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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-8940
PHILIP MORRIS COMPANIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 13-3260245
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
120 PARK AVENUE, NEW YORK, N.Y. 10017
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 212-880-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $1 par value New York Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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At February 1, 1994, the aggregate market value of the shares of Common Stock
held by non-affiliates of the registrant was approximately $52.3 billion. At
such date, there were 877,255,534 shares of the registrant's Common Stock
outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to stockholders for the year ended
December 31, 1993 are incorporated in Item 1 of Part I, Part II and Part IV
hereof and made a part hereof. The registrant's definitive proxy statement in
connection with its annual meeting of stockholders to be held on April 21,
1994, filed with the Securities and Exchange Commission, is incorporated in
Part III hereof and made a part hereof.
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PART I
ITEM 1. BUSINESS.
GENERAL DESCRIPTION OF BUSINESS
GENERAL
Philip Morris Companies Inc. is a holding company whose principal wholly-
owned subsidiaries, Philip Morris Incorporated, Philip Morris International
Inc., Kraft General Foods, Inc. and Miller Brewing Company, are engaged
primarily in the manufacture and sale of various consumer products. A wholly-
owned subsidiary of the Company, Philip Morris Capital Corporation, engages in
various financing and investment activities. As used herein, unless the context
indicates otherwise, the term "Company" means Philip Morris Companies Inc. and
its subsidiaries. The Company is the largest consumer packaged goods company in
the world.*
Philip Morris Incorporated ("Philip Morris U.S.A.") and its subsidiaries and
affiliates are engaged primarily in the manufacture and sale of cigarettes.
Philip Morris U.S.A. is the largest cigarette company in the United States.
Philip Morris International Inc. ("Philip Morris International") is a holding
company whose subsidiaries and affiliates and their licensees are engaged
primarily in the manufacture and sale of tobacco products (mainly cigarettes);
certain Latin American subsidiaries and affiliates manufacture and sell a wide
variety of food products. A subsidiary of Philip Morris International is the
leading United States exporter of cigarettes. Marlboro, the principal cigarette
brand of these companies, has been the world's largest selling cigarette brand
since 1972.
The Company's food subsidiary, Kraft General Foods, Inc. ("KGF"), is the
largest processor and marketer of packaged grocery, coffee, cheese and
processed meat products in the United States. A wide variety of similar
products is manufactured and marketed by KGF in Europe, Canada and the
Asia/Pacific region. KGF also conducts foodservice businesses and sells food
ingredients.
Miller Brewing Company ("Miller") is the second largest brewing company in
the United States.
SOURCE OF FUNDS -- DIVIDENDS
Because the Company is a holding company, one of its principal sources of
funds is dividends from its subsidiaries. The Company's principal wholly-owned
subsidiaries currently are not limited by long-term debt or other agreements in
their ability to pay cash dividends or make other distributions with respect to
their common stock.
INDUSTRY SEGMENTS
Tobacco products (mainly cigarettes), which accounted for 43% of the
Company's operating revenues in 1993 and in 1992, food products, beer and
financial services and real estate represent the Company's significant industry
segments. Operating revenues, operating profit (together with a reconciliation
to operating income) and identifiable assets attributable to each such segment
for each of the last three years, set forth in note 11 to the Company's
consolidated financial statements, are incorporated herein by reference to its
annual report to stockholders for the year ended December 31, 1993.
Operating profit from tobacco operations was approximately 62% of the
Company's total operating profit in 1993 compared with 69% in 1992, of which
Philip Morris U.S.A. and Philip Morris International contributed 33% and 29%,
respectively, in 1993 and 50% and 19%, respectively, in 1992. Food products
accounted for approximately 33% of the Company's operating profit in 1993 and
27% in 1992. Beer contributed approximately 2% and financial services and real
estate contributed approximately 3% of the Company's operating profit in 1993,
as compared with 2% each in 1992.
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* Claims made with respect to the Company's competitive ranking in its various
businesses are based on sales data or, in the case of cigarettes and beer,
shipments, unless otherwise indicated.
