the best interests of Reynolds American; provided, however, that any such suspension shall not exceed 60 days and all such suspensions shall not exceed 120 days in any twelve-month period (the "Deferral Period"). Reynolds American shall promptly give B&W written notice of any such suspension containing the approximate length of the anticipated delay, and Reynolds American shall notify B&W upon the termination of the Deferral Period. SECTION 3.07. Registration Expenses. All fees and expenses incident to Reynolds American's performance of or compliance with the registration obligations of this Article III, including all fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for any Underwriters in connection with blue sky qualifications of the Registrable Securities), printing expenses, messenger and delivery expenses of Reynolds American, any registration or filing fees payable under any Federal or state securities or blue sky laws, the fees and expenses incurred in connection with any listing or quoting of the securities to be registered on any national securities exchange or automated quotation system, fees and disbursements of counsel for Reynolds 30 American and its independent certified public accountants (including the expenses of any comfort letters required by or incident to such performance) and the fees and expenses of other Persons retained by Reynolds American, will be borne by Reynolds American. Any Investor Party or any other Person registering Registrable Securities will bear and pay any underwriting discounts and commissions applicable to securities offered for its or its affiliates' account, transfer taxes and fees and expenses of its counsel. SECTION 3.08. Indemnification; Contribution. (a) In connection with any registration of Registrable Securities pursuant to Section 3.01 or 3.02 hereof, Reynolds American agrees to indemnify, to the fullest extent permitted by law, B&W, its affiliates, their directors, officers and shareholders and each Person who controls B&W (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) against any and all losses, claims, damages, liabilities and expenses (including reasonable attorneys' fees) caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, prospectus or preliminary prospectus contained therein, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading; provided, however, that Reynolds American shall not be required to indemnify B&W, its affiliates, their officers, directors, shareholders or controlling Persons for any losses, claims, damages, liabilities or expenses resulting from any such untrue statement or omission if such untrue statement or omission is made in reliance on and in conformity with any information with respect to B&W or such other parties furnished to Reynolds American in writing by B&W or such other parties expressly for use therein. In connection with an underwritten offering, Reynolds American will indemnify each Underwriter, the officers and directors of such Underwriter, and each Person who controls such Underwriter (within the meaning of either the Securities Act or the Exchange Act) to the same extent as provided above with respect to the indemnification of B & W; provided, however, that such Underwriter agrees to indemnify Reynolds American to the same extent as provided 31 below with respect to the indemnification of Reynolds American by B&W. Notwithstanding the forgoing, with respect to any untrue statement or omission of material fact made in any prospectus or preliminary prospectus, the provisions of this Section 3.08 shall not inure to the benefit of any Investor Party, any other holder of Registrable Securities or any Underwriter from whom the Person asserting any such loss, claim, damages, liabilities or expenses purchased the Registrable Securities to the extent that it shall be established that (i) any such loss, claim, damages, liabilities or expenses of such Person arises primarily from the fact that any Investor Party or any Underwriter sold Registrable Securities to such a Person, (ii) there was not sent or given a copy of the final prospectus (as amended or supplemented) at or prior to the written confirmation of such sale (provided Reynolds American shall have previously furnished a sufficient number of copies thereof on a timely basis to the Investor Parties, any such holder and each Underwriter, as the case may be, in accordance herewith) and (iii) the final prospectus (as amended or supplemented) would have corrected any such untrue statement or omission of a material fact. (b) In connection with any Registration Statement, the Investor Parties holding Registrable Securities, as the case may be, will furnish to Reynolds American in writing such information and affidavits with respect to the Investor Parties holding Registrable Securities, as the case may be, as Reynolds American reasonably requests, including, but not limited to, information relating to the Investor Parties, as the case may be, for use in connection with any such Registration Statement, prospectus or preliminary prospectus and agrees to indemnify Reynolds American, its directors, its officers who sign the Registration Statement and each Person, if any, who controls Reynolds American (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as the foregoing indemnity from Reynolds American to B&W, but only with respect to information relating to B&W or such other holders of Registrable Securities, as the case may be, furnished to Reynolds American in writing by B&W expressly for use in the Registration Statement, the prospectus, any 32 amendment or supplement thereto, or any preliminary prospectus. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 3.08(a) or (b), such Person (hereinafter called the indemnified party) shall promptly notify the Person against whom such indemnity may be sought (hereinafter called the indemnifying party) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and the indemnified party shall have been advised by counsel that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such indemnified parties, and that all such reasonable fees and expenses shall be reimbursed as they are incurred. In the case of the retention of any such separate firm for the indemnified parties, such firm shall be designated in writing by the indemnified parties. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of 33 counsel as contemplated by the third sentence of this Section 3.08(c), the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request or reasonably objected in writing, on the basis of the standards set forth herein, to the propriety of such reimbursement prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in this Section 3.08 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 3.08, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, 34 liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 3.08(c), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties agree that it would not be just and equitable if contribution pursuant to this Section 3.08(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in this Section 3.08(d). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 3.08, the indemnifying party shall indemnify each indemnified party to the full extent provided in Sections 3.08(a) and (b) without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 3.08(d). SECTION 3.09. Rule 144. For so long as Reynolds American is subject to the requirements of Section 13, 14 or 15(d) of the Securities Act, Reynolds American agrees that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder and it will take such further action as B&W reasonably may request, all to the extent required from time to time to enable the Investor Parties to sell Registrable Securities within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of B&W, Reynolds American will deliver to B&W a written statement as to whether it has complied with such requirements. SECTION 3.10. Lockup. If and to the extent requested by the managing Underwriters of an underwritten public offering of equity securities of Reynolds American, Reynolds American and B&W agree not to effect, and to cause 35 their respective affiliates not to effect, except as part of such registration, any offer, sale, pledge, transfer or other distribution or disposition or any agreement with respect to the foregoing, of the issue being registered or of a similar security of Reynolds American, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144, during the seven-day period prior to and during such period that the lead Underwriter may reasonably request, no greater than 90 days, beginning on the effective date of such registration. SECTION 3.11. Termination of Registration Rights. The registration rights contained in this Article III shall terminate on the date on which all shares of Common Stock subject to this Agreement cease to be Registrable Securities. Notwithstanding the forgoing, the registration rights contained in this Article III shall terminate in any event with respect to any Investor Party or any other holder of Registrable Securities when any such holder no longer owns any Registrable Securities. In addition, even if the registration rights contained in this Article III are no longer in effect, in the event that an Investor Party intends to dispose of a significant number of Common Shares and such disposition could reasonably be expected to have an adverse impact on the trading price of shares of Common Stock or otherwise have an adverse impact on the market for Common Stock, Reynolds American and the Investor Parties shall cooperate in connection with such disposition and shall take commercially reasonable efforts to mitigate the adverse effects of any such disposition; provided, however, that nothing in this sentence shall be deemed to restrict an Investor Party in connection with the sale of any Common Stock (including the size or timing of such disposition). ARTICLE IV. Limitations on Purchases of Equity Securities and Other Actions SECTION 4.01. Purchases of Equity Securities. Except for the acquisition of shares of Common Stock pursuant to the Combination Agreement and subject to the exceptions set forth in Section 4.03, during the Standstill Period, the Investor Parties shall not, directly or indirectly, acquire, agree to acquire or make a proposal to 36 acquire beneficial ownership of any shares of Equity Securities. Equity Securities acquired pursuant to this Article IV shall be subject to all of the terms, covenants and conditions of this Agreement. SECTION 4.02. Additional Limitations. Subject to the exceptions set forth in Section 4.03, during the Standstill Period, the Investor Parties shall not: (a) seek, make or take any action to solicit, initiate or encourage, any offer or proposal for, or any indication of interest in, a merger, consolidation, tender or exchange offer, sale or purchase of assets or securities or other business combination or any dissolution, liquidation, restructuring, recapitalization or similar transaction in each case involving Reynolds American or any of its Subsidiaries or the acquisition of any equity interest in, or a substantial portion of the assets of, Reynolds American or any of its Subsidiaries; (b) "solicit", or become a "participant" in any "solicitation" of, any "proxy" (as such terms are defined in Regulation 14A under the Exchange Act) from any holder of Voting Stock in connection with any vote on any matter (whether or not relating to the election or removal of Directors), or agree or announce its intention to vote with any Person undertaking a "solicitation", except to the extent required by applicable law, rule, regulation or order (including any applicable rule, regulation or order of a self-governing authority, such as the New York Stock Exchange, the UK Listing Authority and the UK Panel on Takeovers and Mergers); (c) form, join or in any way participate in a 13D Group with respect to any Voting Stock (other than a 13D Group composed of the Investor Parties); (d) grant any proxies with respect to any Voting Stock to any Person (other than as recommended by the Board of Directors) or deposit any Voting Stock in a voting trust or enter into any other arrangement or agreement with respect to the voting thereof; 37 (e) seek, alone or in concert with other Persons, additional representation on the Board of Directors or seek the removal of any member of the Board that is not an Investor Director or a change in the composition or size of the Board of Directors that is inconsistent with this Agreement; (f) enter into any arrangements, understandings or agreements (whether written or oral) with, or advise, finance or assist any other Persons in connection with any of the foregoing; or (g) request, propose or otherwise seek any amendment or waiver of the provisions of Article IV. SECTION 4.03. Standstill Exceptions. Notwithstanding Sections 4.01 and 4.02: (a) during the Standstill Period, the Investor Parties may acquire beneficial ownership of additional Equity Securities if, after giving effect to any such acquisition, B&W's Percentage Interest would not exceed the Standstill Percentage less the percentage of Voting Power (calculated as of the date of disposition) associated with any Equity Securities disposed of by any Investor Party (other than to another Investor Party) following the date of this Agreement; (b) if, during the Standstill Period, Reynolds American becomes the subject of a Third Party Offer, Reynolds American shall promptly, and in any event within two business days, deliver written notice to B&W to such effect, which notice shall to the extent known by Reynolds American set forth the percentage of Voting Power or assets that the third party is seeking to acquire pursuant to the Third Party Offer, and the Investor Parties shall have the right to make a B&W Counteroffer to the Board of Directors in response to such Third Party Offer. If Reynolds American accepts any such B&W Counteroffer, the Investor Parties may acquire Equity Securities in accordance with the terms of such B&W Counteroffer. If Reynolds American rejects any such B&W Counteroffer and enters into an agreement with a third party (other than the Investor Parties) with respect to a Significant Transaction or a third 38 party (other than the Investor Parties) initiates a tender offer or exchange offer that would constitute a Significant Transaction, the Investor Parties may make and consummate a public proposal constituting a B&W Counteroffer (including by way of a tender offer or exchange offer). Notwithstanding the foregoing, an Investor Party's right to make any B&W Counteroffer and to acquire additional Equity Securities pursuant to this clause (b) is subject to the condition that the Investor Directors recuse themselves from any and all consideration by the Board of Directors or any committee thereof of a Third Party Offer or a B&W Counteroffer; and (c) during the Standstill Period, the Investor Parties shall be permitted to make requests to the Board of Directors to amend or waive any of the limitations set forth in Section 4.01 or 4.02, which the Other Directors, acting by majority, may accept or reject in their sole discretion; provided, however, that (i) any such request shall not be publicly disclosed by the Investor Parties and (ii) any such request shall be made in a manner that is not reasonably likely to require the public disclosure of such request by Reynolds American. ARTICLE V. Transfer of Common Stock SECTION 5.01. Limitation on Transfer of Common Stock. (a) During the term of this Agreement, any sale, transfer or other disposition of shares of Common Stock by the Investor Parties shall be subject to the following limitations: (i) no shares of Common Stock may be sold, transferred or otherwise disposed of, directly or indirectly, to any Person or 13D Group, if, after giving effect to such sale, transfer or other disposition such Person or 13D Group would, to B&W's knowledge, beneficially own, or have the right to acquire, 7.5% or more of the Voting Power of all Voting Stock, except in connection with a tender offer or exchange offer for Common Stock (provided that the Board of Directors has not recommended to its 39 shareholders that such tender offer or exchange offer be rejected); and (ii) none of the Investor Parties will, in any six-month period, sell, transfer or otherwise dispose of, directly or indirectly, Common Stock representing in the aggregate more than 5% of the Voting Power of all Voting Stock without first obtaining the consent of a majority of the Other Directors, except in connection with a tender offer or exchange offer for Common Stock (provided that the Board of Directors has not recommended to its shareholders that such tender offer or exchange offer be rejected). (b) Notwithstanding any of the foregoing, B&W may at any time transfer any or all of its shares of Common Stock to any Investor Party, and any such transferee may make similar transfers; provided, however, that (x) any such transferee shall agree to be bound by the terms of this Agreement and (y) for purposes of calculating any ownership threshold applicable to B&W and/or its affiliates under this Agreement, all shares of Common Stock held by B&W and any permitted transferee under this Section 5.01(b) shall be taken into account. (c) Reynolds American may place appropriate legends on the certificates representing Common Stock held by the Investor Parties setting forth the restrictions referred to above and any restrictions appropriate for compliance with U.S. federal securities laws. Reynolds American will promptly issue replacement certificates to the Investor Parties, upon request, in order to permit the Investor Parties to engage in sales, transfers and other dispositions that are not restricted hereunder or under U.S. federal securities laws. Purported transfers of shares of Common Stock that are not in compliance with this Article V shall be void. ARTICLE VI. Miscellaneous SECTION 6.01. Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the parties at the following addresses (or 40 at such other address for a party as shall be specified by like notice): (a) if to BAT, to Globe House 4 Temple Place London WC2R 2PG United Kingdom Fax: 44 207 845 2189 Attention: General Counsel with a copy to: Cravath, Swaine & Moore LLP 825 Eighth Avenue New York, NY 10019 Fax: 212-474-3700 Phone: 212-474-1000 Attention: Philip A. Gelston, Esq. Sarkis Jebejian, Esq. (b) if to B&W, to 401 South 4th Avenue Louisville, KY 40232 Fax: (502) 217-7297 Attention: General Counsel with a copy to: Cravath, Swaine & Moore LLP 825 Eighth Avenue New York, NY 10019 Fax: 212-474-3700 Phone: 212-474-1000 Attention: Philip A. Gelston, Esq. Sarkis Jebejian, Esq. (c) if to Reynolds American, to 401 North Main Street Winston-Salem, NC 27102-2990 41 Fax: (336) 741-2998 Attention: General Counsel with a copy to: Jones Day 222 East 41st Street New York, NY 10017 Fax: 212-755-7306 Phone: 212-326-3939 Attention: Jere R. Thomson, Esq. SECTION 6.02. Amendments; Waivers. (a) No provision of this Agreement may be amended or waived unless such amendment or waiver is in writing and signed, in the case of an amendment, by the parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective; provided, however, that no such amendment or waiver by Reynolds American shall be effective without the approval of a majority of the Other Directors (except for amendments or waivers that are administrative in nature or that do not materially adversely affect the rights of the Unaffiliated Equity Holders, which amendments and waivers shall only require the approval of a majority of the Directors). (b) The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights nor shall any single or partial exercise by any party to this Agreement of any of its rights under this Agreement preclude any other or further exercise of such rights or any other rights under this Agreement. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law or otherwise. SECTION 6.03. Interpretation. When a reference is made in this Agreement to a Section, Subsection or Exhibit, such reference shall be to a Section or Subsection of, or an Exhibit to, this Agreement unless otherwise indicated. The headings contained in this Agreement are 42 for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words "date hereof" shall refer to the date of this Agreement. The term "or" is not exclusive. The word "extent" in the phrase "to the extent" shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply "if". The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. Any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented. References to a Person are also to its permitted successors and assigns. SECTION 6.04. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the Transactions contemplated hereby are fulfilled to the extent possible. SECTION 6.05. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. SECTION 6.06. Entire Agreement; No Third-Party Beneficiaries. This Agreement and the other Transaction 43 Agreements constitute the entire agreement, and supercede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof and are not intended to confer upon any Person other than the parties any rights or remedies. SECTION 6.07. Governing Law. Except to the extent specifically required by the North Carolina Business Corporation Act, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. The parties declare that it is their intention that this Agreement shall be regarded as made under the laws of the State of Delaware and that the laws of the State of Delaware shall be applied in interpreting its provisions in all cases where legal interpretation shall be required, except to the extent the North Carolina Business Corporation Act is specifically required by such act to govern the interpretation of this Agreement. SECTION 6.08. Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties without the prior written consent of the other parties hereto, except that B&W may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to BAT or any of its Subsidiaries that agrees in writing to be bound by the provisions hereof. Any purported assignment without such prior written consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. SECTION 6.09. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal court located in the State of Delaware or in the Chancery Court 44 of the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or Chancery Court of the State of Delaware in the event any dispute arises out of this Agreement or any Transaction, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) irrevocably and unconditionally waives (and agrees not to plead or claim) any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or any Transaction, (d) agrees that it will not bring any action relating to this Agreement or any Transaction in any court other than any Federal court sitting in the State of Delaware or Chancery Court of the State of Delaware, (e) waives any right to trial by jury with respect to any action related to or arising out of this Agreement or any Transaction and (f) agrees that this Agreement involves at least $100,000 and has been entered into by the parties in express reliance upon 6 Del. C. Section 2708. Without limiting the agreement of the parties set forth in this Section 6.11, in the event that any dispute arising under this Agreement is subject to, or adjudicated by, the courts of the State of North Carolina, the parties agree that any such dispute will be adjudicated by the North Carolina Business Court (with any references in this Section 6.09 to Delaware courts being deemed to be references to North Carolina courts and any references in this Section 6.09 to the Chancery Court of the State of Delaware being deemed to be references to the North Caroline Business Court). SECTION 6.10. Effectiveness. This Agreement shall become effective upon the execution of this Agreement. SECTION 6.11. Termination. (a) Automatic Termination. This Agreement shall automatically terminate at such time that (i) B&W's Percentage Interest equals 100% or is less than 15% or (ii) any Person or 13D Group (other than the Investor Parties or any Person participating in a 13D Group with the Investor Parties) beneficially owns or controls Voting 45 Stock representing more than 50% of the Voting Power of all Voting Stock. (b) Termination by BAT and B&W. BAT and B&W shall be entitled to terminate this Agreement in the event that (i) (A) Reynolds American, the Board of Directors or any committee of the Board of Directors takes any action, or fails to take appropriate action, which action, or failure to take action, would have resulted in a material breach of any of the Board Provisions but for the fiduciary duty exception set forth in Section 2.08 or (B) an Approval Termination Event occurs or (ii) the number of Investor Directors serving on the Board of Directors at any time is less than the number of Investor Directors to which B&W is entitled at such time pursuant to Section 2.01 (provided B&W has complied in all material respects and in good faith with the requirements set forth in this Agreement regarding the nomination of, and voting for, directors), in the case of clauses (i) and (ii) subject to notice from B&W and the expiration of a 45-day period in which to cure such action or failure to act (if such action or failure to act is capable of being cured). (c) Termination of Obligations. BAT and B&W shall be entitled to terminate Articles IV and V and Sections 2.01(g) and (h) and Sections 2.02(b) and (c), but the remainder of this Agreement shall continue until otherwise terminated pursuant to Section 6.11(a) or (b), in the event that the Board of Directors or Reynolds American willfully and deliberately fails to take appropriate action, which action, or failure to take action, results in a material breach of the Board Provisions, subject to notice from B&W and the expiration of a 45-day period in which to cure such breach or failure (if such breach or failure is capable of being cured). Reynolds American shall be entitled to terminate Article II (provided that Section 2.04(c) shall survive until the fifth anniversary of the date of this Agreement and Sections 2.01(g)(i) and (h) and 2.02(b) and (c) shall survive until otherwise terminated pursuant to Section 6.11(a)), but the remainder of this Agreement shall continue until otherwise terminated pursuant to Section 6.11(a), in the event that BAT or B&W willfully and deliberately takes any action, or fails to take appropriate action, which action, or failure to take action, results in a material breach of Section 4.01 hereof 46 (subject to the exceptions set forth in Section 4.03), subject to notice from Reynolds American and the expiration of a 45-day period in which to cure such breach or failure (if such breach or failure is capable of being cured). (d) Survival. In the event that this Agreement shall terminate, all provisions of this Agreement shall terminate and shall be void, except (i) Article III shall survive any such termination until the Investor Parties no longer hold Registrable Securities, (ii) Section 2.04(c) shall survive until the fifth anniversary of the date of this Agreement and (iii) Articles I and VI shall survive any such termination indefinitely. Nothing in this Section 6.11 will be deemed to release any party from any liability for any wilful and material breach of this Agreement or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement. SECTION 6.12. Confidentiality. (a) Each of BAT and B&W agree to maintain, and they shall cause each of their respective Subsidiaries, directors, officers, employees and other representatives (including any Investor Director) to maintain, the confidentiality of all material non-public information obtained by the Investor Parties from Reynolds American or any of its Subsidiaries or their respective directors, officers, employees or agents, and not to use such information for any purpose other (i) than the evaluation and protection of the investment by the Investor Parties in Reynolds American, (ii) the exercise by the Investor Parties of any of their respective rights under this Agreement and (iii) the exercise by the Investor Directors of their fiduciary duties as Directors of Reynolds American. (b) Notwithstanding the foregoing, the confidentiality obligations of Section 6.12(a) will not apply to information obtained other than in violation of this Agreement: (i) which any of Investor Parties or any of their officers, employees, representatives, consultants or advisors is required to disclose by judicial or administrative process, or by other requirements of applicable law or regulation or any governmental 47 authority (including any applicable rule, regulation or order of a self-governing authority, such as the New York Stock Exchange, the UK Listing Authority and the UK Panel on Takeovers and Mergers); provided, however, that, where and to the extent practicable, the disclosing party (A) gives the other party reasonable notice of any such requirement and, to the extent protective measures consistent with such requirement are available, the opportunity to seek appropriate protective measures and (B) cooperates with such party in attempting to obtain such protective measures; (ii) which becomes available to the public other than as a result of a breach of Section 6.12(a); or (iii) which has been provided to any of the Investor Parties or any of their officers, employees, representatives, consultants or advisors by a third party who obtained such information other than from any such Person or other than as a result of a breach of Section 6.12(a). (c) Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative or other agent of such party) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure, except that (i) this provision shall not permit disclosure until the earliest of (A) the date of the public announcement of discussions relating to the transaction, (B) the date of the public announcement of the transaction or (C) the date of the execution of an agreement (with or without conditions) to enter into the transaction, (ii) tax treatment and tax structure shall not include the identity of any existing or future party (or any affiliate of such party) to this Agreement and (iii) this provision shall not permit disclosure to the extent that nondisclosure is necessary in order to comply with applicable securities laws. Nothing in this Agreement shall in any way limit any party's ability to consult any tax advisor (including a tax advisor independent from all other entities involved in the 48 transactions contemplated by this Agreement) regarding the tax treatment or tax structure of the transactions contemplated by this Agreement. SECTION 6.13. Acknowledgment of Securities Laws. Each of BAT and B&W hereby acknowledges that it is aware, and that it will advise its representatives who are informed as to the material non-public information that is the subject of Section 6.12, that the United States securities laws prohibit any Person who has received from an issuer material, non-public information from purchasing or selling securities of such issuer or from communication of such information to any other Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities. 49 IN WITNESS WHEREOF, the parties hereto have executed this Governance Agreement as of the day and year first above written. BRITISH AMERICAN TOBACCO P.L.C. By Roger H. Lomax ------------------------------------------ Name: Roger H. Lomax Title: Attorney-in-Fact BROWN & WILLIAMSON TOBACCO CORPORATION By Timothy J. Hazlett ------------------------------------------ Name: Timothy J. Hazlett Title: Vice President and Secretary REYNOLDS AMERICAN INC. By Charles A. Blixt ------------------------------------------ Name: Charles A. Blixt Title: Executive Vice President and General Counsel 50 EX-10.3 10 g90345exv10w3.txt EX-10.3 Exhibit 10.3 NON-COMPETITION AGREEMENT (this "Agreement"), dated as of July 30, 2004, between Reynolds American Inc., a North Carolina corporation ("Reynolds American"), and British American Tobacco p.l.c., a public limited company organized under the laws of England and Wales ("BAT"). RECITALS: A. Reynolds American, Brown & Williamson Tobacco Corporation, a Delaware corporation and wholly-owned subsidiary of BAT ("B&W"), and R.J. Reynolds Tobacco Holdings, Inc., a Delaware corporation ("RJR"), have entered into a Business Combination Agreement, dated as of October 27, 2003, as amended ("Combination Agreement"), pursuant to which each of B&W and RJR and certain of their affiliates have agreed to engage in a series of transactions resulting in the combination of R. J. Reynolds Tobacco Company, a New Jersey corporation ("RJR Tobacco"), and the U.S. tobacco business of B&W. B. As a condition to the consummation of the transactions contemplated by the Combination Agreement, the parties hereto have agreed to enter into this Agreement. C. Capitalized terms used herein and not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Combination Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth in this Agreement, the consummation of the transactions contemplated by the Combination Agreement and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. "BAT Restricted Business" means the manufacture, sale, distribution or other transfer for sale of BAT Restricted Products in the BAT Restricted Territory, but does not include (a) the continuation of any arrangements existing as of the date of the Combination Agreement relating to the manufacture of BAT Restricted Products for, and sale to, third parties who own or have rights to use the intellectual property associated with the brand of BAT Restricted Products to be manufactured as long as such products are not also sold, distributed or otherwise transferred for sale by BAT or any of its Controlled Affiliates or (b) the manufacture of BAT Restricted Products in the BAT Restricted Territory by Reynolds American or any of its Controlled Affiliates on behalf of BAT or any of its Controlled Affiliates as long as those products are not also sold, distributed or otherwise transferred for sale in the BAT Restricted Territory. "BAT Restricted Period" means the period beginning on the date of this Agreement and ending on the 10th anniversary of the date of this Agreement. "BAT Restricted Products" means manufactured cigarettes, "roll your own" cigarette tobacco, cigars, cigarillos and pipe tobacco. "BAT Restricted Territory" means the United States. "B&W Business" means the business acquired by Reynolds American from B&W pursuant to the Combination Agreement. "Control" means beneficial or record ownership of a majority of the voting power of the equity securities having the right to vote generally for the election or removal of directors, managers or members of a similar governing body of the entity being Controlled or the right to appoint or remove a majority of the members of such governing body. As used herein, "control" has the common meaning associated with such term and, may include, but is not limited to, the meaning assigned to the term "Control." "Controlled Affiliate" means, with respect to any entity, any other entity directly or indirectly Controlled by such person but, with respect to BAT, does not include Reynolds American or any of its Controlled Affiliates. "Manufacturing Intellectual Property" means all patents, patent applications, inventions, trade secrets, proprietary processes, databases, software, and formulae, and all other proprietary technical information, know-how and processes, whether registered, patentable or unpatentable, in each case to the extent such manufacturing intellectual property was available for use in the B&W Business on or prior to the date of this Agreement. For the avoidance of doubt, Manufacturing Intellectual Property shall not include service marks and service mark applications, trademarks and trademark applications, trade dress, logos and slogans. 2 "Reynolds American Restricted Business" means the manufacture, sale, distribution or other transfer for sale of Reynolds American Restricted Products in the Reynolds American Restricted Territory, but does not include (a) the sale, distribution or other transfer for sale of Reynolds American Restricted Products at duty free shops in the United States and United States military bases anywhere in the world, (b) the sale, distribution or other transfer for sale of KOOL, PALL MALL, PALL MALL RED, PALL MALL Filter, CAPRI, MISTY, KENT and NEWPORT cigarettes in the Republic of Palau, (c) the sale, distribution or other transfer for sale of PALL MALL BOX and KOOL cigarettes in duty free shops in Canada, (d) the sale, distribution or other transfer for sale of KOOL, PALL MALL RED, PALL MALL Filter, CAPRI and MISTY cigarettes in the Federated States of Micronesia, (e) the manufacture of Reynolds American Restricted Products for, and sale to, third parties who own or have rights to use the intellectual property associated with the brand of Reynolds American Restricted Products to be manufactured as long as such products are not also sold, distributed or otherwise transferred for sale by Reynolds American or any of its Controlled Affiliates, (f) the manufacture of Reynolds American Restricted Products in the Reynolds American Restricted Territory as long as those products are not also sold, distributed or otherwise transferred for sale in the Reynolds American Restricted Territory, or (g) the continued manufacture, sale, distribution or other transfer for sale of Reynolds American Restricted Products in the Reynolds American Restricted Territory by Lane Limited, but only to the extent Lane Limited engaged in such activities between October 27, 2003 and the date of this Agreement and only for a period ending 60 calendar days following the date of this Agreement. "Reynolds American Restricted Period" means the period beginning on the date of this Agreement and ending on the 5th anniversary of the date of this Agreement. "Reynolds American Restricted Products" means manufactured cigarettes and "roll your own" cigarette tobacco, cigars, cigarillos and pipe tobacco. "Reynolds American Restricted Territory" means any place in the world outside of the United States. "Santa Fe" means Santa Fe Natural Tobacco Company, Inc., a New Mexico corporation and a wholly-owned subsidiary of Reynolds American. 3 "Santa Fe Brands" means the brands "American Spirit," "Natural American Spirit" and any natural extension thereof. "Santa Fe Restricted Territory" means any country other than the countries listed on Exhibit A. "United States" means the United States of America and its territories and possessions. 2. BAT Noncompete. (a) Except as provided in Section 2(b) or 2(c) of this Agreement, during the BAT Restricted Period, BAT will not, and will cause its Controlled Affiliates not to, directly or indirectly, engage in, carry on, own, lease, manage, operate, control, share any revenues of or have any profit or other equity interest in any business or entity engaged in the BAT Restricted Business. (b) Notwithstanding anything to the contrary in this Section 2, BAT and any of its Controlled Affiliates may own beneficially or of record (i) securities of Reynolds American, (ii) a non-Controlling interest in Skandinavisk Tobakskampagni AS (Denmark), ITC Ltd. (India) and VST Industries Ltd. (India), and (iii) no more than five percent of the issued and outstanding capital stock or equity interests of an entity which has issued securities that are publicly traded and which is engaged in the BAT Restricted Business. (c) Notwithstanding anything to the contrary in this Section 2, BAT will not be in violation of this Section 2 for any sale, distribution or other transfer for sale of BAT Restricted Products in any jurisdiction if such BAT Restricted Products (i) do not satisfy all applicable packaging and labeling requirements in such jurisdiction (provided that any such sale, distribution or other transfer is (A) not the result of acts taken by means and persons controlled by BAT or any of its Controlled Affiliates and (B) contrary to representations of the known customers of BAT and its Controlled Affiliates) or (ii) do satisfy all applicable packaging and labeling requirements in such jurisdiction but are present in such jurisdiction (A) by means and persons not controlled by BAT and its Controlled Affiliates and (B) contrary to representations of the known customers of BAT and its Controlled Affiliates. In addition to the exceptions provided in the preceding sentence or otherwise in this Section 2, BAT will not be in violation of this Section 2 for sales, distribution or transfers for sale of BAT Restricted Products in the BAT Restricted Territory that do 4 not exceed in the aggregate 2 billion individual cigarettes in any calendar year, including any such sale, distribution or transfer for sale that is known or controllable by BAT and its Controlled Affiliates. (d) BAT acknowledges and agrees that the foregoing restrictions are reasonable given the nature of the transactions contemplated by the Combination Agreement. 3. Reynolds American Noncompete. (a) Except as provided in Section 3(b) or 3(c) of this Agreement, during the Reynolds American Restricted Period, Reynolds American will not, and will cause its Controlled Affiliates not to, directly or indirectly, engage in, carry on, own, lease, manage, operate, control, share any revenues of or have any profit or other equity interest in any business or entity engaged in the Reynolds American Restricted Business. (b) Notwithstanding anything to the contrary in this Section 3, (i) Reynolds American and any of its Controlled Affiliates may own beneficially or of record no more than five percent of the issued and outstanding capital stock or equity interests of an entity which has issued securities that are publicly traded and which is engaged in the Reynolds American Restricted Business, (ii) Reynolds American will not be in violation of this Section 3 solely as a result of (A) Reynolds American's relationship with R.J. Reynolds-Gallaher International Sarl, a Swiss limited liability company ("JV"), (B) JV's business, or (C) if the JV has been terminated, the manufacture, sale, marketing or distribution of a brand listed on Exhibit C in any country listed on Exhibit B in which the JV was distributing such brand prior to termination of the JV; provided, however, that, for purposes of this clause (ii), Reynolds American and its Controlled Affiliates will not contribute or license or otherwise transfer any additional brands to the JV, except to the extent required by the agreements relating to the JV (as in effect on the date hereof); and (iii) Santa Fe may sell, distribute or otherwise transfer for sale Reynolds American Restricted Products under the Santa Fe Brands in the countries listed on Exhibit A and, subject to compliance with Section 6, may sell, distribute or otherwise transfer for sale Reynolds American Restricted Products under the Santa Fe Brands in the Santa Fe Restricted Territory. (c) Notwithstanding anything to the contrary in this Section 3, Reynolds American will not be in violation of this Section 3 for any sale, distribution or other transfer for sale 5 of Reynolds American Restricted Products in any jurisdiction if such Reynolds American Restricted Products (i) do not satisfy all applicable packaging and labeling requirements in such jurisdiction (provided that any such sale, distribution or other transfer is (A) not the result of acts taken by means and persons controlled by Reynolds American or any of its Controlled Affiliates and (B) contrary to representations of the known customers of Reynolds American and its Controlled Affiliates) or (ii) do satisfy all applicable packaging and labeling requirements in such jurisdiction but are present in such jurisdiction (A) by means and persons not controlled by Reynolds American and its Controlled Affiliates and (B) contrary to representations of the known customers of Reynolds American and its Controlled Affiliates. In addition to the exceptions provided in the preceding sentence or otherwise in this Section 3, Reynolds American will not be in violation of this Section 3 for sales, distribution or transfers for sale of Reynolds American Restricted Products in the Reynolds American Restricted Territory that do not exceed in the aggregate 2 billion individual cigarettes in any calendar year, including any such sale, distribution or transfer for sale that is known or controllable by Reynolds American and its Controlled Affiliates. (d) Reynolds American acknowledges and agrees that the foregoing restrictions are reasonable given the nature of the transactions contemplated by the Combination Agreement. 4. BAT Nonsolicitation. Without the prior written consent of Reynolds American, for a period of two years following the date of this Agreement, BAT will not, and will cause its Controlled Affiliates not to, directly or indirectly, on behalf of itself or any other person, recruit or otherwise solicit for employment or employ any officer, or other employee of Reynolds American or any of its Controlled Affiliates whose salary and bonus exceeded $200,000 in the year prior to the date of such solicitation or employment (or, the proportionate amount of $200,000 if, and to the extent that, any such employee is employed by Reynolds American or such Controlled Affiliate for only a portion of the year), provided, that the foregoing provision shall not prevent BAT or any of its Controlled Affiliates from hiring any such person who contacts BAT on his or her own initiative without any direct or indirect solicitation from BAT or any of its Controlled Affiliates, and provided further, that the foregoing provision shall not prohibit (a) any advertisement or general solicitation (or any hiring pursuant thereto) that is not specifically targeted at such persons or (b) the solicitation or employment of any person 6 who is not employed by Reynolds American or any of its Controlled Affiliates on the date BAT or any of its Controlled Affiliates first solicits him or her. 5. Reynolds American Nonsolicitation. Without the prior written consent of BAT, for a period of two years following the date of this Agreement, Reynolds American will not, and will cause its Controlled Affiliates not to, directly or indirectly, on behalf of itself or any other person, recruit or otherwise solicit for employment or employ any officer, or other employee of BAT or any of its Controlled Affiliates whose salary and bonus exceeded $200,000 (or pounds sterling equivalent) in the year prior to the date of such solicitation or employment (or, the proportionate amount of $200,000 (or pounds sterling equivalent) if, and to the extent that, any such employee is employed by BAT or such Controlled Affiliate for only a portion of the year), provided, that the foregoing provision shall not prevent Reynolds American or any of its Controlled Affiliates from hiring any such person who contacts Reynolds American or any of its Controlled Affiliates on his or her own initiative without any direct or indirect solicitation from Reynolds American or any of its Controlled Affiliates, and provided further, that the foregoing provision shall not prohibit (a) any advertisement or general solicitation (or any hiring pursuant thereto) that is not specifically targeted at such persons or (b) the solicitation or employment of any person who is not employed by BAT or any of its Controlled Affiliates on the date Reynolds American or any of its Controlled Affiliates first solicits him or her. 6. BAT Right of First Refusal. Prior to entering into any distribution agreement with a third party for the distribution of Santa Fe Brands in any country in the Santa Fe Restricted Territory, Reynolds American will cause Santa Fe to submit a written proposal (the "Notice") to BAT identifying (i) the country as to which Santa Fe wishes to enter into a distribution agreement, (ii) the products Santa Fe wishes to distribute in such country, (iii) the distribution capability required by Santa Fe for distribution in such country, and (iv) the material terms and conditions of such proposed distribution agreement. Within 20 calendar days after receiving the Notice, BAT will send to Reynolds American its written response (a "Response") to such offer indicating either (A) acceptance of the terms of such Notice or (B) rejection of the terms of such Notice. Failure to deliver a Response within 20 calendar days of receiving the Notice shall constitute the delivery of a Response rejecting the Notice. In the event the Notice is 7 rejected, Reynolds American or one of its Controlled Affiliates may enter into a distribution agreement with a third party on terms and conditions not materially more favorable to the third party than the terms and conditions set forth in the Notice and neither BAT nor any of its Controlled Affiliates will have any further rights under this Section 6 with respect to the distribution of the products identified in the Notice in the country identified in the Notice. 7. Reynolds American Right of First Refusal for U.S. Sourced Manufactured American Blend Cigarettes. (a) The parties hereby incorporate by reference Section 2.1 of that certain Contract Manufacturing Agreement, dated as of July 30, 2004 (the "Contract Manufacturing Agreement"), between R. J. Reynolds Tobacco Company, a North Carolina corporation, and B.A.T. (UK & Export) Limited, a corporation organized under the laws of England and Wales. BAT shall cause its future Controlled Affiliates to agree in writing to be bound by, and subject to the terms and conditions of, Sections 2.1 and 4.4 of the Contract Manufacturing Agreement. (b) Nothing in this Section 7 shall be deemed to permit B&W to manufacture tobacco products in the United States if such activity would otherwise be prohibited by Section 2. 8. Covenants Not to Sue. (a) BAT shall not, and shall cause its Controlled Affiliates not to, threaten, bring, commence, prosecute or maintain any suit, action, filing, or administrative proceeding, either at law or at equity, in any court, administrative agency, or elsewhere against Reynolds American or any of its Controlled Affiliates or any of their respective divisions, customers, successors, assigns, or anyone acting on their behalf (collectively, the "Reynolds American Parties"), on account of, arising from, growing out of, related to, or in any way connected with the use by the Reynolds American Parties of any Manufacturing Intellectual Property. (b) Reynolds American shall not, and shall cause its Controlled Affiliates not to, threaten, bring, commence, prosecute or maintain any suit, action, filing, or administrative proceeding, either at law or at equity, in any court, administrative agency, or elsewhere against BAT or any of its Controlled Affiliates or their respective divisions, customers, successors, assigns, or anyone acting on their behalf (collectively, the "B&W Parties"), on account of, arising from, 8 growing out of, related to, or in any way connected with the use by the B&W Parties of the Manufacturing Intellectual Property. 9. Term. This Agreement shall become effective on the date of this Agreement and shall continue: (a) in the case of Section 2, to the end of the BAT Restricted Period; (b) in the case of Section 3, to the end of the Reynolds American Restricted Period; (c) in the case of Sections 4 and 5, to the second anniversary of the date of this Agreement; (d) in the case of Sections 6 and 7 until such time as BAT and its Controlled Affiliates no longer beneficially own at least 25% of the equity securities of Reynolds American entitled to vote generally for the election of directors; and (e) in the case of Sections 1 and 8 through 17, indefinitely. 10. Extension of Restricted Period. (a) In the event of a breach or violation by BAT or any of its Controlled Affiliates of the covenants set forth in this Agreement prior to the expiration of the BAT Restricted Period, the BAT Restricted Period shall be extended by the same amount of time which elapses from the commencement of such breach or violation until such breach or violation has been cured. (b) In the event of a breach or violation by Reynolds American or any of its Controlled Affiliates of the covenants set forth in this Agreement prior to the expiration of the Reynolds American Restricted Period, the Reynolds American Restricted Period shall be extended by the same amount of time which elapses from the commencement of such breach or violation until such breach or violation has been cured. 11. General Provisions. (a) Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to BAT, to: 9 British American Tobacco p.l.c. Globe House 4 Temple Place London WC2R 2PG United Kingdom Fax: 44 207 845 2189 Attention: Company Secretary with a copy to: Cravath, Swaine & Moore LLP 825 Eighth Avenue New York, NY 10019 Fax: 212-474-3700 Attention: Philip A. Gelston, Esq. Sarkis Jebejian, Esq. (ii) if to Reynolds American, to: Reynolds American Inc. 401 North Main Street Winston-Salem, NC 27102-2990 Fax: 336-741-2998 Attention: General Counsel with a copy to: Jones Day 222 East 41st Street New York, NY 10017 Fax: 212-755-7306 Attention: Jere R. Thomson, Esq. 12. Interpretation. When a reference is made in this Agreement to a Section, Subsection or Exhibit, such reference shall be to a Section or Subsection of, or an Exhibit to, this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The words "hereof" and "herein" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term "or" is not exclusive. The 10 definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. Any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented. References to a person are also to its permitted successors and assigns. 13. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the restrictions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the agreements contemplated hereby are fulfilled to the extent possible. 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other party. 15. Entire Agreement; No Third-Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and is not intended to confer upon any person other than the parties any rights or remedies. 16. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. The parties hereto hereby declare that it is their intention that this Agreement shall be regarded as made under the laws of the State of Delaware and that the laws of said State shall be applied in interpreting its provisions in all cases where legal interpretation shall be required. 17. Enforcement; Service of Process. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance 11 with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal court located in the State of Delaware or in the Court of Chancery of the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto irrevocably and unconditionally (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or the Court of Chancery of the State of Delaware in the event any dispute arises out of this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) irrevocably and unconditionally waives (and agrees not to plead or claim) any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or any Transaction, (d) agrees that it will not bring any action relating to this Agreement in any court other than any Federal court sitting in the State of Delaware or the Court of Chancery of the State of Delaware, (e) waives any right to trial by jury with respect to any action related to or arising out of this Agreement, and (f) agrees that this Agreement involves at least $100,000 and has been entered into by the parties hereto in express reliance upon 6 Del. C. Section 2708. 18. Assignment. Neither this Agreement nor any of the rights or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties without the prior written consent of the other parties hereto. Any purported assignment without such prior written consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns. 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. REYNOLDS AMERICAN INC. By: Charles A. Blixt ---------------------------------------- Name: Charles A. Blixt Title: Executive Vice President and General Counsel British American Tobacco p.l.c. By: Roger H. Lomax ------------------------------------------ Name: Roger H. Lomax Title: Attorney-in-Fact EXHIBIT A SANTA FE TERRITORIES Australia Austria France Germany Japan Monaco Netherlands Switzerland United Kingdom United States EXHIBIT B JV TERRITORIES Principality of Andorra Kingdom of Belgium Channel Islands of Jersey and Guernsey Kingdom of Denmark Republic of Estonia Republic of Finland French Republic Federal Republic of Germany Gibraltar Hellenic Republic Republic of Iceland Ireland Isle of Man Italian Republic (including Sicily and Sardinia) Japan Republic of Latvia Principality of Liechtenstein Republic of Lithuania Grand Duchy of Luxembourg Principality of Monaco Kingdom of the Netherlands Kingdom of Norway Portuguese Republic (including Madeira) Republic of San Marino Kingdom of Spain (including the Canary and Balearic Islands) Kingdom of Sweden Swiss Confederation United Kingdom of Great Britain and Northern Ireland (including England, Scotland, Wales, Northern Ireland, the Hebrides, Orkney, the Shetland Islands, Isle of Wight, Anglesey, and the Isles of Scilly) EXHIBIT C CURRENT JV BRANDS Reynolds RJR Action Pak Austin Gyro McCoy Mondo Redston Ritual Rockland Sedona Slide-O-Matic Tribeca Tukish Gold Turkish Jade Zuni EX-10.4 11 g90345exv10w4.txt EX-10.4 EXHIBIT 10.4 CONTRACT MANUFACTURING AGREEMENT EXECUTION COPY This Contract Manufacturing Agreement (the "Agreement") is made and entered into as of this 30th day of July, 2004 (the "Effective Date"), by and between R. J. REYNOLDS TOBACCO COMPANY, a North Carolina corporation (hereinafter, "RJRTC"), and BATUS JAPAN, INC., a Delaware corporation (hereinafter, "BATUS Japan"). RJRTC and BATUS Japan shall be referred to herein individually as a "Party" and collectively as the "Parties." RECITALS WHEREAS, BATUS Japan or its Affiliates have the right to distribute, market and sell certain Cigarettes (as defined below) and other tobacco products in the Territory (as defined below); WHEREAS, prior to the Effective Date, certain American-blend Cigarettes sold by BATUS Japan were manufactured in the United States for BATUS Japan by Brown & Williamson Tobacco Corporation ("B&W"). B&W and BATUS Japan are both indirect wholly owned subsidiaries of B.A.T. (as defined below); WHEREAS, on October 27, 2003, B&W and RJRTC's Affiliate, R.J. Reynolds Tobacco Holdings, Inc., entered into a Business Combination Agreement (the "BCA"), which requires in the pertinent part that an agreement for the contract manufacturing of American-blend Cigarettes be entered between RJRTC and BATUS Japan; WHEREAS, BATUS Japan desires to continue to have American-blend Cigarettes it sells in Japan manufactured in the United States and wishes to engage RJRTC to manufacture those products in the United States; WHEREAS, RJRTC has facilities for, and expertise relating to, the manufacture of American-blend Cigarettes and other tobacco products; and, WHEREAS, RJRTC is willing to manufacture American-blend Cigarettes for BATUS Japan in the United States pursuant to the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the mutuality, receipt and sufficiency of which are hereby acknowledged, RJRTC and BATUS Japan agree as follows: SECTION 1 DEFINITIONS For purposes of this Agreement, the following terms shall mean: 1.1 "AFFILIATE" of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. 1.2 "AGREEMENT" has the meaning set forth in the Preamble above and shall also include any and all Schedules attached hereto, as may be amended from time to time by mutual agreement of the Parties. 1.3 "ANTIBOYCOTT LAWS" means laws and regulations of the U.S.A. that prohibit participation or cooperation with, agreements to cooperate with and, in some cases, the provision of information in support of, any international boycott not sanctioned by the U.S.A., such as the Arab League boycott of Israel, and including but not limited to Section 999 of the U.S.A. Internal Revenue Code of 1986, and guidelines issued thereunder, and the U.S.A. Export Administration Regulations, 15 C.F.R. Part 760. 1.4 B.A.T. means British American Tobacco p.l.c., BATUS Japan's indirect parent corporation. 1.5 "BATUS JAPAN INDEMNIFIED PARTY" has the meaning set forth in Sub-Section 6.9. 1.6 "CARTON" means a container that contains Cigarette Packages and associated materials including, but not limited to, inserts and onserts (e.g., ten (10) packages of twenty (20) Cigarettes each). 1.7 "CASE" means a shipping container that contains Cartons (e.g., a container which contains fifty (50) cartons). 1.8 "CIGARETTE" means: (a) any roll of tobacco wrapped in paper or in any substance not containing tobacco or (b) any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging or labeling, is likely to be offered to, or purchased by consumers, as a cigarette described in the foregoing clause (a). 1.9 "CIGARETTE PACKAGE" means the smallest container for Cigarettes that, when filled with Cigarettes and sealed, is intended for distribution and sale (e.g., packs of twenty (20) Cigarettes). 1.10 "CONFIDENTIAL INFORMATION" means; (a) information or data (whether of a technical or business nature), including, but not limited to, that relating to research, development, know-how, inventions, Trade Secrets, engineering, manufacturing, -2- proposals and business plans, marketing plans and matters, financial matters and arrangements, personnel matters, sales, suppliers or customers; or (b) proprietary information or data of either Party hereto or of a third Person with whom such Party has an obligation of confidence (including all such information owned by any Affiliate of either Party), whether created by a Party individually or through the efforts contemplated by this Agreement; or (c) any other information or data, not publicly known, of either Party hereto or of a third Person with whom such Party has an obligation of confidence (including all such information owned by any Affiliate of either Party); whether any of the foregoing set forth in clauses (a)-(c) above is observed or in oral, written, graphic or electronic form, and whether or not marked or otherwise identified as "confidential." 1.11 "CONTRACT YEAR" means each successive period during the Term of this Agreement running from January 1st through December 31st. 1.12 "DAMAGES" has the meaning set forth in Sub-Section 6.8. 1.13 "DELIVERY GRACE PERIOD" has the meaning set forth in Sub-Section 2.17(c). 1.14 "EFFECTIVE DATE" is the date set forth in the Preamble above. 1.15 "EXPORT LICENSE" means any license, permit, or other authorization issued by a Governmental Authority, including but not limited to OFAC (as defined below), permitting the manufacture, export and/or sale of the Products hereunder. 1.16 "FOREIGN CORRUPT PRACTICES ACT" means 15 U.S.C. Sections 78dd-l, et seq. and any and all amendments thereto. 1.17 "GOVERNMENTAL AUTHORITY" means any of the following: (a) the government of the U.S.A. or any other foreign country; (b) the government of any state, province, county, municipality, city, town, or district of the U.S.A. or any foreign country, or any multi-country district; and (c) any ministry, agency, department, authority, commission, administration, court, magistrate, tribunal, arbitrator, instrumentality, or political subdivision of, or within the geographical jurisdiction of, any government described in the foregoing clauses (a) and (b). 1.18 "INCOTERMS" means the terms for the international transportation of goods published by the International Chamber of Commerce, as in effect from time to time during the Term of this Agreement. 1.19 "INTELLECTUAL PROPERTY" means information, concepts, ideas, discoveries, inventions (whether conceived or reduced to practice, and whether or not patentable), Specifications, requirements, samples of prototypical Cigarettes and Cigarette components, data, codes and programs, graphics, designs, prints, sketches, drawings and photographs, developments, processes and methods, know-how, Trades Secrets, patent applications, patents, other intellectual property of any type (including copyrights, -3- trademarks, and service marks), and enhancements, derivatives, and improvements thereof. 1.20 "NON-TOBACCO COMPONENT" means a material that is used in combination with any Tobacco Material for the manufacture of Cigarettes, including tobacco rod wrapping materials, filter materials and components, plug wrapping materials, tipping materials, inks, flavor and casing components, and Packaging. 1.21 "OFAC" means the United States Department of the Treasury, Office of Foreign Assets Control, or any successor agency, department or unit of the federal government of the U.S.A. with regulatory authority over export/re-export transactions subject to U.S.A. jurisdiction. 1.22 "ON TIME/IN FULL" is the performance metric used in certain circumstances to measure RJRTC's performance under this Agreement. On Time/In Full delivery performance is measured at the Purchase Order SKU order line level by week. To be credited for On Time/In Full delivery of a specific Purchase Order SKU order line level by week, RJRTC must: (a) deliver one hundred percent (100%) of the SKU volume ordered; (b) on the firm delivery date established pursuant to the mechanisms provided in Sub-Section 2.16 of this Agreement for the particular Purchase Order SKU order line; (c) at the railroad railhead or, if air freight delivery is required by the applicable Purchase Order, at the fuselage of the aircraft; and (d) with all export and shipping documentation fully and properly completed. For purposes of Sub-Sections 1.22(b) and (c) above, should RJRTC cause a specific Purchase Order SKU order line volume level by week to arrive in the Territory not later than the date on which such SKU volume would have arrived in the Territory if delivered to the railroad railhead by RJRTC on the firm delivery date established pursuant to the mechanisms provided in Sub-Section 2.16, then such Purchase Order SKU order line volume by week shall be deemed delivered on time. 1.23 "ON TIME/IN FULL DELIVERY PERCENTAGE" means the percentage of RJRTC' s On Time/In Full deliveries over the time period stated in Sub-Section 2.17(d)(iv) measured as follows: [(total number of Purchase Order SKU order lines issued by week during the measurement period by BATUS Japan and accepted by RJRTC) minus (number of total Purchase Order SKU order lines not delivered by RJRTC On Time/In Full)] divided by (total number of Purchase Order SKU order lines issued by week during the measurement period by BATUS Japan and accepted by RJRTC) times one hundred (100). Stated formulaically: Number of Total Purchase Order SKU order lines issued by week during the measurement period by BATUS Japan and accepted by RJRTC (-) Number of Total Purchase Order SKU order lines not delivered On Time/In Full _________________________________________ x 100= On Time/In Full Delivery Percentage Total Purchase Order SKU order lines issued by week -4- during the measurement period by BATUS Japan and accepted by RJRTC By way of illustration, if over the applicable measurement period orders for 1,500 total Purchase Order SKU order lines were issued by BATUS Japan and accepted by RJRTC, and RJRTC has On Time/In Full delivery of 1,450 of such total Purchase Order SKU order lines, RJRTC's On Time/In Full Delivery Percentage for the measurement period would be as follows: 1,500(-)50 ______________ x 100 = 96.6% 1,500 1.24 "OUTSIDE THE JURISDICTION OF THE U.S.A." means all places other than the fifty (50) States of the U.S.A., including offshore areas within their jurisdiction pursuant to Section 3 of the Submerged Lands Act (43 U.S.C. Section 1311), the District of Columbia, Puerto Rico, and all territories, dependencies, and possessions of the U.S.A., including foreign trade zones established pursuant to 19 U.S.C. Sections 81A-81U, and also including the outer continental shelf, as defined in Section 2(a) of the Outer Continental Shelf Lands Act (43 U.S.C. Section 1331 (a)). 1.25 "PACKAGING" means materials that are used to contain Cigarettes (or containers enclosing Cigarettes) for the purpose of distribution and sale to customers, including component materials referred to as foil, innerframes, closures, Cigarette boxes, labels, films, tear tapes, optional pack inserts and onserts, cartons and cases, including all graphics, holographics and printed matter on such materials. 1.26 "PERSON" means any firm, corporation, partnership, limited liability company, joint venture, trust, unincorporated association or organization, business, enterprise or other entity, any individual and any Governmental Authority. 1.27 "PPI" means the Producer Price Index for Stage of Processing - Finished Goods, as compiled by the United States Bureau of Labor Statistics (1982 = 100). If the Bureau of Labor Statistics substantially revises the manner in which the PPI is determined, an adjustment shall be made in the revised index that will produce results equivalent, as nearly as possible, to those that would be obtained if the PPI had not been so revised. If the 1982 average is no longer used as an index of one hundred (100), or if the PPI is no longer available, then the Parties shall substitute a mutually acceptable comparable index, based on changes in the cost of production measured at the finished goods level published by an agency of the federal government of the U.S.A. 1.28 "PRINCIPAL PARTY IN INTEREST" means the Person in the U.S.A. listed as such on Shipper's Export Declarations or Automated Export System records (and as defined in the U.S.A. Export Administration Regulations (15 C.F.R. Part 730 et seq.) and the U.S.A. Foreign Trade Statistics Regulations (15 C.F.R. Part 30)) as the Person that receives the -5- primary benefit, monetary or otherwise, of the transaction associated with such export shipment, 1.29 "PRODUCT" or "PRODUCTS" means American-blend Cigarettes manufactured for B.A.T. Customers pursuant to this Agreement which are intended to be distributed or sold in the Territory. 1.30 "PRODUCT BASE PRICES" means the prices for each Product chargeable by RJRTC for Products subject to Purchase Orders issued by BATUS Japan Customers between the Effective Date and the end of Contract Year 2004. The Product Base Prices are listed on the attached Schedule "A," The Product Base Prices are calculated by adding (or subtracting) all of the costing elements identified on Schedule "A." Schedule_"A" includes the international Order Policies & Customer Responsibilities included therewith. 1.31 "PROHIBITED COUNTRIES" means countries subject to Trade Restrictions (as defined below) and for which no Governmental Authority licenses or authorizations permitting manufacture or export of Products are obtained. For the purposes of this Agreement, Prohibited Countries shall not include Restricted Countries. 1.32 "PURCHASE ORDER" means a purchase order issued by BATUS Japan on its behalf (or on behalf of its Affiliate, RFEBV) to RJRTC containing the following information about an order for Products pursuant to this Agreement: (a) identity of Products by SKU, with each SKU ordered entered on a separate order line; (b) quantity of Products by SKU; (c) delivery instructions and required delivery date(s) for the Products at the railroad railhead or, if air freight delivery is required by the applicable Purchase Order, at the fuselage of the aircraft (with each Purchase Order typically providing for multiple deliveries of Product by SKU at scheduled intervals); (d) shipping instructions to the Territory; (e) consignee identification; (f) contact personnel; (g) Case mark requirements; (h) matters including "bill to" and "sold to" (which may be BATUS Japan or RFEBV); and (i) such other requirements as the BATUS Japan may specify or RJRTC may reasonably require. 1.33 "RAI" means Reynolds American Inc., RJRTC's parent corporation, 1.34 "RECEIVING PARTY" has the meaning set forth in Sub-Section 5.1. 1.35 "RESTRICTED COUNTRIES" means those countries in the Territory that from time to time are subject to Trade Restrictions and for which Products are manufactured for export under this Agreement by RJRTC pursuant to licenses or other authorizations duly issued and in effect by the applicable Governmental Authority whether within or outside the U.S.A, including but not limited to OFAC, and to which the additional provisions of Schedule "C" shall apply. These additional provisions shall prevail only to the extent that they are inconsistent with the other provisions of this Agreement. 1.36 "RESTRICTED COUNTRIES RENEWAL Term" has the meaning set forth in Schedule -6- 1.37 "RESTRICTED PARTIES" means Persons who have been denied export privileges or who are otherwise restricted under the U.S.A. Export Administration Regulations or wife respect to whom transactions, including but not limited to export and financial transactions, are restricted, pursuant to applicable Trade Restrictions (as defined below) in force from time to time. 1.38 "RFEBV" means BATUS Japan's Affiliate, Rothmans Far East, B.V 1.39 "RJRTC Indemnified Patty" has the meaning set forth in Sub-Section 6.8. 1.40 "SKU" means a stock keeping unit designation referring to a particular Cigarette brand style. 1.41 "SPECIFICATIONS" means specifications and standards set by the BATUS Japan on the Effective Date, and which are consistent with the specifications and manufacturing standards met by B&W immediately prior to the Effective Date, as set forth in the Specifications manuals. Unless changed pursuant to the procedures set forth in this Agreement with respect to the Products and their Packaging, the Parties agree and acknowledge that, once secondary production is moved to RJRTC's North Carolina facilities, Specifications relating to the process of manufacture will be reoriented to reflect different processes in manufacturing and/or quality systems at RJRTC's North Carolina facilities, provided that such new process specifications or specified materials do not alter the Product or Packaging performance or characteristics of the Product or its Packaging discernable to consumers when they interact with the Product or its Packaging, or marketing claims made for the Product prior to the time of reorientation. The Parties acknowledge that, prior to the Effective Date, the Specifications manuals have been provided to and reviewed by RJRTC and that both Parties have a copy of the Specifications manuals initialed by the other Party. 1.42 "TERM" means the period in which this Agreement is in effect as defined in Section 4 and, where applicable, each Restricted Countries Renewal Term. 1.43 "TERRITORY" means Japan the political jurisdiction outside the U.S.A. where BATUS Japan and RFEBV distribute and sell the Products and any other jurisdictions that the Parties may mutually agree upon in writing from time to time. The Territory subject to this Agreement is listed on the attached Schedule "B" as may be amended from time to time by mutual written agreement of the Parties. 1.44 "TOBACCO MATERIAL" means any type or form of tobacco, including tobacco in whole leaf, strip, stem or blended cut filler form, reconstituted tobacco, and including tobacco by-products, and tobacco in any type of processed form, whether or not in blended form. 1.45 "TRADEMARK" means any trademark: (a) that at any time is used on or in connection with a Product or (b) that is owned, licensed or controlled by BATUS Japan or an Affiliate of BATUS Japan. -7- 1.46 "TRADE RESTRICTIONS" mean restrictions on trade and dealings with certain countries, Persons or entities, including but not limited to restrictions on exports, imports, sales, and supplies of products, transshipments, and financial transactions imposed pursuant to export controls, trade sanctions and other trade and investment regulations of the U.S.A. and/or any other Governmental Authority outside the U.S.A. in force from time to time. 1.47 "TRADE SECRET" means information and data, including, without limitation, Specifications, that: (a) derive independent economic value, actual or potential, from not being generally known to the public or other Persons who can obtain economic value from their disclosure and use and (b) are the subject of efforts that are reasonable under the circumstances to maintain their secrecy. 1.48 "TSRA" means the U.S.A. Trade Sanctions Reform and Export Enhancement Act of 2000 (Title IX of Pub. L. 106-387). 1.49 "TTB" means The Alcohol & Tobacco Tax and Trade Bureau, an agency of the U.S.A. Department of the Treasury. 1.50 "U.S.A." means the District of Columbia, the fifty (50) states of the United States of America, its territories and possessions (including Puerto Rico), and its military facilities and installations wherever located. 1.51 "WORKOUT PERIOD" has the meanings set forth in Sub-Sections 2.17(d)(i), (ii) and (iii). 1.52 "OTHER TERMS" shall have the defined meanings stated elsewhere in this Agreement SECTION 2 RESPONSIBILITIES OF THE PARTIES 2.1 APPOINTMENT OF RJRTC FOR MANUFACTURE. Commencing on the Effective Date and until such time, if any, that this Agreement is terminated pursuant to its terms and provisions, BATUS Japan hereby appoints RJRTC to be BATUS Japan's exclusive manufacturer of all of BATUS Japan's requirements for American-blend Cigarettes intended to be disturbed and sold in the Teritory, except Cigarettes bearing the brand names CARTIER, VOGUE, DUNHILL or STATE EXPRESS 555. American-blend Cigarettes manufactured under this Agreement bearing the brand name DUNHILL shall be subject to the terms and conditions of this Agreement, but shall not be subject to RJRTC's rights of exclusive appointment to manufacture, and the manufacturing, packaging and supply of DUNHILL brand Cigarettes may be moved to alternative sources of supply outside the U.S.A. at BATUS Japan's sole discretion upon one (1) calendar years' advance written notice to RJRTC. -8- 2.2 RJRTC's MANUFACTURE OF PRODUCT. Commencing on the Effective Date, RJRTC shall provide Products to the BATUS Japan subject to and in accordance with the terms and conditions of this Agreement. RJRTC shall initially manufacture Products in the U.S.A. at its facility in Macon, Georgia. It is contemplated that RJRTC will subsequently move the manufacture of Products to its facilities located in North Carolina in various stages. Secondary manufacturing operations will be moved first. After installation in North Carolina, all secondary manufacturing equipment will be fully qualified using customary equipment commissioning protocols. Blended cut filler will also be shipped from Macon to North Carolina for test Product Manufacture. Shipment tests have been or will be conducted on the transported blended cut filler and on Products manufactured from the transported blended cut filler (including internal smoke panels) to test the effects of such transport and Product quality and performance. Subsequently, RJRTC will move its primary production operations from Macon to North Carolina. However, notwithstanding the foregoing, other than for limited testing purposes, RJRTC shall not move its primary production to its North Carolina facilities without BATUS Japan's prior written consent, which shall be granted only after full consumer acceptability testing of Products manufactured in North Carolina has been completed (the costs associated with such consumer acceptability tests relating to such final transfer of manufacturing shall be borne by BATUS Japan, including the costs of sampling and consumer testing as determined necessary by BATUS Japan in the Territory). The trial, sampling and consumer testing methodology will be determined by BATUS Japan in accordance with BATUS Japan's standard Consumer Product Testing Protocols attached hereto as Schedule "D." Further, RJRTC shall not transfer production of Products subject to this Agreement to any other facility without BATUS Japan's prior written consent. Other than the costs and expenses relating to consumer acceptability testing of Products to the Territory as described above, RJRTC shall bear all other costs and expenses (including capital expenditures) incurred in moving manufacturing operations for Products subject to this Agreement from Macon to North Carolina. 2.3 SPECIFICATIONS. (a) ORIGINAL. (i) The BATUS Japan has furnished RJRTC with the Specifications for all Products to be produced by RJRTC for the BATUS Japan pursuant to this Agreement. (ii) Promptly after the Effective Date of this Agreement, the Parties shall meet to discuss matters relating to, but not limited to, mutually acceptable manners by which: (1) costs might be controlled and (2) Products might be manufactured using processes: process conditions and equipment configurations that have been adopted by RJRTC, subject to the applicable BATUS Japan's determination of consumer acceptability, -9- (b) CHANGES PROPOSED BY BATUS JAPAN. (i) In accordance with the procedures stated below in clauses (ii) through (iv), RJRTC shall comply with arty BATUS Japan reasonable instructions in meeting any new Specifications (the costs of evaluating and implementing any such changes shall be borne by BATUS Japan prior written approval of the budget for expenditure of such costs which approval shall not be unreasonably withheld). If such budgets include required capital expenditures which RJRTC requests BATUS Japan to fond, a separate mutually acceptable agreement will be negotiated between the parties relating to the ownership and/or transfer of such capital improvements. (ii) The Parties shall conduct trials, as appropriate, in order to evaluate the effect of changes in Specifications upon Products, Product pricing and RJRTC's manufacturing environments (the costs associated with shall be borne by BATUS Japan subject to trail BATUS Japan BATUS Japan prior written approval of the budget for expenditure of such costs which approval shall not be unreasonably withheld). (iii) BATUS Japan shall provide written approval for changed Specifications of all Products upon completion of activities, including those set forth in the foregoing clauses (i) and (ii) BATUS Japan shall not be responsible for accepting any quantity of Products for which such BATUS Japan has not provided such final approval, unless such BATUS Japan has otherwise agreed in writing. (iv) RJRTC shall accept and acknowledge all changed Specifications for which BATUS Japan has provided final approval and provided to RJRTC, provided that RJRTC has determined that it can meet those Specifications. (v) Should mutually agreed changes to Specifications require Product pricing changes, the parties shall negotiate the applicable pricing changes (both increases and decreases) based on the associated effects of the Specification changes on RJRTC's costs. (c) CHANGES PROPOSED BY RJRTC. (i) RJRTC shall inform BATUS japan of changes in RJRTC's manufacturing operations proposed at any time during the Term which are anticipated to have an effect upon or require modifications to Specifications or upon RJRTC's ability to produce the projected volumes of Products anticipated to be ordered by such BATUS Japan (the costs of evaluating and implementing any such changes shall be borne by RJRTC, subject to RJRTC's prior written approved of the budget for expenditure of such costs which approval shall not be unreasonably withheld). RJRTC shall provide sufficient advance notice of such proposed changes in manufacturing operations so as to allow BATUS Japan commercially reasonable time 10 evaluate and test the effects of the associated Specification changes on the Products and the Products' consumer acceptability in the Territory. -10- (ii) The Parties shall conduct trials, as appropriate, in order to evaluate the effect of the foregoing changes in Specifications upon Products, Product pricing and RJRTC's manufacturing environments and the Products' consumer acceptability in the Territory (the costs associated with such trials shall be borne by RJRTC, including the costs of sampling and consumer testing as determined necessary by the BATUS Japan Customers in the Territory, subject to RJRTC's prior written approval of the budget for expenditure of such costs which approval shall not be unreasonably withheld). The trial, sampling and consumer testing methodology will be determined by mutual agreement of the Parties in accordance with BATUS Japan's standard Consumer Product Testing Protocols attached hereto as Schedule "D." (iii) BATUS Japan shall provide written approval for changed Specifications of all Products upon completion of activities, including those set forth in the foregoing clauses (i) and (ii). BATUS Japan shall not be responsible for accepting any quantity of Products for which such BATUS Japan has not provided such final approval, unless such BATUS Japan has otherwise agreed in writing. (iv) RJRTC shall accept and acknowledge all changed Specifications for which BATUS Japan has provided final approval and provided to RJRTC. (v) Should mutually agreed changes to Specifications require Product pricing changes, the Parties shall negotiate the applicable pricing changes (both increases and decreases) based on the associated effects of the Specification changes on RJRTC's costs. 2.4 CONTACT PERSONNEL. Promptly after the Effective Date, each Party BATUS Japan shall designate primary contact individuals for purposes of this Agreement. Those individuals shall have responsibility for communicating and receiving information regarding all matters that are relevant pursuant to the Parties' relationship with one another in accordance with this Agreement. Each Party shall promptly notify the other upon the occurrence of a change in the identity of any contact individual of that Party. 2.5 MONTHLY VIDEO CONFERENCES; PERIODIC MEETINGS. Representatives of RJRTC and BATUS Japan shall conduct monthly video Conferences to discuss with one another the Products, quality control procedures, and any other matters relating to the activities involving the supply of Products to BATUS Japan by RJRTC. All issues identified by either Party during such conferences shall be immediately evaluated, addressed and remedied as soon as commercially reasonable. Further, BATUS Japan and RJRTC shall arrange for other periodic meetings at mutually agreeable times as needed to facilitate each Party's continued performance under the Agreement. 2.6 VISIT AT FACILITIES AND INSPECTION. Representatives of any BATUS Japan may, upon reasonable notice and at times reasonably acceptable to RJRTC, visit RJRTC's facilities at which the Products are manufactured. BATUS Japan shall bear its own expenses with regard to any such visits, unless otherwise agreed upon in writing by the Parties. If requested by BATUS Japan RJRTC shall cause appropriate individuals working on the -11- activities relating to this Agreement to be available for meetings at the location of the facilities where such individuals are employed at times reasonably convenient to each party. BATUS Japan's inspection rights shall include the inspection of the inventory of Products maintained by RJRTC, RJRTC's manufacturing facilities and processes relating to the Products, RJRTC's quality control procedures relating to the Products, and all materials used in the manufacturing and packaging of the Products. Further, if requested by BATUS Japan at any time during the Term, BATUS Japan shall have the right to station not more then four (4) employees of BATUS Japan or any of its Affiliates on site at the facilities at Which RJRTC manufacturers the Products subject to this Agreement. These employees, when escorted RJRTC personnel, shall be allowed to observe the production of Products and shall function as intermediaries between BATUS Japan and RJRTC to facilitate the timely production, inventory management, quality and shipment of Products subject to purchase Orders issued by BATUS Japan under this Agreement. RJRTC shall provide these employees offices form which to operate, telephone, computer, fax and copier services, and shall provide access to all facility common areas such as parking spaces, restroom facilities, meeting rooms, cafeteria facilities, etc. BATUS Japan shall reimburse RJRTC for the costs of telephone, computer, fax and copier services actually used by BATUS Japan's personnel. BATUS Japan shall be responsible for ensuring that its representatives abide by all of RJRTC's rules and regulations with regard to safety, security, personnel matters, computer use and computer network use while at RJRTC's facilities. BATUS Japan shall inform its representatives that have access to RJRTC's premises of their obligations under this Agreement and shall require its representatives to enter into a confidentiality agreement with RJRTC in a form to be mutually agreed by the Parties. BATUS Japan shall be responsible for ensuring that all of its visitors to RJRTC's facilities are received and logged through RJRTC's reception area, in accordance with RJRTC's usual practice. BATUS Japan Customer shall also be responsible for ensuring that its representatives and visitors refrain from actions and conduct that materially interfere with RJRTC's business and operations and shall instruct its representatives and visitors not to conduct unauthorized activities on RJRTC's facilities. 2.7 INITIAL FORECAST. Promptly after the Effective Date of this Agreement, BATUS Japan shall provide RJRTC with a forecast (by SKU) that provides a projection for volumes for the various Products that BATUS Japan may require RJRTC to manufacture and supply during the period immediately following the Effective Date through the end of Contract Year 2005. 2.8 SUBSEQUENT ANNUAL FORECASTS. Beginning with Contract Year 2006, and for each successive Contract Year, BATUS Japan shall provide RJRTC with a forecast (by SKU) that provides a projection for volumes for the various Products that BATUS Japan may require RJRTC to provide during each successive Contract Year. A Preliminary forecast for each successive contract year shall be provided to RJRTC at least by July 1st and a confirmed forecast shall be provided by October 1st of each proceeding Contract -12- Year. Any and all forecasts supplied are non-binding and will be supplied for purpose of general planning of capacities, inventories, etc. 2.9 PERIODIC FORECASTS. Promptly after providing its initial forecast in accordance with Sub-Section 2.7. BATUS shall begin providing RJRTC on a monthly basis rolling eighteen (18) month forecasts (by SKU) that provide projections for volumes of the various Products for which the BATUS JAPAN expects to place Purchase Orders during the period covered by such periodic forecasts. Any and all forecasts supplied are non-binding and will be supplied for purposes of general planning of capacities, inventories, etc. 2.10 PURCHASE OF MATERIALS. RJRTC shall use raw materials (including, but not limited to, Tobacco Materials, Non-Tobacco Components, and Packaging materials) that are obtained from sources and suppliers selected by RJRTC, which sources and suppliers must be approved by the BATUS JAPAN, such approval not to be withheld, conditioned or delayed unless the BATUS JAPAN can reasonably demonstrate that RJRTC's selected source(s) or supplier(s) do not at the time of selection meet the applicable Specifications. Unless otherwise agreed upon in writing, RJRTC shall be solely responsible for ordering, receiving, storing, maintaining, using, paving for (including the payment of all import duties, fees and internal revenue taxes, if applicable) and disposing of ail raw materials. 2.11 INVENTORY. The Parties shall communicate in order to ensure that RJRTC possesses an inventory of raw materials sufficient to promptly fill Purchase Orders that BATUS Japan may place. The Parties shall communicate such that each Party possesses knowledge regarding the level of inventory of Products that RJRTC possesses. The Parties shall agree in writing to the levels of inventory for all required raw materials that RJRTC will be responsible for having on hand to fulfill BATUS Japan's forecasted purchase Orders. 2.12 SHARING OF INFORMATION. RJRTC and the BATUS JAPAN shall cooperate with one another (and relevant third Persons) in order to ensure that each is provided with relevant information regarding the physical and chemical properties (including toxicological information) of raw materials, equipment, process conditions, processes or treatment conditions that RJRTC may employ when producing Products for the BATUS JAPAN- If requested by a BATUS JAPAN, RJRTC shall provide samples of raw materials, at the times and in the amounts requested, to the BATUS JAPAN or an Affiliate designee for testing and evaluation. Any change to raw material, type of equipment (routine/preventive maintenance and ordinary wear and tear excepted), processes, process conditions, or treatment conditions that RJRTC may employ when producing Products for a BATUS JAPAN must be approved by the BATUS JAPAN prior to implementation of the change by RJRTC. 2.13 CIGARETTE PACKAGING, CARTON AND CASE MARKINGS. (a) MARKINGS. Every Cigarette Package, Carton and Case produced by RJRTC for the BATUS JAPAN shall bear such markings as required by: (i) the applicable laws -13- and regulations of the U.S.A. for exported Products; (ii) the applicable laws and regulations of the relevant Territory; and (iii) the Specifications. (b) LIMITATIONS. Except as set forth in Sub-Section 2.13(a) or otherwise agreed between the Parties in writing, RJRTC shall not be obligated to produce (and BATUS Japan shall not be obligated to accept as conforming) Products with markings on the Packaging, Carton or Case identifying RJRTC or an Affiliate of RJRTC as the corporate source of the Products. 2.14 REVENUE STAMPS. [Intentionally Left Blank]. 2.15 PURCHASE ORDERS AND PRODUCTION SCHEDULES. BATUS Japan shall place with RJRTC from time to time such Purchase Orders for Products that BATUS Japan (or RFEBV) desires to order. Unless an alternative schedule is determined necessary by BATUS Japan, BATUS Japan will place one (1) Purchase Order per month which will contain binding orders (by SKU) for a four (4) week period, and non-binding forecasted orders for the succeeding two (2) month period. Each Purchase Order will designate delivery dates for Products ordered by SKU, which will typically require one (1) delivery per week during the four (4) week firm order period. BATUS Japan shall provide (or reference) to RJRTC the Specifications for each of the Products ordered pursuant to a Purchase Order. RJRTC shall schedule production of Products based on forecasts provided by BATUS Japan and Purchase Orders placed by BATUS Japan. Each Purchase Order which requires normal ocean freight shipment shall contain instructions for each delivery that specify mode of transport to the Territory and a requested delivery date of the Products at the railroad railhead that: (a) for the first delivery under a Purchase Order shall not be less than twenty-eight (28) calendar days from RJRTC's receipt of the Purchase Order; (b) for the second delivery under a Purchase Order shall not be less than thirty-five (35) calendar days from RJRTC's receipt of the Purchase Order, (c) for the third delivery under a Purchase Order shall not be less than forty-two (42) calendar days from RJRTC's receipt of the Purchase Order; and (d) for the fourth delivery under a Purchase Order shall not be less than forty-nine (49) calendar days from RJRTC's receipt of the Purchase Order. Notwithstanding the foregoing, BATUS Japan may submit not more than three (3) Purchase Orders per calendar year which require that the first delivery under the Purchase Order he delivered to the railroad railhead within twenty-eight (28) calendar days from RJRTC's receipt of the Purchase Order. All other Purchase Orders submitted by BATUS Japan during the calendar year shall require first delivery of Product to the railroad railhead in not less than thirty (30) calendar days from RJRTC's receipt of the Purchase Order. Purchase Orders which require delivery by air freight shipment may contain requested delivery dates at the fuselage of the aircraft that are not less than twenty-eight (28) calendar days from RJRTC's receipt of the applicable Purchase Order. -14- 2.16 PRODUCTION ACTIVITIES. RJRTC shall acknowledge receipt of each Purchase Order within three (3) business days of RJRTC's receipt of such Purchase Order. RJRTC shall promptly inform BATUS Japan RJRTC's schedule for production and delivery of ordered Products at the railroad or, if air freight delivery is required by BATUS Japan in the applicable Purchase Order, at the fuselage of the aircraft. If RJRTC determines that it cannot fill any portion of the Purchase Order by the requested delivery date(s), BATUS Japan shall be notified in writting within three (3) business days of RJRTC's receipt of the Purchase Order. RJRTC's notice shall include a proposed alternative delivery date(s) for the Products (or any portion thereof) subject to the Purchase Order. In such cases, the Parties will negotiate a revised delivery date(s) agreeable to both Parties and shall confirm such final agreed delivery date(s) in writing. If an alternative delivery date(s) acceptable to the applicable BATUS Japan cannot be agreed using normal transport as defined in Sub-Section 2.17(a), RJRTC will be obligated to fill the Purchase Order (or the applicable portion of the Purchase Order) on a date that is acceptable to the BATUS Japan pursuant to the air freight remedy specified in Sub-Section 2.17(c). If no notice is given by RJRTC in accordance with this Sub-Section 2.16, the original delivery date(s) stated in the Purchase Order shall become a firm delivery date(s) by which RJRTC must deliver the Products subject to the Purchase Order at the railroad railhead or, if air freight delivery is required by the BATUS Japan in the applicable Purchase Order, at the fuselage of the aircraft. RJRTC shall produce and deliver to the applicable BATUS Japan the amount of ordered Products within the time period set forth in the applicable Purchase Order (unless modified as stated above), and such Products shall meet the BATUS Japan Secifications. Notwithstanding the foregoing of this Sub-Section 2.16. RJRTC shall have the right to accept or reject, in whole or in part, any Purchase Order placed by BATUS Japan , in the event that: (a) the Purchase Order would require RJRTC to possess materials in inventory for production of Products in excess of the inventory levels agree to pursuant to Sub-Section 2.11. and RJRTC does not otherwise possess inventory levels sufficient to fulfill the Purchase Order (RJRTC's right of rejection shall apply only to the extent that such inventory levels are unavailable and the remainder of the Purchase Order shall be filled); (b) RJRTC is not prepared to manufacture Product due to a change in Specifications by BATUS Japan, if such changes have not been previously agreed to by RJRTC and the B.A.T. Customer, (c) the production of Product would be, in RJRTC's good faith belief based on credible evidence, in violation of the law of a relevant Governmental Authority, or (d) & Force Majeure event has occurred, 2.17 DELIVERY AND SHIPMENT; REMEDIES FOR FAILURE TO DELIVER BY AGREED DELIVERY DATES. (a) SHIPPING INSTRUCTIONS. Following the manufacture of Products, and subject to obtaining all required Export Licenses in accordance with Schedule "C" (if any), RJRTC shall effect delivery of all Products "at the railroad railhead if air freight delivery is required by the applicable B.A.T. Customer in the BATUS Japan, at the fuselage of the aircraft, by the delivery date(s) required in BATUS Japan, Purchase Orders or the agreed firm delivery date(s) (if modified pursuant to Sub-Section 2.16). RJRTC shall -15- ship Products on a first in/first out basis as determined by the date of manufacture and deliver Products in the manner prescribed in any instructions that BATUS Japan furnishes; provided, that all Products must be shipped using shipping terms that require RJRTC to control the Products until delivered to a location Outside the Jurisdiction of the U.S.A.; and for avoidance of doubt, risk of loss to Products shall pass to BATUS Japan once the Products pass Outside the Jurisdiction of the U.S.A. With respect to all shipping, export and other documents prepared by or for third Persons, INCOTERMS 2000 shipping terms may be used to the extent required (e.g., FOB named vessel at U.S.A. port of shipment). As between Parties the use of such INCOTERMS 2000 shipping terms shall not alter the express provisions of this Agreement. Products shall be shipped by reputable commercial common carriers selected and contracted by the BATUS Japan for shipping the Products Outside the Jurisdiction of the U.S.A. RJRTC shall arrange for shipment and delivery through its freight forwarder and prepare all necessary shipping documentation relating to the Products, contact BATUS Japan for routing instructions, and be responsible for arranging loading. Such shipping documentation shall comply with all U.S.A. legal requirements, as well as the legal requirements of the country of destination (inspections, certificates of origin, etc.). RJRTC shall be listed as shipper of the Products on corresponding export bills of lading, as well as the Principal Party in Interest for export declaration reporting purposes. BATUS Japan will assist RJRTC in obtaining copies of all documents evidencing proof of export of Products within sixty (60) calendar days of the passage of risk of loss. If BATUS Japan is unable to provide such proof of export, BATUS Japan will reimburse RJRTC for any excise taxes assessed by a Governmental Authority and paid by RJRTC as a result of such transactions. RJRTC will provide documentary evidence of such payment and will assist BATUS Japan in any effort made to contest the assessment of such excise taxes. (b) TRANSPORT. RJRTC shall be responsible for proper packing of the Products for shipment in accordance with BATUS Japan directions. Such packing shall be adequate for normal transport conditions for export so as to prevent damage and/or deterioration of Products prior to reaching their ultimate destination. BATUS Japan shall pay all costs (including insurance costs) relating to the ocean shipment or air freight shipment (if requested by BATUS Japan in the applicable Purchase Order) of the Products. Further, the Product invoice prices payable by BATUS Japan shall include overland shipping charges and associated insurance costs to the railroad railhead in accordance with Schedule "A." Shipping charges and associated insurance costs for freight from the railroad railhead the port of export and Ocean freight or air freight shipping charges and associated insurance costs shall be paid by BATUS Japan . (c) AIR FREIGHT REMEDY FOR FAILURE TO DELIVER PRODUCTS MEETING THE APPLICABLE SPECIFICATIONS WITHIN THE DELIVERY GRACE PERIOD. In accordance with the procedures stated in Sub-Section 2.16. final agreed firm delivery dates for Products at the railroad railhead (or, if air freight delivery is required by BATUS Japan in the applicable Purchase Order, at the fuselage of the aircraft) shall be established for Products supplied under each Purchase Order issued BATUS Japan. Absent delays caused by BATUS Japan failure to fulfill its obligations under this Agreement or an intervening Force Majeure event as defined in Sub-Section 7.4, RJRTC shall be responsible for delivery of -16- Products meeting the applicable Specifications by the final agreed firm delivery dates. Should RJRTC be unable to deliver some or all of the Products by any such firm delivery date, RJRTC must remedy its delay so as to deliver those Products at the railroad railhead by the next subsequently scheduled delivery date (the "Delivery Grace Period"). If RJRTC cannot meet its delivery requirements within the Delivery Grace Period, RJRTC shall be required to arrange for air freight shipment of those Products to BATUS Japan. In such circumstances, the BATUS. Japan shall be responsible for payment of only such shipping and insurance costs as would have been incurred had RJRTC been able to deliver the Products by the agreed firm delivery date using normal ocean freight shipment. RJRTC shall be responsible for payment of the difference between those costs and the air freight shipping and insurance costs actually incurred. (d) MATERIAL BREACH OF CONTRACT FOR FAILURE TO DELIVER PRODUCTS MEETING THE APPLICABLE SPECIFICATIONS BY THE AGREED DELIVERY DATES. (i) TERMINATION OF RJRTC'S EXCLUSIVE MANUFACTURING RIGHTS WITH RESPECT TO SPECIFIC PRODUCT SKU'S. (1) DURING THE FIRST TWELVE (12) MONTHS FOLLOWING THE EFFECTIVE DATE. Notwithstanding any other remedy available to BATUS Japan under this Agreement, BATUS Japan shall be entitled (but not required) to terminate RJRTC's exclusive manufacturing rights with respect to any particular Product SKU(s) for cause without allowing the cure period provided for other material breaches of contract as provided in Sub-Section 4.2(c)(iv) if during the first twelve (12) month period following the Effective Date of this Agreement: (A) RJRTC fails to deliver any particular Product SKU(s) meeting the applicable Specifications within the Delivery Grace Period with respect to four (4) deliveries of the affected Product SKU(s); and (B) as a result of RJRTC's failure, pursuant to the remedies available under Sub-Section 3.4, BATUS Japan rejects and RJRTC is required to replace all four (4) of such Product SKU deliveries. (2) AFTER THE FIRST TWELVE (12) MONTHS FOLLOWING THE EFFECTIVE DATE. Upon the expiration of the first twelve (12) month period following the Effective Date, the assessment period shall restart and run anew as if no previous breaches had occurred for purposes of this Sub-Section 2.17(d)(i). Thereafter, BATUS Japan shall be entitled (but not required) to terminate RJRTC's exclusive manufacturing rights with respect to any particular Product SKU(s) for cause without allowing the cure period provided for other material breaches of contract as provided in Sub-Section 4(c)(iv) if during any subsequent twelve (12) month period: (A) RJRTC fails to deliver any particular Product SKU(s) meeting the applicable Specifications within the Delivery Grace Period with respect to two (2) deliveries of such Product SKU(s); and (B) as a result of RJRTC's failure, pursuant to the remedies available under Sub-Section 3.4, BATUS Japan rejects and RJRTC is required to replace both of such Product SKU deliveries. (3) GENERAL CONDITIONS FOR PARTIAL TERMINATION UNDER SUB-SECTION 2.17(d)(i). After any such partial termination becomes effective under this Sub- -17- Section 2.17(d)(i) and without being subject to the right of first refusal provided in Sub-Section 4.4, BATUS Japan may have the affected Product SKU(s) manufactured by any other Person, free from RJRTC's exclusive manufacturing rights stated in Sub-Section 2.1 BATUS Japan must invoke its partial termination rights under this Sub-Section 2.17(d)(i) by written notice to RJRTC within ten (10) business days of the accrual of such right or such right of partial termination shall be waived with respect to the applicable material breach. If BATUS Japan invokes its partial termination rights, after notice of partial termination is given, termination of RJRTC's exclusive manufacturing rights with respect to the affected SKU(s) shall become effective not less than three (3) months, nor more than twelve (12) months, from the date of BATUS Japan's notice as designated by BATUS Japan in such notice (the "Workout Period"). During such Workout Period, BATUS Japan shall continue to order the affected SKU(s) exclusively from RJRTC, but shall be allowed to have test Products manufactured by alternative sources for purposes of qualifying such alternative manufacturers. If the right of partial termination is waived by BATUS Japan, the applicable twelve (12) month assessment period shall restart and ran anew from the day such waiver becomes effective as if no previous breaches had occurred with respect to such Product SKU for purposes of this Sub-Section 2.17(d)(j). Notwithstanding anything contained in the foregoing, during the Workout Period, RJRTC shall not be required to make any capital expenditures or incur any costs which would reduce RJRTC's profit margin on the affected SKU(s) below five percent (5%) during such Workout Period in order to provide Products which meet the applicable Specifications. Such capital expenditures or excess costs shall be borne by BATUS Japan. Upon the effective date of any partial termination under this Sub-Section 2.17(d)(i). RJRTC shall honor and fulfill any then-outstanding Purchase Orders for the terminated SKU(s). Further, RJRTC shall prepare and provide to BATUS Japan an accounting of its inventories of finished Products and unique Non-Tobacco Components relating to the terminated SKU(s). BATUS Japan shall be required to purchase a portion of such finished Products equaling a thirty (30) calendar days' inventory based on BATUS Japan's most recent monthly periodic forecast provided under Sub-Section 2.9. BATUS Japan shall also purchase RJRTC's inventory of such unique Non-Tobacco Components up to the agreed inventory levels established under Sub-Section 2.11. (ii) TERMINATION OF RJRTC'S EXCLUSIVE MANUFACTURING RIGHTS WITH RESPECT TO ALL PRODUCT SKUS IN A CIGARETTE BRAND FAMILY FOR PERSISTENT FAILURE TO MEET SPECIFICATIONS. Notwithstanding any other remedy available to BATUS Japan under this Agreement, BATUS Japan shall be entitled (but not required) to terminate RJRTC's exclusive manufacturing rights with respect to all Product SKUs in a particular Cigarette brand family for cause without allowing the cure period provided For other material breaches of contract as provided in Sub-Section 4.2(c)(iv) if: (1) it is finally determined that RJRTC has delivered any particular Product SKU within such Cigarette brand family that does not meet the required Specifications; (2) during the -18- twelve (12) month period following the determination of the Parties as to such breach, twenty-five percent (25%) or more of the total volume of the affected Product SKU manufactured by RJRTC under this Agreement failed to meet the required Specifications; and (3) as a result of RJRTC's failure, pursuant to the remedies available under Sub-Section 3.4, BATUS Japan rejects and RJRTC is required to replace the volume of the affected Product which failed to meet the required Specifications. After the effective date of such partial termination, and without being subject to the right of first refusal provided in Sub-Section 4.4, BATUS Japan may have any and all Product SKUs in that Cigarette brand family manufactured by any other Person, free from RJRTC's exclusive manufacturing rights stated in Sub-Section 2.1. BATUS Japan must invoke its partial termination rights under this Sub-Section 2.17(d)(ii) by written notice to RJRTC within thirty (30) calendar days of the accrual of such right or such right of partial termination shall be waived with respect to the applicable material breach. Further, after notice of partial termination is given, termination of RJRTC's exclusive manufacturing rights with respect to the affected Cigarette brand family shall become effective not less than three (3) months, nor more than twelve (12) months, from the date of BATUS Japan's notice as designated by BATUS Japan in such notice (the "Workout Period"). During such Workout Period, BATUS Japan shall continue to order Products in the affected Cigarette brand family exclusively from RJRTC, but shall be allowed to have test Products in that Cigarette brand family manufactured by alternative sources for purposes of qualifying such alternative manufacturers. Notwithstanding anything contained in the foregoing, during the Workout Period, RJRTC shall not be required to make any capital expenditures or incur any costs which would reduce RJRTC's profit margin on the affected Cigarette brand family below five percent (5%) during such Workout Period in order to provide Products which meet the applicable Specifications. Such capital expenditures or excess costs shall be borne by BATUS Japan. (iii) TERMINATION OF THE ENTIRE AGREEMENT FOR PERSISTENT FAILURE TO MEET SPECIFICATIONS. Notwithstanding any other remedy available to BATUS Japan under this Agreement, BATUS Japan shall be entitled (but not required) to terminate the entire Agreement for cause without allowing the cure period provided for other material breaches of contract as provided in Sub-Section 4.2(c)(iv) if, over any twelve (12) month period, pursuant to the remedies available under Sub-Section 3.4, BATUS Japan rejects and RJRTC is required to replace twenty percent (20%) or more of the total Product volume manufactured under this Agreement based on the failure of such Products to meet the required Specifications. After the effective date of such termination, and without being subject to the right of first refusal provided in Sub-Section 4.4, BATUS Japan may have Products manufactured by any other Person, free from RJRTC's exclusive manufacturing rights stated in Sub-Section 2.1. -19- BATUS Japan must invoke its termination rights under this Sub-Section 2.17 (d)(iii) by written notice to RJRTC within thirty (30) calendar days of the accrual of such right or such right of termination shall be waived with respect to the applicable material breach. Further, after notice of termination is given, the Agreement's termination shall become effective not less than three (3) months, nor more than twelve (12) months, from the date of BATUS Japan's notice as designated by BATUS Japan in such notice (the "Workout Period"). During such Workout Period, BATUS Japan shall continue to order Products exclusively from RJRTC, but shall be allowed to have test Products manufactured by alternative sources for purposes of qualifying such alternative manufacturers. Notwithstanding anything contained in the foregoing, during the Workout Period, RJRTC shall not be required to make any capital expenditures or incur any costs which would reduce RJRTC's profit margin on the Products manufactured under the Agreement below five percent (5%) during such Workout Period in order to provide Products which meet the applicable Specifications. Such capital expenditures or excess costs shall be borne by BATUS Japan. (iv) TERMINATION OF THE ENTIRE AGREEMENT FOR FAILURE TO MEET REQUIRED ON TIME/IN FULL DELIVERY PERCENTAGE. RJRTC must maintain at least an eighty percent (80%) On Time/In Full Delivery Percentage based on a rolling twelve (12) month assessment period. RJRTC's failure to maintain at least an eighty percent (80%) On Time/In Full Delivery Percentage based on a rolling twelve (12) month assessment period shall constitute material breach of contract by RJRTC, entitling (but not requiring) BATUS Japan to terminate the entire Agreement for cause without allowing the cure period provided for other material breaches of contract as provided in Sub-Section 4.2 (c)(v). After the effective date of such termination, and without being subject to the right of first refusal provided in Sub-Section 4.4. BATUS Japan may have Products manufactured by any other Person, free from RJRTC's exclusive manufacturing rights stated is Sub-Section 2.1. BATUS Japan must invoke Its termination rights under mis Sub-Section 2.17(d)(iv) by written notice to RJRTC within ninety (90) calendar days of the accrual of such right or such right of termination shall be waived with respect to the applicable material breach. Further, after notice of termination is given, the Agreement's termination shall become effective one (1) year from the date of BATUS Japan's notice. During such one (1) year period, BATUS Japan shall continue to order Products exclusively from RJRTC, but shall be allowed to have test Products manufactured by alternative sources for purposes of qualifying such alternative manufacturers. 2.18 CONTINGENCY MANUFACTURING PLANS; ALTERNATIVE SOURCE OF SUPPLY. Immediately after the Effective Date of this Agreement, or as soon thereafter as practical, RJRTC shall disclose to BATUS Japan any contingency manufacturing plans which have been prepared or entered by RJRTC to ensure that Products can be manufactured and supplied to BATUS Japan in accordance with this Agreement should RJRTC suffer a loss or damage to its manufacturing facilities or any other interruption to, or interference with, RJRTC's ability to manufacture Products. Further, in the event that during the Term of -20- this Agreement RJRTC becomes unable to provide Product to BATUS Japan in accordance with the terms and conditions of this Agreement and in accordance with the volumes placed by BATUS Japan through its Purchase Orders, then RJRTC shall cooperate with BATUS Japan towards arranging an alternative supply of Product for BATUS Japan, as quickly as possible and always in compliance with applicable Trade Restrictions (if any). 2.19 TITLE AND RISK. In accordance with Sub-Section 2.17(a), risk of loss to Products shall pass to BATUS Japan once the Products pass Outside the Jurisdiction of the U.S.A. Title to Products shall likewise transfer to BATUS Japan once the Products pass Outside the Jurisdiction of the U.S.A. and BATUS Japan shall own the Products free and dear of any liens, claims, security interest or other encumbrances of any nature. 2.20 ADDITIONAL SERVICES. Upon written request by BATUS Japan, RJRTC may, at RJRTC'S sole discretion, provide certain additional services subject to compliance with applicable laws, including Trade Restrictions (if any). The Parties shall negotiate in good faith towards arriving at a separate agreement setting forth terms and conditions by which RJRTC shall provide such services for BATUS Japan, and by which BATUS Japan shall pay RJRTC for such services. SECTION 3 COMMERCIAL TERMS 3.1 PRICING: (a) PRODUCT BASE PRICING FOR CONTRACT YEAR 2004. For Products manufactured pursuant to Purchase Orders issued by BATUS Japan between the Effective Date and the end of Contract Year 2004, RJRTC shall charge and BATUS Japan shall pay the Product Base Prices established in Schedule "A." In addition, RJRTC shall be allowed to recover and BATUS Japan shall pay the actual costs incurred by RJRTC resulting from any new fees, duties, taxes, and/or levies that are not in existence or imposed as of the Effective Date of this Agreement by any Governmental Authority applicable to RJRTC's manufacture in the U.S.A. and/or export of Product to the Territory. (b) Product PRICING INCREASES AND DECREASES FOR CONTRACT YEAR 2005 THROUGH CONTRACT YEAR 2009. For Contract Year 2005 through Contract Year 2009, the prices chargeable for Products manufactured under this Agreement shall increase or decrease, as the case may be, over or under the prices chargeable in the immediately preceding Contract Year by the percentage change in: (i) the PPI in effect for September of the immediately preceding Contract Year over (ii) the PPI in effect for September of the Contract Year prior to the immediately preceding Contract Year. Notwithstanding the foregoing, and regardless of the actual change in PPI over the applicable period, Product price increases or decreases shall be capped at six percent (6.0%) from those charged in the immediately preceding Contract Year. By way of example only, and subject to the six percent (6.0%) cap stated above, the Product prices chargeable for -21- Contract Year 2006 shall increase or decrease from the prices in effect for Contract Year 2005 by the percentage increase or decrease in PPI between September 2004 and September 2005. In addition to the foregoing, RJRTC shall be allowed to recover and BATUS Japan shall pay the actual costs incurred by RJRTC resulting from any new fees, duties, taxes, arid/or levies that are not in existence or imposed as of the Effective Date of this Agreement by any Governmental Authority applicable to RJRTC's manufacture in the U.S.A. and/or export of Product to the Territory. Once Product pricing is established for a Contract Year, RJRTC shall prepare and the Parties shall mutually execute a revised Schedule "A" governing the Product pricing for the Contract Year in question which shall automatically be incorporated into this Agreement without further action by the Parties. (c) PRODUCT PRICING FOR EACH CONTRACT YEAR DURING THE REMAINDER OF THE TERM. Product pricing applicable for Contract Year 2010 and for each Contract Year thereafter shall be equal to RJRTC's costs of manufacturing the Products subject to this Agreement in the immediately preceding Contract Year, plus a profit margin of ten percent (10%). Product manufacturing costs shall be calculated for each Product SKU and shall be based on the manufacturing costing methodology which is attached hereto as Schedule "E". Discussions regarding Product pricing shall commence no later than September 1 st of the Contract Year immediately preceding the Contract Year at issue. At that time, BATUS Japan shall be provided with RJRTC's calculation and analysis of Product manufacturing costs for the immediately preceding Contract Year and BATUS Japan shall be provided access to all data, records, and information upon which RJRTC's calculation of Product costs are based. Subject to the standard manufacturing costing methodology, the Parties shall act in good faith to agree upon Product pricing for the next Contract Year. If Product pricing cannot be agreed upon prior to the commencement of the Contract Year at issue, the prices applicable during the immediately preceding Contract Year shall remain in place until agreement on modified pricing can be finalized. Notwithstanding the foregoing, if revised Product pricing cannot be agreed on prior to March 1st of the Contract Year at issue, if not already invoked, the issue shall be submitted to the dispute resolution procedures provided in Sub-Section 7.7. Once Product pricing is established for a Contract Year, RJRTC shall prepare and the Parties shall mutually execute a revised Schedule "A" governing the Product pricing for the Contract Year in question which shall automatically be incorporated into this Agreement without further action by the Parties. Unless otherwise mutually agreed, such revised Product pricing will be retroactive to all Products manufactured pursuant to Purchase Orders issued since January 1st of the Contract Year at issue. The Parties shall reconcile all payments made for Purchase Orders issued between January 1st of the Contract Year in question and the date of execution of the revised Schedule "A" and any -22- required payment will be made by the paying Party to the other Party within thirty (30) calendar days of the completion of such reconciliation. 3.2 INVOICE. RJRTC shall invoice BATUS Japan (or, where applicable, RFEBV) monthly for all Products shipped by RJRTC during the applicable month. BATUS Japan's obligation to make payment shall accrue once title and risk of loss to the applicable Products pass to BATUS Japan. Such invoices shall be due and payable by BATUS Japan (or RFEBV) by the last calendar day of the month following the month of shipment from RJRTC's manufacturing facilities. 3.3 PAYMENTS. All payments to RJRTC shall be by wire transfer of funds to RJRTC's bank account (or accounts) as clearly designated from time to time in RJRTC's invoice, or as otherwise specified by RJRTC and agreed upon by the Parties. RJRTC's current payment instructions are set forth in Schedule "F" of this Agreement. All payments made to RJRTC shall be in U.S.A. Dollars. Payments to RJRTC in accordance with Sub-Section 3.2 are without prejudice to any rights BATUS Japan may have for any reason whatsoever, and any liability of RJRTC for breach of this Agreement shall not be terminated or reduced by reason of such payment. 3.4 REJECTED PRODUCTS. RJRTC shall ensure that the Products it manufactures for BATUS Japan comply with the Specifications of BATUS Japan as have been confirmed between the Parties and with all Packaging, Carton and Case marking requirements as provided hereunder. BATUS Japan may reject any Product that, as of the time the Product passes "across the ship's rail," does not comply with the applicable Specifications and/or Packaging, Carton or Case marking requirements as are current upon manufacture within one hundred and twenty (120) calendar days after arrival of the Products in the Territory. In such case, BATUS Japan's written notice of rejection to RJRTC shall state in commercially reasonable detail the Products which BATUS Japan deems non-compliant, the Purchase Order pursuant to which those Products were manufactured and the Specification defects and/or Packaging, Carton or Case marking requirements which BATUS Japan believes were not fulfilled. BATUS Japan shall bear the burden to demonstrate Product non-compliance as of the time the Product passes "across the ship's rail." Within ten (10) business days of receipt of a notice of rejection, RJRTC may contest such rejection and provide documentation and other evidence relating to the quality assurance measures taken with respect to the rejected Products and any other matters relating to the compliance of the Products at issue. Thereafter, the Parties shall confer in good faith to resolve the controversy. If any Product is finally deemed to be non-compliant, such non-compliant Product will be, at RJRTC's option and expense, either returned to RJRTC or destroyed. If returned to RJRTC in the U.S.A., BATUS Japan shall provide necessary reference information to allow RJRTC to receive such returned Product without being required to incur the expense of applicable U.S.A. customs duties or U.S.A. excise taxes. In the event of any such rejection, RJRTC shall replace such non-complying Products with complying Products as soon as possible at no additional charge to BATUS Japan. -23- RJRTC shall bear all reasonable costs inclined by BATUS Japan in inspecting and deposing of or returning the non-complying Products, as well as the full costs of shipping complying Products to the Territory via air freight shipment, including applicable insurance. If non-complying Product returned to RJRTC is destroyed by RJRTC, RJRTC will provide documentary evidence of such destruction to BATUS Japan. 3.5 ADJUST RIGHTS OF BATUS JAPAN. RJRTC shall maintain accurate and complete records including, but not limited to, correspondence, instructions, receipts, quality assurances records, Specifications, Purchase Orders, Non-Tobacco Component and Tobacco Material procurement records, warehousing records and cost data, export records, transportation records and cost data, other manufacturing cost records and data, and similar documents and data relating to BATUS Japan's order and receipt of Products from RJRTC and RJRTC's production and delivery of Products for BATUS Japan, RJRTC shall keep such records in sufficient detail to enable BATUS Japan to determine or verify raw materials inventories, process conditions and quality controls for Products supplied pursuant to each Purchase Order. BATUS Japan shall likewise have the right to review and audit RJRTC's records relating to projected and actual Product costing increases or decreases derived from changes in Specifications made pursuant to the procedures set forth above in Sub-Section 2.3. Further, commencing with Contract Year 2009, BATUS Japan shall have the right to review and audit such records so as to analyze and verify all manufacturing costing calculations generated by RJRTC with respect to the determination of Product pricing for Contract Year 2010 and for each Contract Year thereafter. RJRTC shall keep such records for a period of time as determined by its normal document retention policies, but in any event not less than eighteen (18) months after the date of the transaction to which those records relate, or longer if required by law, RJRTC shall permit BATUS Japan to examine RJRTC's records and its facilities from time to time (during regular business hours and upon not less than five (5) business days written notice) to the extent necessary for BATUS Japan to make the foregoing determinations and verifications, and such examination shall be made at the expense of BATUS Japan either by its employees (or those of its Affiliates) or by an independent auditor appointed by BATUS Japan who shall report to BATUS Japan those matters associated with such examination. 3.6 AUDIT RIGHTS OF RJRTC. BATUS Japan shall maintain (or cause to be maintained) accurate and complete records including, but not limited to, those relating to the ordering, exportation, transport, handling, importation, receipt, inspection, storage and distribution of Products manufactured under this Agreement. BATUS Japan shall keep such records in sufficient detail to enable RJRTC to evaluate, determine or verify any claim by BATUS Japan that Products do not meet Specifications or are not delivered On Time/In Full. BATUS Japan shall keep such records for a period of time as determined by its normal document retention policies, but in any event not less than eighteen (18) months after the date of the transaction to which those records relate, or longer if required by law. BATUS Japan shall permit RJRTC to examine BATUS -24- Japan's records from time to time (during regular business hours and upon not less than five (5) business days written notice) to the extent necessary for RJRTC to make the foregoing evaluations, determinations and verifications, and such examination shall be made at the expense of RJRTC either by its employees (or those of its Affiliates) or by an independent auditor appointed by RJRTC who shall report to RJRTC those matters associated with such examination. 