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During 1993, the Company provided $741 million for the costs of restructuring
its worldwide operations. In addition, the Company adopted, effective January
1, 1993, Statement of Financial Accounting Standards ("SFAS") No. 112, which
resulted in additional operating expense of $29 million. Excluding the impacts
of the restructuring and SFAS No. 112, the percentages of total operating
profit from tobacco, food and beer operations were 59%, 34% and 4%,
respectively.
NARRATIVE DESCRIPTION OF BUSINESS
TOBACCO PRODUCTS
Philip Morris U.S.A. is responsible for the manufacture, marketing and sale
of cigarettes in the United States (including military sales); subsidiaries and
affiliates of Philip Morris International and their licensees are responsible
for the manufacture, marketing and sale of tobacco products outside the United
States; and a subsidiary of Philip Morris International is responsible for
tobacco product exports from the United States.
The tobacco industry continues to be subject to health concerns and
litigation, as well as tax increases, which could have an adverse impact on the
Company.
Domestic Tobacco Products
In 1993, Philip Morris U.S.A.'s total shipments of cigarettes amounted to
194.7 billion units, a decrease of 19.6 billion units (9.1%) from 1992. The
industry's estimated cigarette shipments in the United States decreased by 9.0%
in 1993 as compared to 1992, following a decrease of 0.4% in 1992 as compared
to 1991. As discussed below, in 1993, Philip Morris U.S.A. implemented a
strategy which lowered the price of Marlboro and its other premium brands. This
action resulted in lower shipments in 1993 as compared with 1992 when
distributors bought in anticipation of price increases and higher federal
excise taxes, effective January 1, 1993. The following table sets forth the
industry's estimated cigarette shipments in the United States, Philip Morris
U.S.A.'s shipments and its share of industry shipments (excluding in all cases
export and overseas military shipments):
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PHILIP MORRIS
YEARS ENDED PHILIP MORRIS U.S.A. SHARE
DECEMBER 31 INDUSTRY (a) U.S.A. OF INDUSTRY (a)
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(IN BILLIONS OF UNITS) (%)
<S> <C> <C> <C>
1993............................ 461.2 194.7 42.2
1992............................ 507.0 214.3 42.3
1991............................ 509.1 220.7 43.4
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(a) Source: Wheat, First Securities, Inc. (John C. Maxwell, Jr.)
According to The Maxwell Consumer Report issued by Wheat, First Securities,
Inc., Philip Morris U.S.A. has been the leading cigarette company in the United
States market since 1983. Philip Morris U.S.A.'s major cigarette brands are
Marlboro, Benson & Hedges 100's, Merit, Virginia Slims, Cambridge and Basic.
Marlboro is the largest selling brand in the United States with shipments of
108.5 billion units in 1993 (down 12.4% from 1992, primarily the result of the
differences in distributor buying patterns noted above), 23.5% of the United
States market.
During the first half of 1993, domestic cigarette industry volume continued
to shift from the full price (premium) segment to the lower margin discount
segment. In April 1993, Philip Morris U.S.A. announced its decision to
institute, in the second quarter of 1993, an extensive promotional program to
reduce the average retail price of Marlboro cigarettes, a major shift in
pricing strategy designed to restore lost market share and improve long-term
profitability. In August 1993, Philip Morris U.S.A. lowered the price of its
premium brands and raised the price of its discount products in further
response to the highly price sensitive market environment. The overall effect
of these changes has been lower profit margins that have not been offset
entirely by higher volume. Lower profit margins will continue at least until
sustained improvements in the economic environment occur. As a result of these
strategic initiatives, retail sales data compiled by Nielsen Marketing Research
indicate Marlboro's market share rising from 22.1% in March 1993 to 26.8% in
December 1993. In addition, such retail sales data indicate that a reversal
occurred in the second half of
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1993 in the shift away from the premium segment (67.8% of the industry in
December 1993 compared with 64.0% in March 1993) to the discount segment. These
developments, and their impact on the Company's financial results, are more
fully discussed in Management's Discussion and Analysis of Financial Condition
and Results of Operations (the "MD&A"), incorporated herein by reference to the
Company's annual report to stockholders for the year ended December 31, 1993.