3.7 INSURANCE AND TRANSPORTATION COSTS. Costs of insurance and transport shall be paid in accordance with Sub-Section 2.17. Further, BATUS Japan shall be responsible for all customs duties, excise taxes, and like fees and expenses due as a result of import; of Products to the appropriate jurisdiction within the Territory. SECTION 4 TERM, GENERAL TERMINATION, RIGHT OF FIRST REFUSAL 4.1 TERM OF THE AGREEMENT. This Agreement shall be effective upon the Effective Date and shall remain in effect until terminated by either Party pursuant to its terms and conditions- With not less than thirty-six (36) months' prior written notice, BATUS Japan may terminate this Agreement without cause and at its discretion as of December 31, 2014, or upon any December 31 st thereafter. Notwithstanding the foregoing, the Term of this Agreement with regard to Products manufactured for distribution in Restricted Countries shall be subject to the additional provisions stated in Schedule "C" and the definition of "Restricted Countries Renewal Term" provided therein. 4.2 GENERAL TERMINATION. (a) MUTUAL. The Parties may mutually agree in writing at any time to terminate this Agreement. (b) BY BATUS JAPAN. BATUS Japan shall have those rights of partial and complete termination for cause as provided in Sub-Section 2.17(d) (i), (ii), (iii)and (iv). (c) BY EITHER PARTY. Either Party may terminate this Agreement at any time upon written, notice to the other if: (i) Voluntary bankruptcy or a petition for involuntary bankruptcy of the other Party is not dismissed within a period of sixty (60) calendar days of its filing, in which case the termination shall become effective immediately upon the non-terminating Party's receipt of notice of termination from the terminating Party or at such later date as specified in the termination notice; (ii) The other Party ceases to pay its debts as they mature in the ordinary course of business, or makes an assignment for the benefit of its creditors, in which case the termination shall become effective immediately upon the non-terminating Party's receipt of notice of termination from the terminating Party or at such later date as specified in the termination notice; -25- (iii) A receiver is appointed for the other Party or its property, in which case the termination shall become effective immediately upon the non-terminating Party's receipt of notice of termination from the terminating Party or at such later date as specified in the termination notice; or (iv) The other Party is in material breach of any material term of this Agreement and the breaching Party fails to cure such breach within thirty (30) calendar days of receipt of notice of breach from the other Party, or if such breach is not reasonably capable of cure within such thirty (30) calendar day period, such breaching Party fails to cure the breach within ninety (90) calendar days of receipt of notice of breach from the other Party. The terminating Party must invoke its rights of termination under this Sub-Section 4.2)(c)(iv) by written notice to the breaching Party within thirty (30) calendar days of the accrual of such right or such right of termination shall be waived with respect to the applicable material breach. Further, after notice of termination is given, termination of the Agreement shall become effective one (1) year after the date of the terminating Party's notice of termination. During such period, BATUS Japan shall continue to order Products exclusively from RJRTC, but shall be allowed to have test Products manufactured by alternative sources for purposes of qualifying such alternative manufacturers. 4.3 EFFECT OF TERMINATIONS (a) ACRIONS BY RJRTC. Upon termination of this Agreement, RJRTC shall: (i) Deliver to BATUS Japan or its designee all raw materials, finished Products, and/or specialized manufacturing equipment that have been, or must be, paid for by BATUS Japan in accordance with this Agreement; (ii) Execute all documents and take all actions reasonably necessary to enable BATUS Japan to carry out its obligations to customers, and make commercially reasonable efforts to cooperate with BATUS Japan in making the necessary transition; (iii) Make commercially reasonable efforts to cooperate with BATUS Japan, in the preparation of a final accounting; and (iv) Stop producing Product, except as the Parties may agree at the time in writing. (b) ACTIONS BY BATUS JAPAN. Upon the effective date of termination of this Agreement, BATUS Japan shall promptly pay RJRTC for such Products in accordance with Sub-Section 3.1,. together with any other amounts that are due and owing by BATUS Japan to RJRTC, BATUS Japan also shall promptly pay RJRTC for such unique raw materials that RJRTC has purchased to produce Products for BATUS Japan and such raw materials shall be shipped to BATUS Japan or its designee at BATUS Japan's expense. If a written agreement for reimbursement of identified capital costs exists between the Parties, BATUS Japan also shall promptly pay RJRTC for such identified capital -26- expenditures and commitments that RJRTC has made on behalf of BATUS Japan and for which RJRTC has not been paid as of the effective date of termination. Upon such payment, title to any equipment which has been paid for by BATUS Japan shall transfer to BATUS Japan and shall be shipped to BATUS Japan or its designee at BATUS Japan's expense. (c) WIND-UP PAYMENT BY BATUS JAPAN. Upon the effective date of any termination of this Agreement by BATUS Japan, then RJRTC shall be reimbursed by BATUS Japan for all reasonable costs incurred and non-cancelable commitments made in the performance of this Agreement for which BATUS Japan has expressly agreed in writing to be responsible. In such an event, RJRTC shall take steps to minimize any amount for which BATUS Japan may be responsible. 4.4 RIGHT OF FIRST REFUSAL. (a) GRANT OF RIGHT OF FIRST REFUSAL. Upon the effective date of any termination of this Agreement by either Party pursuant to this Section 4, and for so long as B&W or any of its Affiliates maintain at least a twenty-five percent (25%) ownership interest in RAI or any entity which owns RAI, should BATUS Japan wish to distribute or sell American-blend Cigarettes in Japan (other than Cigarettes bearing the brands names CARTIER, VOGUE, DUNHILL or STATE EXPRESS 555 which are not subject to PJRTC's rights hereunder), RJRTC shall have a right of first refusal to manufacture the requested American-blend Cigarettes pursuant to the procedures provided in Sub-Section 4.4(b) below. For clarity, such right of first refusal shall not apply should this Agreement be terminated pursuant to BATUS Japan's rights of partial or full termination as provided in Sub-Section 2.17(d) above. (b) PROCEDURES GOVERNING RIGHT OF FIRST REFUSAL. Should BATUS Japan wish to distribute or sell such American-blend Cigarettes in Japan (other than Cigarettes bearing the brands names CARTIER, VOGUE, DUNHILL or STATE EXPRESS 555); RJRTC's right of first refusal shall be as follows: (i) BATUS Japan first shall offer RJRTC the opportunity to manufacture such American-blend Cigarettes by providing RJRTC with a written proposal setting forth, at a minimum: (1) the Specifications for the American-blend Cigarettes and Packaging; (2) the anticipated quantities of the American-blend Cigarettes to be ordered during the then-present calendar year and the next calendar year; and (3) the anticipated dates on which Purchase Orders would be placed for such American-blend Cigarettes during the first six (6) months of manufacture and the anticipated quantities for each such Purchase Order. (ii) Within fifteen (15) calendar days of RJRTC's receipt of BATUS Japan's written proposal, RJRTC shall indicate whether its wishes to enter negotiations regarding such manufacture of the American-blend Cigarettes at issue, if RJRTC declines to enter negotiations for the manufacture of such American-blend Cigarettes, BATUS Japan may have such American-blend Cigarettes manufactured by any third -27- Person, free from RJRTC's right of first refusal. If RJRTC indicates a desire to negotiate, the Parties shall enter an exclusive negotiation period of sixty (60) calendar days from the first negotiation session regarding the manufacture of the American-blend Cigarettes. Such exclusive period of negotiations may be extended by mutual written agreement of the Parties. The Parties shall negotiate in good faith at reasonable times and with reasonable frequency in Winston-Salem, North Carolina or in another mutually agreeable location., (iii) If the Parties cannot reach agreement during the exclusive negotiation period, BATUS Japan shall be free to negotiate with any third Person regarding manufacture of such American-blend Cigarettes. (iv) If BATUS Japan reaches a tentative agreement with such third Person, before entering a binding agreement, BATUS Japan shall provide a copy of the tentative agreement to RJRTC and, if the terms referred to in Sub-Section 4.4(b)(i)-(ii) above shall not have changed, RJRTC shall have fifteen (15) calendar days from its receipt of the tentative agreement to indicate whether it is willing to enter into an agreement identical in all material respects to the tentative agreement, or, if the terms referred to in Sub-Section 4.4(b)(i)-(ii) above have changed, RJRTC shall have thirty (30) calendar days from its receipt of the tentative agreement to indicate whether it is willing enter into an agreement identical in all material respects to the tentative agreement. (v) If RJRTC chooses not to enter an agreement for the manufacture of the American-blend Cigarettes at issue as stated in Sub-Section 4.4(b)(iv), BATUS Japan may enter the binding agreement with the third Person. If BATUS Japan enters into a binding agreement with such third Person, BATUS Japan shall not agree to any material amendment of that agreement for a period of two (2) years from the effective date of the agreement. (vi) Upon the expiration or termination of any binding agreement entered with a third Person pursuant to the procedures stated above, BATUS Japan shall be free to enter subsequent agreements for the manufacture of the Cigarettes at issue with that third Person free from RJRTC's rights of first refusal granted under this Sub-Section 4.4, However, upon such expiration or termination, should BATUS Japan wish to seek an alternative third Person to manufacture the American-blend Cigarettes, RJRTC's right of first refusal shall again be initiated and the procedures set forth above will again be followed. 4.5 OTHER AGREEMENTS. Non-renewal or termination of this Agreement for any reason shall have no legal effect upon other projects, activities, collaborations, commercial arrangements or service arrangements that the Parties may have with one another. 4.6 EFFECT of NON-RENEWAL OR TERMINATION. Subject to the provisions of Sub-Section 4.7 and Schedule "C," if either BATUS Japan or RJRTC terminates this Agreement as provided in this Section 4, this Agreement will be of no further force and -28- effect, and except as set forth in Sub-Sections 4.3 and 4.4, there will be no liability or obligation on the part of either Party to the other. Non-renewal or termination of this Agreement does not impair or extinguish any accrued right, obligation or liability that a Party hereto may have under this Agreement at the time it terminated. 4.7 SURVIVAL. The provisions of Sections and Sub-Sections 3.5, 3.6, 4.4, 5, 6.2, 6.3, 6.4, 6.5, 6.6, 6.8, 6.9, 7.5, 7.6, 7.7 and 7.11 will continue in effect after expiration or termination of this Agreement. SECTION 5 CONFIDENTIALITY 5.1 CONFIDENTIALITY OBLIGATION. During the Term of this Agreement and for a period of five (5) years thereafter, each Party receiving Confidential Information as a "Receiving Party" shall maintain in confidence all Confidential Information disclosed to it by the other Party, as a "Disclosing Party." Notwithstanding the foregoing, subject to Sub-Section 5.2, each of the Party's respective obligations of confidentiality with respect to the other Party's Trade Secrets, including BATUS Japan's and its Affiliates, Specifications, shall be perpetual. Neither Party will use, disclose or grant the use of such Confidential Information except as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, the Receiving Party shall obtain prior agreement from its employees, representatives and contracting parties to whom disclosure is to be made to hold in confidence and not make use of such information for any purpose other than those purposes permitted by this Agreement. Each Party, as a Receiving Party, will use at least the same standard of care (but not less than a reasonable standard of care) as it uses to protect its own proprietary and Trade Secret information to ensure that such employees, representatives and contracting parties do not disclose or make any unauthorized use of such Confidential Information. Each Party, as a Receiving Party will promptly notify the other upon discovery of any unauthorized use or disclosure of Confidential Information, The Receiving Party shall be responsible to the Disclosing Party for any loss of Confidential Information of the Disclosing Party or breach of the provisions of this Sub-Section 5.1 by any employee, representative or contracting party of the Receiving Party. 5.2 EXCEPTIONS. The obligations of confidentiality contained in Sub-Section 5.1 will not apply to the extent that it can be established by the Receiving Party by competent proof that such Confidential Information: (a) Was already known to the Receiving Party, other than under an obligation of confidentiality, at the time of receipt from the Disclosing Party, (b) Was generally available to the public or otherwise part of the public domain at the time of its receipt from the Disclosing Party; -29- (c) Becomes generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the Receiving Party in breach of this Agreement; (d) Was received by the Receiving Party, other than under an obligation of confidentiality, by a third Person lawfully in possession of the information; or (e) Was independently developed by the Receiving Party, without reference or access to any Confidential Information of the Disclosing Party. 5.3 AUTHORIZED DISCLOSURE. Each Party (and third Persons as applicable) may disclose Confidential Information to the extent such disclosure is reasonably necessary in filing or prosecuting patent applications, prosecuting or defending litigation, complying with court orders, or complying with applicable governmental regulations, provided that if such Party is required to make any such disclosure of Confidential Information it will to the extent practicable give reasonable advance notice to the other Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such information required to be disclosed. SECTION 6 WARRANTIES. REPRESENTATIONS, COVENANTS AND INDEMNITY 6.1 WARRANTIES AND DISCLAIMER OF WARRANTIES. RJRTC WARRANTS THAT PRODUCTS MANUFACTURED AND PACKAGED PURSUANT TO THIS AGREEMENT SHALL BE FREE FROM DEFECTS IN MATERIALS AND WORKMANSHIP, AND SUCH PRODUCTS SHALL BE MANUFACTURED, PACKAGED AND SHIPPED IN CONFORMITY WITH BATUS JAPAN'S SPECIFICATIONS AND THE PACKAGING AND SHIPPING REQUIREMENTS OF THIS AGREEMENT. ANY MEASURES TAKEN TO REMEDY NON-CONFORMANCE WITH THIS WARRANTY WILL BE AT RJRTC'S SOLE COST AND EXPENSE. SUBJECT TO THE FOREGOING, PRODUCTS SUPPLIED BY RJRTC ARE PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE. 6.2 LIMITATION OF REMEDIES, LIABILITY AND DAMAGES. A PARTY'S LIABILITY FOR DAMAGES FOR BREACH OF ITS OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY; SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW ARE WAIVED. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL, .INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR BY CONTRACT. -30- 6.3 U.S.A. STATUTES AND REGULATIONS. BATUS Japan represents and warrants that it is aware of: (a) U.S. Trade Restrictions controlling exports from the U.S.A. and reexports from third countries of U.S. origin goods, software, and technology, including foreign made goods, software and technology with more than de minimus U.S. content, Jo Prohibited and Restricted Countries and to Restricted Parties, as well as the restrictions and prohibitions under U.S. trade sanctions on dealings by U.S. persons with such countries and persons, and is further aware that the lists of Prohibited Countries, Restricted Countries, and Restricted Parries may change from rime to time; (b) Antiboycott Laws; and (c) the Foreign Corrupt Practices Act. 6.3 COMPLIANCE WITH LAWS. In performance of their respective obligations under this Agreement, RJRTC and BATUS Japan each shall comply with, and shall ensure that their respective employees and Affiliates shall comply with, all laws, regulations, agreements, licenses and consents applicable to or otherwise relating to the subject matter of this Agreement, including those referenced in Sub-Section 6.3. Without limitation to the foregoing, the Parties represent and warrant that they shall not transfer, provide, resell, export, re-export, distribute, or dispose of any Product or component thereof or any related technology or technical data, directly or indirectly, without first obtaining ail necessary written consents, permits and authorizations and completing such formalities as may be required by any applicable laws, rules and regulations. BATUS Japan shall not sell or otherwise provide Products to any Person that BATUS Japan knows, believes or has reason to believe will take any action which, if done by BATUS Japan, would constitute a violation of any of the terms and conditions of this Agreement. 6.5 PRODUCT FOR EXPORT ONLY. Except for limited quantities of Product manufactured for testing purposes only, the Parries each represent and warrant that Products produced by RJRTC for BATUS Japan in accordance with this Agreement are intended to be manufactured in the U.S.A. solely for lawful export from the U.S.A. and for sale only within the Territory in accordance with the laws of the Governmental Authority within each relevant country within the Territory. RJRTC will not provide Product manufactured for BATUS Japan to any third Person, without BATUS Japan's prior written consent BATUS Japan will not in any way transport, or cause to be transported, Product to any country outside of the Territory for use, distribution or sale. 6.6 EXPORT LAWS. No equipment, computer software, technology or information obtained by one Party from the other, and no Product or component thereof, will be made available or re-exported, directly or indirectly, except in compliance with all applicable export laws and regulations. 6.7 BATUS JAPAN'S DUTY TO INSPECT. BATUS Japan or its designees shall be solely responsible for inspecting all Specifications of Products to be produced by RJRTC in order to ensure that each such Product is in compliance with all applicable laws of the relevant Governmental Authority of the Territory into which the Product is intended to be shipped or sold. BATUS Japan or its designees shall be solely responsible for giving RJRTC full and complete instructions to ensure that all Packaging, Cartons and Cases are -31- appropriately marked with relevant health warnings (if applicable) and other relevant markings mandated by relevant Governmental Authority, whether within the U.S.A., the Territory or elsewhere. 6.8 BATUS JAPAN'S INDEMNITY OBLIGATIONS. (a) IN GENERAL. BATUS Japan will indemnify, defend and hold harmless RJRTC, its Affiliates and their respective current and former officers, directors, employees, representatives and agents (each an "RJRTC Indemnified Party") from and against any and all losses, damages, claims, liabilities, demands, assessments, judgments, settlements, compromises and related costs and expenses (including without limitation reasonable attorneys' fees and costs) (collectively, "Damages") resulting from demands, actions, suits or proceedings initiated by any third Person (including any Governmental Authority) and arising out of: (i) A material breach of the obligations of BATUS Japan under this Agreement; or (ii) The marketing, advertising, distribution or sale by BATUS Japan or its Affiliates of any Products, including any Damages which relate to any claimed adverse health effects or health risks relating to the use of such Products. (b) EXCEPTIONS. Notwithstanding Sub-Section 6.8(a), BATUS Japan shall not be required to indemnify any RJRTC Indemnified Party for any portion of Damages to which such RJRTC Indemnified Party may become subject to the extent (but only to the extent) they relate to, result from or arise out of: (i) The failure of RJRTC to comply with its obligations under this Agreement; (ii) The negligence or willful misconduct or willful failure to act of RJRTC; or (iii) RJRTC's failure to produce Products meeting the required Specifications and/or to comply with the Packaging and shipment requirements of this Agreement. (c) NOTICE. RJRTC shall give BATUS Japan prompt written notice of any claim or suit that may be brought directly against RJRTC or any other RJRTC Indemnified Party by a third Person, and BATUS Japan shall thereafter be entitled to employ counsel, control the defense of, and settle or compromise, such claim or suit 6.9 RJRTC'S INDEMNITY OBLIGATIONS. (a) IN GENERAL. Subject to Sub-Section 6.1, RJRTC will indemnify, defend and hold harmless BATUS Japan, its Affiliates and their respective current and former -32- officers, directors, employees, representatives and agents (each a "BATUS Japan Indemnified Party") from and against all Damages resulting from demands, actions, suits, or proceedings initiated by any third Person (including any Governmental Authority) and arising out of material breach of the obligations of RJRTC under this Agreement including, but not limited to, RJRTC's failure to produce Products meeting the required Specifications and/or to comply with the Packaging and shipment requirements of this Agreement. (b) EXCEPTIONS. Notwithstanding Sub-Section 6.9(a). RJRTC shall not be required to indemnify any BATUS Japan Indemnified Party for any portion of Damages to which such BATUS Japan Indemnified Party may become subject, to the extent (but only to the extent) they relate to, result from or arise out of: (i) The failure of BATUS Japan to comply with its obligations under this Agreement; or (ii) The negligence or willful misconduct or willful failure to act of BATUS Japan. (c) NOTICE. BATUS Japan shall give RJRTC prompt written notice of any such claim or suit that may be brought directly against BATUS Japan or any other BATUS Japan Indemnified Party by a third Person, and RJRTC shall thereafter be entitled to employ counsel, control the defense of, and settle or compromise, such claim or suit. 6.10 BATUS JAPAN'S EXCLUSIVE SUPPLIER FOR PRODUCT. BATUS Japan represents and warrants that as of the Effective Date, it has not entered into any agreement with any third Person that obligates BATUS Japan to purchase any Product subject to this Agreement from any third Person, which Product is subject to BATUS Japan's obligations to RJRTC regarding BATUS Japan's appointment of RJRTC to exclusively provide BATUS Japan's requirements of American-blend Cigarettes during the Term of this Agreement. 6.11 BATUS JAPAN'S RIGHT TO INTELLECTUAL PROPERTY. BATUS Japan represents and warrants that it (or its Affiliate, RFEBV) has the right to use all Intellectual Property associated with the Products, including Trademarks, in the relevant countries in the Territory. RJRTC shall obtain no rights with respect to Intellectual Property owned by BATUS Japan or its Affiliates as a result of this Agreement. SECTION 7 MISCELLANEOUS 7.1 FURTHER ASSURANCES. Each Party agrees to enter into or execute, or procure the entering into or execution, of such agreements, assignments or further assurances, or do such other acts as the other Party may reasonably request to carry out the terms and conditions of this Agreement. -33- 7.2 WAIVER. No waiver by either Party of any of the provisions of this Agreement will be effective unless explicitly set forth in writing and executed by that Party. Any waiver by either Party of a breach of this Agreement will not operate or be construed as a waiver of any subsequent breach. 7.3 RELATIONSHIP OF THE PARTIES. RJRTC and BATUS Japan shall be and shall remain independent contractors, and this Agreement shall not be construed as establishing a general agency, employment, partnership, or joint venture relationship between BATUS Japan and RJRTC. Neither Party shall have the authority to make any statements, representations or commitments of any kind (whether express or implied), or to take any action, which shall be binding on the other or create any liability or obligation on behalf of the other, without the prior written authorization of the other Party to do so. 7.4 FORCE MAJEURE. Notwithstanding anything to the contrary herein, neither Party shall be liable to the other for loss, injury, delay, damage or other casualty suffered by such other Party due to any inability to perform any obligation hereunder, and neither Party shall be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term or provision of this Agreement (other than payment of monies due), when such failure or delay is caused by or results from causes beyond the control of the affected Party including, but not limited to, acts of God, fire, flood, storm, earthquake, explosion, epidemic, embargo, war, acts of war (whether war be declared or not), acts of terrorism, insurrection, riot, civil commotion, labor disputes and strikes suffered by third-party suppliers, sub-contractors, or services providers not working in or on RJRTC's facilities, or acts, omissions or delays in acting by any Governmental Authority (including legislative, administrative, judicial, police or any other official governmental acts). Notwithstanding the foregoing, nothing set forth in this Sub-Section 7.4 shall relieve RJRTC of its obligation to initiate its contingency manufacturing plans as identified pursuant to Sub-Section 2.18. 7.5 GOVERNING LAW. The validity, construction and performance of this Agreement shall be governed and interpreted in accordance with the substantive laws of the State of New York, without giving effect to principles of conflicts of laws thereof. 7.6 JURISDICTION. The Parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought only in: (a) the Federal District Court having jurisdiction in Forsyth County, North Carolina or (b) the State Superior Court of Forsyth County, North Carolina, with a request that the case be assigned to The Special Superior Court Judge For Complex Business Cases, and each of the Parties hereby irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, nether -34- Party waives its rights of removal from the North Carolina State Court identified above to the Federal District Court identified above as permitted under governing law. Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. The method of service of process may be by any method provided by law or by certified mail to the Parties' addresses provided below in Sub-Section 7.10. 7,7 ALTERNATIVE DISPUTE RESOLUTION. Any dispute arising out of or relating to this Agreement shall be resolved in accordance with the procedures specified in this Sub-Section 7.7, which shall be the sole and exclusive procedures for the resolution of any such disputes: (a) ESCALATION TO THE PARTIES' EXECUTIVES. To the extent that controversies arising from this Agreement cannot be resolved by the respective personnel of each Party responsible for the administration of this Agreement, the Parties shall attempt in good faith to resolve any such dispute by negotiation between their respective senior executive officers who have authority to settle the controversy and who are at a higher level of management than those employees who administer this Agreement on a day to day basis. Any Party may give the other Party written notice of any dispute which has not been resolved in the ordinary course of business. Within ten (10) calendar days of receipt of such notice, the receiving Party shall submit a written response to such notice. The notice and response shall include: (i) a detailed description of the dispute; (ii) a statement of the Party's position which respect to such dispute; and (iii) the name and title of the senior executive officer who will negotiate on behalf of such Party. Within thirty (30) calendar days of delivery of the initial notice, or within a time mutually agreed by the Parties, the designated senior executive officers will meet or otherwise confer in an attempt to resolve the dispute. Such negotiations shall continue either until the controversy is resolved or until one of the Parties initiates the mediation procedure set forth below in Sub-Section 7.7(b). During the negotiation process, all reasonable requests for information and documents from one Party to the other shall be honored. (b)MEDIATION. If a dispute cannot be resolved pursuant to the negotiation procedures set forth above in Sub-Section 7.7(a), then the controversy shall be submitted to non-binding mediation. Neither Party may initiate mediation until at least sixty (60) calendar days after the initial notice of dispute is submitted by one Party to the other as provided in Sub-Section 7.7(a). If a Party wishes to initiate mediation, notice of demand for mediation shall be submitted to the other Party in writing. Such mediation shall be conducted in accordance with the American Arbitration Association's then-current Model Mediation Procedures and will be conducted by a single mediator. Unless otherwise agreed between the Parties, the mediator will be nominated by the American Arbitration Association and the mediation shall be conducted in Winston-Salem, North Carolina. Each Party shall bear its own costs and expenses of mediation. Further, ail mediation expenses, including the filing fees and fees and costs of the mediator, will be equally shared between the Parties. Such mediation will be scheduled as soon as possible by agreement of the Parties and the mediator. -35- (c) LITIGATION. Neither Party may initiate litigation against the other Party relating to any dispute under this Agreement until the mediation required under Sub-Section 7.7(b) has been completed. However, subject to Sub-Sections 7.5 and 7.6. notwithstanding the foregoing, either Party may initiate litigation to seek immediate injunctive relief against the other Party for any violation or threatened violation of the Parties' respect obligations under this Agreement including, but not limited to, the Parties' obligations of confidentiality under Section 5. 7.8 SEVERABILITY. If any provision of this Agreement shall be held to be invalid or unlawful, the same shall be deemed to be deleted from this Agreement, but this Agreement shall remain in full force and effect as if the deleted provision had never been contained in it. The Parties shall negotiate hi good faith as to the terms of a mutually acceptable and satisfactory provision in place of any deleted provision, and if such terms shall be agreed, this Agreement shall be amended accordingly. 7.9 AMENDMENTS. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by both Parties hereto. In the event of any conflict between this Agreement and the terms of a Purchase Order, the terms of this Agreement shall govern. 7.10 NOTICES. Unless otherwise provided in this Agreement, day to day commercial communications may be exchanged by any reasonable means. All material notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice): If to RJRTC, to: R. J. Reynolds Tobacco Company 401 North Main Street Winston-Salem, North Carolina 27101 Attn: General Counsel If to BATUS Japan, to: BATUS Japan, Inc. 401 South Fourth Street Suite 1200 Louisville, Kentucky 40202 Attn: President With a Copy to: Jeffrey P. Clemente, Esq. Tozai Sogo Law Office Kioicho K Bldg. 3-28 Kioicho, Chiyoda-Ku Tokyo, Japan 102-0094 7.11 ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding between the Parties regarding the subject matter hereof, and supercedes -36- any prior agreement and negotiations between the Parties with respect to the subject matter hereof, including those set forth in Exhibit "K" to the BCA. 7.12 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective legal successors and assigns. This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned, subcontracted, licensed or transferred by either Party without the other Party's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that either Party may, without the other Party's prior consent, assign this Agreement and its rights and obligations hereunder to a wholly owned subsidiary or entity under common control with such assigning Party through 100% ownership of the equity interests therein, Any permitted assignee shall assume all the rights and obligations of its assignor under this Agreement, Any assignment in violation of the foregoing shall be null and void. 7.13 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to and shall not be construed to give any Person (other than the Parties signatory hereto and to the extent provided herein, their respective Affiliates), including any employee or former employee, any interest or rights (including, without limitation, any third-party beneficiary rights) with respect to or in connection with any agreement or provision contained herein or contemplated hereby, 7.14 Counterparts. This Agreement and any amendment may be executed in multiple counterparts, each of which is an original and all which constitute one agreement or amendment, as the case may be, notwithstanding that all of the Parties are not signatories to the original or the same counterpart, or that signature pages from different counterparts are combined, and the signature of any Party to any counterpart is a signature to and may be appended to any other counterpart. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives effective as of the Effective Date set forth in the Preamble above. BATUS JAPAN, INC. By: /s/ Timothy J. Hazlett ---------------------------- Print Name: Timothy J. Hazlett Title: Secretary Date: July 30, 2004 ("BATUS Japan") -37- R. J. REYNOLDS TOBACCO COMPANY By. /s/ Charles A. Blixt ------------------------------------------ Print Name: Charles A. Blixt Title: Executive Vice President and General Counsel Date: July 30, 2004 ("RJRTC") Schedules, to the Agreement: "A" - Product Base Prices (including International Order Policies & Customer Responsibilities) "B" - Identification of the Territory "C" - Supplies to Restricted Countries "D" - BATUS Japan's Standard Consumer Product Testing Protocols "E" - Manufacturing Costing Methodology "F" - RJRTC Payment Instructions -38- EX-10.5 12 g90345exv10w5.txt EX-10.5 EXHIBIT 10.5 CONTRACT MANUFACTURING AGREEMENT EXECUTION COPY This Contract Manufacturing Agreement (the "Agreement") is made and entered into as of this 30th day of July, 2004 (the "Effective Date"), by and between R. J. REYNOLDS TOBACCO COMPANY, a North Carolina corporation (hereinafter, "RJRTC"), and B.A.T (U.K. & EXPORT) LIMITED, a corporation formed under the laws of England and Wales (hereinafter, "BATUKE"). RJRTC and BATUKE shall be referred to herein individually as a "Party" and collectively as the "Parties." RECITALS WHEREAS, BATUKE or its Affiliates have the right to distribute, market and sell certain Cigarettes (as defined below) and other tobacco products in the Territory (as defined below); WHEREAS, prior to the Effective Date, certain American-blend Cigarettes sold by BATUKE or its Affiliates were manufactured in the United States by Brown & Williamson Tobacco Corporation ("B&W"). B&W and BATUKE are both indirect wholly owned subsidiaries of B.A.T. (as defined below); WHEREAS, on October 27, 2003, B&W and RJRTC's Affiliate, R.J. Reynolds Tobacco Holdings, Inc., entered into a Business Combination Agreement (the "BCA"), which requires in the pertinent part that an agreement for the contract manufacturing of certain American-blend Cigarettes be entered between RJRTC and BATUKE; WHEREAS, BATUKE and its Affiliates desire to continue to have American-blend Cigarettes sold in the Territory manufactured in the United States and wish to engage RJRTC to manufacture those products in the United States pursuant to this Agreement; WHEREAS, RJRTC has facilities for, and expertise relating to, the manufacture of American-blend Cigarettes and other tobacco products; and, WHEREAS, RJRTC is willing to manufacture American-blend Cigarettes for BATUKE and its Affiliates in the United States pursuant to the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the mutuality, receipt and sufficiency of which are hereby acknowledged, RJRTC and BATUKE agree as follows: SECTION 1 DEFINITIONS For purposes of this Agreement, the following terms shall mean: 1.1 "AFFILIATE" of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. 1.2 "AGREEMENT" has the meaning set forth in the Preamble above and shall also include any and all Schedules attached hereto, as may be amended from time to time by mutual agreement of the Parties. 1.3 "ANTIBOYCOTT LAWS" means laws and regulations of the U.S.A. that prohibit participation or cooperation with, agreements to cooperate with and, in some cases, the provision of information in support of, any international boycott not sanctioned by the U.S.A., such as the Arab League boycott of Israel, and including but not limited to Section 999 of the U.S.A. Internal Revenue Code of 1986, and guidelines issued thereunder, and the U.S.A. Export Administration Regulations, 15 C.F.R. Part 760. 1.4 B.A.T. means British American Tobacco p.l.c., BATUKE's indirect parent corporation. 1.5 "B.A.T. CUSTOMER" means BATUKE and/or any present or future Affiliate of B.A.T. which chooses to have American-blend Cigarettes manufactured in the United States for sale or distribution in the Territory. The definition of "B.A.T. Customer" shall not include B.A.T.'s Affiliates BATUS Japan, Inc. or Rothmans Far East, B.V., which will order the manufacture of Cigarettes from RJRTC under a separate agreement. 1.6 "B.A.T. CUSTOMER INDEMNIFIED PARTY" has the meaning set forth in Sub-Section 6.9. 1.7 "CARTON" means a container that contains Cigarette Packages and associated materials including, but not limited to, inserts and onserts (e.g., ten (10) packages of twenty (20) Cigarettes each). 1.8 "CASE" means a shipping container that contains Cartons (e.g., a container which contains fifty (50) cartons). 1.9 "CIGARETTE" means: (a) any roll of tobacco wrapped in paper or in any substance not containing tobacco, or (b) any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging or labeling, is likely to be offered to, or purchased by consumers, as a cigarette described in the foregoing clause (a). -2- 1.10 "CIGARETTE PACKAGE" means the smallest container for Cigarettes that, when filled with Cigarettes and sealed, is intended for distribution and sale (e.g., packs of twenty (20) Cigarettes). 1.11 "CONFIDENTIAL INFORMATION" means; (a) information or data (whether of a technical or business nature), including, but not limited to, that relating to research, development, know-how, inventions, Trade Secrets, engineering, manufacturing, proposals and business plans, marketing plans and matters, financial matters and arrangements, personnel matters, sales, suppliers or customers; or (b) proprietary information or data of either Party hereto or of a third Person with whom such Party has an obligation of confidence (including all such information owned by any Affiliate of either Party and/or any B.A.T. Customer), whether created by a Party individually or through the efforts contemplated by this Agreement; or (c) any other information or data, not publicly known, of either Party hereto or of a third Person with whom such Party has an obligation of confidence (including all such information owned by any Affiliate of either Party and/or any B.A.T. Customer); whether any of the foregoing set forth in clauses (a)-(c) above is observed or in oral, written, graphic or electronic form, and whether or not marked or otherwise identified as "confidential." 1.12 "CONTRACT YEAR" means each successive period during the Term of this Agreement running from January 1st through December 31st. 1.13 "DAMAGES" has the meaning set forth in Sub-Section 6.8. 1.14 "DELIVERY GRACE PERIOD" has the meaning set forth in Sub-Section 2.17(c). 1.15 "EFFECTIVE DATE" is the date set forth in the Preamble above. 1.16 "EXPORT LICENSE" means any license, permit, or other authorization issued by a Governmental Authority, including but not limited to OFAC (as defined below), permitting the manufacture, export and/or sale of the Products hereunder. 1.17 "FOREIGN CORRUPT PRACTICES ACT" means 15 U.S.C. Sections 78dd-l, et seq. and any and all amendments thereto. 1.18 "GOVERNMENTAL AUTHORITY" means any of the following: (a) the government of the U.S.A. or any other foreign country; (b) the government of any state, province, county, municipality, city, town, or district of the U.S.A. or any foreign country, and any multi-country district; and (c) any ministry, agency, department, authority, commission, administration, court, magistrate, tribunal, arbitrator, instrumentality, or political subdivision of, or within the geographical jurisdiction of, any government described in the foregoing clauses (a) and (b). 1.19 "INCOTERMS" means the terms for the international transportation of goods published by the International Chamber of Commerce, as in effect from time to time during the Term of this Agreement. -3- 1.20 "INTELLECTUAL PROPERTY" means information, concepts, ideas, discoveries, inventions (whether conceived or reduced to practice, and whether or not patentable), Specifications, requirements, samples of prototypical Cigarettes and Cigarette components, data, codes and programs, graphics, designs, prints, sketches, drawings and photographs, developments, processes and methods, know-how, Trades Secrets, patent applications, patents, other intellectual property of any type (including copyrights, trademarks, and service marks), and enhancements, derivatives, and improvements thereof. 1.21 "NON-TOBACCO COMPONENT" means a material that is used in combination with any Tobacco Material for the manufacture of Cigarettes, including tobacco rod wrapping materials, filter materials and components, plug wrapping materials, tipping materials, inks, flavor and casing components, and Packaging. 1.22 "OFAC" means the United States Department of the Treasury, Office of Foreign Assets Control, or any successor agency, department or unit of the federal government of the U.S.A. with regulatory authority over export/re-export transactions subject to U.S.A. jurisdiction. 1.23 "ON TIME/IN FULL" is the performance metric used in certain circumstances to measure RJRTC's performance under this Agreement. On Time/In Full delivery performance is measured at the Purchase Order SKU order line level. To be credited for On Time/In Full delivery of a specific Purchase Order SKU order line, RJRTC must: (a) deliver one hundred percent (100%) of the SKU volume ordered; (b) on the firm delivery date established pursuant to the mechanisms provided in Sub-Section 2.16 of this Agreement for the particular Purchase Order SKU order line; (c) "across the ship's rail," port of export or, if air freight delivery is required by the applicable Purchase Order, at the fuselage of the aircraft; and (d) with all export and shipping documentation fully and properly completed. For purposes of Sub-Sections 1.23(b) and (c) above, should RJRTC cause a specific Purchase Order SKU order line volume to arrive in the country in the Territory where the Products are to be sold at retail not later than the date on which such SKU volume would have arrived in such country if delivered "across the ship's rail," port of export by RJRTC on the firm delivery date established pursuant to the mechanisms provided in Sub-Section 2.16, then such Purchase Order SKU order line volume shall be deemed delivered on time. 1.24 "ON TIME/IN FULL DELIVERY PERCENTAGE" means the percentage of RJRTC's On Time/In Full deliveries over the time period stated in Sub-Section 2.17(d) measured as follows: [(total number of Purchase Order SKU order lines issued during the measurement period by all B.A.T. Customers and accepted by RJRTC) minus (number of total Purchase Order SKU order lines not delivered by RJRTC On Time/In Full)] divided by (total number of Purchase Order SKU order lines issued during the measurement period by all B.A.T. Customers and accepted by RJRTC) times one hundred (100). Stated formulaically: -4- Number of Total Purchase Order SKU order lines issued during the measurement period by all B.A.T. Customers and accepted by RJRTC (-) Number of Total Purchase Order SKU order lines not delivered On Time/In Full _____________________________________________ x 100 = On Time/In Full Delivery Percentage Total Purchase Order SKU order lines issued during the measurement period by all B.A.T. Customers and accepted by RJRTC By way of illustration, if over the applicable measurement period orders for 1,500 total Purchase Order SKU order lines were issued by B.A.T. Customers and accepted by RJRTC, and RJRTC has On Time/In Full delivery of 1,450 of such total Purchase Order SKU order lines, RJRTC's On Time/In Full Delivery Percentage for the measurement period would be as follows: 1,500 (-)50 _____________ x 100-96.6% 1,500 1.25 "OUTSIDE THE JURISDICTION OF THE U.S.A." means all places other than the fifty (50) States of the U.S.A., including offshore areas within their jurisdiction pursuant to Section 3 of the Submerged Lands Act (43 U.S.C. Section 1311), the District of Columbia, Puerto Rico, and all territories, dependencies, and possessions of the U.S.A., including foreign trade zones established pursuant to 19 U.S.C. Sections 81A-81U, and also including the outer continental shelf, as defined in Section 2(a) of the Outer Continental Shelf Lands Act (43 U.S.C. Section 1331 (a)). 1.26 "PACKAGING" means materials that are used to contain Cigarettes (or containers enclosing Cigarettes) for the purpose of distribution and sale to customers, including component materials referred to as foil, innerframes, closures, Cigarette boxes, labels, films, tear tapes, optional pack inserts and onserts, cartons and cases, including all graphics, holographics and printed matter on such materials. 1.27 "PERSON" means any firm, corporation, partnership, limited liability company, joint venture, trust, unincorporated association or organization, business, enterprise or other entity, any individual and any Governmental Authority. 1.28 "PPI" means the Producer Price Index for Stage of Processing - Finished Goods, as compiled by the United States Bureau of Labor Statistics (1982 = 100). If the Bureau of Labor Statistics substantially revises the manner in which the PPI is determined, an adjustment shall be made in the revised index that will produce results equivalent, as nearly as possible, to those that would be obtained if the PPI had not been so revised. If the 1982 average is no longer used as an index of one hundred (100), or if the PPI is no -5- longer available, then the Parties shall substitute a mutually acceptable comparable index, based on changes in the cost of production measured at the finished goods level published by an agency of the federal government of the U.S.A. 1.29 "PRINCIPAL PARTY IN INTEREST" means the Person in the U.S.A. listed as such on Shipper's Export Declarations or Automated Export System records (and as defined in the U.S.A. Export Administration Regulations (15 C.F.R. Part 730 et seq.) and the U.S.A. Foreign Trade Statistics Regulations (15 C.F.R. Part 30)) as the Person that receives the primary benefit, monetary or otherwise, of the transaction associated with such export shipment. 1.30 "PRODUCT" OR "PRODUCTS" means American-blend Cigarettes manufactured for B.A.T. Customers pursuant to this Agreement which are intended to be distributed or sold in the Territory. 1.31 "PRODUCT BASE PRICES" means the prices for each Product chargeable by RJRTC for Products subject to Purchase Orders issued by B.A.T. Customers between the Effective Date and the end of Contract Year 2004. The Product Base Prices are listed on the attached Schedule "A." The Product Base Prices are calculated by adding (or subtracting) all of the costing elements identified on Schedule "A." Schedule "A" includes the International Order Policies & Customer Responsibilities included therewith. 1.32 "PROHIBITED COUNTRIES" means countries subject to Trade Restrictions (as defined below) and for which no Governmental Authority licenses or authorizations permitting manufacture or export of Products are obtained. For the purposes of this Agreement, Prohibited Countries shall not include Restricted Countries. 1.33 "PURCHASE ORDER" means a purchase order issued by BATUKE or another B.A.T. Customer to RJRTC containing the following information about an order for Products pursuant to this Agreement: (a) identity of Products by SKU, with each SKU ordered entered on a separate order line; (b) quantity of Products by SKU; (c) delivery instructions and required delivery date(s) for the Products "across the ship's rail," port of export or, if air freight delivery is required by the applicable Purchase Order, at the fuselage of the aircraft (with each Purchase Order possibly providing for multiple deliveries of Product by SKU at scheduled intervals); (d) shipping instructions; (e) consignee identification; (f) contact personnel; (g) Case mark requirements; (h) matters including "bill to" and "sold to" (which will be the B.A.T. Customer which placed the Purchase Order); and (i) such other requirements as the applicable B.A.T. Customer may specify or RJRTC may reasonably require. 1.34 "RAI" means Reynolds American Inc., RJRTC's parent corporation. 1.35 "RECEIVING PARTY" has the meaning set forth in Sub-Section 5.1. 1.36 "RESTRICTED COUNTRIES" means those countries in the Territory that from time to time are subject to Trade Restrictions and for which Products are manufactured for export -6- under this Agreement by RJRTC pursuant to licenses or other authorizations duly issued and in effect by the applicable Governmental Authority whether within or outside the U.S.A, including but not limited to OFAC, and to which the additional provisions of Schedule "C" shall apply. These additional provisions shall prevail only to the extent that they are inconsistent with the other provisions of this Agreement. 1.37 "RESTRICTED COUNTRIES RENEWAL TERM" has the meaning set forth in Schedule. 1.38 "RESTRICTED PARTIES" means Persons who have been denied export privileges or who are otherwise restricted under the U.S.A. Export Administration Regulations or with respect to whom transactions, including but not limited to export and financial transactions, are restricted, pursuant to applicable Trade Restrictions (as defined below) in force from time to time. 1.39 "RJRTC INDEMNIFIED PARTY" has the meaning set forth in Sub-Section 6.8. 1.40 "SKU" means a stock keeping unit designation referring to a particular Cigarette brand style. 1.41 "SPECIFICATIONS" means specifications and standards set by the B.A.T. Customers for their respective Products and Packaging on the Effective Date, and which are consistent with the specifications and manufacturing standards met by B&W immediately prior to the Effective Date, as set forth in the Specifications manuals. Unless changed pursuant to the procedures set forth in this Agreement with respect to the Products and their Packaging, the Parties agree and acknowledge that, once secondary production is moved to RJRTC's North Carolina facilities, Specifications relating to the process of manufacture will be reoriented to reflect different processes in manufacturing and/or quality systems at RJRTC's North Carolina facilities, provided that such new process specifications or specified materials do not alter the Product or Packaging performance or characteristics of the Product or its Packaging discernable to consumers when they interact with the Product or its Packaging, or marketing claims made for the Product prior to the time of reorientation. The Parties acknowledge that, prior to the Effective Date, the Specifications manuals have been provided to and reviewed by RJRTC and that both Parties have a copy of the Specification manuals initialed by the other Party. 1.42 "TERM" means the period in which this Agreement is in effect as defined in Section 4 and, where applicable, each Restricted Countries Renewal Term. 1.43 "TERRITORY" means all countries in the World where any B.A.T. Customers distribute and sell Products, excluding Japan and the U.S.A., as stated on the attached Schedule "B." 1.44 "TOBACCO MATERIAL" means any type or form of tobacco, including tobacco in whole leaf, strip, stem or blended cut filler form, reconstituted tobacco, and including -7- tobacco by-products, and tobacco in any type of processed form, whether or not in blended form. 1.45 "TRADEMARK" means any trademark: (a) that at any time is used on or in connection with a Product or (b) that is owned, licensed or controlled by any B.A.T. Customer. 1.46 "TRADE RESTRICTIONS" mean restrictions on trade and dealings with certain countries, Persons or entities, including but not limited to restrictions on exports, imports, sales, and supplies of products, transshipments, and financial transactions imposed pursuant to export controls, trade sanctions and other trade and investment regulations of the U.S.A. and/or any other Governmental Authority outside the U.S.A. in force from time to time. 1.47 "TRADE SECRET" means information and data, including, without limitation, Specifications, that: (a) derive independent economic value, actual or potential, from not being generally known to the public or other Persons who can obtain economic value from their disclosure and use and (b) are the subject of efforts that are reasonable under the circumstances to maintain their secrecy. 1.48 "TSRA" means the U.S.A. Trade Sanctions Reform and Export Enhancement Act of 2000 (Title IX of Pub. L. 106-387). 1.49 "TTB" means The Alcohol & Tobacco Tax and Trade Bureau, an agency of the United States Department of the Treasury. 1.50 "U.S.A." means the District of Columbia, the fifty (50) states of the United States of America, its territories and possessions (including Puerto Rico), and its military facilities and installations wherever located. 1.51 OTHER DEFINED TERMS. Other terms shall have the defined meanings stated elsewhere in this Agreement. SECTION 2 RESPONSIBILITIES OF THE PARTIES 2.1 APPOINTMENT OF RJRTC FOR MANUFACTURE. Commencing on the Effective Date, and, unless this Agreement is sooner terminated pursuant to its terms and conditions, continuing through Contract Year 2014, RJRTC is hereby appointed as the exclusive U.S. manufacturer of all American-blend Cigarettes which any B.A.T. Customer chooses to have manufactured in the U.S.A. The Parties recognize that each B.A.T. Customer will take into consideration end-market demand, marketing and pricing considerations, and applicable Trade Restrictions with respect to the countries in the Territory in which they distribute and sell Cigarettes in their determination of whether to have (or continue to have) such American-blend Cigarettes manufactured in the U.S.A. For the avoidance of doubt, any B.A.T. Customer may choose to have American-blend Cigarettes -8- manufactured by any third Person outside the U.S.A. at any time and at such B.A.T. Customer's discretion. If, after Contract Year 2014, a B.A.T. Customer wishes to have American-blend Cigarettes manufactured in the U.S.A. by any entity other than RJRTC, RJRTC shall enjoy the right of first refusal as stated in Sub-Section 4.4 below. For the further avoidance of doubt, the Parties agree and affirm that this Agreement shall only apply with respect to Products intended for distribution and sale in Restricted Countries to the extent that the activities provided hereunder are contemplated under TSRA and are authorized, to the extent necessary, under general or specific licenses issued by the applicable Governmental Authorities. Without limitation to the foregoing, RJRTC's performance of its obligations under this Agreement specifically pertaining to exports to Restricted Countries and other transactions incidental thereto shall at all time be contingent upon the obtaining of Export Licenses, to the extent required. 2.2 RJRTC'S MANUFACTURE OF PRODUCT. Commencing on the Effective Date, RJRTC shall provide Products to the B.A.T. Customers subject to and in accordance with the terms and conditions of this Agreement, including in particular obtaining Export Licenses, as required. RJRTC shall initially manufacture Products in the U.S.A. at its facility in Macon, Georgia. Upon satisfactory consumer testing of Cigarettes manufactured in North Carolina for BATUS Japan, Inc. under a separate contract, RJRTC will move the manufacture of Products under this Agreement to North Carolina. RJRTC agrees to use the same care and to follow the same procedures in transferring the production of Products, commissioning of secondary manufacturing equipment, and internal testing of blended cut filler Tobacco Materials for the movement of production of Products under this Agreement as RJRTC will use for moving manufacturing of Cigarettes for BATUS Japan, Inc; provided, however, the Parties agree that the B.A.T. Customers' consent to the movement of such manufacturing is not required. RJRTC agrees, upon request by any B.A.T. Customer, to supply sample Products manufactured in North Carolina for consumer testing in the Territory at such B.A.T. Customer's expense. Other than the costs and expenses relating to consumer acceptability testing of Products in the Territory as described above, RJRTC shall bear all other costs and expenses (including capital expenditures) incurred in moving manufacturing operations for Products subject to this Agreement from Macon to North Carolina. 2.3 SPECIFICATIONS. (a) ORIGINAL. (i) The B.A.T. Customers have furnished RJRTC with the Specifications for all Products which may be produced by RJRTC for the B.A.T. Customers pursuant to this Agreement. (ii) Promptly after the Effective Date of this Agreement, the Parties shall meet to discuss matters relating to, but not limited to, mutually acceptable manners by which: (1) costs might be controlled and (2) Products might be manufactured using -9- processes, process conditions and equipment configurations that have been adopted by RJRTC, subject to the applicable B.A.T. Customer's determination of consumer acceptability. (b) CHANGES PROPOSED BY B.A.T. CUSTOMERS. (i) In accordance with the procedures stated below in clauses (ii) through (iv), RJRTC shall comply with any B.A.T. Customer's reasonable instructions in meeting any new Specifications (the costs of evaluating and implementing any such changes shall be borne by the applicable B.A.T. Customer, subject to such B.A.T. Customer's prior written approval of the budget for expenditure of such costs which approval shall not be unreasonably withheld). If such budgets include capital expenditures which RJRTC requests the applicable B.A.T. Customer to fund, a separate mutually acceptable agreement will be negotiated between RJRTC and the applicable B.A.T. Customer relating to the ownership and/or transfer of such capital improvements. (ii) The Parties shall conduct trials, as appropriate, in order to evaluate the effect of changes in Specifications upon Products, Product pricing and RJRTC's manufacturing environments (the costs of evaluating and implementing any such changes shall be borne by the applicable B.A.T. Customer, subject to such B.A.T. Customer's prior written approval of the budget for expenditure of such costs which approval shall not be unreasonably withheld). (iii) The applicable B.A.T. Customer shall provide written approval for changed Specifications of all Products upon completion of activities, including those set forth in the foregoing clauses (i) and (ii). The applicable B.A.T. Customer shall not be responsible for accepting any quantity of Products for which such B.A.T. Customer has not provided such final approval, unless such B.A.T. Customer has otherwise agreed in writing. (iv) RJRTC shall accept and acknowledge all changed Specifications for which the applicable B.A.T. Customer has provided final approval and provided to RJRTC, provided that RJRTC has determined that it can meet those Specifications. (v) Should mutually agreed changes to Specifications require Product pricing changes, RJRTC and the applicable B.A.T. Customer shall negotiate the applicable pricing changes (both increases and decreases) based on the associated effects of the Specification changes on RJRTC's costs. (c) CHANGES PROPOSED BY RJRTC. (i) RJRTC shall inform all effected B.A.T. Customers of changes in RJRTC's manufacturing operations proposed at any time during the Term which are anticipated to have an effect upon or require modifications to Specifications or upon RJRTC's ability to produce the projected volumes of Products anticipated to be ordered by such B.A.T. Customers (the costs of evaluating and implementing any such changes -10- shall be borne by RJRTC, subject to RJRTC's prior written approval of the budget for expenditure of such costs which approval shall not be unreasonably withheld). RJRTC shall provide sufficient advance notice of such proposed changes in manufacturing operations so as to allow all effected B.A.T. Customers commercially reasonable time to evaluate and test the effects of the associated Specification changes on the Products and the Products' consumer acceptability in the Territory. (ii) RJRTC and the B.A.T. Customers shall conduct trials, as appropriate, in order to evaluate the effect of the foregoing changes in Specifications upon Products, Product pricing and RJRTC's manufacturing environments and the Products' consumer acceptability in the Territory (the costs associated with such trials shall be borne by RJRTC, including the costs of sampling and consumer testing as determined necessary by the B.A.T. Customers in the Territory, subject to RJRTC's prior written approval of the budget for expenditure of such costs which approval shall not be unreasonably withheld). The trial, sampling and consumer testing methodology will be determined by mutual agreement of the Parties in accordance with the standard Consumer Product Testing Protocols attached hereto as Schedule "D." (iii) Each applicable B.A.T. Customer shall provide written approval for changed Specifications of all Products upon completion of activities, including those set forth in the foregoing clauses (i) and (ii). B.A.T. Customers shall not be responsible for accepting any quantity of Products for which such B.A.T. Customers have not provided such final approval, unless such B.A.T. Customers have otherwise agreed in writing. (iv) RJRTC shall accept and acknowledge all changed Specifications for which B.A.T. Customers have provided final approval and provided to RJRTC. (v) Should mutually agreed changes to Specifications require Product pricing changes, RJRTC and the applicable B.A.T. Customers shall negotiate the applicable pricing changes (both increases and decreases) based on the associated effects of the Specification changes on RJRTC's costs. 2.4 CONTACT PERSONNEL. Promptly after the Effective Date, both RJRTC and each B.A.T. Customer shall designate primary contact individuals for purposes of this Agreement. Those individuals shall have responsibility for communicating and receiving information regarding all matters that are relevant pursuant to the relationship between RJRTC and the B.A.T. Customers in accordance with this Agreement. RJRTC and each B.A.T. Customer shall promptly notify the other upon the occurrence of a change in the identity of any contact individual of that entity. 2.5 CONFERENCES. Representatives of RJRTC and the B.A.T. Customers shall conduct such conferences (video; telephonic; in person) as they deem necessary to discuss with one another the Products, quality control procedures, and any other matters relating to the activities involving the supply of Products to B.A.T. Customers by RJRTC. All issues -11- identified during such conferences shall be immediately evaluated, addressed and remedied as soon as commercially reasonable. 2.6 VISIT AT FACILITIES AND INSPECTION. Representatives of any B.A.T. Customer may, upon reasonable notice and at times reasonably acceptable to RJRTC, visit RJRTC's facilities at which the Products are manufactured. Each B.A.T. Customer shall bear its own expenses with regard to any such visits, unless otherwise agreed upon in writing. If requested by a B.A.T. Customer, RJRTC shall cause appropriate individuals working on the activities relating to this Agreement to be available for meetings at the location of the facilities where such individuals are employed at times reasonably convenient to RJRTC and the B.A.T. Customer. B.A.T. Customers' inspection rights shall include the inspection of the inventory of Products maintained by RJRTC, RJRTC's manufacturing facilities and processes relating to the Products, RJRTC's quality control procedures relating to the Products, and all materials used in the manufacturing and packaging of the Products. Each B.A.T. Customer shall be responsible for ensuring that its representatives abide by all of RJRTC's rules and regulations with regard to safety, security, personnel matters, computer use and computer network use while at RJRTC's facilities. Each B.A.T. Customer shall inform its representatives that have access to RJRTC's premises of their obligations under this Agreement and shall require its representatives to enter into a confidentiality agreement with RJRTC in a form to be mutually agreed by the Parties. Each B.A.T. Customer shall be responsible for ensuring that all of its visitors to RJRTC's facilities are received and logged through RJRTC's reception area, in accordance with RJRTC's usual practice. Each B.A.T. Customer shall also be responsible for ensuring that its representatives and visitors refrain from actions and conduct that materially interfere with RJRTC's business and operations and shall instruct its representatives and visitors not to conduct unauthorized activities on RJRTC's facilities. 2.7 INITIAL FORECAST. Promptly after the Effective Date of this Agreement, each B.A.T. Customer shall provide RJRTC with a forecast (by SKU) that provides a projection for volumes for the various Products that the B.A.T. Customer may require RJRTC to manufacture and supply during the period immediately following the Effective Date through the end of Contract Year 2005. 2.8 SUBSEQUENT ANNUAL FORECASTS. [Intentionally Left Blank.] 2.9 PERIODIC FORECASTS. Promptly after providing its initial forecast in accordance with Sub-Section 2.7, each B.A.T. Customer shall begin providing RJRTC on a monthly basis with rolling eighteen (18) month forecasts (by SKU) that provide projections for volumes of the various Products for which the B.A.T. Customer expects to place Purchase Orders during the period covered by such monthly forecasts. Any and all forecasts supplied are non-binding and will be supplied for purposes of general planning of capacities, inventories, etc. -12- 2.10 PURCHASE OF MATERIALS. RJRTC shall use raw materials (including, but not limited to, Tobacco Materials, Non-Tobacco Components, and Packaging materials) that are obtained from sources and suppliers selected by RJRTC, which sources and suppliers must be approved by the B.A.T. Customers, such approval not to be withheld, conditioned or delayed unless the B.A.T. Customers can reasonably demonstrate that RJRTC's selected source(s) or supplier(s) do not at the time of selection meet the applicable Specifications. Notwithstanding the foregoing, the Parties agree that if any particular source or supplier selected by RJRTC has been approved by BATUS Japan, Inc. under separate contract, such source or supplier shall be deemed approved by the B.A.T. Customers for purposes of this Agreement. Unless otherwise agreed upon in writing, RJRTC shall be solely responsible for ordering, receiving, storing, maintaining, using, paying for (including the payment of all import duties, fees and internal revenue taxes, if applicable) and disposing of all raw materials. 2.11 INVENTORY. RJRTC and the B.A.T. Customers may agree in writing to the levels of inventory for all required raw materials that RJRTC will be responsible for having on hand to fulfill forecasted Purchase Orders. 2.12 SHARING OF INFORMATION. RJRTC and the B.A.T. Customers shall cooperate with one another (and relevant third Persons) in order to ensure that each is provided with relevant information regarding the physical and chemical properties (including toxicological information) of raw materials, equipment, process conditions, processes or treatment conditions that RJRTC may employ when producing Products for the B.A.T. Customers. If requested by a B.A.T. Customer, RJRTC shall provide samples of raw materials, at the times and in the amounts requested, to the B.A.T. Customer or an Affiliate designee for testing and evaluation. Any change to raw material, type of equipment (routine/preventive maintenance and ordinary wear and tear excepted), processes, process conditions, or treatment conditions that RJRTC may employ when producing Products for a B.A.T. Customer must be approved by the B.A.T. Customer prior to implementation of the change by RJRTC. 2.13 CIGARETTE PACKAGING, CARTON AND CASE MARKINGS. (a) MARKINGS. Every Cigarette Package, Carton and Case produced by RJRTC for the B.A.T. Customers shall bear such markings as required by: (i) the applicable laws and regulations of the U.S.A. for exported Products; (ii) the applicable laws and regulations of the jurisdiction in the Territory in which the Products are to be sold at retail; and (iii) the Specifications. (b) LIMITATIONS. Except as set forth in Sub-Section 2.13(a) or otherwise mutually agreed in writing, RJRTC shall not be obligated to produce (and the B.A.T. Customers shall not be obligated to accept as conforming) Products with markings on the Packaging, Carton or Case identifying RJRTC or an Affiliate of RJRTC as the corporate source of the Products. -13- 2.14 REVENUE STAMPS. Each B.A.T. Customer shall be responsible for obtaining any and all revenue and non-revenue closures, stamps or other similar devices required by any jurisdiction through which Products are to be transhipped, or in which Products are distributed and sold at retail. Such closures or stamps shall, where relevant, be delivered to RJRTC or any other Person nominated by RJRTC, together with directions describing the placement and orientation of the closures or stamps on the Cigarette Packaging, and if appropriate, the Cartons, in a timely manner so as not to delay or interfere with the production and packaging of Products by RJRTC. RJRTC shall ensure that the closures or stamps are prepared and affixed to the Cigarette Packaging, and if appropriate, the Cartons, in accordance with the directions provided by the applicable B.A.T. Customer describing the placement and orientation of the closures or stamps. Promptly after the Effective Date of this Agreement, RJRTC and the B.A.T. Customers shall agree and adhere to a written policy to supply sufficient quantities of the closures or stamps in a timely manner and to maximize the efficient utilization of the closures or stamps once supplied. The policy shall include, but not be limited to, appropriate waste targets, reconciliation and reclaim procedures, and reconciliation payments, taking into account the revenue and non-revenue nature of the closures or stamps and the requirements of the jurisdiction in which such Products are to be transhipped, or in which Products are distributed and sold at retail. For the avoidance of doubt, the policy once agreed and signed by RJRTC and the B.A.T. Customers shall be incorporated as a material term of this Agreement. 2.15 PURCHASE ORDERS AND PRODUCTION SCHEDULES. The B.A.T. Customers shall place with RJRTC from time to time such Purchase Orders for Products that each such B.A.T. Customer desires to order. The applicable B.A.T. Customer shall provide (or reference) to RJRTC the Specifications for each of the Products ordered pursuant to a Purchase Order. RJRTC shall schedule production of Products based on forecasts provided by the B.A.T. Customer and Purchase Orders placed by the B.A.T. Customer. Each Purchase Order which requires normal ocean freight shipment shall contain instructions for each delivery that specify mode of transport to the Territory and a requested delivery date of the Products "across the ship's rail," port of export (or if air freight delivery is required in the applicable Purchase Order, at the fuselage of the aircraft) that shall not be less than forty-two (42) calendar days from RJRTC's receipt of the Purchase Order. 2.16 PRODUCTION ACTIVITIES. RJRTC shall acknowledge receipt of each Purchase Order within three (3) business days of RJRTC's receipt of such Purchase Order. RJRTC shall promptly inform the applicable B.A.T. Customer of RJRTC's schedule for production and delivery of ordered Products "across the ship's rail," port of export or, if air freight delivery is required by the B.A.T. Customer in the applicable Purchase Order, at the fuselage of the aircraft. If RJRTC determines that it cannot fill any portion of the Purchase Order by the requested delivery date(s), the applicable B.A.T. Customer shall be notified in writing within three (3) business days of RJRTC's receipt of the Purchase Order. RJRTC's notice shall include a proposed alternative delivery date(s) for the Products (or any portion thereof) subject to the Purchase Order. In such cases, RJRTC and the B.A.T. Customer will negotiate a revised delivery date(s) agreeable to both -14- entities and shall confirm such final agreed delivery date(s) in writing. If an alternative delivery date(s) acceptable to the applicable B.A.T. Customer cannot be agreed using normal transport as defined in Sub-Section 2.17(a), RJRTC will be obligated to fill the Purchase Order (or the applicable portion of the Purchase Order) on a date that is acceptable to the B.A.T. Customer pursuant to the air freight remedy specified in Sub-Section 2.17(c). If no notice is given by RJRTC in accordance with this Sub-Section 2.16, the original delivery date(s) stated in the Purchase Order shall become a firm delivery date(s) by which RJRTC must deliver the Products subject to the Purchase Order "across the ship's rail," port of export or, if air freight delivery is required by the B.A.T. Customer in the applicable Purchase Order, at the fuselage of the aircraft. RJRTC shall produce and deliver to the applicable B.A.T. Customer the amount of ordered Products within the time period set forth in the applicable Purchase Order (unless modified as stated above), and such Products shall meet the B.A.T. Customer's Specifications. From time to time, Letters of Credit must be secured by a B.A.T. Customer from its customer(s) prior to shipment of Product. RJRTC will be notified in such circumstances if a delay in shipment may be caused by the credit approval process. If such a delay occurs, the firm delivery date(s) will be extended to accommodate for such delay and a revised firm delivery date(s) shall be agreed and confirmed in writing between RJRTC and the B.A.T. Customer. Subject to the applicable storage charges set forth in the International Order Policies & Customer Responsibilities (included in Exhibit "A"), RJRTC will store the applicable Products and ship such Products after the credit approval process is completed. Notwithstanding the foregoing of this Sub-Section 2.16, RJRTC shall have the right to accept or reject, in whole or in part, any Purchase Order placed by a B.A.T. Customer, in the event that: (a) the Purchase Order would require RJRTC to possess materials in inventory for production of Products in excess of the inventory levels agree to pursuant to Sub-Section 2.11 and RJRTC does not otherwise possess inventory levels sufficient to fulfill the Purchase Order (RJRTC's right of rejection shall apply only to the extent that such inventory levels are unavailable and the remainder of the Purchase Order shall be filled); (b) RJRTC is not prepared to manufacture Product due to a change in Specifications by the applicable B.A.T. Customer, if such changes have not been previously agreed to by RJRTC and the B.A.T. Customer, (c) the production of Product would be, in RJRTC's good faith belief based on credible evidence, in violation of the law of a relevant Governmental Authority, or (d) a Force Majeure event has occurred. 2.17 DELIVERY AND SHIPMENT; REMEDIES FOR FAILURE TO DELIVER BY AGREED DELIVERY DATES. (a) SHIPPING INSTRUCTIONS. Following the manufacture of Products, and subject to obtaining all required Export Licenses in accordance with Schedule "C" (if any), RJRTC shall effect delivery of all Products "across the ship's rail," port of export or, if air freight delivery is required by the applicable B.A.T. Customer in the Purchase Order, at the fuselage of the aircraft, by the delivery date(s) required in the governing Purchase Orders or the agreed firm delivery date(s) (if modified pursuant to Sub-Section -15- 2.16). RJRTC shall ship Products on a first in/first out basis as determined by the date of manufacture and shall ship and deliver Products in the manner prescribed in any instructions that the B.A.T. Customer famishes; provided, that all Products must be shipped using shipping terms that require RJRTC to control the Products until delivered to a location Outside the Jurisdiction of the U.S.A.; and for avoidance of doubt, risk of loss to Products shall pass to the applicable B.A.T. Customer once the Products pass Outside the Jurisdiction of the U.S.A. With respect to all shipping, export and other documents prepared by or for third Persons, INCOTERMS 2000 shipping terms may be used to the extent required (e.g., FOB named vessel at U.S.A. port of shipment). As between RJRTC and the applicable B.A.T. Customer, use of such INCOTERMS 2000 shipping terms shall not alter the express provisions of this Agreement. Products shall be shipped by reputable commercial common carriers selected and contracted by the applicable B.A.T. Customer for shipping the Products Outside the Jurisdiction of the U.S.A. RJRTC shall arrange for shipment and delivery through its freight forwarder and prepare all necessary shipping documentation relating to the Products, contact the applicable B.A.T. Customer for routing instructions, and be responsible for arranging loading. Such shipping documentation shall comply with all U.S.A. legal requirements, as well as the legal requirements of the country of destination (inspections, certificates of origin, etc.). RJRTC shall be listed as shipper of the Products on corresponding export bills of lading, as well as the Principal Party in Interest for export declaration reporting purposes. The applicable B.A.T. Customer will assist RJRTC in obtaining copies of all documents evidencing proof of export of Products within sixty (60) calendar days of the passage of risk of loss. If the B.A.T. Customer is unable to provide such proof of export, that B.A.T. Customer will reimburse RJRTC for any excise taxes assessed by a Governmental Authority and paid by RJRTC as a result of such transactions. RJRTC will provide documentary evidence of such payment and will assist the B.A.T. Customer in any effort made to contest the assessment of such excise taxes. (b) TRANSPORT. RJRTC shall be responsible for proper packing of the Products for shipment in accordance with the applicable B.A.T. Customer's directions. Such packing shall be adequate for normal transport conditions for export so as to prevent damage and/or deterioration of Products prior to reaching their ultimate destination. The applicable B.A.T. Customer shall pay all costs (including insurance costs) relating to the ocean shipment or air freight shipment (if requested by the B.A.T. Customer in the applicable Purchase Order) of the Products. Further, the Product invoice prices payable by the B.A.T. Customer shall include overland shipping charges and associated insurance costs to the port of export in accordance with Schedule "A." Ocean freight or air freight shipping charges and associated insurance costs shall be paid by the applicable B.A.T. Customer. (c) AIR FREIGHT REMEDY FOR FAILURE TO DELIVER PRODUCTS MEETING THE APPLICABLE SPECIFICATIONS WITHIN THE DELIVERY GRACE PERIOD. In accordance with the procedures stated in Sub-Section 2.16, final agreed firm delivery dates for Products "across the ship's rail," port of export (or, if air freight delivery is required by the applicable B.A.T. Customer in the Purchase Order, at the fuselage of the aircraft) shall be established for Products supplied under each Purchase Order issued by a B.A.T. -16- Customer. Absent delays caused by the applicable B.A.T. Customer's failure to fulfill its obligations under this Agreement or an intervening Force Majeure event as defined in Sub-Section 7.4, RJRTC shall be responsible for delivery of Products meeting the applicable Specifications by the final agreed firm delivery dates. Should RJRTC be unable to deliver some or all of the Products by any such firm delivery date, RJRTC must remedy its delay so as to deliver those Products at the port of export within seven (7) calendar days of such firm delivery date (the "Delivery Grace Period"). If RJRTC cannot meet its delivery requirements within the Delivery Grace Period, RJRTC shall be required to arrange for air freight shipment of those Products to the applicable B.A.T. Customer in the country in the Territory where the Products are to be sold at retail. In such circumstances, the B.A.T. Customer shall be responsible for payment of only such shipping and insurance costs as would have been incurred had RJRTC been able to deliver the Products by the agreed firm delivery date using normal ocean freight shipment. RJRTC shall be responsible for payment of the difference between those costs and the air freight shipping and insurance costs actually incurred. (d) MATERIAL BREACH OF CONTRACT FOR FAILURE TO MEET REQUIRED ON TIME/IN FULL DELIVERY PERCENTAGE. RJRTC must maintain at least an eighty percent (80%) On Time/In Full Delivery Percentage based on a rolling twelve (12) month assessment period for all Products ordered by all B.A.T. Customers under this Agreement. RJRTC's failure to maintain an eighty percent (80%) On Time/In Full Delivery Percentage based on a rolling twelve (12) month assessment period shall constitute material breach of contract by RJRTC, entitling (but not requiring) the B.A.T. Customers to terminate the entire Agreement for cause without allowing the cure period provided for other material breaches of contract as provided in Sub-Section 4.2(c)(iv). The B.A.T. Customers must invoke their termination rights by written notice to RJRTC within ninety (90) calendar days of the accrual of such right or such right of termination shall be waived with respect to the applicable material breach. Further, after notice of termination is given, the termination of the Agreement shall become effective one (1) year from the date of the B.A.T. Customers' notice. During such one (1) year period, RJRTC shall continue to manufacture Products pursuant to Purchase Orders placed by B.A.T. Customers, if any. 2.18 CONTINGENCY MANUFACTURING PLANS; ALTERNATIVE SOURCE OF SUPPLY. Immediately after the Effective Date of this Agreement, or as soon thereafter as practical, RJRTC shall disclose to the B.A.T. Customers any contingency manufacturing plans which have been prepared or entered by RJRTC to ensure that Products can be manufactured and supplied to the B.A.T. Customers in accordance with this Agreement should RJRTC suffer a loss or damage to its manufacturing facilities or any other interruption to, or interference with, RJRTC's ability to manufacture Products. Further, in the event that during the Term of this Agreement, RJRTC becomes unable to provide Product to the B.A.T. Customers in accordance with the terms and conditions of this Agreement and in accordance with the volumes placed by such B.A.T. Customers through their Purchase Orders, then RJRTC shall cooperate with the B.A.T. Customers towards arranging an alternative supply of Product as quickly as possible and always in compliance with applicable Trade Restrictions. -17- 2.19 TITLE AND RISK. In accordance with Sub-Section 2.17(a), risk of loss to Products shall pass to the applicable B.A.T. Customer once the Products pass Outside the Jurisdiction of the U.S.A. Title to Products shall likewise transfer to the applicable B.A.T. Customer once the Products pass Outside the Jurisdiction of the U.S.A. and the B.A.T. Customer shall own the Products free and clear of any liens, claims, security interest or other encumbrances of any nature. 2.20 ADDITIONAL SERVICES. Upon written request by a B.A.T. Customer, RJRTC may, at RJRTC's sole discretion, provide certain additional services subject always to compliance with applicable laws, including but not limited to Trade Restrictions. RJRTC and the applicable B.A.T. Customer shall negotiate in good faith towards arriving at a separate agreement setting forth terms and conditions by which RJRTC shall provide such services for the applicable B.A.T. Customer, and by which such B.A.T. Customer shall pay RJRTC for such services. SECTION 3 COMMERCIAL TERMS 3.1 PRICING. (a) PRODUCT BASE PRICING THROUGH CONTRACT YEAR 2004. For Products manufactured pursuant to Purchase Orders issued by a B.A.T. Customer between the Effective Date and the end of Contract Year 2004, RJRTC shall charge and the applicable B.A.T. Customer shall pay the Product Base Prices established in Schedule "A." The additional ancillary expenses and charges identified in the International Order Policies & Customer Responsibilities included in Exhibit "A" shall also be chargeable by RJRTC. In addition, RJRTC shall be allowed to recover and the B.A.T. Customers shall pay the actual costs incurred by RJRTC resulting from any new fees, duties, taxes, and/or levies that are not in existence or imposed as of the Effective Date of this Agreement by any Governmental Authority applicable to RJRTC's manufacture in the U.S.A. and/or export of Product to the Territory. (b) PRODUCT PRICING INCREASES AND DECREASES FOR CONTRACT YEAR 2005 THROUGH CONTRACT YEAR 2009. For Contract Year 2005 through Contract Year 2009, the prices chargeable for Products manufactured under this Agreement shall increase or decrease, as the case may be, over or under the prices chargeable in the immediately preceding Contract Year by the percentage change in: (i) the PPI in effect for September of the immediately preceding Contract Year over (ii) the PPI in effect for September of the Contract Year prior to the immediately preceding Contract Year. Notwithstanding the foregoing, and regardless of the actual change in PPI over the applicable period, Product price increases or decreases shall be capped at six percent (6.0%) from those charged in the immediately preceding Contract Year. By way of example only, and subject to the six percent (6.0%) cap stated above, the Product prices chargeable for Contract Year 2006 shall increase or decrease from the prices in effect for Contract Year 2005 by the percentage increase or decrease in PPI between September 2004 and September 2005. -18- In addition to the foregoing, RJRTC shall be allowed to recover and the B.A.T. Customers shall pay the actual costs incurred by RJRTC resulting from any new fees, duties, taxes, and/or levies that are not in existence or imposed as of the Effective Date of this Agreement by any Governmental Authority applicable to RJRTC's manufacture in the U.S.A. and/or export of Product to the Territory. Once Product pricing is established for a Contract Year, RJRTC shall prepare and RJRTC and the B.A.T. Customers shall execute a revised Schedule "A" governing the Product pricing for the Contract Year in question which shall automatically be incorporated into this Agreement without further action by RJRTC or the B.A.T. Customers. (c) PRODUCT PRICING FOR EACH CONTRACT YEAR DURING THE REMAINDER OF THE TERM. Product pricing applicable for Contract Year 2010 and for each Contract Year thereafter shall be equal to RJRTC's costs of manufacturing the Products subject to this Agreement in the immediately preceding Contract Year, plus a profit margin of ten percent (10%). Product manufacturing costs shall be calculated for each Product SKU which may be ordered by a B.A.T. Customer and shall be based on the manufacturing costing methodology which is attached hereto as Schedule "E." Discussions regarding Product pricing shall commence no later than September 1st of the Contract Year immediately preceding the Contract Year at issue. At that time, the B.A.T. Customers shall be provided with RJRTC's calculation and analysis of Product manufacturing costs for the immediately preceding Contract Year and the B.A.T. Customers shall be provided access to all data, records, and information upon which RJRTC's calculation of Product costs are based. Subject to the standard manufacturing costing methodology, RJRTC and the B.A.T. Customers shall act in good faith to agree upon Product pricing for the next Contract Year. If Product pricing cannot be agreed upon prior to the commencement of the Contract Year at issue, the prices applicable during the immediately preceding Contract Year shall remain in place until agreement on modified pricing can be finalized. Notwithstanding the foregoing, if revised Product pricing cannot be agreed on prior to March 1st of the Contract Year at issue, if not already invoked, the issue shall be submitted to the dispute resolution procedures provided in Sub-Section 7.7. Once Product pricing is established for a Contract Year, RJRTC shall prepare and RJRTC and the B.A.T. Customers shall execute a revised Schedule "A" governing the Product pricing for the Contract Year in question which shall automatically be incorporated into this Agreement without further action by RJRTC or the B.A.T. Customers. Unless otherwise mutually agreed, such revised Product pricing will be retroactive to all Products manufactured pursuant to Purchase Orders issued since January 1st of the Contract Year at issue. RJRTC and the applicable B.A.T. Customers shall reconcile all payments made for Purchase Orders issued between January 1st of the Contract Year in question and the date of execution of the revised Schedule "A" and any required payment will be made by the paying entity to the other within thirty (30) calendar days of the completion of such reconciliation. -19- 3.2 INVOICES. RJRTC shall invoice each B.A.T. Customer upon shipment of Products from RJRTC's manufacturing facilities. The applicable B.A.T. Customer's obligation to make payment shall accrue once title and risk of loss to the Products pass to such B.A.T. Customer. Such invoices shall be due and payable by the applicable B.A.T. Customer within thirty (30) calendar days from the date of RJRTC's invoice. 3.3 PAYMENTS. All payments by B.A.T. Customers to RJRTC shall be by wire transfer of funds to RJRTC's bank account (or accounts) as clearly designated from time to time in RJRTC's invoice, or as otherwise specified by RJRTC and agreed upon by the Parties. RJRTC's current payment instructions are set forth in Schedule "F" of this Agreement. All payments made by a B.A.T. Customer to RJRTC shall be in U.S.A. Dollars. Payments by a B.A.T. Customer to RJRTC in accordance with Sub-Section 3.2 are without prejudice to any rights the B.A.T. Customer may have for any reason whatsoever, and any liability of RJRTC for breach of this Agreement shall not be terminated or reduced by reason of such payment. 3.4 REJECTED PRODUCTS. RJRTC shall ensure that the Products it manufactures for each B.A.T. Customer comply with the Specifications of such B.A.T. Customer as have been confirmed between RJRTC and the B.A.T. Customer and with all Packaging, Carton and Case marking requirements as provided hereunder. A B.A.T. Customer may reject any Product that, as of the time the Product passes "across the ship's rail," does not comply with the applicable Specifications and/or Packaging, Carton or Case marking requirements as are current upon manufacture within one hundred and twenty (120) calendar days after arrival of the Products in the country in the Territory in which the Products are to be sold at retail. In such case, the B.A.T. Customer's written notice of rejection to RJRTC shall state in commercially reasonable detail the Products which the B.A.T. Customer deems non-compliant, the Purchase Order pursuant to which those Products were manufactured and the Specification defects and/or Packaging, Carton or Case marking requirements which the B.A.T. Customer believes were not fulfilled. The B.A.T. Customer shall bear the burden to demonstrate Product non-compliance as of the time the Product passes "across the ship's rail." Within ten (10) business days of receipt of a notice of rejection, RJRTC may contest such rejection and provide documentation and other evidence relating to the quality assurance measures taken with respect to the rejected Products and any other matters relating to the compliance of the Products at issue. Thereafter, RJRTC and the applicable B.A.T. Customer shall confer in good faith to resolve the controversy. If any Product is finally deemed to be non-compliant, such non-compliant Product will be, at RJRTC's option and expense, either returned to RJRTC or destroyed. If returned to RJRTC in the U.S.A., the applicable B.A.T. Customer shall provide necessary reference information to allow RJRTC to receive such returned Product without being required to incur the expense of applicable U.S.A. customs duties or U.S.A. excise taxes. In the event of any such rejection, RJRTC shall replace such non-complying Products with complying Products as soon as possible at no additional charge to the applicable B.A.T Customer, and subject to and in compliance with the terms of any applicable Export Licenses. RJRTC shall bear all reasonable costs incurred by the applicable -20- B.A.T. Customer in inspecting and disposing of or returning the non-complying Products, as well as the full costs of shipping complying Products to the country in the Territory where to Products are to be sold via air freight shipment, including applicable insurance. If non-complying Product returned to RJRTC is destroyed by RJRTC, RJRTC will provide documentary evidence of such destruction to the applicable B.A.T. Customer. 3.5 AUDIT RIGHTS OF THE B.A.T. CUSTOMERS. RJRTC shall maintain accurate and complete records including, but not limited to, correspondence, instructions, receipts, quality assurances records, Specifications, Purchase Orders, Non-Tobacco Component and Tobacco Material procurement records, warehousing records and cost data, export records, transportation records and cost data, other manufacturing cost records and data, and similar documents and data relating to the B.A.T. Customers' order and receipt of Products from RJRTC and RJRTC's production and delivery of Products for the B.A.T. Customers. RJRTC shall keep such records in sufficient detail to enable the B.A.T. Customers to determine or verify raw materials inventories, process conditions and quality controls for Products supplied pursuant to each Purchase Order. The B.A.T. Customers shall likewise have the right to review and audit RJRTC's records relating to projected and actual Product costing increases or decreases derived from changes in Specifications made pursuant to the procedures set forth above in Sub-Section 2.3. Further, commencing with Contract Year 2009, the B.A.T. Customers shall have the right to review and audit such records so as to analyze and verify all manufacturing costing calculations generated by RJRTC with respect to the determination of Product pricing for Contract Year 2010 and for each Contract Year thereafter. RJRTC shall keep such records for a period of time as determined by its normal document retention policies, but in any event not less than eighteen (18) months after the date of the transaction to which those records relate, or longer if required by law. RJRTC shall permit BATUKE and the other B.A.T. Customers to examine RJRTC's records and its facilities from time to time (during regular business hours and upon not less than five (5) business days written notice) to the extent necessary for the B.A.T. Customers to make the foregoing determinations and verifications, and such examination shall be made at the expense of the B.A.T. Customers either by their employees (or those of their Affiliates) or by an independent auditor appointed by the B.A.T. Customers who shall report to the B.A.T. Customers those matters associated with such examination. 3.6 AUDIT RIGHTS OF RJRTC. Each B.A.T. Customer shall maintain (or cause to be maintained) accurate and complete records including, but not limited to, those relating to the ordering, exportation, transport, handling, importation, receipt, inspection, storage and distribution of Products manufactured under this Agreement. Each B.A.T. Customer shall keep such records in sufficient detail to enable RJRTC to evaluate, determine or verify any claim by a B.A.T. Customer that Products do not meet Specifications or are not delivered On Time/In Full. Each B.A.T. Customer shall keep such records for a period of time as determined by its normal document retention policies, but in any event not less than eighteen (18) months after the date of the transaction to which those records relate, or longer if required by law. Each B.A.T. Customer shall permit RJRTC to examine the B.A.T. Customer's records from time to time (during regular business hours -21- and upon not less than five (5) business days written notice) to the extent necessary for RJRTC to make the foregoing evaluations, determinations and verifications, and such examination shall be made at the expense of RJRTC either by its employees (or those of its Affiliates) or by an independent auditor appointed by RJRTC who shall report to RJRTC those matters associated with such examination. 3.7 INSURANCE AND TRANSPORTATION COSTS. Costs of insurance and transport shall be paid in accordance with Sub-Section 2.17. Further, each B.A.T. Customer shall be responsible for all customs duties, excise taxes, and like fees and expenses due as a result of import of Products to the appropriate jurisdiction within the Territory. SECTION 4 TERM, GENERAL TERMINATION, RIGHT OF FIRST REFUSAL 4.1 TERM OF THE AGREEMENT. This Agreement shall be effective upon the Effective Date and, unless sooner terminated by either Party pursuant to its terms and conditions, shall remain in effect until December 31, 2014. Thereafter, the Agreement will automatically extend for successive Contract Years until terminated by either Party pursuant to its terms and conditions. With not less than twelve (12) months' prior written notice, RJRTC or the B.A.T. Customers may terminate this Agreement without cause and at their discretion as of December 31, 2014, or upon any December 31st thereafter. Notwithstanding the foregoing, the Term of this Agreement with regard to Products manufactured for distribution in Restricted Countries shall be subject to the additional provisions stated in Schedule "C" and the definition of "Restricted Countries Renewal Term" provided therein. 4.2 GENERAL TERMINATION. (a) MUTUAL. The Parties may mutually agree in writing at any time to terminate this Agreement. (b) BY BATUKE. The B.A.T. Customers shall have those rights of termination for cause as provided in Sub-Section 2.17(d). (c) BY EITHER PARTY. Either Party may terminate this Agreement at any time upon written notice to the other if: (i) Voluntary bankruptcy or a petition for involuntary bankruptcy of the other Party is not dismissed within a period of sixty (60) calendar days of its filing, in which case the termination shall become effective immediately upon the non-terminating Party's receipt of notice of termination from the terminating Party or at such later date as specified in the termination notice; (ii) The other Party ceases to pay its debts as they mature in the ordinary course of business, or makes an assignment for the benefit of its creditors, in which case the termination shall become effective immediately upon the non-terminating -22- Party's receipt of notice of termination from the terminating Party or at such later date as specified in the termination notice; (iii) A receiver is appointed for the other Party or its property, in which case the termination shall become effective immediately upon the non-terminating Party's receipt of notice of termination from the terminating Party or at such later date as specified in the termination notice; or (iv) The other Party is in material breach of any material term of this Agreement and the breaching Party fails to cure such breach within thirty (30) calendar days of receipt of notice of breach from the other Party, or if such breach is not reasonably capable of cure within such thirty (30) calendar day period, such breaching Party fails to cure the breach within ninety (90) calendar days of receipt of notice of breach from the other Party. The terminating Party must invoke its rights of termination under this Sub-Section 4.2(c)(iv) by written notice to the breaching Party within thirty (30) calendar days of the accrual of such right or such right of termination shall be waived with respect to the applicable material breach. Further, after notice of termination is given, the termination of the Agreement shall become effective one (1) year from the date of the termination notice. During such one (1) year period, RJRTC shall continue to manufacture Products pursuant to Purchase Orders placed by B.A.T. Customers, if any, and subject to the terms and conditions of this Agreement. 4.3 EFFECT OF TERMINATION. (a) ACTIONS BY RJRTC. Upon termination of this Agreement, RJRTC shall: (i) Deliver to the B.A.T. Customers or their designees all raw materials, finished Products, and/or specialized manufacturing equipment that have been, or must be, paid for by each such B.A.T. Customer in accordance with this Agreement; (ii) Execute all documents and take all actions reasonably necessary to enable each B.A.T. Customer to carry out its obligations to customers, and make commercially reasonable efforts to cooperate with each B.A.T. Customer in making the necessary transition; (iii) Make commercially reasonable efforts to cooperate with each B.A.T. Customer in the preparation of a final accounting; and (iv) Stop producing Product, except as RJRTC and the B.A.T. Customers may agree at the time in writing. (b) ACTIONS BY THE B.A.T. CUSTOMERS. Upon the effective date of termination of this Agreement, each B.A.T. Customer shall promptly pay RJRTC for such Products in accordance with Sub-Section 3.1, together with any other amounts that are due and owing by each such B.A.T. Customer to RJRTC. Each B.A.T. Customer also shall promptly pay RJRTC for such unique raw materials that RJRTC has purchased to -23- produce Products for such B.A.T. Customer and such raw materials shall be shipped to the applicable B.A.T. Customer or its designee at the B.A.T. Customer's expense. If a written agreement for reimbursement of identified capital costs exists between RJRTC and any B.A.T. Customer, the applicable B.A.T. Customer also shall promptly pay RJRTC for such identified capital expenditures and commitments that RJRTC has made on behalf of such B.A.T. Customer and for which RJRTC has not been paid as of the effective date of termination. Upon such payment, title to any equipment which has been paid for by the B.A.T. Customer shall transfer to the B.A.T. Customer and shall be shipped to such B.A.T. Customer or its designee at such B.A.T. Customer's expense. (c) WIND-UP PAYMENTS BY THE B.A.T. CUSTOMERS. Upon the effective date of any termination of this Agreement by the B.A.T. Customers, then RJRTC shall be reimbursed by each B.A.T. Customer for all reasonable costs incurred and non-cancelable commitments made in the performance of this Agreement for which such B.A.T. Customers have expressly agreed in writing to be responsible. In such an event, RJRTC shall take steps to minimize any amount for which any B.A.T. Customer may be responsible. 4.4 RIGHT OF FIRST REFUSAL. (a) GRANT OF RIGHT OF FIRST REFUSAL. Commencing January 1, 2015, and for so long as B.A.T. or any of its present or future Affiliates maintains at least a twenty-five percent (25%) ownership interest in RAI or any entity which owns RAI, should any B.A.T. Customer wish to have American-blend Cigarettes manufactured in the U.S.A., RJRTC shall have a right of first refusal to manufacture the requested American-blend Cigarettes in the U.S.A. pursuant to the procedures provided in Sub-Section 4.4(b) below. (b) PROCEDURES GOVERNING RIGHT OF FIRST REFUSAL. During the period that RJRTC's right of first refusal remains in effect, should any B.A.T. Customer wish to have American-blend Cigarettes manufactured in the U.S.A.: (i) The applicable B.A.T. Customer first shall offer RJRTC the opportunity to manufacture the American-blend Cigarettes by providing RJRTC with a written proposal setting forth, at a minimum: (1) the Specifications for the American-blend Cigarettes and Packaging; (2) the anticipated quantities of the American-blend Cigarettes to be ordered during the then-present calendar year and the next calendar year; and (3) the anticipated dates on which Purchase Orders would be placed for such American-blend Cigarettes during the first six (6) months of manufacture and the anticipated quantities for each such Purchase Order. (ii) Within fifteen (15) calendar days of RJRTC's receipt of the B.A.T. Customer's written proposal, RJRTC shall indicate whether its wishes to enter negotiations regarding such manufacture of the American-blend Cigarettes at issue. If RJRTC declines to enter negotiations for the manufacture of such American-blend Cigarettes, the B.A.T. Customer may have the American-blend Cigarettes manufactured by any third Person, free from RJRTC's right of first refusal. If RJRTC indicates a desire -24- to negotiate, RJRTC and the B.A.T. Customer shall enter an exclusive negotiation period of sixty (60) calendar days from the first negotiation session regarding the manufacture of the American-blend Cigarettes. Such exclusive period of negotiations may be extended by mutual written agreement of RJRTC and the applicable B.A.T. Customer. RJRTC and the B.A.T. Customer shall negotiate in good faith at reasonable times and with reasonable frequency in Winston-Salem, North Carolina or in another mutually agreeable location. (iii) If RJRTC and the B.A.T. Customer cannot reach agreement during the exclusive negotiation period, the B.A.T. Customer shall be free to negotiate with any third Person regarding manufacture of such American-blend Cigarettes. (iv) If the B.A.T. Customer reaches a tentative agreement with such third Person, before entering a binding agreement, the B.A.T. Customer shall provide a copy of the tentative agreement to RJRTC and, if the terms referred to in Sub-Section 4.4(b)(i)-(ii) above shall not have changed, RJRTC shall have fifteen (15) calendar days from its receipt of the tentative agreement to indicate whether it is willing to enter into an agreement identical in all material respects to the tentative agreement, or, if the terms referred to in Sub-Section 4.4(b)(i)-(ii) above have changed, RJRTC shall have thirty (30) calendar days from its receipt of the tentative agreement to indicate whether it is willing enter into an agreement identical in all material respects to the tentative agreement. (v) If RJRTC chooses not to enter an agreement for the manufacture of the American-blend Cigarettes at issue as stated in Sub-Section 4.4(b)(iv), the applicable B.A.T. Customer may enter the binding agreement with the third Person. If such B.A.T. Customer enters into a binding agreement with such third Person, the B.A.T. Customer shall not agree to any material amendment of that agreement for a period of two (2) years from the effective date of the agreement, other than the termination of the binding agreement for the purpose of moving the manufacture of the applicable American-blend Cigarettes outside the U.S.A. (vi) Upon the expiration or termination of any binding agreement entered with a third Person pursuant to the procedures stated above, the applicable B.A.T. Customer shall be free to enter subsequent agreements for the manufacture of the American-blend Cigarettes at issue with that third Person free from RJRTC's rights of first refusal granted under this Sub-Section 4.4. However, upon such expiration or termination, should the B.A.T. Customer wish to seek an alternative third Person to manufacture the American-blend Cigarettes in the U.S.A., RJRTC's right of first refusal shall again be initiated and the procedures set forth above will again be followed. 4.5 OTHER AGREEMENTS. Non-renewal or termination of this Agreement for any reason shall have no legal effect upon other projects, activities, collaborations, commercial arrangements or service arrangements that RJRTC and any B.A.T. Customer may have with one another. 4.6 EFFECT OF NON-RENEWAL OR TERMINATION. Subject to the provisions of Sub- Section 4.7 and Schedule "C," if either the B.A.T. Customers or RJRTC choose not to -25- renew or terminate this Agreement as provided in this Section 4, this Agreement will be of no further force and effect, and except as set forth in Sub-Sections 4.3 and 4.4, there will be no liability or obligation on the part of either Party to the other. Non-renewal or termination of this Agreement does not impair or extinguish any accrued right, obligation or liability that a Party hereto may have under this Agreement at the time it terminated. 4.7 SURVIVAL. The provisions of Sections and Sub-Sections 3.5, 3.6, 4.3, 4.4, 5, 6.2, 6.3, 6.4, 6.5, 6.6, 6.8, 6.9, 7.5, 7.7 and 7.11 will continue in effect after expiration or termination of this Agreement. SECTION 5 CONFIDENTIALITY 5.1 CONFIDENTIALITY OBLIGATION. During the Term of this Agreement and for a period of five (5) years thereafter, RJRTC and each B.A.T. Customer receiving Confidential Information as a "Receiving Party" shall maintain in confidence all Confidential Information disclosed to it by the other Party, as a "Disclosing Party." Notwithstanding the foregoing, subject to Sub-Section 5.2, RJRTC's and each B.A.T. Customer's respective obligations of confidentiality with respect to the other Party's Trade Secrets, including the B.A.T. Customer's Specifications, shall be perpetual. Neither RJRTC nor any B.A.T. Customer will use, disclose or grant the use of such Confidential Information except as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, the Receiving Party shall obtain prior agreement from its employees, representatives and contracting parties to whom disclosure is to be made to hold in confidence and not make use of such information for any purpose other than those purposes permitted by this Agreement. RJRTC and each B.A.T. Customer, as a Receiving Party, will use at least the same standard of care (but not less than a reasonable standard of care) as it uses to protect its own proprietary and Trade Secret information to ensure that such employees, representatives and contracting parties do not disclose or make any unauthorized use of such Confidential Information. RJRTC and each B.A.T. Customer, as a Receiving Party, will promptly notify the other upon discovery of any unauthorized use or disclosure of Confidential Information. The Receiving Party shall be responsible to the Disclosing Party for any loss of Confidential Information of the Disclosing Party or breach of the provisions of this Sub-Section 5.1 by any employee, representative or contracting party of the Receiving Party. 5.2 EXCEPTIONS. The obligations of confidentiality contained in Sub-Section 5.1 will not apply to the extent that it can be established by the Receiving Party by competent proof that such Confidential Information: (a) Was already known to the Receiving Party, other than under an obligation of confidentiality, at the time of receipt from the Disclosing Party; (b) Was generally available to the public or otherwise part of the public domain at the time of its receipt from the Disclosing Party; -26- (c) Becomes generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the Receiving Party in breach of this Agreement; (d) Was received by the Receiving Party, other than under an obligation of confidentiality, by a third Person lawfully in possession of the information; or (e) Was independently developed by the Receiving Party, without reference or access to any Confidential Information of the Disclosing Party. 5.3 AUTHORIZED DISCLOSURE. RJRTC and each B.A.T. Customer (and third Persons as applicable) may disclose Confidential Information to the extent such disclosure is reasonably necessary in filing or prosecuting patent applications, prosecuting or defending litigation, complying with court orders, or complying with applicable governmental regulations, provided that if RJRTC or any B.A.T. Customer is required to make any such disclosure of Confidential Information it will to the extent practicable give reasonable advance notice to the Disclosing Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such information required to be disclosed. SECTION 6 WARRANTIES, REPRESENTATIONS, COVENANTS AND INDEMNITY 6.1 WARRANTIES AND DISCLAIMER OF WARRANTIES. RJRTC WARRANTS THAT PRODUCTS MANUFACTURED AND PACKAGED PURSUANT TO THIS AGREEMENT SHALL BE FREE FROM DEFECTS IN MATERIALS AND WORKMANSHIP, AND SUCH PRODUCTS SHALL BE MANUFACTURED, PACKAGED AND SHIPPED IN CONFORMITY WITH THE APPLICABLE SPECIFICATIONS AND THE PACKAGING AND SHIPPING REQUIREMENTS OF THIS AGREEMENT. ANY MEASURES TAKEN TO REMEDY NON- CONFORMANCE WITH THIS WARRANTY WILL BE AT RJRTC'S SOLE COST AND EXPENSE. SUBJECT TO THE FOREGOING, PRODUCTS SUPPLIED BY RJRTC ARE PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE. 6.2 LIMITATION OF REMEDIES, LIABILITY AND DAMAGES. RJRTC'S AND EACH B.A.T. CUSTOMER'S LIABILITY FOR DAMAGES FOR BREACH OF ITS RESPECTIVE OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY; SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW ARE WAIVED. NEITHER RJRTC NOR ANY B.A.T. CUSTOMER SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER -27- BUSINESS INTERRUPTION DAMAGES ARISING FROM THIS AGREEMENT, BY STATUTE, IN TORT OR BY CONTRACT. 6.3 U.S.A. STATUTES AND REGULATIONS. RJRTC and each B.A.T. Customer represents and warrants that it is aware of: (a) U.S. Trade Restrictions controlling exports from the U.S.A. and re-exports from third countries of U.S. origin goods, software and technology, including foreign made goods, software and technology with more than de minimus U.S. content, to Prohibited and Restricted Countries and to Restricted Parties, as well as the restrictions and prohibitions under U.S. trade sanctions on dealings by U.S. persons with such countries and persons, and is further aware that the lists of Prohibited Countries, Restricted Countries, and Restricted Parties may change from time to time; (b) Antiboycott Laws; and (c) the Foreign Corrupt Practices Act. 6.4 COMPLIANCE WITH LAWS. In performance of their respective obligations under this Agreement, RJRTC and each B.A.T. Customer shall comply with, and shall ensure that their respective employees and Affiliates shall comply with, all laws, regulations, agreements, licenses and consents applicable to or otherwise relating to the subject matter of this Agreement, including those referenced in Sub-Section 6.3. Without limitation to the foregoing, RJRTC and each B.A.T. Customer represents and warrants that they shall not transfer, provide, resell, export, re-export, distribute, or dispose of any Product or component thereof or any related technology or technical data, directly or indirectly, without first obtaining all necessary written consents, permits and authorizations and completing such formalities as may be required by any applicable laws, rules and regulations. No B.A.T. Customer shall sell or otherwise provide Products to any Person that such B.A.T. Customer knows, believes or has reason to believe will take any action which, if done by such B.A.T. Customer, would constitute a violation of any of the terms and conditions of this Agreement. 6.5 PRODUCT FOR EXPORT ONLY. Except for limited quantities of Product manufactured for testing purposes only, RJRTC and each B.A.T. Customer represents and warrants that Products produced by RJRTC for any B.A.T. Customer in accordance with this Agreement are intended to be manufactured in the U.S.A. solely for lawful export from the U.S.A., and for sale only within the Territory in accordance with the laws of the Governmental Authority within each relevant country within the Territory. RJRTC will not provide Product manufactured for any B.A.T. Customer to any third Person, without the applicable B.A.T. Customer's prior written consent. No B.A.T. Customer will in any way transport, or cause to be transported, Products to any country outside of the Territory for use, distribution or sale. 6.6 EXPORT LAWS. No equipment, computer software, technology or information obtained pursuant to this Agreement, and no Product or component thereof, will be made available or re-exported, directly or indirectly, except in compliance with all applicable export laws and regulations. 6.7 THE B.A.T. CUSTOMERS' DUTY TO INSPECT. Each B.A.T. Customer or its designees shall be solely responsible for inspecting all Specifications of Products to be -28- produced by RJRTC for such B.A.T. Customer in order to ensure that each such Product is in compliance with all applicable laws of the relevant Governmental Authority of the country in the Territory into which the Product is intended to be shipped or sold. Each B.A.T. Customer or its designees shall be solely responsible for giving RJRTC full and complete instructions to ensure that all Packaging, Cartons and Cases are appropriately marked with relevant health warnings (if applicable) and other relevant markings mandated by relevant Governmental Authorities, whether within the U.S.A., the Territory or elsewhere. 6.8 B.A.T. CUSTOMER'S INDEMNITY OBLIGATIONS. (a) IN GENERAL. Each applicable B.A.T. Customer, severally, will indemnify, defend and hold harmless RJRTC, its Affiliates and their respective current and former officers, directors, employees, representatives and agents (each an "RJRTC Indemnified Party") from and against any and all losses, damages, claims, liabilities, demands, assessments, judgments, settlements, compromises and related costs and expenses (including without limitation reasonable attorneys' fees and costs) (collectively, "Damages") resulting from demands, actions, suits or proceedings initiated by any third Person (including any Governmental Authority) and arising out of: (i) A material breach by such B.A.T. Customer of its respective obligations under this Agreement; or (ii) The marketing, advertising, distribution or sale by such B.A.T. Customer of any Products manufactured under this Agreement for such B.A.T. Customer, including any Damages which relate to any claimed adverse health effects or health risks relating to the use of such Products. (b) EXCEPTIONS. Notwithstanding Sub-Section 6.8(a), the B.A.T. Customers shall not be required to indemnify any RJRTC Indemnified Party for any portion of Damages to which such RJRTC Indemnified Party may become subject to the extent (but only to the extent) they relate to, result from or arise out of: (i) The failure of RJRTC to comply with its obligations under this Agreement; (ii) The negligence or willful misconduct or willful failure to act of RJRTC; or (iii) RJRTC's failure to produce Products meeting the required Specifications and/or to comply with the Packaging and Shipment requirements of this Agreement. (c) NOTICE. RJRTC shall give the applicable B.A.T. Customer prompt written notice of any claim or suit that may be brought directly against RJRTC or any other RJRTC Indemnified Party by a third Person, and the applicable B.A.T. Customer shall -29- thereafter be entitled to employ counsel, control the defense of, and settle or compromise, such claim or suit. 6.9 RJRTC'S INDEMNITY OBLIGATIONS. (a) IN GENERAL. Subject to Sub-Section 6.1, RJRTC will indemnify, defend and hold harmless each B.A.T. Customer, and their respective current and former officers, directors, employees, representatives and agents (each a "B.A.T. Customer Indemnified Party") from and against all Damages resulting from demands, actions, suits, or proceedings initiated by any third Person (including any Governmental Authority) and arising out of material breach of the obligations of RJRTC under this Agreement including, but not limited to, RJRTC's failure to produce Products meeting the required Specifications and/or to comply with the Packaging and Shipment requirements of this Agreement. (b) EXCEPTIONS. Notwithstanding Sub-Section 6.9(a), RJRTC shall not be required to indemnify any B.A.T. Customer Indemnified Party for any portion of Damages to which such B.A.T. Customer Indemnified Party may become subject, to the extent (but only to the extent) they relate to, result from or arise out of: (i) The failure of the applicable B.A.T. Customer to comply with their respective obligations under this Agreement; or (ii) The negligence or willful misconduct or willful failure to act of the applicable B.A.T. Customer. (c) Notice. The B.A.T. Customer Indemnified Party shall give RJRTC prompt written notice of any such claim or suit that may be brought directly against such B.A.T. Customer Indemnified Party by a third Person, and RJRTC shall thereafter be entitled to employ counsel, control the defense of, and settle or compromise, such claim or suit. 6.10 THE B.A.T. CUSTOMER'S SUPPLIER FOR PRODUCT. Each B.A.T. Customer represents and warrants that as of the Effective Date, it has not entered into any agreement with any third Person that obligates such B.A.T. Customer to purchase any Product subject to this Agreement from any third Person, which Product is subject to such B.A.T. Customer's obligations to RJRTC regarding the manufacture of American-blend Cigarettes sourced from the U.S.A. pursuant to the terms and conditions of this Agreement. 6.11 THE B.A.T. CUSTOMERS' RIGHTS TO INTELLECTUAL PROPERTY. Each B.A.T. Customer represents and warrants that it (or its Affiliates) has the right to use all Intellectual Property associated with the Products manufactured for it under this Agreement, including Trademarks, in the relevant countries in the Territory. RJRTC shall obtain no rights with respect to Intellectual Property owned by any B.A.T. Customer or its Affiliates as a result of this Agreement. -30- ARTICLE 7 MISCELLANEOUS 7.1 FURTHER ASSURANCES. Each Party agrees to enter into or execute, or procure the entering into or execution, of such agreements, assignments or further assurances, or do such other acts as the other Party may reasonably request to carry out the terms and conditions of this Agreement. Further, Purchase Orders issued by B.A.T. Customers under this Agreement shall provide that such Purchase Orders are issued pursuant to, and governed by, the terms and conditions of this Agreement. 7.2 WAIVER. No waiver by either RJRTC or any B.A.T Customer of any of the provisions of this Agreement will be effective unless explicitly set forth in writing and executed by that entity. Any waiver by either RJRTC or any B.A.T. Customer of a breach of this Agreement will not operate or be construed as a waiver of any subsequent breach. 7.3 RELATIONSHIP OF RJRTC AND THE B.A.T. CUSTOMERS. RJRTC and each B.A.T. Customer shall be and shall remain independent contractors as to each other, and this Agreement shall not be construed as establishing a general agency, employment, partnership, or joint venture relationship between them. Neither RJRTC nor any B.A.T. Customer shall have the authority to make any statements, representations or commitments of any kind (whether express or implied), or to take any action, which shall be binding on the other or create any liability or obligation on behalf of the other, without the prior written authorization of the entity to be bound. 7.4 FORCE MAJEURE. Notwithstanding anything to the contrary herein, neither RJRTC nor any B.A.T. Customer shall be liable for loss, injury, delay, damage or other casualty suffered by such other entity due to any inability to perform any obligation hereunder, and neither RJRTC nor any B.A.T. Customer shall be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term or provision of this Agreement (other than payment of monies due), when such failure or delay is caused by or results from causes beyond the control of the affected entity including, but not limited to, acts of God, fire, flood, storm, earthquake, explosion, epidemic, embargo, war, acts of war (whether war be declared or not), acts of terrorism, insurrection, riot, civil commotion, labor disputes and strikes suffered by third-party suppliers, sub-contractors, or services providers not working in or on RJRTC's facilities, or acts, omissions or delays in acting by any Governmental Authority (including legislative, administrative, judicial, police or any other official government acts). Notwithstanding the foregoing, nothing set forth in this Sub-Section 7.4 shall relieve RJRTC of its obligation to initiate its contingency manufacturing plans as identified pursuant to Sub-Section 2.18. 7.5 GOVERNING LAW. The validity, construction and performance of this Agreement shall be governed and interpreted in accordance with the substantive laws of the State of New York, without giving effect to principles of conflicts of laws thereof. -31- 7.6 JURISDICTION. [Intentionally Left Blank] 7.7 DISPUTE RESOLUTION. Any dispute arising out of or relating to this Agreement shall be resolved in accordance with the procedures specified in this Sub-Section 7.7, which shall be the sole and exclusive procedures for the resolution of any such disputes: (a) ESCALATION TO RJRTC'S AND THE APPLICABLE B.A.T. CUSTOMER'S EXECUTIVES. To the extent that controversies arising from this Agreement cannot be resolved by the respective personnel of RJRTC and the applicable B.A.T. Customer responsible for the administration of this Agreement, RJRTC and the applicable B.A.T. Customer shall attempt in good faith to resolve any such dispute by negotiation between their respective senior executive officers who have authority to settle the controversy and who are at a higher level of management than those employees who administer this Agreement on a day to day basis. RJRTC or the applicable B.A.T. Customer may give the other entity written notice of any dispute which has not been resolved in the ordinary course of business. Within ten (10) calendar days of receipt of such notice, the receiving entity shall submit a written response to such notice. The notice and response shall include: (i) a detailed description of the dispute; (ii) a statement of the entity's position which respect to such dispute; and (iii) the name and title of the senior executive officer who will negotiate on behalf of such entity. Within thirty (30) calendar days of delivery of the initial notice, or within a time mutually agreed by RJRTC and the applicable B.A.T. Customer, the designated senior executive officers will meet or otherwise confer in an attempt to resolve the dispute. Such negotiations shall continue either until the controversy is resolved or until one of the entities initiates the mediation procedure set forth below in Sub-Section 7.7(b). During the negotiation process, all reasonable requests for information and documents from one entity to the other shall be honored. (b) MEDIATION. If a dispute cannot be resolved pursuant to the negotiation procedures set forth above in Sub-Section 7.7(a), then the controversy shall be submitted to non-binding mediation. Neither RJRTC nor the applicable B.A.T. Customer may initiate mediation until at least sixty (60) calendar days after the initial notice of dispute is submitted by one entity to the other as provided in Sub-Section 7.7(a). If either RJRTC or the applicable B.A.T. Customer wishes to initiate mediation, notice of demand for mediation shall be submitted to the other entity in writing. Such mediation shall be conducted in accordance with the Centre for Effective Dispute Resolution's ("CEDR") then-current Model Mediation Procedures and will be conducted by a single mediator. Unless otherwise agreed between the entities, the mediator will be nominated by CEDR and the mediation shall be conducted on London, England. Each entity shall bear its own costs and expenses of mediation. Further, all mediation expenses, including the filing fees and fees and costs of the mediator, will be equally shared between the entities. Such mediation will be scheduled as soon as possible by agreement of RJRTC, the applicable B.A.T. Customer and the mediator. (c) ARBITRATION. Neither RJRTC nor the applicable B.A.T. Customer may initiate arbitration against the other relating to any dispute under this Agreement until the mediation required under Sub-Section 7.7(b) has been completed. If any dispute arising -32- out of, or in connection with, this Agreement cannot be resolved through such mediation, including disputes relating to the Agreement's existence, validity or termination, either RJRTC or the applicable B.A.T. Customer may initiate arbitration against the other entity. Such arbitration shall be filed with and finally resolved by the International Chamber of Commerce pursuant to its Rules of Arbitration. Such arbitration shall be conducted before one (1) arbitrator appointed pursuant to such Rules of Arbitration and the proceeding shall be conducted in Bermuda. The language to be used in the arbitral proceedings shall be English. 7.8 SEVERABILITY. If any provision of this Agreement shall be held to be invalid or unlawful, the same shall be deemed to be deleted from this Agreement, but this Agreement shall remain in full force and effect as if the deleted provision had never been contained in it. The Parties shall negotiate in good faith as to the terms of a mutually acceptable and satisfactory provision in place of any deleted provision, and if such terms shall be agreed, this Agreement shall be amended accordingly. 7.9 AMENDMENTS. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by the Parties hereto. In the event of any conflict between this Agreement and the terms of a Purchase Order, the terms of this Agreement shall govern. 7.10 NOTICES. Unless otherwise provided in this Agreement, day to day commercial communications may be exchanged by any reasonable means. All material notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice): If to RJRTC, to: R. J. Reynolds Tobacco Company 401 North Main Street Winston-Salem, North Carolina 27101 Attn: General Counsel If to BATUKE, to: B.A.T (U.K. & Export) Limited Globe House 1 Water Street London, United Kingdom WC2R 3LA Attn: Company Secretary Notice addresses for all other B.A.T. Customers shall be provided to RJRTC as soon as practical. 7.11 ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding between RJRTC and the B.A.T. Customers regarding the subject matter hereof, and supercedes any prior agreement and negotiations between them with respect to the subject matter hereof, including those set forth in Exhibit "K" to the BCA. -33- 7.12 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of RJRTC and each B.A.T. Customer hereto and their respective legal successors and assigns. This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned, subcontracted, licensed or transferred by RJRTC or any B.A.T. Customer without the other entity's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that RJRTC and any B.A.T. Customer may, without the other entity's prior consent, assign its respective rights and obligations hereunder to a wholly owned subsidiary or entity under common control with such assigning entity through 100% ownership of the equity interests therein. Any permitted assignee shall assume all the rights and obligations of its assignor under this Agreement. Any assignment in violation of the foregoing shall be null and void. 7.13 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to and shall not be construed to give any Person (other than the Parties signatory hereto and to the extent provided herein, other B.A.T. Customers), including any employee or former employee, any interest or rights (including, without limitation, any third-party beneficiary rights) with respect to or in connection with any agreement or provision contained herein or contemplated hereby. 7.14 COUNTERPARTS. This Agreement and any amendment may be executed in multiple counterparts, each of which is an original and all which constitute one agreement or amendment, as the case may be, notwithstanding that all of the Parties are not signatories to the original or the same counterpart, or that signature pages from different counterparts are combined, and the signature of any Party to any counterpart is a signature to and may be appended to any other counterpart. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives effective as of the Effective Date set forth in the Preamble above. B.A.T (U.K. & EXPORT) LIMITED By: /s/ [ILLEGIBLE] --------------------------- Print Name: [ILLEGIBLE] Title Attorney-in-Fact Date: July 30, 2004 ------------- ("BATUKE") -34- R. J. REYNOLDS TOBACCO COMPANY By: /s/ Charles A. Blixt --------------------------- Print Name: Charles A. Blixt Executive Vice President and General Counsel Date: JulY 30, 2004 ------------- ("RJRTC") Schedules to the Agreement: "A" - Product Base Prices through Contract Year 2004 (Including International Order Policies & Procedures) "B" - Identification of the Territory "C" - Supplies to Restricted Countries "D" - Standard Consumer Product Testing Protocols "E" - Manufacturing Costing Methodology "F" - RJRTC Payment Instructions -35- EX-10.6 13 g90345exv10w6.txt EX-10.6 Exhibit 10.6 ================================================================================ THIRD AMENDED AND RESTATED CREDIT AGREEMENT, AMONG REYNOLDS AMERICAN INC., R.J. REYNOLDS TOBACCO HOLDINGS, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT, CITIBANK, N.A. AND GENERAL ELECTRIC CAPITAL CORPORATION, AS SYNDICATION AGENTS, LEHMAN COMMERCIAL PAPER INC. AND MIZUHO CORPORATE BANK, LTD., AS DOCUMENTATION AGENTS, J.P. MORGAN SECURITIES INC. AND CITIGROUP GLOBAL MARKETS, INC., EACH AS A JOINT LEAD ARRANGER AND JOINT BOOKRUNNER, AND VARIOUS LENDING INSTITUTIONS ------------------------- Dated as of July 30, 2004 ------------------------- $486,250,000 ================================================================================ THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 30, 2004, among REYNOLDS AMERICAN INC., a North Carolina corporation ("Parent"), R.J. REYNOLDS TOBACCO HOLDINGS, INC., a Delaware corporation (the "Borrower"), and the lending institutions listed from time to time on Annex I hereto (each, a "Lender" and, collectively, the "Lenders"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 10 are used herein as so defined. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower and certain financial institutions are party to a Credit Agreement, dated as of May 7, 1999, amended and restated as of November 17, 2000 and further amended and restated as of May 10, 2002 (as so amended and restated and as the same has been further amended, modified, supplemented to, but not including, the Third Restatement Effective Date, the "Second Amended and Restated Credit Agreement"); and WHEREAS, the parties hereto wish to amend and restate the Second Amended and Restated Credit Agreement in its entirety as herein provided; NOW, THEREFORE, the parties hereto agree that the Second Amended and Restated Credit Agreement shall be and is hereby amended and restated in its entirety as follows: NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. 1.01 Commitments. (A) Subject to and upon the terms and conditions herein set forth, each Lender severally agrees to make a loan or loans (each, a "Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower, which Revolving Loans: (i) shall be made at any time and from time to time on and after the Original Effective Date and prior to such Lender's Maturity Date; (ii) may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Reference Rate Loans or Eurodollar Loans, provided that all Revolving Loans made by all Lenders pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of Revolving Loans of the same Type; (iii) may be repaid and reborrowed in accordance with the provisions hereof; and (iv) shall not exceed for any Lender at any time outstanding that aggregate principal amount which, when added to the product of (x) such Lender's Percentage and (y) the sum of (I) the aggregate Letter of Credit Outstandings plus (II) the aggregate outstanding principal amount of all Swingline Loans then outstanding, equals the Commitment of such Lender at such time. (B) Subject to and upon the terms and conditions herein set forth, each Swingline Lender severally agrees, at any time and from time to time on and after the Original Effective Date and prior to such Swingline Lender's Swingline Maturity Date, to make a loan or loans (each, a "Swingline Loan" and, collectively, the "Swingline Loans") to the Borrower, which Swingline Loans: (i) shall be Reference Rate Loans; (ii) shall have the benefit of the provisions of Section 1.01(C); (iii) shall not exceed in the aggregate at any one time outstanding the Swingline Commitment of such Swingline Lender at such time; (iv) shall not exceed in the aggregate for all Swingline Lenders at any one time outstanding, when combined with the aggregate principal amount of all Revolving Loans then outstanding and all Letter of Credit Outstandings at such time, the Total Commitment then in effect; and (v) may be repaid and reborrowed in accordance with the provisions hereof. On (x) the Swingline Maturity Date of each Swingline Lender, all Swingline Loans of such Swingline Lender shall be repaid in full and (y) the last Business Day of each calendar quarter, all Swingline Loans shall be repaid in full and may not be reborrowed until the next succeeding Business Day, provided that repayment of the Swingline Loans pursuant to this clause (y) shall not be required to the extent that the aggregate outstanding principal amount of Swingline Loans to be repaid is less than $10,000,000. No Swingline Lender will make a Swingline Loan after it has received written notice from the Required Lenders that one or more of the applicable conditions to Credit Events specified in Section 5 are not then satisfied. (C) On any Business Day, a Swingline Lender (the "Notifying SL Lender") may, in its sole discretion, give notice to the Lenders that all then outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (provided that such notice shall be deemed to have been automatically given by each Swingline Lender and each Swingline Lender shall constitute a Notifying SL Lender upon the occurrence of an Event of Default under Section 9.05), in which case a Borrowing of Revolving Loans constituting Reference Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all Lenders pro rata based on each Lender's Percentage, and the proceeds thereof shall be applied directly to repay ratably all Swingline Lenders for their outstanding Swingline Loans. Each Lender hereby irrevocably agrees to make Reference Rate Loans upon one Business Day's notice (or deemed notice) pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Notifying SL Lender, notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 5 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) any reduction in the Total Commitment after any such Swingline Loans were made. In the event that any Mandatory Borrowing cannot for any reason be made on the date -2- otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each Lender (other than each Swingline Lender with respect to its Swingline Loans) hereby agrees that it shall forthwith purchase from each Swingline Lender (without recourse or warranty) such assignment of its outstanding Swingline Loans as shall be necessary to cause the Lenders to share in such Swingline Loans ratably based upon their respective Percentages; provided that all interest payable on such Swingline Loans shall be for the account of the Swingline Lenders until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the Lender purchasing same from and after such date of purchase. 1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings. The aggregate principal amount of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount with respect thereto (except that Mandatory Borrowings shall be made in the amounts required by Section 1.01(C)). More than one Borrowing may be incurred on any date; provided that at no time shall there be outstanding more than twenty Borrowings of Eurodollar Loans under this Agreement. 1.03 Notice of Borrowing of Committed Loans. (a) Whenever the Borrower desires to incur Revolving Loans hereunder (other than Mandatory Borrowings), it shall give the Administrative Agent at the Administrative Agent's Office (x) prior to 11:00 A.M. (New York time) at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Revolving Loans constituting Eurodollar Loans and (y) prior to 11:00 A.M. (New York time) at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Revolving Loans constituting Reference Rate Loans. Each such notice (each, together with each notice of a Borrowing of Swingline Loans pursuant to Section 1.03(b), a "Notice of Borrowing") shall be irrevocable and shall specify (i) the aggregate principal amount of the Revolving Loans to be made pursuant to such Borrowing, (ii) the date of Borrowing (which shall be a Business Day) and (iii) whether the respective Borrowing shall consist of Reference Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall promptly give each Lender written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing of Revolving Loans, of such Lender's proportionate share thereof and of the other matters covered by the Notice of Borrowing. (b) Whenever the Borrower desires to incur Swingline Loans hereunder, it shall give the Administrative Agent at the Administrative Agent's Office written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Swingline Loans prior to 11:00 A.M. (New York time) on the date of such Borrowing. Each such notice shall be irrevocable and shall specify (i) the aggregate principal amount of the Swingline Loans to be made pursuant to such Borrowing and (ii) the date of Borrowing (which shall be a Business Day). The Administrative Agent shall promptly give each Swingline Lender written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing of Swingline Loans, of such Swingline Lender's proportionate share thereof and of the other matters covered by the Notice of Borrowing. -3- (c) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(C), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section. (d) Without in any way limiting the obligation of the Borrower to confirm in writing any notice it may give hereunder by telephone, the Administrative Agent may act prior to receipt of written confirmation without liability upon the basis of such telephonic notice, believed by the Administrative Agent in good faith to be from an Authorized Officer of the Borrower. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's record of the terms of any such telephonic notice. 1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New York time) on the date of each Borrowing (including Mandatory Borrowings), each Lender will make available its pro rata portion, if any, of each Borrowing requested to be made on such date in the manner provided in Section 1.04(b) below. (b) Each Lender shall make available all amounts it is to fund under any Borrowing in U.S. Dollars and immediately available funds to the Administrative Agent at the Administrative Agent's Office and the Administrative Agent will (except in the case of Mandatory Borrowings) make available to the Borrower by depositing to its account at the Administrative Agent's Office the aggregate of the amounts so made available in U.S. Dollars and the type of funds received. Unless the Administrative Agent shall have been notified by any Lender prior to the date of any such Borrowing that such Lender does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender and the Administrative Agent has made available same to the Borrower, the Administrative Agent shall be entitled to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Lender, the overnight Federal Funds Rate or (y) if paid by the Borrower, the then applicable rate of interest, calculated in accordance with Section 1.08, for the respective Loans. (c) Nothing in this Section 1.04 shall be deemed to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. 1.05 Notes; Register. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made by each Lender shall be set forth in the Register maintained by the -4- Administrative Agent pursuant to Section 12.04(f) and, subject to the provisions of Section 1.05(e), shall be evidenced (i) if Revolving Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit A-1 with blanks appropriately completed in conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes") and (ii) if Swingline Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit A-2 with blanks appropriately completed in conformity herewith (each, a "Swingline Note" and, collectively, the "Swingline Notes" and, together with the Revolving Notes, each a "Note" and, collectively, the "Notes"). (b) The Revolving Note issued to each Lender with a Commitment or outstanding Revolving Loans shall (i) be executed by the Borrower, (ii) be payable to such Lender or its registered assigns and be dated the Third Restatement Effective Date (or, in the case of any Revolving Note issued after the Third Restatement Effective Date, the date of issuance thereof), (iii) be in a stated principal amount equal to the Commitment of such Lender on the date of issuance thereof (or, if issued after the termination of such Commitment, in a stated principal amount equal to the outstanding principal amount of the Revolving Loans of such Lender on the date of the issuance thereof) and be payable in the principal amount of the Revolving Loans evidenced thereby from time to time, (iv) mature on such Lender's Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Reference Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary repayment as provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The Swingline Note issued to each Lender with a Swingline Commitment or outstanding Swingline Loans shall (i) be executed by the Borrower, (ii) be payable to such Lender or its registered assigns and be dated the Third Restatement Effective Date (or, in the case of any Swingline Note issued after the Third Restatement Effective Date, the date of issuance thereof), (iii) be in a stated principal amount equal to the Swingline Commitment of such Swingline Lender on the date of issuance thereof (or, if issued after the termination of such Commitment, in a stated principal amount equal to the outstanding principal amount of the Swingline Loans of such Swingline Lender on the date of the issuance thereof) and be payable in the principal amount of the Swingline Loans evidenced thereby from time to time, (iv) mature on such Swingline Lender's Swingline Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Reference Rate Loans evidenced thereby, (vi) be subject to voluntary repayment as provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of its Note endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation or any error in any such notation shall not affect the Borrower's obligations in respect of such Loans. (e) Notwithstanding anything to the contrary contained above or elsewhere in this Agreement, Notes shall only be delivered to Lenders that at any time specifically request the -5- delivery of such Notes. No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) which would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the security or guaranties therefor provided pursuant to the various Credit Documents. Any Lender that does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (d). At any time when any Lender requests the delivery of a Note to evidence any of its Loans, the Borrower shall promptly execute and deliver to the respective Lender the requested Note or Notes in the appropriate amount or amounts to evidence such Loans. 1.06 Conversions. The Borrower shall have the option to convert on any Business Day all or a portion equal to at least the Minimum Borrowing Amount of the outstanding principal amount of Revolving Loans of one Type into a Borrowing or Borrowings of Revolving Loans of another Type; provided that (i) no partial conversion of Eurodollar Loans shall reduce the outstanding principal amount of Eurodollar Loans made pursuant to a single Borrowing to less than the applicable Minimum Borrowing Amount, (ii) Reference Rate Loans may only be converted into Eurodollar Loans if no Event of Default is in existence on the date of the conversion and (iii) Borrowings resulting from conversions pursuant to this Section 1.06 shall be limited in number as provided in Section 1.02. Each such conversion shall be effected by the Borrower by giving the Administrative Agent at the Administrative Agent's Office prior to 11:00 A.M. (New York time) at least three Business Days' (or one Business Day's in the case of a conversion into Reference Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each, a "Notice of Conversion") specifying the Revolving Loans to be so converted, the Type of Revolving Loans to be converted into and, if to be converted into Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed conversion affecting any of its Revolving Loans. 1.07 Pro Rata Borrowings. All Borrowings of Revolving Loans under this Agreement shall be loaned by the Lenders pro rata on the basis of their respective Percentages. All Borrowings of Swingline Loans shall be loaned by the Swingline Lenders pro rata on the basis of their Swingline Commitments. It is understood that no Lender shall be responsible for any default by any other Lender in its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fulfill its commitments hereunder. 1.08 Interest. (a) The unpaid principal amount of each Reference Rate Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Reference Rate Margin plus the Reference Rate, in each case as in effect from time to time. (b) The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate. -6- (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to the Reference Rate in effect from time to time plus the sum of (i) 2% and (ii) the Applicable Reference Rate Margin; provided that each Eurodollar Loan shall bear interest after maturity (whether by acceleration or otherwise) until the end of the Interest Period then applicable thereto at a rate per annum equal to 2% in excess of the rate of interest applicable thereto at maturity. (d) Interest on each Loan shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Reference Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three-month intervals after the first day of such Interest Period, and on any prepayment (on the amount prepaid) and (iii) in respect of each Loan, at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with Section 12.07(b). (f) The Administrative Agent, upon determining the interest rate for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower and the Lenders thereof. 1.09 Interest Periods. At the time the Borrower gives a Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 11:00 A.M. (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower, be a one, two, three or six month period. Notwithstanding anything to the contrary contained above: (i) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Reference Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) if any Interest Period relating to a Borrowing of Eurodollar Loans begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided that if any Interest Period in respect of a Eurodollar Loan would otherwise -7- expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; and (iv) no Interest Period in respect of any Borrowing of Eurodollar Loans shall extend beyond the Maturity Date for any Lender participating in such Borrowing. Notwithstanding the foregoing, if an Event of Default is in existence at the time any Interest Period in respect of any Eurodollar Loans is to expire, such Eurodollar Loans may not be continued as Eurodollar Loans but instead shall be automatically converted on the last day of such Interest Period into Reference Rate Loans. If upon the expiration of any Interest Period in respect of Eurodollar Loans, the Borrower has failed to elect a new Interest Period to be applicable thereto as provided above, the Borrower shall be deemed to have elected to convert such Borrowing into a Borrowing of Reference Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurodollar Rate for any Interest Period that, by reason of any changes arising on or after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans because of (x) any change since the Original Effective Date in any applicable law, governmental rule, regulation, guideline or order (or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline or order) such as, for example, but not limited to, (A) a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D or (B) a change in the basis of taxation of payments to a Lender of the principal of or interest on the Loans or any other amount payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or net profits of such Lender imposed by the jurisdiction in which its principal office or applicable lending office is located) and/or (y) other circumstances affecting the interbank Eurodollar market; or (iii) at any time, that the making or continuance of any Loan (other than Reference Rate Loans) has become unlawful by compliance by such Lender in good faith with any law, governmental rule, regulation, guideline or order (or would conflict with any such governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful), or, in the case of a Eurodollar Loan, has become impracticable as a result of a contingency occurring after the Original Effective Date which materially and adversely affects the interbank Eurodollar market; -8- then, and in any such event, such Lender (or the Administrative Agent, in the case of clause (i) above) shall on such date give notice (if by telephone confirmed in writing) to the Borrower and to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing in reasonable detail the basis for the calculation thereof, submitted to the Borrower by such Lender shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) shall) either (i) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof as promptly as practicable after the Borrower was notified by a Lender pursuant to Section 1.10(a)(ii) or (iii), or (ii) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' notice to the Administrative Agent, require the affected Lender to convert each such Eurodollar Loan into a Reference Rate Loan; provided that if more than one Lender is affected in a similar manner at any time, then all such similarly affected Lenders must be treated the same pursuant to this Section 1.10(b). (c) If after the Original Effective Date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by a Lender or its parent with any request or directive made or adopted after the Original Effective Date regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's or its parent's capital or assets as a consequence of such Lender's commitments or obligations hereunder to a level below that which such Lender or its parent could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's or its parent's policies with respect to capital adequacy), then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or its parent for such reduction. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall set forth in reasonable detail the basis of the calculation of -9- such additional amounts, although the failure to give any such notice shall not, subject to Section 1.15, release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this Section 1.10(c) upon receipt of such notice. (d) In the event that any Lender shall reasonably determine (which determination shall, absent manifest error, be final and conclusive and binding on all parties hereto) at any time that by reason of Regulation D such Lender is required to maintain reserves in respect of eurodollar loans or liabilities during any period it has a Eurodollar Loan outstanding, such Lender shall promptly notify the Borrower in writing specifying the additional amounts required to indemnify such Lender against the cost of maintaining such reserves (such written notice to set forth in reasonable detail a computation of such additional amounts) and the Borrower shall pay to such Lender such specified amounts as additional interest at the time that such Borrower is otherwise required to pay interest in respect of the affected Eurodollar Loan or, if later, on written demand therefor from such Lender. 1.11 Compensation. The Borrower shall compensate each Lender, upon its written request (which request shall set forth in reasonable detail the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurodollar Loans but excluding any loss of anticipated profit with respect to such Loans) which such Lender may sustain: (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10); (ii) if any repayment or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurodollar Loans when required by the terms of this Agreement or (y) an election made pursuant to Section 1.10(b). Calculation of all amounts payable to a Lender under this Section 1.11 in respect of Eurodollar Loans shall be made as though that Lender had actually funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 1.11. 1.12 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), 2.05 or 4.04 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event; provided that such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such Section. Nothing in this -10- Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in Section 1.10, 2.05 or 4.04. 1.13 Maturity Date Extensions. Prior to (but not less than 60 days nor more than 90 days prior to) the applicable Extension Date, the Borrower may make a written request to the Administrative Agent, who shall forward a copy of each such request to each of the Continuing Lenders, that the Facility Maturity Date then in effect be extended to the date occurring eighteen (18) months after such existing Facility Maturity Date. Such request shall be accompanied by a certificate of an Authorized Officer of the Borrower stating that no Default or Event of Default has occurred and is continuing. If, by the date (an "Extension Response Date") which is 30 days prior to the applicable Extension Date, Continuing Lenders which are not Defaulting Lenders holding at least a majority of the Commitments held by Continuing Lenders which are not Defaulting Lenders agree thereto in writing, the Facility Maturity Date, and the Maturity Date of each Continuing Lender then consenting, shall be automatically extended to the date occurring eighteen (18) months after the then existing Facility Maturity Date. In the event that the Borrower has not obtained the requisite percentage of Continuing Lenders to permit an extension by the relevant Extension Response Date, the Borrower may extend the deadline for obtaining such percentage to the 30th day following such Extension Response Date in order to take such actions, including those contemplated by Section 1.14, with respect to any Lender that is a Non-Continuing Lender after giving effect to such Extension Response Date in order to obtain the requisite percentage of Lenders constituting Continuing Lenders to permit such extension. The Administrative Agent shall notify the Borrower and each Lender of the effectiveness of any such extension. No Lender shall be obligated to grant any extensions pursuant to this Section 1.13 and any such extension shall be in the sole discretion of each of them. A Lender's Maturity Date shall not be so extended pursuant to this Section 1.13 for (x) any Lender that is a Non-Continuing Lender at the time such request for extension is made and (y) any Continuing Lender at the time of such request that has not consented in writing, within the time specified above, to any such request for the extension thereof. 1.14 Replacement of Lenders. If (w) any Lender becomes a Non-Continuing Lender at any time after the first Extension Response Date occurring after the Third Restatement Effective Date, (x) any Lender becomes a Defaulting Lender or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings, (y) any Lender refuses to give timely consent to proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders or (z) any Lender is owed increased costs under Section 1.10(a) or (c), Section 2.05 or Section 4.04 which in the judgment of the Borrower are material in amount and which are not otherwise requested generally by the other Lenders, the Borrower shall have the right, if no Event of Default then exists and, in the case of a Lender described in clause (z) above, such Lender has not withdrawn its request for such compensation or changed its applicable lending office with the effect of eliminating or substantially decreasing (to a level which in the judgment of the Borrower is not material) such increased cost, to replace such Lender (the "Replaced Lender") with one or more other Eligible Transferee or Transferees (collectively, the "Replacement Lender") reasonably acceptable to the Majority SMA, provided that (i) at the time of any replacement pursuant to this Section 1.14, the Replacement Lender shall enter into one or more Assignment Agreements pursuant to which the Replacement Lender shall acquire all of the Commitment and outstanding Loans of, and participations in Letters of Credit by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced -11- Lender in respect thereof an amount equal to the sum of (a) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, (b) an amount equal to such Replaced Lender's participations in Unpaid Drawings that have been funded by such Replaced Lender, together with all then unpaid interest with respect thereto at such time, and (c) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Lender pursuant to Section 3.01 hereof and (y) the appropriate Letter of Credit Issuer an amount equal to such Replaced Lender's Percentage of any Unpaid Drawing not funded by such Replaced Lender, (ii) all obligations of the Borrower owing to the Replaced Lender (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Lender concurrently with such replacement and (iii) in the case of the replacement of a Replaced Lender that is a Non-Continuing Lender as contemplated by clause (w) above, the Maturity Date applicable to the Replacement Lender's Commitment shall be the Facility Maturity Date then in effect. Upon the execution of the respective assignment documentation, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note executed by the Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement, which shall survive as to such Replaced Lender. 1.15 Notice of Certain Costs. Notwithstanding anything in this Agreement to the contrary, to the extent any notice required by Section 1.10 or 2.05 is given by any Lender more than 180 days after the occurrence of the event giving rise to the additional cost, reduction in amounts or other additional amounts of the type described in such Section, such Lender shall not be entitled to compensation under Section 1.10 or Section 2.05, as the case may be, for any such amounts incurred or accruing prior to the giving of such notice to the Borrower. SECTION 2. Letters of Credit. 2.01 Letters of Credit. (a) Subject to and upon the terms and conditions herein set forth, the Borrower, at any time and from time to time on or after the Original Effective Date and prior to the Facility Maturity Date, may request that a Letter of Credit Issuer issue, for the account of the Borrower and in support of any Permitted Obligations, to replace Existing Letters of Credit, to effect Permitted Litigation Bonding or in support of such other obligations of the Borrower and/or any of its Subsidiaries as are acceptable to the Majority SMA, an irrevocable standby letter of credit or letters of credit in such form as may be approved by such Letter of Credit Issuer and the Majority SMA, acting reasonably, and, subject to and upon the terms and conditions set forth in this Agreement, each Designated Issuer and, to the extent it has agreed to issue Letters of Credit, each other Letter of Credit Issuer will issue the Letters of Credit so requested to be issued. It is the intention of the Borrower and the Designated Issuers that each Designated Issuer only issue Letters of Credit in an aggregate Stated Amount that is substantially pro rata to the aggregate Stated Amount of the Letters of Credit issued by each other Designated Issuer, it being recognized that credit policies of beneficiaries may result in non-pro rata treatment for one or more Designated Issuers and may require adjustments to the procedures set forth in the next sentence. To effect the foregoing intention, (i) subject to the following clauses (ii) and (iii), new Letters of Credit issued after the Third Restatement Effective Date will be issued serially by the Designated Issuers in the same order as the Designated Issuers are listed in the -12- definition thereof, (ii) any Letter of Credit with a Stated Amount in excess of $100,000,000 that is to be issued by a Designated Issuer will be issued severally by all Designated Issuers, pro rata among same (or otherwise allocated to give effect to clause (i) above), with JPMCB, if an issuer thereunder (or, if JPMCB is not an issuer, such other issuer as selected by the Borrower) to be the paying agent under any such Letter of Credit, and (iii) a Designated Issuer will not be obligated to (but may in its sole discretion) issue any Letter of Credit if after giving effect thereto the aggregate Stated Amount of all outstanding Letters of Credit issued by such Designated Issuer shall exceed by more than $100,000,000 the highest aggregate Stated Amount of outstanding Letters of Credit issued by any other Designated Issuer, with the Administrative Agent to provide the Designated Issuers at the time of issuance of any new Letter of Credit with any requested information relating to the outstanding Letters of Credit issued by the Designated Issuers. The Administrative Agent will coordinate the issuance of Letters of Credit by the Designated Issuers to give effect to the two foregoing sentences. (b) Notwithstanding the foregoing (i) no Letter of Credit shall be issued (x) the Stated Amount of which, when added to the Letter of Credit Outstandings at such time would exceed, when added to the sum of the aggregate principal amount of all Revolving Loans and all Swingline Loans then outstanding, the Total Commitment at such time or (y) with an expiration date beyond the then Maturity Date of any Lender if after giving effect thereto the Stated Amount of all Letters of Credit with an expiration date beyond such Maturity Date would exceed, when added to the aggregate outstanding principal amount of all Revolving Loans with Interest Periods that extend beyond such Maturity Date, the Expected Total Commitment in effect for each day on which such Letter of Credit is to be outstanding that occurs beyond such Maturity Date; (ii) each Letter of Credit shall have an expiry date occurring no later than the Business Day next preceding the then Maturity Date of the Letter of Credit Issuer or Letter of Credit Issuers thereunder; (iii) each Letter of Credit shall be denominated in U.S. Dollars or an Approved Alternate Currency; and (iv) no Letter of Credit shall be issued by a Letter of Credit Issuer after it has received a notice in writing from the Required Lenders that one or more of the applicable conditions specified in Section 5 are not then satisfied. (c) Annex III hereto contains a description of all letters of credit issued by any Lender for the account of the Borrower pursuant to the Second Amended and Restated Credit Agreement and certain other letter of credit reimbursement agreements identified to the Senior Managing Agents and outstanding on the Third Restatement Effective Date (and setting forth, with respect to each such letter of credit, (i) the name of the issuing lender, (ii) the letter of credit number, (iii) the name(s) of the account party or account parties, (iv) the stated amount (including the currency in which such letter of credit is denominated, which (if not U.S. Dollars) shall be an Approved Currency), (v) the name of the beneficiary and (vi) the expiry date). Each such letter of credit, including any extension or renewal thereof (each, as amended from time to time in accordance with the terms thereof and hereof, an "Existing Letter of Credit") shall constitute a "Letter of Credit" for all purposes of this Agreement, issued, for purposes of Section 2.03(a), on the Third Restatement Effective Date and the respective issuer(s) thereof shall constitute the "Letter of Credit Issuer(s)" with respect to such Letter of Credit for all purposes of this Agreement. 2.02 Letter of Credit Requests. Whenever the Borrower desires that a Letter of Credit be issued for its account, it shall give the Administrative Agent and the Letter of Credit -13- Issuer or Letter of Credit Issuers that are to issue same at least five Business Days' (or such lesser number of days as may be agreed to by the relevant Letter of Credit Issuer) written notice thereof. Each notice shall be executed by the Borrower and shall be in the form of Exhibit B attached hereto (each, a "Letter of Credit Request"). The Administrative Agent shall promptly transmit copies of each Letter of Credit Request to each Lender. 2.03 Letter of Credit Participations. (a) Immediately upon the issuance by a Letter of Credit Issuer of any Letter of Credit (and on the Third Restatement Effective Date, in the case of Existing Letters of Credit), such Letter of Credit Issuer shall be deemed to have sold and transferred to each other Lender (each such other Lender, in its capacity under this Section 2.03, a "Participant"), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation (each, a "participation"), to the extent of such Participant's Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor that remains in effect after the Original Effective Date, or guaranty pertaining thereto (although Letter of Credit Fees will be paid directly to the Administrative Agent for the ratable account of the Participants as provided in Section 3.01(c) and the Participants shall have no right to receive any portion of any Facing Fees). Upon any change in the Commitments of the Lenders pursuant to Section 1.14 or 12.04, the termination of a Commitment of a Non-Continuing Lender or the occurrence of any Lender Default, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.03 to reflect the new Percentages of the assignor and assignee Lender, of all Lenders, all Continuing Lenders or all Non-Defaulting Lenders, as the case may be. (b) In determining whether to pay under any Letter of Credit, the Letter of Credit Issuer issuing same shall have no obligation relative to the Participants other than to confirm that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by a Letter of Credit Issuer under or in connection with any Letter of Credit issued by it, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Letter of Credit Issuer any resulting liability. (c) In the event that any Letter of Credit Issuer makes any payment under any Letter of Credit issued by it and the Borrower shall not have reimbursed such amount in full to such Letter of Credit Issuer pursuant to Section 2.04(a), such Letter of Credit Issuer shall promptly notify the Administrative Agent and each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Administrative Agent for the account of such Letter of Credit Issuer, the amount of such Participant's Percentage of such unreimbursed payment in U.S. Dollars and in same day funds; provided, however, that no Participant shall be obligated to pay to the Administrative Agent for the account of such Letter of Credit Issuer its Percentage of such unreimbursed amount for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer (as determined by a court of competent jurisdiction in a final and non-appealable decision). If such Letter of -14- Credit Issuer so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to the Administrative Agent for the account of such Letter of Credit Issuer such Participant's Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Percentage of the amount of such payment available to the Administrative Agent for the account of such Letter of Credit Issuer, such Participant agrees to pay to the Administrative Agent for the account of such Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon for each day from such date until the date such amount is paid to the Administrative Agent for the account of such Letter of Credit Issuer at the overnight Federal Funds Rate. The failure of any Participant to make available to the Administrative Agent for the account of the applicable Letter of Credit Issuer its Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of such Letter of Credit Issuer its Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent such other Participant's Percentage of any such payment. (d) Whenever any Letter of Credit Issuer receives a payment in respect of an unpaid reimbursement obligation as to which the Administrative Agent has received for the account of such Letter of Credit Issuer any payments from the Participants pursuant to the preceding clause (c), such Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Participant which has paid its Percentage of such reimbursement obligation, in U.S. Dollars and in same day funds, an amount equal to such Participant's share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations. (e) The obligations of the Participants to make payments to the Administrative Agent for the account of the Letter of Credit Issuers with respect to Letters of Credit shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever (except as expressly provided in Section 2.03(c)) and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, any Letter of Credit Issuer, any Lender, or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); -15- (iii) any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; (v) the occurrence of any Default or Event of Default; or (vi) the failure of any condition precedent set forth in Section 5 hereof to have been satisfied at the time of the issuance of any Letter of Credit unless the applicable Letter of Credit Issuer shall have received a notice in writing to such effect from the Required Lenders pursuant to Section 2.01(b)(iv) hereof prior to the issuance of such Letter of Credit. 2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby agrees to reimburse the respective Letter of Credit Issuer, by making payment to the Administrative Agent in U.S. Dollars and immediately available funds at the Administrative Agent's Office, for any payment or disbursement made by such Letter of Credit Issuer under any Letter of Credit issued by it (each such amount so paid until reimbursed, an "Unpaid Drawing") immediately after, and in any event on the date of, notice given by such Letter of Credit Issuer to the Borrower of such payment (which notice each Letter of Credit Issuer hereby agrees to give promptly after the making of any payment or disbursement under a Letter of Credit), with interest on the amount so paid or disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but excluding the date such Letter of Credit Issuer is reimbursed therefor, at a rate per annum which shall be the Applicable Reference Rate Margin plus the Reference Rate as in effect from time to time (plus an additional 2% per annum if not reimbursed by the second Business Day following any such notice of payment or disbursement), such interest to be payable on demand. Notwithstanding the foregoing, to the extent that a Letter of Credit Issuer of a Letter of Credit denominated in a currency other than U.S. Dollars has agreed in writing to such arrangement at the time of the issuance of such Letter of Credit, the Borrower shall reimburse any Drawing thereunder in the currency in which such Letter of Credit is denominated; provided that (x) if any such Drawing is made at a time when there exists an Event of Default or (y) if such reimbursement is not made by the close of business two Business Days after the Borrower has received notice of such Drawing, then, in either such case, such reimbursement shall instead be made in U.S. Dollars and in immediately available funds. (b) The Borrower's obligations under this Section 2.04 to reimburse each Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) issued by it shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or any other Person may have or have had against any Lender (including in its capacity as a Letter of Credit Issuer or as a Participant), including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit (each, a "Drawing") to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such Drawing; provided that the Borrower shall not be obligated to reimburse the respective Letter of -16- Credit Issuer for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence as determined by a court of competent jurisdiction on the part of such Letter of Credit Issuer. 2.05 Increased Costs. If after the Original Effective Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or actual compliance by any Letter of Credit Issuer or any Participant with any request or directive made or adopted after the Original Effective Date (whether or not having the force of law), by any such authority, central bank or comparable agency shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued by such Letter of Credit Issuer, or such Participant's participation therein, or (ii) impose on any Letter of Credit Issuer or any Participant any other conditions affecting its obligations under this Agreement in respect of Letters of Credit or participations therein or any Letter of Credit or such Participant's participation therein; and the result of any of the foregoing is to increase the cost to such Letter of Credit Issuer or such Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by such Letter of Credit Issuer or such Participant hereunder in respect of Letters of Credit or participations therein, then, upon demand to the Borrower by such Letter of Credit Issuer or such Participant, as the case may be (a copy of which notice shall be sent by such Letter of Credit Issuer or such Participant to each Senior Managing Agent), the Borrower shall pay to such Letter of Credit Issuer or such Participant such additional amount or amounts as will compensate such Letter of Credit Issuer or such Participant for such increased cost or reduction. A certificate submitted to the Borrower by such Letter of Credit Issuer or such Participant, as the case may be (a copy of which certificate shall be sent by such Letter of Credit Issuer or such Participant to each Senior Managing Agent), setting forth in reasonable detail the basis for the determination of such additional amount or amounts necessary to compensate such Letter of Credit Issuer or such Participant as aforesaid shall be conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not, subject to Section 1.15, release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this Section 2.05 upon receipt of such certificate. 2.06 Indemnification; Nature of Letter of Credit Issuers' Duties. (a) In addition to its other obligations under this Section 2, the Borrower hereby agrees to protect, indemnify, pay and save each of the Letter of Credit Issuers harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees but excluding those taxes excluded from the definition of Taxes in Section 4.04) that any such Letter of Credit Issuer may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit or (ii) the failure of any Letter of Credit Issuer to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority (all such acts or omissions, herein called "Government Acts"). (b) As between the Borrower and the Letter of Credit Issuers, the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Letter of Credit Issuers shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection -17- with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply fully with conditions required in order to draw upon a Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (vii) for any consequences arising from causes beyond the control of the Letter of Credit Issuers, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of any of the Letter of Credit Issuers' rights or powers hereunder. (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Letter of Credit Issuer, under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put such Letter of Credit Issuer under any resulting liability to the Borrower. It is the intention of the parties that this Agreement shall be construed and applied to protect and indemnify the Letter of Credit Issuers against any and all risks involved in the issuance of the Letters of Credit arising from any present or future Government Acts. The Letter of Credit Issuers shall not, in any way, be liable for any failure by the Letter of Credit Issuers or anyone else to pay any Drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of the Letter of Credit Issuers. (d) Nothing in this Section 2.06 is intended to limit the reimbursement obligation of the Borrower contained in Section 2.04 hereof. The obligations of the Borrower under this Section 2.06 shall survive the termination of this Agreement. No act or omission of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Letter of Credit Issuers to enforce any right, power or benefit under this Agreement. (e) Notwithstanding anything to the contrary contained in this Section 2.06, (i) the Borrower shall have no obligation to indemnify any Letter of Credit Issuer in respect of any liability incurred by such Letter of Credit Issuer arising solely out of the gross negligence or willful misconduct of such Letter of Credit Issuer (as determined by a court of competent jurisdiction in a final and non-appealable decision) and (ii) the Borrower shall have a claim against any Letter of Credit Issuer and such Letter of Credit Issuer shall be liable to the Borrower to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower which the Borrower proves were caused by (x) such Letter of Credit Issuer's willful misconduct or gross negligence (as determined by a court of competent jurisdiction in a final and non-appealable decision) in determining whether the documents presented under its Letter of Credit complied with the terms of such Letter of Credit or (y) such Letter of Credit Issuer's willful or grossly negligent failure to pay under its Letter of Credit after presentation to it of a drawing certificate and any other documents strictly complying with the terms and conditions of such Letter of Credit (as determined by a court of competent jurisdiction in a final and non-appealable decision). -18- SECTION 3. Fees; Commitments. 3.01 Fees. (a) The Borrower agrees to pay the Administrative Agent for the account of each Non-Defaulting Lender a facility fee (the "Facility Fee") for the period from and including the Original Effective Date to but not including the Facility Maturity Date or, if earlier, the date upon which the Total Commitment has been terminated, computed for each day at a rate per annum equal to the Applicable Facility Fee Percentage for such day multiplied by the then Commitment of such Lender. Such Facility Fee shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the date upon which the Total Commitment is terminated. (b) The Borrower agrees to pay to the Administrative Agent for the account of the Lenders pro rata on the basis of their respective Percentages, a fee in respect of each Letter of Credit (the "Letter of Credit Fee"), computed for each day at a rate per annum equal to the Applicable Eurodollar Margin for such day multiplied by the then Stated Amount of such Letter of Credit. Such Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the date upon which the Total Commitment is terminated. (c) The Borrower agrees to pay to the Administrative Agent for the account of each Letter of Credit Issuer a fee in respect of each Letter of Credit issued by it (the "Facing Fee") computed for each day at a rate equal to 0.25% per annum multiplied by the average daily Stated Amount of such Letter of Credit. Such Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the date upon which the Total Commitment is terminated. (d) The Borrower hereby agrees to pay directly to each Letter of Credit Issuer upon each issuance of, drawing under, and/or amendment of, a Letter of Credit issued by such Letter of Credit Issuer such amount as shall at the time of such issuance, drawing or amendment be the administrative charge which such Letter of Credit Issuer is customarily charging for issuances of, drawings under or amendments of, letters of credit issued by it. (e) The Borrower shall pay to the Administrative Agent for the account of each Senior Managing Agent and each other Lender the fees specified in the accepted commitment letter, or related fee letter, executed by such Senior Managing Agent or such Lender, as the case may be, when and as due. (f) All computations of Fees shall be made in accordance with Section 12.07(b). 3.02 Voluntary Reduction of Commitments. Upon at least three Business Days' prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at the Administrative Agent's Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, without premium or penalty, (i) to terminate the Total Unutilized Commitment, in part or in whole (or, to the extent that at such time there are no Loans outstanding and no Letter of Credit Outstandings, to terminate the Total Commitment, in whole), provided that (x) any such termination shall apply to proportionately and permanently reduce the Commitment of each of the Lenders and (y) any partial reduction pursuant to this Section 3.02(i) shall be in the amount of at least $10,000,000, and (ii) at any time -19- within the 30 days prior to the Maturity Date of any Non-Continuing Lender and so long as no Event of Default then exists, to terminate the Commitment of such Non-Continuing Lender, provided that (x) all Loans, together with unpaid accrued interest thereon, of such Non-Continuing Lender are repaid in full and (y) after giving effect to such termination and repayment, the sum of the aggregate principal amount of all outstanding Loans and the Letter of Credit Outstandings does not exceed the Total Commitment. 3.03 Mandatory Reduction of Commitments, etc. (a) On the date which is the earlier of (x) 30 days after any date on which a Change of Control occurs and (y) the date on which any Indebtedness of the Borrower in excess of $75,000,000 individually or $150,000,000 in the aggregate is required to be repurchased as a result of any such Change of Control, each of (i) the Total Commitment (and the Commitment of each Lender) and (ii) the Total Swingline Commitment (and the Swingline Commitment of each Swingline Lender) shall be reduced to zero. (b) The Total Commitment shall terminate on the Facility Maturity Date. (c) Each Swingline Lender's Swingline Commitment shall terminate on such Swingline Lender's Swingline Maturity Date. (d) The Commitment of each Lender shall terminate on such Lender's Maturity Date. SECTION 4. Payments. 4.01 Voluntary Prepayments. The Borrower shall have the right to prepay Loans in whole or in part from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent at the Administrative Agent's Office written notice (or telephonic notice promptly confirmed in writing) of its intent to make such prepayment, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice shall be given by the Borrower no later than (x) in the case of Revolving Loans, 11:00 A.M. (New York time) one Business Day prior to, or (y) in the case of Swingline Loans, 11:00 A.M. (New York time) on, the date of such prepayment and shall promptly be transmitted by the Administrative Agent to each of the Lenders or Swingline Lenders, as the case may be; (ii) each partial prepayment of any Borrowing shall be in an aggregate principal amount of at least $10,000,000, provided that no partial prepayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Revolving Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount for Eurodollar Loans; and (iii) each prepayment in respect of any Revolving Loans or Swingline Loans made pursuant to a Borrowing shall be applied pro rata among such Revolving Loans or Swingline Loans, as the case may be, provided that (x) at the Borrower's election in connection with any prepayment pursuant to this Section 4.01, such prepayment shall not be applied to any Revolving Loan of a Defaulting Lender at any time when the aggregate amount of Revolving Loans of any Non-Defaulting Lender exceeds such Non-Defaulting Lender's Percentage of all Revolving Loans then outstanding and (y) the Borrower may repay the Revolving Loans and Swingline Loans of a Non-Continuing Lender in connection with the termination of the Commitment of such Non-Continuing Lender in accordance with the requirements of clause (ii) -20- of Section 3.02 without any accompanying repayment of the Revolving Loans or Swingline Loans, as the case may be, of the other Lenders, so long as all amounts, if any, owing to such Lender (and any other Lenders) pursuant to Section 1.11 are paid at such time. 4.02 Mandatory Prepayments. (A) Requirements. If on any date the sum of the outstanding principal amount of all Loans and the aggregate amount of Letter of Credit Outstandings (all the foregoing, collectively, the "Aggregate Outstandings") exceeds the Total Commitment as then in effect, the Borrower shall repay on such date the principal of Swingline Loans and, after Swingline Loans have been paid in full, Revolving Loans, in an amount equal to such excess. If, after giving effect to the prepayment of all outstanding Loans, the Aggregate Outstandings exceed the Total Commitment then in effect, the Borrower shall pay to the Administrative Agent an amount in cash equal to such excess and the Administrative Agent shall hold such payment as security for the obligations of the Borrower hereunder (including, without limitation, obligations in respect of Letter of Credit Outstandings) pursuant to a cash collateral agreement to be entered into in form and substance satisfactory to the Administrative Agent (which shall permit certain investments in cash equivalents satisfactory to the Administrative Agent, until the proceeds are applied to the secured obligations). In addition, the Borrower shall repay (i) to each Lender on such Lender's Maturity Date, the outstanding Revolving Loans of such Lender on such date and (ii) to each Swingline Lender on such Swingline Lender's Swingline Maturity Date, the outstanding Swingline Loans of such Swingline Lender on such date. (B) Application. With respect to each prepayment of Loans required by this Section 4.02, the Borrower may designate the Types of Loans which are to be prepaid and the specific Borrowing(s) pursuant to which made; provided that: (i) if any prepayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Revolving Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount for Eurodollar Loans, such Borrowing shall immediately be converted into Reference Rate Loans; and (ii) each prepayment of any Loans made pursuant to a Borrowing (including, without limitation, any repayment of Revolving Loans or Swingline Loans on any required payment date pursuant to clause (i) or (ii) of the last sentence appearing in Section 4.02(A)) shall be applied pro rata among such Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. 4.03 Method and Place of Payment. (a) Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable account of the Lenders entitled thereto, not later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately available funds and in lawful money of the United States of America at the Administrative Agent's Office, it being understood that written, telex or facsimile notice by the Borrower to the Administrative Agent to make a payment from the funds in the Borrower's account at the Administrative Agent's Office shall constitute the making of such payment to the extent of such funds held in such account. The Administrative Agent will thereafter cause to be distributed on the same day (if payment was actually received by the Administrative Agent prior to 2:00 P.M. (New York time) on such day) like -21- funds relating to the payment of principal or interest or Fees ratably to the Lenders entitled thereto. If and to the extent that any such distribution shall not be so made by the Administrative Agent in full on the same day (if payment was actually received by the Administrative Agent prior to 2:00 P.M. (New York time) on such day), the Administrative Agent shall pay to each Lender its ratable amount thereof and each such Lender shall be entitled to receive from the Administrative Agent, upon demand, interest on such amount at the overnight Federal Funds Rate for each day from the date such amount is paid to the Administrative Agent until the date the Administrative Agent pays such amount to such Lender. (b) Any payments under this Agreement which are made later than 1:00 P.M. (New York time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 4.04 Net Payments. (a) All payments made by the Borrower hereunder will be made without setoff, counterclaim or other defense. The Borrower will pay, prior to the date on which penalties attach thereto, all present and future income, stamp and other taxes, levies, or costs and charges whatsoever imposed, assessed, levied or collected on or in respect of a Loan and/or the recording, registration, notarization or other formalization thereof and/or any payments of principal, interest or other amounts made on or in respect of a Loan (all such taxes, levies, costs and charges being herein collectively called "Taxes"; provided that Taxes shall not include taxes imposed on or measured by the overall net income of that Lender (or any alternative tax imposed generally by any relevant jurisdiction in lieu of a tax on net income) by the United States of America or any political subdivision or taxing authority thereof or therein or taxes on or measured by the overall net income (or any alternative tax imposed generally by any relevant jurisdiction in lieu of a tax on net income) of that Lender by any foreign country or subdivision thereof pursuant to the laws of which such Lender is organized or in which the principal office or applicable lending office of such Lender is located). The Borrower shall also pay such additional amounts equal to increases in taxes payable by that Lender described in the foregoing proviso which increases are attributable to payments made by the Borrower described in the immediately preceding sentence of this Section. Promptly after the date on which payment of any such Tax is due pursuant to applicable law, the Borrower will, at the request of that Lender, furnish to that Lender evidence, in form and substance satisfactory to that Lender, that the Borrower has met its obligation under this Section 4.04. The Borrower will indemnify each Lender against, and reimburse each Lender on demand for, any Taxes, as determined by that Lender in its good faith and reasonable discretion. Such Lender shall provide the Borrower with appropriate receipts for any payments or reimbursements made by the Borrower pursuant to this Section 4.04. (b) Each Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for United States federal income tax purposes agrees to provide to the Borrower on or prior to the Third Restatement Effective Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.14 or Section 12.04 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer and such Lender is in compliance with the provisions of this -22- Section 4.04(b)), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) (or successor forms) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement or any Note or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8ECI or W-8BEN (with respect to a complete exemption under an income tax treaty) pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit J (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio interest exemption) (or successor form) certifying to such Lender's entitlement as of such date to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement or under any Note. Each Lender that is a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, but that is not a corporation (as such term is defined in Section 7701(a)(3) of the Code) for such purposes, agrees to provide to the Borrower on or prior to the Third Restatement Effective Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.14 or Section 12.04 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer and such Lender is in compliance with the provisions of this Section 4.04(b)), on the date of such assignment to such Lender, two accurate and complete original signed copies of Internal Revenue Service Form W-9 (or successor form). In addition, each such Lender agrees that from time to time after the Third Restatement Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower two new accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or W-8BEN (with respect to a claim for benefits of an income tax treaty) or Form W-8BEN (with respect to the portfolio interest exemption) and a Section 4.04(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement or any Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such form. Notwithstanding anything to the contrary contained in Section 4.04(a), (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or other similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for United States federal income tax purposes and which has not provided to the Borrower such forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) to pay a Lender in respect of income or similar taxes imposed by the United States or any additional amounts with respect thereto if such Lender has not provided to the Borrower the Internal Revenue Service forms required to be provided to the Borrower pursuant to this Section 4.04(b). Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04, the Borrower agrees to pay additional amounts and to indemnify each Lender in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding -23- sentence as a result of any changes after the Third Restatement Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income or similar taxes. SECTION 5. Conditions Precedent. 5.01 Conditions Precedent to the Third Restatement Effective Date. This Agreement shall become effective on the date (the "Third Restatement Effective Date") when each of the following conditions are first satisfied: A. Execution; Notes. The Third Restatement Execution Date shall have occurred as provided in Section 12.10 and there shall have been delivered to the Administrative Agent for the account of each Lender requesting same the appropriate Note executed by the Borrower in the amount, maturity and as otherwise provided herein. B. Officer's Certificate. The Administrative Agent shall have received certificates, dated the Third Restatement Effective Date and signed by an appropriate officer of Parent, stating that all of the applicable conditions set forth in Sections 5.01F., G., H., I., J., R. and T. and 5.02 exist as of such date. C. Opinions of Counsel. The Administrative Agent shall have received an opinion, or opinions, in form and substance satisfactory to each Senior Managing Agent, addressed to each of the Lenders and dated the Third Restatement Effective Date, from (i) McDara P. Folan, Vice President, Deputy General Counsel and Secretary of Parent, which opinion shall cover the matters contained in Exhibit C-1 hereto, (ii) Womble Carlyle Sandridge & Rice, PLLC, special counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit C-2 hereto, and (iii) Kilpatrick Stockton LLP, special counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit C-3 hereto, together with such other opinions, if any, covering such matters as the Majority SMA shall reasonably request, from counsel, and in form and substance, satisfactory to the Majority SMA. D. Company Proceedings. On the Third Restatement Effective Date, all Company and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be satisfactory in form and substance to each Senior Managing Agent, and the Administrative Agent shall have received all information and copies of all certificates, documents and papers, including records of Company proceedings and governmental approvals, if any, which any Senior Managing Agent reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper Company or governmental authorities. E. Organizational Documentation, etc. The Lenders shall have received copies of the Certificate of Incorporation and By-Laws or other equivalent organizational documents of each Credit Party, certified on the Third Restatement Effective Date as true and complete by an appropriate Company officer or Governmental Authority. F. Combination Transactions. On the Third Restatement Effective Date, (i) each of the Combination Transactions shall have been consummated in all material respects in accordance with the Combination Transaction Documents therefor and all applicable laws, (ii) -24- the Administrative Agent shall have received true and correct copies of all Combination Transaction Documents, certified as such by an appropriate officer of Parent, (iii) all Combination Transaction Documents, and all terms and conditions thereof, shall be in form and substance reasonably satisfactory to the Senior Managing Agents, (iv) all Combination Transaction Documents shall have been duly executed and delivered by the parties thereto and be in full force and effect, (v) the Combination Transactions (including all of the terms and conditions thereof) shall have been duly approved by the requisite boards of directors and (if required by applicable law) the requisite shareholders of the Borrower, Parent and B&W, (vi) the representations and warranties set forth in the Combination Transaction Documents shall be true and correct in all material respects as if made on and as of the Third Restatement Effective Date, (vii) each of the conditions precedent to the consummation of each the Combination Transaction as set forth in the relevant Combination Transaction Documents therefor shall have been satisfied in all material respects, and not waived except with the consent of each Senior Managing Agent and the Required Lenders, to the reasonable satisfaction of each Senior Managing Agent and the Required Lenders, and (viii) all Liens or Indebtedness to be incurred or assumed in connection with the Combination Transactions shall otherwise be permitted under this Agreement (including, without limitation, Sections 8.03 and 8.04). G. Adverse Change, etc. Nothing shall have occurred from December 31, 2003 to the Third Restatement Effective Date which has had, or would reasonably be expected to have, a Material Adverse Effect. H. Litigation. Except as set forth in Annex IV hereto, there shall be on the Third Restatement Effective Date no actions, suits, proceedings, inquiry, injunction or restraining order pending, entered or threatened with respect to Parent or any of its Subsidiaries that has had, or would reasonably be expected to have, a Material Adverse Effect. I. Approvals. On or prior to the Third Restatement Effective Date, (i) all necessary governmental (domestic and foreign), regulatory and third party approvals in connection with the Transaction, the transactions contemplated by the Documents and otherwise referred to herein or therein shall have been obtained and remain in full force and effect and evidence thereof shall have been provided to the Administrative Agent and (ii) all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Transaction, the making of the Loans and the transactions contemplated by the Documents or otherwise referred to herein or therein. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon, or materially delaying, or making economically unfeasible, the consummation of the Transaction or the making of the Loans. J. No Defaults. On the Third Restatement Effective Date, there shall exist no event of default (or condition which would constitute an event of default with the giving of notice or the passage of time) under any material financing or lease agreement or other material contract of any of the Credit Parties. -25- K. Unaudited Pro Forma Condensed Combined Financial Statements - - Integration Basis; Pro Forma Financial Statements. (i) The Lenders shall have received financial forecasts for Parent and its Subsidiaries (exclusive of the Acquired B&W Business) for the period from January 1, 2003 to and including December 31, 2006 (the "Unaudited Pro Forma Condensed Combined Financial Statements - Integration Basis"). The Unaudited Pro Forma Condensed Combined Financial Statements - Integration Basis (and the supporting assumptions and explanations thereto) shall be in form and substance satisfactory to the Majority SMA. (ii) The Lenders shall have received an unaudited pro forma condensed combined balance sheet of Parent and its Subsidiaries as of December 31, 2003 (calculated as if the Transaction had occurred on such date) and the related pro forma condensed combined statement of income for the twelve-month period ended as of such date (calculated as if the Transaction had occurred on the first day of the period covered thereby), after giving effect to the Transaction and prepared in accordance with GAAP (the "Pro Forma Financial Statements"). The Pro Forma Financial Statements shall be in form and substance satisfactory to the Majority SMA. L. Subsidiary Guaranty. Each Subsidiary Guarantor shall have duly authorized, executed and delivered an amended and restated Subsidiary Guaranty substantially in the form of Exhibit D hereto (as so amended and restated and as the same may be further amended, restated, modified and/or supplemented from time to time in accordance with the terms hereof and thereof, the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force and effect. M. Intercompany Subordination Agreement. Parent and each of its Subsidiaries (other than an Insignificant Subsidiary) shall have duly authorized, executed and delivered an amended and restated Subordination Agreement substantially in the form of Exhibit G hereto (as so amended and restated and as the same may be further amended, restated, modified and/or supplemented from time to time in accordance with the terms hereof and thereof, the "Intercompany Subordination Agreement"), and the Intercompany Subordination Agreement shall be in full force and effect. N. Pledge Agreement. Each of Parent, the Borrower and each Subsidiary Guarantor shall have duly authorized, executed and delivered an amended and restated Pledge Agreement in the form of Exhibit H (as so amended and restated and as the same may be further amended, restated, modified and/or supplemented from time to time in accordance with the terms hereof and thereof, the "Pledge Agreement"), and the following other documents shall be, or shall previously have been, delivered to the Collateral Agent, as Pledgee thereunder: (i) all Collateral referred to in the Pledge Agreement then owned by such Credit Party (including all outstanding shares of Parent Preferred Stock), (x) endorsed in blank, or accompanied by executed and undated endorsements for transfer, in the case of promissory notes constituting Collateral thereunder and (y) together with executed and undated endorsements for transfer, in the case of equity interests constituting certificated Collateral thereunder; (ii) proper Financing Statements (Form UCC-1) and/or Financing Statement amendments (Form UCC-3) fully executed for filing under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in the opinion of the Collateral -26- Agent, desirable to perfect the security interests purported to be created by the Pledge Agreement; and (iii) evidence of the completion of all other recordings and filings of, or with respect to, the Pledge Agreement as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Pledge Agreement; and the Pledge Agreement shall be in full force and effect. O. Security Agreement. Parent, the Borrower and each Subsidiary Guarantor shall have duly authorized, executed and delivered an amended and restated Security Agreement in the form of Exhibit I (as so amended and restated and as the same may be further amended, restated, modified and/or supplemented from time to time in accordance with the terms thereof and hereof, the "Security Agreement") covering all of the Collateral referred to therein, and the following other documents shall be, or shall previously have been, delivered to the Collateral Agent: (i) executed copies of financing statements (Form UCC-1) and/or financing statement amendments (Form UCC-3) (or appropriate local equivalent) in appropriate form for filing under the UCC or appropriate local equivalent of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Security Agreement; and (ii) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable, to perfect the security interests purported to be created by the Security Agreement have been taken; and the Security Agreement shall be in full force and effect. P. Mortgages. On the Third Restatement Effective Date (but subject to Section 12.19), the Collateral Agent shall have received: (i) fully executed counterparts of amendments (the "Mortgage Amendments"), in form and substance satisfactory to the Collateral Agent, to each of the Existing Mortgages, together with evidence that a counterpart of each such Mortgage Amendment has been delivered to the title company insuring the Lien on the respective Existing Mortgage for recording in all places to the extent necessary or desirable, in the judgment of the Collateral Agent, effectively to maintain a valid and enforceable first priority mortgage lien on each Existing Mortgaged Property in favor of the Collateral Agent for the benefit of the Secured Creditors; (ii) endorsements of the authorized issuing agent for title insurers reasonably satisfactory to the Collateral Agent to each Existing Mortgage Policy assuring the Collateral Agent that each Existing Mortgage is a valid and enforceable first priority mortgage lien on the respective Existing Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Liens; -27- (iii) fully executed counterparts of Mortgages in form and substance satisfactory to the Collateral Agent, which Mortgages shall cover such of the Real Property (located in the United States or any State or territory thereof) owned or leased by Parent or any of its Subsidiaries (after giving effect to the Transaction) as are designated on Annex VIII as a "New Mortgaged Property", together with evidence that counterparts of the Mortgages have been delivered to the title insurance company insuring the lien of such Mortgage for recording in all places to the extent necessary or, in the reasonable opinion of the Collateral Agent, desirable to effectively create a valid and enforceable first priority mortgage lien on each such New Mortgaged Property in favor of the Collateral Agent for the benefit of the Secured Creditors, subject to Permitted Liens; (iv) Mortgage Policies on the New Mortgaged Properties issued by such title insurers reasonably satisfactory to the Collateral Agent in amounts satisfactory to the Senior Managing Agents assuring the Collateral Agent that the Mortgages on such New Mortgaged Properties are valid and enforceable first priority mortgage liens on the respective New Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Liens and such Mortgage Policies shall otherwise be in form and substance satisfactory to the Senior Managing Agents and the Required Lenders and shall include, as appropriate, an endorsement for future advances under this Agreement and the Notes and for any other matter that the Collateral Agent may request, shall not include an exception for mechanics' liens or creditors' rights, and shall provide for affirmative insurance and such reinsurance (including direct access agreements) as the Collateral Agent may request; and (v) surveys, in form and substance reasonably satisfactory to the Collateral Agent, of each New Mortgaged Property designated as a "surveyed property" on Annex VIII, dated a recent date reasonably acceptable to the Collateral Agent and certified in a manner reasonably satisfactory to the Collateral Agent by a licensed professional surveyor reasonably satisfactory to the Senior Managing Agents. Q. Insurance Certificates. On or before the Third Restatement Effective Date, the Administrative Agent shall have received evidence of insurance complying with the requirements of Section 7.03 for the business and properties of Parent and its Subsidiaries (including, without limitation, the Acquired B&W Business), in scope, form and substance reasonably satisfactory to the Senior Managing Agents and the Required Lenders and naming the Collateral Agent as an additional insured and/or loss payee, and stating that such insurance shall not be terminated without at least 30 days' prior written notice by the insurer to the Collateral Agent. R. Second Amended and Restated Credit Agreement. On the Third Restatement Effective Date, (i) all Loans (if any) outstanding pursuant to (and as defined in) the Second Amended and Restated Credit Agreement shall have been repaid in full (and the Borrower shall have paid all breakage costs and similar costs resulting therefrom in accordance with the provisions of Section 1.11 of the Second Amended and Restated Credit Agreement), (ii) all outstanding Letters of Credit under, and as defined in, the Second Amended and Restated Credit Agreement shall have been incorporated as Letters of Credit hereunder pursuant to Section 2.01(c), (iii) all accrued interest on all outstanding extensions of credit, and all accrued fees, -28- pursuant to the Second Amended and Restated Credit Agreement shall be paid in full on, and through, the Third Restatement Effective Date (whether or not same would otherwise be then due and payable pursuant to the Second Amended and Restated Credit Agreement), (iv) all other amounts then due and owing to each Lender under, and as defined in, the Second Amended and Restated Credit Agreement pursuant to the Second Amended and Restated Credit Agreement shall have been paid in full and (v) (immediately prior to giving effect thereto), no Default or Event of Default under, and as defined in, the Second Amended and Restated Credit Agreement shall have occurred and be continuing. S. Tax Sharing Agreement. On or prior to the Third Restatement Effective Date, Parent, the Borrower, CMSI and Santa Fe shall have duly authorized, executed and delivered a tax sharing agreement in form and substance satisfactory to the Senior Managing Agents and the Required Lenders (the "Tax Sharing Agreement"), which Tax Sharing Agreement shall supersede any existing tax sharing or similar agreements theretofore in effect. T. Fees, etc. On the Third Restatement Effective Date, the Borrower shall have paid to each Senior Managing Agent and each Lender all costs, fees and expenses payable to the Senior Managing Agents or the Lenders, to the extent then due. 5.02 Conditions Precedent to All Credit Events. The obligation of each Lender to make any Loans (other than pursuant to a Mandatory Borrowing) and the obligation of each Letter of Credit Issuer to issue or extend Letters of Credit, is subject, at the time of the making of each such Loan and/or the issuance or extension of each such Letter of Credit, to the satisfaction of the following conditions at such time: A. No Default; Representations and Warranties. At the time of each Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Credit Event, unless such representation and warranty expressly indicates that it is being made as of a specified date, in which case such representation or warranty shall be true and correct in all material respects only as of such specified date. The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by each Credit Party to each of the Lenders that all of the applicable conditions specified above exist as of that time. All of the certificates, legal opinions and other documents and papers referred to in Section 5.01, unless otherwise specified, shall be delivered to the Administrative Agent at the Administrative Agent's Office for the account of each of the Lenders and, except for the Notes, in sufficient counterparts for each of the Lenders and shall be satisfactory in form and substance to each Senior Managing Agent. SECTION 6. Representations, Warranties and Agreements. In order to induce the Lenders to enter into this Agreement, to make the Loans and issue or participate in Letters of Credit as provided for herein, each Credit Agreement Party makes the following representations and warranties to and agreements with the Lenders, all of which shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance (or, in the case of -29- Existing Letters of Credit, deemed issuance) of the Letters of Credit (with (x) all such representations, warranties and agreements being first made on the Third Restatement Effective Date and (y) the occurrence of each Credit Event being deemed to constitute a representation and warranty that the matters specified in this Section 6 are true and correct in all material respects on and as of the date hereof and as of the date of each such Credit Event, unless such representation and warranty expressly indicates that it is being made as of any specific date, in which case such representation or warranty shall be true and correct in all material respects only as of such specified date): 6.01 Status. Each of Credit Party and each of its Material Subsidiaries (i) is a duly organized and validly existing Company in good standing under the laws of the jurisdiction of its organization and has the requisite Company power and authority to own its property and assets and to transact the business in which it is engaged and (ii) has duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified would have a Material Adverse Effect. 6.02 Power and Authority. Each Credit Party has the requisite Company power and authority to execute, deliver and carry out the terms and provisions of the Documents to which it is a party and has taken all necessary Company action to authorize the execution, delivery and performance of the Documents to which it is a party. Each Credit Party has duly executed and delivered each Document to which it is a party and each such Document constitutes the legal, valid and binding obligation of such Credit Party enforceable in accordance with its terms. 6.03 No Violation. Neither the execution, delivery and performance by any Credit Party of the Documents to which it is a party nor compliance with the terms and provisions thereof, nor the consummation of the transactions contemplated therein (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any Governmental Authority, (ii) will conflict or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except for the Liens created pursuant to the Security Documents) upon any of the property or assets of Parent or any of its Subsidiaries pursuant to the terms of any material indenture, mortgage, deed of trust, agreement or other instrument to which Parent or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the Certificate of Incorporation or By-Laws (or equivalent organizational documents) of Parent or any of its Subsidiaries. 6.04 Litigation. Except as set forth on Annex IV, there are no actions, suits or proceedings pending or threatened with respect to Parent or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect. 6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all Loans shall be utilized by the Borrower for general corporate purposes of Parent and/or its Subsidiaries (including, without limitation, payment of fees and expenses in connection with the Transaction, the refinancing of Indebtedness, the backing up of commercial paper issued by the Borrower and Permitted Litigation Bonding). -30- (b) Except as otherwise permitted by Section 8.05(b), (c), (d), (g) and (l), no part of any Credit Event (or the proceeds thereof) will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof nor the occurrence of any other Credit Event will violate or be inconsistent with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System. (c) The fair market value of all Margin Stock owned by Parent and its Subsidiaries does not exceed $50,000,000 (for such purposes, determined without regard to the fair market value of the shares of Excluded Joint Ventures held by the Borrower and its Subsidiaries, to the extent same shall at any time constitute Margin Stock). At the time of each Credit Event, not more than 25% of the value of the assets of Parent and its Subsidiaries taken as a whole will constitute Margin Stock. (d) Notwithstanding the foregoing provisions of this Section 6.05, no proceeds of any Loan will be utilized to purchase any Margin Stock in a transaction, or as part of a series of transactions, the result of which is the ownership by Parent and/or its Subsidiaries of 5% or more of the capital stock of a corporation unless the Board of Directors of such corporation has approved such transaction prior to any public announcement of the purchase, or the intent to purchase, any such Margin Stock. 6.06 Governmental Approvals. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority, or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Document or (ii) the legality, validity, binding effect or enforceability of any Document. 6.07 Investment Company Act, etc. (a) Neither Parent nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. (b) Neither Parent nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 6.08 True and Complete Disclosure. All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of the Credit Parties or any of their Subsidiaries in writing to any Senior Managing Agent or any Lender for purposes of or in connection with this Agreement, the other Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of such Persons in writing to any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided. The projections and pro forma financial information contained in such materials (including the Unaudited Pro Forma Condensed Combined Financial Statements - Integration Basis (but -31- excluding any information with respect to the Acquired B&W Business contained in such materials delivered prior to the Third Restatement Effective Date, as to which no representation is made) were based on good faith estimates and assumptions believed by such Persons to be reasonable at the time made, it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. 6.09 Financial Condition; Financial Statements. (a) The consolidated balance sheets of the Borrower and its Subsidiaries, at December 31, 2001, at December 31, 2002 and at December 31, 2003 and the related consolidated statements of income and cash flows (and retained earnings) for the fiscal years ended as of said dates, which statements have been examined by KPMG LLP, independent certified public accountants, who delivered an unqualified opinion in respect of the financial statements examined by them, copies of which have heretofore been furnished to each Lender, present fairly the consolidated financial position of the Borrower at the dates of said statements and the results of operations for the periods covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied, except to the extent provided in the notes to said financial statements. (b) The combined consolidated balance sheets of the Acquired B&W Business, at December 31, 2001, at December 31, 2002 and at December 31, 2003 and the related combined consolidated statements of income and cash flows (and retained earnings) for the fiscal years ended as of said dates, which statements have been examined by Deloitte & Touche LLP, independent certified public accountants, who delivered an unqualified opinion in respect of the financial statements examined by them, copies of which have heretofore been furnished to each Lender, present fairly the consolidated financial position of the Acquired B&W Business at the dates of said statements and the results of operations for the periods covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied, except to the extent provided in the notes to said financial statements. (c) The Pro Forma Financial Statements present a good faith estimate of the combined pro forma financial condition of Parent and its Subsidiaries and the pro forma results of operations of Parent and its Subsidiaries for the respective periods covered thereby (after giving effect to the Transaction at the date thereof or for the period covered thereby). (d) Since December 31, 2003 (after giving effect to the Transaction as if same had occurred immediately prior to such date), nothing has occurred which has had a Material Adverse Effect. 6.10 Tax Returns and Payments. Each of Parent and its Subsidiaries has timely filed all federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it (the "Returns"). The Returns accurately reflect in all material respects all liability for taxes of Parent and its Subsidiaries as a whole for the periods covered thereby. Each of Parent and each of its Subsidiaries have paid all material taxes and assessments payable by them other than those contested in good faith and adequately disclosed and for which adequate reserves have been established in accordance with generally accepted accounting principles. -32- 6.11 Compliance with ERISA. Except to the extent that all events described in the following clauses of this sentence and then in existence could not, in the aggregate, reasonably be expected to have a Material Adverse Effect, each Plan is in substantial compliance with ERISA and the Code; no Reportable Event has occurred with respect to any Plan; no Plan is insolvent or in reorganization, no Plan has an Unfunded Current Liability, and no Plan has an accumulated or waived funding deficiency or permitted decreases in its funding standard account within the meaning of Section 412 of the Code; none of Parent, any Subsidiary nor any ERISA Affiliate has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code; no proceedings have been instituted to terminate any Plan; no condition exists which presents a material risk to Parent or any Subsidiary of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code. With respect to Plans that are multi-employer plans (within the meaning of Section 3(37) of ERISA) and Plans which are not currently maintained or contributed to by Parent, any Subsidiary or any ERISA Affiliate, the representations and warranties in this Section are made to the best knowledge of each Credit Agreement Party. 6.12 Subsidiaries. Part A of Annex V hereto lists each Material Subsidiary of Parent (and the direct and indirect ownership interest of Parent therein), in each case existing on the Third Restatement Effective Date. All ownership percentages referred to in Part A of Annex V are calculated without regard to directors' or nominees' qualifying shares. 6.13 Patents, etc. Parent and each of its Subsidiaries have obtained all material patents, trademarks, servicemarks, trade names, copyrights, licenses and other rights, free from burdensome restrictions, that are necessary for the operation of their respective businesses as presently conducted and as proposed to be conducted. 6.14 Pollution and Other Regulations. Parent and each of its Subsidiaries are in material compliance with all material laws and regulations relating to pollution and environmental control, equal employment opportunity and employee safety in all domestic jurisdictions in which Parent and each of its Subsidiaries is presently doing business, and Parent will comply, and cause each of its Subsidiaries to comply, with all such laws and regulations which may be imposed in the future in jurisdictions in which Parent or such Subsidiary may then be doing business other than, in each case, those the non-compliance with which would not reasonably be expected to have a Material Adverse Effect. 6.15 Properties. Parent and each of its Subsidiaries have good title to all properties that are necessary for the operation of their respective businesses as presently conducted and as proposed to be conducted, free and clear of all Liens, other than as permitted by this Agreement. All Real Property owned by Parent or any of its Subsidiaries, and all material leaseholds leased by Parent or any of its Subsidiaries, in each case as of the Third Restatement Effective Date and after giving effect to the Transaction, and the nature of the interest therein, is correctly set forth in Annex VIII. 6.16 Special-Purpose Corporations. Each of Parent and Parent Merger Sub was formed to effect to the Transaction. Prior to the consummation of the Transaction, none of Parent or Parent Merger Sub had any significant assets or liabilities. -33- SECTION 7. Affirmative Covenants. Each Credit Agreement Party hereby covenants and agrees that on the Third Restatement Effective Date and thereafter, for so long as this Agreement is in effect and until the Commitments and each Letter of Credit have terminated and the Loans and Unpaid Drawings, together with interest, Fees and all other Obligations incurred hereunder, are paid in full: 7.01 Information Covenants. Parent will furnish to each Lender: (a) Annual Financial Statements. Within 100 days after the close of each fiscal year of Parent, to the extent prepared to comply with SEC requirements, a copy of the SEC Form 10-Ks filed by Parent with the SEC for such fiscal year, or, if no such Form 10-K was so filed by Parent for such fiscal year, the consolidated balance sheet of Parent and its Subsidiaries, as at the end of such fiscal year and the related consolidated statements of income and of cash flows for such fiscal year, setting forth comparative consolidated figures as of the end of and for the preceding fiscal year, and examined by independent certified public accountants of recognized national standing whose opinion shall not be qualified as to the scope of audit or as to the status of Parent or any of its Subsidiaries as a going concern, together in any event with a certificate of such accounting firm stating that in the course of its regular audit of the business of Parent, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge of any Default or Event of Default which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof. (b) Quarterly Financial Statements. As soon as available and in any event within 55 days after the close of each of the first three quarterly accounting periods in each fiscal year of Parent to the extent prepared to comply with SEC requirements, a copy of the SEC Form 10-Qs filed by Parent with the SEC for each such quarterly period, or, if no such Form 10-Q was so filed by Parent with respect to any such quarterly period, the consolidated condensed balance sheet of Parent and its Subsidiaries as at the end of such quarterly period and the related consolidated condensed statements of income for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and the related consolidated condensed statement of cash flows for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and in each case setting forth comparative consolidated figures for the related periods in the prior fiscal year or, in the case of such consolidated condensed balance sheet, for the last day of the prior fiscal year, all of which shall be certified by an Authorized Officer of Parent, subject to changes resulting from audit and normal year-end audit adjustments. (c) Officer's Certificates. At the time of the delivery of the financial statements provided for in Section 7.01(a) and (b), a certificate of an Authorized Officer of Parent to the effect that no Default or Event of Default (including, without limitation, under Section 9.10) exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate shall set forth (x) the calculations required to establish whether Parent and its Subsidiaries were in compliance with the provisions of Sections 8.02(d), 8.02(l), 8.03(g), 8.03(i), 8.03(o), 8.04(i), 8.04(k), 8.04(m), 8.05(c), 8.05(d), 8.05(l), 8.07, 8.08 and 8.09(e), 8.09(i), 8.09(j) and 8.09(n) as at the end of such -34- fiscal period or year, as the case may be and (y) the amount of any Dividend excluded from the determination of "Consolidated Fixed Charges" pursuant to clause (I) of the proviso appearing in the definition thereof for such fiscal period or year, as the case may be. (d) Notice of Default or Litigation. Promptly, and in any event within three Business Days after any senior financial or legal officer of any Credit Agreement Party obtains knowledge thereof, notice of (x) the occurrence of any event which constitutes a Default or Event of Default which notice shall specify the nature thereof, the period of existence thereof and what action Parent and/or the relevant Subsidiary proposes to take with respect thereto and (y) any litigation or governmental proceeding pending against or affecting Parent or any of its Subsidiaries which is likely to have a material adverse effect on the business, properties, assets, financial condition or prospects of Parent and its Subsidiaries taken as a whole, the rights and remedies of the Agents and the Lenders or the ability of any Credit Party to perform its obligations hereunder or under any other Credit Document to which it is a party. (e) Credit Rating Changes. Promptly after any senior financial or legal officer of Parent obtains knowledge thereof, notice of any change in the Applicable Credit Rating assigned by either Rating Agency. (f) Other Information. Promptly upon transmission thereof, copies of any filings and registrations with, and reports to, the Securities and Exchange Commission or any successor thereto (the "SEC") by Parent or any of its Subsidiaries (other than amendments to any registration statement (to the extent such registration statement, in the form it becomes effective, is delivered to the Lenders), exhibits to any registration statement, any registration statements on Form S-8 and Forms 3, 4 and 5 and any annual report on Form 11-K) and copies of all financial statements, proxy statements, notices and reports that Parent or any of its Subsidiaries shall send to analysts or the holders of any publicly issued debt of Parent and/or any of its Subsidiaries in their capacity as such holders (in each case, to the extent not theretofore delivered to the Lenders pursuant to this Agreement) and, with reasonable promptness, such other information or documents (financial or otherwise) as any Senior Managing Agent on its own behalf or on behalf of the Required Lenders may reasonably request from time to time. 7.02 Books, Records and Inspections. Each Credit Agreement Party will, and will cause each of its Subsidiaries to, permit, upon reasonable notice to an Authorized Officer of Parent, officers and designated representatives of any Senior Managing Agent or the Required Lenders to visit and inspect any of the properties or assets of Parent and any of its Subsidiaries in whomsoever's possession, and to examine the books of account of Parent and any of its Subsidiaries and discuss the affairs, finances and accounts of Parent and of any of its Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as any Senior Managing Agent or the Required Lenders may desire. 7.03 Insurance. Each Credit Agreement Party will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect insurance in such amounts, covering -35- such risks and liabilities and with such deductibles or self-insured retentions as are in accordance with normal industry practice. 7.04 Payment of Taxes. Each Credit Agreement Party will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, in each case on a timely basis, and all lawful claims which, if unpaid, might become a Lien or charge upon any properties of Parent or any of its Subsidiaries; provided that neither Parent nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves (in the good faith judgment of the management of Parent) with respect thereto in accordance with GAAP. 7.05 Consolidated Corporate Franchises. Each Credit Agreement Party will do, and will cause each Subsidiary Guarantor and each of its Material Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence, rights and authority; provided that any transaction permitted by Section 8.02 will not constitute a breach of this Section 7.05. 7.06 Compliance with Statutes, etc. Each Credit Agreement Party will, and will cause each Subsidiary to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls) other than those the non-compliance with which would not reasonably be expected to have a Material Adverse Effect. 7.07 ERISA. As soon as possible and, in any event, within 10 days after Parent or any Subsidiary knows or has reason to know of the occurrence of any of the following, Parent will deliver to each of the Lenders a certificate of an Authorized Officer of Parent setting forth details as to such occurrence and the action, if any, which Parent, such Subsidiary or an ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by Parent, such Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant (other than notices relating to an individual participant's benefits) or the Plan administrator with respect thereto: that a Reportable Event has occurred (except to the extent that Parent has previously delivered to the Lenders a certificate and notices (if any) concerning such event pursuant to the next clause hereof), that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan, that a Plan which has an Unfunded Current Liability has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA, that a Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the Code, that proceedings may be or have been instituted to terminate a Plan which has an Unfunded Current Liability, that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan, or that Parent, any -36- Subsidiary or any ERISA Affiliate will or may incur any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or with respect to a Plan under Section 4971 or 4975 of the Code or Section 409 or 502(i) or 502(l) of ERISA. Upon request of a Lender, Parent will deliver to such Lender a complete copy of the annual report (Form 5500) of each Plan required to be filed with the Internal Revenue Service. In addition to any certificates or notices delivered to the Lenders pursuant to the first sentence hereof, copies of any notices received by Parent or any Subsidiary shall be delivered to the Lenders no later than 10 days after the later of the date such notice has been filed with the Internal Revenue Service or the PBGC, given to Plan participants (other than notices relating to an individual participant's benefits) or received by Parent or such Subsidiary. 7.08 Good Repair. Each Credit Agreement Party will, and will cause each of its Subsidiaries to, ensure that its properties and equipment used or useful in its business in whomsoever's possession they may be, are kept in good repair, working order and condition, normal wear and tear excepted, and that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, to the extent and in the manner customary for companies in similar businesses. 7.09 End of Fiscal Years; Fiscal Quarters. Parent will, for financial reporting purposes, cause (i) each of its fiscal years to end on December 31 of each year, (ii) each of its fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year and (iii) each of the Subsidiaries to maintain the accounting periods maintained by such Subsidiary on the Third Restatement Effective Date, consistent with the past practice and procedures of each such Subsidiary; provided that any of the foregoing fiscal or reporting periods may be changed if (x) Parent gives the Lenders 30 days' prior written notice of such proposed change and (y) prior to effecting such change, the Credit Agreement Parties and the Majority SMA shall have agreed upon adjustments, if any, to Sections 8.05, 8.07 and 8.08 (and the definitions used therein) the sole purpose of which shall be to give effect to the proposed change in fiscal or accounting periods (it being understood and agreed that to the extent that the Credit Agreement Parties and the Majority SMA cannot agree on appropriate adjustments to such Sections (or that no adjustments are necessary), the proposed change may not be effected). 7.10 Subsidiary Guaranty; Collateral. (a) No later than 15 days after the date on which a Guaranty Event occurs after the Third Restatement Effective Date, each Material Subsidiary not then a Subsidiary Guarantor shall (i) authorize the execution of, and execute and deliver to the Administrative Agent on behalf of the Lenders, a Subsidiary Guaranty and (ii) cause to be delivered such opinions of counsel as are reasonably requested by, and are reasonably satisfactory to, the Senior Managing Agents in respect of such Subsidiary Guaranty. (b) No later than 15 days after the date on which a Trigger Event occurs after the Third Restatement Effective Date, each Credit Party (including each Subsidiary which is required to become a Subsidiary Guarantor pursuant to Section 7.10(a)) shall (i) authorize, execute and deliver to the Collateral Agent on behalf of the Secured Creditors pledge agreements, security agreements and/or mortgages substantially in the form of the respective Security Documents entered into on the Third Restatement Effective Date (with such modifications -37- thereto as may be reasonably required by the Senior Managing Agents), which agreements and mortgages shall be effective to create in favor of the Collateral Agent on behalf of the Secured Creditors a pledge of and/or a lien on substantially all of its assets (other than Excluded Collateral and subject to such other exceptions as are reasonably satisfactory to the Senior Managing Agents) with such priority as is provided for in the representations contained in the respective Security Documents, (ii) deliver in pledge thereunder all securities, notes, instruments and transfer powers required to be delivered by the terms of the respective Security Documents, (iii) execute and cause to be filed such financing statements and mortgages as are required to perfect the pledges and Liens created under the Security Documents and to obtain the priority of such perfection required by the respective Security Documents and (iv) cause to be delivered such opinions of counsel as are reasonably requested by, and as are reasonably satisfactory to, the Senior Managing Agents with respect to the Security Documents and the pledges and Liens created thereunder. Notwithstanding the foregoing, all Collateral shall be automatically released (subject to reinstatement upon the occurrence of a new Trigger Event) if at any time subsequent to the Credit Parties providing the Collateral in compliance with the preceding sentence the Applicable Credit Rating issued by each Rating Agency shall, after giving effect to such release and subject to the completion of such release, if applicable, each be the Minimum Investment Grade Rating or higher. (c) At any time (i) a Guaranty Event has occurred and is continuing and (ii) a Material Subsidiary Threshold Event occurs, then on the 45th day following the date of the occurrence of such Material Subsidiary Threshold Event, Parent shall cause one or more Subsidiaries not then a Subsidiary Guarantor (other than Santa Fe, CMSI or Lane) to take the actions described in Section 7.10(a) such that, after giving effect to such actions, such Material Subsidiary Threshold Event shall cease to exist. At any time (i) a Trigger Event has occurred and is continuing and (ii) a Material Subsidiary Threshold Event occurs, then on the 45th day following the date of the occurrence of such Material Subsidiary Threshold Event, Parent shall cause one or more Subsidiaries not then a party to Security Documents (other than Santa Fe, CMSI or Lane) to take the actions described in Section 7.10(b) such that, after giving effect to such actions, such Material Subsidiary Threshold Event shall cease to exist. (d) At any time a Trigger Event has occurred and is continuing, each Credit Agreement Party will, and will cause each of the other Credit Parties that are Subsidiaries of Parent to, grant to the Collateral Agent for the benefit of the Secured Creditors security interests and mortgages in such assets and properties of such Credit Agreement Party and such other Credit Parties as are not covered by the original Security Documents (excluding Excluded Collateral) and as may be reasonably requested from time to time by the Administrative Agent or the Required Lenders (collectively, the "Additional Security Documents"). All such security interests and mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and shall constitute valid and enforceable perfected security interests and mortgages superior to and prior to the rights of all third Persons and subject to no other Liens except for Permitted Liens. The Additional Security Documents or instruments related thereto shall have been duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Additional Security Documents and all taxes, fees and other charges payable in connection therewith shall have been paid in full. -38- (e) At any time a Trigger Event has occurred and is continuing, each Credit Agreement Party will, and will cause each of the other Credit Parties to, at the expense of the Borrower, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports, landlord waivers, bailee agreements, control agreements and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents as the Collateral Agent may reasonably require. Furthermore, each Credit Agreement Party will, and will cause the other Credit Parties to, deliver to the Collateral Agent such opinions of counsel, title insurance and other related documents as may be reasonably requested by the Administrative Agent to assure itself that this Section 7.10 has been complied with. (f) If the Administrative Agent or any Lender reasonably determine that they are required by law or regulation to have appraisals prepared in respect of any Real Property of Parent and its Subsidiaries constituting Collateral, the Borrower will, at its own expense, provide to the Administrative Agent appraisals which satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of the Financial Institution Reform, Recovery and Enforcement Act of 1989, as amended, and which shall otherwise be in form and substance reasonably satisfactory to the Administrative Agent. (g) The Credit Agreement Parties agree that each action required by clauses (d) through (f) of this Section 7.10 shall be completed as soon as possible, but in no event later than 60 days after such action is requested to be taken by the Administrative Agent, the Required Lenders or a given Lender, as the case may be; provided that in no event will Parent or any of its Subsidiaries be required to take any action, other than using its best efforts, to obtain consents from third parties with respect to its compliance with this Section 7.10. (h) Promptly (and in any event within five business days) after repayment or defeasance in full of the Macon-Bibb Industrial Authority Taxable Industrial Development Revenue Bonds (Brown & Williamson Tobacco Corporation Project), Series 1993A in the original aggregate principal amount of $25,000,000, Parent shall give notice of the same to the Administrative Agent and, if requested by the Collateral Agent at such time, take such actions with respect to such Real Property as may be required pursuant to Section 7.10(d), (e), (f) and (g). 7.11 Margin Stock. Parent will take all actions so that at all times the fair market value of all Margin Stock owned by Parent and its Subsidiaries shall not exceed $50,000,000 (for such purposes, determined without regard to the fair market value of the shares of the Excluded Joint Ventures held by the Borrower and its Subsidiaries, to the extent same shall at any time constitute Margin Stock). So long as the covenant contained in the immediately preceding sentence is complied with, all Margin Stock at any time owned by Parent and its Subsidiaries will not constitute Collateral and no security interest shall be granted therein pursuant to any Credit Document. Without excusing any violation of the first sentence of this Section 7.11, if at any time the fair market value of all Margin Stock owned by Parent and its Subsidiaries exceeds the amount permitted pursuant to the first sentence of this Section 7.11, then (x) all Margin Stock owned by the Credit Parties shall be pledged, and delivered for pledge, pursuant to the Pledge -39- Agreement and (y) the Borrower will execute and deliver to the Lenders appropriate completed forms (including, without limitation, Forms G-3 and U-1, as appropriate) establishing compliance with Regulations T, U and X of the Board of Governors of the Federal Reserve System. If at any time any Margin Stock is required to be pledged as a result of the provisions of the immediately preceding sentence, repayments of outstanding Obligations shall be required, and subsequent Credit Events shall be permitted, only in compliance with the applicable provisions of Regulations T, U and X of the Board of Governors of the Federal Reserve System. 7.12 Ownership Structure. Parent shall (i) at all times own 100% of the capital stock of the Borrower and (ii) cause each Subsidiary Guarantor at all times to be owned directly by Parent, the Borrower or another Subsidiary Guarantor. 7.13 Tax Sharing Agreement. Parent shall cause each new direct Subsidiary formed or acquired after the Third Restatement Effective Date (other than an Insignificant Subsidiary) to execute a counterpart to the Tax Sharing Agreement (or a joinder agreement therefor in form and substance reasonably satisfactory to the Administrative Agent) within 5 days following such formation or acquisition. SECTION 8. Negative Covenants. Each Credit Agreement Party hereby covenants and agrees that on the Third Restatement Effective Date and thereafter, for so long as this Agreement is in effect and until the Commitments and each Letter of Credit have terminated and the Loans and Unpaid Drawings, together with interest, Fees and all other Obligations incurred hereunder, are paid in full: 8.01 Changes in Business. (a) Except as otherwise permitted by Section 8.02, Parent and its Subsidiaries, taken as a whole, will not substantively alter the character of their business from that conducted by Parent and its Subsidiaries taken as a whole on the Third Restatement Execution Date. (b) Notwithstanding the foregoing, Parent will not engage in any business and will not own any significant assets (other than (x) its ownership of the capital stock of the Borrower, Santa Fe, CMSI, Lane and any other Subsidiary created, established or acquired by Parent after the Third Restatement Effective Date which does not give rise to a violation of this Agreement, (y) any Intercompany Note evidencing an Intercompany Loan permitted to be made by it pursuant to Section 8.09(i) and (z) cash and/or Marketable Investments to be on-loaned, dividended, contributed and/or otherwise applied or held for purposes not otherwise prohibited by this Agreement) or have any liabilities (other than those liabilities for which it is responsible under this Agreement and the Documents to which it is a party and such other liabilities which Parent is expressly permitted to incur pursuant to the terms of this Agreement); provided that (I) Parent may (i) issue shares of Parent Preferred Stock, Parent Common Stock and options and warrants to purchase Parent Common Stock, (ii) issue the Parent Intercompany Note and make payments in respect thereof, and (iii) engage in those activities that are incidental to (x) the maintenance of its corporate existence in compliance with applicable law, (y) legal, tax and accounting matters in connection with any of the foregoing activities and (z) the entering into, and performing its obligations under, this Agreement and the other Documents to which it is a party and (II) the conduct of business restriction referenced above shall not prohibit (or be construed to prohibit) Parent from conducting administrative and other ordinary course "holding -40- company" activities necessary or desirable in connection with the operation of the business through Subsidiaries of Parent (including, without limitation, intercompany management functions and the provision of umbrella insurance policies). 