The discount segment of the industry, which consists of "generic" and lower-
priced cigarettes that have a lower profit margin than premium brands, has
grown markedly in recent years, constituting 36.8% of United States industry
shipments in 1993, up from 30.2% in 1992, but down from 39.0% and 40.7% for the
first and second quarters of 1993, respectively. Philip Morris U.S.A. accounted
for 29.4% of the discount segment in 1993, up from 27.1% in 1992.
Excise taxes, sales taxes and other taxes levied by various states, counties
and municipalities affecting cigarettes have been increasing. These taxes vary
considerably and, when combined with the federal excise tax, may be as high as
$1.05 per package of 20 cigarettes. The federal excise tax was increased by
$.04 to $.24 per package of 20 cigarettes effective January 1, 1993. As part of
its health care reform proposal, the administration has proposed an increase of
$.75 per package (to $.99), effective October 1, 1994. In the opinion of the
Company, the 1993 increase has had an adverse effect on sales and the proposed
1994 increase, if adopted, could result in volume declines for Philip Morris
U.S.A. and further shifts from the premium segment to the discount segment.
International Tobacco Products
The Company estimates that world cigarette industry unit sales (excluding the
United States) were approximately 5.0 trillion units in 1993, of which the
Company's share, including licensees, was 9.2% in 1993 and 8.6% in 1992. Unit
sales of its principal brand, Marlboro, increased 3.5% in 1993 over 1992 to
240.1 billion units, accounting for 4.8% of the world cigarette market
(excluding the United States). Subsidiaries and affiliates of Philip Morris
International and their licensees have cigarette market shares of at least
15%-- and in a number of instances substantially more than 15% -- in more than
30 markets, including Argentina, Australia, Belgium, the Canary Islands, the
Czech Republic, the Dominican Republic, Finland, France, Germany, Hong Kong,
Italy, Kuwait, Mexico, the Netherlands, the Philippines, Saudi Arabia,
Singapore, Slovakia and Switzerland.
A subsidiary of Philip Morris International is the leading United States
exporter of cigarettes. It exported 114.4 billion units in 1993, an increase of
3.6% from 1992.
Cigarette prices in many international markets are government-controlled, and
excise and other tax increases, higher costs and government price restraints in
a number of markets have restricted, and may continue to restrict, the sales
and operating income of Philip Morris International.
In 1993, Philip Morris International acquired majority interests in
government-owned tobacco companies in Lithuania, Russia and Kazakhstan and
signed a cooperation agreement with the China National Tobacco Company to
produce and sell Marlboro cigarettes for the Chinese domestic market.
Smoking and Health and Related Matters
Reports with respect to the alleged harmful physical effects of cigarette
smoking have been publicized for many years and, in the opinion of the Company,
have had and continue to have an adverse effect upon tobacco industry sales.
Since 1964, the Surgeon General of the United States and the Secretary of
Health and Human Services have released a number of reports which purport to
link cigarette smoking with a broad range of health hazards, including various
types of cancer, coronary heart disease and chronic lung disease, and recommend
various governmental measures to reduce the incidence of smoking. The 1990 and
1992
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reports focus upon the purported addictive nature of cigarettes, the purported
effects of smoking cessation, the decrease in smoking in the United States and
the economic and regulatory aspects of smoking in the Western Hemisphere. The
most recent report, released in February 1994, focuses upon cigarette smoking
by adolescents, particularly the purported addictive nature of cigarette
smoking in adolescence.
Federal legislation requires cigarette manufacturers and importers to include
the following warning statements in rotating sequence on cigarette packages and
in advertisements: SURGEON GENERAL'S WARNING: Smoking Causes Lung Cancer, Heart
Disease, Emphysema, And May Complicate Pregnancy; SURGEON GENERAL'S WARNING:
Quitting Smoking Now Greatly Reduces Serious Risks to Your Health; SURGEON
GENERAL'S WARNING: Smoking By Pregnant Women May Result in Fetal Injury,
Premature Birth, And Low Birth Weight; and SURGEON GENERAL'S WARNING: Cigarette
Smoke Contains Carbon Monoxide. Such legislation also covers the size and
format of warnings on cigarette packages and in cigarette advertising, and
prescribes a modified version of the warnings for outdoor billboard
advertisements. In addition to the warning statements, cigarette advertising in
the United States must disclose the average "tar" and nicotine deliveries of
the advertised brand or variety. Cigarette manufacturers and importers are also
required to provide annually to the Secretary of Health and Human Services a
list of ingredients added to tobacco in the manufacture of cigarettes, and the
Secretary is directed to report to Congress concerning the health effects, if
any, of such ingredients. Most of the cigarettes sold by the Company's
subsidiaries, affiliates and their licensees are sold in countries where
warning statement requirements for cigarette packages have been adopted. In
countries where such statements are not legally required, the Company places
the U.S. Surgeon General's warnings on all of its cigarette packages.
Studies with respect to the alleged health risk to nonsmokers of diluted and
modified cigarette smoke, often referred to as environmental tobacco smoke
("ETS"), have received significant publicity. In 1986, the Surgeon General of
the United States and the National Academy of Sciences reported that nonsmokers
were at increased risk of lung cancer and respiratory illness due to ETS. In
January 1993, the United States Environmental Protection Agency (the "EPA")
issued a report concluding, among other things, that ETS is a human lung
carcinogen and that ETS increases certain health risks for young children. In
June 1993, Philip Morris U.S.A. joined five other representatives of the
tobacco manufacturing and related industries in a lawsuit against the EPA
seeking a declaration that the EPA does not have the authority to regulate ETS,
and that, in view of the available scientific evidence and the EPA's failure to
follow its own guidelines in making the determination, the EPA's final risk
assessment be declared arbitrary and capricious. The EPA report, as well as
adverse publicity on ETS, have resulted in the enactment of legislation that
restricts or bans cigarette smoking in certain public places and some places of
employment.
Another federal statute established the Interagency Committee on Cigarette
and Little Cigar Fire Safety to direct the work of a Technical Study Group
created by the same statute and to make policy recommendations to Congress. The
Technical Study Group, which consisted of representatives of designated
government agencies, the tobacco and furniture industries and various other
organizations, studied the feasibility and consequences of developing
cigarettes and little cigars that would have a minimum propensity to ignite
upholstered furniture or mattresses. Based on this research, the Interagency
Committee submitted its final technical report to Congress in December 1987,
which contained the conclusion of the Technical Study Group that it is
technically feasible and may be commercially feasible to develop cigarettes
that will have a significantly reduced propensity to ignite upholstered
furniture and mattresses. Legislation in August 1990 provided for further
research under the direction of the Consumer Product Safety Commission (the
"CPSC"), with advice from a new scientific committee, the Technical Advisory
Group. The CPSC reported to Congress in August 1993 that it is practicable to
develop a performance standard for cigarette ignition propensity, but that "it
is unclear that such a standard will effectively address the number of
cigarette-related fires."
Television and radio advertising of cigarettes is prohibited in the United
States and prohibited or restricted in many other countries. Enactments by
regulatory agencies and other governmental authorities have restricted or
prohibited smoking areas aboard certain common carriers, in certain public
places and in some places of employment. Smoking is currently banned on all
commercial airline flights, regardless of
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duration, within and between the 48 contiguous states, the District of
Columbia, the U.S. Virgin Islands and Puerto Rico and within Alaska and Hawaii,
and on all commercial flights to or from Alaska and Hawaii scheduled for less
than six hours. In addition, various foreign airlines voluntarily have banned
smoking on certain flights.
Numerous other legislative and regulatory measures have been proposed at the
federal, state and local levels which, if implemented, could adversely affect
Philip Morris U.S.A.'s cigarette business. The most significant of such
measures would increase federal, state or local taxes on cigarettes, restrict
the sale and distribution of cigarettes through limitations on points of sale,
further restrict cigarette advertising and promotion and further restrict or
prohibit smoking aboard common carriers or in public places or places of
employment.