8.02 Consolidation, Merger, Sale of Assets, etc. No Credit Agreement Party will, nor will permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease (as lessor) or otherwise dispose of all or any part of its property or assets (other than sales of inventory to customers in the ordinary course of business) or agree to do any of the foregoing at any future time, except that: (a) any Subsidiary of Parent may from time to time sell or otherwise dispose of inventory, equipment, raw materials and other assets (other than equity interests) to another Subsidiary of Parent in the ordinary course of business, so long as (x) cash in an amount equal to at least the fair market value of the assets so transferred (as determined in good faith by senior management of the Borrower) is received by the respective transferor or (y) so long as no Default or Event of Default then exists or would result therefrom, intercompany indebtedness owing by the respective transferor to the respective transferee in an amount equal to at least the fair market value of the assets so transferred (as determined in good faith by senior management of Parent) is forgiven by such transferor; (b) each Subsidiary of Parent may sell or otherwise transfer obsolete, uneconomic or worn-out equipment, materials or other assets in the ordinary course of business; (c) the Combination Transactions may be consummated in accordance with the requirements of Section 5.01F; (d) any Subsidiary of Parent may transfer or otherwise dispose of any of its respective assets (including cash, fixed assets and intellectual property but excluding capital stock or other equity interests of a Subsidiary Guarantor owned or held by such Person) to any of their respective Subsidiaries not otherwise permitted by this Section 8.02, so long as (i) no Default or Event of Default is then in existence or would result therefrom and (ii) the aggregate amount of all such transfers and dispositions made pursuant to this clause (d) on and after the Third Restatement Effective Date (taking the fair market value (as determined in good faith by senior management of Parent) of any non-cash assets so transferred or disposed of) shall not exceed, when aggregated with (I) the aggregate amount of all Investments made by Subsidiaries of Parent in reliance on Section 8.09(n) (taking the fair market value (as determined in good faith by senior management of Parent) of any non-cash assets so invested and determined without regard to any write-downs or write-offs thereof and net of any returns of capital), (II) the aggregate amount of contributions, capitalizations and forgiveness theretofore made by Credit Parties pursuant to Section 8.09(j) to (or in respect of) Wholly-Owned Subsidiaries that are not Credit Parties and (III) the aggregate outstanding principal amount of all Intercompany Loans made pursuant to Section 8.09(i) by Credit Parties to Wholly-Owned Subsidiaries that are not Credit Parties (determined without regard to any write-downs or write-offs thereof), $175,000,000; -41- (e) each Subsidiary of Parent may sell or discount, in each case without recourse and in the ordinary course of business, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof and not as part of any financing transaction; (f) each Subsidiary of Parent may grant licenses, sublicenses, leases or subleases to other Persons not materially interfering with the conduct of the business of any Subsidiary of Parent or any other, in each case so long as no such grant otherwise affects any security interest of the Collateral Agent in the asset or property subject thereto; (g) any Subsidiary of Parent (other than the Borrower) may merge with and into, or be dissolved or liquidated into, or transfer assets to, any Subsidiary Guarantor, so long as (x) in the case of any merger, dissolution or liquidation, a Subsidiary Guarantor is the surviving Company of any such merger, dissolution or liquidation, and (y) if a Trigger Event has occurred and is continuing, any security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets of such surviving Subsidiary Guarantor or so transferred are in full force and effect and perfected; (h) any Domestic Subsidiary of Parent that is not a Credit Party may merge with and into, or be dissolved or liquidated into, or transfer assets to, any other Wholly-Owned Domestic Subsidiary of Parent that is not a Credit Party, so long as (x) in the case of any merger, dissolution or liquidation, such Wholly-Owned Domestic Subsidiary is the surviving Company of any such merger, dissolution or liquidation, and (y) if a Guaranty Event has occurred and is continuing and either (I) the Person that is the survivor of any such merger, dissolution or liquidation is (after giving effect thereto) a Material Subsidiary or (II) the Person that is the transferee of such assets is a Material Subsidiary after giving effect thereto, such new Material Subsidiary shall have executed (A) a counterpart of the Subsidiary Guaranty and (B) if a Trigger Event has occurred and is continuing at such time, such Security Documents as the Majority SMA shall reasonably request, with, in the case of this clause (B), such actions having been taken to perfect the pledge of, and Liens on, the stock and substantially all of the assets of such new Subsidiary as would have been taken if such new Subsidiary had been a Subsidiary on the Third Restatement Effective Date, all to the reasonable satisfaction of the Majority SMA; (i) Acquisition Corp. may merge or consolidate with, or sell or otherwise dispose of its assets, to the Borrower, so long as (i) prior to any such transaction, Acquisition Corp. has not theretofore (x) merged or consolidated with any other Subsidiary of the Borrower or (y) engaged in any tobacco related business and (ii) in the case of a merger or consolidation, the Borrower is the surviving corporation of such merger or consolidation; (j) any Foreign Subsidiary of Parent may merge with and into, or be dissolved or liquidated into, or transfer any of its assets to, any Wholly-Owned Foreign Subsidiary of Parent, so long as (i) in the case of any such merger, dissolution or liquidation, a Wholly-Owned Foreign Subsidiary of Parent is the survivor of such merger, dissolution or liquidation, and (ii) any security interests granted to the Collateral Agent for the benefit -42- of the Secured Creditors pursuant to the Security Documents in the equity interests of such Wholly-Owned Foreign Subsidiary shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger, dissolution or liquidation); (k) Santa Fe, Lane and CMSI may merge with and into, or be dissolved or liquidated into, or transfer assets to, one another; and (l) any Subsidiary of Parent may sell assets (other than the equity interests of any Wholly-Owned Subsidiary unless all of the equity interests of such Wholly-Owned Subsidiary are sold in accordance with this clause (l)) to a Person other than a Subsidiary, so long as (x) no Default or Event of Default then exists or would result therefrom, (y) each such sale is in an arm's-length transaction and the respective Subsidiary receives at least fair market value (as determined in good faith by such Subsidiary), and (z) the aggregate amount of the proceeds received from all assets sold pursuant to this clause (l) shall not exceed $250,000,000 in any fiscal year of Parent. To the extent the Required Lenders waive the provisions of this Section 8.02 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 8.02 (other than to Parent or a Subsidiary thereof), such Collateral shall be sold free and clear of the Liens created by the Security Documents, and the Administrative Agent and the Collateral Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing. 8.03 Liens. No Credit Agreement Party will, nor will permit any of its Subsidiaries to, (x) create, incur, assume or suffer to exist any Lien in respect of Indebtedness upon any property or assets of any kind (real or personal, tangible or intangible) of such Credit Agreement Party or any such Subsidiary whether now owned or hereafter acquired or (y) assign any right to receive income as security for the payment of Indebtedness, except for the following (collectively, "Permitted Liens"): (a) Liens encumbering customary initial deposits and margin deposits, and other Liens incurred in the ordinary course of business and which are within the general parameters customary in the industry, securing obligations under Commodities Agreements; (b) Liens securing reimbursement obligations of any Subsidiary of Parent with respect to (x) trade letters of credit incurred in the ordinary course of business, which are to be repaid in full not more than one year after the date originally incurred to finance the purchase of goods by any Subsidiary of Parent, provided that such Liens shall attach only to documents or other property relating to such letters of credit and the products and proceeds thereof and (y) letters of credit incurred in the ordinary course of business in connection with payments of foreign excise taxes in respect of tobacco sales, provided that such Liens are granted in the ordinary course of business; (c) Liens (x) arising pursuant to purchase money mortgages securing Indebtedness of any Subsidiary of Parent (and any extensions, renewals or refinancings of such Indebtedness to the extent not increasing the outstanding principal amount -43- thereof) representing the purchase price (or financing of the purchase price within 180 days after the respective purchase) of assets acquired after the Third Restatement Effective Date, provided that (i) any such Liens attach only to the assets so purchased and (ii) the Indebtedness (including any such permitted extensions, renewals or refinancings) secured by any such Lien does not exceed 100%, nor is less than 70%, of the purchase price of the property being purchased and (y) existing on specific tangible assets at the time acquired by any Subsidiary of Parent or on assets of a Person at the time such Person first becomes a Subsidiary (together with Liens securing any extensions, renewals or refinancings of the Indebtedness secured thereby to the extent not increasing the outstanding principal amount thereof), provided that (i) any such Liens were not created at the time of or in contemplation of the acquisition of such assets or Person by the respective Subsidiary, (ii) in the case of any such acquisition of a Person, any such Lien attaches only to a specific tangible asset of such Person and not assets of such Person generally and (iii) the Indebtedness secured by any such Lien does not exceed 100% of the fair market value of the asset to which such Lien attaches, determined at the time of the acquisition of such asset or at the time such Person first becomes a Subsidiary, as the case may be; (d) Liens created pursuant to the Security Documents; (e) Liens resulting from the Borrower or Reynolds Tobacco cash collateralizing supersedeas and other appeal bonds, or providing cash collateral directly to courts to satisfy such courts' requirements for a stay to appeal verdicts, orders and/or judgments, so long as Permanent Surplus Cash is applied for such purposes before proceeds of Loans are used for such purpose; (f) Existing Liens (and any extensions or renewals of such Liens (to the extent included in the definition of Existing Liens), to the extent such Liens do not attach to any additional properties and the Indebtedness secured thereby is not increased); (g) Liens resulting from the Borrower directly cash collateralizing PBGC Obligations and/or cash collateralizing bonds in support of PBGC Obligations, provided that the sum of (i) the aggregate amount of cash that collateralizes PBGC Obligations and/or bonds in support of such PBGC Obligations plus (ii) the aggregate stated amounts of bonds and letters of credit (including Letters of Credit) issued in support of PBGC Obligations (but excluding any portion of the stated amounts of such bonds or letters of credit that are cash collateralized and thus included pursuant to preceding clause (i)) does not exceed $150,000,000; (h) Liens encumbering Parent Common Stock repurchased in accordance with the requirements of Section 8.05(c), (d) or (l), to the extent that such Liens (x) are created for the sole purpose of securing obligations of Parent to the agent brokering any such repurchase incurred in connection with such repurchase and (y) terminate upon the payment of such obligations; (i) Liens encumbering cash deposits securing obligations under Permitted Interest Rate Agreements and Permitted Currency Agreements, so long as the aggregate -44- amount of the cash pledged to secure such obligations pursuant to this clause (i) does not exceed $250,000,000; (j) Liens in respect of property or assets of Parent or any of its Subsidiaries imposed by law which were incurred in the ordinary course of business and which have not arisen to secure Indebtedness for borrowed money, such as carriers', materialmen's, warehousemen's and mechanics' Liens, statutory and common law landlord's Liens, and other similar Liens arising in the ordinary course of business, and which either (x) do not in the aggregate materially detract from the value of Parent's or such Subsidiary's property or assets or materially impair the use thereof in the operation of the business of Parent or such Subsidiary or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; (k) Liens arising from or related to precautionary UCC financing statements regarding operating leases entered into by any Subsidiary of Parent in the ordinary course of business; (l) easements, rights-of-way, restrictions, encroachments and other similar charges or encumbrances, and minor title deficiencies, in each case not securing Indebtedness and not materially interfering with the conduct of the business of Parent or any of its Subsidiaries; (m) Permitted Encumbrances; (n) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles; and (o) Liens not otherwise permitted by the foregoing clauses (a) through (n) above securing any Indebtedness of any Subsidiary of Parent, provided that the aggregate principal amount of Indebtedness on a consolidated basis secured by Liens permitted by this clause (o) shall not exceed $100,000,000 at any time. 8.04 Indebtedness. No Credit Agreement Party will, nor will permit any of its Subsidiaries to, contract create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (b) Intercompany Loans by and among Parent and its Subsidiaries, to the extent permitted by Section 8.09(i); (c) Indebtedness of any Subsidiary of Parent (x) consisting of Contingent Obligations in respect of, or (y) constituting reimbursement obligations under letters of credit issued in support of, obligations (other than Contingent Obligations) of any Subsidiary of Parent, to the extent such other obligations are permitted by this Agreement -45- (but excluding any Contingent Obligations in respect of, or reimbursement obligations relating to, Independent Litigation Bonds); (d) obligations under letters of credit described in Section 8.03(b); (e) [(x)] Indebtedness of Parent and any of its Subsidiaries under, or under any guaranty of, Permitted Currency Agreements and Permitted Interest Rate Agreements [and (y) Indebtedness of Parent under guaranties of the Borrower's obligations in respect of the Stub Notes]; (f) obligations of any Subsidiary of Parent under letters of credit incurred in the ordinary course of business in connection with the purchase of tobacco or other products or goods for use in the day-to-day operations of the Subsidiaries of Parent consistent with such Subsidiaries' past practices or then current industry practices; (g) Indebtedness secured, in whole or in part, by Liens permitted by Section 8.03(e); (h) Existing Debt (and any extensions, renewals or refinancings of such Indebtedness to the extent not increasing the outstanding principal amount thereof); provided that any intercompany Indebtedness among the Parent or any of its Subsidiaries shall be subject to the requirements applicable to Intercompany Loans as set forth in clauses (iii), (iv) and (v) of the proviso appearing in Section 8.09(i) as if such intercompany Indebtedness was an Intercompany Loan and shall be subject to extensions, renewals or refinancings only to the extent the obligor and obligee of such intercompany Indebtedness are not altered; (i) Indebtedness of the Borrower in respect of the Existing Senior Notes and Refinancing Senior Notes, and of the Guarantors under guaranties of the Borrower's obligations in respect of the Existing Senior Notes and the Refinancing Senior Notes, in an aggregate principal amount not to exceed $2,000,000,000 at any time outstanding; provided however that additional Indebtedness of the Borrower under Refinancing Senior Notes in aggregate outstanding principal amount of up to $750,000,000 (and of the Guarantors in respect of guaranties thereof) shall be permitted, to the extent (and only to the extent) that the Borrower has cash on its balance sheet in an amount equal to at least the aggregate principal amount of the Refinancing Senior Notes incurred in reliance on this proviso (reserved for purposes of refinancing Existing Senior Notes or other then outstanding Refinancing Senior Notes); (j) Indebtedness of Reynolds Tobacco constituting reimbursement obligations in respect of Independent Litigation Bonds, and of the Subsidiary Guarantors as guarantors of Reynolds Tobacco's obligations in respect of Independent Litigation Bonds; (k) Indebtedness of any Subsidiary of Parent in any manner guaranteeing or intended to guarantee, whether directly or indirectly, any leases, dividends or other monetary obligations of any Person in which such Subsidiary has an ownership interest, provided that the aggregate maximum stated or -46- determinable amount (or, if not stated or determinable, the maximum reasonably anticipated liability in respect of such Indebtedness as determined in good faith by such Subsidiary) of all Indebtedness permitted pursuant to this clause (k) shall not exceed at any time an amount in excess of $50,000,000; (l) unsecured Contingent Obligations of Parent as a guarantor of any contractual obligations of any Wholly-Owned Subsidiary of Parent (which contractual obligations do not themselves constitute Indebtedness); and (m) Indebtedness of Subsidiaries of Parent not otherwise permitted by the foregoing clauses (a) through (l), provided that the aggregate outstanding principal amount of Indebtedness on a consolidated basis incurred pursuant to this clause (m) shall not exceed $100,000,000 at any time. 8.05 Limitation on Dividends. No Credit Agreement Party will, nor will permit any of its Subsidiaries to, declare, pay or otherwise authorize any dividends (other than dividends payable solely in non-redeemable common stock or comparable common equity interests of Parent or any such Subsidiary, as the case may be) or return any equity capital to, its stockholders, partners, members or other equityholders or declare, authorize or make any other distribution, payment or delivery of property or cash to its stockholders, partners, members or other equity holders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock or other equity interests, now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares or other equity interests), or set aside any funds for any of the foregoing purposes, and no Credit Agreement Party will permit any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock or other equity interests of Parent or any other Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock or other equity interests) (all of the foregoing "Dividends"), except that: (a) (i) any Subsidiary of the Borrower may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower, (ii) any Non-Guarantor Parent Subsidiary may pay Dividends to Parent or any other Non-Guarantor Parent Subsidiary that is a Wholly-Owned Subsidiary of Parent, (iii) any Subsidiary of any Direct Parent Subsidiary Guarantor may pay Dividends to such Direct Parent Subsidiary Guarantor or any Wholly-Owned Subsidiary of such Direct Parent Subsidiary Guarantor and (iv) any non-Wholly-Owned Subsidiary of Parent may pay cash Dividends to its shareholders generally so long as Parent or its respective Subsidiary which owns the equity interest in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holding of the equity interests in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests of such Subsidiary); (b) Parent may issue shares of Parent Common Stock upon the exercise of any warrants or options or upon the conversion or redemption of any convertible or redeemable preferred or preference stock, and in connection with any such exercise, conversion or redemption, Parent may, so long as no Event of Default then exists or would result therefrom, pay cash in lieu of issuing fractional shares of Parent Common Stock; -47- (c) so long as no Event of Default then exists or would result therefrom, Parent may repurchase Parent Common Stock (and/or options or warrants in respect thereof) pursuant to, and in accordance with the terms of, management and/or employee stock plans, provided that the aggregate amount of cash paid in respect of all such repurchases in any calendar year pursuant to this clause (c) does not exceed $20,000,000; (d) so long as no Event of Default then exists or would result therefrom, Parent may declare and pay, or otherwise pay or make, any other Dividend, provided that, at the time it is, in the case of a Non-Declared Dividend, paid or made and, in the case of any other Dividend, declared or otherwise authorized, the aggregate amount of such Dividend, when added to all Non-Declared Dividends theretofore paid or made and any other Dividends theretofore declared or otherwise authorized (or paid) pursuant to this Section 8.05(d) after the Third Restatement Effective Date shall not exceed an amount equal to the sum of (x) $500,000,000 plus (y) (if positive) 75% of Cumulative Adjusted Cash Net Income plus (z) the aggregate cash proceeds (net of underwriting discounts and commissions) received by Parent after the Third Restatement Effective Date from issuances of its equity securities (provided that the aggregate amount of such aggregate net cash proceeds received in any twelve-month period shall be deemed not to exceed $250,000,000 for purposes of this Section 8.05(d)), in each case determined at, in the case of a Non-Declared Dividend, the date paid or made and, in the case of any other Dividend, the date declared or otherwise authorized, provided that such Dividend (other than a Dividend that is a Non-Declared Dividend) is paid within 90 days of the making of such declaration or other authorization, provided, further, that Dividends may only be paid or made by the Borrower under this Section 8.05(d) if at the time of, in the case of a Non-Declared Dividend, the date paid or made and, in the case of any other Dividend, the date declared or otherwise authorized, the excess of (i) the sum of the Total Unutilized Commitment and Permanent Surplus Cash, in each case at such time, over (ii) the sum of the amount of, in the case of a Non-Declared Dividend, the aggregate amount of such Non-Declared Dividend plus any other Dividends theretofore declared or otherwise authorized but then unpaid and, in the case of any other Dividend, the amount thereof so declared or otherwise authorized, shall equal at least $225,000,000; (e) the Borrower and any Direct Parent Subsidiary Guarantor may pay Dividends to Parent, so long as (x) no Event of Default then exists or would result therefrom, and (y) the cash proceeds thereof are used by Parent within 90 days of receipt thereof for the purposes described in Sections 8.05(b), (c), (d), (g) and (l); (f) Parent may issue and exchange shares of any class or series of its common stock now or hereafter outstanding for shares of any other class or series of its common stock now or hereafter outstanding; (g) Parent may, in connection with any reclassification of its common stock and any exchange permitted by clause (f) above, pay cash in lieu of issuing fractional shares of any class or series of its common stock; (h) the Borrower and any Direct Parent Subsidiary Guarantor may pay cash Dividends to Parent, so long as the proceeds thereof are used by Parent to pay operating -48- expenses incurred in the ordinary course of business (including, without limitation, professional fees and expenses) and other similar corporate overhead costs and expenses; (i) the Borrower and any Direct Parent Subsidiary Guarantor may pay cash Dividends to Parent, in the amounts and at the times of any payment by Parent in respect of its taxes (or taxes of its consolidated group), provided that (x) the amount of cash Dividends paid pursuant to this clause (i) to enable Parent to pay taxes at any time shall not exceed the amount of such taxes owing by Parent at such time, (y) any refunds received by Parent attributable to the Borrower, any Direct Parent Subsidiary Guarantor or any of their respective Subsidiaries shall be promptly returned by Parent to the relevant Person entitled thereto and (z) in no event shall the Borrower or any Direct Parent Subsidiary Guarantor be permitted to pay cash Dividends to Parent for the purposes described above in excess of the amounts permitted to be paid by it pursuant to Section 9.10 for the relevant tax period; (j) the Borrower may from time to time pay cash Dividends to Parent with the proceeds of payments received by it from Santa Fe under the Santa Fe Intercompany Note for purposes of enabling Parent to pay interest and principal on the Parent Intercompany Note as and when due, so long as Parent promptly (and in any event within 30 days of receipt thereof) uses the full amount of such cash Dividends to pay interest and principal on the Parent Intercompany Note as and when due; (k) (i) the Borrower may from time to time pay cash Dividends to Parent with the proceeds of Intercompany Loans received by it from Reynolds Tobacco for purposes of enabling Parent to pay cash Dividends on the Parent Preferred Stock held by the Borrower as and when due, so long as Parent promptly (and in any event within 30 days of receipt thereof) uses the full amount of such cash Dividends to pay cash Dividends on the Parent Preferred Stock held by the Borrower as and when due and (ii) Parent may from time to time pay to the Borrower cash Dividends on the Parent Preferred Stock as and when due; and (l) so long as no Event of Default then exists or would result therefrom, Parent may repurchase shares of Parent Common Stock for cash at such times on or prior to June 30, 2005, and in such amounts, as may be required pursuant to contractual obligations under the Combination Transaction Documents existing on the Third Restatement Effective Date to maintain B&W Parent's ownership interest in Parent at 42% (determined on a fully diluted basis); provided however that the aggregate amount of cash used to effect Dividends pursuant to this clause (l) after the Third Restatement Effective Date shall not exceed $55,000,000. 8.06 Transactions with Affiliates. No Credit Agreement Party will, nor will permit any of its Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any Affiliate (other than any Wholly-Owned Subsidiary of the Borrower) other than on terms and conditions substantially as favorable to such Credit Agreement Party or such Subsidiary as would be obtainable by such Credit Agreement Party or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate; provided that the foregoing restrictions shall not apply to: (i) customary fees -49- paid to members of the Board of Directors of Parent and of its Subsidiaries; (ii) the Transaction; (iii) Dividends may be paid to the extent provided in Section 8.05; and (iv) Parent and its Subsidiaries may enter into, and may make payments under, employment agreements, employee benefits plans, stock option plans, indemnification provisions, severance arrangements, and other similar compensatory arrangements with officers, employees and directors of Parent and its Subsidiaries in the ordinary course of business. 8.07 Consolidated Total Leverage Ratio. Parent will not permit the Consolidated Total Leverage Ratio at any time during a period set forth below to be greater than the ratio set forth opposite such period below: Period Ratio ------ ----- September 30, 2004 through and including September 30, 2005 2:25:1.00 Thereafter 2:00:1.00 8.08 Fixed Charge Coverage Ratio. Parent will not permit the ratio of (i) Adjusted Operating Income to (ii) Consolidated Fixed Charges for any Test Period ending after June 30, 2004 to be less than 1.10 to 1.00. 8.09 Investments. No Credit Agreement Party will, nor will permit any of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Marketable Investments (each of the foregoing an "Investment" and, collectively, "Investments"), except that the following shall be permitted: (a) any Subsidiary of Parent may acquire and hold accounts receivables owing to any of them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of the Borrower or such Subsidiary; (b) Parent and its Subsidiaries may acquire and hold cash, Marketable Investments and Investment Equities; provided however that the aggregate amount of cash, Marketable Investments and Investment Equities permitted to be held by the Non-Guarantor Parent Subsidiaries (including Santa Fe, CMSI and Lane) shall not exceed $25,000,000 for any period of five consecutive Business Days; (c) Parent and its Subsidiaries may hold the Investments held by them on the Third Restatement Effective Date and described on Annex IX, provided that any additional Investments made with respect thereto shall be permitted only if independently justified under the other provisions of this Section 8.09; (d) any Subsidiary of Parent may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of -50- suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (e) any Subsidiary of Parent may make loans and advances to their officers and employees for moving, relocation and travel expenses and other similar expenditures, in each case in the ordinary course of business in an aggregate amount not to exceed $1,000,000 at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances); (f) Parent may acquire and hold obligations of one or more officers, directors or other employees of Parent or any of its Subsidiaries in connection with such officers', directors' or employees' acquisition of shares of capital stock of Parent so long as no cash is paid by Parent or any of its Subsidiaries to such officers, directors or employees in connection with the acquisition of any such obligations; (g) Parent and any of its Subsidiaries may enter into Permitted Interest Rate Agreements and Permitted Currency Agreements; (h) any Subsidiary of Parent may acquire and hold promissory notes and other non-cash consideration issued by the purchaser of assets in connection with a sale or other disposition of such assets permitted by Sections 8.02(d) and (l); (i) Parent and its Wholly-Owned Subsidiaries may make intercompany loans and advances between and among one another (collectively, "Intercompany Loans"), provided that (i) at no time shall the aggregate outstanding principal amount of all Intercompany Loans made pursuant to this clause (i) by Credit Parties to Wholly-Owned Subsidiaries that are not Credit Parties (determined without regard to any write-downs or write-offs thereof), when added to (I) the aggregate amount of contributions, capitalizations and forgiveness theretofore made by Credit Parties pursuant to Section 8.09(j) to (or in respect of) Wholly-Owned Subsidiaries that are not Credit Parties, (II) the aggregate amount of all Investments made pursuant to Section 8.09(n) (taking the fair market value (as determined in good faith by senior management of Parent) of any non-cash assets so invested and determined without regard to any write-downs or write-offs thereof and net of any returns of capital), and (III) the aggregate amount of all transfers and dispositions made by Subsidiaries of Parent in reliance on Section 8.02(d) (taking the fair market value (as determined in good faith by senior management of Parent) of any non-cash assets so transferred or disposed of), exceed $175,000,000, (ii) no Intercompany Loans may be made by a Credit Party to a Wholly-Owned Subsidiary that is not a Credit Party at a time that an Event of Default exists and is continuing, (iii) if any such Intercompany Loan made by a Credit Party is evidenced by a promissory note, such note shall be in form and substance satisfactory to the Administrative Agent and shall be pledged to the Collateral Agent as, and to the extent required by, the Pledge Agreement (if then in effect), (iv) each Intercompany Loan made pursuant to this clause (i) shall be subject to subordination as, and to the extent required by, the Intercompany Subordination Agreement and (v) any Intercompany Loan made pursuant to this clause (i) shall cease to be permitted hereunder if the obligor or obligee thereunder ceases to be Parent or a Wholly-Owned Subsidiary of Parent as contemplated above; -51- (j) Parent and its Wholly-Owned Subsidiaries may make cash capital contributions to their respective Wholly-Owned Subsidiaries, and may capitalize or forgive any Indebtedness owed to them by a Wholly-Owned Subsidiary outstanding under clause (i) of this Section 8.09, provided that (i) the aggregate amount of such contributions, capitalizations and forgiveness made by Credit Parties to Wholly-Owned Subsidiaries that are not Credit Parties, when added to (I) the aggregate outstanding principal amount of Intercompany Loans made by Credit Parties to Wholly-Owned Subsidiaries that are not Credit Parties pursuant to Section 8.09(i) (determined without regard to any write-downs or write-offs thereof), (II) the aggregate amount of all Investments made pursuant to Section 8.09(n) (taking the fair market value (as determined in good faith by senior management of Parent) of any non-cash assets so invested and determined without regard to any write-downs or write-offs and net of any returns of capital), and (III) the aggregate amount of all transfers and dispositions made by Subsidiaries of Parent in reliance on Section 8.02(d) (taking the fair market value (as determined in good faith by senior management of Parent) of any non-cash assets so transferred or disposed of), shall not exceed an amount equal to $175,000,000 at any time, and (ii) no such contributions, capitalizations or forgivenesses may be made by a Credit Party to a Wholly-Owned Subsidiary that is not a Credit Party at any time that an Event of Default exists and is continuing; (k) any Subsidiary of Parent may acquire the stock or other equity interests of any Person owned by another Subsidiary of Parent by way of the dividend of such stock or equity interest by such other Subsidiary to such Subsidiary of Parent, so long as, in the event any such stock or other equity interests are held by the Borrower or a Subsidiary Guarantor immediately prior to the respective dividend, such stock or other equity interests are held by the Borrower or another Subsidiary Guarantor after giving effect to such dividend; (l) Parent and any of its Wholly-Owned Subsidiaries may acquire the capital stock or other equity interests of a Person that has theretofore been conducting a business, so long as (x) such acquisition constitutes a Permitted Investment and (y) no Default or Event of Default is then in existence or would result therefrom; (m) Subsidiaries of Parent may make loans or advances to salespersons employed by them for purposes of enabling such salespersons to purchase "car stock" and for other ordinary course purposes, all on a basis consistent with such Subsidiaries' past practices as in effect on the Third Restatement Effective Date; and (n) Parent and any of its Subsidiaries may make Investments not otherwise permitted by clauses (a) through (m) of this Section 8.09 (including by way of a capital contribution by Parent or any of its Subsidiaries to any other Person of cash, fixed assets and intellectual property but excluding capital stock or other equity interests of any Subsidiary Guarantor), so long as (x) no Default or Event of Default then exists or would result therefrom, and (y) the aggregate amount of all Investments made pursuant to this clause (n) (taking the fair market value (as determined in good faith by senior management of Parent) of any non-cash assets so invested and determined without regard to any write-downs or write-offs thereof and net of any returns of capital), when aggregated with -52- (I) the aggregate amount of all transfers and dispositions made by Subsidiaries of Parent in reliance on Section 8.02(d) (taking the fair market value (as determined in good faith by senior management of Parent) of any non-cash assets so transferred or disposed of), (II) the aggregate amount of contributions, capitalizations and forgiveness theretofore made by Credit Parties pursuant to Section 8.09(j) to (or in respect of) Wholly-Owned Subsidiaries that are not Credit Parties and (III) the aggregate outstanding principal amount of all Intercompany Loans made pursuant to Section 8.09(i) by Credit Parties to Wholly-Owned Subsidiaries that are not Credit Parties (determined without regard to any write-downs or write-offs thereof), shall not exceed $175,000,000. 8.10 No Negative Pledge. No Credit Agreement Party shall, nor shall permit any of its Subsidiaries to, enter into any agreement or arrangement that prohibits or restricts (including by requiring ratable sharing of Liens) any Credit Party from entering into the Security Documents and/or granting any Lien in favor of the Collateral Agent for the benefit of the Secured Creditors other than (i) any ratable sharing of Liens provisions governing any of the Existing Senior Notes or the Refinancing Senior Notes, in each case, to the extent such provisions shall be satisfied by the entering into of the Security Documents and the granting of Liens thereunder in favor of the Collateral Agent for the benefit of the Secured Creditors and (ii) any prohibition created in connection with any Lien permitted by Section 8.03 to the extent applicable only to the property subject to such Lien. 8.11 Prepayments of Indebtedness. The Borrower will not make any voluntary or optional prepayment on or voluntary or optional redemption, repurchase or acquisition for value of, any Qualified Stub Notes, Existing Senior Notes or Refinancing Senior Notes if after giving effect thereto the aggregate outstanding principal amount of Qualified Stub Notes, Existing Senior Notes and Refinancing Senior Notes would be less than $1,000,000,000. 8.12 Maintenance of Company Separateness. Each Credit Agreement Party will, and will cause each of its Subsidiaries to, satisfy customary Company formalities, including the holding of regular board of directors' and shareholders' meetings or action by directors or shareholders without a meeting and the maintenance of Company records. Neither Parent nor any other Credit Party shall make any payment to a creditor of any Non-Guarantor Subsidiary in respect of any liability of any Non-Guarantor Subsidiary, and no bank account of any Non-Guarantor Subsidiary shall be commingled with any bank account of Parent or any other Credit Party. Finally, neither Parent nor any of its Subsidiaries shall take any action, or conduct its affairs in a manner, which is likely to result in the Company existence of any Credit Agreement Party, any other Credit Party or any Non-Guarantor Subsidiaries being ignored, or in the assets and liabilities of Parent or any other Credit Party being substantively consolidated with those of any other such Person or any Non-Guarantor Subsidiary in a bankruptcy, reorganization or other insolvency proceeding. 8.13 Limitations on Amendments to Certain Documents. No Credit Agreement Party shall, nor shall permit any of its Subsidiaries to, amend, modify or change any Combination Transaction Document or the Tax Sharing Agreement, or enter into any new tax sharing agreement, other than any amendments, modifications or changes to any Combination Transaction Document or the Tax Sharing Agreement which do not in any way adversely affect the interests of the Lenders. -53- SECTION 9. Events of Default. Upon the occurrence of any of the following specified events (each, an "Event of Default"): 9.01 Payments. The Borrower shall (i) default in the payment when due of any principal of the Loans or (ii) default, and such default shall continue for five or more days, in the payment when due of any interest on the Loans or any Fees or any Unpaid Drawings or any other amounts owing hereunder or under any other Credit Document; or 9.02 Representations, etc. Any representation, warranty or statement made or deemed made by any Credit Party herein or in any other Credit Document or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 9.03 Covenants. Parent or any of its Subsidiaries shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Section 7.09, 7.10, 7.12 or 8, or (b) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this Agreement and such default shall continue unremedied for a period of at least 30 days after notice to any Credit Agreement Party by any Senior Managing Agent or the Required Lenders; or 9.04 Default Under Other Agreements. (a) Parent or any of its Subsidiaries shall (i) default in any payment with respect to any Indebtedness (other than the Obligations) in excess of $75,000,000 individually or $150,000,000 in the aggregate, for Parent and its Subsidiaries, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice or lapse of time is required), any such Indebtedness to become due prior to its stated maturity; or (b) any such Indebtedness shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment or as a mandatory prepayment (unless such required prepayment or mandatory prepayment results from a default or an event of the type that constitutes an Event of Default), prior to the stated maturity thereof; or 9.05 Bankruptcy, etc. Any Credit Party or any of its Material Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against any Credit Party or any of its Material Subsidiaries and the petition is not controverted within 10 days after service of notice of such case on such Credit Party or such Material Subsidiary, or is not dismissed within 60 days after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of any Credit Party or any of its Material Subsidiaries; or any Credit Party or any of its Material Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or -54- liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to any Credit Party or any of its Material Subsidiaries; or there is commenced against any Credit Party or any of its Material Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or any Credit Party or any of its Material Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or any Credit Party or any of its Material Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or any Credit Party or any of its Material Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by any Credit Party or any of its Material Subsidiaries for the purpose of effecting any of the foregoing; or 9.06 ERISA. (a) A single-employer plan (as defined in Section 4001 of ERISA) maintained or contributed to by any Credit Party or any of its Subsidiaries or any ERISA Affiliate shall fail to maintain the minimum funding standard required by Section 412 of the Code for any plan year or part thereof or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or shall provide security to induce the issuance of such waiver or extension, (b) any Plan is or shall have been terminated or the subject of termination proceedings under ERISA or an event has occurred entitling the PBGC to terminate a Plan under Section 4042(a) of ERISA, (c) any Plan shall have an Unfunded Current Liability, (d) Parent or any Subsidiary or any ERISA Affiliate has incurred or is likely to incur a material liability to or on account of a termination of or a withdrawal from a Plan under Section 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA, (e) Parent or any Subsidiary has incurred after the Third Restatement Effective Date liabilities (after giving effect to any reserves applicable thereto and maintained on the Third Restatement Effective Date) pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to retired employees (other than as required by Section 601 of ERISA) or employee pension benefit plans (as defined in Section 3(2) of ERISA) (except in each case solely as a result of a change in estimate or adjustment of liabilities existing on the Third Restatement Effective Date upon the adoption or implementation of Financial Accounting Statement 106), or (f) Parent or any Subsidiary or any ERISA Affiliate has incurred a liability under Section 409, 502(i) or 502(l) of ERISA or Section 4971 or 4975 of the Code; and there shall result from any such event or events described in the preceding clauses of this Section 9.06 the imposition of a Lien upon the assets of Parent or any Subsidiary, the granting of a security interest, or a liability or a material risk of incurring a liability, which Lien, security interest or liability would reasonably be expected to have a Material Adverse Effect; or 9.07 Guaranties. (i) Any Guaranty or any provision thereof shall cease to be in full force or effect, (ii) any Guarantor or any Person acting by or on behalf thereof shall deny or disaffirm such Guarantor's obligations under its Guaranty or (iii) any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to its Guaranty and such default, if (but only if) a default of the covenant therein not to violate the provisions of Section 7 hereof, shall continue unremedied for a period of at least 30 days after written notice to the Borrower from the Administrative Agent; or 9.08 Judgments. One or more judgments or decrees shall be entered against any Credit Party or any of its Material Subsidiaries involving a liability of $75,000,000 or more in -55- the case of any one such judgment or decree and $150,000,000 or more in the aggregate for all such judgments and decrees for the Credit Parties and their Material Subsidiaries (to the extent not paid or fully covered by insurance) and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days from the entry thereof; or 9.09 Security Documents. At any time the Security Documents are in effect (or required to be in effect pursuant to Section 7.10), (a) any Security Document shall cease to be in full force and effect, or shall cease to give the Collateral Agent the Liens or any of the material rights, powers and privileges purported to be created thereby in favor of the Collateral Agent, or (b) any Credit Party shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant to any such Security Document and such default (other than a default arising from the failure to deliver Collateral) shall continue unremedied for a period of at least 30 days after written notice to the Borrower by the Collateral Agent; or 9.10 Special Tax Default. The Holdings Tax Group or any Direct Parent Subsidiary Guarantor Tax Group (as each such term is defined in the Tax Sharing Agreement) shall, with respect to any taxable year, pay taxes in excess of the amount required to be paid by such group for such taxable year pursuant to the terms of the Tax Sharing Agreement; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Lenders, by written notice to either Credit Agreement Party, take any or all of the following actions, without prejudice to the rights of any Senior Managing Agent or any Lender to enforce its claims against the Borrower, except as otherwise specifically provided for in this Agreement (provided that, if an Event of Default specified in Section 9.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon the Commitment and Swingline Commitment, if any, of each Lender shall forthwith terminate immediately and any Facility Fee theretofore accrued shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and all other Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) terminate any Letter of Credit which may be terminated in accordance with its terms; (iv) direct the Borrower to pay (and the Borrower agrees that upon receipt of such notice, or upon the occurrence of an Event of Default specified in Section 9.05 with respect to the Borrower, it will pay) to the Administrative Agent at the Administrative Agent's Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations for Drawings that may subsequently occur thereunder, equal to the aggregate Stated Amount of all Letters of Credit issued and then outstanding; and/or (v) direct the Collateral Agent to enforce any or all of the Security Documents then in effect. Notwithstanding anything contained in the foregoing paragraph, if at any time within 60 days after an acceleration of the Loans pursuant to the preceding paragraph, the Borrower shall pay all arrears of interest and all payments on account of principal which shall have become due otherwise than by acceleration (with interest on principal and, to the extent -56- permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Defaults (other than non-payment of the principal of and accrued interest on the Loans, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 12.12, then Non-Defaulting Lenders holding at least 66-2/3% of the Total Commitment (which Lenders shall include in any event each of the Administrative Agent and the Syndication Agents), by written notice to the Borrower, may at their option rescind and annul the acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Default or impair any right consequent thereon. The provisions of this paragraph are intended merely to bind the Lenders to a decision which may be made at the election of the aforesaid percentage of the Lenders and are not intended to benefit the Borrower and do not grant the Borrower the right to require the Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. SECTION 10. Definitions. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "Absolute Rate" shall mean an interest rate (rounded to the nearest .0001) expressed as a decimal. "Acquired B&W Business" shall mean Lane, CMSI, B&W Opco and the related assets and liabilities acquired pursuant to the Combination Transactions (other than Santa Fe). "Acquisition Corp." shall mean RJR Acquisition Corp., a Delaware corporation. "Additional Security Documents" shall have the meaning provided in Section 7.10(c). "Adjusted Operating Income" shall mean for any period (x) the consolidated operating income of Parent and its Subsidiaries for such period plus (y) the sum of the consolidated depreciation expense, consolidated amortization expense and consolidated non-cash impairment of goodwill and trademarks (if any) of Parent and its Subsidiaries for such period, all as determined in accordance with GAAP, it being understood that the determination of the amount specified in clauses (x) and (y) shall be made on a basis consistent with the methodology utilized by the Borrower to determine such amount on the Third Restatement Effective Date, provided that (i) for the purposes of Section 8.08 only, for any Test Period during which Consolidated Fixed Charges includes cash taxes paid as a result of any extraordinary sale of assets, Adjusted Operating Income shall include a portion of the gross cash proceeds received by Parent and its Subsidiaries as a result of such extraordinary sale of assets equal to the percentage of such gross cash proceeds determined by dividing the cash taxes paid during such Test Period as a result of such sale by the aggregate cash taxes payable as a result of such sale, (ii) for the purposes only of Section 8.08 (to the extent such acquisition resulted in Consolidated Capital Expenditures) and 8.07 for any Test Period during which any acquisition of any Person or business occurs, Adjusted Operating Income shall be determined on a Pro Forma Basis to give effect to such acquisition as if it occurred on the first day of such Test Period (to the extent the business so acquired is not subsequently sold or otherwise disposed of by Parent or any of its Subsidiaries during such period), (iii) for all purposes, Adjusted Operating Income shall be -57- adjusted by subtracting therefrom the amount of all payments made by Parent and its Subsidiaries during any Test Period pursuant to any settlement with respect to tobacco liability which otherwise did not reduce Adjusted Operating Income for such period or prior periods , (iv) for any Test Period which includes any portion of the period from April 1, 2004 to and including December 31, 2004, Adjusted Operating Income shall be adjusted by adding thereto the pre-tax Fiscal Year 2004 Restructuring Charges recorded or accrued during such period, in each case to the extent deducted in any determination of Adjusted Operating Income and (v) for all purposes, for any Test Period which includes any portion of the period from Third Restatement Effective Date to and including July 30, 2006, Adjusted Operated Income shall be adjusted by adding thereto the pre-tax Post-Closing Merger Integration Charges recorded or accrued during such period, in each case to the extent deducted in any determination of Adjusted Operating Income. Notwithstanding anything to the contrary contained above, to the extent Adjusted Operating Income is to be determined for any period which includes any fiscal quarter of Parent (or portion thereof) occurring prior to the Third Restatement Effective Date, Adjusted Operating Income for such fiscal quarter shall be calculated in accordance with the definition of Test Period contained herein. "Administrative Agent" shall mean JPMCB, in its capacity as administrative agent for the Lenders hereunder, and shall include any successor thereto appointed pursuant to Section 11.09 or the immediately succeeding proviso; provided that, notwithstanding anything to the contrary contained in Section 11.09, if JPMCB shall cease to constitute a Senior Managing Agent hereunder, the remaining Senior Managing Agent or Senior Managing Agents shall have the option to appoint one of such remaining Senior Managing Agents (including itself, if it remains the sole Senior Managing Agent) as the Administrative Agent. "Administrative Agent's Office" shall mean the office of the Administrative Agent located at 270 Park Avenue, New York, New York 10017, or such other office in New York City as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 20% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Aggregate Outstandings" shall have the meaning provided in Section 4.02(A). "Agreement" shall mean the Original Credit Agreement as amended and restated pursuant to the First Amended and Restated Credit Agreement, further amended and restated pursuant to the Second Amended and Restated Credit Agreement and further amended and restated pursuant to this Third Amended and Restated Credit Agreement, as so amended and -58- restated and as the same may be further amended, restated, modified and/or supplemented from time to time. "Applicable Credit Rating" shall mean the highest rating level (a rating level being, e.g., each of BBB-, BBB and BBB+, in the case of S&P) assigned by each Rating Agency to any of the Long-Term Debt Issues of the Borrower. "Applicable Eurodollar Margin" shall mean, in respect of each Interest Period commencing during a period set forth below, the percentage set forth below opposite such period below: Applicable Period Eurodollar Margin ------ ----------------- Level IV NIG Period 1.500% Level III NIG Period 1.500% Level II NIG Period 1.500% Level I NIG Period 1.500% Minimum Investment Grade Period 1.500% Increased Investment Grade Period 1.375% Maximum Investment Grade Period 1.250% "Applicable Facility Fee Percentage" shall mean, at any time during a period set forth below, the percentage set forth opposite such period below: Applicable Period Fee Percentage ------ -------------- Level IV NIG Period 2.250% Level III NIG Period 1.750% Level II NIG Period 1.500% Level I NIG Period 1.250% Minimum Investment Grade Period 1.000% Increased Investment Grade Period .875% Maximum Investment Grade Period .750% -59- "Applicable Reference Rate Margin" shall mean, at any time during a period set forth below, the percentage set forth opposite such period below: Applicable Reference Period Rate Margin ------ ----------- Level IV NIG Period .500% Level III NIG Period .500% Level II NIG Period .500% Level I NIG Period .500% Minimum Investment Grade Period .500% Increased Investment Grade Period .375% Maximum Investment Grade Period .250% "Approved Alternate Currency" shall mean Euros and Pounds Sterling. "Approved Fund" means, with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Assignment Agreement" shall have the meaning provided in Section 12.04(b)(A). "Authorized Officer" shall mean, with respect to (i) delivering Notices of Borrowing, Notices of Conversion, Letter of Credit Requests and similar administrative notices, any person or persons that has or have been (x) authorized by the board of directors of Parent or the Borrower or (y) designated by a person authorized by the board of directors of Parent or the Borrower, in each case, to deliver such notices pursuant to this Agreement and that has or have appropriate signature cards on file with the Administrative Agent and the respective Letter of Credit Issuer; (ii) delivering financial information and officer's certificates pursuant to this Agreement, the chief financial officer, chief accounting officer, controller or other senior financial officer of Parent or the Borrower designated as such in writing to the Senior Managing Agents by the Borrower, in each case to the extent acceptable to the Majority SMA; and (iii) any other matter in connection with this Agreement or any other Credit Document, any officer (or a person or persons so designated by any two officers) of Parent or the Borrower. "BAT" shall mean British American Tobacco p.l.c., a company organized under the laws of England and Wales. -60- "B&W Opco" shall mean Brown & Williamson U.S.A., Inc., a North Carolina corporation. - "B&W Opco Formation Agreement" shall mean the Formation Agreement, dated as of the Third Restatement Effective Date in the form of Exhibit A to the Combination Agreement, between B&W Parent, B&W Opco and Parent, as in effect on the Third Restatement Effective Date and as the same may be amended, modified or supplemented from time to time pursuant to the terms hereof and thereof. "B&W Parent" shall mean Brown & Williamson Tobacco Corporation, a Delaware corporation and (prior to the consummation of the Transaction) an indirect Wholly-Owned Subsidiary of British American Tobacco p.l.c. "Bankruptcy Code" shall have the meaning provided in Section 9.05. "Base Rate" shall mean, for any day, the publicly announced prime rate on such date of JPMCB. "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrowing" shall mean and include (i) the incurrence of Swingline Loans from the Swingline Lenders on a pro rata basis on a given date and (ii) the incurrence of one Type of Loan by the Borrower from all of the Lenders on a pro rata basis on a given date (or resulting from conversions on a given date), having in the case of Eurodollar Loans the same Interest Period, provided that Reference Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in U.S. dollar deposits in the interbank Eurodollar market. "Calyon" shall mean Calyon New York Branch and any successor corporation thereto by merger, consolidation or otherwise. "Capital Lease", as applied to any Person, shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is, or is required to be, accounted for as a capital lease on the balance sheet of that Person. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of Parent or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. -61- "Change of Control" shall mean and include (a) at any time Continuing Directors shall not constitute a majority of the Board of Directors of Parent; (b) any Person or "group" (within the meaning of Rule 13d-3 and 13d-5 of the of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than B&W Parent), shall acquire, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 and 13d-5 of the Exchange Act) of 30% or more, on a fully diluted basis, of the economic or voting interest in Parent's capital stock, (c) B&W Parent and/or any other Person or "group" (within the meaning of Rules 13d-3 and 13d-5 of the Exchange Act) shall have obtained and exercised the power to elect or designate a majority of the Board of Directors of Parent and (d) Parent shall cease to own directly or indirectly 100% of the capital stock of the Borrower. "Citibank" shall mean Citibank, N.A. and any successor corporation thereto by merger, consolidation or otherwise. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans. "CMSI" shall mean Cigarette Manufacturers Supplies, Inc., a Delaware corporation. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all property (whether real, personal or otherwise) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document (including, without limitation, all Mortgaged Properties and all cash and cash equivalents delivered as collateral pursuant to Section 4.02(A) or 9). "Collateral Agent" shall mean the Administrative Agent acting as Collateral Agent under the Security Documents. "Combination Agreement" shall mean the Business Combination Agreement, dated as of October 27, 2003, between B&W Parent and the Borrower, as in effect on the Third Restatement Effective Date and as the same may be amended, modified and/or supplemented from time to time pursuant to the terms hereof and thereof. "Combination Transactions" shall mean, collectively, (i) the contribution by the Borrower of all of the shares of the capital stock of Santa Fe as a common equity contribution to Parent in exchange for shares of Parent Preferred Stock, (ii) the loan by FHS of $400,000,000 to Parent in exchange for the Parent Intercompany Note, (iii) the contribution by B&W Parent and its affiliates to B&W Opco of the Contributed Assets (as defined in the B&W Opco Formation Agreement) and the assumption by B&W Opco of the Assumed Liabilities (as defined in the B&W Opco Formation Agreement), in each case on the terms and conditions set forth in the B&W Opco Formation Agreement, (iv) the contribution by B&W Parent of all of the shares of the capital stock of B&W Opco as a common equity contribution to Parent in exchange for shares of Parent Common Stock (representing approximately 42% of the outstanding shares of -62- capital stock of Parent on a fully diluted basis) on the terms set forth in the Combination Agreement, (v) the merger of Parent Merger Sub with and into the Borrower (with the Borrower as the surviving corporation of such merger), as a result of which each issued and outstanding share of common stock of the Borrower shall be converted into a right to receive one share of Parent Common Stock, all on the terms set forth in the Combination Agreement, (vi) the sale by Lane Seller of all of the shares of capital stock of CMSI to Parent for an aggregate cash purchase price of $400,000,000 pursuant to, and in accordance with the terms of, the Lane Stock Purchase Agreement, (vii) the contribution by Parent of all of the shares of the capital stock of B&W Opco as a common equity contribution to the Borrower, (viii) the merger of Reynolds Tobacco with and into B&W Opco, with B&W Opco to be the surviving corporation of such merger and to be renamed "R. J. Reynolds Tobacco Company" and (ix) the entering into of the related agreements, documents and instruments contemplated by the Contribution Agreement. "Combination Transaction Documents" shall mean the Combination Agreement, the B&W Opco Formation Agreement, the Lane Stock Purchase Agreement, the Parent Intercompany Note and all other agreements, instruments and documents entered into or delivered in connection with the Combination Transactions, in each case as the same may be amended, modified and/or supplemented from time to time in accordance with the terms hereof and thereof. "Commitment" shall mean, with respect to each Lender, the amount set forth opposite such Lender's name in Annex I hereto, as the same may be reduced from time to time pursuant to Section 3.02, 3.03, 9 and/or 12.04(b)(A). "Commodities Agreement" shall mean any forward contract, futures contract, option contract or similar agreement or arrangement, in each case intended to protect the Persons entering into same from fluctuations in the price of, or shortage of supply of, commodities. "Company" shall mean any corporation, limited liability company, partnership or other business entity (or the adjectival form thereof, where appropriate). "Confidential Information" shall have the meaning provided in Section 12.15. "Consolidated Capital Expenditures" shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including in all events all amounts expended or capitalized under Capital Leases but excluding any amount representing capitalized interest) by Parent and its Subsidiaries during that period that, in conformity with GAAP, are or are required to be included as additions during such period to property, plant or equipment reflected in a consolidated balance sheet of Parent and its Subsidiaries, provided that (x) except as set forth in clause (y) below, Consolidated Capital Expenditures shall in any event include the purchase price paid in connection with the acquisition of any Person (including through the purchase of all of the capital stock or other ownership interests of such Person, or through merger or consolidation with any Person but not including any capital contribution that forms or establishes any Subsidiary) whether or not allocable to property, plant and equipment and (y) Consolidated Capital Expenditures shall in any event exclude (A) expenditures made in connection with the replacement, substitution or restoration of assets (i) to the extent financed from insurance proceeds paid on account of the loss of or damage to the assets being replaced or -63- restored or (ii) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (B) the purchase price paid by the Borrower or any of its Subsidiaries in connection with any Investment Equities and (C) the purchase price paid in connection with the acquisition of the Acquired B&W Business pursuant to the Combination Transactions. "Consolidated Cash Interest Expense" shall mean, for any period, (x) (i) consolidated interest expense of Parent and its Subsidiaries, but excluding, however, to the extent included in such consolidated interest expense, (I) non-cash interest expense and (II) amortization of debt issuance cost less (ii) consolidated cash interest income of Parent and its Subsidiaries, plus (y) cash dividends paid on all preferred stock of Parent and its Subsidiaries during such period (other than Parent Preferred Stock held by the Borrower), it being understood that the determination of the amounts specified in clauses (x)(i)(I) and (x)(i)(II) shall be made on a basis consistent with the methodology utilized by the Borrower to determine such amounts on the Third Restatement Effective Date. "Consolidated Fixed Charges" shall mean, for any period, the sum, without duplication, of (A) the amounts for such period of (i) Consolidated Cash Interest Expense, (ii) cash taxes paid by Parent and its Subsidiaries during such period (other than cash taxes during such period paid to the extent (and only to the extent) that such taxes were due and payable solely as a result of the NGH Acquisition), and (iii) Consolidated Capital Expenditures, all as determined on a consolidated basis for Parent and its Subsidiaries in accordance with GAAP, it being understood that the determination of the amounts specified in clause (iii) shall be made on a basis consistent with the methodology utilized by the Borrower to determine such amount on the Third Restatement Effective Date plus (B) all Dividends paid by Parent during such period pursuant to Sections 8.05(c), (d) and (g); provided however that (I) for purposes of any determination of "Consolidated Fixed Charges", if Parent would (in the absence of this proviso) violate Section 8.08 solely as a result of the inclusion of all or part of a Dividend paid pursuant to Section 8.05(d) during such period, Dividends actually paid by Parent during such period (in an aggregate amount not to exceed $200,000,000 for all such Dividends paid after the Third Restatement Effective Date and subject to exclusion pursuant to this proviso) shall be excluded for purposes of preceding clause (B) (but only to the extent necessary to avoid such violation) and (II) for purposes of determining compliance with Section 8.08 for any Test Period which includes any portion of the period from the Third Restatement Effective Date to and including July 30, 2006, Consolidated Fixed Charges shall be determined without regard to the Post-Merger Capital Costs made, recorded or accrued during such period, in each case to the extent otherwise included in the determination of Consolidated Capital Expenditures during such period. Notwithstanding anything to the contrary contained above, to the extent Consolidated Fixed Charges are to be determined for any period which includes any fiscal quarter of Parent (or portion thereof) occurring prior to the Third Restatement Effective Date, Consolidated Fixed Charges for such fiscal quarter shall be calculated in accordance with the definition of Test Period contained herein. "Consolidated Indebtedness" shall mean, at any time, the sum of (without duplication) (i) all indebtedness of Parent and its Subsidiaries for borrowed money (including obligations evidenced by bonds, notes or similar instruments), (ii) the aggregate amount of all Capitalized Lease Obligations of Parent, (iii) all Indebtedness of the types described in clause (i), -64- (ii), (iv), or (v) of this definition secured by any Lien on any property owned by Parent or any of its Subsidiaries, whether or not such Indebtedness has been assumed by such Person (provided that, if the Person has not assumed or otherwise become liable in respect of such Indebtedness, such Indebtedness shall be deemed to be in an amount equal to the fair market value of the property to which such Lien relates as determined in good faith by such Person), (iv) all Contingent Obligations of Parent and any of its Subsidiaries (regardless of any contrary treatment under GAAP), and (v) all Indebtedness of Parent and its Subsidiaries of the type described in clauses (ii), (iii), (iv) and (viii) of the definition of Indebtedness contained herein; provided that for purposes of this definition, (x) the amount of Indebtedness in respect of Hedging Agreements shall be at any time the unrealized net loss position, if any, of Parent and/or its Subsidiaries thereunder on a marked-to-market basis determined no more than one month prior to such time and (y) Contingent Obligations in respect of surety bonds issued in the ordinary course of business and consistent with the past practices of Parent and its Subsidiaries as in effect on the Third Restatement Effective Date (excluding, however, for avoidance of doubt, any Independent Litigation Bond or any other similar bond supporting litigation or judgment obligations) shall be excluded in any determination of "Consolidated Indebtedness". "Consolidated Total Leverage Ratio" shall mean, at any time, the ratio of (x) Consolidated Indebtedness at such time to (y) Adjusted Operating Income for the Test Period then most recently ended. "Contingent Obligations" shall mean, as to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other monetary obligations including reimbursement obligations in respect of litigation bonds (the "primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the lesser of (x) the maximum stated or determinable amount of such Contingent Obligation and (y) the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Continuing Director" shall mean, at any date, an individual (x) who is a member of the Board of Directors of Parent on the Third Restatement Effective Date, (y) who, as at such date, has been a member of such Board of Directors for at least the twelve preceding months, or (z) who has been nominated, or designated by B&W pursuant to a governance agreement, to be a -65- member of such Board of Directors by a majority of the other Continuing Directors then in office. "Continuing Lender" shall mean, at any time, (i) each Lender which has a Maturity Date which is the Facility Maturity Date and (ii) each Lender which has then consented to the extension of its then Maturity Date to the newly proposed Facility Maturity Date pursuant to Section 1.13 on or prior to the respective first Extension Response Date in circumstances where Continuing Lenders (as defined in preceding clause (i)) holding at least a majority of the Commitments have not consented to an extension of the Facility Maturity Date on or prior to such date. "Credit Agreement Party" shall mean and include Parent and the Borrower. "Credit Card Issuer" shall mean JPMCB or any of its affiliates (even if JPMCB ceases to be a Lender under the Credit Agreement for any reason) and their respective successors or assigns. "Credit Agreement Party Guaranty" shall mean, collectively, the guaranties of Parent and the Borrower pursuant to Section 13 of this Agreement. "Credit Documents" shall mean this Agreement, the Notes, the Subsidiary Guaranty, the Intercompany Subordination Agreement and (if then in effect) the Security Documents. "Credit Event" shall mean and include the making of a Loan and/or the issuance of a Letter of Credit. "Credit Party" shall mean each of Parent, the Borrower and each Subsidiary Guarantor. "Credit Rating" shall mean (i) the Applicable Credit Rating assigned by each Rating Agency, if such Applicable Credit Ratings are the same or (ii) if the Applicable Credit Ratings assigned by the Rating Agencies differ, the lower of the Applicable Credit Ratings assigned by the Rating Agencies. "Cumulative Adjusted Cash Net Income" shall mean, at any time for any determination thereof, the sum of (i) consolidated net income (or losses) of Parent and its Subsidiaries, determined in accordance with GAAP, for the period (taken as one accounting period) commencing July 1, 2004 and ending on the last day of the last fiscal quarter of Parent then ended plus (ii) all losses from debt retirement deducted in determining such consolidated net income of Parent and its Subsidiaries for the period referred to in clause (i) above plus (iii) all trademark and goodwill amortization and all non-cash impairments of goodwill and trademarks (if any) of Parent and its Subsidiaries for such period, in each case to the extent deducted in determining such consolidated net income for such period plus (iv) the post-tax Post-Closing Merger Integration Charges recorded or accrued during such period, in each case to the extent deducted in determining such consolidated net income for such period, less (v) any tax benefit relating to the losses described in preceding clause (ii) and included in determining such consolidated net income for such period; provided however that for purposes of determining -66- consolidated net income (or losses) of Parent and its Subsidiaries for purposes of this definition during the period from July 1, 2004 through the Third Restatement Effective Date, same shall be determined on a pro forma basis as if Parent had been formed, and the Transaction has been consummated, on July 1, 2004 (but without taking account of synergies, cost savings and other adjustments or charges during such period, except to the extent (x) otherwise expressly contemplated by this definition or (y) reflected as a pro forma adjustment in the footnotes appearing in the pro forma financial statements contained in Parent's Form S-4, filed with the SEC on June 23, 2004. "Currency Agreement" shall mean any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement designed to protect the Persons entering into same against fluctuations in currency values. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default other than an Event of Default under Section 9.08. "Defaulting Lender" shall mean any Lender with respect to which a Lender Default is in effect. "Designated Issuers" shall mean JPMCB, Citibank and Calyon, in each case, so long as such entity remains a Lender with a Commitment hereunder. "Direct Parent Subsidiary Guarantor" shall mean any Subsidiary Guarantor that is a direct Wholly-Owned Subsidiary of Parent. "Dividends" shall have the meaning provided in Section 8.05. "Documentation Agents" shall mean Lehman Commercial Paper Inc. and Mizuho and any successor to any such Person, by merger, consolidation or otherwise. "Documents" shall mean and include (i) the Credit Documents, (ii) the Combination Transaction Documents and (iii) all other documents, agreements and instruments executed in connection with the Transaction. "Domestic Subsidiary" shall mean, as to any Person, any Subsidiary of such Person incorporated or organized in the United States or any State or territory thereof. "Drawing" shall have the meaning provided in Section 2.04(b). "Eligible Transferee" shall mean and include a commercial Lender, financial institution or other "accredited investor" (as defined in SEC Regulation D); provided that Eligible Transferee shall not include any Person (or any Affiliate thereof) who competes with the Borrower and its Subsidiaries in the tobacco business. "Environmental Liability" means any liability, contingent or otherwise (including any liability or damages, costs or environmental remediation, fines or penalties or indemnities), of Parent or any Subsidiary directly or indirectly resulting from or based upon (a) violation of -67- any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower, any Subsidiary or any Credit Party would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loans" shall mean each Revolving Loan bearing interest at the rates provided in Section 1.08(b). "Eurodollar Rate" shall mean, with respect to each day during each Interest Period for a Eurodollar Loan, the rate of interest determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate Service (or otherwise on such service), the "Eurodollar Rate" shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, the "Eurodollar Rate" shall instead be the rate per annum announced by the Administrative Agent as the rate at which the Administrative Agent is offered Dollar deposits at or about 10:00 A.M., New York time, two Business Days prior to the beginning of such Interest Period, in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "Event of Default" shall have the meaning provided in Section 9. "Excluded Collateral" shall mean (i) the capital stock of Santa Fe, CMSI, Lane and the Excluded Joint Ventures and (ii) the leasehold interest and rights of Reynolds Tobacco in and to property located at the Zachary Smith Reynolds Airport, under a certain lease agreement with the Airport Commission of Forsyth County, dated January 1, 1980, recorded in Book 1298, -68- Page 1365, Forsyth County Registry, and assigned and transferred to Reynolds Tobacco by its former parent company pursuant to an Assignment of Lease, dated April 27, 1989, to the extent the grant of a leasehold mortgage in such leasehold is prohibited by the terms thereof. "Excluded Joint Ventures" shall mean and include Targacept, Inc. and Large Scale Biology Corporation. "Existing Debt" shall mean the Indebtedness of the Subsidiaries of Parent outstanding on the Third Restatement Effective Date and set forth in Annex VII (other than Indebtedness evidenced by Existing Senior Notes and Independent Litigation Bonds), provided that such Indebtedness (excluding intercompany Indebtedness among Parent and its Subsidiaries) shall not exceed $145,000,000 in aggregate outstanding principal amount. "Existing Letter of Credit" shall have the meaning provided in Section 2.01(c). "Existing Liens" shall mean the Liens on the assets and properties of the Subsidiaries of Parent outstanding on the Third Restatement Effective Date and set forth in Annex VI, provided that the Indebtedness secured by all such Liens shall not exceed $20,000,000 in aggregate outstanding principal amount. "Existing Mortgage Policies" shall mean the Mortgage Policies for each Existing Mortgaged Property pursuant to the Second Amended and Restated Credit Agreement. "Existing Mortgaged Properties" shall mean all real property of the Borrower and its Subsidiaries listed on Annex VIII and designated as "Existing Mortgaged Properties" therein. "Existing Mortgages" shall mean all Mortgages granted by the Borrower and its Subsidiaries pursuant to the Second Amended and Restated Credit Agreement and which have not been released prior to the Third Restatement Effective Date. "Existing Senior Notes" shall mean senior notes of the Borrower issued pursuant to (i) that certain Indenture, dated as of May 15, 1999, among the Borrower, as issuer, various Subsidiaries of the Borrower, as guarantors, and The Bank of New York, as trustee, and (ii) that certain Indenture, dated as of May 20, 2002, among the Borrower, as issuer, various Subsidiaries of the Borrower, as guarantors, and The Bank of New York, as trustee, in each case as the same may be amended, modified and/or supplemented from time to time on terms reasonably satisfactory to the Senior Managing Agents. "Existing Interest Rate Swap Agreement" shall mean that certain Interest Rate Swap, dated as of May 16, 2002, between the Borrower and Calyon (Ref #32834), as in effect on the Third Restatement Effective Date. "Expected Total Commitment" shall mean, at any time of determination with respect to any future date, the Total Commitment in effect at such time of determination less the aggregate Commitments of all Lenders with a Maturity Date prior to such future date. "Extension Date" shall mean, at any time, (i) initially, February 13, 2006 and (ii) thereafter, the date occurring one year prior to the then existing Facility Maturity Date. -69- "Extension Response Date" shall have the meaning provided in Section 1.13. "Facility Fee" shall have the meaning provided in Section 3.01(a). "Facility Maturity Date" shall mean February 13, 2006 (or, if the Existing Senior Notes due on May 15, 2006 have been refinanced in full with the proceeds of a new issuance or issuances of Refinancing Senior Notes in an aggregate principal amount equal to at least the aggregate principal amount of such Existing Senior Notes so refinanced on or prior to February 13, 2006, January 30, 2007), as such date may be extended pursuant to Section 1.13. "Facing Fee" shall have the meaning provided in Section 3.01(c). "Federal Funds Rate" shall mean for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "Fees" shall mean all amounts payable pursuant to, or referred to in, Section 3.01. "FHS" shall mean FHS, Inc., a Delaware corporation, and any successor thereto by merger, consolidation, reincorporation or otherwise. "Fiscal Year 2004 Restructuring Charges" shall mean restructuring charges actually accrued or recorded by the Borrower and its Subsidiaries during the period commencing on April 1, 2004 and ending December 31, 2004 in connection with lease terminations, the relocation of equipment and employees and the payment of professional fees (including other associated costs disclosed in the SEC Form 10-K or SEC Form 10-Q, as the case may be, filed by the Borrower with the SEC for the fiscal quarter in which such restructuring charges are accrued or recorded); provided that the aggregate amount of such restructuring charges (to the extent provided for as an add-back pursuant to the definition of "Adjusted Operating Income") shall not exceed $11,000,000 during such fiscal year (determined on a pre-tax basis). "First Amended and Restated Credit Agreement" shall have the meaning provided in the first recital of this Agreement. "First Restatement Effective Date" shall mean the Restatement Effective Date under, and as defined in, the First Amended and Restated Credit Agreement. "Fitch" shall mean Fitch Ratings. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time; it being understood and agreed that determinations in accordance with GAAP for purposes of Section 8, including defined terms as used therein, shall be made pursuant to Section 12.07(a). -70- "GECC" shall mean General Electric Capital Corporation and any successor thereto. "GMB" shall mean GMB, Inc., a North Carolina corporation. "Government Acts" shall have the meaning provided in Section 2.06(a). "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Granting Lender" shall have the meaning provided in Section 12.04. "Guaranteed Creditors" shall mean and include the Administrative Agent, the Collateral Agent, each Senior Managing Agent, each Lender, each Swingline Lender, each Letter of Credit Issuer, each Credit Card Issuer, each party (other than any Credit Party) party to (or participating in) a Hedging Agreement to the extent such party is a Lender or an affiliate thereof (even if such Lender subsequently ceases to be a Lender under this Agreement for any reason) and their subsequent assigns and Calyon, as counterparty to the Existing Interest Rate Swap Agreement. "Guaranteed Party" shall mean Parent, the Borrower and each other Subsidiary of Parent (other than any Non-Guarantor Parent Subsidiary) party to a Secured Credit Card Agreement with any Credit Card Issuer or a Hedging Agreement with any Guaranteed Creditor. "Guarantor" shall mean Parent, the Borrower and each Subsidiary Guarantor. "Guaranty" shall mean and include the Subsidiary Guaranty and the Credit Agreement Party Guaranty. "Guaranty Event" shall mean that the Applicable Credit Rating issued by at least one Rating Agency is at least one level below the Minimum Investment Grade Rating. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreements" shall mean and include Commodities Agreements, Currency Agreements, Interest Rate Agreements and all other similar hedging arrangements. "Increased Investment Grade Period" shall mean any period during which the Credit Rating at all times is the Increased Investment Grade Rating. -71- "Increased Investment Grade Rating" shall mean the rating assigned by each Rating Agency which is one rating level above the Minimum Investment Grade Rating, it being understood that as of the date of this Agreement the "Increased Investment Grade Rating" of S&P is BBB and the "Increased Investment Grade Rating" of Moody's is Baa2. "Indebtedness" of any Person shall mean (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder until reimbursed in full, (iv) the stated amount of all litigation bonds issued for the account of such Person and, without duplication, all payments made thereunder until reimbursed in full, (v) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed, (vi) all Capitalized Lease Obligations of such Person, (vii) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (viii) all obligations of such Person under Hedging Agreements and (ix) all Contingent Obligations of such Person, provided that Indebtedness shall not include (x) trade payables and accrued expenses, in each case arising in the ordinary course of business and (y) any obligation of the Borrower or any Subsidiary thereof to purchase tobacco and/or other products, services and produce utilized in its business pursuant to agreements entered into in the ordinary course of business on a basis consistent with the Borrower's past practices or then current industry practices; and provided, further, that (a) for the purposes of Section 9.04, the amount of Indebtedness represented by any Hedging Agreement shall be at any time the unrealized net loss position, if any, of the Borrower and/or its Subsidiaries thereunder on a marked-to-market basis determined no more than one month prior to such time and (b) for the purposes of determining the Indebtedness permitted to be secured pursuant to Section 8.03(g) or outstanding under Section 8.04(m), the amount of Indebtedness included in such determination that is attributable to all Hedging Agreements secured or permitted thereunder, as the case may be, shall be an amount equal to the Net Termination Value, if any, of all such Hedging Agreements (less, in the case of any determination of Indebtedness permitted to be outstanding under Section 8.04(m) only, the aggregate amount of cash and cash equivalents pledged to secure obligations under all such Hedging Agreements pursuant to customary cash collateral arrangements). "Indemnitee" shall have the meaning provided in Section 12.01. "Independent Litigation Bond" shall mean any surety bond, judgment bond or other bond or insurance policy issued for bonding litigation judgments for appeal, other than any such bond or insurance policy that has been fully cash collateralized (to the satisfaction of the Majority SMA) by the Borrower or Reynolds Tobacco or which is supported by Letters of Credit issued hereunder in the full stated amount of such bond or insurance policy. "Insignificant Subsidiary" shall mean, at any time, any Subsidiary of Parent (other than any Subsidiary Guarantor and any Non-Guarantor Parent Subsidiary) the gross book value of the assets of which does not exceed $10,000,000. "Intercompany Loans" shall have the meaning provided in Section 8.09(i). -72- "Intercompany Subordination Agreement" shall have the meaning provided in Section 5.01M. "Interest Period" shall mean, with respect to any Loan, the interest period applicable thereto, as determined pursuant to Section 1.09. "Interest Rate Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate futures contract, interest rate option contract or other similar agreement or arrangement. "Investment Equities" shall mean and include (x) equity securities (i) of any entity in which Parent and its Subsidiaries do not collectively own more than 5% of the outstanding equity securities of such entity, (ii) which are listed and regularly traded on a nationally recognized U.S. stock exchange or market and (iii) which are not restricted as to resale by the Borrower or its Subsidiaries (whether by contract, law or otherwise), (y) preferred stock of any investment vehicle owned by the Borrower or any of its Subsidiaries, so long as (i) such investment vehicle invests solely in debt securities and (ii) the aggregate amount of cash used to acquire such preferred stock after the Third Restatement Effective Date does not exceed $25,000,000 and (z) the equity interests of the Excluded Joint Ventures owned by the Borrower or any of its Subsidiaries. "Investments" shall have the meaning provided in Section 8.09. "JPMCB" shall mean JPMorgan Chase Bank and any successor corporation thereto by merger, consolidation or otherwise. "Lane" shall mean Lane Limited, a New York corporation. "Lane Seller" shall mean American Cigarette Company Overseas B.V., an Netherlands affiliate of BAT. "Lane Stock Purchase Agreement" shall mean the Stock Purchase Agreement, dated as of the Third Restatement Effective Date in the form of Exhibit B to the Combination Agreement, among Lane Seller, CMSI and the Borrower, as in effect on the Third Restatement Effective Date and as the same may be amended, modified or supplemented from time to time pursuant to the terms hereof and thereof. "Lender" shall have the meaning provided in the first paragraph of this Agreement. "Lender Default" shall mean (i) the refusal (which has not been retracted) of a Lender to make available its portion of any Borrowing or to fund its portion of any unreimbursed payment under Section 2.03(c) or (ii) a Lender having notified any Senior Managing Agent and/or the Borrower that it does not intend to comply with its obligations under Section 1.01(A) or 1.01(C) or under Section 2.03(c), in the case of either (i) or (ii) as a result of the appointment of a receiver or conservator with respect to such Lender at the direction or request of any regulatory agency or authority. -73- "Letter of Credit" shall mean each standby letter of credit issued pursuant to Section 2.01. "Letter of Credit Fee" shall have the meaning provided in Section 3.01(b). "Letter of Credit Issuer" shall mean and include (i) each of the Designated Issuers, (ii) each other Lender requested by the Borrower to issue Letters of Credit to the extent consented to by such Lender and (iii) with respect to the Existing Letters of Credit, the Lender designated as the issuer thereof on Annex III. "Letter of Credit Outstandings" shall mean, at any time, the sum of, without duplication, (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.02. "Level I NIG Period" shall mean any period during which the Credit Rating is at all times the Level I NIG Rating. "Level I NIG Rating" shall mean the rating assigned by each Rating Agency which is one level below the Minimum Investment Grade Rating, it being understood that as of the Third Restatement Effective Date the "Level I NIG Rating" of S&P is BB+ and the "Level I NIG Rating" of Moody's is Ba1. "Level II NIG Period" shall mean any period during which the Credit Rating is at all times the Level II NIG Rating. "Level II NIG Rating" shall mean the rating assigned by each Rating Agency which is one level below the Level I NIG Rating, it being understood that as of the Third Restatement Effective Date the "Level II NIG Rating" of S&P is BB and the "Level II NIG Rating" of Moody's is Ba2. "Level III NIG Period" shall mean any period during which the Credit Rating is at all times the Level III NIG Rating. "Level III NIG Rating" shall mean the rating assigned by each Rating Agency which is one level below the Level II NIG Rating, it being understood that as of the Third Restatement Effective Date the "Level III NIG Rating" of S&P is BB- and the "Level III NIG Rating" of Moody's is Ba3. "Level IV NIG Period" shall mean any period during which the Credit Rating is at all times below the Level III NIG Rating. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement (other than customary negative pledge clauses) to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof). -74- "Loan" shall mean any Revolving Loan or Swingline Loan. "Long-Term Debt Issues" shall mean, with respect to the Borrower, each issuance of long-term senior debt of the Borrower which ranks on a parity, as to payment and security, with the Loans. "Majority SMA" shall mean, at any time, at least one-half in number of the Senior Managing Agents. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(C). "Margin Stock" shall have the meaning provided in Regulation U. "Marketable Investments" shall mean , as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof having maturities of not more than two years from the date of acquisition, (ii) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within two years from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from S&P, Moody's or Fitch, (iii) Dollar denominated domestic and Eurodollar time deposits, domestic and Yankee certificates of deposit and bank obligations and bankers acceptances of any Lender or any commercial bank having, or which is the principal banking subsidiary of a bank holding company having, a long-term unsecured debt rating of at least "A" or the equivalent thereof from S&P or Fitch or "A2" or the equivalent thereof from Moody's with maturities of not more than two years from the date of acquisition by such Person, (iv) repurchase obligations with a term of not more than one year and collateralized with US Treasury, US Government Agency or other permitted investments consistent with the Borrower's corporate guidelines and which have a collateral margin of at least 102%, marked to market daily, (v) commercial paper, extendable commercial notes and master notes issued by any Person incorporated in the United States and euro-commercial paper of domestic and foreign companies rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's or at least F-1 by Fitch and in each case maturing not more than 397 days after the date of acquisition by such Person, (vi) U.S. dollar denominated commercial paper or Canadian dollar commercial paper and government obligations of Canada, fully hedged, of Canadian companies whose commercial paper is rated R-1 by Dominion Bond Rating Service, (vii) investments in 2a-7 money market funds, (viii) corporate bonds and medium term notes rated at least "A" by S&P and/or Fitch and/or "A2" by Moody's with maturities of not more than two years from the date of acquisition by such Person, (ix) asset-backed securities and collateralized mortgage obligations rated "A" or better by any of S&P, Moody's or Fitch with maturities or rate reset dates of not more than two years from the date of acquisition by such Person, (x) taxable money market preferred (including but not limited to taxable auction debt) instruments rated at least "A" by S&P and/or Moody's and/or Fitch and redeemable at par with a rollover period no longer than six months, (xi) tax exempt debt and par value preferred instruments rate at least "A" or the equivalent by S&P and/or Moody's and/or Fitch and redeemable at par with a rollover period no longer than six months, (xii) domestic and international equity and bond funds (including indexed funds) with a capitalization of not less than $500.0 million and (xiii) separate account portfolios managed by registered investment advisors with guidelines adhering substantially to the securities above. -75- "Material Adverse Effect" shall mean a material adverse effect on (i) the operations, business, property, assets or financial condition of Parent and its Subsidiaries taken as a whole, (ii) the rights or remedies of the Agents and the Lenders or the ability of any Credit Party to perform its obligations to the Agents or the Lenders hereunder or under any other Credit Document to which it is party, (iii) in the case of any condition to be satisfied, or representation or warranty to be made, on the Third Restatement Effective Date, (x) the Transaction or (y) the operations, business, properties, assets, financial conditions or prospects of the Acquired B&W Business taken as a whole and/or (iv) in the case of Section 5.01G, Section 5.01H and Section 6.04, on the prospects of Parent and its Subsidiaries taken as a whole, provided that (w) neither the existence of the Permitted Obligations described in clause (ix) of the definition thereof nor the issuance of Letters of Credit to support such Permitted Obligations shall in and of itself constitute a "Material Adverse Effect", (x) the existence of any action, suit, proceeding or inquiry or the rendering of any verdict or entry of any order, injunction or judgment thereunder will not in and of itself constitute a "Material Adverse Effect", unless such action, suit, proceeding or verdict, order, injunction and/or judgment has also been designated in writing by the Required Lenders as having a Material Adverse Effect, (y) the existence of, or the rendering of any verdict or entry of any order, injunction or judgment in, any action, suit, proceeding or inquiry listed on Annex IV will not have a "Material Adverse Effect" for purposes of Section 5.01H and Section 6.04 and (z) (I) the existence of, or the rendering of, any verdict or entry of any order, injunction or judgment that in each case can be stayed pending appeal (but only for so long as such stay can still be obtained) or that is stayed pending appeal and (II) the posting of a supersedeas or other appeal bond in respect of any verdict, order or judgment shall not, in each case, in and of itself have a "Material Adverse Effect" for purposes of Section 5.01G or Section 6.09(d), even if such verdict, order or judgment could be viewed as having a material adverse effect on future litigation prospects, unless such verdict, order or judgment results in an actual material adverse effect on the operations, business, property, assets or financial condition of Parent and its Subsidiaries taken as a whole. It is understood and agreed that for purposes of any condition to be satisfied, or representation or warranty to be made, on the Third Restatement Effective Date references in this definition to "Parent and its Subsidiaries" shall include the Acquired B&W Business. "Material Subsidiary" shall mean and include the Borrower, Reynolds Tobacco, Acquisition Corp., each of the Specified Subsidiaries and each other Subsidiary of Parent (including any Person first becoming a Subsidiary upon consummation of a Permitted Investment) to the extent that (x) the aggregate book value of the assets of such other Subsidiary, determined on a consolidating basis, is equal to or more than $100,000,000 or (y) the net sales of such other Subsidiary during its then most recently ended fiscal year, determined on a consolidating basis, were equal to or more than $75,000,000, provided that such net sales shall be determined on a pro forma basis for the 12 months last ended when determining whether any Person that is the survivor of any merger or consolidation or that is the transferee of any property or assets from other Subsidiaries of Parent is a Material Subsidiary. "Material Subsidiary Threshold Event" shall mean the occurrence of either of the following events: (i) the aggregate book value of the assets of all Subsidiaries of Parent (other than Sante Fe, Lane and CMSI) which (x) do not constitute Material Subsidiaries in accordance with the definition thereof or (y) are not then party to the Subsidiary Guaranty (and, if a Trigger Event is then in existence, the relevant Security Documents), exceeds $250,000,000 or (ii) the -76- net sales of all Subsidiaries of Parent (other than Sante Fe, Lane and CMSI) which (x) do not constitute Material Subsidiaries in accordance with the definition thereof or (y) are not then party to the Subsidiary Guaranty (and, if a Trigger Event is then in existence, the relevant Security Documents), exceeds $200,000,000. "Maturity Date" of any Lender shall mean February 13, 2006 (or, if the Existing Senior Notes due on May 15, 2006 have been refinanced in full with the proceeds of a new issuance or issuances of Refinancing Senior Notes in an aggregate principal amount equal to at least the aggregate principal amount of such Existing Senior Notes so refinanced on or prior to February 13, 2006, January 30, 2007), as such date may be extended for such Lender pursuant to Section 1.13. "Maximum Investment Grade Period" shall mean any period during which the Credit Rating is at all times above the Increased Investment Grade Rating. "Minimum Borrowing Amount" shall mean (i) with respect to a Borrowing of Revolving Loans, $10,000,000 and (ii) with respect to a Borrowing of Swingline Loans, $5,000,000. "Minimum Investment Grade Period" shall mean any period during which the Credit Rating is at all times the Minimum Investment Grade Rating. "Minimum Investment Grade Rating" shall mean the lowest rating level established as investment grade by each Rating Agency; it being understood that, as of the Third Restatement Effective Date, the "Minimum Investment Grade Rating" of S&P is BBB- and the "Minimum Investment Grade Rating" of Moody's is Baa3. "Mizuho" shall mean Mizuho Corporate Bank, Ltd. and any successor thereto. "Moody's" shall mean Moody's Investors Service, Inc., or any successor corporation thereto. "Mortgage" shall mean each mortgage, deed of trust or deed to secure debt required to be delivered with respect to any real property pursuant to the terms of this Agreement (including, after the execution and delivery thereof, each Mortgage required pursuant to Section 7.10), together with any assignment of leases and rents to be executed in connection therewith (as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof). "Mortgage Amendment" shall have the meaning provided in Section 5.01P. "Mortgage Policy" shall mean each mortgage title insurance policy (and all endorsements thereto) for each Mortgaged Property required to be delivered pursuant to this Agreement. "Mortgaged Properties" shall mean the Existing Mortgaged Properties and the New Mortgaged Properties and shall include any real property mortgaged pursuant to Section 7.10. -77- "Net Termination Value" shall mean at any time, with respect to all Hedging Agreements for which a Net Termination Value is being determined, the excess, if positive, of (i) the aggregate of the unrealized net loss position of Parent and/or its Subsidiaries under each of such Hedging Agreements on a marked-to-market basis determined no more than one month prior to such time less (ii) the aggregate of the unrealized net gain position of Parent and/or its Subsidiaries under each of such Hedging Agreements on a marked-to-market basis determined no more than one month prior to such time. "New Mortgaged Properties" shall mean each Mortgaged Property designated as such on Annex VIII hereto. "NGH" shall mean Nabisco Group Holdings Corp., a Delaware corporation. "NGH Acquisition" shall have the meaning provided in the Second Amended and Restated Credit Agreement. "Non-Continuing Lender" shall mean, at any time, each Lender which is not a Continuing Lender at such time. "Non-Declared Dividend" shall mean and include, as to any Person, (i) the redemption, retirement, purchase, or other acquisition, directly or indirectly, for a consideration, of any shares of any class of its capital stock or of any other equity interests of such Person outstanding on the Third Restatement Effective Date or thereafter (or any warrants for or options or stock or similar appreciation rights in respect of any such shares or equity interests but not including any convertible debt) or the setting aside of any funds for any of the foregoing purposes and (ii) the making or payment of any other Dividend on or after the Third Restatement Effective Date by such Person which does not require or involve a declaration or authorization by such Person. "Non-Defaulting Lender" shall mean and include each Lender other than a Defaulting Lender. "Non-Guarantor Parent Subsidiary" shall mean any Non-Guarantor Subsidiary of Parent that is not a Subsidiary of the Borrower. "Non-Guarantor Subsidiary" shall mean (i) on the Third Restatement Effective Date, each Subsidiary of Parent listed on Part B of Annex V and (ii) after the Third Restatement Effective Date, any Subsidiary of Parent that is not at such time a Subsidiary Guarantor. "Note" shall have the meaning provided in Section 1.05(a). "Notice of Borrowing" shall have the meaning provided in Section 1.03(a). "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notifying SL Lender" shall have the meaning provided in Section 1.01(C). -78- "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to any Senior Managing Agent, the Administrative Agent or any Lender pursuant to the terms of this Agreement or any other Credit Document. "Original Credit Agreement" shall mean the Credit Agreement, dated as of May 7, 1999, among the Borrower and certain financial institutions, as in effect on the First Restatement Effective Date (immediately prior to giving effect thereto). "Original Effective Date" shall mean the "Closing Date" under, and as defined in, the Original Credit Agreement. "Original Execution Date" shall mean the "Execution Date" under, and as defined in, the Original Credit Agreement. "Original Senior Managing Agents" shall mean the "Senior Managing Agents", as such term is defined in the Original Credit Agreement. "Parent" shall have the meaning provided in the first paragraph of this Agreement. "Parent Common Stock" shall mean the common stock, par value $0.0001 per share, of Parent. "Parent Intercompany Note" shall mean that certain promissory note issued by Parent to FHS on the Third Restatement Effective Date in an initial aggregate principal amount of $400,000,000, which promissory note shall be in form and substance satisfactory to the Senior Managing Agent. "Parent Preferred Stock" shall mean the Series B preferred stock, par value $0.01 per share, of Parent, having the terms set forth in the Articles of Incorporation of Parent. "Parent Merger Sub" shall mean RAI Merger Corp., a Delaware corporation and (prior to the consummation of the Acquisition) a Wholly-Owned Subsidiary of Parent. "Participant" shall have the meaning provided in Section 2.03(a). "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "PBGC Obligations" shall mean the obligations imposed by the PBGC on the Borrower and its Subsidiaries in connection with the Transactions (as defined in the Original Credit Agreement) pursuant to that certain Agreement, dated as of May 20, 1999 and amended as of June 14, 1999, by and among the PBGC, NGH and the Borrower. "Percentage" shall mean, at any time, for each Lender, the percentage obtained by dividing such Lender's Commitment at such time by the Total Commitment at such time, provided that at any time when the Total Commitment shall have been terminated, each Lender's -79- Percentage shall be the percentage obtained by dividing such Lender's outstanding Revolving Loans at such time by the aggregate outstanding Revolving Loans of all Lenders at such time. "Permanent Surplus Cash" shall mean cash on hand and cash equivalents (including marketable securities) at Parent and its Domestic Subsidiaries that has not been designated to be used to pay income, excise or other taxes or to make settlement payments in respect of tobacco liability, provided that the lesser of (i) $100,000,000 and (ii) the total amount of cash on hand in the cash management systems of Parent and its Domestic Subsidiaries, shall be excluded from Permanent Surplus Cash. "Permitted Currency Agreement" shall mean any Currency Agreement entered into in the ordinary course of business by Parent, the Borrower and/or any other Subsidiary of Parent with any Lender or Lenders (and/or their affiliates) to the extent consistent with the practices of the Borrower and its Subsidiaries prior to the Third Restatement Effective Date or with then current practices in the industry and so long as the entering into of any such Currency Agreement is a bona fide hedging activity and not for speculative purposes. "Permitted Encumbrance" shall mean, with respect to any Mortgaged Property, such exceptions to title as are set forth in the Mortgage Policy delivered with respect thereto, all of which exceptions must be acceptable to the Administrative Agent in its reasonable discretion. "Permitted Interest Rate Agreements" shall mean, collectively, (i) Interest Rate Agreements entered into in the ordinary course of business by Parent, the Borrower and/or any Subsidiary Guarantor with any financial institution that is a Lender (and/or an affiliate of any Lender) at the time of the entering into of any such Interest Rate Agreement, so long as the entering into of any such Interest Rate Agreement is a bona fide hedging activity and not for speculative purposes and (ii) the Existing Interest Rate Swap Agreement . "Permitted Investment" shall mean the acquisition by Parent or any of its Subsidiaries of the capital stock or other equity interests of a Person that has theretofore been conducting a business, to the extent that (i) all or substantially all of the purchase price therefor would constitute Consolidated Capital Expenditures, (ii) after giving effect to such acquisition, the character of the business of Parent and its Subsidiaries taken as a whole has not been substantially altered from that conducted by Parent and its Subsidiaries taken as a whole on the Third Restatement Effective Date and (iii) such Person shall not be a Material Subsidiary after giving effect to such acquisition, unless such acquisition has been consented to in writing by the Senior Managing Agents or such Person becomes a Subsidiary Guarantor upon the consummation of such acquisition and takes all of the actions specified in Section 8.02(h)(y)(B). "Permitted Liens" shall have the meaning provided in Section 8.03. "Permitted Litigation Bonding" shall mean the making of deposits with the proceeds of Loans and/or the issuance of Letters of Credit, in each case for the purposes of bonding litigation judgments entered against any Credit Party after the Third Restatement Effective Date, provided that, at the time of the making of any such Loan or issuance of any such Letter of Credit, and after giving effect to any usage by the Credit Parties of Permanent Surplus Cash to effect such bonding of litigation judgments, the amount of Permanent Surplus Cash shall be zero, -80- provided, further, however, that, in the event a bonding company requires its bond to be supported by a letter of credit instead of cash, Letters of Credit will be available for bonding litigation judgments before all such Permanent Surplus Cash has been utilized for such purpose, if and only if the Letters of Credit so issued are cash collateralized with the Permanent Surplus Cash otherwise required to be used for such purpose pursuant to cash collateral arrangements in form and substance satisfactory to the Majority SMA. "Permitted Obligations" shall mean and include obligations (i) to pay taxes, (ii) to pay import duties, to post customs bonds and otherwise in connection with customs and trade laws, (iii) to purchase equipment or fixtures and otherwise in connection with capital expenditures, (iv) in connection with the importation or purchase of tobacco or other products or goods for use in the day-to-day operations of Parent and any Subsidiary of Parent consistent with the practices of Parent and its Subsidiaries in effect prior to the Third Restatement Effective Date or with then current practices in the industry, (v) to make utility payments, (vi) in connection with worker's compensation obligations or other employee disability obligations, (vii) to provide credit support for any of the foregoing, (viii) in respect of employee loans made in connection with transfers, (ix) to provide credit support for suppliers and distributors in the ordinary course of business, (ix) imposed by the PBGC in connection with the Transactions (as defined in the Original Credit Agreement), provided that the aggregate Stated Amount of the Letter of Credit issued in connection with such PBGC Obligations, when aggregated with the sum of (x) the aggregate amount of cash that collateralizes PBGC Obligations and/or bonds in support of such PBGC Obligations plus (y) the aggregate stated amounts of bonds and any other letters of credit issued in support of PBGC Obligations (but excluding any portion of the stated amounts of bonds or other letters of credit that are cash collateralized pursuant to preceding clause (x)), shall not exceed $150,000,000 and (x) to support Indebtedness supported by Existing Letters of Credit on the Third Restatement Effective Date. "Person" shall mean any individual, partnership, limited liability company, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any multiemployer or single-employer plan as defined in Section 4001 of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribution of), or at any time during the five calendar years preceding the date of this Agreement was maintained or contributed to by (or to which there is an obligation to contribution of), the Borrower, any Subsidiary of the Borrower or an ERISA Affiliate. "Pledge Agreement" shall have the meaning provided in Section 5.01N. "Post-Closing Merger Integration Charges" shall mean integration charges actually accrued or recorded by Parent and its Subsidiaries during the period commencing on Third Restatement Effective Date and ending on July 30, 2006 in connection with the severance of employees, the relocation of offices, equipment and employees, the payment of professional fees, other merger related integration costs and the amortization of merger related intangibles following the consummation of the Combination Transactions; provided that the aggregate amount of such restructuring charges (to the extent provided for as an add-back pursuant to the definitions of "Adjusted Operating Income" or "Cumulative Adjusted Consolidated Net -81- Income") shall not exceed $337,000,000 in the aggregate (determined on a pre-tax basis), of which no more than approximately $220,000,000 (determined on a pre-tax basis) shall be characterized as cash restructuring charges. "Post-Merger Capital Costs" shall mean certain capital expenditures actually made, accrued or recorded by Parent and its Subsidiaries during the period commencing on the Third Restatement Effective Date and ending on July 30, 2006 in connection with the reconfiguration of plants, the updating of certain hardware and software, related consulting activities and other merger related activities following the consummation of the Combination Transactions; provided that the aggregate amount of such capital expenditures (to the extent excluded from the determination of "Consolidated Fixed Charges" pursuant to the definition thereof) shall not exceed $170,000,000 in the aggregate. "Pounds Sterling" shall mean freely transferable lawful money of the United Kingdom (expressed in Pounds Sterling). "Pro Forma Basis" shall mean, in connection with any calculation of compliance with any financial covenant or financial term, the calculation thereof after giving effect on a pro forma basis to (x) the incurrence of any Indebtedness (other than revolving Indebtedness, except to the extent same is incurred to refinance other outstanding Indebtedness or to finance a Permitted Investment) after the first day of the relevant Test Period as if such Indebtedness had been incurred (and the proceeds thereof applied) on the first day of the relevant Test Period, (y) the permanent repayment of any Indebtedness (other than revolving Indebtedness except to the extent accompanied by a corresponding permanent commitment reduction) after the first day of the relevant Test Period as if such Indebtedness had been retired or redeemed on the first day of the relevant Test Period and/or (z) the Permitted Investment, if any, then being consummated as well as any other Permitted Investment consummated after the first day of the relevant Test Period and on or prior to the date of the respective Permitted Investment then being effected, as the case may be, with the following rules to apply in connection therewith: (i) all Indebtedness (x) (other than revolving Indebtedness, except to the extent same is incurred to refinance other outstanding Indebtedness or to finance a Permitted Investment) incurred or issued after the first day of the relevant Test Period (whether incurred to finance a Permitted Investment, to refinance Indebtedness or otherwise) shall be deemed to have been incurred or issued (and the proceeds thereof applied) on the first day of the respective Test Period and remain outstanding through the date of determination and (y) (other than revolving Indebtedness except to the extent accompanied by a corresponding permanent commitment reduction) permanently retired or redeemed after the first day of the relevant Test Period shall be deemed to have been retired or redeemed on the first day of the respective Test Period and remain retired through the date of determination; (ii) all Indebtedness assumed to be outstanding pursuant to preceding clause (i) shall be deemed to have borne interest at (x) the rate applicable thereto, in the case of fixed rate indebtedness, or (y) at the rate which would have been applicable thereto on the last day of the respective Test Period, in the case of floating rate Indebtedness (although interest expense with respect to any Indebtedness for periods while same was actually -82- outstanding during the respective period shall be calculated using the actual rates applicable thereto while same was actually outstanding); and (iii) in making any determination of Adjusted Operating Income, pro forma effect shall be given to any Permitted Investment consummated during the periods described above, with such Adjusted Operating Income to be determined as if such Permitted Investment was consummated on the first day of the relevant Test Period, but without taking into account any pro forma cost savings and expenses. "Pro Forma Financial Statements" shall have the meaning provided in Section 5.01K. "Qualified Stub Notes" shall mean Stub Notes with no scheduled principal payment due prior to the Facility Maturity Date. "Quarterly Payment Date" shall mean the third Business Day following the last day occurring in each of March, June, September and December. "Rating Agency" shall mean each of S&P and Moody's. "Real Property" of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including leaseholds. "Reference Rate" shall mean, at any time, the higher of (x) the rate which is 1/2 of 1% in excess of the Federal Funds Rate and (y) the Base Rate as in effect from time to time. "Reference Rate Loan" shall mean each Revolving Loan or Swingline Loan bearing interest at the rates provided in Section 1.08(a). "Refinancing Senior Notes" shall mean one or more issuances of senior notes issued by the Borrower, all of the terms and conditions of which (and of the indenture governing the same) are substantially identical to (or, from the perspective of the Lenders, more favorable than) those applicable to the Existing Senior Notes (and the indenture governing the same), regardless of the repayment and/or termination thereof; provided that, in any event, the interest rate, tenor and principal amount of any such senior notes may differ from that of any issuance of Existing Senior Notes. "Register" shall have the meaning provided in Section 12.04(f). "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. -83- "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Relevant Guaranteed Obligations" shall mean (i) as to the Borrower, (x) all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Guaranteed Party owing under any Secured Credit Card Agreement entered into by such Guaranteed Party with any Credit Card Issuer, whether now in existence or hereafter arising, and the due performance and compliance by each Guaranteed Party with all terms, conditions and agreements contained therein and (y) all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Guaranteed Party owing under any Hedging Agreement entered into by such Guaranteed Party with any Guaranteed Creditor, whether now in existence or hereafter arising, and the due performance and compliance by each Guaranteed Party with all terms, conditions and agreements contained therein and (ii) as to Parent, (x) the principal and interest on each Note issued to each Lender, and all Loans made, under this Agreement, all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, together with all the other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to any Guaranteed Creditor now existing or hereafter incurred under, arising out of or in connection with this Agreement and each other Credit Document and the due performance and compliance by the Borrower with all the terms, conditions and agreements contained in this Agreement and each other Credit Document to which it is a party, (y) all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Borrower and each other Guaranteed Party owing under each Secured Credit Card Agreement entered into by the Borrower or such Guaranteed Party with any Credit Card Issuer, whether now in existence or hereafter arising, and the due performance and compliance by the Borrower and each other Guaranteed Party with all terms, conditions and agreements contained therein and (z) all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Borrower and each other Guaranteed Party owing under each Hedging Agreement entered into by the Borrower or such Guaranteed Party with any Guaranteed Creditor (including the Existing Interest Rate Swap Agreement), whether now in existence or hereafter arising, and the due performance and compliance by the Borrower and each other Guaranteed Party with all terms, conditions and agreements contained therein. "Replaced Lender" shall have the meaning provided in Section 1.14. "Replacement Lender" shall have the meaning provided in Section 1.14. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by the PBGC. "Required Lenders" shall mean Non-Defaulting Lenders the sum of whose outstanding Revolving Commitments (or after the termination thereof, outstanding Revolving Loans -84- and Percentages of (x) outstanding Swingline Loans and (y) Letter of Credit Outstandings) represent an amount greater than 50% of the sum of the Revolving Commitments of all Non-Defaulting Lenders (or after the termination thereof, the sum of then total outstanding Revolving Loans of Non-Defaulting Lenders and the aggregate Percentages of all Non-Defaulting Lenders of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time). "Returns" shall have the meaning provided in Section 6.10. "Revolving Loan" shall have the meaning provided in Section 1.01(A). "Revolving Note" shall have the meaning provided in Section 1.05(a). "Reynolds Tobacco" shall mean (i) at any time on or prior to the date of the consummation of the Combination Transactions, R.J. Reynolds Tobacco Company, a New Jersey corporation and (ii) thereafter, B&W Opco, as a surviving corporation of the merger described in clause (viii) of the definition of "Combination Transactions". "S&P" shall mean Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc., or any successor thereto. "Santa Fe" shall mean Santa Fe Natural Tobacco Company, Inc., a New Mexico corporation. "Santa Fe Intercompany Note" shall mean, collectively, (i) that certain promissory note, dated as of June 4, 2003 and due January 31, 2022, issued by Santa Fe to the Borrower in an initial principal amount of $314,000,000, (ii) that certain promissory note, dated as of April 2, 2003, issued by Santa Fe to the Borrower in an initial principal amount of $2,632,018.29 and (iii) that certain promissory note, dated as of April 2, 2003, issued by Santa Fe to the Borrower in an initial principal amount of Euro 7,240,500. "SEC" shall have the meaning provided in Section 7.01(f). "SEC Regulation D" shall mean Regulation D as promulgated under the Securities Act of 1933, as amended, as the same may be in effect from time to time. "Second Amended and Restated Credit Agreement" shall have the meaning provided in the first recital of this Agreement. "Secured Credit Card Agreement" shall have the meaning provided in the Security Agreement. "Secured Creditors" shall mean and include, with respect to any Collateral, (i) all Lenders (including in their capacity as Letter of Credit Issuers, Swingline Lenders, Credit Card Issuers or parties to Hedging Agreements) and their affiliates and other Hedging Agreements parties as provided in the Security Documents and (ii) all holders of Existing Senior Notes and Refinancing Senior Notes, in each case, to the extent the Lien sharing provisions of the Existing Senior Notes or the Refinancing Senior Notes, as the case may be, require them to be secured by such Collateral. -85- "Security Agreement" shall have the meaning provided in Section 5.01O. "Security Document" shall mean and include (i) each of the Security Agreement, the Pledge Agreement and each Mortgage entered into on the Third Restatement Effective Date (or, thereafter, pursuant to Section 12.19) until the same are terminated in accordance with their terms, (ii) after the execution and delivery thereof, each Additional Security Document, until the same are terminated in accordance with their terms and (iii) upon the occurrence of a new Trigger Event after the Third Restatement Effective Date, the pledge agreements, security agreements and mortgages entered into (or required to be entered into) pursuant to Section 7.10(b). "Senior Managing Agent" shall mean and include JPMCB and Citibank and any successor to either thereof appointed pursuant to Section 11.09, it being understood that such term, when used herein, shall include JPMCB or Citibank, as the case may be, acting in its capacity as Administrative Agent, Collateral Agent or Syndication Agent, as applicable. "SPC" shall have the meaning provided in Section 12.04. "Specified Subsidiaries" shall mean GMB and FHS. "Stated Amount" of any Letter of Credit shall mean the maximum amount available to be drawn thereunder, determined without regard to whether any conditions to drawing could then be met. "Stub Notes" shall mean any outstanding senior notes of the Borrower issued on or prior to June 30, 2004, which Stub Notes aggregated approximately $140,000,000 in outstanding principal amount on the Third Restatement Effective Date. "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than a 50% equity interest at the time. Unless otherwise expressly provided, all references herein to "Subsidiary" shall mean a Subsidiary of Parent. "Subsidiary Guarantor" shall mean (i) each Material Subsidiary of Parent as of the Third Restatement Effective Date (other than the Borrower, CMSI, Lane and Santa Fe) and (ii) each other Subsidiary of Parent created, established or acquired after the Third Restatement Effective Date which executes and delivers the Subsidiary Guaranty, unless and until such time as the respective Subsidiary ceases to constitute a Subsidiary or is released from all of its obligations under the Subsidiary Guaranty in accordance with the terms and provisions thereof. "Subsidiary Guaranty" shall have the meaning provided in Section 5.01L. -86- "Swingline Commitment" shall mean, at any time, for each Swingline Lender, the lesser of (x) the Commitment of such Swingline Lender (in its capacity as a Lender) at such time and (y) $15,000,000. "Swingline Lender" shall mean and include each of JPMCB, Citibank. GECC and Mizuho, in each case, so long as such entity remains a Lender hereunder. "Swingline Loans" shall have the meaning provided in Section 1.01(B). "Swingline Maturity Date" of any Swingline Lender shall mean the date which is five Business Days prior to the Maturity Date for the Commitments and Revolving Loans of such Swingline Lender. "Swingline Note" shall have the meaning provided in Section 1.05(a). "Syndication Agents" shall mean Citibank and GECC acting in their respective capacities as syndication agents hereunder. "Taxes" shall have the meaning provided in Section 4.04(a). "Tax Sharing Agreement" shall have the meaning provided in Section 5.01S. "Test Period" shall mean each period of four consecutive fiscal quarters then last ended, in each case taken as one accounting period. Notwithstanding anything to the contrary contained above or in Section 13.07 or otherwise required by GAAP, in the case of any Test Period ending prior to the first anniversary of the Third Restatement Effective Date, such period shall be a one-year period ending on the last day of the fiscal quarter last ended, with any calculations of Consolidated Fixed Charges and Adjusted Operating Income required in determining compliance with Section 8.07 or 8.08 to be made on a pro forma basis in accordance with, and to the extent provided in, the immediately succeeding sentences. To the extent the respective Test Period (i) includes the fiscal quarter of the Borrower ended December 31, 2003, Consolidated Fixed Charges and Adjusted Operating Income for such fiscal quarter shall be deemed to be $348,000,000 and $297,000,000, respectively, (ii) includes the fiscal quarter of the Borrower ended March 31, 2004, Consolidated Fixed Charges and Adjusted Operating Income for such fiscal quarter shall be deemed to be $116,000,000 and $413,000,000, respectively, (iii) includes the fiscal quarter ended June 30, 2004, Consolidated Fixed Charges and Adjusted Operating Income shall be determined by taking actual Consolidated Fixed Charges or Adjusted Operating Income, as the case may be, determined in accordance with the respective definition therefor for such fiscal quarter (as if Parent had been formed and the Transaction had been consummated prior to the first day of such fiscal quarter) and (iv) includes the fiscal quarter ended September 30, 2004, Consolidated Fixed Charges and Adjusted Operating Income shall be determined by taking actual Consolidated Fixed Charges or Adjusted Operating Income, as the case may be, determined in accordance with the respective definition therefor for such fiscal quarter (as if Parent had been formed and the Transaction had been consummated prior to the first day of such fiscal quarter); provided that any additional adjustments required by the definition of Pro Forma Basis for occurrences after the Third Restatement Effective Date shall also be made. -87- "Third Restatement Effective Date" shall have the meaning provided in Section 5.01. "Third Restatement Execution Date" shall have the meaning provided in Section 12.10. "Total Commitment" shall mean, at any time, the sum of the Commitments of each Lender at such time. "Total Swingline Commitment" shall mean, at any time, the sum of the Swingline Commitments of each of the Swingline Lenders at such time, provided that the Total Swingline Commitment shall not at any time exceed the Total Commitment. "Total Unutilized Commitment" shall mean, at any time, the excess of (x) the Total Commitment at such time over (y) the sum of (i) the aggregate outstanding principal amount of all Revolving Loans and Swingline Loans at such time and (ii) the Letter of Credit Outstandings at such time. "Transaction" shall mean, collectively, (i) the consummation of the Combination Transactions, (ii) the entering into of this Agreement and the related Credit Documents, (iii) the occurrence of the Third Restatement Effective Date, and (iv) the payment of all fees and expenses incurred in connection with the foregoing. "Trigger Event" shall mean that the Applicable Credit Rating issued by each Rating Agency is at least one level below the Minimum Investment Grade Rating or that the Applicable Credit Rating issued by either Rating Agency is at least two levels below the Minimum Investment Grade Rating. "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, i.e., a Reference Rate Loan or Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code. "Unaudited Pro Forma Condensed Combined Financial Statements-Integration Basis" shall have the meaning provided in Section 5.01K "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the present value of the accrued benefits under such Plan as of the close of its most recent plan year, determined in accordance with Statement of Financial Accounting Standards No. 35, based upon the actuarial assumptions used by such Plan's actuary in the most recent annual valuation of such Plan, exceeds the fair market value of the assets allocable thereto, determined in accordance with Section 412 of the Code. "Unpaid Drawing" shall have the meaning provided in Section 2.04(a). "U.S. Dollars" shall mean freely transferable lawful money of the United States of America. -88- "Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any Wholly-Owned Subsidiary of such Person that is a Domestic Subsidiary of such Person. "Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of such Person to the extent all of the capital stock or other ownership interests in such Subsidiary, other than directors' or nominees' qualifying shares, is owned directly or indirectly by such Person. "Written" or "in writing" shall mean any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. SECTION 11. The Senior Managing Agents. 11.01 Appointment. Each Lender hereby irrevocably designates and appoints JPMCB and Citibank, as Senior Managing Agents (such term as used in this Section 11 to include each Senior Managing Agent acting as Administrative Agent or Syndication Agent, as applicable, and the Administrative Agent acting as Collateral Agent) for such Lender to act as specified herein and in the other Credit Documents, and each such Lender hereby irrevocably authorizes JPMCB and Citibank, as the Senior Managing Agents for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the respective Senior Managing Agents by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Each Senior Managing Agent agrees to act as such upon the express conditions contained in this Section 11. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Senior Managing Agent shall have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against any Senior Managing Agent. The provisions of this Section 11 are solely for the benefit of the Senior Managing Agents and the Lenders, and no Credit Party shall have any rights as a third party beneficiary of any of the provisions hereof, provided that the Borrower shall have the rights granted to it pursuant to Section 11.09. In performing its functions and duties under this Agreement and each other Credit Document, each Senior Managing Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for either Credit Party. No Lender which is a Syndication Agent (other than Citibank), Documentation Agent, Managing Agent, Co-Agent, Participant, Joint Lead Arranger or Joint Bookrunner (as such Lender may be designated as such pursuant to the signature pages hereto) shall have any duties or obligations in its capacity as such under this Agreement. 