A number of foreign countries have also taken steps to restrict or prohibit
cigarette advertising and promotion, to increase taxes on cigarettes and to
discourage cigarette smoking. In some cases, such restrictions are more onerous
than those in the United States. Canada has enacted a ban on cigarette
advertising, which is being challenged on constitutional grounds. In 1992, the
European Parliament approved a proposal to ban all tobacco advertisements in
the European Community. Various additional approvals must be obtained before
the proposal can be enacted. It is not possible to predict the outcome of this
legislative effort.
In February 1994, the Food and Drug Administration (the "FDA"), in a letter
to an anti-smoking group, claimed that it may be possible for the FDA to
regulate cigarettes under the drug provisions of the Food, Drug, and Cosmetic
Act. The FDA's claim is based upon allegations that manufacturers may intend
that their products contain nicotine to satisfy an alleged addiction on the
part of some of their customers. The FDA stated that any regulation would need
to be based upon an evidentiary record indicating such intent. The letter
indicated that regulation of cigarettes under said Act could ultimately result
in the removal from the market of products containing nicotine at levels that
cause or satisfy addiction. Because of the complexity and magnitude of the
issues raised by this claim, the FDA has asked Congress to provide "clear
direction" to the agency. While Philip Morris U.S.A. does not believe that
cigarettes are addictive and denies the allegation that its products are
intended to satisfy an alleged addiction, management cannot predict the
ultimate outcome of the FDA's efforts.
There is litigation pending against the leading United States cigarette
manufacturers seeking compensatory and, in some cases, punitive damages for
cancer and other health effects alleged to have resulted from cigarette smoking
or exposure to cigarette smoking. As of December 31, 1993, there were 47 and as
of February 15, 1994, 45 such actions pending against the leading United States
cigarette manufacturers; 55 such cases were pending as of December 31, 1992.
Philip Morris U.S.A. was a defendant in 22 actions pending as of December 31,
1993 and 21 such actions pending as of February 15, 1994; there were 27 such
cases as of December 31, 1992.
Among the defenses to certain of this litigation raised by Philip Morris
U.S.A. is preemption by the Federal Cigarette Labeling and Advertising Act, as
amended (the "Act"). On June 24, 1992, the United States Supreme Court held
that the Act, as enacted in 1965, does not preempt common law damage claims but
that the Act, as amended in 1969, preempts claims arising after 1969 against
cigarette manufacturers "based on failure to warn and the neutralization of
federally mandated warnings to the extent that those claims rely on omissions
or inclusions in advertising or promotions." The Court also held that the 1969
Act does not preempt claims based on express warranty, fraudulent
misrepresentation or conspiracy. The Court also held that claims for fraudulent
concealment were preempted except "insofar as those claims relied on a duty to
disclose . . . facts through channels of communication other than advertising
or promotion." (The Court did not consider whether such common law damage
claims were valid under state law.) The Court's ruling affirmed in part, and
reversed in part, a 1990 decision of the Court of Appeals for the Third
Circuit, holding that the Act preempted claims arising after 1965 that
challenged the adequacy of the federally mandated warning or the propriety of
cigarette manufacturers' advertising and promotional activities. The Court's
decision was announced by a plurality opinion. The effect of the decision on
pending and future cases will be the subject of further proceedings in the
lower federal and state courts. Additional similar litigation could be
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encouraged if legislative proposals to eliminate the federal preemption
defense, pending in Congress since 1991, were enacted. It is not possible to
predict whether any such legislation will be enacted.
Philip Morris U.S.A. believes, and it has been so advised by counsel, that it
has a number of valid defenses to all smoking and health cases, including, but
not limited to, those defenses based on preemption under the Supreme Court
decision referred to above. All such cases are, and will continue to be,
vigorously defended. It is not possible to predict the outcome of this
litigation. Litigation is subject to many uncertainties, and it is possible
that some of these actions could be decided unfavorably to Philip Morris U.S.A.
An unfavorable outcome of a pending action could encourage the commencement of
additional similar litigation. Reference is made to note 15 to the Company's
consolidated financial statements, incorporated herein by reference to the
Company's annual report to stockholders for the year ended December 31, 1993.
Philip Morris U.S.A. has been advised that there is a grand jury
investigation being conducted by the U.S. Attorney for the Eastern District of
New York which is looking into possible violations of criminal law in
connection with activities relating to the Council for Tobacco Research - USA,
Inc., of which Philip Morris U.S.A. is a sponsor. The outcome of this
investigation cannot be predicted.
Philip Morris U.S.A. has received a Civil Investigative Demand from the
Antitrust Division of the United States Department of Justice in an
investigation of possible joint activity among United States manufacturers in
the production and sale of cigarettes, including possible joint activity to
limit new product development. The outcome of this investigation cannot be
predicted.
Distribution, Competition and Raw Materials
Philip Morris U.S.A. sells its tobacco products principally to wholesalers
(including distributors), large retail organizations, vending machine operators
and the armed services. Subsidiaries and affiliates of Philip Morris
International and their licensees market cigarettes and other tobacco products
worldwide, directly or through export sales organizations and other entities
with which they have contractual arrangements.
The market for tobacco products is highly competitive, with product quality,
price, marketing and packaging constituting significant methods of competition.
Promotional activities include, in certain instances, allowances, the use of
incentive items, price reductions and other discounts. This highly competitive
market, and Philip Morris U.S.A.'s 1993 initiatives therein, are more fully
described in "Tobacco Products--Domestic Tobacco Products" above and in the
MD&A. The tobacco products of the Company's subsidiaries, affiliates and their
licensees are extensively advertised and promoted through various media,
although television and radio advertising of cigarettes is prohibited in the
United States and is prohibited or restricted in many other countries.
Philip Morris U.S.A. and Philip Morris International's subsidiaries and
affiliates and their licensees purchase domestic burley and flue cured leaf
tobaccos of various grades and types each year, primarily at domestic auction.
In addition, oriental tobacco and certain other tobaccos are purchased outside
the United States. The tobacco is then graded, cleaned, stemmed and redried
prior to its storage for aging up to three years. Large quantities of leaf
tobacco inventory are maintained to support cigarette manufacturing
requirements. Tobacco is an agricultural commodity subject to United States
government controls, including the tobacco price support and production
adjustment programs administered by the United States Department of Agriculture
(the "USDA").
As of January 1, 1994, legislation became effective requiring, subject to
financial penalties, the use of at least 75% American-grown tobacco, which is
more expensive than imported tobacco, in cigarettes manufactured in the United
States. Due to the high content of American-grown tobacco (approximately 65% in
1993) used in Philip Morris U.S.A.'s products and those exported by
subsidiaries of Philip Morris International, this new requirement is not
expected to have a material adverse effect on the results of operations of
Philip Morris U.S.A. or Philip Morris International.
FOOD PRODUCTS
KGF's reporting and management structure currently comprises Kraft General
Foods North America, Kraft Foodservice and Kraft General Foods International.
Kraft General Foods North America currently
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has four operating units: (i) General Foods USA, responsible for General Foods
United States packaged grocery products, coffee, cereal, beverage and certain
frozen foods businesses; (ii) Kraft USA, responsible for Kraft United States
dry grocery foods, refrigerated foods (principally dairy products), certain
frozen foods and the processed meat and poultry products businesses of Oscar
Mayer Foods; (iii) Kraft Food Ingredients, responsible for United States food
ingredients businesses; and (iv) Kraft General Foods Canada, responsible for
all General Foods and Kraft Canadian businesses. Kraft Foodservice is
responsible for United States foodservice businesses. Kraft General Foods
International is responsible for all of the Company's food, coffee and
confectionery businesses outside the United States, Canada and Latin America.