11.02 Delegation of Duties. Each Senior Managing Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Senior Managing Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by Section 11.03. -89- 11.03 Exculpatory Provisions. No Senior Managing Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and non-appealable decision) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by Parent, any Subsidiary or any of their respective officers contained in this Agreement, any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by any Senior Managing Agent under or in connection with, this Agreement or any other Credit Document or for any failure of Parent or any Subsidiary or any of their respective officers to perform its obligations hereunder or thereunder. No Senior Managing Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of Parent or any Subsidiary. No Senior Managing Agent shall be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by any Senior Managing Agent to the Lenders or by or on behalf of Parent or any Subsidiary to any Senior Managing Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or Letters of Credit or of the existence or possible existence of any Default or Event of Default. 11.04 Reliance by Senior Managing Agents. Each Senior Managing Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, facsimile transmission, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Credit Parties), independent accountants and other experts selected by such Senior Managing Agent. Each Senior Managing Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Senior Managing Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 12.12, all the Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. 11.05 Notice of Default. No Senior Managing Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Senior Managing Agent has received notice from a Lender or either Credit Agreement Party referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that any Senior Managing Agent receives such a -90- notice, such Senior Managing Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 11.06 Non-Reliance on Senior Managing Agents and Other Lenders. Each Lender expressly acknowledges that no Senior Managing Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Senior Managing Agent hereafter taken, including any review of the affairs of Parent or any Subsidiary, shall be deemed to constitute any representation or warranty by any Senior Managing Agent to any Lender. Each Lender represents to each Senior Managing Agent that it has, independently and without reliance upon any Senior Managing Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of Parent and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Senior Managing Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other condition, prospects and creditworthiness of Parent and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Senior Managing Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial and other conditions, prospects or creditworthiness of Parent or any of its Subsidiaries which may come into the possession of such Senior Managing Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 11.07 Indemnification. The Lenders agree to indemnify each Senior Managing Agent in its capacity as such ratably according to their aggregate Commitments (or, if the Total Commitment has been terminated, their aggregate Commitments as in effect immediately prior to such termination), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against such Senior Managing Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Credit Document, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted to be taken by any Senior Managing Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by Parent or any of its Subsidiaries; provided that no Lender shall be liable to any Senior Managing Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from such Senior Managing Agent's gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable -91- decision). If any indemnity furnished to any Senior Managing Agent for any purpose shall, in the opinion of such Senior Managing Agent, be insufficient or become impaired, such Senior Managing Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 11.07 shall survive the payment of all Obligations. 11.08 Senior Managing Agents in Their Individual Capacities. Each Senior Managing Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with Parent and/or any of its Subsidiaries as though such Senior Managing Agent were not a Senior Managing Agent hereunder. With respect to the Loans made by it, Letters of Credit issued by it and all Obligations owing to it, each Senior Managing Agent shall have the same rights and powers under this Agreement and each other Credit Document as any Lender and may exercise the same as though it were not a Senior Managing Agent, and the terms "Lender" and "Lenders" shall include each Senior Managing Agent in its individual capacity. 11.09 Successor Senior Managing Agents, etc. (a) Each Senior Managing Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents (including, without limitation, its functions and duties as Collateral Agent) at any time by giving 30 Business Days' prior written notice to the Lenders and, unless a Default or an Event of Default under Section 10.05 then exists, the Borrower. Any such resignation by a Senior Managing Agent hereunder shall also constitute its resignation (if applicable) as a Letter of Credit Issuer and Swingline Lender, in which case the resigning Senior Managing Agent (x) shall not be required to issue any further Letters of Credit or make any additional Swingline Loans hereunder and (y) shall maintain all of its rights as Letter of Credit Issuer or Swingline Lender, as the case may be, with respect to any Letter of Credit issued by it, or Swingline Loans made by it, prior to the date of such resignation. Such resignation shall take effect upon (i) in the case of the Senior Managing Agent serving as Administrative Agent and/or Collateral Agent, the appointment of a successor Senior Managing Agent pursuant to clauses (b) and (c) below or as otherwise provided below and (ii) in the case of any other Senior Managing Agent, on such 30th Business Day following delivery of the notice described above. (b) Upon any such notice of resignation by a Senior Managing Agent then serving as Administrative Agent and Collateral Agent, the Required Lenders shall appoint a successor Senior Managing Agent hereunder and/or under the other Credit Documents which shall be a commercial bank or trust company acceptable to the Borrower, which acceptance shall not be unreasonably withheld or delayed (provided that the Borrower's approval shall not be required if an Event of Default then exists). (c) If a successor Senior Managing Agent shall not have been so appointed within such 30 Business Day period as contemplated by preceding clause (b), the Administrative Agent, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed, provided that the Borrower's consent shall not be required if an Event of Default then exists), shall then appoint a successor Senior Managing Agent who shall serve as Senior -92- Managing Agent hereunder and/or under the other Credit Documents until such time, if any, as the Required Lenders appoint a successor Senior Managing Agent as provided above. (d) If no successor Senior Managing Agent has been appointed pursuant to clause (b) or (c) above by the 30th Business Day after the date such notice of resignation was given by such Senior Managing Agent, such Senior Managing Agent's resignation shall become effective and the Required Lenders shall thereafter perform all the duties of such Senior Managing Agent hereunder and/or under any other Credit Document until such time, if any, as the Lenders appoint a successor Senior Managing Agent as provided above. (e) Upon a resignation of any Senior Managing Agent pursuant to this Section 11.09, such Senior Managing Agent shall remain indemnified to the extent provided in this Agreement and the other Credit Documents and the provisions of this Section 11 shall continue in effect for the benefit of such Senior Managing Agent for all of its actions and inactions while serving as such Senior Managing Agent. SECTION 12. Miscellaneous. 12.01 Payment of Expenses, etc. (a) Each Credit Agreement Party jointly and severally agrees to: (i) pay all reasonable out-of-pocket costs and expenses of (x) the Senior Managing Agents, whether or not the transactions herein contemplated are consummated, in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees and disbursements of White & Case LLP), (y) each Letter of Credit Issuer incurred in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (z) each Senior Managing Agent, each Letter of Credit Issuer, each Swingline Lender and each of the Lenders in connection with the enforcement of or protection of its rights under the Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and disbursements of counsel for each Senior Managing Agent and for each of the Lenders incurred during any workout, restructuring or negotiations in respect of any Credit Event); (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify each Senior Managing Agent, the Administrative Agent, each Syndication Agent, the Collateral Agent, each Letter of Credit Issuer, each Swingline Lender and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Credit Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the Transaction or any other transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by any Letter of Credit Issuer to honor a demand for payment under a -93- Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned, leased or operated by Parent or any of its Subsidiaries, or any Environmental Liability related in any way to Parent or any of its Subsidiaries, or (iv) any actual or prospective claims, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. To the extent that the undertaking to indemnify, pay or hold harmless any Senior Managing Agent, the Administrative Agent, the Collateral Agent, any Letter of Credit Issuer or any Lender set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the respective Credit Agreement Party shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. (b) To the extent that either Credit Agreement Party fails to pay any amount required to be paid by it to any Senior Managing Agent, the Administrative Agent, the Collateral Agent, any Letter of Credit Issuer or any Swingline Lender under paragraph (a) of this Section, each Lender severally agrees to pay to such Senior Managing Agent, the Administrative Agent, the Collateral Agent, such Letter of Credit Issuer or such Swingline Lender, as the case may be, such Lender's applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claims, damage, liability or related expense, as the case may be, was incurred by or asserted against such Senior Managing Agent, the Administrative Agent, the Collateral Agent, such Letter of Credit Issuer or such Swingline Lender in its capacity as such. (c) To the extent permitted by applicable law, no Credit Agreement Party shall assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, any Credit Document or any agreement or instrument contemplated thereby, the Transaction, any Loan or Letter of Credit or the use of the proceeds thereof. (d) All amounts due under this Section shall be payable promptly after written demand therefor. 12.02 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender and each of its Affiliates is hereby authorized at any time or from time to time, to the fullest extent permitted by law, without presentment, demand, protest or other notice of any kind to any Credit Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special, time or demand, provisional or final) and any other obligations at any time held or owing by such Lender of Affiliate (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of any Credit Party against and on account of -94- the Obligations and liabilities of such Credit Party to such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of such Credit Party purchased by such Lender pursuant to Section 12.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. 12.03 Notices. (a) Except as otherwise expressly provided herein (including Section 12.03(b) below), all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered, if to a Credit Party, at the address specified opposite its signature below or in the other relevant Credit Documents, as the case may be; if to any Lender, at its address specified for such Lender on Annex II hereto or its Administrative Questionnaire; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and shall be effective when received. (b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Sections 1, 2, 3 or 4 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. 12.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, provided that (i) no Credit Agreement Party may assign or transfer any of its interests hereunder, except to the extent any such assignment results from the consummation of a transaction permitted under Section 8.02, without the prior written consent of each of the Lenders (and any attempted assignment or transfer by either Credit Agreement Party without such consent shall be null and void) and (ii) the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth below in this Section 12.04. Notwithstanding the foregoing or anything else in this Section 12.04, any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided however that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. -95- (b) Each Lender shall have the right to transfer, assign or grant participations in all or any part of its remaining rights and obligations hereunder on the basis set forth below in this clause (b). (A) Assignments. At any time, each Lender may assign pursuant to an Assignment Agreement substantially in the form of Exhibit E-2 hereto (each, an "Assignment Agreement") all or a portion of its rights and obligations hereunder (including all or a portion of its Commitment, Swingline Commitment and the Loans at the time owing to it) pursuant to this clause (b)(A) to one or more Lenders and/or their affiliates and/or one or more Eligible Transferees, in any such case with the prior written consent (such consent not to be unreasonably withheld or delayed) of the Borrower, the Administrative Agent and each Letter of Credit Issuer, provided that the consent of the Borrower shall not be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee. Each assignment shall be subject to the following additional conditions: (I) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, Swingline Commitment or Loans of any Class, the amount of the Commitment, Swingline Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000, unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing; (II) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, provided that this clause shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one Class of Commitments or Loans; and (III) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and a written notice in the form of Exhibit E-1 hereto from the assigning Lender and the assignee Lender. Any assignment to another Lender pursuant to this clause (b)(A) will become effective upon the payment to the Administrative Agent by (I) either the assigning or the assignee Lender or (II) in the case of an assignment pursuant to Section 1.14, the Replacement Lender, of a nonrefundable assignment fee of $3,500, the satisfaction of clause (III) of the preceding sentence (if applicable), the receipt of any written consents to such assignment required above and the recording by the Administrative Agent of such assignment, and the resultant effects thereof on the Commitments of the assigning Lender and the assignee Lender, in the Register, the Administrative Agent hereby agreeing to effect such recordation no later than five Business Days after its receipt of a written notification by the assigning Lender and the assignee Lender of the proposed assignment, provided that the Administrative Agent shall not be required to (but may if it so elects) so record any assignment in the Register on or after the date on which any proposed amendment, -96- modification or supplement in respect of this Agreement has been circulated to the Lenders for approval until the earlier of (x) the effectiveness of such amendment, modification or supplement in accordance with Section 12.12 or (y) 30 days following the date on which such proposed amendment, modification or supplement was circulated to the Lenders. Upon the effectiveness of any assignment pursuant to this clause (b)(A), (x) the assignee will become a "Lender" for all purposes of this Agreement and the other Credit Documents with a Commitment as so recorded by the Administrative Agent in the Register, and to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder with respect to the portion of its Commitment being assigned, (y) Annex I shall be deemed to be amended to reflect the Commitment of the respective assignee and of the other Lenders and (z) the Borrower shall issue new Notes (in exchange for the Note of the assigning Lender) to the assigning Lender (to the extent such Lender's Commitment is not reduced to zero as a result of such assignment) and to the assignee Lender, in each case to the extent requested by the assigning Lender or assignee Lender, as the case may be, in conformity with the requirements of Section 1.05 to the extent needed to reflect the revised Commitments of such Lenders. The Administrative Agent will (x) notify each Letter of Credit Issuer within 5 Business Days of the effectiveness of any assignment hereunder and (y) prepare on the last Business Day of each calendar quarter during which an assignment has become effective pursuant to this clause (b)(A) a new Annex I giving effect to all such assignments effected during such quarter and will promptly provide same to the Borrower and each of the Lenders. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (B) Participations. Each Lender may transfer, grant or assign participations in all or any part of such Lender's interests and obligations hereunder pursuant to this clause (b)(B) to any Eligible Transferee, provided that (i) such Lender shall remain a "Lender" for all purposes of this Agreement and the transferee of such participation shall not constitute a Lender hereunder and (ii) no participant under any such participation shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (u) extend the scheduled final maturity of any Loan, Commitment or Note, or any portion thereof, in which such participant is participating, (v) reduce the interest rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) or Fees applicable to any of the Loans, Commitments or Letters of Credit or reduce the principal amount thereof, (w) release Parent or Reynolds Tobacco from its Guaranty, (x) at any time Collateral is pledged pursuant to the Security Documents release (other than pursuant to the automatic release provided for in Section 7.10 or as otherwise expressly permitted by the Security Documents) all or substantially all of the Collateral, (y) amend, modify or waive any provision of this clause (B) (other than technical amendments which do not adversely affect the rights of any Lender) or (z) consent to the assignment or transfer by any Credit Agreement Party of any of its rights and obligations under this Agreement. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against the granting Lender in respect of such participation to be those set forth in the agreement with such Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided that such participant shall be entitled to receive additional amounts under Sections 1.10, 1.11, 2.05 and 4.04 on the same basis as if it were a Lender. In addition, each agreement creating any participation must include -97- an agreement by the participant to be bound by the provisions of Section 12.15 and such participant shall have executed a confidentiality agreement in the form of Exhibit F hereto. (c) Notwithstanding any other provisions of this Section 12.04, no transfer or assignment of the interests or obligations of any Lender hereunder or any grant of participations therein shall be permitted if such transfer, assignment or grant would require the Borrower or any Guarantor to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any State. (d) Each Lender initially party to this Agreement hereby represents, and each Person that becomes a Lender pursuant to an assignment permitted by the preceding clause (b)(A) will upon its becoming party to this Agreement represent, that it is an Eligible Transferee which makes loans in the ordinary course of its business and that it will make or acquire Loans for its own account in the ordinary course of such business, provided that, subject to the preceding clauses (a) through (c), the disposition of any promissory notes or other evidences of or interests in Indebtedness held by such Lender shall at all times be within its exclusive control. (e) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (each, an "SPC") of such Granting Lender, identified as such in writing from time to time by the respective Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to Section 1.01(A), provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the respective Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the respective Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that (x) no SPC shall be liable for any payment under this Agreement for which a Lender would otherwise be liable and (y) the Granting Lender for any SPC shall be (and hereby agrees that it is) liable for any payment under this Agreement for which the SPC would be liable in the absence of preceding clause (x). In furtherance of the foregoing, each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 12.04, any SPC may (i) with notice to, but without the prior written consent of, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Lender or to any financial institutions (if consented to by the Borrower and the Administrative Agent) providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC. -98- (f) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one its offices a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and Unpaid Drawings owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, each Letter of Credit Issuer and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, any Letter of Credit Issuer and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 12.05 No Waiver; Remedies Cumulative. No failure or delay on the part of any Senior Managing Agent, the Administrative Agent, any Letter of Credit Issuer or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Credit Party and any Senior Managing Agent, the Administrative Agent, any Letter of Credit Issuer or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which any Senior Managing Agent, the Administrative Agent, any Letter of Credit Issuer or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle such Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Senior Managing Agents, the Administrative Agent, the Letter of Credit Issuers or the Lenders to any other or further action in any circumstances without notice or demand. No waiver of any provision of this Agreement or consent to any departure by any Credit Agreement Party therefrom shall in any event be effective unless the same shall be permitted by Section 12.12, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality for the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or any Letter of Credit Issuer may have had notice or knowledge of such Default or Event of Default at the time. 12.06 Payments Pro Rata. (a) The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of any Credit Party in respect of any Obligations of such Credit Party, it shall, except as otherwise provided in this Agreement, distribute such payment to the Lenders pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or Lender's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligations then owed and due to such Lender bears to the total of such Obligations then owed and due to all of the Lenders -99- immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash (without recourse or warranty) from the other Lenders an interest in the Obligations of the respective Credit Party to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 12.07 Calculations; Computations. (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders); provided that, except as otherwise specifically provided herein, all computations determining compliance with Section 8, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the financial statements for the fiscal year of the Borrower ended December 31, 2003 delivered to the Lenders pursuant to Section 7.01(b), provided that in the event GAAP shall be modified from that in effect at the time of the preparation of such financial statements, Parent shall be entitled to utilize GAAP, as so modified, for purposes of such computations to the extent that (x) Parent gives the Lenders 30 days' prior written notice of such proposed modification and (y) prior thereto the Borrower and the Majority SMA shall have agreed upon adjustments, if any, to Sections 8.03(o), 8.04(m), 8.05, 8.07 and 8.08 (and the definitions used therein), the sole purpose of which shall be to give effect to such proposed change (it being understood and agreed that to the extent that Parent and the Majority SMA cannot agree on appropriate adjustments to such Sections (or that no adjustments are necessary), the proposed change may not be effected); and provided, further, that if at any time the computations determining compliance with Section 8 (and the definitions used therein) utilize accounting principles different from those utilized in the financial statements furnished to the Lenders pursuant to this Agreement, such financial statements shall be accompanied by reconciliation work-sheets. Notwithstanding the foregoing, for purposes of the computations determining compliance with Section 8, all expenses and other charges arising from any settlement of tobacco liability which are required by GAAP to be retroactively applied to a previous fiscal quarter of the Borrower shall instead be accrued in the fiscal quarter in which such expenses and charges occur. (b) All computations of interest and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days. (c) All determinations of the Stated Amount of Letters of Credit and of the principal amount of Unpaid Drawings, in each case to the extent denominated in a currency other than U.S. Dollars, shall be made by converting same into U.S. Dollars at (x) if a Currency Agreement has been entered into by the Borrower and/or any of its Subsidiaries in connection with such Indebtedness, and is in effect at the time of such determination, the rate provided in such Currency Agreement, provided that this clause (x) shall not be applicable (I) unless the Administrative Agent has received sufficient information from the Borrower to determine the exchange rate established by such Currency Agreement and the duration thereof, or (II) to any determination of the Borrower's obligation to reimburse in U.S. Dollars a Drawing under a Letter of -100- Credit denominated in a currency other than U.S. Dollars, (y) in the case of a determination of the Borrower's obligation to reimburse in U.S. Dollars a Drawing under a Letter of Credit denominated in a currency other than U.S. Dollars, the spot exchange rate for the currency in question of the Letter of Credit Issuer on the date of such Drawing or (z) if the provisions of the foregoing clauses (x) and (y) are not applicable, the "official" exchange rate, if applicable, or the spot exchange rate for the currency in question calculated by the Administrative Agent on the last Business Day of the month then last ended preceding the date on which any such determination is being made and at such other times as the Administrative Agent elects to make such determination, it being understood that the Administrative Agent shall have no obligation to make any such other determinations. The Administrative Agent will promptly notify the Borrower and each Letter of Credit Issuer of its determinations hereunder. 12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS (OTHER THAN CERTAIN SECURITY DOCUMENTS EXPRESSLY PROVIDING OTHERWISE) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Each Credit Agreement Party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Credit Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Senior Managing Agent, the Administrative Agent, the Collateral Agent, any Letter of Credit Issuer, any Swingline Lender or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Credit Agreement Party or its properties in the courts of any jurisdiction. (b) Each Credit Agreement Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 12.03. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 12.09 Counterparts; Severability. (a) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject -101- matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. (b) Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any jurisdiction. 12.10 Execution. The Third Amended and Restated Credit Agreement shall be fully executed on the date (the "Third Restatement Execution Date") on which Parent, the Borrower, each Lender (as defined in the Second Amended and Restated Credit Agreement) and each Lender shall have signed a copy thereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent at the Administrative Agent's Office or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written, telex or facsimile notice (actually received) at such office that the same has been signed and mailed to it. The Administrative Agent will give the Borrower and each Lender prompt written notice of the occurrence of the Third Restatement Execution Date. 12.11 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 12.12 Amendment or Waiver. Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Required Lenders; provided that (x) no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) with Obligations being directly affected thereby, (i) extend the scheduled final maturity of any Loan or Note, or any portion thereof, or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or Fees or reduce the principal amount thereof, or increase the Commitment of any Lender over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment shall not constitute a change in the terms of the Commitment of any Lender), (ii) release Parent or Reynolds Tobacco from its Guaranty, (iii) at any time Collateral is pledged pursuant to the Security Documents release (other than pursuant to the automatic release provided for in Section 7.10 or as otherwise expressly permitted by the Security Documents) all or substantially all of the Collateral, (iv) amend, modify or waive any provision of this Section (other than technical amendments which do not adversely affect the rights of any Lender), or Section 12.06 in a manner that would alter the pro rata sharing of payments required thereby, (v) reduce the percentage specified in the definition of Required Lenders or (vi) consent to the assignment or transfer by any Credit Agreement Party of any of its rights and obligations under this Agreement; and (y) the financial covenants set forth in Sections 8.03(o), 8.04(m), 8.05, 8.07 and 8.08 (and the defined terms used therein) may be adjusted with the consent of the -102- Borrower and the Majority SMA to the extent provided in Sections 7.09 and 12.07(a). No provision of Section 11 may be amended or modified without the consent of any Senior Managing Agent adversely affected thereby. The obligations of Swingline Lenders to make Swingline Loans, the terms of any such Swingline Loans and the obligations of the other Lenders to fund Mandatory Borrowings shall not be amended or modified without the consent of the Swingline Lenders adversely affected thereby. The terms of Section 2 shall not be amended or modified without the consent of any Letter of Credit Issuer adversely affected thereby. 12.13 Survival. All covenants, agreements, representations and warranties made by each Credit Agreement Party herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation by any such other party or in its behalf and notwithstanding that any Senior Managing Agent, the Administrative Agent, the Collateral Agent, any Letter of Credit Issuer, any Swingline Lender or any Lender may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. All indemnities set forth herein including, without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01 shall survive the execution and delivery of this Agreement and the making of the Loans, the issuances of Letters of Credit, the repayment of the Obligations and the termination of the Total Commitment. 12.14 Domicile of Loans. Subject to Section 12.04, each Lender may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Lender; provided that the Borrower shall not be responsible for costs arising under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer (other than a transfer pursuant to Section 1.12) to the extent not otherwise applicable to such Lender prior to such transfer. 12.15 Confidentiality. Subject to Section 12.04, each Lender shall hold all non-public information furnished by or on behalf of a Credit Agreement Party in connection with such Lender's evaluation of whether to become a Lender hereunder or obtained pursuant to the requirements of this Agreement, which has been identified as such by such Credit Agreement Party ("Confidential Information"), in accordance with its customary procedure for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure reasonably required by any bona fide transferee or participant (which shall be an Eligible Transferee) in connection with the contemplated transfer of any Loans or participations therein or as required or requested by any governmental agency or representative thereof or pursuant to legal process or to such Lender's attorneys or independent auditors; provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify Parent or the Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further, that in no event shall any Lender be obligated or required to return any materials furnished by either Credit Agreement Party or -103- any Subsidiary. Each Lender agrees that it will not provide to prospective assignees, transferees or participants any of the Confidential Information unless such Person has executed a Confidentiality Agreement in the form of Exhibit F. 12.16 Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER CREDIT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 12.17 USA Patriot Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act. 12.18 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively, the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender. 12.19 Post-Closing Actions. Notwithstanding anything to the contrary contained in this Agreement or the other Credit Documents, the parties hereto acknowledge and agree that the actions relating to the Mortgages and Real Property of Parent and its Subsidiaries and such other matters described on Annex X shall be completed in accordance with Annex X. The provisions of Annex X shall be deemed incorporated herein by reference as fully as if set forth herein in its entirety. All provisions of this Credit Agreement and the other Credit Documents (including, without limitation, all conditions precedent, representations, warranties, covenants, -104- events of default and other agreements herein and therein) shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described above within the time periods required above, rather than as otherwise provided in the Credit Documents); provided that (x) to the extent any representation and warranty would not be true because the foregoing actions were not taken on the Third Restatement Effective Date the respective representation and warranty shall be required to be true and correct in all material respects at the time the respective action is taken (or was required to be taken) in accordance with the foregoing provisions of this Section 12.19 and (y) all representations and warranties relating to the Security Documents shall be required to be true immediately after the actions required to be taken by this Section 12.19 have been taken (or were required to be taken). The acceptance of the benefits of the Credit Events shall constitute a covenant and agreement by each of Parent and the Borrower to each of the Lenders that the actions required pursuant to this Section 12.19 will be, or have been, taken within the relevant time periods referred to in this Section 12.19 and that, at such time, all representations and warranties contained in this Credit Agreement and the other Credit Documents shall then be true and correct without any modification pursuant to this Section 12.19. The parties hereto acknowledge and agree that the failure to take any of the actions required above, within the relevant time periods required above, shall give rise to an immediate Event of Default pursuant to this Agreement. 12.20 Special Provisions Relating to Amendment and Restatement. (a) The Required Lenders under, and as defined in, the Second Amended and Restated Credit Agreement hereby consent to the "refinancing indebtedness" under this Agreement being treated as "indebtedness pursuant to the Credit Agreement" for purposes of the Pledge Agreement, the Security Agreement, the Intercompany Subordination Agreement and the Mortgages. The Borrower, for its part, hereby gives notice that the refinancing indebtedness under this Agreement shall be treated as "issued under the Credit Agreement" for purposes of the Pledge Agreement, Security Agreement, the Intercompany Subordination Agreement and the Mortgages. (b) The parties hereto acknowledge and agree that: (i) the Borrower and its Subsidiaries (as defined in the Second Amended and Restated Credit Agreement) executed and delivered the Security Documents (as defined in the Second Amended and Restated Credit Agreement) in favor of the Collateral Agent on behalf of the Secured Creditors (as defined in the Second Amended and Restated Credit Agreement) to secure the payment and performance of, inter alia, the Obligations (as defined in the Second Amended and Restated Credit Agreement); (ii) the security interests granted to the Collateral Agent on behalf of the Secured Creditors pursuant to the Security Documents (as defined in the Second Amended and Restated Credit Agreement) shall remain outstanding and in full force and effect, without interruption or impairment of any kind, in accordance with the terms of such Security Documents and shall continue to secure the Obligations (as defined in such Security Documents); (iii) the Obligations represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the Obligations (as -105- defined in the Second Amended and Restated Credit Agreement) arising in connection with the Second Amended and Restated Credit Agreement and other Credit Documents (as defined in the Second Amended and Restated Credit Agreement) executed in connection therewith; (iv) (a) the Second Amended and Restated Credit Agreement and the other Credit Documents (as defined in the Second Amended and Restated Credit Agreement) executed in connection therewith and the collateral pledged thereunder shall secure, without interruption or impairment of any kind, all existing Indebtedness (as defined in the Second Amended and Restated Credit Agreement) under the Second Amended and Restated Credit Agreement and the other Credit Documents (as defined in the Second Amended and Restated Credit Agreement) executed in connection therewith, as they may be amended, restated, renewed, extended, consolidated and modified hereunder, together with all other Obligations hereunder; (b) all Liens evidenced by the Credit Documents (as defined in the Second Amended and Restated Credit Agreement) executed in connection therewith are hereby ratified, confirmed and continued; and (c) the Credit Documents are intended to restate, renew, extend, consolidate, amend and modify the Second Amended and Restated Credit Agreement and the other Credit Documents (as defined in the Second Amended and Restated Credit Agreement) executed in connection therewith; and (v) (a) the provisions of the Second Amended and Restated Credit Agreement and the other Credit Documents (as defined in the Second Amended and Restated Credit Agreement) executed in connection therewith, to the extent restated, renewed, extended, consolidated, amended and modified hereby or the other corresponding Credit Documents, are hereby superseded and replaced by the provisions hereof and of the corresponding other Credit Documents; (b) the Notes restate, renew, extend, consolidate, amend, modify, replace, are substituted for and supersede, but do not extinguish, the Indebtedness (as defined in the Second Amended and Restated Credit Agreement) arising under the Notes (as defined in the Second Amended and Restated Credit Agreement) issued pursuant to the Second Amended and Restated Credit Agreement; and (c) the execution and delivery of the Credit Documents, and the performance by Credit Parties of their respective obligations thereunder shall not constitute a novation. 12.21 Termination of Commitments. Notwithstanding anything to the contrary contained in Section 3.02 or anywhere else in Credit Agreement, immediately prior to the occurrence of the Third Restatement Effective Date, the Borrower shall have voluntarily terminated the Commitments of The Bank of New York, The Bank of Nova Scotia and City National Bank of New Jersey, each in an amount necessary to reduce such Lender's Commitment at such time to the amount set forth opposite its name on Annex I hereto. SECTION 13. Credit Agreement Party Guaranty. 13.01 The Credit Agreement Party Guaranty. In order to induce the Lenders to enter into this Agreement and to extend credit hereunder, to induce the Credit Card Issuers to enter into and/or maintain Secured Credit Card Agreements, to induce the Lenders or any of their respective affiliates to enter into Hedging Agreements and to induce Calyon to maintain the Existing Interest Rate Swap Agreement and, in recognition of the direct benefits to be received -106- by each Credit Agreement Party from the proceeds of the Loans, the issuance of the Letters of Credit and the entering into and/or maintenance of Secured Credit Card Agreements and Hedging Agreements, each Credit Agreement Party hereby agrees as follows: each Credit Agreement Party hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, acceleration or otherwise, of any and all of the Relevant Guaranteed Obligations to the Guaranteed Creditors. If any or all of the Relevant Guaranteed Obligations to the Guaranteed Creditors becomes due and payable hereunder, each Credit Agreement Party unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, together with any and all expenses which may be incurred by the Guaranteed Creditors in collecting any of the Relevant Guaranteed Obligations. This Credit Agreement Party Guaranty is a guaranty of payment and not of collection. This Credit Agreement Party Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. If claim is ever made upon any Guaranteed Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Relevant Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including any Guaranteed Party), then and in such event each Credit Agreement Party agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Credit Agreement Party, notwithstanding any revocation of this Credit Agreement Party Guaranty or any other instrument evidencing any liability of any other Guaranteed Party, and such Credit Agreement Party shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 13.02 Bankruptcy. Additionally, each Credit Agreement Party unconditionally and irrevocably guarantees the payment of any and all of the Relevant Guaranteed Obligations to the Guaranteed Creditors whether or not due or payable by any Guaranteed Party upon the occurrence of any of the events specified in Section 9.05, and unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand. 13.03 Nature of Liability. The liability of each Credit Agreement Party hereunder is exclusive and independent of any guaranty of the Relevant Guaranteed Obligations whether executed by such Credit Agreement Party, any other guarantor or by any other party, and the liability of each Credit Agreement Party hereunder is not affected or impaired by (a) any direction as to application of payment by any Guaranteed Party or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Relevant Guaranteed Obligations, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by any Guaranteed Party, or (e) any payment made to the Guaranteed Creditors on the Relevant Guaranteed Obligations which any such Guaranteed Creditor repays to any Guaranteed Party pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Credit Agreement Party waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding, or (f) any action or inaction of the type described in Section 13.05, or (g) the lack of validity or enforceability of any Credit Document or any other instrument relating thereto. -107- 13.04 Independent Obligation. No invalidity, irregularity or unenforceability of all or any part of the Relevant Guaranteed Obligations shall affect, impair or be a defense to this Credit Agreement Party Guaranty, and this Credit Agreement Party Guaranty shall be primary, absolute and unconditional notwithstanding the occurrence of any event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full of the Relevant Guaranteed Obligations of each Credit Agreement Party. The obligations of Credit Agreement Party hereunder are independent of the obligations of any Guaranteed Party, any other guarantor or any other Person and a separate action or actions may be brought and prosecuted against either Credit Agreement Party whether or not action is brought against any Guaranteed Party, any other guarantor or any other Person and whether or not any Guaranteed Party, any other guarantor or any other Person be joined in any such action or actions. Each Credit Agreement Party waives, to the full extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by any Guaranteed Party with respect to any Relevant Guaranteed Obligations or other circumstance which operates to toll any statute of limitations as to such Guaranteed Party shall operate to toll the statute of limitations as to the relevant Credit Agreement Party. 13.05 Authorization. Each Credit Agreement Party authorizes the Guaranteed Creditors without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (i) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Relevant Guaranteed Obligations (including any increase or decrease in the rate of interest thereon) or any liability incurred directly or indirectly in respect thereof, and this Credit Agreement Party Guaranty made shall apply to the Relevant Guaranteed Obligations as so changed, extended, renewed, increased or altered; (ii) take and hold security for the payment of the Relevant Guaranteed Obligations and sell, exchange, release, impair, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Relevant Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (iii) exercise or refrain from exercising any rights against any Guaranteed Party or others or otherwise act or refrain from acting; (iv) release or substitute any one or more endorsers, guarantors, any Guaranteed Party or other obligors; (v) settle or compromise any of the Relevant Guaranteed Obligations or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of any Guaranteed Party to their respective creditors other than the Guaranteed Creditors; -108- (vi) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of any Guaranteed Party to the Guaranteed Creditors regardless of what liability or liabilities of such Guaranteed Party remain unpaid; (vii) consent to or waive any breach of, or any act, omission or default under, this Agreement, any other Credit Document, any Secured Credit Card Agreement, any Hedging Agreement or any of the instruments or agreements referred to herein or therein, or otherwise amend, modify or supplement this Agreement, any other Credit Document, any Secured Credit Card Agreement, any Hedging Agreement or any of such other instruments or agreements; and/or (viii) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of such Credit Agreement Party from its liabilities under this Credit Agreement Party Guaranty. 13.06 Reliance. It is not necessary for the Guaranteed Creditors to inquire into the capacity or powers of any Guaranteed Party or the officers, directors, partners or agents acting or purporting to act on their behalf, and any Relevant Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder by the relevant Credit Agreement Party. 13.07 Subordination. Any of the indebtedness of any Guaranteed Party now or hereafter owing to either Credit Agreement Party is hereby subordinated to the Relevant Guaranteed Obligations of such Guaranteed Party owing to the Guaranteed Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness of such Guaranteed Party to such Credit Agreement Party shall be collected, enforced and received by such Credit Agreement Party for the benefit of the Guaranteed Creditors and be paid over to the Administrative Agent on behalf of the Guaranteed Creditors on account of the Relevant Guaranteed Obligations of such Guaranteed Party to the Guaranteed Creditors, but without affecting or impairing in any manner the liability of either Credit Agreement Party under the other provisions of this Credit Agreement Party Guaranty. Prior to the transfer by either Credit Agreement Party to any Person (other than a Subsidiary Guarantor) of any note or negotiable instrument evidencing any of the indebtedness of any Guaranteed Party to such Credit Agreement Party, such Credit Agreement Party shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, each Credit Agreement Party hereby agrees with the Guaranteed Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Credit Agreement Party Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Relevant Guaranteed Obligations have been irrevocably paid in full in cash. 13.08 Waiver. (a) Each Borrower waives any right (except as shall be required by applicable statute and cannot be waived) to require any Guaranteed Creditor to (i) proceed against any Guaranteed Party, any other guarantor or any other party, (ii) proceed against or exhaust any security held from any Guaranteed -109- Party, any other guarantor or any other party or (iii) pursue any other remedy in any Guaranteed Creditor's power whatsoever. Each Credit Agreement Party waives any defense based on or arising out of any defense of any Guaranteed Party, any other guarantor or any other party, other than payment in full in cash of the Relevant Guaranteed Obligations, based on or arising out of the disability of any Guaranteed Party, any other guarantor or any other party, or the unenforceability of the Relevant Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any Guaranteed Party other than payment in full in cash of the Relevant Guaranteed Obligations. The Guaranteed Creditors may, at their election, foreclose on any security held by the Administrative Agent or any other Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Guaranteed Creditors may have against any Guaranteed Party or any other party, or any security, without affecting or impairing in any way the liability of either Credit Agreement Party hereunder except to the extent the Relevant Guaranteed Obligations of each Credit Agreement Party have been paid in full in cash. Each Credit Agreement Party waives any defense arising out of any such election by the Guaranteed Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Credit Agreement Party against any Guaranteed Party or any other party or any security. (b) Each Credit Agreement Party waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Credit Agreement Party Guaranty, and notices of the existence, creation, modification or incurring of new or additional Relevant Guaranteed Obligations. Each Credit Agreement Party assumes all responsibility for being and keeping itself informed of each Guaranteed Party's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Relevant Guaranteed Obligations and the nature, scope and extent of the risks which each Credit Agreement Party assumes and incurs hereunder, and agrees that the Guaranteed Creditors shall have no duty to advise such Credit Agreement Party of information known to them regarding such circumstances or risks. (c) Until such time as the Relevant Guaranteed Obligations have been paid in full in cash, each Credit Agreement Party hereby waives all rights of subrogation which it may at any time otherwise have as a result of this Credit Agreement Party Guaranty (whether contractual, under Section 509 of the Bankruptcy Code, or otherwise) to the claims of the Guaranteed Creditors against any other guarantor of the Relevant Guaranteed Obligations and all contractual, statutory or common law rights of reimbursement, contribution or indemnity from any Guaranteed Party or any other guarantor which it may at any time otherwise have as a result of this Credit Agreement Party Guaranty. 13.09 Payments. All payments made by either Credit Agreement Party pursuant to this Section 13 shall be made in U.S. Dollars. All payments made by either Credit Agreement Party pursuant to this Section 13 will be made without setoff, counterclaim or other defense, and shall be subject to the payment provisions applicable to the Borrower in Sections 4.03 and 4.04. * * * -110- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. REYNOLDS AMERICAN INC. By: /s/ Lynn L. Lane ---------------------------------------- Title: Senior Vice President & Treasurer R.J. REYNOLDS TOBACCO HOLDINGS, INC. By: /s/ Lynn L. Lane ---------------------------------------- Title: Senior Vice President & Treasurer Address: 401 North Main Street Winston-Salem, NC 27102 Taxpayer ID Number: 56-0950247 LEAD AGENTS ----------- JPMORGAN CHASE BANK, Individually and as Administrative Agent, Senior Managing Agent, Joint Lead Arranger and Joint Bookrunner By: /s/ Robert T. Sacks ----------------------------------------- Title: Managing Director CITIBANK, N.A., Individually and as Syndication Agent, Senior Managing Agent, Joint Lead Arranger and Joint Bookrunner By: /s/ Carolyn A. Kee ----------------------------------------- Title: Vice President GENERAL ELECTRIC CAPITAL CORPORATION, Individually and as a Syndication Agent By: /s/ William R. Doolittle ------------------------------------------ Title: Duly Authorized Signatory LEHMAN COMMERCIAL PAPER INC., Individually and as Documentation Agent By: /s/ Janine M. Shugan ------------------------------------------ Title: Authorized Signatory MIZUHO CORPORATE BANK, LTD., Individually and as Documentation Agent By: /s/ Kentaro Akashi ------------------------------------------ Title: Deputy General Manager PARTICIPANT LENDERS ------------------- THE BANK OF NOVA SCOTIA By: /s/ C. J. Allen ------------------------------------------ Title: Managing Director THE BANK OF NEW YORK By: /s/ David C. Siegel ------------------------------------------ Title: Vice President CHOHUNG BANK, NEW YORK BRANCH By: /s/ Nam Soo Heo ------------------------------------------ Title: General Manager WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Mark S. Supple ------------------------------------------ Title: Vice President CITY NATIONAL BANK OF NEW JERSEY By: /s/ Edward Wright ------------------------------------------ Title: Senior Vice President ANNEX I ------- LENDERS AND COMMITMENTS ----------------------- Lender Commitment ------ ---------- JPMorgan Chase Bank $90,000,000 Citicorp USA, Inc. $90,000,000 General Electric Capital Corporation $90,000,000 Mizuho Corporate Bank, Ltd. $50,000,000 Lehman Commercial Paper Inc. $50,000,000 The Bank of Nova Scotia $35,000,000 The Bank of New York $25,000,000 Chohung Bank, New York Branch $25,000,000 Wachovia Bank, National Association $25,000,000 City National Bank of New Jersey $6,250,000 Total $486,250,000 ============ TABLE OF CONTENTS (continued) ANNEX I -- List of Lenders and Commitments ANNEX II -- Lender Addresses ANNEX III -- Existing Letters of Credit ANNEX IV -- Certain Litigation ANNEX V -- Schedule of Subsidiaries ANNEX VI -- Existing Liens ANNEX VII -- Existing Debt ANNEX VIII -- Real Property ANNEX IX -- Existing Investments ANNEX X -- Post-Closing Matters EXHIBIT A-1 -- Form of Revolving Note EXHIBIT A-2 -- Form of Swingline Note EXHIBIT B -- Form of Letter of Credit Request EXHIBIT C-1 -- Form of Opinion of Executive Vice President, General Counsel and Assistant Secretary of the Borrower EXHIBIT C-2 -- Form of Opinion of Womble Carlyle Sandridge & Rice, PLLC EXHIBIT C-3 -- Form of Opinion of Kilpatrick Stockton LLP EXHIBIT D -- Form of Subsidiary Guaranty EXHIBIT E-1 -- Form of Notice of Assignment EXHIBIT E-2 -- Form of Assignment Agreement EXHIBIT F -- Form of Confidentiality Agreement EXHIBIT G -- Form of Intercompany Subordination Agreement EXHIBIT H -- Form of Pledge Agreement EXHIBIT I -- Form of Security Agreement EXHIBIT J -- Form of Section 4.04(b)(ii) Certificate (v) EX-10.7 14 g90345exv10w7.txt EX-10.7 EXHIBIT 10.7 FOURTH AMENDED AND RESTATED SUBSIDIARY GUARANTY GUARANTY, dated as of May 18, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002, as further amended and restated as of January 17, 2003 and as further amended and restated as of July 30, 2004 (as so amended and restated and as the same may be further amended, restated, modified and/or supplemented from time to time, this "Guaranty"), made by the undersigned (together with any other entity which becomes a party hereto pursuant to Section 24, each, a "Guarantor" and, collectively, the "Guarantors"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : WHEREAS, Reynolds American Inc. ("Parent"), R.J. Reynolds Tobacco Holdings, Inc. (the "Borrower"), the various lending institutions from time to time party thereto (the "Lenders"), and JPMorgan Chase Bank, as Administrative Agent (the "Administrative Agent"), have entered into a Credit Agreement, dated as of May 7, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002 and as further amended and restated as of July 30, 2004 (as so amended and restated and as the same may be further amended, restated, modified and/or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (the Lenders, each Letter of Credit Issuer, the Administrative Agent, the Senior Managing Agents and the Collateral Agent herein called the "Lender Creditors"); WHEREAS, Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more agreements or arrangements with JPMCB or any of its affiliates (even if JPMCB ceases to be a Lender under the Credit Agreement for any reason (JPMCB, any such affiliate and their respective successors and assigns, each, a "Credit Card Issuer")) providing for credit card loans made available to certain employees of Parent and/or one or more of its Subsidiaries (each such agreement or arrangement with a Credit Card Issuer, a "Secured Credit Card Agreement"). WHEREAS, the Parent and/or one or more of its Subsidiaries may from time to time enter into one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafter defined), together with the Existing Interest Rate Swap Agreement, a "Permitted Hedging Agreement") with any Lender, any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if, in either case, any such Exhibit D Page 2 Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other such financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement), and in each case its subsequent successors and assigns, collectively, the "Hedging Creditors", and together with the Lender Creditors and each Credit Card Issuer, the "Creditors"); WHEREAS, each Guarantor is a direct or indirect Subsidiary of Parent; WHEREAS, certain of the Guarantors have heretofore entered into a Subsidiary Guaranty, dated as of May 18, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002 and as further amended and restated as of January 17, 2003 (as so amended and restated and as further amended, modified and/or supplemented to, but not including, the date hereof, the "Third Amended and Restated Subsidiary Guaranty"); WHEREAS, the Guarantors desire to amend and restate the Third Amended and Restated Subsidiary Guaranty in the form of this Guaranty; WHEREAS, the Credit Agreement and/or the Permitted Hedging Agreements require that this Guaranty be executed and delivered; and WHEREAS, each Guarantor will obtain benefits from the incurrence and maintenance of Loans by the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower under the Credit Agreement and the entering into and/or maintaining by Parent and/or one or more of its Subsidiaries of the Secured Credit Card Agreements and the Permitted Hedging Agreements and, accordingly, desires to execute this Guaranty in order to satisfy the requirements described in the preceding paragraph; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby makes the following representations and warranties to the Creditors and hereby covenants and agrees with each Creditor as follows: 1. Each Guarantor, jointly and severally, irrevocably and unconditionally guarantees: (i) to the Lender Creditors the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the Notes issued by, and the Loans made to, the Borrower under the Credit Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit and (y) all other obligations (including obligations which, but for any automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower to the Lender Creditors (including, without limitation, indemnities, Fees and interest thereon (including, without limitation, any interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided for in the Credit Agreement, whether or not such interest is an allowed claim in any such proceeding)) now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement or any other Credit Document and the due performance and compliance with the terms, conditions and agreements contained in the Credit Documents by the Borrower (all such principal, interest, liabilities and obligations Exhibit D Page 3 being herein collectively called the "Credit Document Obligations"); (ii) to each Credit Card Issuer the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for any automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by each Guaranteed Party to the Credit Card Issuers (including, without limitation, indemnities, fees and interest thereon (including, without limitation, any interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided for in the respective Secured Credit Card Agreement, whether or not such interest is an allowed claim in any such proceeding)) under each Secured Credit Card Agreement, whether now in existence or hereafter arising, and the due performance and compliance by each Guaranteed Party with all terms, conditions and agreements contained therein (all such obligations and liabilities under this clause (ii) being herein collectively called the "Credit Card Obligations") and (iii) to each Hedging Creditor the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for any automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by each Guaranteed Party to the Hedging Creditors (including, without limitation, indemnities, fees and interest thereon (including, without limitation, any interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided for in the respective Permitted Hedging Agreement, whether or not such interest is an allowed claim in any such proceeding)) under each Permitted Hedging Agreement, whether now in existence or hereafter arising, and the due performance and compliance by each Guaranteed Party with all terms, conditions and agreements contained therein (all such obligations and liabilities under this clause (iii) being herein collectively called the "Hedging Obligations", and together with the Credit Document Obligations and Credit Card Obligations are herein collectively called the "Guaranteed Obligations"). As used herein, the term "Guaranteed Party" shall mean Parent, the Borrower and each Subsidiary of Parent party to any Secured Credit Card Agreement or Permitted Hedging Agreement (other than a Parent Non-Guarantor Subsidiary). Each Guarantor understands, agrees and confirms that the Creditors may enforce this Guaranty up to the full amount of the Guaranteed Obligations against each Guarantor without proceeding against any other Guarantor, the Borrower, any other Guaranteed Party, against any security for the Guaranteed Obligations, or against any other guarantor under any other guaranty covering all or a portion of the Guaranteed Obligations. This Guaranty shall constitute a guaranty of payment and not of collection. All payments by each Guarantor under this Guaranty shall be made on the same basis as payments by the Borrower under Sections 4.03 and 4.04 of the Credit Agreement. 2. Additionally, each Guarantor, jointly and severally, unconditionally and irrevocably, guarantees the payment of any and all Guaranteed Obligations to the Creditors whether or not due or payable by the Borrower or any other Guaranteed Party upon the occurrence in respect of the Borrower or any such other Guaranteed Party of any of the events specified in Section 9.05 of the Credit Agreement, and unconditionally and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of the United States of America. 3. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations whether executed by such Guarantor, any other Guarantor, any other guarantor or by any other person, and the liability of each Guarantor hereunder shall not be affected or impaired by (i) any direction as to application Exhibit D Page 4 of payment by the Borrower, any other Guaranteed Party or any other person, (ii) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other person as to the Guaranteed Obligations, (iii) any payment on or in reduction of any such other guaranty or undertaking, (iv) any dissolution, termination or increase, decrease or change in personnel by the Borrower or any other Guaranteed Party, (v) any payment made to any Creditor on the Guaranteed Obligations which any Creditor repays the Borrower or any other Guaranteed Party pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding, (vi) any action or inaction by the Creditors as contemplated in Section 6 hereof or (vii) any invalidity, irregularity or unenforceability of all or part of the Guaranteed Obligations or of any security therefor. 4. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor, any other guarantor of any Guaranteed Party, the Borrower or any other Guaranteed Party, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor, any other guarantor of any Guaranteed Party, the Borrower or any other Guaranteed Party and whether or not any other Guarantor, any other guarantor of any Guaranteed Party, the Borrower or any other Guaranteed Party be joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or any other Guaranteed Party or other circumstance which operates to toll any statute of limitations as to the Borrower or such other Guaranteed Party shall operate to toll the statute of limitations as to each Guarantor. 5. Each Guarantor hereby waives notice of acceptance of this Guaranty and notice of any liability to which it may apply, and waives promptness, diligence, presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Creditor against, and any other notice to, any party liable thereon (including such Guarantor, any other Guarantor, any other guarantor of any Guaranteed Party or any other Guaranteed Party). 6. Any Creditor may at any time and from time to time without the consent of, or notice to, any Guarantor, without incurring responsibility to such Guarantor, without impairing or releasing the obligations of such Guarantor hereunder, upon or without any terms or conditions and in whole or in part: (i) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (ii) take and hold security for the payment of the Guaranteed Obligations and/or sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those Exhibit D Page 5 hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (iii) exercise or refrain from exercising any rights against the Borrower, any Guarantor, any other guarantor of any Guaranteed Party, any other Guaranteed Party or others or otherwise act or refrain from acting; (iv) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower or any other Guaranteed Party to creditors of the Borrower or any other Guaranteed Party; (v) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower or any other Guaranteed Party to the Creditors regardless of what liabilities of the Borrower or such other Guaranteed Party remain unpaid; (vi) release or substitute any one or more endorsers, guarantors, Guarantors, the Borrower, any other Guaranteed Party or other obligors; (vii) consent to or waive any breach of, or any act, omission or default under, the Secured Credit Card Agreements, the Permitted Hedging Agreements, the Credit Documents or any of the instruments or agreements referred to therein, or otherwise amend, modify or supplement any of the Secured Credit Card Agreements, the Permitted Hedging Agreements, the Credit Documents or any of such other instruments or agreements; and/or (viii) act or fail to act in any manner referred to in this Guaranty which may deprive such Guarantor of its right to subrogation against the Borrower or any other Guaranteed Party to recover full indemnity for any payments made pursuant to this Guaranty. 7. No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor shall affect, impair or be a defense to this Guaranty, and this Guaranty shall be primary, absolute and unconditional notwithstanding the occurrence of any event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full of the Guaranteed Obligations. 8. This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No failure or delay on the part of any Creditor in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which any Creditor would otherwise have. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Creditor to any other or further action in any circumstances without Exhibit D Page 6 notice or demand. It is not necessary for any Creditor to inquire into the capacity or powers of the Borrower, any other Guaranteed Party or any of their respective Subsidiaries or the officers, directors, partners or agents acting or purporting to act on its or their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 9. Any indebtedness of the Borrower or any other Guaranteed Party now or hereafter held by any Guarantor is hereby subordinated to the indebtedness of the Borrower or such other Guaranteed Party, as the case may be, to the Creditors; and such indebtedness of the Borrower or such other Guaranteed Party to any Guarantor, if the Administrative Agent, after an Event of Default has occurred, so requests, shall be collected, enforced and received by such Guarantor as trustee for the Creditors and be paid over to the Creditors on account of the indebtedness of the Borrower or such other Guaranteed Party to the Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any indebtedness of the Borrower or any other Guaranteed Party to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash. 10. (a) Each Guarantor waives any right (except as shall be required by applicable statute and cannot be waived) to require the Creditors to: (i) proceed against the Borrower, any other Guaranteed Party, any other Guarantor, any other guarantor of any Guaranteed Party or any other person; (ii) proceed against or exhaust any security held from the Borrower, any other Guaranteed Party, any other Guarantor, any other guarantor of any Guaranteed Party or any other person; or (iii) pursue any other remedy in the Creditors' power whatsoever. Each Guarantor waives any defense based on or arising out of any defense of the Borrower, any other Guaranteed Party, any other Guarantor, any other guarantor of any Guaranteed Party or any other person other than payment in full in cash of the Guaranteed Obligations, including, without limitation, any defense based on or arising out of the disability of the Borrower, any other Guaranteed Party, any other Guarantor, any other guarantor of any Guaranteed Party or any other person, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Guaranteed Party, other than payment in full in cash of the Guaranteed Obligations. The Creditors may, at their election, foreclose on any security held by the Administrative Agent, the Collateral Agent or the other Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Creditors may have against the Borrower, any other Guaranteed Party or any other person, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder, except to the extent the Guaranteed Obligations have been paid in full in cash. Each Guarantor waives any defense arising out of any such election by the Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower, any other Guaranteed Party or any other person or any security. Exhibit D Page 7 (b) Each Guarantor waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's and each other Guaranteed Party's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that the Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. (c) Until such time as the Guaranteed Obligations have been paid in full in cash, each Guarantor hereby forbears from exercising all contractual, statutory or common law rights of reimbursement, contribution or indemnity from the Borrower, any other Guaranteed Party or any other Guarantor which it may at any time otherwise have as a result of this Guaranty. 11. If and to the extent that any Guarantor makes any payment to any Creditor or to any other Person pursuant to or in respect of this Guaranty, any claim which such Guarantor may have against the Borrower or any other Guaranteed Party by reason thereof shall be subject and subordinate to the prior payment in full in cash of the Guaranteed Obligations to each Creditor. 12. Each Guarantor covenants and agrees that on and after the date hereof and until the termination of the Total Commitment and when no Note or Letter of Credit remains outstanding and all Credit Document Obligations have been paid in full (other than those arising from indemnities for which no request has been made), such Guarantor shall take, or will refrain from taking, as the case may be, all actions that are necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in Section 7 or 8 of the Credit Agreement, and so that no Event of Default, is caused by the actions of such Guarantor or any of its Subsidiaries. 13. The Guarantors hereby jointly and severally agree to pay all reasonable and actual out-of-pocket costs and expenses of each Creditor in connection with the enforcement of this Guaranty and the protection of such Creditor's rights hereunder, and in connection with any amendment, waiver or consent relating hereto (including, without limitation, the reasonable and actual fees and disbursements of counsel employed by the Administrative Agent or any of the other Creditors). Any reference in this Guaranty to "fees of counsel" shall mean the actual and reasonable fees of counsel incurred at customary and reasonable rates in the jurisdiction in which such counsel performed its services, not pursuant to any statutory formula or percentage calculation. 14. This Guaranty shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the Creditors and their successors and assigns. 15. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated in any manner whatsoever unless in writing duly signed by the Administrative Agent (with the consent of (x) the Required Lenders or, to the extent required by Section 12.12 of the Credit Agreement, all of the Lenders, at all times prior to the time at which Exhibit D Page 8 all Credit Document Obligations have been paid in full, or (y) the holders of at least a majority of the outstanding Credit Card Obligations and Hedging Obligations at all times after the time at which all Credit Document Obligations have been paid in full) and each Guarantor directly affected thereby (it being understood that the addition or release of any Guarantor hereunder shall not constitute a change, waiver, discharge or termination affecting any Guarantor other than the Guarantor so added or released); provided, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Creditors (and not all Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class. For the purpose of this Guaranty, the term "Class" shall mean each class of Creditors, i.e., whether (i) the Lender Creditors as holders of the Credit Document Obligations, (ii) the Credit Card Issuers as holders of the Credit Card Obligations or (iii) the Hedging Creditors as holders of the Hedging Obligations. For the purpose of this Guaranty, the term "Requisite Creditors" of any Class shall mean each of (i) with respect to the Credit Document Obligations, the Required Lenders, (ii) with respect to the Credit Card Obligations, the holders of at least a majority of all Credit Card Obligations outstanding from time to time and (iii) with respect to the Hedging Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Permitted Hedging Agreements. 16. Each Guarantor acknowledges that an executed (or conformed) copy of each of the Credit Documents, the Secured Credit Card Agreements and the Permitted Hedging Agreements has been made available to its principal executive officers and such officers are familiar with the contents thereof. 17. In addition to any rights now or hereafter granted under applicable law (including, without limitation, Section 151 of the New York Debtor and Creditor Law) and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default (such term to mean and include any "Event of Default" as defined in the Credit Agreement and any payment default under any Secured Credit Card Agreement or Permitted Hedging Agreement and to include in any event, any payment default on any of the Guaranteed Obligations continuing after any applicable grace period), each Creditor is hereby authorized at any time or from time to time, without notice to any Guarantor or to any other Person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Creditor to or for the credit or the account of such Guarantor, against and on account of the obligations and liabilities of such Guarantor to such Creditor under this Guaranty, irrespective of whether or not such Creditor shall have made any demand hereunder and although said obligations, liabilities, deposits or claims, or any of them, shall be contingent or unmatured. Each Creditor acknowledges and agrees that the provisions of this Section 17 are subject to the sharing provisions set forth in Section 12.06(b) of the Credit Agreement. 18. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered (including by way of overnight courier) (i) in the case of any Lender Creditor, as provided in the Credit Agreement, (ii) in the case of any Guarantor, at its address set forth opposite its signature below, (iii) in the case of any Credit Card Issuer, at such address as such Credit Card Issuer shall have specified in writing to the Guarantor and (iv) in the case of any Hedging Creditor, at such address as such Hedging Exhibit D Page 9 Creditor shall have specified in writing to the Guarantor; or, in any case, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be deemed to have been duly given or made (i) in the case of any Creditor, when received and (ii) in the case of any Guarantor, when delivered to such Guarantor in any manner required or permitted hereunder. 19. If claim is ever made upon any Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of said Creditors repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such Creditor or any of its property or (ii) any settlement or compromise of any such claim effected by such Creditor with any such claimant (including the Borrower and each other Guaranteed Party), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or the cancellation of any Note, any Secured Credit Card Agreement or any Permitted Hedging Agreement or other instrument evidencing any liability of the Borrower or any other Guaranteed Party, and such Guarantor shall be and remain liable to such Creditor hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such Creditor. 20. (a) This Guaranty and the rights and obligations of the Creditors and of the undersigned hereunder shall be governed by and construed in accordance with the law of the state of New York. (b) Any legal action or proceeding with respect to this Guaranty or any other Credit Document to which any Guarantor is a party may be brought in the courts of the state of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Guarantor at its address set forth opposite its signature below, such service to become effective 30 days after such mailing. Each Guarantor hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other credit document to which such Guarantor is a party that service of process was in any way invalid or ineffective. Each Guarantor hereby irrevocably appoints the Borrower as its agent for service of process in respect of any such action or proceeding. Nothing herein shall affect the right of any of the Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Guarantor in any other jurisdiction. (c) Each Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty or any other Credit Document brought in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in Exhibit D Page 10 any such court that such action or proceeding brought in any such court has been brought in an inconvenient forum. (d) Each Guarantor hereby irrevocably waives all rights to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Guaranty, the other Credit Documents or the transactions contemplated hereby or thereby. 21. In the event that all of the capital stock or other equity interests of one or more Guarantors is sold or otherwise disposed of (to a Person other than the Borrower or a Wholly-Owned Subsidiary thereof) or liquidated in compliance with the requirements of Section 8.02 of the Credit Agreement (or such sale, disposition or liquidation has been approved in writing by the Required Lenders (or all Lenders, if required by Section 12.12 of the Credit Agreement)), such Guarantor shall be released from this Guaranty and this Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no further force or effect (it being understood and agreed that the sale of one or more Persons that own, directly or indirectly, all of the capital stock or other equity interests of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 21). 22. All payments made by any Guarantor hereunder will be made without setoff, counterclaim or other defense. 23. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 24. It is understood and agreed that any Subsidiary of Parent that is required to execute a counterpart of this Guaranty pursuant to the Credit Agreement shall automatically become a Guarantor hereunder by executing a counterpart hereof (or an assumption agreement in form and substance satisfactory to the Administrative Agent) and delivering the same to the Administrative Agent. 25. Notwithstanding anything else to the contrary in this Guaranty, the Creditors agree that this Guaranty may be enforced only by the action of the Administrative Agent acting upon the instructions of the Required Lenders (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least a majority of the outstanding Credit Card Obligations and Hedging Obligations), and that no other Creditor shall have any right individually to seek to enforce or to enforce this Guaranty, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the holders of at least a majority of the outstanding Credit Card Obligations and Hedging Obligations, as the case may be, for the benefit of the Creditors upon the terms of this Guaranty. The Creditors further agree that this Guaranty may not be enforced against any director, officer, employee, or stockholder of any Guarantor (except to the extent such stockholder is also a Guarantor hereunder). It is understood that the agreement in this Section 25 is among and solely for the benefit of the Lenders and that if the Required Lenders so agree (without requiring the consent of any Guarantor), this Guaranty may be directly enforced by any Creditor. Exhibit D Page 11 26. Each Guarantor hereby confirms that it is its intention that this Guaranty not constitute a fraudulent transfer or conveyance for purposes of any bankruptcy, insolvency or similar law, the Uniform Fraudulent Conveyance Act or any similar Federal, state of foreign law. To effectuate the foregoing intention, each Guarantor hereby irrevocably agrees that the Guaranteed Obligations shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws, result in the Guaranteed Obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent transfer or conveyance. 27. Each of the Administrative Agent and each Guarantor hereby acknowledges and agrees that this Guaranty amends and restates (and supersedes in its entirety) the Third Amended and Restated Subsidiary Guaranty. * * * IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. Address: P.O. Box 2959 R. J. REYNOLDS TOBACCO COMPANY, 401 N. Main Street as a Guarantor Winston Salem, NC 27102 Attn: Guy Blynn By: /s/ Lynn L. Lane ------------------------------------- Title: Senior Vice President & Treasurer RJR ACQUISITION CORP., as a Guarantor By: /s/ Lynn L. Lane ------------------------------------- Title: Vice President & Treasurer GMB, INC., as a Guarantor By: /s/ Daniel A. Fawley ------------------------------------- Title: Treasurer FHS, INC., as a Guarantor By: /s/ Caroline M. Price ------------------------------------- Title: President R. J. REYNOLDS TOBACCO CO., as a Guarantor By: /s/ Lynn L. Lane ------------------------------------- Title: Treasurer RJR PACKAGING, LLC, as a Guarantor By: /s/ Lynn L. Lane ------------------------------------- Title: Treasurer Exhibit D Page 13 BWT BRANDS, INC., as a Guarantor By: /s/ Daniel A. Fawley ------------------------------------- Title: Treasurer Accepted and Agreed to: JPMORGAN CHASE BANK, as Administrative Agent for the Lenders By /s/ Robert T. Sacks -------------------------------------------- Title: Managing Director -13- EX-10.8 15 g90345exv10w8.txt EX-10.8 Exhibit 10.8 ================================================================================ AMENDED AND RESTATED SECURITY AGREEMENT among REYNOLDS AMERICAN INC., R.J. REYNOLDS TOBACCO HOLDINGS, INC., VARIOUS SUBSIDIARIES OF REYNOLDS AMERICAN INC. and JPMORGAN CHASE BANK, as Collateral Agent Dated as of July 30, 2004 ================================================================================ EXHIBIT 1 AMENDED AND RESTATED SECURITY AGREEMENT SECURITY AGREEMENT, dated as of July 15, 2003 and amended and restated as of July 30, 2004 (as so amended and restated and as the same may be further amended, restated, supplemented and/or otherwise modified from time to time, this "Agreement"), among each of the undersigned (together with any other entity that becomes a party hereto pursuant to Section 10.12 hereof, each, an "Assignor" and, collectively, the "Assignors") and JPMORGAN CHASE BANK, as Collateral Agent (in such capacity, together with any successor collateral agent, the "Collateral Agent") for the Secured Creditors (as defined below). Capitalized terms used herein shall have the meaning specified in Article IX herein or, if not defined therein, as specified in the Credit Agreement referred to below. W I T N E S S E T H: WHEREAS, Reynolds American Inc. ("Parent"), R.J. Reynolds Tobacco Holdings, Inc. (the "Borrower"), the various lending institutions from time to time party thereto (the "Lenders"), and JPMORGAN CHASE BANK, as Administrative Agent (the "Administrative Agent"), have entered into a Credit Agreement, dated as of May 7, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002 and as further amended and restated as of July 30, 2004, providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (with (i) the Lenders, each Letter of Credit Issuer, the Administrative Agent, the Senior Managing Agents, the Pledgee and the Collateral Agent being herein called the "Lender Creditors" and (ii) the term "Credit Agreement" as used herein to mean the Credit Agreement described above in this paragraph, as the same may be further amended, modified, extended, renewed, replaced, restated, supplemented and/or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lenders or holders; provided that, with respect to any agreement providing for the refinancing or replacement of indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (x) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Lenders shall have consented in writing to the refinancing or replacement indebtedness being treated as indebtedness pursuant to the Credit Agreement, and (y) a notice to the effect that the refinancing or replacement indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Borrower to the Collateral Agent); WHEREAS, Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more agreements or Exhibit I Page 2 arrangements with JPMCB or any of its affiliates (even if JPMCB ceases to be a Lender under the Credit Agreement for any reason (JPMCB and any such affiliate and their respective successors and assigns, each, a "Credit Card Issuer")) providing for credit card loans to be made available to certain employees of Parent and/or one or more of its Subsidiaries (each such agreement or arrangement with a Credit Card Issuer, a "Secured Credit Card Agreement"). WHEREAS, Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafter defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender, or any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other such financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement), and in each case their subsequent successors and assigns, collectively, the "Hedging Creditors", and together with the Lender Creditors and each Credit Card Issuer, the "Lender Secured Creditors"); WHEREAS, the Borrower and the trustee thereunder (the "Existing Senior Notes Trustee"), on behalf of the holders of the Existing Senior Notes (such holders, together with the Existing Senior Notes Trustee, the "Existing Senior Notes Creditors"), have from time to time entered into, and may in the future from time to time enter into, one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Existing Senior Notes Indenture" and, together with the Existing Senior Notes, the "Existing Senior Notes Documents") providing for the issuance of Existing Senior Notes by the Borrower; WHEREAS, the Borrower and the trustee or trustees thereunder (collectively, the "Refinancing Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes (such holders, together with the Refinancing Senior Notes Trustee, the "Refinancing Senior Notes Creditors", with the Lender Secured Creditors, the Existing Senior Notes Creditors and the Refinancing Senior Notes Creditors being herein called the "Secured Creditors"), may from time to time enter into one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Refinancing Senior Notes Indenture" and, together with the Refinancing Senior Notes, the "Refinancing Senior Notes Documents") providing for the issuance of Refinancing Senior Notes by the Borrower; WHEREAS, pursuant to the Subsidiary Guaranty, each Assignor (other than the Borrower) has jointly and severally guaranteed to the Lender Secured Creditors the payment when due of the Guaranteed Obligations (as defined in the Subsidiary Guaranty); WHEREAS, pursuant to the Credit Agreement Party Guaranty, each Credit Agreement Party has guaranteed to the Hedging Creditors and each Credit Card Issuer the payment when due of the Relevant Guaranteed Obligations; Exhibit I Page 3 WHEREAS, each Specified Assignor (other than the Borrower) has jointly and severally guaranteed to the Existing Senior Notes Creditors the payment when due of principal and interest on the Existing Senior Notes; WHEREAS, each Specified Assignor (other than the Borrower) has jointly and severally guaranteed to the Refinancing Senior Notes Creditors the payment when due of principal and interest on the Refinancing Senior Notes; WHEREAS, certain of the Assignors have heretofore entered into a Security Agreement, dated as of July 15, 2003 (as amended, restated, modified and/or supplemented from time to time, but not including, the date hereof, the "Original Security Agreement"); WHEREAS, the Assignors desire to amend and restate the Original Security Agreement in the form of this Agreement; WHEREAS, the Credit Agreement requires this Agreement be executed and delivered to the Collateral Agent by the Assignors and the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture, require that this Agreement secure the respective Obligations as provided herein; WHEREAS, each Assignor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties and hereby covenants and agrees as follows: ARTICLE I SECURITY INTERESTS 1.1 Grant of Security Interests. (a) As security for the prompt and complete payment and performance when due of all of its Applicable Obligations, each Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent for the benefit of the Secured Creditors as their interests may appear, a continuing security interest in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable; (ii) all Contracts, together with all Contract Rights arising thereunder; (iii) all Inventory; (iv) all Equipment; Exhibit I Page 4 (v) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor symbolized by the Marks; (vi) the Cash Collateral Account established for such Assignor and all moneys, securities and instruments deposited or required to be deposited in such Cash Collateral Account; (vii) all Patents and Copyrights and all reissues, renewals or extensions thereof; (viii) all computer programs of such Assignor and all intellectual property rights therein and all other proprietary information of such Assignor, including, but not limited to, Trade Secrets Rights; (ix) all insurance policies; (x) all other Goods, General Intangibles, Chattel Paper (including without limitation all Tangible Chattel Paper and all Electronic Chattel Paper), Documents and Instruments; (xi) all Permits; (xii) all cash; (xiii) all Commercial Tort Claims; (xiv) all Deposit Accounts and all other demand, deposit, time, savings, cash management, passbook and similar accounts maintained by such Assignor with any Person and all moneys, securities, Instruments and other investments deposited or required to be deposited in any of the foregoing; (xv) all Investment Property; (xvi) all Letter-of-Credit Rights (whether or not the respective letter of credit is evidenced by a writing); (xvii) all Software and all Software licensing rights, all writings, plans, specifications and schematics, all engineering drawings, customer lists, goodwill and licenses, and all recorded data of any kind or nature, regardless of the medium of recording; (xviii) all Supporting Obligations; and (xix) all Proceeds and products of any and all of the foregoing (all of the above, including this clause (xix), collectively, the "Collateral"); provided that the Collateral that secures the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations of a Specified Assignor shall be limited to Collateral owned by such Specified Assignor consisting of any shares of stock, indebtedness or other Exhibit I Page 5 obligations of a Subsidiary of Parent or of any Principal Property of any Specified Assignor (the "Designated Collateral"), all of which Collateral shall also ratably secure all other Applicable Obligations of such Specified Assignor, and the Collateral Proceeds with respect to any item of Collateral owned by a Specified Assignor that are to be applied to the Existing Senior Notes Obligations or to the Refinancing Senior Notes Obligations shall be limited to Collateral Proceeds from the sale, other disposition of or other realization upon, and other moneys received in respect of, the Designated Collateral of such Specified Assignor, with such Collateral Proceeds to also be applied ratably to all other Applicable Obligations of such Specified Assignor. (b) Notwithstanding anything contained herein to the contrary, "Collateral" shall not include any Copyright, Mark, Patent, Trade Secret, computer program or Software to the extent such property is subject to a license or agreement the terms of which prohibit an assignment of, or the granting of a security interest in, such Assignor's rights thereunder or such Assignor's grant of a security interest pursuant to this Agreement would give any party thereto (other than such Assignor) the right to terminate its obligations thereunder; provided that the foregoing limitation shall not affect, limit, restrict or impair the grant by an Assignor of the security interest pursuant to this Agreement in any account or any money or other amounts due or to become due under any such Copyright, Mark, Patent, Trade Secret, computer program or Software or such license or agreement governing the same. (c) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the continuation of this Agreement. 1.2 Power of Attorney. Each Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of such Assignor or otherwise) to act, require, demand, receive, compound and give acquittance for any and all moneys and claims for moneys due or to become due to such Assignor under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be necessary or advisable in the premises, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1 Necessary Filings. All filings, registrations and recordings necessary or appropriate to create, preserve, protect and perfect the security interest granted by such Assignor to the Collateral Agent hereby in respect of all the Collateral have been accomplished or shall have been accomplished within 45 days of a Trigger Event (or, in the case of Collateral constituting Excluded Unperfected Collateral, on the date on which such Collateral ceases to Exhibit I Page 6 qualify as such in accordance with the definition of Excluded Unperfected Collateral) and the security interest granted to the Collateral Agent pursuant to this Agreement in and to all of the Collateral (other than Excluded Unperfected Collateral) constitutes, upon satisfaction of such filings, registrations and recordings, a perfected security interest therein superior and prior to the rights of all other Persons therein (other than any such rights pursuant to any Permitted Liens that have a priority as provided under applicable law) and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests. 2.2 No Liens. Such Assignor is, and as to all Collateral acquired by it from time to time after the date hereof such Assignor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and such Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein (other than in connection with Permitted Liens) adverse to the Collateral Agent. 2.3 Other Financing Statements. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral (other than financing statements filed in respect of Permitted Liens and financing statements filed pursuant to the same liens as Permitted Liens) and at all times prior to the Termination Date, such Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Assignor or as permitted by the Credit Agreement. 2.4 Chief Executive Office; Records. As of the date hereof, the chief executive office of such Assignor is located at the address or addresses indicated on Annex A hereto. Such Assignor will not move its chief executive office except to such new location as such Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights and Trade Secret Rights of such Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office and/or one or more of the locations shown on Annex A, or at such new locations as such Assignor may establish in accordance with the last sentence of this Section 2.4. All Receivables and Contract Rights and Trade Secret Rights of such Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above, or such new locations as such Assignor may establish in accordance with the last sentence of this Section 2.4. Such Assignor shall not establish new locations for such chief executive offices until (i) it shall have given to the Collateral Agent not less than 15 days' prior written notice (or such lesser notice as shall be acceptable to the Collateral Agent in the case of a new record location to be established in connection with newly acquired Contracts) of its intention to do so, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, and (ii) with respect to such new location, it shall have taken all action, reasonably satisfactory to Exhibit I Page 7 the Collateral Agent, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.5 Location of Inventory and Equipment. All Inventory and Equipment held on the date hereof by each Assignor (other than immaterial amounts of Inventory and Equipment) is located at one of the locations shown on Annex B attached hereto, is in transit between such locations, or is in transit to customers. 2.6 Legal Names; Organizational Identification Number; Trade Names; Change of Name; etc. The exact legal name of each Assignor, and the organizational identification number (if any) of each Assignor, as of the date hereof, is listed on Annex C hereto for such Assignor. No Assignor has or operates in any jurisdiction under, or in the five years preceding the date hereof has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name and such other trade or fictitious names as are listed on Annex C hereto for such Assignor. No Assignor shall change its legal name, organizational identification number (if any) or assume or operate in any jurisdiction under any trade, fictitious or other name except its legal name, organizational identification number and those trade names in each case listed on Annex C hereto for such Assignor and those that may be established in accordance with the immediately succeeding sentence of this Section 2.6. No Assignor shall change its legal name or organizational identification number or assume or operate in any jurisdiction under any new trade, fictitious or other name or operate under any existing name in any additional jurisdiction until (i) it shall have given to the Collateral Agent not less than 15 days' prior written notice of its intention so to do, clearly describing such new name and/or jurisdiction and, in the case of a new name, the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new name and/or jurisdiction, it shall have taken all action necessary, or in the reasonable opinion of the Collateral Agent, desirable to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) the Collateral Agent shall have received evidence that all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. In addition, to the extent that any Assignor does not have an organizational identification number on the date hereof and later obtains one, such Assignor shall promptly thereafter notify the Collateral Agent of such organizational identification number and shall take all actions reasonably satisfactory to the Collateral Agent to the extent necessary to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby fully perfected and in full force and effect. 2.7 Recourse. This Agreement is made with full recourse to such Assignor and pursuant to and upon all the warranties, representations, covenants, and agreements on the part of such Assignor contained herein, in the other Credit Documents, in the Secured Hedging Agreements, in the Existing Senior Notes Documents and in the Refinancing Senior Notes Documents, and otherwise in writing in connection herewith or therewith. 2.8 Jurisdiction and Type of Organization. The jurisdiction of organization of each Assignor, and the type of organization of each Assignor, as of the date hereof, is listed on Exhibit I Page 8 Annex I hereto for such Assignor. No Assignor shall change its jurisdiction of organization or its type of organization until (i) it shall have given to the Collateral Agent not less than 15 days' prior written notice of intention so to do, clearly describing such new jurisdiction of organization and/or type of organization and providing such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such new jurisdiction of organization and/or type of organization, it shall have taken all actions reasonably requested by the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.9 Collateral in the Possession of a Bailee. If any Inventory or other Goods are at any time in the possession of a bailee, the respective Assignor shall promptly notify the Collateral Agent thereof and, if requested by the Collateral Agent, shall use its reasonable best efforts to promptly obtain an acknowledgment from such bailee, in form and substance reasonably satisfactory to the Collateral Agent, that the bailee holds such Collateral for the benefit of the Collateral Agent and shall act upon the instructions of the Collateral Agent, without the further consent of the respective Assignor. The Collateral Agent agrees with the Assignors that the Collateral Agent shall not give any such instructions unless an Event of Default has occurred and is continuing or would occur after taking into account any action by the respective Assignor with respect to any such bailee. 2.10 As-Extracted Collateral; Timber-to-be-Cut. As of the date hereof, no Assignor owns, or expects to acquire, any property which constitutes, or would constitute, As-Extracted Collateral or Timber-to-be-Cut. If at any time after the date hereof any Assignor owns, acquires or obtains rights to any As-Extracted Collateral or Timber-to-be-Cut, such Assignor shall furnish the Collateral Agent with prompt written notice thereof (which notice shall describe in reasonable detail the As-Extracted Collateral and/or Timber-to-be-Cut and the locations thereof) and shall take all actions as may be deemed reasonably necessary or desirable by the Collateral Agent to perfect the security interest of the Collateral Agent therein. ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 3.1 Additional Representations and Warranties. As of the time when each of its Receivables arises, each Assignor shall be deemed to have represented and warranted that such Receivable, and all material records, papers and documents relating thereto (if any) are genuine and in all material respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes) and (ii) will, to the knowledge of such Assignor, evidence true and valid obligations of the account debtor named therein. 3.2 Maintenance of Records. Each Assignor will keep and maintain at its own cost and expense satisfactory and complete records of its Receivables and Contracts, and such Assignor will make the same available to the Collateral Agent for inspection, at such Assignor's Exhibit I Page 8 own cost and expense, at any and all reasonable times (i.e., during normal business hours) and upon reasonable prior notice to such Assignor. If requested by the Collateral Agent while an Event of Default is in existence, such Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, copies of all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). If the Collateral Agent so directs, upon the occurrence and during the continuance of an Event of Default, such Assignor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, the Receivables and Contracts, as well as books, records and documents of such Assignor evidencing or pertaining to such Receivables with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3 Modification of Terms; etc. No Assignor shall rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify any term thereof or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except (i) as permitted by Section 3.4 hereof and (ii) in accordance with such Assignor's reasonable business practices. Each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with all material Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.4 Collection. Each Assignor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, so long as no Event of Default is then in existence in respect of which the Collateral Agent has given notice that this exception is no longer applicable, any Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Assignor finds appropriate in accordance with sound business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services. The reasonable costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by any Assignor or the Collateral Agent, shall be borne by such Assignor. 3.5 Direction to Account Debtors; etc. Upon the occurrence and during the continuance of a Noticed Event of Default, and if the Collateral Agent so directs any Assignor, to the extent permitted by applicable law, such Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in preceding clause (x) and (z) that the Collateral Agent may enforce collection of any Receivables or Contracts and may adjust, settle or compromise the amount of payment thereof, in the same Exhibit I Page 10 manner and to the same extent as the Assignor. The Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses (including reasonable attorneys' fees) of collection, whether incurred by any Assignor or the Collateral Agent, shall be borne by such Assignor. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the relevant Assignor; provided that, the failure of the Collateral Agent to so notify such Assignor shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.5. 3.6 Instruments. If any Assignor owns or acquires any Instrument, such Assignor will within 30 Business Days notify the Collateral Agent thereof, and upon request by the Collateral Agent promptly deliver such Instrument (other than checks payable to any Assignor and processed in the ordinary course of business) to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7 Further Actions. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps, including any and all actions as may be necessary or required under the Federal Assignment of Claims Act, relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require to give effect to the purposes of this Agreement. 3.8 Assignors Remain Liable Under Receivables and Contracts. Anything herein to the contrary notwithstanding, the Assignors shall remain liable under each of the Receivables and each Contract to observe and perform all of the conditions and obligations to be observed and performed by them thereunder, all in accordance with the terms of the agreement giving rise to such Receivables or such Contract. Neither the Collateral Agent nor any other Secured Creditor shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) or any Contract by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Creditor of any payment relating to such Receivable or such Contract pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any Receivable (or any agreement giving rise thereto) or any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by them or as to the sufficiency of any performance by any party under any Receivable (or any agreement giving rise thereto) or any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. 3.9 Deposit Accounts; Etc. (a) No Assignor maintains, or at any time after the date hereof shall establish or maintain, any demand, time, savings, passbook or similar account, except for such accounts maintained with a bank (as defined in Section 9-102 of the UCC) whose jurisdiction (determined in accordance with Section 9-304 of the UCC) is within a State of the United States, provided that an Assignor may maintain or establish an account or accounts outside of the United States on terms, and in circumstances, reasonably acceptable to Exhibit I Page 11 the Collateral Agent, so long as (i) any amounts deposited in any such account represent monies from revenue generated exclusively from operations outside of the United States and (ii) the aggregate amount of cash in all such accounts maintained outside the United States does not exceed an amount reasonably satisfactory to the Collateral Agent (each such account outside the United States meeting the foregoing requirements, a "Non-U.S. Deposit Account"). Annex J hereto accurately sets forth, as of the date of this Agreement, for each Assignor, each Deposit Account maintained by such Assignor (including a description thereof and the respective account number), the name of the respective bank with which such Deposit Account is maintained, and the jurisdiction of the respective Bank with respect to such Deposit Account. For each Perfected Deposit Account, the respective Assignor shall cause the bank with which the Perfected Deposit Account is maintained to execute and deliver to the Collateral Agent, within 60 days after the Third Restatement Effective Date or, if later, at the time of the establishment of the respective Perfected Deposit Account, a "control agreement" in the form of Annex L hereto (appropriately completed), with such changes thereto as may be approved by the Collateral Agent (such approval not to be unreasonably withheld). If any bank with which a Perfected Deposit Account is maintained refuses to, or does not, enter into such a "control agreement", then the respective Assignor shall promptly (and in any event within 60 days after the Third Restatement Effective Date or, if later, 60 days after the opening of such account) close the respective Perfected Deposit Account and transfer all balances therein to the Cash Collateral Account or another Perfected Deposit Account meeting the requirements of this Section 3.9. If any bank with which a Perfected Deposit Account is maintained refuses to subordinate all its claims with respect to such Perfected Deposit Account to the Collateral Agent's security interest therein on terms satisfactory to the Collateral Agent, then the Collateral Agent, at its option, may (x) require that such Perfected Deposit Account be terminated in accordance with the immediately preceding sentence or (y) agree to a "control agreement" without such subordination, provided that in such event the Collateral Agent may at any time, at its option, subsequently require that such Perfected Deposit Account be terminated (within 60 days after notice from the Collateral Agent) in accordance with the requirements of the immediately preceding sentence. (b) After the date hereof, no Assignor shall establish any new demand, time, savings, passbook or similar account, except for Perfected Deposit Accounts established and maintained with banks and meeting the requirements of preceding clause (a). At the time any such Perfected Deposit Account is established, the appropriate "control agreement" shall be entered into in accordance with the requirements of preceding clause (a) and the respective Assignor shall furnish to the Collateral Agent a supplement to Annex J hereto containing the relevant information with respect to the respective Perfected Deposit Account and the bank with which same is established. 3.10 Letter-of-Credit Rights. If any Assignor is at any time a beneficiary under a letter of credit with a stated amount of $1,000,000 or more, such Assignor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, such Assignor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, use its reasonable best efforts to (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under such letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of such letter of credit, with each Assignor and the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be applied as provided in Exhibit I Page 12 this Agreement after the occurrence and during the continuance of a Noticed Event of Default (it being understood and agreed that at any time prior to the occurrence of a Noticed Event of Default, such proceeds shall be directed to the relevant Assignor). 3.11 Commercial Tort Claims. All Commercial Tort Claims of each Assignor and any events or circumstances that would reasonably be expected to give rise to any Commercial Tort Claims of each Assignor as of the date of this Agreement are described in Annex K hereto. If any Assignor shall at any time and from time to time after the date hereof become aware of any Commercial Tort Claims or events or circumstances that would reasonably be expected to give rise to a Commercial Tort Claim of such Assignor, in an amount (taking the greater of the aggregate claimed damages thereunder or the reasonably estimated value thereof) of $1,000,000 or more, such Assignor shall (i) promptly notify the Collateral Agent thereof in a writing signed by such Assignor and describing the details thereof and shall grant to the Collateral Agent in such writing a security interest in all such Commercial Tort Claims and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Collateral Agent and (ii) perform all actions reasonably requested by the Collateral Agent to perfect such security interest in such Commercial Tort Claims. 3.12 Chattel Paper. Upon the request of the Collateral Agent made at any time or from time to time, each Assignor shall promptly furnish to the Collateral Agent a list of all Electronic Chattel Paper held or owned by such Assignor. Furthermore, if requested by the Collateral Agent, each Assignor shall promptly take all actions which are reasonably practicable so that the Collateral Agent has "control" of all Electronic Chattel Paper in accordance with the requirements of Section 9-105 of the UCC. Each Assignor will promptly (and in any event within 10 days) following any request by the Collateral Agent, deliver all of its Tangible Chattel Paper to the Collateral Agent. ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS 4.1 Additional Representations and Warranties. Each Assignor represents and warrants as of the date hereof that it is the true and lawful owner of the United States Patent and Trademark Office registrations, and applications for registrations, of the Marks listed in Annex D, Part I attached hereto and that Annex D, Part I lists all the United States Patent and Trademark Office, or the equivalent office thereof in any foreign country, registrations and applications for registrations, of the Marks that such Assignor now owns or uses in connection with its business. Each Assignor represents and warrants as of the date hereof that except with respect to those licensed marks set forth in Annex D, Part I, it owns, is licensed to use or otherwise has the right to use all material Marks that it uses. Each Assignor further warrants as of the date hereof that it is aware of no third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any material Mark. Except as set forth on Annex D, Part II, each Assignor represents and warrants as of the date hereof that it is the true and lawful owner of or otherwise has the right to use all material U.S. trademark registrations and applications listed in Annex D, Part I hereto and that said registrations are valid, Exhibit I Page 13 subsisting, have not been cancelled and that such Assignor is not aware of any third-party claim that any of said registrations or applications for registration with respect to a Mark is invalid or unenforceable or is not aware that there is any reason that any of said material registrations or applications for registration with respect to a Mark is invalid or unenforceable, or that there is any reason that any of said applications will not pass to registration. Each Assignor represents and warrants that upon the recordation of an Assignment of Security Interest in United States Trademarks and Patents in the form of Annex G hereto in the United States Patent and Trademark Office, together with filings on Form UCC-1 pursuant to this Agreement, all filings, registrations and recordings necessary or appropriate to perfect the security interest granted to the Collateral Agent in the United States Marks covered by this Agreement under federal law will have been accomplished. Each Assignor agrees to execute such an Assignment of Security Interest in United States Trademark and Patents covering all of such Assignor's right, title and interest in each United States Mark, and the associated goodwill, of such Assignor, and to record the same. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of a Noticed Event of Default, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all such Assignor's right, title and interest in each United States Mark owned by an Assignor, and record the same. 4.2 Licenses and Assignments. Subject to the provisions of Sections 4.4 and 4.5, each Assignor hereby agrees not to divest itself of any right under a Mark other than in the ordinary course of business absent prior written approval of the Collateral Agent. 4.3 Infringements. Each Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who may be infringing or otherwise violating in any material respect any of such Assignor's rights in and to any Mark material to the operation of its business, or with respect to any party claiming that such Assignor's use of any Mark material to the operation of its business violates in any material respect any property right of that party. Each Assignor further agrees, to prosecute diligently any Person infringing in any material respect any Mark owned by such Assignor in a manner consistent with its past practice and in accordance with reasonable business practices. 4.4 Preservation of Marks. Each Assignor agrees to use or license the use of its Marks in interstate commerce during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks registered under the laws of the United States or the relevant foreign jurisdiction; provided, that no Assignor shall be obligated to preserve any Mark in the event such Assignor determines, in its reasonable business judgment, that the preservation of such Mark is no longer necessary in the conduct of its business. 4.5 Maintenance of Registration. Each Assignor shall, at its own expense, diligently process all documents required to maintain trademark registrations, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office or equivalent governmental agency in any foreign jurisdiction for all of its Marks (excluding unregistered Marks), and shall pay all fees and disbursements in connection therewith, and shall not abandon any such filing of affidavit of use or any such Exhibit I Page 14 application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent; provided, that no Assignor shall be obligated to maintain any Mark or prosecute any such application for registration in the event that such Assignor determines, in its reasonable business judgment, that such Mark or application is no longer necessary in the conduct of its business. 4.6 Future Registered Marks. If any Mark registration issues hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office or equivalent governmental agency in any foreign jurisdiction, at the time of the delivery (or required delivery) of the annual or quarterly financial information of the Borrower to the Lenders pursuant to Section 7.01(a) or (b), as the case may be, of the Credit Agreement, such Assignor shall deliver a copy of the related registration certificate, and a grant of security in such mark to the Collateral Agent, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form of Annex G hereof or in such other form as may be reasonably acceptable to the Collateral Agent. 4.7 Remedies. If a Noticed Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the relevant Secured Creditors pursuant to a trademark security agreement in form and substance satisfactory to the Collateral Agent, executed by such Assignor and filed on the date hereof, pursuant to which all of such Assignor's rights, title and interest in and to the Marks are assigned to the Collateral Agent for the benefit of the relevant Secured Creditors; (ii) take and use or sell the Marks and the goodwill of such Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of such Assignor in connection with which the Marks have been used; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change such Assignor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office or any equivalent governmental agency or office in any foreign jurisdiction to the Collateral Agent. ARTICLE V SPECIAL PROVISIONS CONCERNING TRADE SECRET RIGHTS, PATENTS AND COPYRIGHTS 5.1 Additional Representations and Warranties. Except as set forth in the Annexes attached hereto, each Assignor represents and warrants as of the date hereof that it is the true and lawful owner or licensee of all rights in (i) all Trade Secret Rights, (ii) the Patents of such Assignor listed in Annex E attached hereto and that said Patents constitute all the patents and applications for patents that such Assignor now owns and (iii) the Copyrights of such Exhibit I Page 15 Assignor listed in Annex F attached hereto and that said Copyrights constitute all the registered copyrights and applications for copyright registrations that such Assignor now owns. Except as set forth on Annex F, each Assignor further warrants as of the date hereof that it is aware of no third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any material patent or any material copyright or that such Assignor has misappropriated any material Trade Secret Rights. Each Assignor represents and warrants that upon the recordation of an Assignment of Security Interest in United States Trademarks and Patents in the form of Annex G hereto in the United States Patent and Trademark Office and the recordation of an Assignment of Security Interest in United States Copyrights in the form of Annex H hereto in the United States Copyright Office, together with filings on Form UCC-1 pursuant to this Agreement, all filings, registrations and recordings necessary or appropriate to perfect the security interest granted to the Collateral Agent in the United States Patents and United States Copyrights covered by this Agreement under federal law will have been accomplished. Upon obtaining any Patent, each Assignor agrees to execute an Assignment of Security Interest in United States Trademarks and Patents covering all right, title and interest in each United States Patent of such Assignor and to record the same, and upon obtaining any registration of a Copyright, to execute such an Assignment of Security Interest in United States Copyrights covering all right, title and interest in each such registered United States Copyright of such Assignor and to record the same. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default, any document which may be required by the U.S. Patent and Trademark Office or equivalent governmental agency in any foreign jurisdiction or the U.S. Copyright Office or equivalent governmental agency in any foreign jurisdiction in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and to record the same. 5.2 Licenses and Assignments. Subject to the provisions of Sections 5.4 and 5.5, each Assignor hereby agrees not to divest itself of any right under a Patent or Copyright other than in the ordinary course of business absent prior written approval of the Collateral Agent. 5.3 Infringements. Each Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such Assignor with respect to any material infringement or other violation of such Assignor's rights in any Patent or Copyright, in each case material to its business, or with respect to any claim that the practice of any Patent or the use of any Copyright, in each case material to its business, violates in any material respect any property right of a third party or with respect to any misappropriation of any Trade Secret Right material to its business or any claim that the practice of any Trade Secret Right material to its business violates any property right of a third party. To the extent consistent with its past practice and in accordance with reasonable business practices, each Assignor further agrees, to prosecute diligently any Person materially infringing any Patent or Copyright owned by such Assignor or any Person misappropriating any Trade Secret Right. 5.4 Maintenance of Patents or Copyrights. At its own expense, each Assignor shall make timely payment of all post-issuance fees required to maintain in force rights under each of its Patents and Copyrights; provided, that no Assignor shall be obligated to maintain any Patent in the event such Assignor determines, in its reasonable business judgment, that the maintenance of such Patent is no longer necessary in the conduct of its business. Exhibit I Page 16 5.5 Prosecution of Patent or Copyright Application. At its own expense, each Assignor shall diligently prosecute all applications for (i) Patents of such Assignor listed on Annex E hereto and (ii) Copyrights listed on Annex F hereto, and, in each case, shall not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent, provided that no Assignor shall be obligated to maintain any Patent or Copyright in the event such Assignor determines it is no longer necessary in the conduct of its business. 5.6 Other Patents and Copyrights. At the time of the delivery (or required delivery) of the annual or quarterly financial information of the Borrower to the Lenders pursuant to Section 7.01(a) or (b), as the case may be, of the Credit Agreement, the relevant Assignor shall deliver to the Collateral Agent information of the type required by Annex E or Annex F hereto (as applicable) relating to each newly acquired or issued Patent or Copyright registration and each newly filed application for a Patent or Copyright registration, as the case may be, with a grant of security as to such Patent or Copyright, as the case may be, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially in the form of Annex G or Annex H, as the case may be, hereto; provided, that no Assignor (i) shall be obligated to prosecute any application in the event such Assignor determines, in its reasonable business judgment, that such application is no longer necessary in the conduct of its business and (ii) shall be obligated to provide a copy of a Patent application or any other information with respect to an application for a Patent or Copyright registration (other than the application date and filing number and such other identifying information necessary to perfect a security interest in the respective Patent or Copyright) if such Assignor reasonably believes such information is confidential or such disclosure would materially impair or prejudice Assignor's rights under such application or registration. 