Kraft General Foods North America
General Foods USA. General Foods USA's principal products include ready-to-
eat cereals, coffee and other beverages, dinners, desserts and bakery products.
It is one of the largest processors and marketers of packaged grocery products
in the United States and is the largest processor and marketer of coffee in the
United States. Its principal brands include Maxwell House, Yuban, Sanka, Brim
and Maxim coffees, General Foods international coffees, Jell-O desserts, Post
and Nabisco ready-to-eat cereals, Log Cabin syrups,
Kool-Aid, Tang, Crystal Light, Country Time and Capri Sun beverages,
Entenmann's and Freihofer's bakery products, including the Entenmann's fat free
and cholesterol free bakery line, Oroweat specialty breads, Minute rice, Stove
Top stuffing mix, Shake'n Bake coatings, Good Seasons salad dressing mixes,
Lender's frozen bagels and Cool Whip toppings. In January 1993, KGF completed
its acquisition of the ready-to-eat cold cereals business of RJR Nabisco
Holdings Corp.
Kraft USA. Kraft USA's principal products include cheese and related
products, vegetable oil-based products, such as salad dressings, margarine and
related products, barbecue sauce, confections, cultured dairy products, frozen
pizza, meat and poultry products and packaged pasta dinners. It is one of the
largest processors and marketers of processed meat and poultry products, cheese
and cheese products and salad dressings in the United States and also processes
and markets mayonnaise products and certain frozen food products. In addition
to Kraft, its principal brands include Velveeta, Cracker Barrel and rondele
cheese products, Miracle Whip salad dressing, Philadelphia Brand cream cheese,
Cheez Whiz cheese spread, Seven Seas pourable dressings, Parkay margarine,
Bull's-Eye barbecue sauces, Di Giorno pastas, sauces and cheeses, The Budget
Gourmet frozen entrees, side dishes and dinners, Light n' Lively, Knudsen and
Breakstone's cultured dairy products, Tombstone and Jack's frozen pizzas, Oscar
Mayer luncheon meats, hot dogs, bacon, ham and other meat products, Louis Rich
luncheon meats, poultry franks, turkey bacon and other poultry products,
Lunchables lunch combinations and Claussen pickles. During 1993, KGF sold its
United States frozen desserts and frozen vegetables businesses.
Kraft Food Ingredients. Kraft Food Ingredients manufactures certain private
label products as well as a variety of industrial food products for sale to
other food processors, which products include edible oils, shortenings, whey
products, nondairy creamers, confection products, cheese flavorings, seasonings
and cheese analogs. In 1993, Kraft Food Ingredients discontinued its
manufacture and marketing of commodity oils while retaining its higher margin
value-added oil products business.
Kraft General Foods Canada. Kraft General Foods Canada is responsible for
manufacturing and marketing packaged grocery, coffee and cheese products. Major
brand names include Kraft, Miracle Whip, Philadelphia Brand, Jell-O, Post,
Nabisco (ready-to-eat cereals), Kool-Aid, Baker's, Tang, Parkay, Cool Whip,
Sanka, Maxwell House, Nabob and Magic Moments. The Canadian foodservice
business markets coffee, salad dressings and other Kraft General Foods Canada
products to restaurants, airlines, schools and other institutions. In 1993,
Kraft General Foods Canada acquired Nabob Foods Limited, a manufacturer of
coffee and other packaged goods.
Kraft Foodservice
Kraft Foodservice consists of United States foodservice businesses. Kraft
Foodservice is the second largest broadline distributor of foodservice
products, including food products and supplies manufactured by Kraft General
Foods North America and other suppliers, in the United States.