5.7 Remedies. If a Noticed Event of Default shall occur and be continuing, the Collateral Agent may by written notice to the relevant Assignor take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in each of the Patents and Copyrights vested, in which event such right, title and interest shall immediately vest in the Collateral Agent for the benefit of the relevant Secured Creditors, pursuant to a patent security agreement or copyright security agreement, as the case may be, in form and substance satisfactory to the Collateral Agent, executed by such Assignor and filed on the date hereof, pursuant to which all of such Assignor's right, title, and interest to such Patents and Copyrights are assigned to the Collateral Agent for the benefit of the relevant Secured Creditors; (ii) take and practice, use or sell the Patents and Copyrights; (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and such Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the relevant Secured Creditors. Exhibit I Page 17 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1 Protection of Collateral Agent's Security. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at its own expense, to the extent required by the Credit Agreement; copies of all policies or certificates with respect to such insurance (i) shall be endorsed to the Collateral Agent's reasonable satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee and the Collateral Agent and the other relevant Secured Creditors as additional insureds), (ii) shall state that such insurance policies shall not be cancelled or materially revised without at least 30 days' (or at least 10 days' in the case of nonpayment of premium) prior written notice thereof by the insurer to the Collateral Agent and (iii) shall be deposited with the Collateral Agent. If any Assignor shall fail to insure such Inventory or Equipment to the extent required by the Credit Agreement, or if any Assignor shall fail to so endorse and deposit copies of all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation), upon prior written notice to such Assignor, to procure such insurance and such Assignor agrees to reimburse the Collateral Agent for all reasonable costs and expenses of procuring such insurance. Except as otherwise provided in the Credit Agreement, the Collateral Agent shall apply any proceeds of such insurance required after a Noticed Event of Default in accordance with Section 7.4 (it being understood that so long as no Noticed Event of Default has occurred and is continuing, the Collateral Agent will release any interest it has in the proceeds of any casualty insurance to the Assignors). Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay its Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 6.2 Further Actions. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.3 Financing Statements. Each Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are reasonably necessary or desirable in the reasonable opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral (subject to the Permitted Liens) as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses. Each Assignor hereby authorizes the Collateral Agent to file any such financing Exhibit I Page 18 statements (including, without limitation, (x) financing statements which list the Collateral specifically and/or "all assets" as collateral and (y) "in lieu of" financing statements) without the signature of such Assignor where permitted by law. 6.4 Additional Information. Each Assignor will, at its own expense, from time to time upon the reasonable request of the Collateral Agent, promptly (and in any event within 10 days after its receipt of the respective request) furnish to the Collateral Agent such information with respect to the Collateral (including the identity of the Collateral or such components thereof as may have been requested by the Collateral Agent, the value and location of such Collateral, etc.) as may be requested by the Collateral Agent. Without limiting the forgoing, each Assignor agrees that it shall promptly (and in any event within 10 days after its receipt of the respective request) furnish to the Collateral Agent such updated Annexes hereto as may from time to time be reasonably requested by the Collateral Agent. ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 7.1 Remedies; Obtaining the Collateral Upon Default. Each Assignor agrees that, if a Noticed Event of Default shall have occurred and be continuing, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law and under the other provisions of this Agreement, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and such additional rights and remedies to which a secured creditor is entitled under the laws in effect in all relevant jurisdictions and may also: (i) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from such Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such instrument or agreement directly to the Collateral Agent and may exercise any and all remedies of such Assignor in respect of such Collateral; (iii) instruct all banks which have entered into a control agreement with the Collateral Agent to transfer all moneys, securities and instruments held by such depository bank to the Cash Collateral Account and withdraw all moneys, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4 hereof; Exhibit I Page 19 (iv) sell, assign or otherwise liquidate, or direct such Assignor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof in accordance with Section 7.2 hereof, and take possession of the proceeds of any such sale or liquidation; (v) take possession of the Collateral or any part thereof, by directing such Assignor in writing to deliver the same to the Collateral Agent at any place or places reasonably designated by the Collateral Agent, in which event such Assignor shall at its own expense: (A) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, (B) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2, and (C) while the Collateral shall be so stored and kept, provide such guards, other security and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; (vi) license or sublicense whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine; (vii) apply any moneys constituting Collateral or proceeds thereof in accordance with Section 8.4; and (viii) take any other action as specified in clauses (1) through (5), inclusive, of Section 9-607 of the UCC. it being understood that such Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor of said obligation. By accepting the benefits of this Agreement and each other Security Document, the Secured Creditors expressly acknowledge and agree that (x) this Agreement and each other Security Document may be enforced only by the action of the Collateral Agent acting upon the instructions of the Required Lenders or, if the CA Termination Date has occurred, the holders of a majority of the outstanding principal amount of all remaining Obligations, provided that if prior to the CA Termination Date a payment default with respect to at least $300,000,000 principal amount in the aggregate of Existing Senior Notes and/or Refinancing Senior Notes has continued for at least 180 days (and such defaulted payment has not been received pursuant to a drawing under any letter of credit), the holders of a majority of the outstanding principal amount of the Indebtedness subject to such payment default or defaults can direct the Collateral Agent to commence and continue enforcement of the Liens created hereunder, which the Collateral Agent shall comply with subject to receiving any indemnity which it reasonably requests, provided further that the Collateral Agent shall thereafter comply only with the directions of the Required Lenders as to carrying out such enforcement so long as such directions are not adverse to the Exhibit I Page 20 aforesaid directions of the holders of Indebtedness subject to such payment default or defaults, and (y) no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or any other Security Document or to realize upon the security to be granted hereby or thereby, it being understood and agreed that such rights and remedies shall be exercised exclusively by the Collateral Agent for the benefit of the Secured Creditors as their interest may appear upon the terms of this Agreement and the other Security Documents. 7.2 Remedies; Disposition of the Collateral. Upon the occurrence and continuance of a Noticed Event of Default, any Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than ten (10) days' written notice to the relevant Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the ten (10) days after the giving of such notice, to the right of the relevant Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than ten (10) days' written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in one newspaper in general circulation in the City of New York and one newspaper in general circulation in Winston Salem, North Carolina. To the extent permitted by any such requirement of law, the Collateral Agent on behalf of the Secured Creditors (or certain of them) may bid for and become the purchaser (by bidding in the Obligations or otherwise) of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the relevant Assignor (except to the extent of surplus money received as provided in Section 7.4). If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the relevant Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. 7.3 Waiver of Claims. Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE Exhibit I Page 21 UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and such Assignor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession or any such disposition except any damages which are the direct result of the Collateral Agent's gross negligence or wilful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against such Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor. 7.4 Application of Proceeds. (a) All moneys collected by the Collateral Agent upon any sale, other disposition of or other realization upon any Collateral, together with all other moneys received by the Collateral Agent hereunder (collectively, the "Collateral Proceeds"), shall be applied as follows: (i) first, to the payment of all Obligations owing to the Collateral Agent of the type described in clauses (v), (vi) and (vii) of the definition of "Obligations" contained in Article IX hereof; (ii) second, to the extent proceeds of the sale, any disposition of or other realization upon any item of Collateral remain after the application pursuant to preceding clause (i), an amount equal to the outstanding Applicable Obligations secured by such item of Collateral shall be paid to the Secured Creditors in the manner provided below as their interests may appear, with each Secured Creditor receiving an amount equal to its outstanding Applicable Obligations secured by such item of Collateral or, if the proceeds are insufficient to pay in full all such Applicable Obligations, its Pro Rata Share of the amount so remaining to be distributed, with any such amount to be applied in the case of the Credit Document Obligations, the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations, first to the payment of interest in respect of the unpaid principal amount of Loans, Existing Senior Notes or Refinancing Senior Notes, as the case may be, second to the payment of principal of Loans, Existing Senior Notes or Refinancing Senior Notes, as the case may be, and third to the other Credit Document Exhibit I Page 22 Obligations, Existing Senior Notes Obligations or Refinancing Senior Notes Obligations, as the case may be; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), to the relevant Assignor or, to the extent directed by such Assignor or a court of competent jurisdiction, to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean when calculating a Secured Creditor's portion of any distribution or amount pursuant to Section 7.4(a), the amount (expressed as a percentage) equal to a fraction the numerator of which is the then outstanding amount of the relevant Applicable Obligations secured by the relevant item of Collateral owed such Secured Creditor and the denominator of which is the then outstanding amount of all Applicable Obligations secured by the relevant item of Collateral. (c) All payments required to be made to the (i) Lender Creditors hereunder shall be made to the Administrative Agent for the account of the respective Lender Creditors, (ii) Credit Card Issuers hereunder shall be made to the Credit Card Issuer(s) under the applicable Secured Credit Card Agreement, (iii) Hedging Creditors hereunder shall be made to the paying agent under the applicable Secured Hedging Agreement or, in the case of Secured Hedging Agreements without a paying agent, directly to the applicable Hedging Creditors, (iv) Existing Senior Notes Creditors hereunder shall be made to the Existing Senior Notes Trustee for the account of the respective Existing Senior Notes Creditors, and (v) Refinancing Senior Notes Creditors hereunder shall be made to the Refinancing Senior Notes Trustee for the account of the respective Refinancing Senior Notes Creditors. (d) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent for a determination of the outstanding Credit Document Obligations, (ii) any Credit Card Issuer for a determination of the outstanding Credit Card Obligations owed to such Credit Card Issuer, (iii) any Hedging Creditor for a determination of the outstanding Hedging Obligations owed to such Hedging Creditor, (iv) the Existing Senior Notes Trustee for a determination of the outstanding Existing Senior Notes Obligations and (v) the Refinancing Senior Notes Trustee for a determination of the outstanding Refinancing Senior Notes Obligations. Unless it has actual knowledge (including by way of written notice from a Secured Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Credit Document Obligations other than principal, interest and regularly accruing fees are owing to any Lender Creditor. (e) It is understood that each Assignor shall remain liable to the extent of any deficiency between (x) the amount of the obligations for which it is liable directly or as a Guarantor that are satisfied with proceeds of the Collateral and (y) the aggregate outstanding amount of such Obligations. 7.5 Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and Exhibit I Page 23 remedy specifically given under this Agreement, any Secured Credit Card Agreement, any Secured Hedging Agreement, the other Credit Documents, any Existing Senior Notes Document or any Refinancing Senior Notes Document or now or hereafter existing at law or in equity, or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6 Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the relevant Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted (except to the extent of a determination adverse to the Collateral Agent in such a proceeding). ARTICLE VIII INDEMNITY 8.1 Indemnity. (a) Each Assignor jointly and severally agrees to indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor and their respective successors, permitted assigns, employees, agents and servants (hereinafter in this Section 8.1 referred to individually, as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, suits, judgments and any and all reasonable costs and expenses (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, or the documents executed in connection herewith or in any other way connected with the enforcement of any of the terms of, or the preservation of any rights hereunder, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage), or contract Exhibit I Page 24 claim; provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for expenses, losses, damages or liabilities to the extent caused by the gross negligence or wilful misconduct of such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, loss, damage, penalty, claim, demand, action, judgment or suit, such Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify such Assignor of any such assertion of which such Indemnitee has knowledge. (a) Without limiting the application of Section 8.1(a), each Assignor agrees, jointly and severally, to pay, or reimburse the Collateral Agent for (if the Collateral Agent shall have incurred fees, costs or expenses because such Assignor shall have failed to comply with its obligations under this Agreement) any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other reasonable fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. Any reference in this Agreement, to "fees of counsel" or other similar phraseology shall mean the actual and reasonable fees incurred at customary and reasonable hourly rates in the jurisdiction in which the services of such counsel are performed, not pursuant to any statutory formula or percentage calculation. (b) Without limiting the application of Section 8.1(a) or (b), each Assignor jointly and severally agrees to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any material misrepresentation by an Assignor in this Agreement, or in any statement or writing contemplated by or made or delivered pursuant to or in connection with this Agreement. (c) If and to the extent that the obligations of any Assignor under this Section 8.1 are unenforceable for any reason, each Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2 Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of each Assignor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement, the termination of all Secured Hedging Agreements, the full payment of all Existing Senior Notes issued under the Existing Senior Notes Indenture, the full payment of all Refinancing Senior Notes issued under the Refinancing Senior Notes Indenture and the payment of all of the other Obligations and notwithstanding the discharge thereof. Exhibit I Page 25 ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified unless the context otherwise requires. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Administrative Agent" shall have the meaning provided in the recitals to this Agreement. "Agreement" shall mean this Security Agreement, as the same may be modified, supplemented or amended from time to time in accordance with its terms. "As-Extracted Collateral" shall mean "as-extracted collateral" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Assignor" shall have the meaning specified in the first paragraph of this Agreement. "Applicable Obligations" shall mean (x) for each Assignor that is a Specified Assignor, all the Obligations and (y) for each other Assignor, all the Obligations other than the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations, provided that (i) the Existing Senior Notes Obligations shall be excluded from the Applicable Obligations of a Specified Assignor to the extent the Existing Senior Notes Documents do not require the Existing Senior Notes Obligations to be secured pursuant to this Agreement (or, in the case of the Applicable Obligations of Parent, to the same extent the Existing Senior Notes Obligations are excluded from the Applicable Obligations of the Borrower as provided above in this clause (i)), and (ii) the Refinancing Senior Notes Obligations shall be excluded from the Applicable Obligations of a Specified Assignor to the extent the Refinancing Senior Notes Documents do not require the Refinancing Senior Notes Obligations to be secured pursuant to this Agreement (or, in the case of the Applicable Obligations of Parent, to the same extent the Refinancing Senior Notes Obligations are excluded from the Applicable Obligations of the Borrower as provided above in this clause (ii)). "Business Day" means any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law to close. "CA Termination Date" shall have the meaning provided in Section 10.9 hereof. "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors as their interests may appear. "Chattel Paper" shall mean "chattel paper" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. Without limiting the Exhibit I Page 26 foregoing, the term "Chattel Paper" shall in any event include all Tangible Chattel Paper and all Electronic Chattel Paper. "Class" shall have the meaning provided in Section 10.2 hereof. "Collateral" shall have the meaning provided in Section 1.1(a) hereof. "Collateral Agent" shall have the meaning specified in the first paragraph of this Agreement. "Collateral Proceeds" shall have the meaning provided in Section 7.4(a) hereof. "Commercial Tort Claims" shall mean "commercial tort claims" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Contract Rights" shall mean all rights of any Assignor under each Contract, including, without limitation, (i) any and all rights to receive and demand payments under any or all Contracts and Excluded Contracts, (ii) any and all rights to receive and compel performance under any or all Contracts and (iii) any and all other rights, interests and claims now existing or in the future arising in connection with any or all Contracts. "Contracts" shall mean all contracts between an Assignor and one or more additional parties (including, without limitation, any Secured Credit Card Agreement, any Secured Hedging Agreement and related documents entered into in connection therewith) to the extent the grant by an Assignor of a security interest pursuant to this Agreement in its right, title and interest in any such contract is not prohibited by such contract (or, if prohibited, the consent of each other party to such grant of a security interest is obtained) and would not give any other party to such contract the right to terminate, or automatically result in the termination of, such other party's obligations thereunder or the Assignor's rights thereunder (those contracts where such grant is so prohibited (and consent not obtained) or resulting in such a right of, or automatic, termination are referred to herein as "Excluded Contracts"). "Copyrights" shall mean any United States or foreign copyright owned by any Assignor now or hereafter, including any registration of any copyrights, in the United States Copyright Office or the equivalent thereof in any foreign country, as well as any application for a United States or foreign copyright registration now or hereafter made with the United States Copyright Office or the equivalent thereof in any foreign jurisdiction by any Assignor. "Credit Agreement" shall have the meaning provided in the recitals of this Agreement. "Credit Card Issuer" shall have the meaning provided in the recitals of this Agreement. "Credit Card Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. Exhibit I Page 27 "Credit Document Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Deposit Accounts" shall mean all "deposit accounts" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that the term "Deposit Account" shall not include any Excluded Escrow Account. "Designated Collateral" shall have the meaning provided in Section 1.1(a) hereof. "Documents" shall mean "documents" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Electronic Chattel Paper" shall mean "electronic chattel paper" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, fixtures now or hereafter owned by such Assignor and any and all additions, substitutions and replacements of any of the foregoing and all accessories hereto, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto but excluding (i) Equipment to the extent it is subject to a Permitted Lien and the terms of the Indebtedness securing such Permitted Liens prohibits assignment or granting of a security interest in such Assignor's rights and obligations thereunder and (ii) certain heat exchangers owned by the Assignor's on July 15, 2003 which are leased to third-party tobacco growers and having an aggregate book value not exceeding $2,600,000 on such date. "Event of Default" shall mean any Event of Default under the Credit Agreement, any "event of default" under the Existing Senior Notes Documents or the Refinancing Senior Notes Documents or any payment default, after any applicable grace period, under any Secured Credit Card Agreement or any Secured Hedging Agreement. "Excluded Contracts" shall have the meaning provided in the definition of Contracts. "Excluded Deposit Account" shall mean (i) the Cash Collateral Account, (ii) payroll accounts, (iii) accounts used solely for disbursement purposes, (iv) the five (5) certificates of deposit established with various Lenders and identified as "Excluded Deposit Accounts" on Annex J hereto (provided that such certificates of deposit shall be "Excluded Deposit Accounts" only so long as the aggregate amount of cash and cash equivalents on deposit in such accounts does not exceed $1,000,000 at any time) and (v) each Non-U.S. Deposit Account. "Excluded Escrow Accounts" shall mean (i) the account maintained with the Bank of New York in which cash has been deposited for the benefit of certain former Exhibit I Page 28 shareholders of Nabisco Group Holdings and (ii) escrow accounts which collateralize litigation appeal bonds or judgments being appealed by an Assignor. "Excluded Unperfected Collateral" shall mean and include (i) Excluded Deposit Accounts (other than the Cash Collateral Account), (ii) any motor vehicles or similar titled property a security interest over which may not be perfected by the filing of a UCC-1 financing statement in the relevant jurisdiction, (iii) Patents, Trademarks and Copyrights acquired or issued after the date of this Agreement during (and only during) the period from such date of acquisition or issuance to and including the 15th day following the date of the required delivery of a confirmatory grant of security interest therein pursuant to Section 4.6 or Section 5.6, as the case may be, (iv) during the 60 day period prior to the required delivery of a "control agreement" with respect to a Perfected Deposit Account pursuant to Section 3.9, the respective such Perfected Deposit Account and (v) any Collateral acquired after the Third Restatement Effective Date (or, if later, a given Trigger Date) during (and only during) the period from such date of acquisition thereof to and including the 15th day following such acquisition. "Existing Senior Notes Creditors" shall have the meaning provided in the recitals of this Agreement. "Existing Senior Notes Documents" shall have the meaning provided in the recitals of this Agreement. "Existing Senior Notes Indenture" shall have the meaning provided in the recitals of this Agreement. "Existing Senior Notes Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Existing Senior Notes Trustee" shall have the meaning provided in the recitals of this Agreement. "General Intangibles" mean "general intangibles" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, but excluding those General Intangibles constituting Excluded Contracts (other than any Receivable or any money(ies) due or to become due under any such Excluded Contract). "Goods" shall mean "goods" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Health-Care-Insurance Receivable" shall mean any "health-care-insurance receivable" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Hedging Creditors" shall have the meaning provided in the recitals of this Agreement. "Hedging Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. Exhibit I Page 29 "Indemnitee" shall have the meaning provided in Section 8.1 hereof. "Instrument" shall mean "instrument" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that the term "Instrument" shall not include (x) any Instrument (as defined above in the absence of this proviso) pledged pursuant to the Pledge Agreement or (y) the LSB Note (as defined in the Pledge Agreement). "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof and all accessions thereto, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production from raw materials through work-in-process to finished goods and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor. "Investment Property" shall mean "investment property" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, provided that the term "Investment Property" shall not include (i) Collateral (as defined in the Pledge Agreement) pledged pursuant to the Pledge Agreement or (ii) "investment property" excluded pursuant to the definition of "Investment Property" contained in the Pledge Agreement. "Lender Creditors" shall have the meaning provided in the recitals of this Agreement. "Lender Secured Creditors" shall have the meaning provided in the recitals of this Agreement. "Lenders" shall have the meaning provided in the recitals of this Agreement. "Letter-of-Credit Rights" shall mean "letter-of-credit rights" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Liens" shall mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on an Assignor's property. "Location" of any Assignor, shall mean such Assignor's "location" as determined pursuant to Section 9-307 of the UCC. "Marks" shall mean all right, title and interest in and to any United States or foreign trademarks, service marks and trade names now held or hereafter acquired by any Assignor, including any registration or application for registration of any trademarks and service marks now held or hereafter acquired by an Assignor, which are registered in the United States Patent and Trademark Office or the equivalent thereof in any State of the United States or in any Exhibit I Page 30 foreign country, as well as any unregistered marks used by any Assignor, and any trade dress including logos, designs, company names, business names, fictitious business names and other business identifiers used by any Assignor in the United States or any foreign country. "Non-U.S. Deposit Account" has the meaning provided in Section 3.9(a). "Noticed Event of Default" shall mean (i) an Event of Default with respect to a Credit Party under Section 9.05 of the Credit Agreement and (ii) any other Event of Default in respect of which the Collateral Agent has given either Credit Agreement Party notice that such Event of Default constitutes a "Noticed Event of Default." "Notified Non-Credit Agreement Event of Default" means (i) the acceleration of the maturity of any Existing Senior Notes or Refinancing Senior Notes or the failure to pay at maturity any Existing Senior Notes or Refinancing Senior Notes, or the occurrence of any bankruptcy or insolvency Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, (ii) any Event of Default under a Secured Credit Card Agreement or (iii) any Event of Default under a Secured Hedging Agreement, in the case of any event described in clause (i), (ii) or (iii) to the extent the Existing Senior Notes Trustee, the Refinancing Senior Notes Trustee, the relevant Credit Card Issuer or the relevant Hedging Creditor, as the case may be, has given written notice to the Collateral Agent that a "Notified Non-Credit Agreement Event of Default" exists; provided that such written notice may only be given if such Event of Default is continuing and, provided further, that any such Notified Non-Credit Agreement Event of Default shall cease to exist (I) once there is no longer any Event of Default under the Existing Senior Notes Indenture, the Refinancing Senior Notes Indenture, the respective Secured Credit Card Agreement or the respective Secured Hedging Agreement, as the case may be, in existence, (II) in the case of an Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, after all Existing Senior Notes Obligations or Refinancing Senior Notes Obligations, as the case may be, have been repaid in full, (III) in the case of an Event of Default under a Secured Credit Card Agreement or Secured Hedging Agreement, such Secured Credit Card Agreement or Secured Hedging Agreement, as the case may be, has been terminated and all Credit Card Obligations or Hedging Obligations, as the case may be, thereunder have been repaid in full, (IV) in the case of an Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, if the Existing Senior Notes Creditors or the Refinancing Senior Notes Creditors, as the case may be, holding at least a majority of the aggregate principal amount of the outstanding new Senior Notes or the Refinancing Senior Notes, as the case may be, at such time have rescinded such written notice and (V) in the case of an Event of Default under a Secured Credit Card Agreement or Secured Hedging Agreement, the requisite Credit Card Issuers with Credit Card Obligations or Hedging Creditors with Hedging Obligations, as the case may be, thereunder at such time have rescinded such written notice. "Obligations" shall mean (i) the full and prompt payment when due (whether at stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor, now existing or hereafter incurred under, arising out of or in connection with each Credit Document to which it is a party (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any Exhibit I Page 31 case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)) and the due performance and compliance by such Assignor with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Secured Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor, now existing or hereafter incurred under, arising out of or in connection with each Secured Credit Card Agreement, including all obligations, if any, under a Guaranty in respect of any Secured Credit Card Agreement and all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding (all such obligations and indebtedness under this clause (ii) being herein collectively called the "Credit Card Obligations"); (iii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor, now existing or hereafter incurred under, arising out of or in connection with each Secured Hedging Agreement, including all obligations, if any, under a Guaranty in respect of any Secured Hedging Agreement and all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding (all such obligations and indebtedness under this clause (iii) being herein collectively called the "Hedging Obligations"); (iv) the full and prompt payment when due (whether at stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor, now existing or hereafter incurred under, arising out of or in connection with each Existing Senior Notes Document to which it is a party (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding) and the due performance and compliance by such Assignor with the terms of each such Existing Senior Notes Document (all such obligations and liabilities under this clause (iv), being herein collectively called the "Existing Senior Notes Obligations"); (v) the full and prompt payment when due (whether at stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor, now existing or hereafter incurred under, arising out of or in connection with each Refinancing Senior Notes Document to which it is a party (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition Exhibit I Page 32 interest is allowed in any such proceeding) and the due performance and compliance by such Assignor with the terms of each such Refinancing Senior Notes Document (all such obligations and liabilities under this clause (v), being herein collectively called the "Refinancing Senior Notes Obligations"); (vi) any and all sums advanced by the Collateral Agent or Pledgee in order to preserve the Collateral or preserve its security interest in the Collateral; (vii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of each Assignor referred to in clauses (i), (ii), (iii), (iv), (v) and (vi), after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent or Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (viii) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 hereof. "Patents" shall mean any United States or foreign patent with respect to which any Assignor now or hereafter has any right, title or interest, and any divisions, continuations (including, but not limited to, continuations-in-parts) and improvements thereof, as well as any application for a United States or foreign patent now or hereafter made by any Assignor. "Parent" shall have the meaning provided in the recitals to this Agreement. "Perfected Deposit Account" shall mean, as to any Assignor, each Deposit Account of such Assignor other than an Excluded Deposit Account. "Permits" shall mean, to the extent permitted to be assigned by the terms thereof or by applicable law, all licenses, permits, rights, orders, variances, franchises or authorizations (including certificates of need) of or from any governmental authority or agency. "Permitted Lien" shall mean the Liens permitted to be outstanding under Section 8.03 of the Credit Agreement as in effect on the date hereof. "Principal Property" shall have the meaning provided in the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture (in each case as in effect on the date hereof), as the context may require. "Proceeds" shall have the meaning assigned that term under the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or an Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to an Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. Exhibit I Page 33 "Receivable" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, and in any event shall include but shall not be limited to, all rights to payment of any monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. Without limiting the foregoing, the term "account" shall include all Health-Care-Insurance Receivables. "Refinancing Senior Notes Creditors" shall have the meaning provided in the recitals of this Agreement. "Refinancing Senior Notes Documents" shall have the meaning provided in the recitals of this Agreement. "Refinancing Senior Notes Indenture" shall have the meaning provided in the recitals of this Agreement. "Refinancing Senior Notes Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Refinancing Senior Notes Trustee" shall have the meaning provided in the recitals of this Agreement. "Registered Organization" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Requisite Creditors" shall have the meaning provided in Section 10.2 hereof. "Restricted Subsidiary" shall mean each Subsidiary that is a Restricted Subsidiary, as such term is defined in the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture (each, as in effect on the date hereof), as the context may require. "Secured Credit Card Agreement" shall have the meaning provided in the recitals of this Agreement. "Secured Creditors" shall have the meaning provided in the recitals of this Agreement. "Secured Debt Agreements" shall mean each Credit Document, each Secured Credit Card Agreement, each Secured Hedging Agreement, each Existing Senior Notes Document and each Refinancing Senior Notes Document. Exhibit I Page 34 "Secured Hedging Agreements" shall have the meaning provided in the recitals of this Agreement. "Security" shall mean "security" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Software" shall mean "software" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Specified Assignor" shall mean each of Parent, the Borrower and each Assignor that is a Restricted Subsidiary. "Supporting Obligations" shall mean any "supporting obligation" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor, or in which any Assignor has any rights, and, in any event, shall include, but shall not be limited to all of such Assignor's rights in any Letter-of-Credit Right or secondary obligation that supports the payment or performance of, and all security for, any Receivable, Chattel Paper, Document, General Intangible, Instrument or Investment Property. "Tangible Chattel Paper" shall mean "tangible chattel paper" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Termination Date" shall have the meaning provided in Section 10.9 hereof. "Timber-to-be-Cut" shall mean "timber-to-be-cut" as such term is used in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Trade Secret Rights" shall mean the rights of an Assignor in any Trade Secret it holds. "Trade Secrets" means any secretly held existing engineering and other data, information, production procedures and other know-how relating to the design, manufacture, assembly, installation, use, operation, marketing, sale and servicing of any products or business of an Assignor worldwide whether written or not written. ARTICLE X MISCELLANEOUS 10.1 Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered (including by way of overnight courier): Exhibit I Page 35 (i) if to any Assignor, at its address contained in the Credit Agreement (for the Credit Agreement Parties) or the Subsidiary Guaranty (for the other Assignors); (ii) if to the Collateral Agent, at: JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Attn.: Raju Nanoo Tel. No.: 212-270-2272 Fax. No.: 212-270-5120 (iii) if to any Lender (other than the Collateral Agent), at such address as such Lender shall have specified in the Credit Agreement; (iv) if to any Credit Card Issuer, at such address as such Credit Card Issuer shall have specified in writing to the Assignors and the Collateral Agent; (v) if to any Hedging Creditor, at such address as such Hedging Creditor shall have specified in writing to the Assignors and the Collateral Agent; (vi) if to any Existing Senior Notes Creditor, at such address of the Existing Senior Notes Trustee as the Existing Senior Notes Trustee shall have specified in writing to the Assignors and the Collateral Agent; (vii) if to any Refinancing Senior Notes Creditor, at such address of the Refinancing Senior Notes Trustee as the Refinancing Senior Notes Trustee shall have specified in writing to the Assignors and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. Except as otherwise expressly provided herein, all such notices and communications shall be deemed to have been duly given or made when received. 10.2 Waiver; Amendment. (a) None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Collateral Agent (with the consent of (x) if prior to the CA Termination Date, the Required Lenders or, to the extent required by Section 12.12 of the Credit Agreement, all of the Lenders and (y) if on or after the CA Termination Date, the holders of a majority of the outstanding principal amount of the Obligations remaining outstanding) and each Assignor affected thereby (it being understood that the addition or release of any Assignor hereunder shall not constitute a change, waiver, modification or variance affecting any Assignor other than the Borrower and the Assignor so added or released), provided that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (u) the Lender Creditors as holders of the Credit Document Obligations, (v) the Credit Card Issuers as Exhibit I Page 36 holders of the Credit Card Obligations, (x) the Hedging Creditors as holders of the Hedging Obligations, (y) the Existing Senior Notes Creditors as holders of the Existing Senior Notes Obligations or (z) the Refinancing Senior Notes Creditors as holders of the Refinancing Senior Notes Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (u) with respect to each of the Credit Document Obligations, the Required Lenders, (v) with respect to the Credit Card Obligations, the holders of at least a majority of all Credit Card Obligations outstanding from time to time, (x) with respect to the Hedging Obligations, the holders of at least a majority of all Hedging Obligations outstanding from time to time, (y) with respect to the Existing Senior Notes Obligations, the holders of at least a majority of the outstanding principal amount of the Existing Senior Notes, and (z) with respect to the Refinancing Senior Notes Obligations, the holders of at least a majority of the outstanding principal amount of the Refinancing Senior Notes. (a) No delay on the part of the Collateral Agent in exercising any of its rights, remedies, powers and privileges hereunder or partial or single exercise thereof, shall constitute a waiver thereof. No notice to or demand on any Assignor shall constitute a waiver of any of the rights of the Collateral Agent to any other or further action without notice or demand to the extent such action is permitted to be taken by the Collateral Agent without notice or demand under the terms of this Agreement. 10.3 Obligations Absolute. The obligations of each Assignor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement, any other Credit Document, any Secured Credit Card Agreement, any Secured Hedging Agreement, any Existing Senior Notes Document or any Refinancing Senior Notes Document, except as specifically set forth in a waiver granted pursuant to Section 10.2 hereof; or (c) any amendment to or modification of any other Credit Document, any Secured Credit Card Agreement, any Secured Hedging Agreement, any Existing Senior Notes Document, any Refinancing Senior Notes Document or any security for any of the Obligations; whether or not any Assignor shall have notice or knowledge of any of the foregoing. The rights and remedies of the Collateral Agent herein provided are cumulative and not exclusive of any rights or remedies which the Collateral Agent would otherwise have. 10.4 Successors and Assigns. This Agreement shall be binding upon each Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and its successors and assigns. All agreements, statements, representations and warranties made by such Assignor herein or in any certificate or other instrument delivered by each Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement, the other Credit Documents, the Secured Credit Card Agreements, the Secured Hedging Agreements, the Existing Senior Notes Documents and the Refinancing Senior Notes Documents, regardless of any investigation made by the Secured Creditors on their behalf. 10.5 Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. Exhibit I Page 37 10.6 Severability. Any provision of this Agreement which 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.7 Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the State of New York. 10.8 Assignors' Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of any Assignor under or with respect to any Collateral. 10.9 Termination; Release. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Article VIII hereof shall survive any such termination) and the Collateral Agent, at the request and expense of the respective Assignor, will execute and deliver to such Assignor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement as provided above, and will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Collateral Agent hereunder. As used in this Agreement, (i) "CA Termination Date" shall mean the date upon which the Total Commitment has been terminated, no Letter of Credit or Note under the Credit Agreement is outstanding and all other Credit Document Obligations have been paid in full in cash (other than arising from indemnities for which no request for payment has been made) and (ii) "Termination Date" shall mean the date upon which (x) the CA Termination Date shall have occurred and (y) if (but only if) a Notified Non-Credit Agreement Event of Default shall have occurred and be continuing on the CA Termination Date (and after giving effect thereto), either (I) such Notified Non-Credit Agreement Event of Default shall have been cured or waived by the requisite holders of the relevant Obligations subject to such Notified Non-Credit Agreement Event of Default or (II) all Secured Credit Card Agreements and Secured Hedging Agreements (if any) giving rise to a Notified Non-Credit Agreement Event of Default shall have been terminated and all Obligations subject to such Notified Non-Credit Agreement Event of Default shall have been paid in full (other than arising from indemnities for which no request for payment has been made). (b) So long as no Notified Non-Credit Agreement Event of Default has occurred and is continuing, in the event that (x) prior to the CA Termination Date, (i) any part of the Collateral is sold or otherwise disposed of in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement (it being agreed for such purposes that a release will be deemed "permitted by Section 8.02 of the Credit Agreement" if the proposed transaction constitutes an exception to Section 8.02 of the Credit Agreement) or (ii) all or any Exhibit I Page 38 part of the Collateral is released at the direction of the Required Lenders (or all the Lenders if required by Section 12.12 of the Credit Agreement), and the proceeds of such sale or disposition or from such release (if any) are applied in accordance with the terms of the Credit Agreement to the extent required to be so applied or (y) on and after the CA Termination Date, any part of the Collateral is sold or otherwise disposed of without violating the Existing Senior Notes Documents, the Refinancing Senior Notes Documents, the Secured Credit Card Agreements and the Secured Hedging Agreements, the Collateral Agent, at the request and expense of the respective Assignor will release such Collateral from this Agreement, duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in possession of the Collateral Agent and has not theretofore been released pursuant to this Agreement (it being understood and agreed that upon the release of all or any portion of the Collateral by the Collateral Agent at the direction of the Lenders as provided above, the Lien on the Collateral in favor of the Credit Card Issuer, the Hedging Creditors, the Existing Senior Notes Creditors and the Refinancing Senior Notes Creditors shall automatically be released). (b) In addition to the foregoing, all Collateral shall be automatically released (subject to reinstatement upon the occurrence of a new Trigger Event) in accordance with the provisions of the last sentence of Section 7.10(b) of the Credit Agreement. (c) At any time that the relevant Assignor desires that the Collateral Agent take any action to give effect to any release of Collateral pursuant to the foregoing Section 10.9(a), (b) or (c), it shall deliver to the Collateral Agent a certificate signed by an authorized officer describing the Collateral to be released and certifying its entitlement to a release pursuant to the applicable provisions of Sections 10.9(a), (b) or (c) and in such case the Collateral Agent, at the request and expense of such Assignor, will execute such documents as required to duly release such Collateral and to assign, transfer and deliver to such Assignor or its designee (without recourse and without any representation or warranty) such of the Collateral as is then being released and as may be in the possession of the Collateral Agent. The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by (or which the Collateral Agent in good faith believes to be permitted by) this Section 10.9. Upon any release of Collateral pursuant to Section 10.9(a), (b) or (c), so long as no Noticed Event of Default is then in existence, none of the Secured Creditors shall have any continuing right or interest in such Collateral, or the proceeds thereof (subject to reinstatement rights upon the occurrence of a new Trigger Event in the case of a release pursuant to Section 10.9(c)). 10.10 Collateral Agent. The Collateral Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. By accepting the benefits of this Agreement, each Secured Creditor acknowledges and agrees that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement and Annex M hereto. The Collateral Agent shall act hereunder on the terms and conditions set forth in Section 11 of the Credit Agreement and in Annex M hereto, the terms of which shall be deemed incorporated herein by reference as fully as if the same were set forth herein in their entirety. In the event that any provision set forth in Section 11 of the Credit Agreement in respect of the Collateral Agent conflicts with any provision set forth in Annex M Exhibit I Page 39 hereto, the provisions of Annex M hereto shall govern (except that the Lenders shall remain obligated to indemnify the Collateral Agent pursuant to Section 11 of the Credit Agreement, to the extent the Collateral Agent is not indemnified by Secured Creditors pursuant to Annex M). Notwithstanding anything to the contrary contained in Section 10.2 of this Agreement, this Section 10.10, and the duties and obligations of the Collateral Agent set forth in this Section 10.10, may not be amended or modified without the consent of the Collateral Agent. 10.11 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Collateral Agent. 10.12 Additional Assignors. It is understood and agreed that any Subsidiary of Parent that is required to become a party to this Agreement after the date hereof pursuant to the requirements of the Credit Agreement shall become an Assignor hereunder by (x) executing a counterpart hereof and/or an assumption agreement in form and substance satisfactory to the Collateral Agent, (y) delivering supplements to Annexes A through F hereto and Annexes I, J and K hereto, as are necessary to cause such Annexes to be complete and accurate with respect to such additional Assignor on such date and (z) taking all actions as specified in this Agreement and the Credit Agreement, in each case with all documents required above to be delivered to the Collateral Agent and with all documents and action required above to be taken to the reasonable satisfaction of the Collateral Agent. 10.13 No Third Party Beneficiaries. This Agreement is entered into solely for the benefit of the parties hereto and their respective successors and assigns and for the benefit of the Secured Creditors from time to time and their respective successors and assigns and, except for the Secured Creditors and their successors and assigns, there shall be no third party beneficiaries hereof, nor shall any Person other than the parties hereto and their respective successors and assigns, and the Secured Creditors and their respective successors and assigns, be entitled to enforce the provisions hereof or have any claims against any party hereto (or any Secured Creditor) or their successors and assigns arising from, or under, this Agreement. * * * IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. REYNOLDS AMERICAN INC., as an Assignor By: /s/ Lynn L. Lane ---------------------------------------- Title: Senior Vice President & Treasurer R.J. REYNOLDS TOBACCO HOLDINGS, INC., as an Assignor By: /s/ Lynn L. Lane ---------------------------------------- Title: Senior Vice President & Treasurer R. J. REYNOLDS TOBACCO COMPANY, as an Assignor By: /s/ Lynn L. Lane ---------------------------------------- Title: Senior Vice President & Treasurer RJR ACQUISITION CORP., as an Assignor By: /s/ Lynn L. Lane ---------------------------------------- Title: Vice President & Treasurer GMB, INC., as an Assignor By: /s/ Daniel A. Fawley ---------------------------------------- Title: Treasurer FHS, INC., as an Assignor By: /s/ Caroline M. Price ---------------------------------------- Title: President R. J. REYNOLDS TOBACCO CO., as an Assignor By: /s/ Lynn L. Lane ---------------------------------------- Title: Treasurer RJR PACKAGING, LLC, as an Assignor By: /s/ Lynn L. Lane --------------------------------------- Title: Treasurer BWT BRANDS, INC., as an Assignor By: /s/ Daniel A. Fawley ---------------------------------------- Title: Treasurer Acknowledged And Agreed: JPMORGAN CHASE BANK, as Collateral Agent and Assignee By /s/ Robert T. Sacks ---------------------------------- Title: Managing Director EX-10.9 16 g90345exv10w9.txt EX-10.9 EXHIBIT 10.9 AMENDED AND RESTATED PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of July 15, 2003 and amended and restated as of July 30, 2004 (as so amended and restated and as the same may be further amended, restated, supplemented and/or otherwise modified from time to time, this "Agreement"), made by each of the undersigned (together with any other entity that becomes a party hereto pursuant to Section 23 hereof, each a "Pledgor" and, collectively, the "Pledgors"), in favor of JPMORGAN CHASE BANK, as Collateral Agent (including any successor collateral agent, the "Pledgee") for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement referred to below shall be used herein as therein defined. W I T N E S S E T H: WHEREAS, Reynolds American Inc. ("Parent"), R.J. Reynolds Tobacco Holdings, Inc. (the "Borrower"), the various lending institutions from time to time party thereto (the "Lenders"), and JPMORGAN CHASE BANK, as Administrative Agent (the "Administrative Agent") have entered into a Credit Agreement, dated as of May 7, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002 and as further amended and restated as of July 30, 2004, providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (with (i) the Lenders, each Letter of Credit Issuer, the Administrative Agent, the Senior Managing Agents, the Pledgee and the Collateral Agent being herein called the "Lender Creditors" and (ii) the term "Credit Agreement" as used herein to mean the Credit Agreement described above in this paragraph, as the same may be further amended, modified, extended, renewed, replaced, restated, supplemented and/or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lenders or holders; provided that, with respect to any agreement providing for the refinancing or replacement of indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (x) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Lenders shall have consented in writing to the refinancing or replacement indebtedness being treated as indebtedness pursuant to the Credit Agreement, and (y) a notice to the effect that the refinancing or replacement indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Borrower to the Collateral Agent); Exhibit H Page 2 WHEREAS, Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more agreements or arrangements with JPMCB or any of its affiliates (even if JPMCB ceases to be a Lender under the Credit Agreement for any reason (JPMCB, any such affiliate and their respective successors and assigns, each, a "Credit Card Issuer")) providing for credit card loans made available to certain employees of Parent and/or one or more of its Subsidiaries (each such agreement or arrangement with a Credit Card Issuer, a "Secured Credit Card Agreement"). WHEREAS, Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafter defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender, any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other such financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement), and in each case their subsequent successors and assigns, collectively, the "Hedging Creditors", and together with the Lender Creditors and each Credit Card Issuer, the "Lender Secured Creditors"); WHEREAS, the Borrower and the trustee thereunder (the "Existing Senior Notes Trustee"), on behalf of the holders of the Existing Senior Notes (such holders, together with the Existing Senior Notes Trustee, the "Existing Senior Notes Creditors"), have from time to time entered into, and may in the future from time to time enter into, one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Existing Senior Notes Indenture" and, together with the Existing Senior Notes, the "Existing Senior Notes Documents") providing for the issuance of Existing Senior Notes by the Borrower; WHEREAS, the Borrower and the trustee thereunder (the "Refinancing Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes (such holders, together with the Refinancing Senior Notes Trustee, the "Refinancing Senior Notes Creditors", with the Lender Secured Creditors, the Existing Senior Notes Creditors and the Refinancing Senior Notes Creditors being herein called the "Secured Creditors"), may from time to time enter into, one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Refinancing Senior Notes Indenture" and, together with the Refinancing Senior Notes, the "Refinancing Senior Notes Documents") providing for the issuance of Refinancing Senior Notes by the Borrower; WHEREAS, pursuant to the Subsidiary Guaranty, each Pledgor (other than the Borrower) has jointly and severally guaranteed to the Lender Secured Creditors the payment when due of the Guaranteed Obligations (as defined in the Subsidiary Guaranty); Exhibit H Page 3 WHEREAS, pursuant to the Credit Agreement Party Guaranty, each Credit Agreement Party has guaranteed to the Hedging Creditors and each Credit Card Issuer the payment when due of the Relevant Guaranteed Obligations; WHEREAS, each Specified Pledgor (other than the Borrower) has jointly and severally guaranteed to the Existing Senior Notes Creditors the payment when due of principal and interest on the Existing Senior Notes; WHEREAS, each Specified Pledgor (other than the Borrower) has jointly and severally guaranteed to the Refinancing Senior Notes Creditors the payment when due of principal and interest on the Refinancing Senior Notes; WHEREAS, certain of the Pledgors have heretofore entered into a Pledge Agreement, dated as of July 15, 2003 (as amended, modified and/or supplemented from time to time to, but not including, the date hereof, the "Original Pledge Agreement"); WHEREAS, the Pledgors desire to amend and restate the Original Pledge Agreement in the form of this Agreement; WHEREAS, the Credit Agreement requires this Agreement be executed and delivered to the Pledgee by the Pledgors and the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture require that this Agreement secure the respective Obligations as provided herein; WHEREAS, each Pledgor desires to execute this Agreement to satisfy the requirements described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee and hereby covenants and agrees with the Pledgee as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of such Pledgor, now existing or hereafter incurred under, arising out of or in connection with each Credit Document to which such Pledgor is a party (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)) and the due performance of and compliance by such Pledgor with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of Exhibit H Page 4 obligations or liabilities with respect to Secured Credit Card Agreements and Secured Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of such Pledgor, now existing or hereafter incurred under, arising out of or in connection with each Secured Credit Card Agreement, including, all obligations, if any, of such Pledgor under its Guaranty in respect of Secured Credit Card Agreements (all such obligations and liabilities under this clause (ii) being herein collectively called the "Credit Card Obligations"); (iii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of such Pledgor, now existing or hereafter incurred under, arising out of or in connection with each Secured Hedging Agreement, including, all obligations, if any, of such Pledgor under its Guaranty in respect of Secured Hedging Agreements (all such obligations and liabilities under this clause (iii) being herein collectively called the "Hedging Obligations"); (iv) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of such Pledgor (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)), now existing or hereafter incurred under, arising out of or in connection with each Existing Senior Notes Document, including, all obligations, if any, of such Pledgor under a guaranty in respect of the Existing Senior Notes (all such obligations and liabilities under this clause (iv) being herein collectively called the "Existing Senior Notes Obligations"); (v) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of such Pledgor (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)), now existing or hereafter incurred under, arising out of or in connection with each Refinancing Senior Notes Document, including, all obligations, if any, of such Pledgor under a guaranty in respect of the Refinancing Senior Notes (all such obligations Exhibit H Page 5 and liabilities under this clause (v) being herein collectively called the "Refinancing Senior Notes Obligations"); (vi) any and all sums advanced by the Pledgee in order to preserve the Collateral and/or its security interest therein; (vii) in the event of any proceeding for the collection of the Obligations (as defined below) or the enforcement of this Agreement, after an Event of Default (such term, as used in this Agreement, shall mean and include any Event of Default under the Credit Agreement, any "event of default" under the Existing Senior Notes Documents or the Refinancing Senior Notes Documents and any payment default by the Borrower under any Secured Credit Card Agreement, any Secured Hedging Agreement after the expiration of any applicable grace period) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (viii) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (vii) of this Section 1 being herein collectively called the "Obligations". 2. DEFINITIONS; REPRESENTATIONS. (a) The following capitalized terms used herein shall have the definitions specified below: "Adverse Claim" has the meaning given such term in Section 8-102(a)(1) of the UCC. "Agreement" shall have the meaning set forth in the first paragraph of this Agreement. "Applicable Obligations" shall have the meaning provided in Section 3.1 hereof. "Borrower" shall have the meaning provided in the recitals to this Agreement. "CA Termination Date" shall have the meaning set forth in Section 18 hereof. "Certificated Security" has the meaning given such term in Section 8-102(a)(4) of the UCC. "Class" shall have the meaning provided in Section 20 hereof. "Clearing Corporation" has the meaning given such term in Section 8-102(a)(5) of the UCC. "Collateral" shall have the meaning provided in Section 3.1 hereof. Exhibit H Page 6 "Collateral Accounts" means any and all accounts established and maintained by the Pledgee in the name of any Pledgor to which Collateral may be credited. "Collateral Proceeds" shall have the meaning provided in Section 9 hereof. "Credit Agreement" shall have the meaning provided in the recitals to this Agreement. "Credit Card Issuer" shall have the meaning provided in the recitals to this Agreement. "Credit Card Obligations" shall have the meaning provided in Section 3.1 hereof. "Credit Document Obligations" shall have the meaning provided in Section 1 hereof. "Designated Collateral" shall have the meaning provided in Section 3.1 hereof. "Event of Default" shall have the meaning provided in Section 1 hereof. "Excluded Domestic Entities" shall mean and include (i) Northern Brands International, Inc., a Delaware corporation, (ii) R.J. Reynolds Tobacco International Inc., a Delaware corporation, (iii) Santa Fe, (iv) CMSI and (v) Lane. "Excluded Foreign Entities" shall mean and include one or more direct Subsidiaries of any Pledgor that is not a Domestic Subsidiary and is designated as an "Excluded Foreign Entity" by the Borrower pursuant to a written notice delivered to the Pledgee; provided that if at the time of the delivery (or required delivery) of the financial statements of Parent pursuant to Section 7.01(a) or (b) of the Credit Agreement, (i) the net book value of the assets of any Excluded Foreign Entity as at the last day of the fiscal quarter or fiscal year, as the case may be, to which such financial statements relate is greater than $25,000,000, then on the 90th day following the delivery (or required delivery) of such financial statements, such entity shall cease to be an "Excluded Foreign Entity" for purposes of this Agreement or (ii) the aggregate net book value of the assets of all Excluded Foreign Entities as at the last day of the fiscal quarter or fiscal year, as the case may be, to which such financial statements relate is greater than $75,000,000, then on the 90th day following the delivery (or required delivery) of such financial statements, one or more entities which (I) theretofore constituted "Excluded Foreign Entities", (II) hold assets with an aggregate net book value as at the last day of the relevant fiscal quarter or fiscal year, as the case may be, equal to at least the excess of the aggregate net book value of the assets of all Excluded Foreign Entities as at the last day of such fiscal quarter or fiscal year, as the case may be, over $75,000,000 and (III) have been designated in writing by the Borrower to the Pledgee, shall cease to be "Excluded Foreign Entities" for purposes of this Agreement; provided, however, that if no such designation is provided by the Borrower as contemplated by preceding clause (ii), all entities theretofore constituting "Excluded Foreign Entities" shall cease to be "Excluded Foreign Entities" for purposes of this Agreement on such 90th day. "Excluded Investment Entities" shall mean and include (i) Targacept, Inc., a Delaware corporation, (ii) Technology Concepts & Design, Inc., a Virginia corporation, (iii) Exhibit H Page 7 Intellilink Services, Inc., a Georgia corporation, (iv) an investment in Mountain Capital CLO II Ltd, a corporation organized under the laws of the Cayman Islands, so long as the aggregate amount of such investment (determined without regard to any write-downs or write-offs thereof) does not exceed $5,000,000, and (v) any other CLO investment owned by a Pledgor, so long as the aggregate amount of all such CLO investments (determined without regard to any write-downs or write-offs thereof) do not exceed $25,000,000; provided that the each of foregoing entities shall cease to be an "Excluded Investment Entity" at such time as the organizational documents governing the respective such entity cease to prohibit the assignment of, or granting of a security interest in, capital stock of such entity, it being understood and agreed that any such excluded capital stock shall be subject to the security interests created by this Agreement upon the receipt by the respective Pledgor of any necessary approvals or waivers permitting the assignment thereof or the granting of a security interest therein. "Existing Senior Notes Creditors" shall have the meaning provided in the recitals to this Agreement. "Existing Senior Notes Documents" shall have the meaning provided in the recitals to this Agreement. "Existing Senior Notes Indenture" shall have the meaning provided in the recitals to this Agreement. "Existing Senior Notes Obligations" shall have the meaning provided in Section 1 hereof. "Existing Senior Notes Trustee" shall have the meaning provided in the recitals to this Agreement. "Financial Asset" has the meaning given such term in Section 8-102(a)(9) of the UCC, provided that the term "Financial Asset" shall not include (i) any capital stock of any Excluded Domestic Entity or any Excluded Investment Entity or (ii) any Margin Stock. "Hedging Creditors" shall have the meaning provided in the recitals to this Agreement. "Hedging Obligations" shall have the meaning provided in Section 1 hereof. "Indemnitees" shall have the meaning set forth in Section 11 hereof. "Instrument" has the meaning given such term in Section 9-102(a)(47) of the UCC. "Investment Property" has the meaning given such term in Section 9-102(a)(49) of the UCC, provided that the term "Investment Property" shall not include (i) any capital stock of any Excluded Domestic Entity or any Excluded Investment Entity or (ii) any Margin Stock. "Lender Creditors" shall have the meaning provided in the recitals to this Agreement. Exhibit H Page 8 "Lender Secured Creditors" shall have the meaning provided in the recitals to this Agreement. "Lenders" shall have the meaning provided in the recitals to this Agreement. "Limited Liability Company Assets" shall mean all assets, whether tangible or intangible and whether real, personal or mixed (including, without limitation, all limited liability company capital and interests in other limited liability companies), at any time owned or represented by any Limited Liability Company Interest. "Limited Liability Company Interest" shall mean the entire limited liability company interest at any time directly owned by each Pledgor in any limited liability company (with any limited liability company the equity interests of which are required to be included as "Limited Liability Company Interests" hereunder being herein called a "Pledged LLC"). "LSB Note" shall mean that certain Non-Recourse Secured Promissory Note, dated May 14, 1997, made by Technology Directors II, LLC to R.J. Reynolds Tobacco Company (as assignee of Reynolds Technologies, Inc.) as amended from time to time, in an initial aggregate principal amount of $15,000,000. "Notes" shall mean all promissory notes at any time issued to, or held by, any Pledgor, provided that the term "Note" shall not include the LSB Note. "Noticed Event of Default" shall have the meaning provided in Section 5 hereof. "Notified Non-Credit Agreement Event of Default" means (i) the acceleration of the maturity of any Existing Senior Notes or Refinancing Senior Notes or the failure to pay at maturity any Existing Senior Notes or Refinancing Senior Notes, or the occurrence of any bankruptcy or insolvency Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, (ii) any Event of Default under a Secured Credit Card Agreement or (iii) any Event of Default under a Secured Hedging Agreement, in the case of any event described in clause (i), (ii) or (iii) to the extent the Existing Senior Notes Trustee, the Refinancing Senior Notes Trustee, the relevant Credit Card Issuer or the relevant Hedging Creditor, as the case may be, has given written notice to the Collateral Agent that a "Notified Non-Credit Agreement Event of Default" exists; provided that such written notice may only be given if such Event of Default is continuing and, provided further, that any such Notified Non-Credit Agreement Event of Default shall cease to exist (I) once there is no longer any Event of Default under the Existing Senior Notes Indenture, the Refinancing Senior Notes Indenture, the respective Secured Credit Card Agreement or the respective Secured Hedging Agreement, as the case may be, in existence, (II) in the case of an Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, after all Existing Senior Notes Obligations or Refinancing Senior Notes Obligations, as the case may be, have been repaid in full, (III) in the case of an Event of Default under a Secured Credit Card Agreement or Secured Hedging Agreement, such Secured Credit Card Agreement or Secured Hedging Agreement, as the case may be, has been terminated and all Credit Card Obligations or Hedging Obligations, as the case may be, thereunder have been repaid in full, (IV) in the case of an Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, if the Existing Exhibit H Page 9 Senior Notes Creditors or the Refinancing Senior Notes Creditors, as the case may be, holding at least a majority of the aggregate principal amount of the outstanding Existing Senior Notes or the Refinancing Senior Notes, as the case may be, at such time have rescinded such written notice and (V) in the case of an Event of Default under a Secured Credit Card Agreement or Secured Hedging Agreement, the requisite Credit Card Issuers with Credit Card Obligations or Hedging Creditors with Hedging Obligations, as the case may be, thereunder at such time have rescinded such written notice. "Obligations" shall have the meaning provided in Section 1 hereof. "Parent" shall have the meaning provided in the recitals to this Agreement. "Partnership Assets" shall mean all assets, whether tangible or intangible and whether real, personal or mixed (including, without limitation, all partnership capital and interests in other partnerships), at any time owned or represented by any Pledged Partnership or represented by any Partnership Interest. "Partnership Interest" shall mean the entire partnership interests (whether general and/or limited partnership interests) at any time directly owned by each Pledgor in any partnership (with any partnership the partnership interests of which are required to be included as "Partnership Interests" hereunder being herein called a "Pledged Partnership", and together with any Pledged LLC, each, a "Pledged Entity"). "Pledged Entity" shall have the meaning provided in the definition of "Partnership Interest." "Pledged Notes" shall mean all Notes at any time pledged or required to be pledged hereunder. "Pledged Limited Liability Company Interests" shall mean all Limited Liability Company Interests at any time pledged or required to be pledged hereunder. "Pledged LLC" shall have the meaning provided in the definition of "Limited Liability Company Interest". "Pledged Partnership" shall have the meaning provided in the definition of "Partnership Interest". "Pledged Partnership Interests" shall mean all Partnership Interests at any time pledged or required to be pledged hereunder. "Pledgee" shall have the meaning provided in the first paragraph of this Agreement. "Pledgor" shall have the meaning provided in the first paragraph of this Agreement. Exhibit H Page 10 "Principal Property" shall have the meaning provided in the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture (in each case as in effect on the date hereof), as the context may require. "Proceeds" has the meaning given such term in Section 9-102(a)(64) of the UCC. "Pro Rata Share" shall have the meaning provided in Section 9 hereof. "Refinancing Senior Notes Creditors" shall have the meaning provided in the recitals to this Agreement. "Refinancing Senior Notes Documents" shall have the meaning provided in the recitals to this Agreement. "Refinancing Senior Notes Indenture" shall have the meaning provided in the recitals to this Agreement. "Refinancing Senior Notes Obligations" shall have the meaning provided in Section 1 hereof. "Refinancing Senior Notes Trustee" shall have the meaning provided in the recitals to this Agreement. "Requisite Creditors" shall have the meaning provided in Section 20 hereof. "Restricted Subsidiary" shall mean each Subsidiary that is a Restricted Subsidiary, as such term is defined in the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture (each, as in effect on the date hereof), as the context may require. "Secured Credit Card Agreements" shall have the meaning set forth in the recitals to this Agreement. "Secured Creditors" shall have the meaning set forth in the recitals to this Agreement. "Secured Debt Agreements" shall have the meaning provided in Section 5 hereof. "Secured Hedging Agreement" shall have the meaning provided in the recitals to this Agreement. "Securities Account" has the meaning given such term in Section 8-501(a) of the UCC. "Security" and "Securities" has the meaning given such term in Section 8-102(a)(15) of the UCC and shall in any event also include all Stock and all Notes, provided that the terms "Security" and "Securities" shall not include (i) any capital stock of any Excluded Domestic Entity or any Excluded Investment Entity or (ii) any Margin Stock. Exhibit H Page 11 "Security Entitlement" has the meaning given such term in Section 8-102(a)(17) of the UCC. "Specified Pledgor" shall have the meaning provided in Section 3.1 hereof. "Stock" shall mean (i) all of the issued and outstanding shares of stock of any corporation (other than a corporation that is not organized under the laws of the United States or any State or territory thereof (a "Foreign Corporation")) at any time directly owned by any Pledgor, and (ii) all of the issued and outstanding shares of capital stock of any Foreign Corporation at any time directly owned by any Pledgor, provided that such Pledgor shall not be required to pledge hereunder the capital stock of a Foreign Corporation if more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote are pledged hereunder (after giving effect to the pledge of capital stock of such Foreign Corporation by other Pledgors hereunder), provided further that the term "Stock" shall not include (i) any capital stock of any Excluded Domestic Entity or any Excluded Investment Entity, (ii) any Margin Stock and (iii) excess capital stock of a Foreign Corporation not required to be pledged hereunder as a result of the application of the preceding proviso. "Subsequent Effective Date" shall have the meaning set forth in Section 18 hereof. "Termination Date" shall have the meaning set forth in Section 18 hereof. "UCC" means the Uniform Commercial Code as in effect in the State of New York from time to time; provided that all references herein to specific sections or sub-sections of the UCC are references to such sections or subsections, as the case may be, of the Uniform Commercial Code as in effect in the State of New York on the date hereof. "Uncertificated Security" has the meaning given such term in Section 8-102(a)(18) of the UCC. (b) Each Pledgor represents and warrants that on the date hereof (or, if later, the date it first becomes party hereto) and on any Subsequent Effective Date: (a) each Subsidiary of such Pledgor, and the direct ownership thereof, is listed on Annex A hereto; (b) the Stock held by such Pledgor consists of the number and type of shares of the stock of the corporations as described in Annex B hereto; (c) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as set forth in Annex B hereto; (d) the Notes held by such Pledgor consist of the promissory notes described in Annex C hereto; (e) the Limited Liability Company Interests held by such Pledgor consists of the number and type of interest of the respective Pledged LLC as described in Annex D hereto; (f) such Limited Liability Company Interests held by such Pledgor constitute the percentage of the issued and outstanding equity interests of the respective Pledged LLC as set forth in Annex D hereto for such Pledgor; (g) except for such immaterial exceptions set forth on Annexes B and C as may be reasonably acceptable to the Pledgee, each such Pledgor is the holder of record and sole beneficial owner of the Stock, the Notes, the Limited Liability Company Interests, the Partnership Interests and the Securities identified on Annex G hereto; (h) the Partnership Interests held by such Pledgor consists of the number and type of interest of the respective Pledged Partnership as described in Exhibit H Page 12 Annex E hereto; (i) the Partnership Interests held by such Pledgor constitutes that percentage of the entire Partnership Interest of the respective Pledged Partnership as is set forth in Annex E hereto for such Pledgor; (j) such Pledgor owns or possesses no other Securities except as described on Annexes B, C, D, E and G hereto; and (k) such Pledgor has complied with the respective procedures set forth in Section 3.2(a) with respect to each item of Collateral described in Annexes B through E hereto and Annex G hereto that is required by this Agreement to be pledged to the Pledgee on the date hereof (or the respective subsequent Effective Date). 3. PLEDGE OF SECURITIES, ETC. 3.1 Pledge. To secure the Applicable Obligations for such Pledgor and for the purposes set forth in Section 1, each Pledgor does hereby grant, pledge and assign to the Pledgee for the benefit of the relevant Secured Creditors, and does hereby create a continuing security interest in favor of the Pledgee for the benefit of the relevant Secured Creditors in, all of the right, title and interest in and to the following, whether now existing or hereafter from time to time acquired (collectively, the "Collateral"): (i) each of the Collateral Accounts, including any and all assets of whatever type or kind deposited by such Pledgor in such Collateral Account, whether now owned or hereafter acquired, existing or arising, including, without limitation, all Financial Assets, Investment Property, moneys, checks, drafts, Instruments, Securities or interests therein of any type or nature deposited or required by the Credit Agreement or any other Secured Debt Agreement to be deposited in such Collateral Account, and all investments and all certificates and other Instruments (including depository receipts, if any) from time to time representing or evidencing the same, and all dividends, interest, distributions, cash and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing; (ii) all Securities owned by such Pledgor from time to time and all options and warrants owned by such Pledgor from time to time to purchase Securities; (iii) all Limited Liability Company Interests owned by such Pledgor from time to time and all of such Pledgor's right, title and interest in each limited liability company to which such interests relate, whether now existing or hereafter acquired, including, without limitation: (1) all the capital thereof and its interest in all profits, income, surpluses, losses, Limited Liability Company Assets, distributions and other payments to which such Pledgor shall at any time be entitled in respect of such Limited Liability Company Interests; (2) all other payments due or to become due to such Pledgor in respect of Limited Liability Company Interests, whether under any limited liability company agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (3) all of its claims, rights, powers, privileges, authority, options, security interest, liens and remedies, if any, under any limited liability company Exhibit H Page 13 agreement or operating agreement, or at law or otherwise in respect of such Limited Liability Company Interests; (4) all present and future claims, if any, of any of such Pledgor against any such Pledged LLC for moneys loaned or advanced, for services rendered or otherwise; (5) all of such Pledgor's rights under any limited liability company agreement or operating agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of any of such Pledgor relating to such Limited Liability Company Interests, including any power to terminate, cancel or modify any limited liability company agreement or operating agreement, to execute any instruments and to take any and all other action on behalf of and in the name of any of such Pledgor in respect of such Limited Liability Company Interest and any such Pledged LLC, to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing or for any Limited Liability Company Asset, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing (with all of the foregoing rights to be exercisable only upon the occurrence and during the continuation of a Noticed Event of Default); and (6) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; (iv) all Partnership Interests owned by such Pledgor from time to time and all of such Pledgor's right, title and interest in each partnership to which such interests relate, whether now existing or hereafter acquired, including, without limitation: (1) all of the capital thereof and its interest in all profits, income, surplus, losses, Partnership Assets, distributions and other payments to which such Pledgor shall at any time be entitled in respect of any such Partnership Interest; (2) all other payments due or to become due to such Pledgor in respect of any such Partnership Interest, whether under any partnership agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (3) all of its claims, rights, powers, privileges, authority, options, security interest, liens and remedies, if any, under any partnership or other agreement or at law or otherwise in respect of any such Partnership Interest; Exhibit H Page 14 (4) all present and future claims, if any, of such Pledgor against any Pledged Partnership for moneys loaned or advanced, for services rendered or otherwise; (5) all of such Pledgor's rights under any partnership agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to any Partnership Interest, including any power, if any, to terminate, cancel or modify any general or limited partnership agreement, to execute any instruments and to take any and all other action on behalf of and in the name of such Pledgor in respect of such Partnership Interest and any Pledged Partnership, to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect, or receipt for any of the foregoing or for any Partnership Asset, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing (with all of the foregoing rights to be exercisable only upon the occurrence and during the continuation of a Noticed Event of Default); (6) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; (v) all Financial Assets and Investment Property owned by such Pledgor from time to time; (vi) all Security Entitlements owned by such Pledgor from time to time in any and all of the foregoing; and (vii) all Proceeds of any and all of the foregoing. As used herein, "Applicable Obligations" shall mean (x) for each Pledgor (each, a "Specified Pledgor") that is Parent, the Borrower or a Restricted Subsidiary, all the Obligations and (y) for each other Pledgor, all the Obligations other than the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations, provided that (i) the Existing Senior Notes Obligations shall be excluded from the Applicable Obligations of a Specified Pledgor to the extent the Existing Senior Notes Documents do not require the Existing Senior Notes Obligations to be secured pursuant to this Agreement (or, in the case of the Applicable Obligations of Parent, to the same extent the Existing Senior Notes Obligations are excluded from the Applicable Obligations of the Borrower as provided above in this clause (i)) and (ii) the Refinancing Senior Notes Obligations shall be excluded from the Applicable Obligations of a Specified Pledgor to the extent the Refinancing Senior Notes Documents do not require the Refinancing Senior Notes Obligations to be secured pursuant to this Agreement (or, in the case of the Applicable Obligations of Parent, to the same extent the Refinancing Senior Notes Obligations are excluded from the Applicable Obligations of the Borrower as provided above in this clause (ii)). Exhibit H Page 15 Notwithstanding anything to the contrary contained in this Agreement, the Collateral that secures the Existing Senior Notes Obligations or the Refinancing Senior Notes Obligations of a Specified Pledgor shall be limited to Collateral consisting of any shares of stock, indebtedness or other obligations of a Subsidiary of Parent or of any Principal Property of any Specified Pledgor (the "Designated Collateral"), all of which Collateral shall also ratably secure all other Applicable Obligations of such Specified Pledgor, and the Collateral Proceeds with respect to any item of Collateral owned by a Specified Pledgor that are to be applied to the Existing Senior Notes Obligations or to the Refinancing Senior Notes Obligations shall be limited to Collateral Proceeds resulting from the sale, other disposition of or other realization upon, and other moneys received in respect of, the Designated Collateral of such Specified Pledgor, with such Collateral Proceeds to also be applied ratably to all other Applicable Obligations of such Specified Pledgor. 3.2. Procedures. (a) To the extent that any Pledgor at any time or from time to time owns, acquires or obtains any right, title or interest in any Collateral, such Collateral shall automatically (and without the taking of any action by the respective Pledgor) be pledged pursuant to Section 3.1 of this Agreement and, in addition thereto, such Pledgor shall (to the extent provided below) take the following actions for the benefit of the Pledgee and the other relevant Secured Creditors as set forth below as promptly as practicable and, in any event, within 10 Business Days after it obtains such Collateral, provided that (i) in the case of Collateral consisting of an Uncertificated Security, Limited Liability Company Interest or Partnership Interest of a Person which is not a Subsidiary of such Pledgor and a security interest in which is to be perfected by taking an action specified in sub-clause (ii) or (iv)(2) below, such Pledgor shall have 30 days after it obtains such Collateral to take the respective action required by said sub-clause, (ii) in the case of Collateral a security interest in which is to be perfected by taking an action specified in sub-clause (iii) below, such Pledgor shall have 90 days after the Third Restatement Effective Date (or, if such Collateral is acquired after the Third Restatement Effective Date, the date it obtains such Collateral) to take the respective action required by said sub-clause and (iii) in the case of any Security, Stock, Limited Liability Company Interest or Partnership Interest of an Excluded Foreign Entity, such Pledgor owning the same shall take the respective action required below on the date such Excluded Foreign Entity ceases to qualify as an "Excluded Foreign Entity" in accordance with the definition thereof: (i) with respect to a Certificated Security (other than a Certificated Security credited on the books of a Clearing Corporation), the respective Pledgor shall deliver such Certificated Security to the Pledgee, indorsed to the Pledgee or indorsed in blank; (ii) with respect to an Uncertificated Security (other than an Uncertificated Security credited on the books of a Clearing Corporation), the respective Pledgor shall cause the issuer of such Uncertificated Security (or, in the case of an issuer that is not a Subsidiary of such Pledgor, will use reasonable efforts to cause such issuer) to duly authorize and execute, and deliver to the Pledgee, an agreement for the benefit of the Pledgee and the other Secured Creditors substantially in the form of Annex F hereto (appropriately completed to the reasonable satisfaction of the Pledgee and with such modifications, if any, as shall be reasonably satisfactory to the Pledgee) pursuant to which, subject to Section 5 hereof, such issuer agrees to comply with any and all instructions originated by the Pledgee without further consent by the registered owner and not to comply with instructions regarding such Uncertificated Security (and any Exhibit H Page 16 Partnership Interest and Limited Liability Company Interest issued by such issuer) originated by any other Person other than a court of competent jurisdiction; provided that in the case of an Uncertificated Security issued by a Person that is organized under the laws of a jurisdiction other than the United States or any state thereof, such Pledgor shall enter into a Foreign Pledge Agreement and comply with the requirements of Section 16(d) as if said Person had been (but then ceased to be) an Excluded Foreign Entity, (iii) with respect to a Certificated Security, Uncertificated Security, Partnership Interest or Limited Liability Company Interest credited on the books of a Clearing Corporation (including a Federal Reserve Bank, Participants Trust Company or The Depository Trust Company), the respective Pledgor shall promptly notify the Pledgee thereof and shall promptly take (x) all actions required (i) to comply with the applicable rules of such Clearing Corporation and (ii) to perfect the security interest of the Pledgee under applicable law (including, in any event, under Sections 9-314(a) and (b), 9-106 and 8-106(d) of the UCC) and (y) such other actions as the Pledgee deems reasonably necessary or desirable to effect the foregoing; (iv) with respect to a Partnership Interest or a Limited Liability Company Interest (other than a Partnership Interest or Limited Liability Interest credited on the books of a Clearing Corporation), (1) if such Partnership Interest or Limited Liability Company Interest is represented by a certificate and is a Security for purposes of the UCC, the procedure set forth in Section 3.2(a)(i) hereof, and (2) if such Partnership Interest or Limited Liability Company Interest is not represented by a certificate or is not a Security for purposes of the UCC, the procedure set forth in Section 3.2(a)(ii) hereof; (v) with respect to any Note, delivery of such Note to the Pledgee, indorsed to the Pledgee or indorsed in blank; and (vi) with respect to cash proceeds, (i) establishment by the Pledgee of a cash account in the name of such Pledgor over which the Pledgee shall have exclusive and absolute control and dominion (and no withdrawals or transfers may be made therefrom by any Person except with the prior written consent of the Pledgee) and (ii) deposit of such cash in such cash account. (b) In addition to the actions required to be taken pursuant to Section 3.2(a) hereof, each Pledgor shall take the following additional actions with respect to the Collateral: (i) with respect to all Collateral of such Pledgor whereby or with respect to which the Pledgee may obtain "control" thereof within the meaning of Section 8-106 of the UCC (or under any provision of the UCC as same may be amended or supplemented from time to time, or under the laws of any relevant State other than the State of New York), the respective Pledgor shall take all actions as may be reasonably requested from time to time by the Pledgee so that "control" of such Collateral is obtained and at all times held by the Pledgee; and (ii) each Pledgor shall from time to time cause appropriate financing statements (on Form UCC-1 or other appropriate form) under the Uniform Commercial Exhibit H Page 17 Code as in effect in the various relevant States, covering all Collateral hereunder (with the form of such financing statements to be satisfactory to the Pledgee), to be filed in the relevant filing offices so that at all times the Pledgee has a security interest in all Investment Property and other Collateral which is perfected by the filing of such financing statements (in each case to the maximum extent perfection by filing may be obtained under the laws of the relevant States, including, without limitation, Section 9-312(a) of the UCC). 3.3. Subsequently Acquired Collateral. If any Pledgor shall acquire (by purchase, stock dividend or similar distribution or otherwise) any additional Collateral at any time or from time to time after the date hereof, such Collateral shall automatically (and without any further action being required to be taken) be subject to the pledge and security interests created pursuant to Section 3.1 hereof and, furthermore, the respective Pledgor will promptly thereafter take (or cause to be taken) all action with respect to such Collateral in accordance with the procedures set forth in Section 3.2 hereof, and will promptly thereafter deliver to the Pledgee (i) a certificate executed by a principal executive officer of such Pledgor describing such Collateral and certifying that the same has been duly pledged in favor of the Pledgee (for the benefit of the relevant Secured Creditors entitled thereto) hereunder and (ii) supplements to Annexes A through E hereto as are reasonably necessary to cause such annexes to be complete and accurate at such time, provided that unless specifically requested by the Collateral Agent, such updated Annexes shall not be required to include any after-acquired Securities pledged to the Pledgee pursuant to the procedures set forth in Section 3.2(a)(iii). Notwithstanding the foregoing, no Pledgor shall be required at any time to pledge hereunder any Stock which will result in more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote being pledged hereunder. 3.4. Transfer Taxes. Each pledge of Collateral under Section 3.1 or Section 3.3 hereof shall be accompanied by any transfer tax stamps required in connection with the pledge of such Collateral. 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Collateral, which may be held (in the discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or assigned in blank or, following a Noticed Event of Default which is continuing, in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until a Noticed Event of Default shall have occurred and be continuing, each Pledgor shall be entitled to exercise all voting rights attaching to any and all Collateral owned by it, and to give consents, waivers or ratifications in respect thereof; provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, result in breach of any covenant contained in, or be inconsistent with, any of the terms of this Agreement, the Credit Agreement, any other Credit Document, any Existing Senior Notes Document, any Refinancing Senior Notes Document, any Secured Credit Agreement or any Secured Hedging Agreement (collectively, the "Secured Debt Agreements"), or which would have the effect of impairing the value of the Collateral or any part thereof or the position or interests of the Pledgee or any other Exhibit H Page 18 Secured Creditor therein, provided however, each Pledgor shall be permitted to amend and/or modify intercompany notes constituting Collateral in the ordinary course of business and consistent with past practices. All such rights of a Pledgor to vote and to give consents, waivers and ratifications shall cease in case a Noticed Event of Default shall occur and be continuing and Section 7 hereof shall become applicable. As used herein, a "Noticed Event of Default" shall mean (i) an Event of Default with respect to a Credit Party under Section 9.05 of the Credit Agreement and (ii) any other Event of Default in respect of which the Pledgee has given either Credit Agreement Party notice that such Event of Default constitutes a "Noticed Event of Default". 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until a Noticed Event of Default shall have occurred and be continuing, all cash dividends, distributions, cash Proceeds or other amounts payable in respect of the Collateral shall be paid to the respective Pledgor; provided that all dividends or other amounts payable in respect of the Collateral which are determined by the Pledgee, to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital not permitted by the Credit Agreement shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital, to the Pledgee and retained by it as part of the Collateral (unless such cash dividends are applied to repay the Obligations pursuant to Section 9 of this Agreement). The Pledgee shall also be entitled to receive directly, and to retain as part of the Collateral: (i) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (other than cash) paid or distributed by way of dividend or otherwise in respect of the Collateral; (ii) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (including cash) paid or distributed in respect of the Collateral by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (iii) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate, partnership or other reorganization. Nothing contained in this Section 6 shall limit or restrict in any way the Pledgee's right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement. All dividends, distributions or other payments which are received by the respective Pledgor contrary to the provisions of this Section 6 or Section 7 shall be received in trust for the benefit of the Pledgee and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement). 7. REMEDIES IN CASE OF AN EVENT OF DEFAULT. In case a Noticed Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or by any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of Exhibit H Page 19 the Collateral, including, without limitation, all the rights and remedies of a secured party upon default under the Uniform Commercial Code as in effect in any relevant jurisdiction, and the Pledgee shall be entitled, without limitation, to exercise any or all of the following rights, which each Pledgor hereby agrees to be commercially reasonable: (i) to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 to such Pledgor; (ii) to transfer all or any part of the Collateral into the Pledgee's name or the name of its nominee or nominees; (iii) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon); (iv) to vote all or any part of the Collateral (in each case whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so); (v) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance or advertisement or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its reasonable discretion may determine, provided that at least 10 days' notice of the time and place of any such sale shall be given to such Pledgor. The Pledgee shall not be obligated to make such sale of Collateral regardless of whether any such notice of sale has theretofore been given. Each purchaser at any such sale shall hold the property so sold absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of all Secured Creditors (or certain of them) may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any other Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall it be under any obligation to take any action whatsoever with regard thereto; and (vi) to set-off any and all Collateral against any and all Obligations, and to withdraw any and all cash or other Collateral from any and all Collateral Accounts and to apply such cash and other Collateral to the payment of any and all Obligations. Exhibit H Page 20 8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the Pledgee provided for in this Agreement or any other Secured Debt Agreement, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. Unless otherwise required by the Credit Documents, no notice to or demand on any Pledgor in any case shall entitle it to any other or further notice or demand in similar other circumstances or constitute a waiver of any of the rights of the Pledgee or any other Secured Creditor to any other further action in any circumstances without demand or notice. By accepting the benefits of this Agreement, the Secured Creditors expressly acknowledge and agree that (x) this Agreement may be enforced only by the action of the Pledgee acting upon the instructions of the Required Lenders or, if the CA Termination Date has occurred, the holders of a majority of the outstanding principal amount of all remaining Obligations, provided that if prior to the CA Termination Date a payment default with respect to at least $300,000,000 principal amount in the aggregate of Existing Senior Notes and/or Refinancing Senior Notes has continued for at least 180 days (and such defaulted payment has not been received pursuant to a drawing under any letter of credit), the holders of a majority of the outstanding principal amount of the Indebtedness subject to such payment default or defaults can direct the Pledgee to commence and continue enforcement of the Liens created hereunder, which the Pledgee shall comply with subject to receiving any indemnity which it reasonably requests, provided further that the Pledgee shall thereafter comply only with the directions of the Required Lenders as to how to carry out such enforcement so long as such directions are not adverse to the aforesaid directions of the holders of Indebtedness subject to such payment default or defaults and (y) no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies shall be exercised exclusively by the Pledgee for the benefit of the Secured Creditors as their interests may appear upon the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee upon any sale, other disposition of or other realization upon any Collateral pursuant to the terms of this Agreement, together with all other moneys received by the Pledgee hereunder (collectively, the "Collateral Proceeds"), shall be applied as follows: (i) first, to the payment of all Obligations owing to the Pledgee of the type described in clauses (v), (vi) and (vii) of Section 1 herein; (ii) second, to the extent proceeds of the sale, other disposition of or other realization upon any item of Collateral remain after the application pursuant to preceding clause (i), an amount equal to the outstanding Applicable Obligations secured by such item of Collateral shall be paid to the Secured Creditors in the manner provided below as their interests may appear, with each Secured Creditor receiving an amount equal to its outstanding Applicable Obligations secured by such item of Collateral or, if the proceeds Exhibit H Page 21 are insufficient to pay in full all such Applicable Obligations, its Pro Rata Share of the amount so remaining to be distributed, with any such amount to be applied in the case of the Credit Document Obligations, the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations, first to the payment of interest in respect of the unpaid principal amount of Loans, Existing Senior Notes or Refinancing Senior Notes, as the case may be, second to the payment of principal of Loans, Existing Senior Notes or Refinancing Senior Notes, as the case may be, and third to the other Credit Document Obligations, Existing Senior Notes Obligations or Refinancing Senior Notes Obligations, as the case may be; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), to the relevant Pledgor or, to the extent directed by such Pledgor or a court of competent jurisdiction, to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean when calculating a Secured Creditor's portion of any distribution or amount pursuant to clause (a) above, the amount (expressed as a percentage) equal to a fraction the numerator of which is the then outstanding amount of the relevant Applicable Obligations secured by the relevant item of Collateral owed such Secured Creditor and the denominator of which is the then outstanding amount of all Applicable Obligations secured by the relevant item of Collateral. (c) All payments required to be made to the (i) Lender Creditors hereunder shall be made to the Administrative Agent for the account of the respective Lender Creditors, (ii) Credit Card Issuers hereunder shall be made to the Credit Card Issuer(s) under the applicable Secured Credit Card Agreement, (iii) Hedging Creditors hereunder shall be made to the paying agent under the applicable Secured Hedging Agreement or, in the case of Secured Hedging Agreements without a paying agent, directly to the applicable Hedging Creditors, (iv) Existing Senior Notes Creditors hereunder shall be made to the Existing Senior Notes Trustee for the account of the respective Existing Senior Notes Creditors and (v) Refinancing Senior Notes Creditors hereunder shall be made to the Refinancing Senior Notes Trustee for the account of the respective Refinancing Senior Notes Creditors. (d) For purposes of applying payments received in accordance with this Section 9, the Pledgee shall be entitled to rely upon (i) the Administrative Agent for a determination of the outstanding Credit Document Obligations, (ii) any Credit Card Issuer for a determination of the outstanding Credit Card Obligations owed to such Credit Card Issuer, (iii) any Hedging Creditor for a determination of the outstanding Hedging Obligations owed to such Hedging Creditor, (iv) the Existing Senior Notes Trustee for a determination of the outstanding Existing Senior Notes Obligations, and (v) the Refinancing Senior Notes Trustee for a determination of the outstanding Refinancing Senior Notes Obligations. Unless it has actual knowledge (including by way of written notice from a Secured Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Pledgee, in acting hereunder, shall be entitled to assume that no Credit Document Obligations other than principal, interest and regularly accruing fees are owing to any Lender Creditor. Exhibit H Page 22 (e) It is understood and agreed that each Pledgor shall remain liable to the extent of any deficiency between (x) the amount of the Obligations for which it is responsible directly or as a Guarantor that are satisfied with proceeds of the Collateral and (y) the aggregate outstanding amount of such Obligations. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless the Pledgee and each other Secured Creditor and their respective successors, assigns, employees, agents and affiliates (individually, an "Indemnitee," and collectively the "Indemnitees") from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and (ii) to reimburse each Indemnitee for all reasonable costs and expenses, including reasonable attorneys' fees, in each case growing out of or resulting from this Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement (but excluding any claims, demands, losses, judgments and liabilities or expenses to the extent incurred by reason of gross negligence or willful misconduct of such Indemnitee (as determined by a court of competent jurisdiction in a final and non-appealable decision)). In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for moneys or other property actually received by it in accordance with the terms hereof. If and to the extent that the obligations of any Pledgor under this Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed to make the Pledgee or any other Secured Creditor liable as a general partner or limited partner of any Pledged Partnership or a member of any Pledged LLC and the Pledgee or any other Secured Creditor by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall not have any of the duties, obligations or liabilities of a general partner or limited partner of any Pledged Partnership or a member of any Pledged LLC. The parties hereto expressly agree that, unless the Pledgee shall become the absolute owner of the respective Pledged Partnership Interest, Pledged Limited Liability Company Interest or Security pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Pledgee, any other Secured Creditor and/or any Pledgor. (b) Except as provided in the last sentence of paragraph (a) of this Section, the Pledgee, by accepting this Agreement, did not intend to become a general partner or limited partner of any Pledged Partnership or a member of any Pledged LLC or otherwise be deemed to be a co-venturer with respect to any Pledgor, any Pledged Partnership or any Pledged LLC., either before or after an Event of Default shall have occurred. The Pledgee shall have only those Exhibit H Page 23 powers set forth herein and shall assume none of the duties, obligations or liabilities of a general partner or limited partner of any Pledged Partnership or a member of any Pledged LLC or of any Pledgor. (c) Neither the Pledgee nor any other Secured Creditor shall be obligated to perform or discharge any obligation of any Pledgor as a result of the collateral assignment hereby effected. (d) The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral. 13. FURTHER ASSURANCES. (a) Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the Uniform Commercial Code such financing statements, continuation statements and other documents in such offices as the Pledgee may reasonably deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral hereunder and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or reasonably deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder or thereunder. (b) Each Pledgor hereby appoints the Pledgee, such Pledgor's attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default, in the Pledgee's reasonable discretion to take any action and to execute any instrument which the Pledgee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement. 14. THE PLEDGEE AS COLLATERAL AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in Annex M to the Security Agreement, the terms of which shall be deemed incorporated herein by reference as fully as if same were set forth herein in their entirety (for such purpose, treating each reference to the "Security Agreement" as a reference to this Agreement, each reference to the "Collateral Agent" as a reference to the Pledgee and each reference to an "Assignor" as a reference to a "Pledgor"). 15. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of Exhibit H Page 24 the Collateral or any interest therein if prohibited by the terms of this Agreement or any other Secured Debt Agreement. 16. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS. (a) Each Pledgor represents, warrants and covenants that: (i) it is the legal, record and beneficial owner of, and has good and marketable title to, all Collateral consisting of one or more Securities pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except the liens and security interests created by this Agreement and Permitted Liens; (ii) it has full power, authority and legal right to pledge all the Collateral pledged by it pursuant to this Agreement without the consent of any other Person; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or law); (iv) except to the extent already made or obtained, no consent of any other party (including, without limitation, any stockholder, member, limited or general partner or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with (a) the execution, delivery or performance of this Agreement, (b) the validity or enforceability of this Agreement, (c) the perfection or enforceability of the Pledgee's security interest in the Collateral (other than with respect to the Stock of an Excluded Foreign Entity) or (d) except for compliance with or as may be required by applicable securities laws, the exercise by the Pledgee of any of its rights or remedies provided herein; (v) neither the execution, delivery or performance of this Agreement or any other Secured Debt Agreement to which it is a party violates (a) any material provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or domestic or foreign governmental authority, (b) the certificate of incorporation, certificate of formation, certificate of partnership, partnership agreement, limited liability company agreement (or equivalent organizational documents) or by-laws, as the case may be, of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or (c) any indenture, mortgage, lease, deed of trust, credit agreement, loan agreement, agreement or other instrument to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; Exhibit H Page 25 (vi) all the Collateral consisting of Securities, Pledged Limited Liability Company Interests and Pledged Partnership Interests have been duly and validly issued, are fully paid and non-assessable and are subject to no options to purchase or similar rights; (vii) to Pledgor's knowledge, each of the Pledged Notes constitute, or, when executed by the obligor thereof, will constitute, the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or law); (viii) the pledge, assignment and delivery to the Pledgee of the Collateral consisting of Certificated Securities (other than the Certificated Securities (x) of the Excluded Foreign Entities and (y) required to be pledged pursuant to the procedures set forth in Section 3.2(a)(iii)) and Pledged Notes pursuant to this Agreement, creates a valid and perfected first security interest in such Collateral and the proceeds thereof, subject to no prior Lien or encumbrance or to any agreement purporting to grant to any third party a Lien or encumbrance on the property or assets of such Pledgor which would include the Securities; (ix) it is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under any partnership agreement or limited liability company agreement to which such Pledgor is a party, and such Pledgor is not in violation of any other material provisions of any partnership agreement or limited liability company agreement to which such Pledgor is a party, or otherwise in default or violation thereunder; no Partnership Interest or Limited Liability Company Interest is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Pledgor by any Person with respect thereto; (x) it shall not withdraw as a partner of any Pledged Partnership or member of any Pledged LLC, or file or pursue or take any action which may, directly or indirectly, cause a dissolution or liquidation of or with respect to any Pledged Entity or seek a partition of any property of any Pledged Entity, except as permitted by the Credit Agreement; (xi) the Pledged Partnership Interests or Pledged Limited Liability Company Interests of such Pledgor, as the case may be, constitute, and will at all times hereafter continue to constitute, in the aggregate, all of the partnership interests or membership interests, as the case may be, of each Pledged Entity of such Pledgor and no Pledged Entity shall create any options or rights or other agreements to sell or otherwise transfer, or sell or otherwise transfer, any Partnership Interests or Limited Liability Company Interests; (xii) each partnership agreement and limited liability company agreement is the legal, valid and binding obligation of the parties thereto, enforceable in accordance with Exhibit H Page 26 its terms and, together with this Agreement, contains the entire agreement between the parties thereto relating to the subject matter thereof; and (xiii) "control" (as defined in Section 8-106 of the UCC) has been obtained by the Pledgee over all Collateral consisting of Securities (including Notes which are Securities) with respect to which such "control" may be obtained pursuant to Section 8-106 of the UCC, in each such case to the extent required by the terms of this Agreement. (b) Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and each Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. (c) Each Pledgor covenants and agrees that it will take no action which would violate or be inconsistent with any of the terms of any Secured Debt Agreement, or which would have the effect of impairing the position or interests of the Pledgee or any other Secured Creditor under any Secured Debt Agreement except as permitted by the Credit Agreement. (d) Any Pledgor which owns an equity interest in an Excluded Foreign Entity covenants and agrees that on the date on which such entity ceases to qualify as an "Excluded Foreign Entity" in accordance with the definition thereof, (i) such Pledgor shall have duly authorized, executed and delivered to the Pledgee a pledge agreement, in form and substance satisfactory to the Pledgee, governed by the laws of the jurisdiction of organization of such Excluded Foreign Entity and covering (subject to the pledge limitations in subclause (ii) of the definition of the term "Stock") the equity interests of such Excluded Foreign Entity owned by such Pledgor (as amended, restated, modified and/or supplemented from time to time in accordance with the terms thereof and of the Credit Agreement, each such pledge agreement, a "Foreign Pledge Agreement"), (ii) such Foreign Pledge Agreement shall be in full force and effect and shall have been duly recorded or filed in such manner and in such places as required by the law of the jurisdiction governing such Foreign Pledge Agreement to establish, perfect, preserve and protect the pledge in favor of the Collateral Agent, (iii) all taxes, fees and other charges payable in connection with the such Foreign Pledge Agreement (including the recordation thereof) shall have been paid in full and (iv) the Pledgee shall have received such other evidence that all actions necessary or, in the opinion of the Pledgee, desirable, to perfect and/or render enforceable the security interest purported to be created by such Foreign Pledge Agreement have been taken (including, without limitation, the delivery of an opinion from local counsel acceptable to the Pledgee in form, scope and substance reasonably satisfactory to the Pledgee). (e) Each Pledgor represents and warrants as of the date of each Credit Event under the Credit Agreement, that the fair market value of the Margin Stock held by the Pledgors as of the date of such Credit Event does not exceed $50,000,000. 17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force Exhibit H Page 27 and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of, or addition or supplement to or deletion from any of the Secured Debt Agreements, or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. 18. TERMINATION; RELEASE. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement as provided above, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Pledgee hereunder. As used in this Agreement, (i) "CA Termination Date" shall mean the date upon which the Total Commitment has been terminated, no Letter of Credit or Note under the Credit Agreement is outstanding and all other Credit Document Obligations have been paid in full in cash (other than arising from indemnities for which no request for payment has been made) and (ii) "Termination Date" shall mean the date upon which (x) the CA Termination Date shall have occurred and (y) if (but only if) a Notified Non-Credit Agreement Event of Default shall have occurred and be continuing on the CA Termination Date (and after giving effect thereto), either (I) such Notified Non-Credit Agreement Event of Default shall have been cured or waived by the requisite holders of the relevant Obligations subject to such Notified Non-Credit Agreement Event of Default or (II) all Secured Credit Card Agreements and Secured Hedging Agreements (if any) giving rise to a Notified Non-Credit Agreement Event of Default shall have been terminated and all Obligations subject to such Notified Non-Credit Agreement Event of Default shall have been paid in full (other than arising from indemnities for which no request for payment has been made). Exhibit H Page 28 (b) So long as no Notified Non-Credit Agreement Event of Default has occurred and is continuing, in the event that (x) prior to the CA Termination Date (i) any part of the Collateral is sold or otherwise disposed of in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement (it being agreed for such purposes that a release will be deemed "permitted by Section 8.02 of the Credit Agreement" if the proposed transaction constitutes an exception to Section 8.02 of the Credit Agreement) or (ii) all or any part of the Collateral is released at the direction of the Required Lenders (or all the Lenders if required by Section 12.12 of the Credit Agreement), and the proceeds of such sale or disposition or from such release (if any) are applied in accordance with the terms of the Credit Agreement to the extent required to be so applied or (y) on and after the CA Termination Date, any part of the Collateral is sold or otherwise disposed of without violating the Existing Senior Notes Documents, the Refinancing Senior Notes Documents, the Secured Credit Card Agreements and the Secured Hedging Agreements, the Pledgee, at the request and expense of the respective Pledgor will release such Collateral from this Agreement, duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in possession of the Pledgee and has not theretofore been released pursuant to this Agreement (it being understood and agreed that upon the release of all or any portion of the Collateral by the Collateral Agent at the direction of the Lenders as provided above, the Lien on the Collateral in favor of the Credit Card Issuer, the Hedging Creditors, the Existing Senior Notes Creditors and the Refinancing Senior Notes Creditors shall automatically be released). (c) In addition to the foregoing, all Collateral shall be automatically released (subject to reinstatement upon the occurrence of a new Trigger Event, with each date of such reinstatement, a "Subsequent Effective Date") in accordance with the provisions of the last sentence of Section 7.10(b) of the Credit Agreement. (d) At any time that the relevant Pledgor desires that the Pledgee take any action to give effect to any release of Collateral pursuant to the foregoing Section 18(a), (b) or (c), it shall deliver to the Pledgee a certificate signed by an authorized officer describing the Collateral to be released and certifying its entitlement to a release pursuant to the applicable provisions of Sections 18(a), (b) or (c) and in such case the Pledgee, at the request and expense of such Pledgor, will execute such documents as required to duly release such Collateral and to assign, transfer and deliver to such Pledgor or its designee (without recourse and without any representation or warranty) such of the Collateral as is then being released and as may be in the possession of the Pledgee. The Pledgee shall have no liability whatsoever to any other Secured Creditor as the result of any release of Collateral by it in accordance with (or which the Pledgee in good faith believes to be in accordance with) this Section 18. Upon any release of Collateral pursuant to Section 18(a), (b) or (c), so long as no Noticed Event of Default is then in existence, none of the Secured Creditors shall have any continuing right or interest in such Collateral, or the proceeds thereof (subject to reinstatement rights upon the occurrence of a new Trigger Event in the case of a release pursuant to Section 18(c)). 19. NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered (including by way of overnight courier): Exhibit H Page 29 (i) if to any Pledgor, at its address set forth opposite its signature below; (ii) if to the Pledgee, at: JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Attention: Raju Nanoo Tel: 212-270-2272 Fax: 212-270-5120 (iii) if to any Lender (other than the Pledgee), at such address as such Lender shall have specified in the Credit Agreement; (iv) if to any Credit Card Issuer, at such address as such Credit Card Issuer shall have specified in writing to the Pledgors and the Pledgee; (v) if to any Hedging Creditor, at such address as such Hedging Creditor shall have specified in writing to the Pledgors and the Pledgee; (vi) if to any Existing Senior Notes Creditor, at such address of the Existing Senior Notes Trustee as the Existing Senior Notes Trustee shall have specified in writing to the Pledgors and the Pledgee; (vii) if to any Refinancing Senior Notes Creditor, at such address of the Refinancing Senior Notes Trustee as the Refinancing Senior Notes Trustee shall have specified in writing to the Pledgors and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. Except as otherwise expressly provided herein, all such notices and communications shall be deemed to have been duly given or made when received. 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Pledgee (with the consent of (x) if prior to the CA Termination Date, the Required Lenders or, to the extent required by Section 12.12 of the Credit Agreement, all of the Lenders and (y) if on and after the CA Termination Date, the holders of at least a majority of the outstanding principal amount of the Obligations remaining outstanding), and each Pledgor affected thereby (it being understood that the addition or release of any Pledgor hereunder shall not constitute a change, waiver, discharge or variance affecting any Pledgor other than the Borrower and the Pledgor so added or released), provided that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (v) the Lender Creditors as holders of the Credit Document Obligations, (w) the Credit Card Issuers as holders of the Credit Card Obligations, (x) the Hedging Creditors as holders of the Hedging Obligations, (y) the Exhibit H Page 30 Existing Senior Notes Creditors as holders of the Existing Senior Notes Obligations, or (z) the Refinancing Senior Notes Creditors as holders of the Refinancing Senior Notes Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (v) with respect to each of the Credit Document Obligations, the Required Lenders, (w) with respect to the Credit Card Obligations, the holders of at least a majority of all Credit Card Obligations outstanding from time to time, (x) with respect to the Hedging Obligations, the holders of at least a majority of all Secured Hedging Obligations outstanding from time to time, (y) with respect to the Existing Senior Notes Obligations, the holders of at least a majority of the outstanding principal amount of the Existing Senior Notes, and (z) with respect to the Refinancing Senior Notes Obligations, the holders of at least a majority of the outstanding principal amount of the Refinancing Senior Notes. 21. MISCELLANEOUS. This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect, subject to release and/or termination as set forth in Section 18, (ii) be binding upon each Pledgor, its successors and assigns, and (iii) inure, together with the rights and remedies of the Pledgee hereunder, to the benefit of the Pledgee, the other Secured Creditors and their respective successors, transferees and assigns. This Agreement shall be construed and enforced in accordance with and governed by the law of the State of New York. The headings of the several sections and subsections in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. 22. WAIVER OF JURY TRIAL. Each party hereto irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement or the transactions contemplated hereby. 23. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary of Parent that is required to become a party to this Agreement after the date hereof pursuant to the requirements of the Credit Agreement shall become a Pledgor hereunder by (x) executing a counterpart hereof and/or an assumption agreement in form and substance satisfactory to the Collateral Agent, (y) delivering supplements to Annexes A through E hereto, as are necessary to cause such Annexes to be complete and accurate with respect to such additional Pledgor on such date and (z) taking all actions as specified in this Agreement, in each case with all documents required above to be delivered to the Collateral Agent and with all documents and action required above to be taken to the reasonable satisfaction of the Collateral Agent. 24. NO THIRD PARTY BENEFICIARIES. This Agreement is entered into solely for the benefit of the parties hereto and their respective successors and assigns and for the benefit of the Secured Creditors from time to time and their respective successors and assigns and, except for the Secured Creditors and their successors and assigns, there shall be no third party beneficiaries hereof, nor shall any Person other than the parties hereto and their respective successors and assigns, and the Secured Creditors and their respective successors and assigns, be Exhibit H Page 31 entitled to enforce the provisions hereof or have any claims against any party hereto (or any Secured Creditor) or their successors and assigns arising from, or under, this Agreement. * * * IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. REYNOLDS AMERICAN INC., as a Pledgor By: /s/ Lynn L. Lane ----------------------------------------- Title: Senior Vice President & Treasurer R.J. REYNOLDS TOBACCO HOLDINGS, INC., as a Pledgor By: /s/ Lynn L. Lane ----------------------------------------- Title: Senior Vice President & Treasurer R.J. REYNOLDS TOBACCO COMPANY, as a Pledgor By: /s/ Lynn L. Lane ----------------------------------------- Title: Senior Vice President & Treasurer RJR ACQUISITION CORP., as a Pledgor By: /s/ Lynn L. Lane ----------------------------------------- Title: Vice President & Treasurer GMB, INC., as a Pledgor By: /s/ Daniel A. Fawley ----------------------------------------- Title: Treasurer FHS, INC., as a Pledgor By: /s/ Caroline M. Price ----------------------------------------- Title: President R. J. REYNOLDS TOBACCO CO., as a Pledgor By: /s/ Lynn L. Lane ----------------------------------------- Title: Treasurer RJR PACKAGING, LLC, as a Pledgor By: /s/ Lynn L. Lane ----------------------------------------- Title: Treasurer BWT BRANDS, INC., as a Pledgor By: /s/ Daniel A. Fawley ----------------------------------------- Title: Treasurer Acknowledged And Agreed: JPMORGAN CHASE BANK, as Collateral Agent and Pledgee By /s/ Robert T. Sacks --------------------------------- Title: Managing Director EX-10.10 17 g90345exv10w10.txt EX-10.10 EXHIBIT 10.10 This Mortgage was prepared by, This document is intended and when recorded should be returned to: to be recorded in Cherokee County, South Carolina Jeffrey J. Temple, Esq. White & Case LLP 1155 Avenue of the Americas New York, New York 10036 (212) 819-8729 1107993-0083 MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING made by R. J. REYNOLDS TOBACCO COMPANY, as the Mortgagor, to JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for Various Lending Institutions, as the Mortgagee THIS MORTGAGE CONSTITUTES A FIXTURE FINANCING STATEMENT FILING PURSUANT TO SECTION 36-9-402 OF THE SOUTH CAROLINA CODE OF LAWS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING dated as of July 30, 2004 (as amended, modified or supplemented from time to time, this "Mortgage") made by R. J. Reynolds Tobacco Company, a North Carolina Corporation (the "Mortgagor"), having an address at 401 North Main Street, Winston-Salem, North Carolina 27102 as the Mortgagor to JPMorgan Chase Bank, (together with any successor Mortgagee, the "Mortgagee"), having an address at 270 Park Avenue, New York, NY 10017, as Administrative Agent and Collateral Agent for the benefit of the Secured Creditors (as defined below). All capitalized terms used but not otherwise defined herein shall have the same meanings ascribed to such terms in the Credit Agreement described below. WITNESSETH: WHEREAS, Reynolds American Inc. (the "Parent"). R.J. Reynolds Tobacco Holdings, Inc. (the "Borrower"), the various lending institutions from time to time party thereto (the "Lenders") and the Mortgagee, as Administrative Agent, have entered into a Credit Agreement, dated as of May 7, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002, and further amended and restated as of July 30, 2004, providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, in the aggregate principal amount of up to $486,250,000, all as contemplated therein (with the Lenders, each Letter of Credit Issuer, the Administrative Agent, the Senior Managing Agents, and the Collateral Agent being herein collectively called the "Lender Creditors")(as the same may be further amended, modified, extended, renewed, replaced, restated, supplemented and/or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lender or holders, the "Credit Agreement"; provided that, with respect to any agreement providing for the refinancing or replacement of indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (x) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Lenders shall have consented in writing to the refinancing or replacement indebtedness being treated as indebtedness pursuant to the Credit Agreement, and (y) a notice to the effect that the refinancing or replacement indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Borrower to the Collateral Agent); WHEREAS, the Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafter defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender or any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate swap Agreement), and in each case their subsequent successors and assigns collectively, the "Hedging Creditors", and together with the Lender Creditors, the "Lender Secured Creditors"); WHEREAS, the Borrower and the trustee thereunder (the "Existing Senior Notes Trustee"), on behalf of the holders of the Existing Senior Notes (such holders, together with the Existing Senior Notes Trustee, the "Existing Senior Notes Creditors"), have from time to time entered into, and may in the future from time to time enter into, one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Existing Senior Notes Indenture" and, together with the Existing Senior Notes, the "Existing Senior Notes Documents") providing for the issuance of Existing Senior Notes by the Borrower in the original principal amount of $700,000,000; WHEREAS, the Borrower and the trustee or trustees thereunder (collectively, the "Refinancing Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes (such holders, together with the Refinancing Senior Notes Trustee, the "Refinancing Senior Notes Creditors", and together with the Lender Secured Creditors and the Existing Senior Notes Creditors, the "Secured Creditors"), may from time to time enter into one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Refinancing Senior Notes Indenture" and, together with the Refinancing Senior Notes, the "Refinancing Senior Notes Documents") providing for the issuance of Refinancing Senior Notes by the Borrower, in the original principal amount of $750,000,000; WHEREAS, pursuant to the Subsidiary Guaranty, the Mortgagor has (together with the other Subsidiaries of the Borrower party thereto) jointly and severally guaranteed to the Lender Secured Creditors the payment when due of the Guaranteed Obligations (as and to the extent defined in the Subsidiary Guaranty); WHEREAS, the Mortgagor has guaranteed to the Existing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Existing Senior Notes; WHEREAS, the Mortgagor has guaranteed to the Refinancing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Refinancing Senior Notes; WHEREAS, the Mortgagor is owner of the fee simple title to the Property (as hereinafter defined), subject to Permitted Liens; -2- WHEREAS, the Credit Agreement requires this Mortgage be executed and delivered to the Mortgagee by the Mortgagor and the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture, require that this Mortgage secure the respective Obligations as provided herein; and WHEREAS, the Mortgagor desires to enter into this Mortgage to satisfy the condition in the preceding paragraph and to secure (and this Mortgage shall secure) the following: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Mortgagor, now existing or hereafter incurred under, arising out of or in connection with any Credit Document to which the Mortgagor is a party (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)), as described in Schedule I hereto and the due performance of and compliance by the Mortgagor with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or liabilities with respect to Secured Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) in accordance with Section 29-3-50 of the South Carolina Code of Laws (1976), as amended, all future advances and re-advances that may subsequently be made to the Mortgagor under the Credit Agreement and evidenced by the Notes, Loans, commitments or other notes or instruments, and all modifications, renewals, or extensions thereof, the maximum amount of all Credit Document Obligations outstanding at one time secured by this Mortgage not to exceed $486,250,000, plus interest thereon, attorneys' fees and court costs; (iii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Mortgagor, now existing or hereafter incurred under, arising out of or in connection with any Secured Hedging Agreement (including, all obligations, if any, of the Mortgagor under the Subsidiary Guaranty in respect of Secured Hedging Agreements), and all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding, and the due performance and compliance by the Mortgagor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities under this clause (ii) being herein collectively called the "Hedging Obligations"); -3- (iv) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Mortgagor owing to the Existing Senior Notes Creditors (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)), now existing or hereafter incurred under, arising out of or in connection with any Existing Senior Notes Document, including, all obligations, if any, of the Mortgagor under any guaranty in respect of the Existing Senior Notes and the due performance and compliance by the Mortagor with the terms of each such Existing Senior Notes Document (all such obligations and liabilities under this clause (iii) being herein collectively called the "Existing Senior Notes Obligations"); (v) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Mortgagor owing to the Refinancing Senior Notes Creditors (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)), now existing or hereafter incurred under, arising out of or in connection with any Refinancing Senior Notes Document, including, all obligations, if any, of the Mortgagor under a guaranty in respect of the Refinancing Senior Notes and the due performance and compliance by the Mortgagor with the terms of each such Refinancing Senior Notes Document (all such obligations and liabilities under this clause (iv) being herein collectively called the "Refinancing Senior Notes Obligations"); (vi) any and all sums advanced by the Mortgagee in order to preserve or protect its lien and security interest in the Property; (vii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Mortgagor and/or the Borrower referred to above after an Event of Default (as hereinafter defined) shall have occurred and be continuing, all expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Property, or of any exercise by the Mortgagee of its rights hereunder, together with reasonable attorneys' fees and disbursements (as set forth in Section 4.09 hereof) and court costs; (viii) any and all other indebtedness now owing or which may hereafter be owing by the Mortgagor to the Mortgagee, however and whenever incurred or evidenced, whether express or implied, direct or indirect, absolute or contingent, or due or to become due; and -4- (ix) any and all renewals, extensions and modifications of any of the obligations and liabilities referred to in clauses (i) through (vii) above; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (viii) above being herein collectively called the "Obligations", provided that notwithstanding the foregoing, (i) the Existing Senior Notes Obligations shall be excluded from the Obligations to the extent the Existing Senior Notes Documents do not require the Existing Senior Notes Obligations to be secured pursuant to this Mortgage, and (ii) the Refinancing Senior Notes Obligations shall be excluded from the Obligations to the extent the Refinancing Senior Notes Documents do not require the Refinancing Senior Notes Obligations to be secured pursuant to this Mortgage. The maximum amount of all Obligations outstanding at one time secured by this Mortgage shall not exceed $1,936,250,000, plus interest thereon, attorneys' fees and court costs. The stated last maturity date of the Obligations, if not sooner paid or hereafter extended, is no later than February 13, 2006 (or, if the Existing Senior Notes due on May 15, 2006 have been refinanced in full with the proceeds of a new issuance or issuances of Refinancing Senior Notes in an aggregate principal amount equal to at least the aggregate principal amount of such Existing Senior Notes so refinanced on or prior to February 13, 2006, January 30, 2007), as such date may be extended for such Lender pursuant to Section 1.13 of the Credit Agreement. NOW, THEREFORE, as security for the Obligations and in consideration of the sum of ten dollars ($10.00) and the other benefits accruing to the Mortgagor, the receipt and sufficiency of which are hereby acknowledged, THE MORTGAGOR HEREBY MORTGAGES, GIVES, GRANTS, BARGAINS, SELLS, ASSIGNS, TRANSFERS, CONVEYS AND CONFIRMS TO THE MORTGAGEE AND ITS SUCCESSORS AND ASSIGNS FOREVER FOR THE BENEFIT OF THE SECURED CREDITORS, TOGETHER WITH POWER OF SALE (subject to applicable law) all of the Mortgagor's estate, right, title and interest, whether now owned or hereafter acquired, whether as lessor or lessee and whether vested or contingent, in and to all of the following: A. The land described in Exhibit A hereto, together with all rights, privileges, franchises and powers related thereto which are appurtenant to said land or its ownership, including all minerals, oil and gas and other hydrocarbon substances thereon or therein; waters, water courses, water stock, water rights (whether riparian, appropriative, or otherwise, and whether or not appurtenant), sewer rights, shrubs, crops, trees, timber and other emblements now or hereafter on, under or above the same or any part or parcel thereof (the "Land"); B. All buildings, structures, tenant improvements and other improvements of every kind and description now or hereafter located in or on the Land, including, but not limited to all machine shops, structures, improvements, rail spurs, dams, reservoirs, water, sanitary and storm sewers, drainage, electricity, steam, gas, telephone and other utility facilities, parking areas, roads, driveways, walks and other site improvements of every kind and description now or hereafter erected or placed on the Land; and all additions and betterments thereto and all renewals, alterations, substitutions and replacements thereof (collectively, the "Improvements"); C. All fixtures, attachments, appliances, equipment, machinery, building materials and supplies, and other tangible personal property, now or hereafter attached to said Improvements or now or at any time hereafter located on the Land and/or Improvements includ- -5- ing, but not limited to, artwork, decorations, draperies, furnaces, boilers, oil burners, piping, plumbing, refrigeration, air conditioning, lighting, ventilation, disposal and sprinkler systems, elevators, motors, dynamos and all other equipment and machinery, appliances, fittings and fixtures of every kind located in or used in the operation of the Improvements, together with any and all replacements or substitutions thereof and additions thereto, including the proceeds of any sale or transfer of the foregoing (hereinafter sometimes collectively referred to as the "Equipment"); D. All surface rights, appurtenant rights and easements, rights of way, and other rights appurtenant to the use and enjoyment of or used in connection with the Land and/or the Improvements; E. All streets, roads and public places (whether open or proposed) now or hereafter adjoining or otherwise providing access to the Land, the land lying in the bed of such streets, roads and public places, and all other sidewalks, alleys, ways, passages, vaults, water courses, strips and gores of land now or hereafter adjoining or used or intended to be used in connection with all or any part of the Land and/or the Improvements; F. Any leases, lease guaranties and any other agreements, relating to the use and occupancy of the Land and/or the Improvements or any portion thereof, including but not limited to any use or occupancy arrangements created pursuant to Section 365(h) of he Bankruptcy Code or otherwise in connection with the commencement or continuance of any bankruptcy, reorganization, arrangement, insolvency, dissolution, receivership or similar proceedings, or any assignment for the benefit of creditors, in respect of any tenant or occupant of any portion of the Land and/or the Improvements (collectively, "Leases"); G. All revenues, rents, receipts, income, accounts receivable, issues and profits of the Property (collectively, "Rents"); H. To the extent assignable, all permits, licenses and rights relating to the use, occupation and operation of the Land and the Improvements, any business conducted thereon or therein and any part thereof; I. All real estate tax refunds payable to the Mortgagor with respect to the Land and/or the Improvements, and refunds, credits or reimbursements payable with respect to bonds, escrow accounts or other sums payable in connection with the use, development, or ownership of the Land or Improvements; J. Any claims or demands with respect to any proceeds of insurance in effect with respect to the Land and/or the Improvements, including interest thereon, which the Mortgagor now has or may hereafter acquire and any and all awards made for the taking by eminent domain, condemnation or by any proceedings, transfer or purchase in lieu or in anticipation of the exercise of said rights, or for a change of grade, or for any other injury to or decrease in the value of the whole or any part of the Property; -6- K. Any zoning lot agreements and air rights and development rights which may be vested in the Mortgagor together with any additional air rights or development rights which have been or may hereafter be conveyed to or become vested in the Mortgagor; and L. All proceeds and products of the conversion, voluntary or involuntary, including, without limitation, those from sale, exchange, transfer, collection, loss, damage, disposition, substitution or replacement of any of the foregoing; whether into cash, liquidated claims or otherwise. All of the foregoing estates, right, properties and interests hereby conveyed to the Mortgagee may be referred to herein as the "Property". Notwithstanding the foregoing, the Property that secures the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations shall be limited to Property consisting of any shares of stock, indebtedness or other obligations of a Subsidiary of Parent or any Principal Property (as defined in the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture (in each case as in effect on the date hereof)) of the Mortgagor (the "Designated Trust Property"), all of which Collateral shall also ratably secure all other Obligations, and the Trust Property Proceeds (as defined in Section 4.04(a)) that are to be applied to the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations shall be limited to Trust Property Proceeds resulting from the sale of, and Rents and other amounts generated by the holding, leasing, management, operation or other use pursuant to this Mortgage of, the Designated Trust Property, with such Trust Property Proceeds to also be applied ratably to all other Obligations. TO HAVE AND TO HOLD the above granted and described Property unto the Mortgagee and to its successors and assigns forever, and the Mortgagor hereby covenants and agrees on behalf of itself and its successors and assigns to warrant and defend the Property unto the Mortgagee; its successors and assigns against the claim or claims of all persons and parties whatsoever. PROVIDED, HOWEVER, that if Obligations shall have been paid in cash at the time and in the manner stipulated therein and all other sums payable hereunder and all other indebtedness secured hereby shall have been paid and all other covenants contained in the Credit Documents shall have been performed, then, in such case the Mortgagee shall, subject to the provisions of Section 6.19 of this Mortgage, at the request and expense of the Mortgagor, satisfy this Mortgage (without recourse and without any representation or warranty) and the estate, right, title and interest of the Mortgagee in the Property shall cease, and upon payment to the Mortgagee of all reasonable costs and expenses incurred for the preparation of the release hereinafter referenced and all recording costs if allowed by law, the Mortgagee shall cancel and surrender the estate and interest created by this Mortgage. ARTICLE I REPRESENTATIONS, WARRANTIES, COVENANTS 1.01 Title to this Property. The Mortgagor represents and warrants: (a) it has good and marketable fee title to the Property, free and clear of any liens and encumbrances, other -7- than Liens permitted under Section 8.03 of the Credit Agreement and any other easements, rights and claims of record (collectively "Permitted Liens"), and is lawfully seized and possessed of the Property; (b) this Mortgage is a valid first priority security interest and lien upon the Property subject to the Permitted Liens; (c) it has full power and authority to encumber the Property in the manner set forth herein; and (d) there are no defenses or offsets to this Mortgage or to the Obligations which it secures. The Mortgagor shall preserve such title and the validity and priority of this Mortgage and shall forever warrant and defend the same to the Mortgagee and the Mortgagee's successors and assigns against the claims of all persons and parties whatsoever. The Mortgagor shall take no action nor shall it fail to take any action which could result in an impairment of the lien of this Mortgage or which could form the basis for any Person(s) to claim an interest in the Property (including, without limitation, any claim for adverse use or possession or any implied dedication or easement by prescription other than leases permitted under the Credit Agreement). If any Lien (other than Permitted Liens) is asserted against the Property, the Mortgagor shall promptly, at its expense: (a) provide the Mortgagee with written notice of such Lien, including information relating to the amount of the Lien asserted; and (b) pay the Lien in full or take such other action to cause the Lien to be released, or, so long as the lien of this Mortgage is not compromised, contest the same pursuant to the provisions of the Credit Agreement. From and after the occurrence of an Event of Default, the Mortgagee may, but shall not be obligated, to pay any such asserted Lien if not timely paid by the Mortgagor. 1.02 Compliance with Law. The Mortgagor represents and warrants that it possesses all material certificates, licenses, authorizations, registrations, permits and/or approvals necessary for the ownership, operation, leasing and management of the Property, including, without limitation, all material environmental permits, all of which are in full force and effect and not the subject of any revocation proceeding, undisclosed amendment, release, suspension, forfeiture or the like. The present and contemplated use and occupancy of the Property does not conflict with or violate any such certificate, license, authorization, registration, permit or approval, including, without limitation, any certificate of occupancy which may have been issued for the Property. The Mortgagor will not take any action, or fail to take any required action, so as to compromise or adversely affect the zoning classification of the Property. 1.03 Payment and Performance of Obligations. Subject to the terms of the Credit Agreement, the Mortgagor shall pay all of the Obligations when due and payable without offset or counterclaim, and shall observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements to be observed and performed by it under this Mortgage, the other Credit Documents to which it is a party, the Secured Hedging Agreements, the Existing Senior Notes Documents and the Refinancing Senior Notes Documents (collectively, the "Secured Debt Agreements"). 1.04 Maintenance, Repair, Alterations, Etc. The Mortgagor will: (i) keep and maintain the Property, to the extent used in the Mortgagor's day to day business, in good condition and repair (normal wear and tear excepted); (ii) make or cause to be made, as and when necessary, all material repairs, renewals and replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen which are necessary to so maintain the Property in the Mortgagor's reasonable business judgment; (iii) restore any Improvement, to the extent used in Mortgagor's day to day business, which may be damaged or destroyed so that the same shall be at least substantially equal to its value, condition and -8- character immediately prior to the damage or destruction; (iv) not commit or permit any waste or deterioration (normal wear and tear excepted) of the Property, to the extent used in the Mortgagor's day to day business; (v) not permit any material Improvements, to the extent used in the Mortgagor's day to day business, to be demolished or substantially altered in any manner that substantially decreases the value thereof; (vi) promptly pay when due all claims for labor performed and materials furnished therefor or contest such claim and; (vii) comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities having jurisdiction over the Property, as well as comply with the provisions of any lease, easement or other agreement affecting all or any part of the Property. 1.05 Required Insurance; Use of Proceeds. The Mortgagor will, at its expense, at all times provide, maintain and keep in force policies of property, hazard and liability insurance in accordance with Section 7.03 of the Credit Agreement with respect to the Property, together with statutory workers' compensation insurance with respect to any work to be performed on or about the Property. To the extent required under the Credit Agreement, the Mortgagor shall give prompt written notice to the Mortgagee of the occurrence of any material damage to or material destruction of the Improvements or the Equipment. In the event of any damage to or destruction of the Property or any part thereof, so long as a Noticed Event of Default has not occurred and is not continuing the Mortgagee will release any interest they have in the proceeds of any insurance to the Mortgagor on account of such damage or destruction and the Mortgagor may use such proceeds for repair restoration replacement or other business purposes as the Mortgagor may reasonably determine. In the event of foreclosure of the lien and interest of this Mortgage or other transfer of title or assignment of the Property in extinguishment, in whole or in part, of the Obligations, all right, title and interest of the Mortgagor in and to all proceeds then payable under any policy of insurance required by this Mortgage shall inure to the benefit of and pass to the successor in interest of the Mortgagor, or the purchaser or mortgagor of the Property. After the occurrence of an Event of Default, the Mortgagee shall be afforded the right to participate in and approve the settlement of any claim made by the Mortgagor against the insurance company. 1.06 Preservation of Property. The Mortgagor agrees to pay for any and all reasonable and actual fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Mortgagee's liens on, and security interest in, the Property, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices (including stamp and mortgage or intangible recording taxes or other taxes imposed on the Mortgagee by virtue of its ownership of this Mortgage), which are imposed upon the recording of this Mortgage or thereafter, all reasonable attorneys' fees, payment or discharge of any taxes or Liens upon or in respect of the Property, premiums for insurance with respect to the Property and all other reasonable fees, costs and expenses in connection with protecting, maintaining or preserving the Property and the Mortgagee's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Property. 1.07 Condemnation. Should the Mortgagor receive any notice that a material portion of the Property or interest therein may be taken or damaged by reason of any public improvements or condemnation proceeding or in any other similar manner (a "Condemnation"), the Mortgagor, to the extent required under the Credit Agreement, shall give prompt written notice thereof to the Mortgagee. In the event of any Condemnation, after the occurrence and -9- during the continuation of any Event of Default, the Mortgagee shall have the right to participate in any negotiations or litigation and shall have the right to approve any settlement. So long as no Noticed Event of Default has occurred and is continuing, the Mortgagee will release any interest they have in any and all compensation, awards, damages and proceeds paid to the Mortgagor or the Borrower on account of such Condemnation and the Mortgagor may use such compensation awards, damages and proceeds for repair, restoration, replacement or other business purposes as the Mortgagor may reasonably determine. 1.08 Inspections. The Mortgagor hereby authorizes the Mortgagee, its agents, employees and representatives, upon reasonable prior written notice to the Mortgagor (except in an emergency or following the occurrence and during the continuance of any Event of Default, in which case notice shall not be required) to visit and inspect the Property or any portion(s) thereof, all at such reasonable times and as often as the Mortgagee may reasonably request. 1.09 Transfers. Except as otherwise permitted in accordance with the terms of the Credit Agreement, no part of the Property or of any legal or beneficial interest in the Property shall be sold, assigned, conveyed, transferred or otherwise disposed of (whether voluntarily or involuntarily, directly or indirectly, by sale of stock or any interest in the Mortgagor, or by operation of law or otherwise). 1.10 After Acquired Property Interests. Subject to applicable law, all right, title and interest of the Mortgagor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Property, hereafter acquired by, or released to, the Mortgagor or constructed, assembled or placed by the Mortgagor on the Land, and all conversions of the security constituted thereby (collectively, "After Acquired Property Interests"), immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, conveyance, assignment or other act by the Mortgagor, shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by the Mortgagor and specifically described in the granting clauses hereof. The Mortgagor shall execute and deliver to the Mortgagee all such other assurances, mortgages, conveyances or assignments thereof as the Mortgagee may reasonably require for the purpose of expressly and specifically subjecting such After Acquired Property Interests to the lien of this Mortgage. The Mortgagor hereby irrevocably authorizes and appoints the Mortgagee as the agent and attorney-in-fact of the Mortgagor to execute all such documents and instruments on behalf of the Mortgagor, which appointment shall be irrevocable and coupled with an interest, if the Mortgagor fails or refuses to do so within ten (10) days after a request therefor by the Mortgagee. ARTICLE II SECURITY AGREEMENT 2.01 Grant of Security; Incorporation by Reference. This Mortgage shall, in addition to constituting a mortgage lien on and security interest in those portions of the Property classified as real property (including fixtures to the extent they are real property), constitute a security agreement within the meaning of the Uniform Commercial Code or within the meaning -10- of the common law with respect to those parts of the Property classified as personal property (including fixtures to the extent they are personal property) to the extent a security interest therein can be created by this Mortgage. The Mortgagor hereby grants to the Mortgagee a security interest in and to the following property whether now owned or hereafter acquired (collectively, the "Secured Property") for the benefit of the Mortgagee to further secure the payment and performance of the Obligations: (a) Those parts of the Property classified as personal property (including (i) fixtures to the extent they are personal property and (ii) personal property and fixtures that are leased, but only to the extent the Mortgagor can grant to the Mortgagee a security interest therein without breaching the terms of such lease); (b) All general intangibles, contract rights, accounts and proceeds arising from all insurance policies required to be maintained by the Mortgagor and related to the Property hereunder; (c) All proceeds of any judgment, award or settlement in any condemnation or eminent domain proceeding in connection with the Property, together with all general intangibles, contract rights and accounts arising therefrom; (d) All permits, consents and other governmental approvals in connection with the construction of the Improvements or the operation of the Property, to the extent any of the same may be assigned, transferred, pledged or subjected to a security interest; (e) All plans and specifications, studies, tests or design materials relating to the design, construction, repair, alteration or leasing of the Property, to the extent any of the same may be assigned, transferred, pledged or subjected to a security interest; and (f) All cash and non-cash proceeds of the above-mentioned items. The provisions contained in the Security Agreement are hereby incorporated by reference into this Mortgage with the same effect as if set forth in full herein. In the event of a conflict between the provisions of this Article II and the Security Agreement, the Security Agreement shall control and govern and the Mortgagor shall comply therewith. 2.02 Fixture Filing and Financing Statements. This Mortgage constitutes a security agreement, fixture filing and financing statement as those terms are used in the Uniform Commercial Code. For purposes of this Section, this Mortgage is to be filed and recorded in, among other places, the real estate records of the County in which the Land is located and the following information is included: (1) the Mortgagor shall be deemed the "Debtor" with the address set forth for the Mortgagor on the first page of this Deed of Trust which the Mortgagor certifies is accurate; (2) the Mortgagee shall be deemed to be the "Secured Party" with the address set forth for the Mortgagee on the first page of this Mortgage and shall have all of the rights of a secured party under the Uniform Commercial Code; (3) this Mortgage covers goods which are or are to become fixtures on the real property described in Exhibit A attached hereto; (4) the name of the record owner of the land is the Debtor; (5) the organizational identification number of the Debtor is NC0711678 (6) the Debtor is a corporation, organized under the laws of the State of North Carolina; and (7) the legal name of the Debtor is R. J. Reynolds Tobacco -11- Company. The Debtor hereby authorizes the Mortgagee to file any financing statements and terminations thereof or amendments or modifications thereto without the signature of the Debtor where permitted by law. ARTICLE III ASSIGNMENT OF LEASES, RENTS AND PROFITS 3.01 Assignment. The Mortgagor hereby absolutely, irrevocably and unconditionally sells, assigns, transfers and conveys to the Mortgagee all of the Mortgagor's right, title and interest in and to all current and future Leases and Rents, including those now due, past due, or to become due by virtue of any Lease or other agreement for the occupancy or use of all or any part of the Property regardless of to whom the Rents are payable. The Mortgagor intends that this assignment of Leases and Rents constitutes a present and absolute assignment and not an assignment for additional security only. Such assignment to the Mortgagee shall not be construed to bind the Mortgagee to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise impose any obligation upon the Mortgagee. The Mortgagor covenants that the Mortgagor will not hereafter collect or accept payment of any Rents more than one month prior to the due dates of such Rents, and that no payment of any of the Rents to accrue for any portion of the Property (other than a de minimis amount) will be waived, released, reduced, discounted or otherwise discharged or compromised by the Mortgagor, except as may be approved in writing by the Mortgagee. The Mortgagor agrees that it will not assign any of the Leases or Rents to any other Person. The Mortgagee shall have no liability for any loss which may arise from a failure or inability to collect Rents, proceeds or other payments. The Mortgagor shall maintain all security deposits in accordance with applicable law. 3.02 Revocable License; Agent. Notwithstanding the foregoing, subject to the terms of this Article III, the Mortgagee grants to the Mortgagor a revocable license to operate and manage the Property and to collect the Rents and hereby directs each tenant under a Lease to pay such Rents to, or at the direction of, the Mortgagor, until such time as the Mortgagee provides notice to the contrary to such tenants. The Mortgagor shall hold the Rents, or a portion thereof sufficient to discharge all current sums due in respect of the Obligations, in trust for the benefit of the Mortgagee for use in the payment of such sums. 3.03 Rents. (a) Upon the occurrence and during the continuance of a Noticed Event of Default, without the need for notice or demand, the license granted pursuant to this Article III shall immediately and automatically be revoked and the Mortgagee shall immediately be entitled to possession of all Rents, whether or not the Mortgagee enters upon or takes control of the Property. Upon the revocation of such license, the Mortgagor grants to the Mortgagee the right, at its option, to exercise all the rights granted in Section 4.02(a). Nothing herein contained shall be construed as constituting the Mortgagee a lender in possession in the absence of the taking of actual possession of the Property by the Mortgagee pursuant to Section 4.02(a). As used herein, a "Noticed Event of Default" shall mean (i) an Event of Default with respect to the Borrower under Section 9.05 of the Credit Agreement and (ii) any other Event of Default in -12- respect of which the Mortgagee has given the Borrower notice that such Event of Default constitutes a "Noticed Event of Default". (b) From and after the termination of such license, the Mortgagor may, at the Mortgagee's direction, be the agent for the Mortgagee in collection of the Rents and all of the Rents so collected by the Mortgagor shall be held in trust by the Mortgagor for the sole and exclusive benefit of the Mortgagee and the Mortgagor shall, within one (1) business day after receipt of any Rents, pay the same to the Mortgagee to be applied by the Mortgagee as provided for herein. All Rents collected shall be applied against all expenses of collection, including, without limitation, attorneys' fees, against costs of operation and management of the Property and against the Obligations, in whatever order or priority as to any of the items so mentioned as the Mortgagee directs in its sole and absolute discretion and without regard to the adequacy of its security. Neither the demand for or collection of Rents by the Mortgagee shall constitute any assumption by the Mortgagee of any obligations under any Lease or agreement relating thereto. (c) Any reasonable funds expended by the Mortgagee to take control of and manage the Property and collect the Rents shall become part of the Obligations secured hereby. Such amounts shall be payable from the Mortgagor to the Mortgagee upon the Mortgagee's demand therefor and shall bear interest from the date of disbursement at the interest rate set forth in Section 1.08(c) of the Credit Agreement unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from the Mortgagor under applicable law. 3.04 Sale of Property. (a) Upon any sale of any portion of the Property by or for the benefit of the Mortgagee pursuant to this Mortgage, the Rents attributable to the part of the Property so sold shall be included in such sale and shall pass to the purchaser free and clear of any rights granted herein to the Mortgagor. (b) The Mortgagor acknowledges and agrees that, upon recordation of this Mortgage, the Mortgagee's interest in the Rents shall be deemed to be fully perfected, "choate" and enforceable against the Mortgagor and all third parties, including, without limitation, any debtor in possession or trustee in any case under title 11 of the United States Code, without the necessity of (i) commencing a foreclosure action with respect to this Mortgage, (ii) furnishing notice to the Mortgagor or tenants under the Leases, (iii) making formal demand for the Rents, (iv) taking possession of the Property as a lender-in-possession, (v) obtaining the appointment of a receiver of the Rents, (vi) sequestering or impounding the Rents or (vii) taking any other affirmative action. 3.05 Bankruptcy Provisions. Without limiting the provisions of Article III hereof or the absolute nature of the assignment of the Rents hereunder, the Mortgagor and the Mortgagee agree that, to the extent that the assignment of the Rents hereunder is deemed to be other than an absolute assignment, (a) this Mortgage shall constitute a "security agreement" for purposes of Section 552(b) of the Bankruptcy Code, (b) the security interest created by this Mortgage extends to property of the Mortgagor acquired before the commencement of a bankruptcy case and to all amounts paid as Rents and (c) such security interest shall extend to all Rents acquired by the estate after the commencement of any bankruptcy case. Without limitation of the absolute nature of the assignment of the Rents hereunder, to the extent the -13- Mortgagor (or the Mortgagor's bankruptcy estate) shall be deemed to hold any interest in the Rents after the commencement of a voluntary or involuntary bankruptcy case, the Mortgagor hereby acknowledges and agrees that such Rents are and shall be deemed to be "cash collateral" under Section 363 of the Bankruptcy Code. ARTICLE IV EVENTS OF DEFAULT AND REMEDIES 4.01 Events of Default. The occurrence of (i) an "Event of Default" under and as defined in any of the Credit Documents, (ii) any "event of default" under the Existing Senior Notes Documents or the Refinancing Senior Notes Documents and (iii) any payment default, after any applicable grace period, under any Secured Hedging Agreement shall constitute an Event of Default (each, an "Event of Default") hereunder. 4.02 Remedies Upon Default. Upon the occurrence of a Noticed Event of Default, the Mortgagee may, in the Mortgagee's sole discretion, either itself or by or through one or more trustees, agents, nominees, assignees or otherwise, to the fullest extent permitted by law, exercise any or all of the following rights and remedies individually, collectively or cumulatively: (a) either in person or by its agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of its security, (i) enter upon and take possession of the Property or any part thereof and of all books, records and accounts relating thereto or located thereon, in its own name or in the name of the Mortgagor, and do or cause to be done any acts which it deems necessary or desirable to preserve the value of the Property or any part thereof or interest therein, collect the income therefrom or protect the security hereof; (ii) with or without taking possession of the Property make such repairs, alterations, additions and improvements as the Mortgagee deems necessary or desirable and do any and all acts and perform any and all work which the Mortgagee deems necessary or desirable to complete any unfinished construction on the Property; (iii) make, cancel or modify Leases and sue for or otherwise collect the Rents thereof, including those past due and unpaid; (iv) make any payment or perform any act which the Mortgagor has failed to make or perform hereunder; (v) appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of the Mortgagee; (vi) pay, purchase, contest or compromise any encumbrance, charge or Lien on the Property; and (vii) take such other actions as the Mortgagee deems necessary or desirable; (b) commence and maintain one or more actions at law or in equity or by any other appropriate remedy (i) to protect and enforce the rights of the Mortgagee hereunder, including for the specific performance of any covenant or agreement herein contained (which covenants and agreements the Mortgagor agrees shall be specifically enforceable by injunctive or other appropriate equitable remedy), (ii) to collect any sum then due hereunder, (iii) to aid in the execution of any power herein granted, or (iv) to foreclose this Mortgage in accordance with Section 4.03 hereof; -14- (c) exercise any or all of the remedies available to a secured party under the Uniform Commercial Code; (d) by notice to the Mortgagor (to the extent such notice is required to be given under the Credit Documents), but without formal demand, presentment, notice of intention to accelerate or of acceleration, protest or notice of protest, all of which are hereby waived by the Mortgagor, declare all of the indebtedness secured hereby to be immediately due and payable, and upon such declaration all of such indebtedness shall become and be immediately due and payable, anything in this Mortgage or the other Credit Documents to the contrary notwithstanding; and (e) exercise any other right or remedy available to the Mortgagee under the Secured Debt Agreements. 4.03 Right of Foreclosure. (a) Upon the occurrence of a Noticed Event of Default, the Mortgagee shall have the right, in its sole discretion, to proceed at law or in equity to foreclose this Mortgage with respect to all or any portion of the Property by judicial sale under the judgment of a Court of competent jurisdiction, in accordance with the applicable laws of jurisdiction in which the Property is located. If the Property consists of several lots, parcels or items of Property, the Mortgagee may, in its sole discretion: (i) designate the order in which such lots, parcels or items shall be offered for sale or sold, or (ii) elect to sell such lots, parcels or items through a single sale, or through two or more successive sales, or in any other manner the Mortgagee deems in its best interest. Should the Mortgagee desire that more than one sale or other disposition of the Property be conducted, the Mortgagee may, at its option, cause the same to be conducted simultaneously, or successively, on the same day, or at such different days or times and in such order as the Mortgagee may deem to be in its best interests, and no such sale shall terminate or otherwise affect the lien of this Mortgage on any part of the Property not sold until all Obligations have been fully paid and performed. The Mortgagee may elect to sell the Property for cash or credit. The Mortgagee may, to the extent permitted by law, adjourn from time to time any sale by it to be made under or by virtue of this Mortgage by announcement at the time and place appointed for such sale or for such adjourned sale or sales; and, except as otherwise provided by an applicable provision of law, the Mortgagee may make such sale at the time and place to which the same shall be so adjourned. With respect to all components of the Property and to the extent allowable by applicable law, the Mortgagee is hereby irrevocably appointed the true and lawful attorney-in-fact of the Mortgagor (coupled with an interest), in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the Property in connection with any foreclosure of this Mortgage, and for that purpose the Mortgagee may execute all necessary instruments of conveyance, assignment, transfer and delivery, and may substitute one or more persons with such power, the Mortgagor hereby ratifying and confirming all that its said attorney-in-fact or such substitute or substitutes shall lawfully do by virtue hereof. Notwithstanding the foregoing, the Mortgagor, if so requested by the Mortgagee, shall ratify and confirm any such sale or sales by executing and delivering to the Mortgagee or to such purchaser or purchasers all such instruments as may be advisable, in the judgment of the Mortgagee, for such purpose, and as may be designated in such request. To the extent permitted by law, any such sale or sales made under or by virtue of this Article IV shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of the Mortgagor in and to the properties and rights so sold, and shall be a perpetual -15- bar both at law and in equity against the Mortgagor and against any and all persons claiming or who may claim the same, or any part thereof, from, through or under the Mortgagor. Upon any sale made under or by virtue of this Article IV, the Mortgagee may, to the extent permitted by law, bid for and acquire the Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the Obligations secured hereby the net sales price after deducting therefrom the expenses of the sale and the cost of the action and any other sums which the Mortgagee is authorized to deduct by law or under this Mortgage. (b) Any foreclosure of this Mortgage and any other transfer of all or any part of the Property in extinguishment of all or any part of the Obligations may, at the Mortgagee's option, be subject to any or all Leases of all or any part of the Property and the rights of tenants under such Leases. No failure to make any such tenant a defendant in any foreclosure proceedings or to foreclose or otherwise terminate any such Lease and the rights of any such tenant in connection with any such foreclosure or transfer shall be, or be asserted to be, a defense or hindrance to any such foreclosure or transfer or to any proceedings seeking collection of all or any part of the Obligations (including, without limitation, any deficiency remaining unpaid after completion of any such foreclosure or transfer). (c) If the Mortgagor retains possession of the Property or any part thereof subsequent to a sale, the Mortgagor will be considered a tenant at sufferance of the purchaser, and will, if the Mortgagor remains in possession after demand to remove, be guilty of forcible detainer and will be subject to eviction and removal, forcible or otherwise, with or without process of law, and all damages to the Mortgagor by reason thereof are hereby expressly waived by the Mortgagor. (d) It is agreed and understood that (x) this Mortgage may be enforced only by the action of the Mortgagee acting upon the instructions of the Required Lenders or, if the CA Termination Date (as defined below) has occurred, the holders of a majority of the outstanding principal amount of all remaining Obligations, provided that if prior to the CA Termination Date a payment default with respect to at least $300,000,000 principal amount in the aggregate of Existing Senior Notes and/or Refinancing Senior Notes has continued for at least 180 days (and such defaulted payment has not been received pursuant to a drawing under any letter of credit), the holders of a majority of the outstanding principal amount of the Indebtedness subject to such payment default or defaults can direct the Mortgagee to commence and continue enforcement of the Liens created hereunder, which the Mortgagee shall comply with subject to receiving any indemnity which it reasonably requests, provided further, that the Mortgagee shall thereafter comply only with the directions of the Required Lenders as to carrying out such enforcement so long as such directions are not adverse to the aforesaid directions of the holders of Indebtedness subject to such payment default or defaults, and (y) no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Mortgage or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies shall be exercised exclusively by the Mortgagee for the benefit of the Secured Creditors as their interest may appear upon the terms of this Mortgage. 4.04 Application of Proceeds. (a) To the fullest extent permitted by law, the proceeds of any sale of, and the Rents and other amounts generated by the holding, leasing, management, operation or other use of, each item of the Property pursuant to this Mortgage (the -16- "Trust Property Proceeds") shall be applied by the Mortgagee (or the receiver, if one is appointed) as follows: (i) first, to the payment of all Obligations owing to the Mortgagee of the type described in clauses (v), (vi) and (vii) of the definition of Obligations herein; (ii) second, to the extent Trust Property Proceeds of Property remain after the application pursuant to preceding clause (i), an amount equal to the outstanding Obligations secured by such item of Property shall be paid to the Secured Creditors in the manner provided below as their interests may appear, with each Secured Creditor receiving an amount equal to its outstanding Obligations secured by such item of Property or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rate Share of the amount so remaining to be distributed, with any such amount to be applied in the case of the Credit Document Obligations, the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations, first to the payment of interest in respect of the unpaid principal amount of Loans, Existing Senior Notes or Refinancing Senior Notes, as the case may be, second to the payment of principal of Loans, Existing Senior Notes or Refinancing Senior Notes, as the case may be, and finally to the other Credit Document Obligations, Existing Senior Notes Obligations or Refinancing Senior Notes Obligations, as the case may be; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii) to the Mortgagor or, to the extent directed by the Mortgagor or a court of competent jurisdiction, to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rate Share" shall mean when calculating a Secured Creditor's portion of any distribution or amount pursuant to clause (a) above, the amount (expressed as a percentage) equal to a fraction the numerator of which is the then outstanding amount of the relevant Obligations secured by the relevant item of Property owed such Secured Creditor and the denominator of which is the then outstanding amount of all relevant Obligations secured by the relevant item of Property. (c) All payments required to be made to the (i) Lender Creditors hereunder shall be made to the Administrative Agent for the account of the respective Lender Creditors, (ii) Hedging Creditors hereunder shall be made to the paying agent under the applicable Secured Hedging Agreement or, in the case of Secured Hedging Agreements without a paying agent, directly to the applicable Hedging Creditors, (iii) Existing Senior Notes Creditors hereunder shall be made to the Existing Senior Notes Trustee for the account of the respective Existing Senior Notes Creditors, and (iv) Refinancing Senior Notes Creditors hereunder shall be made to the Refinancing Senior Notes Trustee for the account of the respective Refinancing Senior Notes Creditors. (d) For purposes of applying payments received in accordance with this Section, the Mortgagee shall be entitled to rely upon (i) the Administrative Agent for a determination of the outstanding Credit Document Obligations, (ii) upon any Hedging Creditor for a determination of the outstanding Hedging Obligations owed to such Hedging Creditor, (iii) the -17- Existing Senior Notes Trustee for a determination of the outstanding Existing Senior Notes Obligations, and (iv) the Refinancing Senior Notes Trustee for a determination of the outstanding Refinancing Senior Notes Obligations. Unless it has actual knowledge (including by way of written notice from a Secured Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Mortgagee, in acting hereunder, shall be entitled to assume that no Credit Document Obligations other than principal, interest and regularly accruing fees are owing to any Lender Creditor. (e) It is understood and agreed that the Mortgagor shall remain liable to the extent of any deficiency between (x) the amount of the Obligations for which it is responsible directly or as a guarantor that are satisfied with proceeds of the Property and (y) the aggregate outstanding amount of such Obligations. 4.05 Appointment of Receiver. Upon the occurrence and during the continuance of a Noticed Event of Default, the Mortgagee as a matter of strict right and without notice to the Mortgagor or anyone claiming under the Mortgagor, and without regard to the adequacy or the then value of the Property or the interest of the Mortgagor therein or the solvency of any party bound for payment of the Obligations, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Property, and the Mortgagor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual rights, powers and duties of receivers in like or similar cases and all the rights, powers and duties of the Mortgagee in case of entry as provided in Section 4.02 hereof, including but not limited to the full power to rent, maintain and otherwise operate the Property upon such terms as are approved by the court and shall continue as such and exercise all such powers until the date of confirmation of sale of the Property unless such receivership is sooner terminated. 4.06 Exercise of Rights and Remedies. The entering upon and taking possession of the Property, the collection of any Rents and the exercise of any of the rights contained in this Article IV, shall not, alone, cure or waive any Event of Default or notice of default hereunder or invalidate any act done in response to such Event of Default or pursuant to such notice of default and, notwithstanding the continuance in possession of the Property or the collection, receipt and application of Rents, the Mortgagee shall be entitled to exercise every right provided for herein or in the Credit Documents, the Existing Senior Notes Documents or the Refinancing Senior Notes Documents, or at law or in equity upon the occurrence of any Event of Default. 4.07 Remedies Not Exclusive. The Mortgagee shall be entitled to enforce payment and performance of the Obligations and to exercise all rights and powers under this Mortgage or other agreement or any laws now or hereafter in force, notwithstanding that some or all of the Obligations may now or hereafter be otherwise secured, whether by mortgage, deed of trust, security deed, pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its enforcement, whether by court action or pursuant to the powers herein contained, shall prejudice or in any manner affect the Mortgagee's right to realize upon or enforce any other security now or hereafter held by the Mortgagee, it being agreed that the Mortgagee shall be entitled to enforce this Mortgage and any other security now or hereafter held by the Mortgagee in such order and manner as it may in its absolute and sole discretion and election determine. No remedy herein conferred upon or reserved to the Mortgagee is intended -18- to be exclusive of any other remedy herein or in any of the other Secured Debt Agreements or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy to which the Mortgagee is entitled may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Mortgagee, and the Mortgagee may pursue inconsistent remedies. No delay or omission of the Mortgagee to, exercise any right or power accruing upon any Event of Default shall impair any right or power or shall be construed as a waiver of any Event of Default or any acquiescence therein. If the Mortgagee shall have proceeded to invoke any right or remedy hereunder or under any other Secured Debt Agreement, and shall thereafter elect to discontinue or abandon it for any reason, the Mortgagee shall have the unqualified right to do so and, in such an event, the rights and remedies of the Mortgagee shall continue as if such right or remedy had never been invoked, but no such discontinuance or abandonment shall waive any Event of Default which may then exist or the right of the Mortgagee thereafter to exercise any right or remedy under the Secured Debt Agreements for such Event of Default. 4.08 WAIVER OF REDEMPTION. NOTICE. MARSHALLING, ETC. NOTWITHSTANDING ANYTHING HEREIN CONTAINED TO THE CONTRARY, TO THE EXTENT PERMITTED BY LAW, THE MORTGAGOR ACKNOWLEDGING THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS HEREUNDER; (A) WILL NOT (I) AT ANY TIME INSIST UPON, OR PLEAD, OR IN ANY MANNER WHATSOEVER, CLAIM OR TAKE ANY BENEFIT OR ADVANTAGE OF ANY STAY OR EXTENSION OR MORATORIUM LAW, PRESENT OR FUTURE STATUTE OF LIMITATIONS, ANY LAW RELATING TO THE ADMINISTRATION OF ESTATES OF DECEDENTS, APPRAISEMENT, VALUATION, REDEMPTION, STATUTORY RIGHT OF REDEMPTION, OR THE MATURING OR DECLARING DUE OF THE WHOLE OR ANY PART OF THE OBLIGATIONS, NOTICE OF INTENTION OF SUCH MATURING OR DECLARING DUE, OTHER NOTICE (WHETHER OF DEFAULTS, ADVANCES, THE CREATION, EXISTENCE, EXTENSION OR RENEWAL OF ANY OF THE OBLIGATIONS OR OTHERWISE, EXCEPT FOR RIGHTS TO NOTICES EXPRESSLY GRANTED HEREIN OR IN THE CREDIT DOCUMENTS), SUBROGATION, ANY SET-OFF RIGHTS, HOMESTEAD OR ANY OTHER EXEMPTIONS FROM EXECUTION OR SALE OF THE PROPERTY OR ANY PART THEREOF, WHEREVER ENACTED, NOW OR AT ANY TIME HEREAFTER IN FORCE, WHICH MAY AFFECT THE COVENANTS AND TERMS OF PERFORMANCE OF THIS MORTGAGE, OR (II) CLAIM, TAKE OR INSIST UPON ANY BENEFIT OR ADVANTAGE OR ANY LAW NOW OR HEREAFTER IN FORCE PROVIDING FOR THE VALUATION OR APPRAISAL OF THE PROPERTY OR ANY PART THEREOF, PRIOR TO ANY SALE OR SALES THEREOF WHICH MAY BE MADE PURSUANT TO ANY PROVISION HEREOF, OR PURSUANT TO THE DECREE, JUDGMENT OR ORDER OF ANY COURT OF COMPETENT JURISDICTION; OR (III) AFTER ANY SUCH SALE OR SALES, CLAIM OR EXERCISE ANY RIGHT UNDER ANY STATUTE HERETOFORE OR HEREAFTER ENACTED TO REDEEM THE PROPERTY SO SOLD OR ANY PART THEREOF; AND (B) COVENANTS NOT TO HINDER, DELAY OR IMPEDE THE EXECUTION OF ANY POWER HEREIN GRANTED OR DELEGATED TO THE MORTGAGEE, BUT TO SUFFER AND PERMIT THE EXECUTION OF EVERY POWER AS THOUGH NO SUCH LAW OR LAWS HAD BEEN MADE OR ENACTED. THE MORTGAGOR, FOR ITSELF AND ALL -19- WHO MAY CLAIM UNDER IT, WAIVES, TO THE EXTENT THAT IT LAWFULLY MAY, ALL RIGHT TO HAVE THE PROPERTY MARSHALLED UPON ANY FORECLOSURE HEREOF. 4.09 Expenses of Enforcement. In connection with any action to enforce any remedy of the Mortgagee under this Mortgage, the Mortgagor agrees to pay all costs and expenses which may be paid or incurred by or on behalf of the Mortgagee, including, without limitation, reasonable attorneys' fees, receiver's fees, appraiser's fees, outlays for documentary and expert evidence, stenographer's charges, publication costs, and costs (which may be estimated as to items to be expended after entry of the decree) of procuring all such abstracts of title, title searches and examinations, title insurance policies and similar data and assurances with respect to title and value as the Mortgagee may deem necessary or desirable, and neither the Mortgagee nor any other Person shall be required to accept tender of any portion of the Obligations unless the same be accompanied by a tender of all such expenses, costs and commissions. All of the costs and expenses described in this Section 4.09, and such expenses and fees as may be incurred in the protection of the Property and the maintenance of the Lien of this Mortgage, including the reasonable fees of any attorney employed by the Mortgagee in any litigation or proceeding, including appellate proceedings, affecting this Mortgage or the Property (including, without limitation, the occupancy thereof or any construction work performed thereon), including probate and bankruptcy proceedings, or in preparation for the commencement or defense of any proceeding or threatened suit or proceeding whether or not an action is actually commenced, shall be immediately due and payable by the Mortgagor, with interest thereon at the rate of interest set forth in the Credit Documents and shall be part of the Obligations secured by this Mortgage. ARTICLE V ADDITIONAL COLLATERAL 5.01 Additional Collateral. (a) The Mortgagor acknowledges and agrees that the Obligations are secured by the Property and various other collateral including, without limitation, at the time of execution of this Mortgage certain personal property of the Mortgagor described in the Credit Documents. The Mortgagor specifically acknowledges and agrees that the Property, in and of itself, if foreclosed or realized upon would not be sufficient to satisfy the outstanding amount of the Obligations. Accordingly, the Mortgagor acknowledges that it is in the Mortgagor's contemplation that the other collateral pledged to secure the Obligations may be pursued by the Mortgagee in separate proceedings in the various States, counties and other countries where such collateral may be located and additionally that the Mortgagor liable for payment of the Obligations will remain liable for any deficiency judgments in addition to any amounts the Mortgagee may realize on sales of other property or any other collateral given as security for the Obligations. Specifically, and without limitation of the foregoing, it is agreed that it is the intent of the parties hereto that in the event of a foreclosure of this Mortgage, the Indebtedness evidencing the Obligations shall not be deemed merged into any judgment of foreclosure, but rather shall remain outstanding. It is the further intent and understanding of the parties that the Mortgagee, following a Noticed Event of Default, may pursue all of its collateral -20- with the Obligations remaining outstanding and in full force and effect notwithstanding any judgment of foreclosure or any other judgment which the Mortgagee may obtain. (b) The Mortgagor acknowledges and agrees that the Property and the property which may from time to time be encumbered by the other Credit Documents may be located in more than one State or country and therefore the Mortgagor waives and relinquishes any and all rights it may have, whether at law or equity, to require the Mortgagee to proceed to enforce or exercise any rights, powers and remedies it may have under the Credit Documents in any particular manner, in any particular order, or in any particular State or other jurisdiction. Furthermore, the Mortgagor acknowledges and agrees that the Mortgagee shall be allowed to enforce payment and performance of the Obligations and to exercise all rights and powers provided under this Mortgage, or the other Credit Documents or under any provision of law, by one or more proceedings, whether contemporaneous, consecutive or both in any one or more States in which the security is located. Neither the acceptance of this Mortgage, or any Credit Document nor its enforcement in one State, whether by court action, power of sale, or otherwise, shall prejudice or in any way limit or preclude enforcement of the Credit Documents through one or more additional proceedings, in that State or in any other State or country. (c) The Mortgagor further agrees that any particular remedy or proceeding, including, without limitation, foreclosure through court action (in a state or federal court) or power of sale, may be brought and prosecuted in the local or federal courts of any one or more States as to all or any part of the Property or the property encumbered by the Credit Documents, wherever located, without regard to the fact that any one or more prior or contemporaneous proceedings have been situated elsewhere with respect to the same or any other part of the Property and the property encumbered by the Credit Documents. (d) The Mortgagee may resort to any other security held by the Mortgagee for the payment of the Obligations in such order and manner as the Mortgagee may elect. (e) Notwithstanding anything contained herein to the contrary, the Mortgagee shall be under no duty to the Mortgagor or others, including, without limitation, the holder of any junior, senior or subordinate mortgage on the Property or any part thereof or on any other security held by the Mortgagee, to exercise or exhaust all or any of the rights, powers and remedies available to the Mortgagee. ARTICLE VI MISCELLANEOUS 6.01 Governing Law. The provisions of this Mortgage regarding the creation, perfection and enforcement of the liens, security title and security interests herein granted shall be governed by and construed under the laws of the state in which the Property is located. All other provisions of this Mortgage shall be governed by the laws of the State of New York (including, without limitation, Section 5-1401 of the General Obligations Law of the State of New York), without regard to choice of laws provisions. -21- 6.02 Limitation on Interest. It is the intent of the Mortgagor and the Mortgagee in the execution of this Mortgage and all other instruments evidencing or securing the Obligations to contract in strict compliance with applicable usury laws. In furtherance thereof, the Mortgagee and the Mortgagor stipulate and agree that none of the terms and provisions contained in this Mortgage shall ever be construed to create a contract for the use, forbearance or retention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by relevant law. If this Mortgage or any other instrument evidencing or securing the Obligations violates any applicable usury law, then the interest rate payable in respect of the Loans shall be the highest rate permissible by law. 6.03 Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communications) and mailed, telegraphed, telexed, telecopied, cabled or delivered (including by way of overnight courier): (i) if to the Mortgagor, at; R J. Reynolds Tobacco Company 401 North Main Street, Winston-Salem, North Carolina 27102 (ii) if to the Mortgagee, at: JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Attn.: Raju Nanoo Tel. No.: 212-270-2272 Fax. No.: 212-270-5120 (iii) if to any Lender (other than the Mortgagee), at such address as such Lender shall have specified in the Credit Agreement; (iv) if to any Hedging Creditor, at such address as such Hedging Creditor shall have specified in writing to the Mortgagor and the Mortgagee; (v) if to any Existing Senior Notes Creditor, at such address of the Existing Senior Notes Trustee as the Existing Senior Notes Trustee shall have specified in writing to the Mortgagor and the Mortgagee; (vi) if to any Refinancing Senior Notes Creditor, at such address of the Refinancing Senior Notes Trustee as the Refinancing Senior Notes Trustee shall have specified in writing to the Mortgagor and the Mortgagee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. Except as otherwise expressly provided herein, all such notices and communications shall be deemed to have been duly given or made (i) in the -22- case of any Secured Creditor, when received and (ii) in the case of the Mortgagor, when delivered to the Mortgagor in any manner required or permitted hereunder. 6.04 Captions. The captions or headings at the beginning of each Article and Section hereof are for the convenience of the parties and are not a part of this Mortgage. 6.05 Amendment. None of the terms and conditions of this Mortgage may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Mortgagor and the Mortgagee (with the consent of (x) if prior to the CA Termination Date, the Required Lenders or, to the extent required by Section 12.12 of the Credit Agreement, all of the Lenders and (y) if on and after the CA Termination Date, the holders of at least a majority of the outstanding principal amount of the Obligations remaining outstanding), provided that (i) no such change, waiver, modification or variance shall be made to Section 4.04 hereof or this Section 6.05 without the consent of each Secured Creditor adversely affected thereby and (ii) that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (w) the Lender Creditors as holders of the Credit Document Obligations, (x) the Hedging Creditors as holders of the Hedging Obligations, (y) the Existing Senior Notes Creditors as holders of the Existing Senior Notes Obligations, and (z) the Refinancing Senior Notes Creditors as holders of the Refinancing Senior Notes Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (w) with respect to each of the Credit Document Obligations, the Required Lenders, (x) with respect to the Hedging Obligations, the holders of at least a majority of all Secured Hedging Obligations outstanding from time to time, (y) with respect to the Existing Senior Notes Obligations, the holders of at least a majority of the outstanding principal amount of the Existing Senior Notes, (z) with respect to the Refinancing Senior Notes Obligations, the holders of at least a majority of the outstanding principal amount of the Refinancing Senior Notes. 6.06 Obligations Absolute. The Obligations of the Mortgagor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Mortgagor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Mortgage, any other Credit Document, any Secured Hedging Agreement, any Existing Senior Notes Document or any Refinancing Senior Notes Document; or (c) any amendment to or modification of any Credit Document, any Secured Hedging Agreement, any Existing Senior Notes Document or any Refinancing Senior Notes Document or any security for any of the Obligations; whether or not the Mortgagor shall have notice or knowledge of any of the foregoing. 6.07 Further Assurances. The Mortgagor shall, upon the request of the Mortgagee and at the expense of the Mortgagor: (a) promptly correct any defect, error or omission which may be discovered in the contents of this Mortgage or any UCC financing statements filed in connection herewith; (b) promptly execute, acknowledge, deliver and record or file such further instruments (including, without limitation, further mortgages, deeds to secure debt, security deeds, security agreements, financing statements, continuation statements and -23- assignments of rents or leases) and promptly do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Mortgage and to subject to the liens and security interests hereof any property intended by the terms hereof to be covered hereby, including specifically, but without limitation, any renewals, additions, substitutions, replacements or appurtenances to the Property; and (c) promptly execute, acknowledge, deliver, procure and record or file any document or instrument (including specifically any financing statement) deemed advisable by the Mortgagee to protect, continue or perfect the liens or security interests hereunder against the rights or interests of third persons. 6.08 Partial Invalidity. If any of the provisions of this Mortgage or the application thereof to any person, party or circumstances shall to any extent be invalid or unenforceable, the remainder of this Mortgage, or the application of such provision or provisions to persons, parties or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Mortgage shall be valid and enforceable to the fullest extent permitted by law. 6.09 Partial Releases. No release from the Lien of this Mortgage of any part of the Property by the Mortgagee shall in any way alter, vary or diminish the force or effect of this Mortgage on the balance of the Property or the priority of the Lien of this Mortgage on the balance of the Property. 6.10 Priority. This Mortgage is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby. 6.11 Covenants Running with the Land. All Obligations are intended by the Mortgagor and the Mortgagee to be, and shall be construed as, covenants running with the Property. As used herein, the "Mortgagor" shall refer to the party named in the first paragraph of this Mortgage and to any subsequent owner of all or any portion of the Property. All persons who may have or acquire an interest in the Property shall be deemed to have notice of, and be bound by, the terms of the Credit Agreement and the other Credit Documents; provided, however, that no such party shall be entitled to any rights thereunder without prior written consent of the Mortgagee. 6.12 Successors and Assigns. This Mortgage shall be binding upon and inure to the benefit of the Mortgagee and the Mortgagor and their respective successors and assigns. Except as otherwise permitted by Credit Agreement, the Mortgagor shall not, without the prior written consent of the Mortgagee, assign any rights, duties, or obligations hereunder. 6.13 Purpose of Loans. The Mortgagor hereby represents and agrees that the Loans, Existing Senior Notes and Refinancing Senior Notes are being obtained or issued for business or commercial purposes, and the proceeds thereof will not be used for personal, family, residential, household or agricultural purposes. 6.14 No Joint Venture or Partnership. The relationship created hereunder and under the other Credit Documents, the Secured Hedging Agreements, the Existing Senior Notes Documents and the Refinancing Senior Notes Documents is that of creditor/debtor. The -24- Mortgagee does not owe any fiduciary or special obligation to the Mortgagor and/or any of the Mortgagor's, officers, partners, agents, or representatives. Nothing herein or in any other Credit Document, any Secured Hedging Agreement, any Existing Senior Notes Document or any Refinancing Senior Notes Document is intended to create a joint venture, partnership, tenancy-in-common or joint tenancy relationship between the Mortgagor and the Mortgagee. 6.15 The Mortgagee as Collateral Agent for Secured Creditors. It is expressly understood and agreed that the rights and obligations of the Mortgagee as holder of this Mortgage and as Collateral Agent for the Secured Creditors and otherwise under this Mortgage are only those expressly set forth in this Mortgage and in the Credit Agreement. The Mortgagee shall act hereunder pursuant to the terms and conditions set forth herein and in Annex M to the Security Agreement, the terms of which shall be deemed incorporated herein by reference as fully as if same were set forth herein in their entirety (for such purpose, treating each reference to the "Security Agreement" as a reference to this Agreement, each reference to the "Collateral Agent" as a reference to the Mortgagee and each reference to an "Assignor" as a reference to a "Mortgagor"). 6.16 Full Recourse. This Mortgage is made with full recourse to the Mortgagor (including as to all assets of the Mortgagor, including the Property and the Secured Property). 6.17 Reduction of Secured Amount. In the event the amount secured by this Mortgage is less than the aggregate Obligations, then the amount secured hereby shall be reduced only by the last and final sums that the Mortgagor or the Borrower repays with respect to the Obligations and shall not be reduced by any intervening repayments of the Obligations. So long as the balance of the Obligations exceeds the amount secured hereby, any payments of the Obligations shall not be deemed to be applied against, or to reduce, the portion of the Obligations secured by this Mortgage. Such payments shall instead be deemed to reduce only such portions of the Obligations as are secured by other collateral located outside of the state in which the Property is located or are unsecured. 6.18 Acknowledgment of Receipt. The Mortgagor hereby acknowledges receipt of a true copy of this Mortgage. 6.19 Release Payment. (a) After the Termination Date (as defined below), this Mortgage shall terminate (provided that all indemnities set forth herein shall survive any such termination) and the Mortgagee, at the request and expense of the Mortgagor, will execute and deliver to the Mortgagor a proper instrument or instruments acknowledging the satisfaction and termination of this Mortgage. As used in this Mortgage, (i) "CA Termination Date" shall mean the date upon which the Total Commitment has been terminated, no Letter of Credit or Note under the Credit Agreement is outstanding and all other Credit Document Obligations have been paid in full in cash (other than arising from indemnities for which no request for payment has been made) and (ii) "Termination Date" shall mean the date upon which (x) the CA Termination Date shall have occurred and (y) if (but only if) a Notified Non-Credit Agreement Event of Default (as defined below) shall have occurred and be continuing on the CA Termination Date (and after giving effect thereto), either (I) such Notified Non-Credit Agreement Event of Default shall have been cured or waived by the requisite holders of the relevant Obligations subject to such Notified Non-Credit Agreement Event of Default or (II) all Secured Hedging Agreements -25- (if any) giving rise to a Notified Non-Credit Agreement Event of Default shall have been terminated and all Obligations subject to such Notified Non-Credit Agreement Event of Default shall have been paid in full (other than arising from indemnities for which no request for payment has been made). As used herein "Notified Non-Credit Agreement Event of Default" means (i) the acceleration of the maturity of any Existing Senior Notes or Refinancing Senior Notes or the failure to pay at maturity any Existing Senior Notes or Refinancing Senior Notes, or the occurrence of any bankruptcy or insolvency Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, or (ii) any Event of Default under a Secured Hedging Agreement, in the case of any event described in clause (i) or (ii) to the extent the Existing Senior Notes Trustee, the Refinancing Senior Notes Trustee or the relevant Hedging Creditor, as the case may be, has given written notice to the Mortgagee that a "Notified Non-Credit Agreement Event of Default" exists; provided that such written notice may only be given if such Event of Default is continuing and, provided further, that any such Notified Non-Credit Agreement Event of Default shall cease to exist (I) once there is no longer any Event of Default under the Existing Senior Notes Indenture, the Refinancing Senior Notes Indenture or the respective Secured Hedging Agreement, as the case may be, in existence, (II) in the case of an Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, after all Existing Senior Notes Obligations or Refinancing Senior Notes Obligations, as the case may be, have been repaid in full, (III) in the case of an Event of Default under a Secured Hedging Agreement, such Secured Hedging Agreement has been terminated and all Hedging Obligations thereunder repaid in full, (IV) in the case of an Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, if the Existing Senior Notes Creditors or the Refinancing Senior Notes Creditors, as the case may be, holding at least a majority of the aggregate principal amount of the outstanding Existing Senior Notes or the Refinancing Senior Notes, as the case may be, at such time have rescinded such written notice and (V) in the case of an Event of Default under a Secured Hedging Agreement, the requisite Hedging Creditors with Hedging Obligations thereunder at such time have rescinded such written notice. (b) So long as no Notified Non-Credit Agreement Event of Default has occurred and is continuing, in the event that (x) prior to the CA Termination Date, (i) any part of the Property is sold or otherwise disposed of in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement (it being agreed for such purposes that a release will be deemed "permitted by Section 8.02 of the Credit Agreement" if the proposed transaction is not prohibited by the Credit Agreement) or (ii) all or any part of the Property is otherwise released at the direction of the Required Lenders (or all the Lenders if required by Section 12.12 of the Credit Agreement), and the proceeds of such sale or disposition or from such release are applied in accordance with the terms of the Credit Agreement to the extent required to be so applied (it being understood and agreed by the Mortgagor and the Mortgagee that so long as no Noticed Event of Default has occurred and is continuing, the Mortgagor may use such proceeds as the Mortgagor may reasonably determine) or (y) on and after the CA Termination Date, any part of the Property is sold or otherwise disposed of without violating the Existing Senior Notes Documents, the Refinancing Senior Notes Documents and the Secured Hedging Agreements, the Mortgagee, at the request and expense of the Mortgagor, will release such Property from this Mortgage in the manner provided in clause (a) above (it being understood and agreed that upon the release of all or any portion of the Property by the Mortgagee at the direction of the Lenders as provided above, the Lien on the Property in favor of -26- the Hedging Creditors, the Existing Senior Notes Creditors and the Refinancing Senior Notes Creditors shall automatically be released). (c) In addition to the foregoing, all Property shall be automatically released (subject to reinstatement upon the occurrence of a new Trigger Event) in accordance with the provisions of the last sentence of Section 7.10(b) of the Credit Agreement. (d) At any time that the Mortgagor desires that the Mortgagee take any action to give effect to any release of Property pursuant to the foregoing Section 6.19(a), (b) or (c), it shall deliver to the Mortgagee a certificate signed by an authorized officer describing the Property to be released and certifying its entitlement to a release pursuant to the applicable provisions of Sections 6.19(a), (b) or (c) and in such case the Mortgagee, at the request and expense of the Mortgagor, will execute such documents (without recourse and without any representation or warranty) as required to duly release such Property. The Mortgagee shall have no liability whatsoever to any Secured Creditor as the result of any release of Property by it as permitted by (or which the Mortgagee in good faith believes to be permitted by) this Section 6.19. Upon any release of Property pursuant to Section 6.19(a), (b) or (c), so long as no Noticed Event of Default is then in existence, none of the Secured Creditors shall have any continuing right or interest in such Property, or the proceeds thereof (subject to reinstatement rights upon the occurrence of a new Trigger Event in the case of a release pursuant to Section 6.19(c)(i)). 6.20 Time of the Essence. Time is of the essence of this Mortgage. 6.21 The Mortgagee's Powers. Without affecting the liability of any other Person liable for the payment and performance of the Obligations and without affecting the Lien of this Mortgage in any way, the Mortgagee (acting at the direction of the requisite holders of the relevant Obligations affected thereby) may, from time to time, regardless of consideration and without notice to or consent by the holder of any subordinate Lien, right, title or interest in or to the Property, (a) release any Persons liable for the Obligations, (b) extend the maturity of, increase or otherwise alter any of the terms of the Obligations, (c) modify the interest rate payable on the principal balance of the Obligations, (d) release or reconvey, or cause to be released or reconveyed, all or any portion of the Property, or (e) take or release any other or additional security for the Obligations. 6.22 Rules of Usage. The following rules of usage shall apply to this Mortgage unless otherwise required by the context: (a) Singular words shall connote the plural as well as the singular, and vice versa, as may be appropriate. (b) The words "herein", "hereof and "hereunder" and words of similar import appearing in each such document shall be construed to refer to such document as a whole and not to any particular section, paragraph or other subpart thereof unless expressly so stated. (c) References to any Person shall include such Person and its successors and permitted assigns. -27- (d) Each of the parties hereto and their counsel have reviewed and revised, or requested revisions to, such documents, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construction and interpretation of such documents and any amendments or exhibits thereto. (e) Unless an express provision requires otherwise, each reference to "the Property" shall be deemed a reference to "the Property or any part thereof", and each reference to "Secured Property" shall be deemed a reference to "the Secured Property or any part thereof". 6.23 No Off-Set. All sums payable by the Mortgagor shall be paid without counterclaim, other compulsory counterclaims, set-off, or deduction and without abatement, suspension, deferment, diminution or reduction, and the Obligations shall in no way be released, discharged or otherwise affected (except as expressly provided herein or in the Credit Agreement) by reason of: (i) any damage or any condemnation of the Property or any part thereof; (ii) any title defect or encumbrance or any eviction from the Property or any part thereof by title paramount or otherwise; or (iii) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Mortgagee or the Mortgagor, or any action taken with respect to this Mortgage by any agent or receiver of the Mortgagee. The Mortgagor waives, to the extent permitted by law, all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any of the Obligations. 6.24 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial. (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS MORTGAGE OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE MORTGAGOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE MORTGAGOR HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS PRENTICE-HALL CORPORATION SYSTEM, INC., WITH OFFICES ON THE DATE HEREOF AT 80 STATE STREET, ALBANY, NEW YORK 12207-2543 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, THE MORTGAGOR SHALL DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN THE STATE OF NEW YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THIS MORTGAGE. THE MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE -28- PREPAID, TO THE MORTGAGOR AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 6.03 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT UNDER THE CREDIT AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION INCLUDING, BUT NOT LIMITED TO THE JURISDICTION WHERE THE PROPERTY IS LOCATED WITH RESPECT TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIEN AND SECURITY INTEREST GRANTED BY THIS MORTGAGE. (b) THE MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS MORTGAGE OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS MORTGAGE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS MORTGAGE, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 6.25 Future Advances. This Mortgage is given to secure the Mortgagor's obligations under, or in respect of, the Credit Documents, the Existing Senior Notes Documents and the Refinancing Senior Notes Documents to which the Mortgagor is "party" and shall secure not only obligations with respect to presently existing indebtedness under the foregoing documents and agreements but also any and all other indebtedness now owing or which may hereafter be owing by the Mortgagor or the Borrower, as the case may be, to the Secured Creditors, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and re-advances, pursuant to the Credit Agreement, whether such advances are obligatory or to be made at the option of the Lenders, or otherwise, to the same extent as if such future advances were made on the date of the execution of this Mortgage. The lien of this Mortgage shall be valid as to all indebtedness secured hereby, including future advances, from the time of its filing for record in the recorder's office of the county in which the Property is located. This Mortgage is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting -29- solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby, and Permitted Encumbrances. Although this Mortgage is given wholly or partly to secure all future obligations which may be incurred hereunder and under the other Secured Debt Agreements, whether obligatory or optional, the Mortgagor and the Mortgagee hereby acknowledge and agree that the Mortgagee and the other Secured Creditors are obligated by the terms of the Secured Debt Agreements to make certain future advances, including advances of a revolving nature, subject to the fulfillment of the relevant conditions set forth in the Secured Debt Agreements. -30- The laws of South Carolina provide that in any real estate foreclosure proceeding a defendant against whom a personal judgment may be taken or asked may within thirty days after the sale of the mortgaged property apply to the court for an order of appraisal. The statutory appraisal value as approved by the court would be substituted for the high bid and may decrease the amount of any deficiency owing in connection with the transaction. THE UNDERSIGNED HEREBY WAIVES AND RELINQUISHES THE STATUTORY APPRAISAL RIGHTS WHICH MEANS THE HIGH BID AT THE JUDICIAL FORECLOSURE SALE WILL BE APPLIED TO THE DEBT REGARDLESS OF ANY APPRAISED VALUE OF THE PROPERTY. IN WITNESS WHEREOF, this Mortgage, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing has been duly executed by the Mortgagor as of the date first written above. Signed, sealed, and delivered in R. J. REYNOLDS TOBACCO COMPANY, presence of North Carolina corporation /s/ Mr. Dara Folan -------------------- Mr. Dara Folan, III By: /s/ Lynn L. Lane ------------------- /s/ Alexandre Brodbeck Its: SVP and Treasurer ----------------------- Alexandre Brodbeck -31- STATE OF NEW YORK ) ) ACKNOWLEDGMENT COUNTY OF NEW YORK ) I, Jonathan J. Katz a Notary Public in and for the County and State aforesaid, certify that Lynn L. Lane, the Senior Vice President and Treasurer of R. J. Reynolds Tobacco Company, a North Carolina corporation, the Mortgagor, personally appeared before me this day and acknowledged the execution of the foregoing instrument by her on behalf of the Mortgagor. WITNESS my hand and official stamp or seal this 30th day of July, 2004. /s/ JONATHAN J KATZ -------------------------------- Notary Public for New York My Commission Expires: 8/11/2007 Jonathan J. Katz Notary Public, State of New York Commission # 0 1 KA6096856 Qualified In New York County Commission Expires August 11, 2007 -32- EXHIBIT A DESCRIPTION OF LAND ALL that piece, parcel or tract of land with improvements thereon lying, situate and being in the County of Cherokee, State of South Carolina, shown and designated as Tracts No. 1, 2, 3, 4, 5, 6, 7, 8 and 10 on plat of property of Daniel Construction Company prepared by Davis and Floyd Engrs., Inc., dated 27 September, 1962, recorded in the office of the Clerk of Court for Cherokee County in Book 4X at page 244, and being more particularly described with reference to said plat as follows: BEGINNING at the northwestern corner of said tract at a point on the southeasterly side of Frontage Road of Interstate Highway 85 and running thence along the southeasterly side of said Frontage Road, N. 54-02 E. 784.81 feet to a point; thence N. 54-02 E. 291.70 feet to a concrete monument; thence N. 54-12 E. 437.50 feet to a point; thence N. 54-12 E. 242.26 feet to a point; thence N. 54-12 E. 18.70 feet to a concrete monument; thence N. 48-07 E. 49.52 feet to a point; thence N. 48-07 E. 47.10 feet to a concrete monument; thence N. 54-10 E. 602.86 feet to a concrete monument; thence S. 37-00 E. 10.21 feet to a concrete monument; thence N. 54-29 E. 408.05 feet to a concrete monument; thence along said Frontage Road in a curve the following courses and distances, to-wit: N. 61-47 E. 100.00 feet; N. 84-31 E. 100.00 feet; S. 81-14 E. 100.00 feet; and S. 78-54 E. 236.85 feet to a point; thence continuing along said road, S. 78-54 E. 22.20 feet to a concrete monument; thence N. 78-50 E. 61-58 feet to a point; thence turning and running S. 58-44 E. 73.75 feet to a point on the westerly side of South Carolina Highway 99; thence along the westerly side of said highway, S. 16-16 E. 553.84 feet to a point; thence S. 15-38 E. 135.50 feet to a point; thence S. 15-38 E. 31.71 feet to a point; thence S.13-42 E. 117.21 feet to a point; thence S. 12-37 E. 125.75 feet to a point at the intersection of said South Carolina Highway 99 and property of the Southern Railway System; thence turning and running along the northwesterly side of said railway property, S. 41-55 W. 275.02 feet to a point; thence S. 41-55 W. 400.21 feet to a point; thence S. 41-39 W. 166.49 feet to a point; thence S. 41-39 W. 288.64 feet to a point; thence continuing along a curve in said railway property, the chords of which are as follows: S. 34-25 W. 235.69 feet; S. 27-46 W. 300.00 feet; S. 16-55 W. 425.71 feet to a point; thence S. 4-56 W. 17.39 feet to a point; thence S. 4-56 W. 116.09 feet to a point; thence turning and running S. 26-25 W. 493.00 feet to a point; thence turning and running S. 72-42 W. 538.43 feet to a point; thence N. 40-34 W. 1642.78 feet to a point; thence N. 56-09 W. 298.90 feet to a point; thence N. 15-51 E. 115.50 feet to a point; thence N. 21-10 W. 209.01 feet to the beginning corner, containing 133.26 acres, more or less. ALSO, ALL that piece, parcel or tract of land with improvements thereon lying, situate and being in the County of Cherokee, State of South Carolina, shown and designated as Tract No. 9 on plat above referred to, less two portions of said tract heretofore conveyed by the grantor herein to Arail A. Thomas and Horace W. Burgess, which portions conveyed out are shown and designated as Tracts A and C, and the remaining portion conveyed herein is shown and designated as Tract B on separate plat of property of Daniel Construction Company prepared by Davis and Floyd Engrs., Inc., dated 29 September 1962, recorded in the office of the Clerk of Court for Cherokee County in Book 4X at page 261, and being more particularly described with reference to said latter plat as follows: BEGINNING at an iron pin on the easterly side of the South Carolina Highway 99, joint front corner of Tracts C and B, and running thence along the easterly side of said highway, N. 16-18 W. 284.00 feet to an iron pin, joint front corner of Tracts A and B; thence along the common line of said tracts, N. 73-42 E. 478.24 feet to iron pin in property line of Frank and Edwina D. Neal; thence S. 19-34 E. 284.44 feet to an iron pin joint rear corner of Tracts B and C; thence along the common line of said tracts, S. 73-42 W. 494.45 feet to an iron pin, the point of beginning, containing 3.17 acres, more or less. TOGETHER with all the right, title and interest of the grantor in and to the following properties: that property lying between the center line of Interstate Highway 85 and the northwesterly boundary of property hereinabove described; also that property lying between the center line of the Southern Railway System and the southeasterly boundary of property herein-above described; and also that property lying within the right of way of South Carolina Highway 99 adjoining Tracts 7 and 8 on the east and Tract 9 on the west, less the right, title and interest to portions of same granted to Arail A. Thomas and Horace W. Burgess in deeds above referred to. Continued EXHIBIT "A" CONTINUED TOGETHER with all right, title and interest in and to that certain lease of water rights, and all other rights leased therein, executed by Arail A. Thomas to C. C. Moorhead, Jr., dated March 27, 1961, recorded in the office of the Clerk of Court for Cherokee County in Volume 4X at page 174 and later assigned by deed of Columbus C. and Margaret O. Moorhead, Jr. dated September 28, 1962, and recorded in Volume 5N at page 101. This being the same property conveyed to the Brown & Williamson U.S.A., Inc. by deed of Brown & Williamson Tobacco Corporation recorded on___________________________, 2004 in the Office of the Register of Deeds for Cherokee County in Deed Book____________at Page________. Brown & Williamson USA, Inc., by merger and name change, is now known as R. J. Reynolds Tobacco Company, the Mortgagor herein. Tax Map Number 191-00-00-027.00 SCHEDULE 1 CREDIT AGREEMENT LOANS The Credit Document Obligations secured by this Mortgage are evidenced by the Credit Agreement (including the Mortgagor's obligations under the Subsidiary Guaranty), which provides that the Mortgagor is obligated for the payment and performance of, without limitation, the following: (i) Revolving Loans in the original aggregate principal amount of up to $486,250,000 and having final maturity dates no later than February 13, 2006 (or, if the Existing Senior Notes due on May 15, 2006 have been refinanced in full with the proceeds of a new issuance or issuances of Refinancing Senior Notes in an aggregate principal amount equal to at least the aggregate principal amount of such Existing Senior Notes so refinanced on or prior to February 13, 2006, January 30, 2007), as such date may be extended for such Lender pursuant to Section 1.13 of the Credit Agreement (the "Revolving Loan Maturity Date"); (ii) Swingline Loans in the original aggregate principal amount of up to $60,000,000, and having a final maturity date no later than five business days prior to the Revolving Loan Maturity Date. The Parent and/or one or more of its Subsidiaries may enter into Interest Rate Protection Agreements and Other Hedging Agreements (together with the Existing Interest Rate Swap Agreement), and the Borrower may also request Letters of Credit in accordance Section 2 of the Credit Agreement. ii EX-10.11 18 g90345exv10w11.txt EX-10.11 EXHIBIT 10.11 This Deed to Secure Debt was prepared by, This document is intended and when recorded should be returned to: to be recorded in Bibb County, GEORGIA Jeffrey J. Temple, Esq. White & Case LLP 1155 Avenue of the Americas New York, New York 10036 (212) 819-8729 1107993-0083 DEED TO SECURE DEBT, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES, RENTS AND PROFITS made by R. J. REYNOLDS TOBACCO COMPANY, as the Grantor, to JPMorgan Chase Bank, as Administrative Agent and Collateral Agent for Various Lending Institutions, as the Grantee NOTE TO CLERK: NO INTANGIBLE RECORDING TAX IS DUE. THIS DEED TO SECURE DEBT, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES, RENTS AND PROFITS SECURES A GUARANTY. DEED TO SECURE DEBT, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES, RENTS AND PROFITS THIS DEED TO SECURE DEBT, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES, RENTS AND PROFITS, dated as of July 30, 2004 (as amended, modified or supplemented from time to time, this "Deed to Secure Debt") made by R. J. Reynolds Tobacco Company, a North Carolina Corporation (the "Grantor"), having an address at 401 North Main Street, Winston-Salem, North Carolina 27102 as the Grantor to JPMorgan Chase Bank, (together with any successor grantee, the "Grantee"), having an address at 270 Park Avenue, New York, NY 10017, as Administrative Agent and Collateral Agent for the benefit of the Secured Creditors (as defined below). All capitalized terms used but not otherwise defined herein shall have the same meanings ascribed to such terms in the Credit Agreement described below. W I T N E S S E T H: WHEREAS, Reynolds American Inc. (the "Parent"), R.J. Reynolds Tobacco Holdings, Inc. (the "Borrower"), the various lending institutions from time to time party thereto (the "Lenders") and the Grantee, as Administrative Agent, have entered into a Credit Agreement, dated as of May 7, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002, and further amended and restated as of July 30, 2004, providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, in the aggregate principal amount of up to $486,250,000, as more particularly described in Schedule 1 attached hereto and made a part hereof, all as contemplated therein (with the Lenders, each Letter of Credit Issuer, the Administrative Agent, the Senior Managing Agents, and the Collateral Agent being herein collectively called the "Lender Creditors")(as the same may be further amended, modified, extended, renewed, replaced, restated, supplemented and/or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lender or holders, the "Credit Agreement": provided that, with respect to any agreement providing for the refinancing or replacement of indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (x) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the tune of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Lenders shall have consented in writing to the refinancing or replacement indebtedness being treated as indebtedness pursuant to the Credit Agreement, and (y) a notice to the effect that the refinancing or replacement indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Borrower to the Collateral Agent); WHEREAS, the Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafter defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender or any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement) and in each case their subsequent successors and assigns collectively, the "Hedging Creditors", and together with the Lender Creditors, the "Lender Secured Creditors"); WHEREAS, the Borrower and the trustee thereunder (the "Existing Senior Notes Trustee"), on behalf of the holders of the Existing Senior Notes (such holders, together with the Existing Senior Notes Trustee, the "Existing Senior Notes Creditors"), have from time to time entered into, and may in the future from time to time enter into, one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Existing Senior Notes Indenture" and, together with the Existing Senior Notes, the "Existing Senior Notes Documents") providing for the issuance of Existing Senior Notes by the Borrower in the original principal amount of $700,000,000; WHEREAS, the Borrower and the trustee or trustees thereunder (collectively, the "Refinancing Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes (such holders, together with the Refinancing Senior Notes Trustee, the "Refinancing Senior Notes Creditors", and together with the Lender Secured Creditors and the Existing Senior Notes Creditors, the "Secured Creditors"), may from time to time enter into one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Refinancing Senior Notes Indenture" and, together with the Refinancing Senior Notes, the "Refinancing Senior Notes Documents") providing for the issuance of Refinancing Senior Notes by the Borrower, in the original principal amount of $750,000,000; WHEREAS, pursuant to the Subsidiary Guaranty, the Grantor has (together with the other Subsidiaries of the Borrower party thereto) jointly and severally guaranteed to the Lender Secured Creditors the payment when due of the Guaranteed Obligations (as and to the extent defined in the Subsidiary Guaranty); WHEREAS, the Grantor has guaranteed to the Existing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Existing Senior Notes; WHEREAS, the Grantor has guaranteed to the Refinancing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Refinancing Senior Notes; WHEREAS, the Grantor is owner of the fee simple title to the Property (as hereinafter defined), subject to Permitted Liens; -2- WHEREAS, the Credit Agreement requires this Deed to Secure Debt be executed and delivered to the Grantee by the Grantor and the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture, require that this Deed to Secure Debt secure the respective Obligations as provided herein; and WHEREAS, the Grantor desires to enter into this Deed to Secure Debt to satisfy the condition in the preceding paragraph and to secure (and this Deed to Secure Debt shall secure) the following: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Grantor, now existing or hereafter incurred under, arising out of or in connection with any Credit Document to which the Grantor is a party (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)) and the due performance of and compliance by the Grantor with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or liabilities with respect to Secured Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Grantor, now existing or hereafter incurred under, arising out of or in connection with any Secured Hedging Agreement (including, all obligations, if any, of the Grantor under the Subsidiary Guaranty in respect of Secured Hedging Agreements), and all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding and the due performance and compliance by the Grantor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities under this clause (ii) being herein collectively called the "Hedging Obligations"); (iii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Grantor owing to the Existing Senior Notes Creditors (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)), now existing or hereafter -3- incurred under, arising out of or in connection with any Existing Senior Notes Document, including, all obligations, if any, of the Grantor under any guaranty in respect of the Existing Senior Notes and the due performance and compliance by the Grantor with the terms of each such Existing Senior Notes Document (all such obligations and liabilities under this clause (iii) being herein collectively called the "Existing Senior Notes Obligations"); (iv) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Grantor owing to the Refinancing Senior Notes Creditors (including, without limitation, indemnities, fees and interest (including all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)), now existing or hereafter incurred under, arising out of or in connection with any Refinancing Senior Notes Document, including, all obligations, if any, of the Grantor under a guaranty in respect of the Refinancing Senior Notes and the due performance and compliance by the Grantor with the terms of each such Refinancing Senior Notes Document (all such obligations and liabilities under this clause (iv) being herein collectively called the "Refinancing Senior Notes Obligations"); (v) any and all sums advanced by the Grantee in order to preserve or protect its lien and security interest in the Property; (vi) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Grantor and/or the Borrower referred to above after an Event of Default (as hereinafter defined) shall have occurred and be continuing, all expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Property, or of any exercise by the Grantee of its rights hereunder, together with reasonable attorneys' fees and disbursements (as set forth in Section 4.09 hereof) and court costs; (vii) any and all other indebtedness now owing or which may hereafter be owing by the Grantor to the Grantee, however and whenever incurred or evidenced, whether express or implied, direct or indirect, absolute or contingent, or due or to become due; and (viii) any and all renewals, extensions and modifications of any of the obligations and liabilities referred to in clauses (i) through (vii) above; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (viii) above being herein collectively called the "Obligations", provided that notwithstanding the foregoing, (i) the Existing Senior Notes Obligations shall be excluded from the Obligations to the extent the Existing Senior Notes Documents do not require the Existing Senior Notes Obligations to be secured pursuant to this Deed to Secure Debt, and (ii) the Refinancing Senior Notes Obligations -4- shall be excluded from the Obligations to the extent the Refinancing Senior Notes Documents do not require the Refinancing Senior Notes Obligations to be secured pursuant to this Deed to Secure Debt. NOW, THEREFORE, as security for the Obligations and in consideration of the sum of ten dollars ($10.00) and the other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, THE GRANTOR HEREBY MORTGAGES, GIVES, GRANTS, BARGAINS, SELLS, ASSIGNS, TRANSFERS, CONVEYS AND CONFIRMS TO THE GRANTEE AND ITS SUCCESSORS AND ASSIGNS FOREVER FOR THE BENEFIT OF THE SECURED CREDITORS, TOGETHER WITH POWER OF SALE (subject to applicable law) all of the Grantor's estate, right, title and interest, whether now owned or hereafter acquired, whether as lessor or lessee and whether vested or contingent, in and to all of the following: A. The land described in Exhibit A hereto, together with all rights, privileges, franchises and powers related thereto which are appurtenant to said land or its ownership, including all minerals, oil and gas and other hydrocarbon substances thereon or therein; waters, water courses, water stock, water rights (whether riparian, appropriative, or otherwise, and whether or not appurtenant), sewer rights, shrubs, crops, trees, timber and other emblements now or hereafter on, under or above the same or any part or parcel thereof (the "Land"); B. All buildings, structures, tenant improvements and other improvements of every kind and description now or hereafter located in or on the Land, including, but not limited to all machine shops, structures, improvements, rail spurs, dams, reservoirs, water, sanitary and storm sewers, drainage, electricity, steam, gas, telephone and other utility facilities, parking areas, roads, driveways, walks and other site improvements of every kind and description now or hereafter erected or placed on the Land; and all additions and betterments thereto and all renewals, alterations, substitutions and replacements thereof (collectively, the "Improvements"); C. All fixtures, attachments, appliances, equipment, machinery, building materials and supplies, and other tangible personal property, now or hereafter attached to said Improvements or now or at any time hereafter located on the Land and/or Improvements including, but not limited to, artwork, decorations, draperies, furnaces, boilers, oil burners, piping, plumbing, refrigeration, air conditioning, lighting, ventilation, disposal and sprinkler systems, elevators, motors, dynamos and all other equipment and machinery, appliances, fittings and fixtures of every kind located in or used in the operation of the Improvements, together with any and all replacements or substitutions thereof and additions thereto, including the proceeds of any sale or transfer of the foregoing (hereinafter sometimes collectively referred to as the "Equipment"); D. All surface rights, appurtenant rights and easements, rights of way, and other rights appurtenant to the use and enjoyment of or used in connection with the Land and/or the Improvements; E. All streets, roads and public places (whether open or proposed) now or hereafter adjoining or otherwise providing access to the Land, the land lying in the bed of such -5- streets, roads and public places, and all other sidewalks, alleys, ways, passages, vaults, water courses, strips and gores of land now or hereafter adjoining or used or intended to be used in connection with all or any part of the Land and/or the Improvements; F. Any leases, lease guaranties and any other agreements, relating to the use and occupancy of the Land and/or the Improvements or any portion thereof, including but not limited to any use or occupancy arrangements created pursuant to Section 365(h) of he Bankruptcy Code or otherwise in connection with the commencement or continuance of any bankruptcy, reorganization, arrangement, insolvency, dissolution, receivership or similar proceedings, or any assignment for the benefit of creditors, in respect of any tenant or occupant of any portion of the Land and/or the Improvements (collectively. "Leases"); G. All revenues, rents, receipts, income, accounts receivable, issues and profits of the Property (collectively, "Rents"); H. To the extent assignable, all permits, licenses and rights relating to the use, occupation and operation of the Land and the Improvements, any business conducted thereon or therein and any part thereof; I. All real estate tax refunds payable to the Grantor with respect to the Land and/or the Improvements, and refunds, credits or reimbursements payable with respect to bonds, escrow accounts or other sums payable in connection with the use, development, or ownership of the Land or Improvements; J. Any claims or demands with respect to any proceeds of insurance in effect with respect to the Land and/or the Improvements, including interest thereon, which the Grantor now has or may hereafter acquire and any and all awards made for the taking by eminent domain, condemnation or by any proceedings, transfer or purchase in lieu or in anticipation of the exercise of said rights, or for a change of grade, or for any other injury to or decrease in the value of the whole or any part of the Property; K. Any zoning lot agreements and air rights and development rights which may be vested in the Grantor together with any additional air rights or development rights which have been or may hereafter be conveyed to or become vested in the Grantor; and L. All proceeds and products of the conversion, voluntary or involuntary, including, without limitation, those from sale, exchange, transfer, collection, loss, damage, disposition, substitution or replacement of any of the foregoing; whether into cash, liquidated claims or otherwise. SAVE AND EXCEPT, HOWEVER, for so long as those certain Macon-Bibb Industrial Authority Taxable Industrial Development Revenue Bonds (Brown & Williamson Tobacco Corporation Project), series 1993A in the aggregate principal amount of $25,000,000, dated as of March 1, 1993 remain outstanding, the rights of Grantor under and pursuant to that certain Lease Agreement between Macon-Bibb Industrial Authority and Brown & Williamson Tobacco Corporation (predecessor in interest to the Grantor), dated as of March 1, 1993 (Series 1993A), recorded in the Clerk's Office, Superior Court of Bibb County, Georgia on May 27, 1993 in Book 2310 at Page 1. -6- All of the foregoing estates, right, properties and interests hereby conveyed to the Grantee may be referred to herein as the "Property". Notwithstanding the foregoing, the Property that secures the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations shall be limited to Property consisting of any shares of stock, indebtedness or other obligations of a Subsidiary of Parent or any Principal Property (as defined in the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture (in each case as in effect on the date hereof)) of the Grantor (the "Designated Trust Property"), all of which Collateral shall also ratably secure all other Obligations, and the Trust Property Proceeds (as defined in Section 4.04(a)) that are to be applied to the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations shall be limited to Trust Property Proceeds resulting from the sale of, and Rents and other amounts generated by the holding, leasing, management, operation or other use pursuant to this Deed to Secure Debt of, the Designated Trust Property, with such Trust Property Proceeds to also be applied ratably to all other Obligations. TO HAVE AND TO HOLD the above granted and described Property unto the Grantee and to its successors and assigns forever, in fee simple, and the Grantor hereby covenants and agrees on behalf of itself and its successors and assigns to warrant and defend the Property unto the Grantee, its successors and assigns against the claim or claims of all persons and parties whatsoever. PROVIDED, HOWEVER, that if Obligations shall have been paid in cash at the time and in the manner stipulated therein and all other sums payable hereunder and all other indebtedness secured hereby shall have been paid and all other covenants contained in the Credit Documents shall have been performed, then, in such case the Grantee shall, subject to the provisions of Section 6.19 of this Deed to Secure Debt, at the request and expense of the Grantor, satisfy this Deed to Secure Debt (without recourse and without any representation or warranty) and the estate, right, title and interest of the Grantee in the Property shall cease, and upon payment to the Grantee of all reasonable costs and expenses incurred for the preparation of the release hereinafter referenced and all recording costs if allowed by law, the Grantee shall cancel and surrender the estate and interest created by this Deed to Secure Debt. ARTICLE I REPRESENTATIONS, WARRANTIES, COVENANTS 1.01 Title to this Property. The Grantor represents and warrants: (a) it has good and marketable fee title to the Property, free and clear of any liens and encumbrances, other than Liens permitted under Section 8.03 of the Credit Agreement and any other easements, rights and claims of record (collectively "Permitted Liens"), and is lawfully seized and possessed of the Property; (b) this Deed to Secure Debt is a valid first priority security interest and security title upon the Property subject to the Permitted Liens; (c) it has full power and authority to encumber the Property in the manner set forth herein; and (d) there are no defenses or offsets to this Deed to Secure Debt or to the Obligations which it secures. The Grantor shall preserve such title and the validity and priority of this Deed to Secure Debt and shall forever warrant and defend the same to the Grantee and the Grantee's successors and assigns against the claims of all persons and parties whatsoever. The Grantor shall take no action nor shall it fail to take any action which -7- could result in an impairment of the security interest of this Deed to Secure Debt or which could form the basis for any Person(s) to claim an interest in the Property (including, without limitation, any claim for adverse use or possession or any implied dedication or easement by prescription other than leases permitted under the Credit Agreement). If any Lien (other than Permitted Liens) is asserted against the Property, the Grantor shall promptly, at its expense: (a) provide the Grantee with written notice of such Lien, including information relating to the amount of the Lien asserted; and (b) pay the Lien in full or take such other action to cause the Lien to be released, or, so long as the security interest of this Deed to Secure Debt is not compromised, contest the same pursuant to the provisions of the Credit Agreement. From and after the occurrence of an Event of Default, the Grantee may, but shall not be obligated, to pay any such asserted Lien if not timely paid by the Grantor. 1.02 Compliance with Law. The Grantor represents and warrants that it possesses all material certificates, licenses, authorizations, registrations, permits and/or approvals necessary for the ownership, operation, leasing and management of the Property, including, without limitation, all material environmental permits, all of which are in full force and effect and not the subject of any revocation proceeding, undisclosed amendment, release, suspension, forfeiture or the like. The present and contemplated use and occupancy of the Property does not conflict with or violate any such certificate, license, authorization, registration, permit or approval, including, without limitation, any certificate of occupancy which may have been issued for the Property. The Grantor will not take any action, or fail to take any required action, so as to compromise or adversely affect the zoning classification of the Property. 1.03 Payment and Performance of Obligations. Subject to the terms of the Credit Agreement, the Grantor shall pay all of the Obligations when due and payable without offset or counterclaim, and shall observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements to be observed and performed by it under this Deed to Secure Debt, the other Credit Documents to which it is a party, the Secured Hedging Agreements, the Existing Senior Notes Documents and the Refinancing Senior Notes Documents (collectively, the "Secured Debt Agreements"). 1.04 Maintenance, Repair, Alterations. Etc. The Grantor will: (i) keep and maintain the Property, to the extent used in the Grantor's day to day business, in good condition and repair (normal wear and tear excepted); (ii) make or cause to be made, as and when necessary, all material repairs, renewals and replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen which are necessary to so maintain the Property in the Grantor's reasonable business judgment; (iii) restore any Improvement, to the extent used in Grantor's day to day business, which may be damaged or destroyed so that the same shall be at least substantially equal to its value, condition and character immediately prior to the damage or destruction; (iv) not commit or permit any waste or deterioration (normal wear and tear excepted) of the Property, to the extent used in the Grantor's day to day business; (v) not permit any material Improvements, to the extent used in the Grantor's day to day business, to be demolished or substantially altered in any manner that substantially decreases the value thereof; (vi) promptly pay when due all claims for labor performed and materials furnished therefor or contest such claim and; (vii) comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities having jurisdiction over the -8- Property, as well as comply with the provisions of any lease, easement or other agreement affecting all or any part of the Property. l.05 Required Insurance; Use of Proceeds. The Grantor will, at its expense, at all times provide, maintain and keep in force policies of property, hazard and liability insurance in accordance with Section 7.03 of the Credit Agreement with respect to the Property, together with statutory workers' compensation insurance with respect to any work to be performed on or about the Property. To the extent required under the Credit Agreement, the Grantor shall give prompt written notice to the Grantee of the occurrence of any material damage to or material destruction of the Improvements or the Equipment. In the event of any damage to or destruction of the Property or any part thereof, so long as a Noticed Event of Default has not occurred and is not continuing the Grantee will release any interest they have in the proceeds of any insurance to the Grantor on account of such damage or destruction and the Grantor may use such proceeds for repair restoration replacement or other business purposes as the Grantor may reasonably determine. In the event of foreclosure of the security interest of this Deed to Secure Debt or other transfer of title or assignment of the Property in extinguishment, in whole or in part, of the Obligations, all right, title and interest of the Grantor in and to all proceeds then payable under any policy of insurance required by this Deed to Secure Debt shall inure to the benefit of and pass to the successor in interest of the Grantor, or the purchaser or mortgagor of the Property. After the occurrence of an Event of Default, the Grantee shall be afforded the right to participate in and approve the settlement of any claim made by the Grantor against the insurance company. 1.06 Preservation of Property. The Grantor agrees to pay for any and all reasonable and actual fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Grantee's security interest in the Property, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices (including stamp and mortgage or intangible recording taxes or other taxes imposed on the Grantee by virtue of its ownership of this Deed to Secure Debt), which are imposed upon the recording of this Deed to Secure Debt or thereafter, all reasonable attorneys' fees, payment or discharge of any taxes or Liens upon or in respect of the Property, premiums for insurance with respect to the Property and all other reasonable fees, costs and expenses in connection with protecting, maintaining or preserving the Property and the Grantee's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Property. 1.07 Condemnation. Should the Grantor receive any notice that a material portion of the Property or interest therein may be taken or damaged by reason of any public improvements or condemnation proceeding or in any other similar manner (a "Condemnation"), the Grantor, to the extent required under the Credit Agreement, shall give prompt written notice thereof to the Grantee. In the event of any Condemnation, after the occurrence and during the continuation of any Event of Default, the Grantee shall have the right to participate in any negotiations or litigation and shall have the right to approve any settlement. So long as no Noticed Event of Default has occurred and is continuing, the Grantee will release any interest they have in any and all compensation, awards, damages and proceeds paid to the Grantor or the Borrower on account of such Condemnation and the Grantor may use such compensation awards, damages and proceeds for repair, restoration, replacement or other business purposes as the Grantor may reasonably determine. -9- 1.08 Inspections. The Grantor hereby authorizes the Grantee, its agents, employees and representatives, upon reasonable prior written notice to the Grantor (except in an emergency or following the occurrence and during the continuance of any Event of Default, in which case notice shall not be required) to visit and inspect the Property or any portion(s) thereof, all at such reasonable times and as often as the Grantee may reasonably request. 1.09 Transfers. Except as otherwise permitted in accordance with the terms of the Credit Agreement, no part of the Property or of any legal or beneficial interest in the Property shall be sold, assigned, conveyed, transferred or otherwise disposed of (whether voluntarily or involuntarily, directly or indirectly, by sale of stock or any interest in the Grantor, or by operation of law or otherwise). 1.10 After Acquired Property Interests. Subject to applicable law, all right, title and interest of the Grantor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Property, hereafter acquired by, or released to, the Grantor or constructed, assembled or placed by the Grantor on the Land, and all conversions of the security constituted thereby (collectively, "After Acquired Property Interests"), immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further deed to secure debt, mortgage, conveyance, assignment or other act by the Grantor, shall become subject to the security interest of this Deed to Secure Debt as fully and completely, and with the same effect, as though now owned by the Grantor and specifically described in the granting clauses hereof. The Grantor shall execute and deliver to the Grantee all such other assurances, mortgages, conveyances or assignments thereof as the Grantee may reasonably require for the purpose of expressly and specifically subjecting such After Acquired Property Interests to the security interest of this Deed to Secure Debt. The Grantor hereby irrevocably authorizes and appoints the Grantee as the agent and attorney-in-fact of the Grantor to execute all such documents and instruments on behalf of the Grantor, which appointment shall be irrevocable and coupled with an interest, if the Grantor fails or refuses to do so within ten (10) days after a request therefor by the Grantee. ARTICLE II SECURITY AGREEMENT 2.01 Grant of Security. This Deed to Secure Debt shall, in addition to constituting a security interest on those portions of the Property classified as real property (including fixtures to the extent they are real property), constitute a security agreement within the meaning of the Uniform Commercial Code or within the meaning of the common law with respect to those parts of the Property classified as personal property (including fixtures to the extent they are personal property) to the extent a security interest therein can be created by this Deed to Secure Debt. The Grantor hereby grants to the Grantee a security interest in and to the following property whether now owned or hereafter acquired (collectively, the "Secured Property") for the benefit of the Grantee to further secure the payment and performance of the Obligations: -10- (a) Those parts of the Property classified as personal property (including (i) fixtures to the extent they are personal property and (ii) personal property and fixtures that are leased, but only to the extent the Grantor can grant to the Grantee a security interest therein without breaching the terms of such lease); (b) All general intangibles, contract rights, accounts and proceeds arising from all insurance policies required to be maintained by the Grantor and related to the Property hereunder; (c) All proceeds of any judgment, award or settlement in any condemnation or eminent domain proceeding in connection with the Property, together with all general intangibles, contract rights and accounts arising therefrom; (d) All permits, consents and other governmental approvals in connection with the construction of the Improvements or the operation of the Property, to the extent any of the same may be assigned, transferred, pledged or subjected to a security interest; (e) All plans and specifications, studies, tests or design materials relating to the design, construction, repair, alteration or leasing of the Property, to the extent any of the same may be assigned, transferred, pledged or subjected to a security interest; and (f) All cash and non-cash proceeds of the above-mentioned items. The provisions contained in the Security Agreement are hereby incorporated by reference into this Deed to Secure Debt with the same effect as if set forth in full herein. In the event of a conflict between the provisions of this Article II and the Security Agreement, the Security Agreement shall control and govern and the Grantor shall comply therewith. -11- ARTICLE III ASSIGNMENT OF LEASES, RENTS AND PROFITS 3.01 Assignment. The Grantor hereby absolutely, irrevocably and unconditionally sells, assigns, transfers and conveys to the Grantee all of the Grantor's right, title and interest in and to all current and future Leases and Rents, including those now due, past due, or to become due by virtue of any Lease or other agreement for the occupancy or use of all or any part of the Property regardless of to whom the Rents are payable. The Grantor intends that this assignment of Leases and Rents constitutes a present and absolute assignment and not an assignment for additional security only. Such assignment to the Grantee shall not be construed to bind the Grantee to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise impose any obligation upon the Grantee. The Grantor covenants that the Grantor will not hereafter collect or accept payment of any Rents more than one month prior to the due dates of such Rents, and that no payment of any of the Rents to accrue for any portion of the Property (other than a de minimis amount) will be waived, released, reduced, discounted or otherwise discharged or compromised by the Grantor, except as may be approved in writing by the Grantee. The Grantor agrees that it will not assign any of the Leases or Rents to any other Person. The Grantee shall have no liability for any loss which may arise from a failure or inability to collect Rents, proceeds or other payments. The Grantor shall maintain all security deposits in accordance with applicable law. 3.02 Revocable License: Agent. Notwithstanding the foregoing, subject to the terms of this Article III, the Grantee grants to the Grantor a revocable license to operate and manage the Property and to collect the Rents and hereby directs each tenant under a Lease to pay such Rents to, or at the direction of, the Grantor, until such time as the Grantee provides notice to the contrary to such tenants. The Grantor shall hold the Rents, or a portion thereof sufficient to discharge all current sums due in respect of the Obligations, in trust for the benefit of the Grantee for use in the payment of such sums. 3.03 Rents. (a) Upon the occurrence and during the continuance of a Noticed Event of Default, without the need for notice or demand, the license granted pursuant to this Article III shall immediately and automatically be revoked and the Grantee shall immediately be entitled to possession of all Rents, whether or not the Grantee enters upon or takes control of the Property. Upon the revocation of such license, the Grantor grants to the Grantee the right, at its option, to exercise all the rights granted in Section 4.02(a). Nothing herein contained shall be construed as constituting the Grantee a lender in possession in the absence of the taking of actual possession of the Property by the Grantee pursuant to Section 4.02(a). As used herein, a "Noticed Event of Default" shall mean (i) an Event of Default with respect to the Borrower under Section 9.05 of the Credit Agreement and (ii) any other Event of Default in respect of which the Grantee has given the Borrower notice that such Event of Default constitutes a "Noticed Event of Default". (b) From and after the termination of such license, the Grantor may, at the Grantee's direction, be the agent for the Grantee in collection of the Rents and all of the Rents so -12- collected by the Grantor shall be held in trust by the Grantor for the sole and exclusive benefit of the Grantee and the Grantor shall, within one (1) business day after receipt of any Rents, pay the same to the Grantee to be applied by the Grantee as provided for herein. All Rents collected shall be applied against all expenses of collection, including, without limitation, attorneys' fees, against costs of operation and management of the Property and against the Obligations, in whatever order or priority as to any of the items so mentioned as the Grantee directs in its sole and absolute discretion and without regard to the adequacy of its security. Neither the demand for or collection of Rents by the Grantee shall constitute any assumption by the Grantee of any obligations under any Lease or agreement relating thereto. (c) Any reasonable funds expended by the Grantee to take control of and manage the Property and collect the Rents shall become part of the Obligations secured hereby. Such amounts shall be payable from the Grantor to the Grantee upon the Grantee's demand therefor and shall bear interest from the date of disbursement at the interest rate set forth in Section 1.08(c) of the Credit Agreement unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from the Grantor under applicable law. 3.04 Sale of Property. (a) Upon any sale of any portion of the Property by or for the benefit of the Grantee pursuant to this Deed to Secure Debt, the Rents attributable to the part of the Property so sold shall be included in such sale and shall pass to the purchaser free and clear of any rights granted herein to the Grantor. (b) The Grantor acknowledges and agrees that, upon recordation of this Deed to Secure Debt, the Grantee's interest in the Rents shall be deemed to be fully perfected, "choate" and enforceable against the Grantor and all third parties, including, without limitation, any debtor in possession or trustee in any case under title 11 of the United States Code, without the necessity of (i) commencing a foreclosure action with respect to this Deed to Secure Debt, (ii) furnishing notice to the Grantor or tenants under the Leases, (iii) making formal demand for the Rents, (iv) taking possession of the Property as a lender-in-possession, (v) obtaining the appointment of a receiver of the Rents, (vi) sequestering or impounding the Rents or (vii) taking any other affirmative action. 3.05 Bankruptcy Provisions. Without limiting the provisions of Article III hereof or the absolute nature of the assignment of the Rents hereunder, the Grantor and the Grantee agree that, to the extent that the assignment of the Rents hereunder is deemed to be other than an absolute assignment, (a) this Deed to Secure Debt shall constitute a "security agreement" for purposes of Section 552(b) of the Bankruptcy Code, (b) the security interest created by this Deed to Secure Debt extends to property of the Grantor acquired before the commencement of a bankruptcy case and to all amounts paid as Rents and (c) such security interest shall extend to all Rents acquired by the estate after the commencement of any bankruptcy case. Without limitation of the absolute nature of the assignment of the Rents hereunder, to the extent the Grantor (or the Grantor's bankruptcy estate) shall be deemed to hold any interest in the Rents after the commencement of a voluntary or involuntary bankruptcy case, the Grantor hereby acknowledges and agrees that such Rents are and shall be deemed to be "cash collateral" under Section 363 of the Bankruptcy Code. -13- ARTICLE IV EVENTS OF DEFAULT AND REMEDIES 4.01 Events of Default. The occurrence of (i) an "Event of Default" under and as defined in any of the Credit Documents, (ii) any "event of default" under the Existing Senior Notes Documents or the Refinancing Senior Notes Documents and (iii) any payment default, after any applicable grace period, under any Secured Hedging Agreement shall constitute an Event of Default (each, an "Event of Default") hereunder. 4.02 Remedies Upon Default. Upon the occurrence of a Noticed Event of Default, the Grantee may, in the Grantee's sole discretion, either itself or by or through a nominee, assignee or otherwise, to the fullest extent permitted by law, exercise any or all of the following rights and remedies individually, collectively or cumulatively: (a) either in person or by its agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of its security, (i) enter upon and take possession of the Property or any part thereof and of all books, records and accounts relating thereto or located thereon, in its own name or in the name of the Grantor, and do or cause to be done any acts which it deems necessary or desirable to preserve the value of the Property or any part thereof or interest therein, collect the income therefrom or protect the security hereof; (ii) with or without taking possession of the Property make such repairs, alterations, additions and improvements as the Grantee deems necessary or desirable and do any and all acts and perform any and all work which the Grantee deems necessary or desirable to complete any unfinished construction on the Property; (iii) make, cancel or modify Leases and sue for or otherwise collect the Rents thereof, including those past due and unpaid; (iv) make any payment or perform any act which the Grantor has failed to make or perform hereunder; (v) appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of the Grantee; (vi) pay, purchase, contest or compromise any encumbrance, charge or Lien on the Property; and (vii) take such other actions as the Grantee deems necessary or desirable; (b) commence and maintain one or more actions at law or in equity or by any other appropriate remedy (i) to protect and enforce the rights of the Grantee hereunder, including for the specific performance of any covenant or agreement herein contained (which covenants and agreements the Grantor agrees shall be specifically enforceable by injunctive or other appropriate equitable remedy), (ii) to collect any sum then due hereunder, (iii) to aid in the execution of any power herein granted, or (iv) to foreclose this Deed to Secure Debt in accordance with Section 4.03 hereof; (c) exercise any or all of the remedies available to a secured party under the Uniform Commercial Code; (d) by notice to the Grantor (to the extent such notice is required to be given under the Credit Documents), but without formal demand, presentment, notice of intention to accelerate or of acceleration, protest or notice of protest, all of which are -14- hereby waived by the Grantor, declare all of the indebtedness secured hereby to be immediately due and payable, and upon such declaration all of such indebtedness shall become and be immediately due and payable, anything in this Deed to Secure Debt or the other Credit Documents to the contrary notwithstanding; and (e) exercise any other right or remedy available to the Grantee under the Secured Debt Agreements. 4.03 Right of Foreclosure. (a) Upon the occurrence of a Noticed Event of Default, the Grantee may sell and dispose of the Property at public auction, at the usual place for conducting sales at the courthouse in the county where the Property or any part thereof may be located, to the highest bidder for cash, first advertising the time, terms and place of such sale by publishing a notice thereof once a week for four consecutive weeks immediately preceding the date of sale (without regard to the actual number of days) in a newspaper in which sheriff's advertisements are published in said county, all other notice being hereby waived by the Grantor; and the Grantee may thereupon execute and deliver to the purchaser at said sale a sufficient conveyance of the Property in fee simple, which conveyance may contain recitals as to the happening of the default upon which the execution of the power of sale, herein granted, depends, and said recitals shall be presumptive evidence that all preliminary acts prerequisite to said sale and deed were in all things duly complied with; and, following the occurrence and during the continuance of an Event of Default the Grantor hereby constitutes and appoints the Grantee or its assigns agent and attorney-in-fact to make such recitals, sale and conveyance, and all of the acts of such attorney-in-fact are hereby ratified, and the Grantor agrees that such recitals shall be binding and conclusive upon the Grantor and that the conveyance to be made by the Grantee, or its assigns (and in the event of deed in lieu of foreclosure, then as to such conveyance) shall be effectual to bar all right, title and interest, equity of redemption, including all statutory redemption, homestead, dower, curtesy and all other exemptions of the Grantor, or its successors in interest, in and to said Property; and the Grantor agrees that in case of a sale, as herein provided, the Grantor or any person in possession under the Grantor shall then become and be tenants holding over, and shall forthwith deliver possession to the purchaser at such sale, or be summarily dispossessed in accordance with the provisions of law applicable to tenants holding over; the power and agency hereby granted are coupled with an interest and are irrevocable by dissolution, insolvency, death or otherwise, and are in addition to any and all other remedies which the Grantee may have at law or in equity. Any portion of the Property sold pursuant to this Deed to Secure Debt may, to the extent permitted by applicable law, be sold in one parcel as an entirety, or in such parcels and in such manner or order as the Grantee in its sole discretion, may elect, to the maximum extent permitted by the laws of the State of Georgia. One or more exercises of the powers herein granted shall not extinguish or exhaust the power unless the Obligations are paid in full in cash or the Property is sold. At any such sale, the Grantee, its agents, representatives, successors, or assigns may bid for and acquire, as purchaser, the Property or any part thereof. (b) To the fullest extent permitted by law, any foreclosure of this Deed to Secure Debt and any other transfer of all or any part of the Property in extinguishment of all or any part of the Obligations may, at the Grantee's option, be subject to any or all Leases of all or any part of the Property and the rights of tenants under such Leases. No failure to make any such -15- tenant a defendant in any foreclosure proceedings or to foreclose or otherwise terminate any such Lease and the rights of any such tenant in connection with any such foreclosure or transfer shall be, or be asserted to be, a defense or hindrance to any such foreclosure or transfer or to any proceedings seeking collection of all or any part of the Obligations (including, without limitation, any deficiency remaining unpaid after completion of any such foreclosure or transfer). (c) It is agreed and understood that (x) this Deed to Secure Debt may be enforced only by the action of the Grantee acting upon the instructions of the Required Lenders or, if the CA Termination Date (as defined below) has occurred, the holders of a majority of the outstanding principal amount of all remaining Obligations, provided that if prior to the CA Termination Date a payment default with respect to at least $300,000,000 principal amount in the aggregate of Existing Senior Notes and/or Refinancing Senior Notes has continued for at least 180 days (and such defaulted payment has not been received pursuant to a drawing under any letter of credit), the holders of a majority of the outstanding principal amount of the Indebtedness subject to such payment default or defaults can direct the Grantee to commence and continue enforcement of the security interest created hereunder, which the Grantee shall comply with subject to receiving any indemnity which it reasonably requests, provided further, that the Grantee shall thereafter comply only with the directions of the Required Lenders as to carrying out such enforcement so long as such directions are not adverse to the aforesaid directions of the holders of Indebtedness subject to such payment default or defaults, and (y) no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Deed to Secure Debt or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies shall be exercised exclusively by the Grantee for the benefit of the Secured Creditors as their interest may appear upon the terms of this Deed to Secure Debt. 4.04 Application of Proceeds. (a) To the fullest extent permitted by law, the proceeds of any sale of, and the Rents and other amounts generated by the holding, leasing, management, operation or other use of, each item of the Property pursuant to this Deed to Secure Debt (the "Trust Property Proceeds") shall be applied by the Grantee (or the receiver, if one is appointed) as follows: (i) first, to the payment of all Obligations owing to the Grantee of the type described in clauses (v), (vi) and (vii) of the definition of Obligations herein; (ii) second, to the extent Trust Property Proceeds of Property remain after the application pursuant to preceding clause (i), an amount equal to the outstanding Obligations secured by such item of Property shall be paid to the Secured Creditors in the manner provided below as their interests may appear, with each Secured Creditor receiving an amount equal to its outstanding Obligations secured by such item of Property or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share of the amount so remaining to be distributed, with any such amount to be applied in the case of the Credit Document Obligations, the Existing Senior Notes Obligations and the Refinancing Senior Notes Obligations, first to the payment of interest in respect of the unpaid principal amount of Loans, Existing Senior Notes or Refinancing Senior Notes, as the case may be, second to the payment of principal of Loans, Existing Senior Notes or Refinancing Senior Notes, as the case may be, and finally to the other Credit -16- Document Obligations, Existing Senior Notes Obligations or Refinancing Senior Notes Obligations, as the case may be; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii) to the Grantor or, to the extent directed by the Grantor or a court of competent jurisdiction, to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean when calculating a Secured Creditor's portion of any distribution or amount pursuant to clause (a) above, the amount (expressed as a percentage) equal to a fraction the numerator of which is the then outstanding amount of the relevant Obligations secured by the relevant item of Property owed such Secured Creditor and the denominator of which is the then outstanding amount of all relevant Obligations secured by the relevant item of Property. (c) All payments required to be made to the (i) Lender Creditors hereunder shall be made to the Administrative Agent for the account of the respective Lender Creditors, (ii) Hedging Creditors hereunder shall be made to the paying agent under the applicable Secured Hedging Agreement or, in the case of Secured Hedging Agreements without a paying agent, directly to the applicable Hedging Creditors, (iii) Existing Senior Notes Creditors hereunder shall be made to the Existing Senior Notes Trustee for the account of the respective Existing Senior Notes Creditors, and (iv) Refinancing Senior Notes Creditors hereunder shall be made to the Refinancing Senior Notes Trustee for the account of the respective Refinancing Senior Notes Creditors. (d) For purposes of applying payments received in accordance with this Section, the Grantee shall be entitled to rely upon (i) the Administrative Agent for a determination of the outstanding Credit Document Obligations, (ii) upon any Hedging Creditor for a determination of the outstanding Hedging Obligations owed to such Hedging Creditor, (iii) the Existing Senior Notes Trustee for a determination of the outstanding Existing Senior Notes Obligations, and (iv) the Refinancing Senior Notes Trustee for a determination of the outstanding Refinancing Senior Notes Obligations. Unless it has actual knowledge (including by way of written notice from a Secured Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Grantee, in acting hereunder, shall be entitled to assume that no Credit Document Obligations other than principal, interest and regularly accruing fees are owing to any Lender Creditor. (e) It is understood and agreed that the Grantor shall remain liable to the extent of any deficiency between (x) the amount of the Obligations for which it is responsible directly or as a guarantor that are satisfied with proceeds of the Property and (y) the aggregate outstanding amount of such Obligations. 4.05 Appointment of Receiver. Upon the occurrence and during the continuance of a Noticed Event of Default, the Grantee as a matter of strict right and without notice to the Grantor or anyone claiming under the Grantor, and without regard to the adequacy or the then value of the Property or the interest of the Grantor therein or the solvency of any party bound for payment of the Obligations, shall have the right to apply to any court having jurisdiction to -17- appoint a receiver or receivers of the Property, and the Grantor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual rights, powers and duties of receivers in like or similar cases and all the rights, powers and duties of the Grantee in case of entry as provided in Section 4.02 hereof, including but not limited to the full power to rent, maintain and otherwise operate the Property upon such terms as are approved by the court and shall continue as such and exercise all such powers until the date of confirmation of sale of the Property unless such receivership is sooner terminated. 4.06 Exercise of Rights and Remedies. The entering upon and taking possession of the Property, the collection of any Rents and the exercise of any of the rights contained in this Article IV, shall not, alone, cure or waive any Event of Default or notice of default hereunder or invalidate any act done in response to such Event of Default or pursuant to such notice of default and, notwithstanding the continuance in possession of the Property or the collection, receipt and application of Rents, the Grantee shall be entitled to exercise every right provided for herein or in the Credit Documents, the Existing Senior Notes Documents or the Refinancing Senior Notes Documents, or at law or in equity upon the occurrence of any Event of Default. 4.07 Remedies Not Exclusive. The Grantee shall be entitled to enforce payment and performance of the Obligations and to exercise all rights and powers under this Deed to Secure Debt or other agreement or any laws now or hereafter in force, notwithstanding that some or all of the Obligations may now or hereafter be otherwise secured, whether by mortgage, deed of trust, security deed, pledge, lien, assignment or otherwise. Neither the acceptance of this Deed to Secure Debt nor its enforcement, whether by court action or pursuant to the powers herein contained, shall prejudice or in any manner affect the Grantee's right to realize upon or enforce any other security now or hereafter held by the Grantee, it being agreed that the Grantee shall be entitled to enforce this Deed to Secure Debt and any other security now or hereafter held by the Grantee in such order and manner as it may in its absolute and sole discretion and election determine. No remedy herein conferred upon or reserved to the Grantee is intended to be exclusive of any other remedy herein or in any of the other Secured Debt Agreements or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy to which the Grantee is entitled may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Grantee, and the Grantee may pursue inconsistent remedies. No delay or omission of the Grantee to exercise any right or power accruing upon any Event of Default shall impair any right or power or shall be construed as a waiver of any Event of Default or any acquiescence therein. If the Grantee shall have proceeded to invoke any right or remedy hereunder or under any other Secured Debt Agreement, and shall thereafter elect to discontinue or abandon it for any reason, the Grantee shall have the unqualified right to do so and, in such an event, the rights and remedies of the Grantee shall continue as if such right or remedy had never been invoked, but no such discontinuance or abandonment shall waive any Event of Default which may then exist or the right of the Grantee thereafter to exercise any right or remedy under the Secured Debt Agreements for such Event of Default. 4.08 WAIVER OF REDEMPTION, NOTICE, MARSHALLING, ETC. NOTWITHSTANDING ANYTHING HEREIN CONTAINED TO THE CONTRARY, TO THE -18- EXTENT PERMITTED BY LAW, THE GRANTOR ACKNOWLEDGING THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS HEREUNDER; (A) WILL NOT (I) AT ANY TIME INSIST UPON, OR PLEAD, OR IN ANY MANNER WHATSOEVER, CLAIM OR TAKE ANY BENEFIT OR ADVANTAGE OF ANY STAY OR EXTENSION OR MORATORIUM LAW, PRESENT OR FUTURE STATUTE OF LIMITATIONS, ANY LAW RELATING TO THE ADMINISTRATION OF ESTATES OF DECEDENTS, APPRAISEMENT, VALUATION, REDEMPTION, STATUTORY RIGHT OF REDEMPTION, OR THE MATURING OR DECLARING DUE OF THE WHOLE OR ANY PART OF THE OBLIGATIONS, NOTICE OF INTENTION OF SUCH MATURING OR DECLARING DUE, OTHER NOTICE (WHETHER OF DEFAULTS, ADVANCES, THE CREATION, EXISTENCE, EXTENSION OR RENEWAL OF ANY OF THE OBLIGATIONS OR OTHERWISE, EXCEPT FOR RIGHTS TO NOTICES EXPRESSLY GRANTED HEREIN OR IN THE CREDIT DOCUMENTS), SUBROGATION, ANY SET-OFF RIGHTS, HOMESTEAD OR ANY OTHER EXEMPTIONS FROM EXECUTION OR SALE OF THE PROPERTY OR ANY PART THEREOF, WHEREVER ENACTED, NOW OR AT ANY TIME HEREAFTER IN FORCE, WHICH MAY AFFECT THE COVENANTS AND TERMS OF PERFORMANCE OF THIS DEED TO SECURE DEBT, OR (II) CLAIM, TAKE OR INSIST UPON ANY BENEFIT OR ADVANTAGE OR ANY LAW NOW OR HEREAFTER IN FORCE PROVIDING FOR THE VALUATION OR APPRAISAL OF THE PROPERTY OR ANY PART THEREOF, PRIOR TO ANY SALE OR SALES THEREOF WHICH MAY BE MADE PURSUANT TO ANY PROVISION HEREOF, OR PURSUANT TO THE DECREE, JUDGMENT OR ORDER OF ANY COURT OF COMPETENT JURISDICTION; OR (III) AFTER ANY SUCH SALE OR SALES, CLAIM OR EXERCISE ANY RIGHT UNDER ANY STATUTE HERETOFORE OR HEREAFTER ENACTED TO REDEEM THE PROPERTY SO SOLD OR ANY PART THEREOF; AND (B) COVENANTS NOT TO HINDER, DELAY OR IMPEDE THE EXECUTION OF ANY POWER HEREIN GRANTED OR DELEGATED TO THE GRANTEE, BUT TO SUFFER AND PERMIT THE EXECUTION OF EVERY POWER AS THOUGH NO SUCH LAW OR LAWS HAD BEEN MADE OR ENACTED. THE GRANTOR, FOR ITSELF AND ALL WHO MAY CLAIM UNDER IT, WAIVES, TO THE EXTENT THAT IT LAWFULLY MAY, ALL RIGHT TO HAVE THE PROPERTY MARSHALLED UPON ANY FORECLOSURE HEREOF. 4.09 Expenses of Enforcement. In connection with any action to enforce any remedy of the Grantee under this Deed to Secure Debt, the Grantor agrees to pay all costs and expenses which may be paid or incurred by or on behalf of the Grantee, including, without limitation, reasonable attorneys' fees, receiver's fees, appraiser's fees, outlays for documentary and expert evidence, stenographer's charges, publication costs, and costs (which may be estimated as to items to be expended after entry of the decree) of procuring all such abstracts of title, title searches and examinations, title insurance policies and similar data and assurances with respect to title and value as the Grantee may deem necessary or desirable, and neither the Grantee nor any other Person shall be required to accept tender of any portion of the Obligations unless the same be accompanied by a tender of all such expenses, costs and commissions. All of the costs and expenses described in this Section 4.09, and such expenses and fees as may be incurred in the protection of the Property and the maintenance of the security interest of this Deed to Secure Debt, including the reasonable fees of any attorney employed by the Grantee in any litigation or proceeding, including appellate proceedings, affecting this Deed to Secure Debt -19- or the Property (including, without limitation, the occupancy thereof or any construction work performed thereon), including probate and bankruptcy proceedings, or in preparation for the commencement or defense of any proceeding or threatened suit or proceeding whether or not an action is actually commenced, shall be immediately due and payable by the Grantor, with interest thereon at the rate of interest set forth in the Credit Documents and shall be part of the Obligations secured by this Deed to Secure Debt. ARTICLE V ADDITIONAL COLLATERAL 5.01 Additional Collateral. (a) The Grantor acknowledges and agrees that the Obligations are secured by the Property and various other collateral including, without limitation, at the time of execution of this Deed to Secure Debt certain personal property of the Grantor described in the Credit Documents. The Grantor specifically acknowledges and agrees that the Property, in and of itself, if foreclosed or realized upon would not be sufficient to satisfy the outstanding amount of the Obligations. Accordingly, the Grantor acknowledges that it is in the Grantor's contemplation that the other collateral pledged to secure the Obligations may be pursued by the Grantee in separate proceedings in the various States, counties and other countries where such collateral may be located and additionally that the Grantor liable for payment of the Obligations will remain liable for any deficiency judgments in addition to any amounts the Grantee may realize on sales of other property or any other collateral given as security for the Obligations. Specifically, and without limitation of the foregoing, it is agreed that it is the intent of the parties hereto that in the event of a foreclosure of this Deed to Secure Debt, the Indebtedness evidencing the Obligations shall not be deemed merged into any judgment of foreclosure, but rather shall remain outstanding. It is the further intent and understanding of the parties that the Grantee, following a Noticed Event of Default, may pursue all of its collateral with the Obligations remaining outstanding and in full force and effect notwithstanding any judgment of foreclosure or any other judgment which the Grantee may obtain. (b) The Grantor acknowledges and agrees that the Property and the property which may from time to time be encumbered by the other Credit Documents may be located in more than one State or country and therefore the Grantor waives and relinquishes any and all rights it may have, whether at law or equity, to require the Grantee to proceed to enforce or exercise any rights, powers and remedies it may have under the Credit Documents in any particular manner, in any particular order, or in any particular State or other jurisdiction. Furthermore, the Grantor acknowledges and agrees that the Grantee shall be allowed to enforce payment and performance of the Obligations and to exercise all rights and powers provided under this Deed to Secure Debt, or the other Credit Documents or under any provision of law, by one or more proceedings, whether contemporaneous, consecutive or both in any one or more States in which the security is located. Neither the acceptance of this Deed to Secure Debt, or any Credit Document nor its enforcement in one State, whether by court action, power of sale, or otherwise, shall prejudice or in any way limit or preclude enforcement of the Credit Documents through one or more additional proceedings, in that State or in any other State or country. -20- (c) The Grantor further agrees that any particular remedy or proceeding, including, without limitation, foreclosure through court action (in a state or federal court) or power of sale, may be brought and prosecuted in the local or federal courts of any one or more States as to all or any part of the Property or the property encumbered by the Credit Documents, wherever located, without regard to the fact that any one or more prior or contemporaneous proceedings have been situated elsewhere with respect to the same or any other part of the Property and the property encumbered by the Credit Documents. (d) The Grantee may resort to any other security held by the Grantee for the payment of the Obligations in such order and manner as the Grantee may elect. (e) Notwithstanding anything contained herein to the contrary, the Grantee shall be under no duty to the Grantor or others, including, without limitation, the holder of any junior, senior or subordinate deed to secure debt or mortgage on the Property or any part thereof or on any other security held by the Grantee, to exercise or exhaust all or any of the rights, powers and remedies available to the Grantee. ARTICLE VI MISCELLANEOUS 6.01 Governing Law. The provisions of this Deed to Secure Debt regarding the creation, perfection and enforcement of the liens, security title and security interests herein granted shall be governed by and construed under the laws of the state in which the Property is located. All other provisions of this Deed to Secure Debt shall be governed by the laws of the State of New York (including, without limitation, Section 5-1401 of the General Obligations Law of the State of New York), without regard to choice of laws provisions. 6.02 Limitation on Interest. It is the intent of the Grantor and the Grantee in the execution of this Deed to Secure Debt and all other instruments evidencing or securing the Obligations to contract in strict compliance with applicable usury laws. In furtherance thereof, the Grantee and the Grantor stipulate and agree that none of the terms and provisions contained in this Deed to Secure Debt shall ever be construed to create a contract for the use, forbearance or retention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by relevant law. If this Deed to Secure Debt or any other instrument evidencing or securing the Obligations violates any applicable usury law, then the interest rate payable in respect of the Loans shall be the highest rate permissible by law. 6.03 Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communications) and mailed, telegraphed, telexed, telecopied, cabled or delivered (including by way of overnight courier): (i) if to the Grantor, at; -21- R. J. Reynolds Tobacco Company 401 North Main Street, Winston-Salem, North Carolina 27102 (ii) if to the Grantee, at: JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Attn.: Raju Nanoo Tel. No.: 212-270-2272 Fax. No.: 212-270-5120 (iii) if to any Lender (other than the Grantee), at such address as such Lender shall have specified in the Credit Agreement; (iv) if to any Hedging Creditor, at such address as such Hedging Creditor shall have specified in writing to the Grantor and the Grantee; (v) if to any Existing Senior Notes Creditor, at such address of the Existing Senior Notes Trustee as the Existing Senior Notes Trustee shall have specified in writing to the Grantor and the Grantee; (vi) if to any Refinancing Senior Notes Creditor, at such address of the Refinancing Senior Notes Trustee as the Refinancing Senior Notes Trustee shall have specified in writing to the Grantor and the Grantee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. Except as otherwise expressly provided herein, all such notices and communications shall be deemed to have been duly given or made (i) in the case of any Secured Creditor, when received and (ii) in the case of the Grantor, when delivered to the Grantor in any manner required or permitted hereunder. 6.04 Captions. The captions or headings at the beginning of each Article and Section hereof are for the convenience of the parties and are not a part of this Deed to Secure Debt. 6.05 Amendment. None of the terms and conditions of this Deed to Secure Debt may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Grantor and the Grantee (with the consent of (x) if prior to the CA Termination Date, the Required Lenders or, to the extent required by Section 12.12 of the Credit Agreement, all of the Lenders and (y) if on and after the CA Termination Date, the holders of at least a majority of the outstanding principal amount of the Obligations remaining outstanding), provided that (i) no such change, waiver, modification or variance shall be made to Section 4.04 hereof or this Section 6.05 without the consent of each Secured Creditor adversely affected thereby and (ii) that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the -22- purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (w) the Lender Creditors as holders of the Credit Document Obligations, (x) the Hedging Creditors as holders of the Hedging Obligations, (y) the Existing Senior Notes Creditors as holders of the Existing Senior Notes Obligations, and (z) the Refinancing Senior Notes Creditors as holders of the Refinancing Senior Notes Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (w) with respect to each of the Credit Document Obligations, the Required Lenders, (x) with respect to the Hedging Obligations, the holders of at least a majority of all Secured Hedging Obligations outstanding from time to time, (y) with respect to the Existing Senior Notes Obligations, the holders of at least a majority of the outstanding principal amount of the Existing Senior Notes, (z) with respect to the Refinancing Senior Notes Obligations, the holders of at least a majority of the outstanding principal amount of the Refinancing Senior Notes. 6.06 Obligations Absolute. The Obligations of the Grantor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Grantor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Deed to Secure Debt, any other Credit Document, any Secured Hedging Agreement, any Existing Senior Notes Document or any Refinancing Senior Notes Document; or (c) any amendment to or modification of any Credit Document, any Secured Hedging Agreement, any Existing Senior Notes Document or any Refinancing Senior Notes Document or any security for any of the Obligations; whether or not the Grantor shall have notice or knowledge of any of the foregoing. 6.07 Further Assurances. The Grantor shall, upon the request of the Grantee and at the expense of the Grantor: (a) promptly correct any defect, error or omission which may be discovered in the contents of this Deed to Secure Debt or any UCC financing statements filed in connection herewith; (b) promptly execute, acknowledge, deliver and record or file such further instruments (including, without limitation, further mortgages, deeds to secure debt, security deeds, security agreements, financing statements, continuation statements and assignments of rents or leases) and promptly do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Deed to Secure Debt and to subject to the security interests hereof any property intended by the terms hereof to be covered hereby, including specifically, but without limitation, any renewals, additions, substitutions, replacements or appurtenances to the Property; and (c) promptly execute, acknowledge, deliver, procure and record or file any document or instrument (including specifically any financing statement) deemed advisable by the Grantee to protect, continue or perfect the security interests hereunder against the rights or interests of third persons. 6.08 Partial Invalidity. If any of the provisions of this Deed to Secure Debt or the application thereof to any person, party or circumstances shall to any extent be invalid or unenforceable, the remainder of this Deed to Secure Debt, or the application of such provision or provisions to persons, parties or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Deed to Secure Debt shall be valid and enforceable to the fullest extent permitted by law. -23- 6.09 Partial Releases. No release from the security interest of this Deed to Secure Debt of any part of the Property by the Grantee shall in any way alter, vary or diminish the force or effect of this Deed to Secure Debt on the balance of the Property or the priority of the security interest of this Deed to Secure Debt on the balance of the Property. 6.10 Priority. This Deed to Secure Debt is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby. 6.11 Covenants Running with the Land. All Obligations are intended by the Grantor and the Grantee to be, and shall be construed as, covenants running with the Property. As used herein, the "Grantor" shall refer to the party named in the first paragraph of this Deed to Secure Debt and to any subsequent owner of all or any portion of the Property. All persons who may have or acquire an interest in the Property shall be deemed to have notice of, and be bound by, the terms of the Credit Agreement and the other Credit Documents; provided, however, that no such party shall be entitled to any rights thereunder without prior written consent of the Grantee. 6.12 Successors and Assigns. This Deed to Secure Debt shall be binding upon and inure to the benefit of the Grantee and the Grantor and their respective successors and assigns. Except as otherwise permitted by Credit Agreement, the Grantor shall not, without the prior written consent of the Grantee, assign any rights, duties, or obligations hereunder. 6.13 Purpose of Loans. The Grantor hereby represents and agrees that the Loans, Existing Senior Notes and Refinancing Senior Notes are being obtained or issued for business or commercial purposes, and the proceeds thereof will not be used for personal, family, residential, household or agricultural purposes. 6.14 No Joint Venture or Partnership. The relationship created hereunder and under the other Credit Documents, the Secured Hedging Agreements, the Existing Senior Notes Documents and the Refinancing Senior Notes Documents is that of creditor/debtor. The Grantee does not owe any fiduciary or special obligation to the Grantor and/or any of the Grantor's, officers, partners, agents, or representatives. Nothing herein or in any other Credit Document, any Secured Hedging Agreement, any Existing Senior Notes Document or any Refinancing Senior Notes Document is intended to create a joint venture, partnership, tenancy-in-common or joint tenancy relationship between the Grantor and the Grantee. 6.15 The Grantee as Collateral Agent for Secured Creditors. It is expressly understood and agreed that the rights and obligations of the Grantee as holder of this Deed to Secure Debt and as Collateral Agent for the Secured Creditors and otherwise under this Deed to Secure Debt are only those expressly set forth in this Deed to Secure Debt and in the Credit Agreement. The Grantee shall act hereunder pursuant to the terms and conditions set forth herein and in Annex M to the Security Agreement, the terms of which shall be deemed incorporated herein by reference as fully as if same were set forth herein in their entirety (for such purpose, treating each reference to the "Security Agreement" as a reference to this -24- Agreement, each reference to the "Collateral Agent" as a reference to the Grantee and each reference to an "Assignor" as a reference to a "Grantor"). 6.16 Full Recourse. This Deed to Secure Debt is made with full recourse to the Grantor (including as to all assets of the Grantor, including the Property and the Secured Property). 6.17 Reduction of Secured Amount. In the event the amount secured by this Deed to Secure Debt is less than the aggregate Obligations, then the amount secured hereby shall be reduced only by the last and final sums that the Grantor or the Borrower repays with respect to the Obligations and shall not be reduced by any intervening repayments of the Obligations. So long as the balance of the Obligations exceeds the amount secured hereby, any payments of the Obligations shall not be deemed to be applied against, or to reduce, the portion of the Obligations secured by this Deed to Secure Debt. Such payments shall instead be deemed to reduce only such portions of the Obligations as are secured by other collateral located outside of the state in which the Property is located or are unsecured. 6.18 Acknowledgment of Receipt. The Grantor hereby acknowledges receipt of a true copy of this Deed to Secure Debt. 6.19 Release Payment. (a) After the Termination Date (as defined below), this Deed to Secure Debt shall terminate (provided that all indemnities set forth herein shall survive any such termination) and the Grantee, at the request and expense of the Grantor, will execute and deliver to the Grantor a proper instrument or instruments to cancel and surrender the estate and interest created by this Deed to Secure Debt. As used in this Deed to Secure Debt, (i) "CA Termination Date" shall mean the date upon which the Total Commitment has been terminated, no Letter of Credit or Note under the Credit Agreement is outstanding and all other Credit Document Obligations have been paid in full in cash (other than arising from indemnities for which no request for payment has been made) and (ii) "Termination Date" shall mean the date upon which (x) the CA Termination Date shall have occurred and (y) if (but only if) a Notified Non-Credit Agreement Event of Default (as defined below) shall have occurred and be continuing on the CA Termination Date (and after giving effect thereto), either (I) such Notified Non-Credit Agreement Event of Default shall have been cured or waived by the requisite holders of the relevant Obligations subject to such Notified Non-Credit Agreement Event of Default or (II) all Secured Hedging Agreements (if any) giving rise to a Notified Non-Credit Agreement Event of Default shall have been terminated and all Obligations subject to such Notified Non-Credit Agreement Event of Default shall have been paid in full (other than arising from indemnities for which no request for payment has been made). As used herein "Notified Non-Credit Agreement Event of Default" means (i) the acceleration of the maturity of any Existing Senior Notes or Refinancing Senior Notes or the failure to pay at maturity any Existing Senior Notes or Refinancing Senior Notes, or the occurrence of any bankruptcy or insolvency Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, or (ii) any Event of Default under a Secured Hedging Agreement, in the case of any event described in clause (i) or (ii) to the extent the Existing Senior Notes Trustee, the Refinancing Senior Notes Trustee or the relevant Hedging Creditor, as the case may be, has given written notice to the Grantee that a "Notified Non-Credit Agreement Event of Default" exists; provided that such written notice may only be given if such Event of Default is continuing and, provided further, -25- that any such Notified Non-Credit Agreement Event of Default shall cease to exist (I) once there is no longer any Event of Default under the Existing Senior Notes Indenture, the Refinancing Senior Notes Indenture or the respective Secured Hedging Agreement, as the case may be, in existence, (II) in the case of an Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, after all Existing Senior Notes Obligations or Refinancing Senior Notes Obligations, as the case may be, have been repaid in full, (III) in the case of an Event of Default under a Secured Hedging Agreement, such Secured Hedging Agreement has been terminated and all Hedging Obligations thereunder repaid in full, (IV) in the case of an Event of Default under the Existing Senior Notes Indenture or the Refinancing Senior Notes Indenture, if the Existing Senior Notes Creditors or the Refinancing Senior Notes Creditors, as the case may be, holding at least a majority of the aggregate principal amount of the outstanding Existing Senior Notes or the Refinancing Senior Notes, as the case may be, at such time have rescinded such written notice and (V) in the case of an Event of Default under a Secured Hedging Agreement, the requisite Hedging Creditors with Hedging Obligations thereunder at such time have rescinded such written notice. (b) So long as no Notified Non-Credit Agreement Event of Default has occurred and is continuing, in the event that (x) prior to the CA Termination Date, (i) any part of the Property is sold or otherwise disposed of in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement (it being agreed for such purposes that a release will be deemed "permitted by Section 8.02 of the Credit Agreement" if the proposed transaction is not prohibited by the Credit Agreement) or (ii) all or any part of the Property is otherwise released at the direction of the Required Lenders (or all the Lenders if required by Section 12.12 of the Credit Agreement), and the proceeds of such sale or disposition or from such release are applied in accordance with the terms of the Credit Agreement to the extent required to be so applied (it being understood and agreed by the Grantor and the Grantee that so long as no Noticed Event of Default has occurred and is continuing, the Grantor may use such proceeds as the Grantor may reasonably determine) or (y) on and after the CA Termination Date, any part of the Property is sold or otherwise disposed of without violating the Existing Senior Notes Documents, the Refinancing Senior Notes Documents and the Secured Hedging Agreements, the Grantee, at the request and expense of the Grantor, will release such Property from this Deed to Secure Debt in the manner provided in clause (a) above (it being understood and agreed that upon the release of all or any portion of the Property by the Grantee at the direction of the Lenders as provided above, the security interest in the Property in favor of the Hedging Creditors, the Existing Senior Notes Creditors and the Refinancing Senior Notes Creditors shall automatically be released). (c) In addition to the foregoing, all Property shall be automatically released (subject to reinstatement upon the occurrence of a new Trigger Event) in accordance with the provisions of the last sentence of Section 7.10(b) of the Credit Agreement. (d) At any time that the Grantor desires that the Grantee take any action to give effect to any release of Property pursuant to the foregoing Section 6.19(a), (b) or (c), it shall deliver to the Grantee a certificate signed by an authorized officer describing the Property to be released and certifying its entitlement to a release pursuant to the applicable provisions of Sections 6.19(a), (b) or (c) and in such case the Grantee, at the request and expense of the Grantor, will execute such documents (without recourse and without any representation or -26- warranty) as required to duly release such Property. The Grantee shall have no liability whatsoever to any Secured Creditor as the result of any release of Property by it as permitted by (or which the Grantee in good faith believes to be permitted by) this Section 6.19. Upon any release of Property pursuant to Section 6.19(a), (b) or (c), so long as no Noticed Event of Default is then in existence, none of the Secured Creditors shall have any continuing right or interest in such Property, or the proceeds thereof (subject to reinstatement rights upon the occurrence of a new Trigger Event in the case of a release pursuant to Section 6.19(c)(i)). 6.20 Time of the Essence. Time is of the essence of this Deed to Secure Debt. 6.21 The Grantee's Powers. Without affecting the liability of any other Person liable for the payment and performance of the Obligations and without affecting the security interest of this Deed to Secure Debt in any way, the Grantee (acting at the direction of the requisite holders of the relevant Obligations affected thereby) may, from time to time, regardless of consideration and without notice to or consent by the holder of any subordinate Lien, right, title or interest in or to the Property, (a) release any Persons liable for the Obligations, (b) extend the maturity of, increase or otherwise alter any of the terms of the Obligations, (c) modify the interest rate payable on the principal balance of the Obligations, (d) release or reconvey, or cause to be released or reconveyed, all or any portion of the Property, or (e) take or release any other or additional security for the Obligations. 6.22 Rules of Usage. The following rules of usage shall apply to this Deed to Secure Debt unless otherwise required by the context: (a) Singular words shall connote the plural as well as the singular, and vice versa, as may be appropriate. (b) The words "herein", "hereof" and "hereunder" and words of similar import appearing in each such document shall be construed to refer to such document as a whole and not to any particular section, paragraph or other subpart thereof unless expressly so stated. (c) References to any Person shall include such Person and its successors and permitted assigns. (d) Each of the parties hereto and their counsel have reviewed and revised, or requested revisions to, such documents, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construction and interpretation of such documents and any amendments or exhibits thereto. (e) Unless an express provision requires otherwise, each reference to "the Property" shall be deemed a reference to "the Property or any part thereof", and each reference to "Secured Property" shall be deemed a reference to "the Secured Property or any part thereof". 6.23 No Off-Set. All sums payable by the Grantor shall be paid without counterclaim, other compulsory counterclaims, set-off, or deduction and without abatement, suspension, -27- deferment, diminution or reduction, and the Obligations shall in no way be released, discharged or otherwise affected (except as expressly provided herein or in the Credit Agreement) by reason of: (i) any damage or any condemnation of the Property or any part thereof; (ii) any title defect or encumbrance or any eviction from the Property or any part thereof by title paramount or otherwise; or (iii) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Grantee or the Grantor, or any action taken with respect to this Deed to Secure Debt by any agent or receiver of the Grantee. The Grantor waives, to the extent permitted by law, all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any of the Obligations. 6.24 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial. (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS DEED TO SECURE DEBT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE GRANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE GRANTOR HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS PRENTICE-HALL CORPORATION SYSTEM, INC., WITH OFFICES ON THE DATE HEREOF AT 80 STATE STREET, ALBANY, NEW YORK 12207-2543 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, THE GRANTOR SHALL DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN THE STATE OF NEW YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THIS DEED TO SECURE DEBT. THE GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE GRANTOR AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 6.03 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE GRANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT UNDER THE CREDIT AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION. -28- (b) THE GRANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS DEED TO SECURE DEBT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS DEED TO SECURE DEBT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS DEED TO SECURE DEBT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 6.25 Future Advances. This Deed to Secure Debt is given to secure the Grantor's obligations under, or in respect of, the Credit Documents, the Existing Senior Notes Documents and the Refinancing Senior Notes Documents to which the Grantor is "party" and shall secure not only obligations with respect to presently existing indebtedness under the foregoing documents and agreements but also any and all other indebtedness now owing or which may hereafter be owing by the Grantor or the Borrower, as the case may be, to the Secured Creditors, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and re-advances, pursuant to the Credit Agreement, whether such advances are obligatory or to be made at the option of the Lenders, or otherwise, to the same extent as if such future advances were made on the date of the execution of this Deed to Secure Debt. The security interest of this Deed to Secure Debt shall be valid as to all indebtedness secured hereby, including future advances, from the tune of its filing for record in the recorder's office of the county in which the Property is located. This Deed to Secure Debt is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby, and Permitted Encumbrances. Although this Deed to Secure Debt is given wholly or partly to secure all future obligations which may be incurred hereunder and under the other Secured Debt Agreements, whether obligatory or optional, the Grantor and the Grantee hereby acknowledge and agree that the Grantee and the other Secured Creditors are obligated by the terms of the Secured Debt Agreements to make certain future advances, including advances of a revolving nature, subject to the fulfillment of the relevant conditions set forth in the Secured Debt Agreements. -29- 6.26 Property not a Dwelling. The Grantor represents and warrants to the Grantee that no portion of the Property is used as a dwelling place by the Grantor at the time this Deed to Secure Debt is entered into, and, accordingly, the notice requirements of Official Code of Georgia Annotated Section 44-14-162.2 shall not be applicable to any exercise of the power of sale contained in this Deed to Secure Debt. 6.27 Withdrawal or Discontinuance of Proceedings. In case the Grantee shall have proceeded to enforce any right, power or remedy under this Deed to Secure Debt by foreclosure, entry or otherwise or in the event the Grantee shall have commenced advertising the intended exercise of the right of foreclosure provided hereunder, and such proceeding or advertisement shall have been withdrawn, discontinued or abandoned for any reason, or shall have been determined adversely to the Grantee, then in every such case (a) the Grantor and the Grantee shall be restored to their former positions and rights; (b) all rights, powers and remedies of the Grantee shall continue as if no such proceeding had been taken; (c) each and every Event of Default declared or occurring prior or subsequent to such withdrawal, discontinuance or abandonment shall and shall be deemed to be a continuing Event of Default; and (d) this Deed to Secure Debt, the Secured Debt Agreements, and Obligations secured by this Deed to Secure Debt, or any other instrument concerned therewith, shall not be and shall hot be deemed to have been reinstated or otherwise affected by such withdrawal, discontinuance or abandonment, and the Grantor hereby expressly waives the benefit of any statute or rule of law now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the above. 6.28 Deed to Secure Debt Not a Mortgage. This Deed to Secure Debt is a deed to secure debt passing title to the Property pursuant to the laws of the State of Georgia governing loan or security deeds and is not a mortgage. The words "lien of this Deed to Secure Debt", "Lien of this Deed to Secure Debt" or words of similar import shall mean the security title and security interest granted in this Deed to Secure Debt 6.29 Fees. Any reference in this Deed to Secure Debt to "reasonable attorney's fees" or other similar phraseology shall mean the actual and reasonable fees incurred at customary and reasonable hourly rates in the Property location, not pursuant to any statutory formula or percentage calculation. -30- IN WITNESS WHEREOF, the Grantor has caused this Deed to Secure Debt to be duly executed and delivered under seal as of the day and year first above written. Signed, sealed and delivered in the R. J. REYNOLDS TOBACCO COMPANY, a presence of: North Carolina corporation [ILLEGIBLE] By: /s/ Lynn L. Lane - --------------------------------- ---------------------------------- Unofficial Witness [ILLEGIBLE] Name: Lynn L. Lane Title: Senior Vice President and Treasurer [ILLEGIBLE] - -------------------------------- Notary Public [NOTARIAL SEAL] Commission Expiration Date: 9/8/04 LINDA BURKE NOTARY PUBLIC State of New York No. [ILLEGIBLE] Certificate filed in New York County Commission Expires September 8, 2004 -31- EXHIBIT A DESCRIPTION OF LAND All that tract of land tying and being in Land Lots 104, 105, 114, 115, 116 and 117 of the Seventh Land District of Bibb County, Georgia containing 204.29 acres, and shown on a plat prepared by Tamplin & Sherrill, Inc. on January 18, 1974, and revised on January 21, 1974, entitled "Property of Macon-Bibb County Industrial Authority", and more particularly described according to said plat as follows: Beginning at an iron pin that marks the intersection of the southerly line of Riggins Mill road and the southeasterly line of Weaver Road and running thence right along the arc of a curve having a radius of 5961.77 feet a distance of 359.32 feet to an iron pin, said are being subtended by a chord that runs south 41 degrees 57 minutes 40 seconds east a distance of 359.26 feet to said iron pin; thence south 43 degrees 41 minutes 16 seconds east a distance of 223.07 feet to a concrete monument; thence south 43 degrees 41 minutes 16 seconds east a distance of 236.62 feet to a concrete monument; thence south 45 degrees 40 minutes 39 seconds east a distance of 52.86 feet to a concrete monument; thence south 46 degrees 58 minutes 04 seconds east a distance of 99.63 feet to a concrete monument; thence south 48 degrees 59 minutes 27 seconds east a distance of 99.93 feet to a concrete monument; thence south 53 degrees 01 minutes 02 seconds east a distance of 99.95 feet to a concrete monument; thence south 55 degrees 15 minutes 29 seconds east a distance of 100.03 feet to a concrete monument; thence south 57 degrees 43 minutes 15 seconds east a distance of 99.88 feet to a concrete monument; thence south 59 degrees 47 minutes 03 seconds east a distance of 99.91 feet to a concrete monument; thence south 61 degrees 42 minutes 03 seconds east a distance of 94.96 feet to a concrete monument; thence south 62 degrees 45 minutes 42 seconds east a distance of 104.88 feet to a concrete monument; thence south 63 degrees 56 minutes 01 seconds east a distance of 100.04 feet to a concrete monument; thence South 65 degrees 18 minutes east a distance of 63.23 feet to an iron pin thence south 21 degrees 24 minutes 49 seconds west a distance of 1844.44 feet to an iron pin; thence south 10 degrees 26 minutes 19 seconds west a distance of 161.67 feet to an iron pin; thence south 87 degrees 00 minutes west a distance of 203.73 feet to an iron pin; thence south 27 degrees 00 minutes west a distance of 129.94 feet to an iron pin; thence south 19 degrees 10 minutes 33 seconds west a distance of 549.24 feet to an iron pin; thence south 12 degrees 47 minutes 29 seconds west a distance of 218.84 feet to a concrete monument, thence north 28 degrees 32 minutes 26 seconds west a distance of 493.09 feet to a concrete monument; thence south 61 degrees 08 minutes 34 seconds west a distance of 985.30 feet to a concrete monument; thence south 61 degrees 08 minutes 34 seconds west a distance of 120.75 feet to an iron pin; thence south 31 degrees 20 minutes 51 seconds west a distance of 288.75 feet to an iron pin; thence right along the arc of a curve having a radius of 390.74 feet a distance of 203.92 feet to an iron pin, said are being subtended by a chord that runs south 46 degrees 17 minutes 53 seconds west a distance of 201.61 feet to said iron pin; thence south 61 degrees 14 minutes 55 seconds west a distance of 719.82 feet to an iron pin; thence north 28 degrees 45 minutes 05 seconds west a distance of 1314.06 feet to an iron pin; thence left along the are of a curve having a radius of 422.94 feet a distance of 210.80 feet to an iron pin, said are being subtended by a chord that runs north 43 degrees 01 minutes 46 seconds west a distance of 208.62 feet to an iron pin; thence along the southerly line of relocated Weaver road north 32 degrees 41 minutes 32 seconds east a distance of 1510.77 feet to an iron pin; thence right along the are of a curve having a radius of 1096.28 feet a distance of 606.42 feet to an iron pin, said are being subtended by a chord that runs north 48 degrees 32 minutes 21 seconds east a distance of 598.72 feet to said iron pin; thence north 64 degrees 23 minutes 10 seconds east a distance of 598.26 feet to an iron pin; thence left along the are of a curve having a radius of 1196-28 feet a distance of 868.22 feet to an iron pin; said are being subtended by a chord that runs north 43 degrees 35 minutes 40 seconds east a distance of 849.29 feet to an iron pin; thence north 22 degrees 48 minutes 10 seconds east a distance of 331.86 feet to an iron pin; thence left along the are of a curve having a radius of 3289.81 feet a distance of 598.42 feet to an iron pin that marks the point of beginning, said are being subtended by a chord that runs north 17 degrees 35 minutes 30 seconds east a distance of 597.59 feet to said iron pin that marks the point of beginning. ALSO all that tract or parcel of land lying and being in Land Lot 117 of the 7th Land District of Bibb County, Georgia and being known and designated as Parcel "1A", containing .0229 acre, according to a plat prepared by Robert E. Fountain, registered land surveyor, dated June 10, 1981 and recorded in Plat Book 63, Page 92, Clerk's Office, Bibb Superior Court, said plat being incorporated herein and made a part hereof by this reference thereto. Also included herein are those certain easement rights contained in an easement from E. I Du Pont DC Nemours and Company to Brown & Williamson Tobacco Corporation dated October 15, 1974 and recorded in Deed Book 1222, Page 246, Clerk's Office, Bibb Superior Court. EXCEPTED from the above described property is that portion thereof conveyed to Bibb County, Georgia for right of way purposes by deed dated September 3, 1981 and recorded in Deed Book 1415, Page 84, Clerk's Office, Bibb Superior Court. SCHEDULE 1 CREDIT AGREEMENT LOANS The Credit Document Obligations secured by this Deed to Secure Debt are evidenced by the Credit Agreement (including the Grantor's obligations under the Subsidiary Guaranty), which provides that the Grantor is obligated for the payment and performance of, without limitation, the following: (i) Revolving Loans in the original aggregate principal amount of up to $486,250,000 and having final maturity dates no later than February 13, 2006 (or, if the Existing Senior Notes due on May 15, 2006 have been refinanced in full with the proceeds of a new issuance or issuances of Refinancing Senior Notes in an aggregate principal amount equal to at least the aggregate principal amount of such Existing Senior Notes so refinanced on or prior to February 13, 2006, January 30, 2007), as such date may be extended for such Lender pursuant to Section 1.13 of the Credit Agreement (the "Revolving Loan Maturity Date"); (ii) Swingline Loans in the original aggregate principal amount of up to $ 60,000,000, and having a final maturity date no later than five business days prior to the Revolving Loan Maturity Date. The Parent and/or one or more of its Subsidiaries may enter into Interest Rate Protection Agreements and Other Hedging Agreements (together with the Existing Interest Rate Swap Agreement), and the Borrower may also request Letters of Credit in accordance Section 2 of the Credit Agreement. ii EX-10.12 19 g90345exv10w12.txt EX-10.12 Exhibit 10.12 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: White & Case LLP Davie County, North Carolina 1155 Avenue of the Americas New York, New York 10036 Attention: Jeffrey J. Temple, Esq. 1107993/0083 FIRST AMENDMENT TO DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING FIRST AMENDMENT TO DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING (as amended, modified or supplemented from time to time, this "Agreement"), dated as of July 30, 2004 by and between R. J. REYNOLDS TOBACCO COMPANY, a North Carolina corporation (successor to RJ Reynolds Tobacco Company, a New Jersey corporation), having an office at 401 North Main Street, Winston-Salem, North Carolina 27102, as Trustor (the "Trustor"),) and JPMORGAN CHASE BANK, as Collateral Agent, with an address at 270 Park Avenue, New York, New York 10017 (the "Beneficiary") for the benefit of the Secured Creditors, and acknowledged and agreed to by BANK OF NEW YORK, in its capacity as the Existing Senior Notes Trustee (the "Existing Senior Notes Trustee") and by THE FIDELITY COMPANY, in its capacity as Trustee, with an office at One West Fourth Street, Winston-Salem, North Carolina 27101, (the "Trustee"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement referred to below shall be used herein as so defined. W I T N E S S E T H : WHEREAS, Reynolds American Inc. (the "Parent"), R.J. Reynolds Tobacco Holdings, Inc. (the "Borrower"), the various lending institutions from time to time party thereto (the "Lenders") and the Beneficiary, as Administrative Agent, have entered into a Credit Agreement, dated as of May 7, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002, and further amended and restated as of July 30, 2004, providing for the making of Loans to the Borrower and the issuance of, and articipation in, Letters of Credit for the account of the Borrower, all as contemplated therein (with the Lenders, each Letter of Credit Issuer, the Administrative Agent, the Senior Managing Agents, and the Collateral Agent being herein collectively called the "Lender Creditors")(as the same may be further amended, modified, extended, renewed, replaced, restated, supplemented and/or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lender or holders, the "Credit Agreement"; provided that, with respect to any agreement providing for the refinancing or replacement of indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (x) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Lenders shall have consented in writing to the refinancing or replacement indebtedness being treated as indebtedness pursuant to the Credit Agreement, and (y) a notice to the effect that the refinancing or replacement indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Borrower to the Collateral Agent); WHEREAS, the Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafter defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender or any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement) and in each case their subsequent successors and assigns collectively, the "Hedging Creditors", and together with the Lender Creditors, the "Lender Secured Creditors"); WHEREAS, the Borrower and the trustee thereunder (the "Existing Senior Notes Trustee"), on behalf of the holders of the Existing Senior Notes (such holders, together with the Existing Senior Notes Trustee, the "Existing Senior Notes Creditors"), have from time to time entered into, and may in the future from time to time enter into, one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Existing Senior Notes Indenture" and, together with the Existing Senior Notes, the "Existing Senior Notes Documents") providing for the issuance of Existing Senior Notes by the Borrower; WHEREAS, the Borrower and the trustee or trustees thereunder (collectively, the "Refinancing Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes (such holders, together with the Refinancing Senior Notes Trustee, the "Refinancing Senior Notes Creditors", and together with the Lender Secured Creditors and the Existing Senior Notes Creditors, the "Secured Creditors"), may from time to time enter into one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Refinancing Senior Notes Indenture" and, together with the Refinancing Senior Notes, the "Refinancing Senior Notes Documents") providing for the issuance of Refinancing Senior Notes by the Borrower; WHEREAS, pursuant to the Subsidiary Guaranty, the Trustor has (together with the other Subsidiaries of the Borrower party thereto) jointly and severally guaranteed to the Lender Secured Creditors the payment when due of the Guaranteed Obligations (as and to the extent defined in the Subsidiary Guaranty); WHEREAS, the Trustor has guaranteed to the Existing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Existing Senior Notes; WHEREAS, the Trustor has guaranteed to the Refinancing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Refinancing Senior Notes; WHEREAS, as required by the Credit Agreement, the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture, the Trustor executed a Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, dated as of July 9, 2003, in favor of the Trustee for the benefit of the Beneficiary, and recorded on July 15, 2003 in Book 497, page 436, in the Office of the Register of Deeds of Davie County, North Carolina (as amended hereby and as further amended, modified, restated or supplemented from time to time, the "Deed of Trust") encumbering certain property (the "Property") more particularly described on Exhibit A annexed to the Deed of Trust; WHEREAS, the Deed of Trust remains in full force and effect and the lien and security interest and the priority of such lien and security interest granted to the existing Secured Creditors named therein continues (without interruption) thereunder; and WHEREAS, the Trustor desires to execute this Agreement pursuant to Section 5.01(P) of the Credit Agreement, and pursuant to, and as required by the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture to reflect the amendment to and restatement of the Credit Agreement and certain other Credit Documents. NOW, THEREFORE, in consideration of the execution and delivery by the Beneficiary of the Credit Agreement and other benefits provided therein to the Trustor, the receipt and sufficiency of which are hereby acknowledged, the Trustor hereby makes the following representations and warranties and the Trustor and the Beneficiary hereby covenant and agree as follows: AGREEMENT 1. The sum of $622,000,000 appearing in the first WHEREAS clause of the Deed of Trust is hereby deleted and the sum of $486,250,000 is hereby substituted in lieu thereof. -3- 2. The second WHEREAS clause of the Deed of Trust is hereby amended by deleting therefrom the entire subsection following "(iii)" and substituting in lieu thereof the following language: "other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafer defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender, any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other such financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement), and in each case their subsequent successors and assigns, collectively, the "Hedging Creditors", and together with the Lender Creditors, the "Lender Secured Creditors");" 3. The fourth WHEREAS clause of the Deed of Trust is hereby amended by deleting the words "have from time to time entered into and may in the future from time to time enter into," appearing in lines five and six of such clause, and substituting therefor the following words: "may from time to time enter into". 4. Subsection (ii) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the comma appearing at the end of line six of such subsection: "and all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding"; 5. Subsection (iii) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the term "Existing Senior Notes" appearing on lines 11 and 12 of such subsection: "and the due performance and compliance by the Trustor with the terms of each such Existing Senior Notes Document"; 6. Subsection (iv) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the term "Refinancing Senior Notes" appearing in line 12 of such subsection "and the due performance and compliance by the Trustor with the terms of each such Refinancing Senior Notes Document"; 7. The paragraph appearing on Page 6 of the Deed of Trust following the components of the Trust Property is hereby amended by adding the following words following the word "Subsidiary" appearing in line five of such paragraph "of Parent"; 8. Section 2.02 of the Deed of Trust is hereby amended as follows: (i) Section 2.02(5) of the Deed of Trust is hereby deleted and the following substituted in lieu thereof: "(5) the organizational identification number of the Debtor is NC0711678;"; and (ii) -4- Section 2.02(6) of the Deed of Trust is hereby deleted and the following substituted in lieu thereof: "(6) the Debtor is a corporation, organized under the laws of the State of North Carolina;". 9. The sum of $2,072,000,000 appearing in Section 6.26 of the Deed of Trust is hereby deleted and the sum of $1,936,250,000 is hereby substituted in lieu thereof. 10. The sum of $3,072,000,000 appearing in Section 6.26 of the Deed of Trust is hereby deleted and the sum of $2,936,250,000 is hereby substituted in lieu thereof. 11. It is hereby acknowledged and agreed that each reference in the Deed of Trust to the "Credit Agreement" shall mean and be a reference to the Credit Agreement as defined in the first WHEREAS clause hereof, including, but not limited to the Third Amended and Restated Credit Agreement dated as of July 30, 2004, by and among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., JPMorgan Chase Bank, as Administrative Agent and various lending institutions a party thereto. 12. It is hereby acknowledged and agreed that each reference in the Deed of Trust to the "Security Agreement" shall mean and be a reference to the Security Agreement dated as of July 15, 2003 among R.J. Reynolds Tobacco Holdings, Inc., various Subsidiaries of R.J. Reynolds Tobacco Holdings, Inc., and JPMorgan Chase Bank, as Collateral Agent, as amended and restated as of July 30, 2004 by that certain Amended and Restated Security Agreement among Reynolds American Inc., R.J.Reynolds Tobacco Holdings, Inc., various Subsidiaries of R.J.Reynolds Tobacco Holdings, Inc. and JPMorgan Chase Bank, as Collateral Agent. 13. It is hereby acknowledged and agreed that each reference in the Deed of Trust to: (i) the "New Senior Notes Trustee" shall mean and be a reference to the "Existing Senior Notes Trustee"; (ii) the "New Senior Notes Creditors" shall mean and be a reference to the "Existing Senior Notes Creditors"; (iii) the "New Senior Notes Indenture" shall mean and be a reference to the "Existing Senior Notes Indenture"; (iv) the "New Senior Notes Documents" shall mean and be a reference to the "Existing Senior Notes Documents"; and (v) the "New Senior Notes" shall mean and be a reference to the "Existing Senior Notes". 14. Section 6.19 of the Deed of Trust is hereby amended in the following respects: (a) the reference to Section 7.11(b) appearing in Section 6.19(c) of the Deed of Trust is hereby deleted, and the words "Section 7.10(b)" substituted in lieu thereof; (b) a reference to Section 6.19(a) is hereby added to the fifth line of Section 6.19(d) such that the line shall now read in full as follows: "...provisions of Sections 6.19(a), (b) or (c) and in such case the Beneficiary, at the request and expense...." -5- (c) the parenthetical beginning in the ninth line of Section 6.19(d) is hereby deleted and the following substituted in lieu thereof: "(or which the Beneficiary in good faith believes to be permitted by)". 15. The Trustor hereby reaffirms to the Secured Creditors each of the representations, warranties, covenants and agreements of the Trustor set forth in the Deed of Trust with the same force and effect as if each were separately stated herein and made as of the date hereof. 16. The Trustor hereby ratifies, affirms, reaffirms, acknowledges, confirms and agrees that the Deed of Trust, as modified by this Agreement, and each and every other document and/or instrument which evidences and/or secures payment of the Notes, the Loans, the Existing Senior Notes and the Refinancing Senior Notes represent the valid, enforceable and collectible obligations of the Trustor and the Trustor further acknowledges there are no existing claims, defenses, personal or otherwise, or rights of set-off whatsoever with respect to any of the aforementioned instruments and/or documents known to the Trustor and further acknowledges and represents that, to the Trustor's knowledge no event has occurred and no condition exists which would constitute a default under the Deed of Trust or this Agreement either with or without notice or lapse of time or both. 17. Except as specifically modified herein, all of the terms and provisions of the Deed of Trust and all other documents executed by the parties hereto or binding upon the parties hereto in connection with the Deed of Trust are ratified and reaffirmed by the parties hereto, and are incorporated herein by reference, the Trustor specifically acknowledging the validity and enforceability thereof. 18. The Trustor agrees to pay all costs in connection herewith, including, but without limitation, recordation and filing fees, taxes (other than taxes based on gross receipts, income or revenue of the Beneficiary), reasonable attorneys' fees and expenses, and, to the extent incurred in connection with updating the Beneficiary's existing title policy on the Property, charges for title examination and title insurance premiums (to the extent there is an existing title policy on the Property). The Trustor agrees to have any existing title insurance policy in favor of the Beneficiary updated at its sole cost and expense, the endorsement thereto being subject to the Beneficiary's reasonable approval. 19. The liens, security interests, assignments and other rights evidenced by the Deed of Trust are hereby renewed, extended and modified to secure the Obligations in accordance with this Agreement. 20. This Agreement is limited as specified and other than the specific amendments contained herein shall not constitute an amendment, modification or waiver of, or otherwise affect, in any way, any other provisions of the Deed of Trust. As modified hereby, the Deed of Trust is ratified and confirmed in all respects. 21. The Trustor agrees to execute and deliver, or cause to be executed and delivered, to the Benenficiary all other instruments, certificates, agreements and consents as the Beneficiary may reasonably require in order to confirm the terms of this Agreement. -6- 22. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 23. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 24. Any reference to the "Deed of Trust" in the Deed of Trust shall be deemed to mean the Deed of Trust as modified by this Agreement. 25. The use of the singular shall include the plural when the context requires and vice versa; the use of "a" shall include "an" when the context requires and vice versa. 26. The Trustee joins in this Agreement only to evidence its knowledge of and consent to the terms hereof. -7- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Trustor: R. J. REYNOLDS TOBACCO COMPANY, a North Carolina corporation [SEAL] By: \s\ Lynn L. Lane ------------------------------------- Name: Lynn L. Lane Title: Senior Vice President and Treasurer Beneficiary: JPMORGAN CHASE BANK, Administrative Agent and as Collateral Agent By \s\ Randolph Cates ----------------------------------------- Name: Randolph Cates Title: Vice President -8- ACKNOWLEDGED AND AGREED TO THIS 28th DAY OF JULY, 2004 EXISTING SENIOR NOTES TRUSTEE: BANK OF NEW YORK By:\s\ Derek Kettel ------------------------------- Name: Derek Kettel Title: Agent -9- ACKNOWLEDGED AND AGREED TO THIS 30th DAY OF JULY, 2004 TRUSTEE: THE FIDELITY COMPANY, as Trustee By: \s\ Kenneth A. Moser ------------------------------- Name: Kenneth A. Moser Title: Vice President -10- STATE OF NEW YORK) ss.: COUNTY OF NEW YORK) I, Jonathan J. Katz, certify that Lynn L. Lane personally came before me this day and acknowledged that she is the Senior Vice President and Treasurer of R. J. Reynolds Tobacco Company, a North Carolina corporation, and that by authority duly given and as the act of the corporation, she executed the foregoing instrument as Senior Vice President and Treasurer of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 30 day of July, 2004. \s\ Jonathan J. Katz ---------------------------------- Notary Public My Commission Expires: 8/11/2007 Jonathan J. Katz Notary Public, State of New York Commission # 01KA6096856 Qualified in New York County Commission Expires August 11, 2007 STATE OF NEW YORK) ss.: COUNTY OF NEW YORK) I, May Karen Yip-Daniels, certify that Randolph Cates personally came before me this day and acknowledged that (s)he is the Vice President of JPMorgan Chase Bank, and that by authority duly given and as the act of the corporation, (s)he executed the foregoing instrument as Vice President of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this ____ day of July, 2004. \s\ May Karen Yip-Daniels ---------------------------------- Notary Public My Commission Expires:______________ MAY KAREN YIP DANIELS Notary Public, State of New York No. 01Y16111759 Qualified in New York County Commission Expires June 20, 2008 STATE OF FLORIDA) ss.: COUNTY OF DUVAL) I, Tracy M. Ramseur, certify that Derek Kettel personally came before me this day and acknowledged that he is the Agent of The Bank of New York, and that by authority duly given and as the act of the corporation, (s)he executed the foregoing instrument as Agent of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 28th day of July, 2004. \s\ Tracy Moore Ramseur ---------------------------------- Notary Public My Commission Expires:______________ TRACY MOORE RAMSEUR Comm# DD0238322 Expires 9/21/2007 Bonded thru (800)432-4264 Florida Notary Assn., Inc. STATE OF NORTH CAROLINA) ss.: COUNTY OF FORSYTH) I, Laura H. Carlyle, certify that Kenneth A. Moser personally came before me this day and acknowledged that he is the Vice Pres. of The Fidelity Company, as Trustee, and that by authority duly given and as the act of the corporation, he executed the foregoing instrument as Vice President of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 30th day of July, 2004. \s\ Laura H. Carlyle ---------------------------------- Notary Public My Commission Expires:_______________ Official Seal LAURA H. CARLYLE NOTARY PUBLIC-NORTH CAROLINA COUNTY OF YADKIN My Commission Expires 10-16-07 -12- EX-10.13 20 g90345exv10w13.txt EX-10.13 Exhibit 10.13 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: White & Case LLP Forsyth County, North Carolina 1155 Avenue of the Americas New York, New York 10036 Attention: Jeffrey J. Temple, Esq. 1107993/0083 FIRST AMENDMENT TO DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING FIRST AMENDMENT TO DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING (as amended, modified or supplemented from time to time, this "Agreement"), dated as of July 30, 2004 by and between R. J. REYNOLDS TOBACCO COMPANY, a North Carolina corporation (successor to R. J. Reynolds Tobacco Company, a New Jersey corporation), having an office at 401 North Main Street, Winston-Salem, North Carolina 27102, as Trustor (the "Trustor"),) and JPMORGAN CHASE BANK, as Collateral Agent, with an address at 270 Park Avenue, New York, New York 10017 (the "Beneficiary") for the benefit of the Secured Creditors, and acknowledged and agreed to by THE BANK OF NEW YORK, in its capacity as Existing Senior Notes Trustee (the "Existing Senior Notes Trustee") and by THE FIDELITY COMPANY, in its capacity as Trustee, with an office at One West Fourth Street, Winston-Salem, North Carolina 27101, (the "Trustee"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement referred to below shall be used herein as so defined. W I T N E S S E T H: WHEREAS, Reynolds American Inc. (the "Parent"), R.J. Reynolds Tobacco Holdings, Inc. (the "Borrower"), the various lending institutions from time to time party thereto (the "Lenders") and the Beneficiary, as Administrative Agent, have entered into a Credit Agreement, dated as of May 7, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002, and further amended and restated as of July 30, 2004, providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (with the Lenders, each Letter of Credit Issuer, the Administrative Agent, the Senior Managing Agents, and the Collateral Agent being herein collectively called the "Lender Creditors")(as the same may be further amended, modified, extended, renewed, replaced, restated, supplemented and/or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lender or holders, the "Credit Agreement"; provided that, with respect to any agreement providing for the refinancing or replacement of indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (x) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Lenders shall have consented in writing to the refinancing or replacement indebtedness being treated as indebtedness pursuant to the Credit Agreement, and (y) a notice to the effect that the refinancing or replacement indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Borrower to the Collateral Agent); WHEREAS, the Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafter defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender or any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement), and in each case their subsequent successors and assigns collectively, the "Hedging Creditors", and together with the Lender Creditors, the "Lender Secured Creditors"); WHEREAS, the Borrower and the trustee thereunder (the "Existing Senior Notes Trustee"), on behalf of the holders of the Existing Senior Notes (such holders, together with the Existing Senior Notes Trustee, the "Existing Senior Notes Creditors"), have from time to time entered into, and may in the future from time to time enter into, one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Existing Senior Notes Indenture" and, together with the Existing Senior Notes, the "Existing Senior Notes Documents") providing for the issuance of Existing Senior Notes by the Borrower; WHEREAS, the Borrower and the trustee or trustees thereunder (collectively, the "Refinancing Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes (such holders, together with the Refinancing Senior Notes Trustee, the "Refinancing Senior Notes Creditors", and together with the Lender Secured Creditors and the Existing Senior Notes Creditors, the "Secured Creditors"), may from time to time enter into one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Refinancing Senior Notes Indenture" and, together with the Refinancing Senior Notes, the "Refinancing Senior Notes Documents") providing for the issuance of Refinancing Senior Notes by the Borrower; WHEREAS, pursuant to the Subsidiary Guaranty, the Trustor has (together with the other Subsidiaries of the Borrower party thereto) jointly and severally guaranteed to the Lender Secured Creditors the payment when due of the Guaranteed Obligations (as and to the extent defined in the Subsidiary Guaranty); WHEREAS, the Trustor has guaranteed to the Existing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Existing Senior Notes; WHEREAS, the Trustor has guaranteed to the Refinancing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Refinancing Senior Notes; WHEREAS, as required by the Credit Agreement, the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture, the Trustor executed a Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, dated as of July 9, 2003, in favor of the Trustee for the benefit of the Beneficiary, and recorded on July 15, 2003 in Book 2374, page 1935, in the Office of the Register of Deeds of Forsyth County, North Carolina (as amended hereby and as further amended, modified, restated or supplemented from time to time, the "Deed of Trust") encumbering certain property (the "Property") more particularly described on Exhibit A annexed to the Deed of Trust; WHEREAS, the Deed of Trust remains in full force and effect and the lien and security interest and the priority of such lien and security interest granted to the existing Secured Creditors named therein continues (without interruption) thereunder; and WHEREAS, the Trustor desires to execute this Agreement pursuant to Section 5.01(P) of the Credit Agreement, and pursuant to, and as required by the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture to reflect the amendment to and restatement of the Credit Agreement and certain other Credit Documents. NOW, THEREFORE, in consideration of the execution and delivery by the Beneficiary of the Credit Agreement and other benefits provided therein to the Trustor, the receipt and sufficiency of which are hereby acknowledged, the Trustor hereby makes the following representations and warranties and the Trustor and the Beneficiary hereby covenant and agree as follows: AGREEMENT 1. The sum of $622,000,000 appearing in the first WHEREAS clause of the Deed of Trust is hereby deleted and the sum of $486,250,000 is hereby substituted in lieu thereof. -3- 2. The second WHEREAS clause of the Deed of Trust is hereby amended by deleting therefrom the entire subsection following "(iii)" and substituting in lieu thereof the following language: "other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafer defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender, any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other such financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement), and in each case their subsequent successors and assigns, collectively, the "Hedging Creditors", and together with the Lender Creditors, the "Lender Secured Creditors");" 3. The fourth WHEREAS clause of the Deed of Trust is hereby amended by deleting the words "have from time to time entered into and may in the future from time to time enter into," appearing in lines five and six of such clause, and substituting therefor the following words: "may from time to time enter into". 4. Subsection (ii) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the comma appearing at the end of line six of such subsection: "and all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding"; 5. Subsection (iii) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the term "Existing Senior Notes" appearing on lines 11 and 12 of such subsection: "and the due performance and compliance by the Trustor with the terms of each such Existing Senior Notes Document"; 6. Subsection (iv) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the term "Refinancing Senior Notes" appearing in line 12 of such subsection "and the due performance and compliance by the Trustor with the terms of each such Refinancing Senior Notes Document"; 7. The paragraph appearing on Page 6 of the Deed of Trust following the components of the Trust Property is hereby amended by adding the following words following the word "Subsidiary" appearing in line five of such paragraph "of Parent"; 8. Section 2.02 of the Deed of Trust is hereby amended as follows: (i) Section 2.02(5) of the Deed of Trust is hereby deleted and the following substituted in lieu thereof: "(5) the organizational identification number of the Debtor is NC0711678;"; and (ii) -4- Section 2.02(6) of the Deed of Trust is hereby deleted and the following substituted in lieu thereof: "(6) the Debtor is a corporation, organized under the laws of the State of North Carolina;" 9. The sum of $2,072,000,000 appearing in Section 6.26 of the Deed of Trust is hereby deleted and the sum of $1,936,250,000 is hereby substituted in lieu thereof. 10. The sum of $3,072,000,000 appearing in Section 6.26 of the Deed of Trust is hereby deleted and the sum of $2,936,250,000 is hereby substituted in lieu thereof. 11. It is hereby acknowledged and agreed that each reference in the Deed of Trust to the "Credit Agreement" shall mean and be a reference to the Credit Agreement as defined in the first WHEREAS clause hereof, including, but not limited to the Third Amended and Restated Credit Agreement dated as of July 30, 2004, by and among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., JPMorgan Chase Bank, as Administrative Agent and various lending institutions a party thereto. 12. It is hereby acknowledged and agreed that each reference in the Deed of Trust to the "Security Agreement" shall mean and be a reference to the Security Agreement dated as of July 15, 2003 among R.J. Reynolds Tobacco Holdings, Inc., various Subsidiaries of R.J. Reynolds Tobacco Holdings, Inc., and JPMorgan Chase Bank, as Collateral Agent, as amended and restated as of July 30, 2004 by that certain Amended and Restated Security Agreement among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., various Subsidiaries of R.J. Reynolds Tobacco Holdings, Inc. and JPMorgan Chase Bank, as Collateral Agent. 13. It is hereby acknowledged and agreed that each reference in the Deed of Trust to: (i) the "New Senior Notes Trustee" shall mean and be a reference to the "Existing Senior Notes Trustee"; (ii) the "New Senior Notes Creditors" shall mean and be a reference to the "Existing Senior Notes Creditors"; (iii) the "New Senior Notes Indenture" shall mean and be a reference to the "Existing Senior Notes Indenture"; (iv) the "New Senior Notes Documents" shall mean and be a reference to the "Existing Senior Notes Documents"; and (v) the "New Senior Notes" shall mean and be a reference to the "Existing Senior Notes". 14. Section 6.19 of the Deed of Trust is hereby amended in the following respects: (a) the reference to Section 7.11(b) appearing in Section 6.19(c) of the Deed of Trust is hereby deleted, and the words "Section 7.10(b)" substituted in lieu thereof; (b) a reference to Section 6.19(a) is hereby added to the fifth line of Section 6.19(d) such that the line shall now read in full as follows: "...provisions of Sections 6.19(a), (b) or (c) and in such case the Beneficiary, at the request and expense...." -5- (c) the parenthetical beginning in the ninth line of Section 6.19(d) is hereby deleted and the following substituted in lieu thereof: "(or which the Beneficiary in good faith believes to be permitted by)". 15. The Trustor hereby reaffirms to the Secured Creditors each of the representations, warranties, covenants and agreements of the Trustor set forth in the Deed of Trust with the same force and effect as if each were separately stated herein and made as of the date hereof. 16. The Trustor hereby ratifies, affirms, reaffirms, acknowledges, confirms and agrees that the Deed of Trust, as modified by this Agreement, and each and every other document and/or instrument which evidences and/or secures payment of the Notes, the Loans, the Existing Senior Notes and the Refinancing Senior Notes represent the valid, enforceable and collectible obligations of the Trustor and the Trustor further acknowledges there are no existing claims, defenses, personal or otherwise, or rights of set-off whatsoever with respect to any of the aforementioned instruments and/or documents known to the Trustor and further acknowledges and represents that, to the Trustor's knowledge no event has occurred and no condition exists which would constitute a default under the Deed of Trust or this Agreement either with or without notice or lapse of time or both. 17. Except as specifically modified herein, all of the terms and provisions of the Deed of Trust and all other documents executed by the parties hereto or binding upon the parties hereto in connection with the Deed of Trust are ratified and reaffirmed by the parties hereto, and are incorporated herein by reference, the Trustor specifically acknowledging the validity and enforceability thereof. 18. The Trustor agrees to pay all costs in connection herewith, including, but without limitation, recordation and filing fees, taxes (other than taxes based on gross receipts, income or revenue of the Beneficiary), reasonable attorneys' fees and expenses, and, to the extent incurred in connection with updating the Beneficiary's existing title policy on the Property, charges for title examination and title insurance premiums (to the extent there is an existing title policy on the Property). The Trustor agrees to have any existing title insurance policy in favor of the Beneficiary updated at its sole cost and expense, the endorsement thereto being subject to the Beneficiary's reasonable approval. 19. The liens, security interests, assignments and other rights evidenced by the Deed of Trust are hereby renewed, extended and modified to secure the Obligations in accordance with this Agreement. 20. This Agreement is limited as specified and other than the specific amendments contained herein shall not constitute an amendment, modification or waiver of, or otherwise affect, in any way, any other provisions of the Deed of Trust. As modified hereby, the Deed of Trust is ratified and confirmed in all respects. 21. The Trustor agrees to execute and deliver, or cause to be executed and delivered, to the Benenficiary all other instruments, certificates, agreements and consents as the Beneficiary may reasonably require in order to confirm the terms of this Agreement. -6- 22. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 23. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 24. Any reference to the "Deed of Trust" in the Deed of Trust shall be deemed to mean the Deed of Trust as modified by this Agreement. 25. The use of the singular shall include the plural when the context requires and vice versa; the use of "a" shall include "an" when the context requires and vice versa. 26. The Trustee joins in this Agreement only to evidence its knowledge of and consent to the terms hereof. -7- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Trustor: R. J. REYNOLDS TOBACCO COMPANY, a North Carolina corporation [SEAL] BY: /s/ Lynn L. Lane ------------------------------------ Name: Lynn L. Lane Title: Senior Vice President and Treasurer Beneficiary: JPMORGAN CHASE BANK, Administrative Agent and as Collateral Agent BY /s/ Randolph Cates -------------------------------------- Name: Randolph Cates Title: Vice President -8- ACKNOWLEDGED AND AGREED TO THIS 28(th) DAY OF JULY, 2004 EXISTING SENIOR NOTES TRUSTEE: BANK OF NEW YORK By: /s/ Derek Kettel -------------------------------- Name: Derek Kettel Title: Agent -9- ACKNOWLEDGED AND AGREED TO THIS 30(th)DAY OF JULY, 2004 TRUSTEE: THE FIDELITY COMPANY, as Trustee By: /s/ Keneth A. Moser -------------------------------- Name: Keneth A. Moser Title: Vice President -10- STATE OF NEW YORK) ss.: COUNTY OF NEW YORK) I, Jonathan J. Katz, certify that Lynn L. Lane personally came before me this day and acknowledged that she is the Senior Vice President and Treasurer of R. J. Reynolds Tobacco Company, a North Carolina corporation, and that by authority duly given and as the act of the corporation, she executed the foregoing instrument as Senior Vice President and Treasurer of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 30th day of July, 2004. \s\ Jonathan J. Katz ---------------------------------- Notary Public My Commission Expires: 8/11/2007 Jonathan J. Katz Notary Public, State of New York Commission # 01KA6096856 Qualified in New York County Commission Expires August 11, 2007 STATE OF NEW YORK) ss.: COUNTY OF NEW YORK) I, May Yip-Daniels, certify that Randolph Cates personally came before me this day and acknowledged that (s)he is the Vice President of JPMorgan Chase Bank, and that by authority duly given and as the act of the corporation, (s)he executed the foregoing instrument as Vice President of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this ____ day of July, 2004. \s\ May Karen Yip-Daniels ---------------------------------- Notary Public My Commission Expires:_______________ MAY KAREN YIP DANIELS Notary Public, State of New York No. 01Y16111759 Qualified in New York County Commission Expires June 20, 2008 STATE OF FLORIDA) ss.: COUNTY OF DUVAL) I, Tracy M. Ramseur, certify that Derek Kettel personally came before me this day and acknowledged that he is the Agent of The Bank of New York, and that by authority duly given and as the act of the corporation, (s)he executed the foregoing instrument as Agent of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 28th day of July, 2004. \s\ Tracy Moore Ramseur ---------------------------------- Notary Public My Commission Expires:_______________ TRACY MOORE RAMSEUR Comm# DD0238322 Expires 9/21/2007 Bonded thru (800)432-4264 Florida Notary Assn., Inc. STATE OF NORTH CAROLINA) ss.: COUNTY OF FORSYTH) I, Laura H. Carlyle, certify that Kenneth A. Moser personally came before me this day and acknowledged that he is the Vice Pres. of The Fidelity Company, as Trustee, and that by authority duly given and as the act of the corporation, he executed the foregoing instrument as Vice President of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 30th day of July, 2004. \s\ Laura H. Carlyle ---------------------------------- Notary Public My Commission Expires:_______________ Official Seal LAURA H. CARLYLE NOTARY PUBLIC-NORTH CAROLINA COUNTY OF YADKIN My Commission Expires 10-16-07 -12- EX-10.14 21 g90345exv10w14.txt EX-10.14 Exhibit 10.14 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: White & Case LLP Stokes County, North Carolina 1155 Avenue of the Americas New York, New York 10036 Attention: Jeffrey J. Temple, Esq. 1107993/0083 FIRST AMENDMENT TO DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING FIRST AMENDMENT TO DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING (as amended, modified or supplemented from time to time, this "Agreement"), dated as of July 30, 2004 by and between R. J. REYNOLDS TOBACCO COMPANY, a North Carolina corporation (successor to R. J. Reynolds Tobacco Company, a New Jersey corporation), having an office at 401 North Main Street, Winston-Salem, North Carolina 27102, as Trustor (the "Trustor"),) and JPMORGAN CHASE BANK, as Collateral Agent, with an address at 270 Park Avenue, New York, New York 10017 (the "Beneficiary") for the benefit of the Secured Creditors, and acknowledged and agreed to by THE BANK OF NEW YORK, in its capacity as Existing Senior Notes Trustee (the "Existing Senior Notes Trustee") and by THE FIDELITY COMPANY, in its capacity as Trustee, with an office at One West Fourth Street, Winston-Salem, North Carolina 27101, (the "Trustee"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement referred to below shall be used herein as so defined. W I T N E S S E T H : - - - - - - - - - - WHEREAS, Reynolds American Inc. (the "Parent"), R.J. Reynolds Tobacco Holdings, Inc. (the "Borrower"), the various lending institutions from time to time party thereto (the "Lenders") and the Beneficiary, as Administrative Agent, have entered into a Credit Agreement, dated as of May 7, 1999, as amended and restated as of November 17, 2000, as further amended and restated as of May 10, 2002, and further amended and restated as of July 30, 2004, providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (with the Lenders, each Letter of Credit Issuer, the Administrative Agent, the Senior Managing Agents, and the Collateral Agent being herein collectively called the "Lender Creditors")(as the same may be further amended, modified, extended, renewed, replaced, restated, supplemented and/or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional borrowers or guarantors thereunder or any increase in the amount borrowed) all or any portion of, the indebtedness under such agreement or any successor agreement, whether or not with the same agent, trustee, representative, lender or holders, the "Credit Agreement"; provided that, with respect to any agreement providing for the refinancing or replacement of indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (x) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Lenders shall have consented in writing to the refinancing or replacement indebtedness being treated as indebtedness pursuant to the Credit Agreement, and (y) a notice to the effect that the refinancing or replacement indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Borrower to the Collateral Agent); WHEREAS, the Parent and/or one or more of its Subsidiaries has from time to time entered into, and/or may in the future from time to time enter into, one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafter defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender or affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement), and in each case their subsequent successors and assigns collectively, the "Hedging Creditors", and together with the Lender Creditors, the "Lender Secured Creditors"); WHEREAS, the Borrower and the trustee thereunder (the "Existing Senior Notes Trustee"), on behalf of the holders of the Existing Senior Notes (such holders, together with the Existing Senior Notes Trustee, the "Existing Senior Notes Creditors"), have from time to time entered into, and may in the future from time to time enter into, one or more Indentures (collectively, as amended, modified or supplemented from time to time, the "Existing Senior Notes Indenture" and, together with the Existing Senior Notes, the "Existing Senior Notes Documents") providing for the issuance of Existing Senior Notes by the Borrower; WHEREAS, the Borrower and the trustee or trustees thereunder (collectively, the "Refinancing Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes (such holders, together with the Refinancing Senior Notes Trustee, the "Refinancing Senior Notes Creditors", and together with the Lender Secured Creditors and the Existing Senior Notes Creditors, the "Secured Creditors"), may from time to time enter into one or more Indentures -2- (collectively, as amended, modified or supplemented from time to time, the "Refinancing Senior Notes Indenture" and, together with the Refinancing Senior Notes, the "Refinancing Senior Notes Documents") providing for the issuance of Refinancing Senior Notes by the Borrower; WHEREAS, pursuant to the Subsidiary Guaranty, the Trustor has (together with the other Subsidiaries of the Borrower party thereto) jointly and severally guaranteed to the Lender Secured Creditors the payment when due of the Guaranteed Obligations (as and to the extent defined in the Subsidiary Guaranty); WHEREAS, the Trustor has guaranteed to the Existing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Existing Senior Notes; WHEREAS, the Trustor has guaranteed to the Refinancing Senior Notes Creditors the payment when due of principal, premium (if any) and interest on the Refinancing Senior Notes; WHEREAS, as required by the Credit Agreement, the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture, the Trustor executed a Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, dated as of July 9, 2003, in favor of the Trustee for the benefit of the Beneficiary, and recorded on July 15, 2003 in Book 493, page 1418, in the Office of the Register of Deeds of Stokes County, North Carolina (as amended hereby and as further amended, modified, restated or supplemented from time to time, the "Deed of Trust") encumbering certain property (the "Property") more particularly described on Exhibit A annexed to the Deed of Trust; WHEREAS, the Deed of Trust remains in full force and effect and the lien and security interest and the priority of such lien and security interest granted to the existing Secured Creditors named therein continues (without interruption) thereunder; and WHEREAS, the Trustor desires to execute this Agreement pursuant to Section 5.01(P) of the Credit Agreement, and pursuant to, and as required by the Secured Hedging Agreements, the Existing Senior Notes Indenture and the Refinancing Senior Notes Indenture to reflect the amendment to and restatement of the Credit Agreement and certain other Credit Documents. NOW, THEREFORE, in consideration of the execution and delivery by the Beneficiary of the Credit Agreement and other benefits provided therein to the Trustor, the receipt and sufficiency of which are hereby acknowledged, the Trustor hereby makes the following representations and warranties and the Trustor and the Beneficiary hereby covenant and agree as follows: AGREEMENT 1. The sum of $622,000,000 appearing in the first WHEREAS clause of the Deed of Trust is hereby deleted and the sum of $486,250,000 is hereby substituted in lieu thereof. -3- 2. The second WHEREAS clause of the Deed of Trust is hereby amended by deleting therefrom the entire subsection following "(iii)" and substituting in lieu thereof the following language: "other types of hedging agreements from time to time (each such agreement or arrangement with a Hedging Creditor (as hereinafer defined), together with the Existing Interest Rate Swap Agreement, a "Secured Hedging Agreement"), with any Lender, any affiliate thereof or a syndicate of financial institutions organized by a Lender or an affiliate of a Lender (even if any such Lender ceases to be a Lender under the Credit Agreement for any reason) (any such Lender, affiliate or other such financial institution that participates therein, together with Calyon (as counterparty to the Existing Interest Rate Swap Agreement), and in each case their subsequent successors and assigns, collectively, the "Hedging Creditors", and together with the Lender Creditors, the "Lender Secured Creditors");" 3. The fourth WHEREAS clause of the Deed of Trust is hereby amended by deleting the words "have from time to time entered into and may in the future from time to time enter into," appearing in lines five and six of such clause, and substituting therefor the following words: "may from time to time enter into". 4. Subsection (ii) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the comma appearing at the end of line six of such subsection: "and all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or any other Credit Party at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding"; 5. Subsection (iii) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the term "Existing Senior Notes" appearing on lines 11 and 12 of such subsection: "and the due performance and compliance by the Trustor with the terms of each such Existing Senior Notes Document"; 6. Subsection (iv) of the tenth WHEREAS clause of the Deed of Trust is hereby amended by adding the following words after the term "Refinancing Senior Notes" appearing in line 12 of such subsection "and the due performance and compliance by the Trustor with the terms of each such Refinancing Senior Notes Document"; 7. The paragraph appearing on Page 6 of the Deed of Trust following the components of the Trust Property is hereby amended by adding the following words following the word "Subsidiary" appearing in line five of such paragraph "of Parent"; 8. Section 2.02 of the Deed of Trust is hereby amended as follows: (i) Section 2.02(5) of the Deed of Trust is hereby deleted and the following substituted in lieu thereof: "(5) the organizational identification number of the Debtor is NC0711678;"; and (ii) -4- Section 2.02(6) of the Deed of Trust is hereby deleted and the following substituted in lieu thereof: "(6) the Debtor is a corporation, organized under the laws of the State of North Carolina;". 9. The sum of $2,072,000,000 appearing in Section 6.26 of the Deed of Trust is hereby deleted and the sum of $1,936,250,000 is hereby substituted in lieu thereof. 10. The sum of $3,072,000,000 appearing in Section 6.26 of the Deed of Trust is hereby deleted and the sum of $2,936,250,000 is hereby substituted in lieu thereof. 11. It is hereby acknowledged and agreed that each reference in the Deed of Trust to the "Credit Agreement" shall mean and be a reference to the Credit Agreement as defined in the first WHEREAS clause hereof, including, but not limited to the Third Amended and Restated Credit Agreement dated as of July 30, 2004, by and among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., JPMorgan Chase Bank, as Administrative Agent and various lending institutions a party thereto. 12. It is hereby acknowledged and agreed that each reference in the Deed of Trust to the "Security Agreement" shall mean and be a reference to the Security Agreement dated as of July 15, 2003 among R.J. Reynolds Tobacco Holdings, Inc., various Subsidiaries of R.J. Reynolds Tobacco Holdings, Inc., and JPMorgan Chase Bank, as Collateral Agent, as amended and restated as of July 30, 2004 by that certain Amended and Restated Security Agreement among Reynolds American Inc., R.J. Reynolds Tobacco Holdings, Inc., various Subsidiaries of R.J. Reynolds Tobacco Holdings, Inc. and JPMorgan Chase Bank, as Collateral Agent. 13. It is hereby acknowledged and agreed that each reference in the Deed of Trust to: (i) the "New Senior Notes Trustee" shall mean and be a reference to the "Existing Senior Notes Trustee"; (ii) the "New Senior Notes Creditors" shall mean and be a reference to the "Existing Senior Notes Creditors"; (iii) the "New Senior Notes Indenture" shall mean and be a reference to the "Existing Senior Notes Indenture"; (iv) the "New Senior Notes Documents" shall mean and be a reference to the "Existing Senior Notes Documents"; and (v) the "New Senior Notes" shall mean and be a reference to the "Existing Senior Notes". 14. Section 6.19 of the Deed of Trust is hereby amended in the following respects: (a) the reference to Section 7.11(b) appearing in Section 6.19(c) of the Deed of Trust is hereby deleted, and the words "Section 7.10(b)" substituted in lieu thereof; (b) a reference to Section 6.19(a) is hereby added to the fifth line of Section 6.19(d) such that the line shall now read in full as follows: "...provisions of Sections 6.19(a), (b) or (c) and in such case the Beneficiary, at the request and expense...." -5- (c) the parenthetical beginning in the ninth line of Section 6.19(d) is hereby deleted and the following substituted in lieu thereof: "(or which the Beneficiary in good faith believes to be permitted by)". 15. The Trustor hereby reaffirms to the Secured Creditors each of the representations, warranties, covenants and agreements of the Trustor set forth in the Deed of Trust with the same force and effect as if each were separately stated herein and made as of the date hereof. 16. The Trustor hereby ratifies, affirms, reaffirms, acknowledges, confirms and agrees that the Deed of Trust, as modified by this Agreement, and each and every other document and/or instrument which evidences and/or secures payment of the Notes, the Loans, the Existing Senior Notes and the Refinancing Senior Notes represent the valid, enforceable and collectible obligations of the Trustor and the Trustor further acknowledges there are no existing claims, defenses, personal or otherwise, or rights of set-off whatsoever with respect to any of the aforementioned instruments and/or documents known to the Trustor and further acknowledges and represents that, to the Trustor's knowledge no event has occurred and no condition exists which would constitute a default under the Deed of Trust or this Agreement either with or without notice or lapse of time or both. 17. Except as specifically modified herein, all of the terms and provisions of the Deed of Trust and all other documents executed by the parties hereto or binding upon the parties hereto in connection with the Deed of Trust are ratified and reaffirmed by the parties hereto, and are incorporated herein by reference, the Trustor specifically acknowledging the validity and enforceability thereof. 18. The Trustor agrees to pay all costs in connection herewith, including, but without limitation, recordation and filing fees, taxes (other than taxes based on gross receipts, income or revenue of the Beneficiary), reasonable attorneys' fees and expenses, and, to the extent incurred in connection with updating the Beneficiary's existing title policy on the Property, charges for title examination and title insurance premiums (to the extent there is an existing title policy on the Property). The Trustor agrees to have any existing title insurance policy in favor of the Beneficiary updated at its sole cost and expense, the endorsement thereto being subject to the Beneficiary's reasonable approval. 19. The liens, security interests, assignments and other rights evidenced by the Deed of Trust are hereby renewed, extended and modified to secure the Obligations in accordance with this Agreement. 20. This Agreement is limited as specified and other than the specific amendments contained herein shall not constitute an amendment, modification or waiver of, or otherwise affect, in any way, any other provisions of the Deed of Trust. As modified hereby, the Deed of Trust is ratified and confirmed in all respects. 21. The Trustor agrees to execute and deliver, or cause to be executed and delivered, to the Benenficiary all other instruments, certificates, agreements and consents as the Beneficiary may reasonably require in order to confirm the terms of this Agreement. -6- 22. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 23. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 24. Any reference to the "Deed of Trust" in the Deed of Trust shall be deemed to mean the Deed of Trust as modified by this Agreement. 25. The use of the singular shall include the plural when the context requires and vice versa; the use of "a" shall include "an" when the context requires and vice versa. 26. The Trustee joins in this Agreement only to evidence its knowledge of and consent to the terms hereof. -7- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Trustor: R. J. REYNOLDS TOBACCO COMPANY, a North Carolina corporation [SEAL] By: \s\ Lynn L. Lane --------------------------- Name: Lynn L. Lane Title: Senior Vice President and Treasurer Beneficiary: JPMORGAN CHASE BANK, Administrative Agent and as Collateral Agent By \s\ Randolph Cates -------------------------------- Name: Randolph Cates Title: Vice President -8- ACKNOWLEDGED AND AGREED TO THIS 28th DAY OF JULY, 2004 EXISTING SENIOR NOTES TRUSTEE: BANK OF NEW YORK By: \s\ Derek Kettel ---------------------------------- Name: Derek Kettel Title: Agent -9- ACKNOWLEDGED AND AGREED TO THIS 30th DAY OF JULY, 2004 TRUSTEE: THE FIDELITY COMPANY, as Trustee By: \s\ Kenneth A. Moser ---------------------------------- Name: Kenneth A. Moser Title: Vice President -10- STATE OF NEW YORK) ss.: COUNTY OF NEW YORK) I, Jonathan J. Katz, certify that Lynn L. Lane personally came before me this day and acknowledged that she is the Senior Vice President and Treasurer of R. J. Reynolds Tobacco Company, a North Carolina corporation, and that by authority duly given and as the act of the corporation, she executed the foregoing instrument as Senior Vice President and Treasurer of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 30th day of July, 2004. \s\ Jonathan J. Katz -------------------------- Notary Public My Commission Expires: 8/11/2007 -------------------- ---------------------------------- Jonathan J. Katz Notary Public, State of New York Commission # 01KA6096856 Qualified in New York County Commission Expires August 11, 2007 ---------------------------------- STATE OF NEW YORK) ss.: COUNTY OF NEW YORK) I, May Karen Yip-Daniels, certify that Randolph Cates personally came before me this day and acknowledged that (s)he is the Vice President of JPMorgan Chase Bank, and that by authority duly given and as the act of the corporation, (s)he executed the foregoing instrument as Vice President of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this ____ day of July, 2004. \s\ May Karen Yip-Daniels -------------------------- Notary Public My Commission Expires:_______________ ---------------------------------- MAY KAREN YIP-DANIELS Notary Public, State of New York Commission # 01Y16111759 Qualified in New York County Commission Expires June 20, 2008 ---------------------------------- -11 STATE OF FLORIDA) ss.: COUNTY OF DUVAL) I, Tracy M. Ramseur, certify that Derek Kettel personally came before me this day and acknowledged that he is the Agent of The Bank of New York, and that by authority duly given and as the act of the corporation, (s)he executed the foregoing instrument as Agent of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 28th day of July, 2004. \s\ Tracy Moore Ramseur --------------------------- Notary Public My Commission Expires:_______________ ---------------------------------- TRACY MOORE RAMSEUR Comm# DD0238322 Expires 9/21/2007 Bonded thru (800)432-4264 Florida Notary Assn., Inc. ---------------------------------- STATE OF NORTH CAROLINA) ss.: COUNTY OF FORSYTH) I, Laura H. Carlyle, certify that Kenneth A. Moser personally came before me this day and acknowledged that he is the Vice Pres. of The Fidelity Company, as Trustee, and that by authority duly given and as the act of the corporation, he executed the foregoing instrument as Vice President of the corporation, for and on behalf of the corporation. WITNESS my hand and notarial seal, this 30th day of July, 2004. \s\ Laura H. Carlyle --------------------------- Notary Public My Commission Expires:_______________ ---------------------------------- Official Seal LAURA H. CARLYLE NOTARY PUBLIC - NORTH CAROLINA COUNTY OF YADKIN My Commission Expires 10-16-07 ---------------------------------- -12- -----END PRIVACY-ENHANCED MESSAGE-----


North Carolina	1-32258	20-0546644
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)


	REYNOLDS AMERICAN INC.

	By:	/s/ McDara P. Folan, III

		Name: McDara P. Folan, III
		Title: Senior Vice President, Deputy General Counsel and Secretary

Date: August 9, 2004