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Kraft General Foods International
Kraft General Foods International is responsible for manufacturing and
marketing a wide variety of coffee, confectionery, cheese, packaged grocery and
processed meat products in Europe and the Asia/Pacific region, and for the
Company's international foodservice business. International brands include a
wide variety of the products sold by General Foods USA and Kraft USA, as well
as Milka, Tobler, Toblerone, Suchard, Freia, Marabou, Diam, Estrella, Callard &
Bowser, Terry's, Splendid and Cote d'Or confections, Carte Noire, Gevalia,
Grand'Mere, HAG, Jacobs Cafe, Jacobs Kronung, Jacques Vabre, Night & Day and
Saimaza coffees, Negroni and Simmenthal meats, Miracoli pasta dinners, Dairylea
process cheese, Vegemite sandwich spread and Hollywood chewing gum. The
international foodservice business markets cheese, coffee and grocery products
to restaurants, airlines, schools and other institutions.
In 1993, a subsidiary of KGF completed its acquisition of Freia Marabou a.s,
a Scandinavian confectionery and snack food company. In addition, KGF acquired
The Terry's Group, a United Kingdom confectionery company, and companies in
Poland, the Czech Republic, Lithuania, Bulgaria and China.
In Latin America, certain subsidiaries of Philip Morris International
manufacture and market a wide variety of food products, including a number of
the products sold by General Foods USA and Kraft USA, as well as Kibon ice
cream and Suchard confections.
Distribution, Competition and Raw Materials
Sales of products of General Foods USA, Kraft USA and Kraft General Foods
Canada are generally made on the basis of orders by supermarket chains,
wholesalers, club stores, mass merchandisers, distributors and individual
stores. Substantially all products are distributed through retail food outlets,
including club stores and mass merchandisers. Dry grocery products are shipped
to, or picked up by, customers from plants and distribution centers or shipped
to customers from a number of satellite warehouses and other facilities. Frozen
and refrigerated products are shipped from manufacturing locations and from
intermediate company-operated and public cold storage facilities. Fresh baked
goods are delivered daily to depots and then distributed to the retail trade.
Selling efforts are assisted by national and regional advertising on television
and radio and in magazines and newspapers, as well as by sales promotions,
product displays, trade incentives, informative material offered to customers
and other promotional activities. The products of Kraft Food Ingredients are
distributed to food processors, foodservice operators and distributors and
retail food stores. Sales are made primarily through the Kraft Food Ingredients
sales force and, in some instances, independent brokers. Kraft Food Ingredients
maintains warehouse and distribution centers at each of its main manufacturing
facilities.
Local foodservice distribution centers support the operations of Kraft
Foodservice. Each Kraft Foodservice distribution center has a warehouse, sales
office and fleet of trucks to distribute products to customers in its sales
regions.
Products of Kraft General Foods International are sold primarily through
sales offices and agents abroad. The majority of the sales of this operating
unit are derived from Europe. European regional distribution is coordinated
from its headquarters offices located in Zurich, Switzerland and through
facilities located throughout Europe. The Asia/Pacific area operations are
headquartered in Hong Kong. KGF operations outside of the United States and
Canada are directed from the Kraft General Foods International headquarters in
Rye Brook, New York. Advertising is tailored by product and country to reach
targeted audiences.
KGF is subject to highly competitive conditions in virtually all aspects of
its business. Competitors include large national and international companies
and numerous local and regional companies. Its food products also compete with
generic products and private label products of food retailers, wholesalers and
cooperatives. KGF competes primarily on the basis of product quality, service,
marketing, advertising and price.
8
<PAGE>
KGF is a major purchaser of milk, cheese, green coffee beans, poultry, meat
cuts, wheat, cocoa, rice, eggs, shortening, vegetable oil, aspartame, flour,
fruits and berries, sugar, corn syrup, herbs and spices and tomato products.
KGF continuously monitors worldwide supply and cost trends of these commodities
to enable it to take appropriate action to obtain ingredients needed for
production.
KGF purchases all of its milk requirements from outside sources, principally
from cooperatives and individual producers and a substantial part of its
cheddar cheese requirements from outside sources, principally cooperatives and
independent cheese processors, all pursuant to both contractual relationships
and informal arrangements. The prices for United States milk purchases are
substantially influenced by the floor prices established by the milk price
support program administered by the USDA. The prices paid for cheese in the
United States are based upon or substantially influenced by weekly quotations
on the National Cheese Exchange in Green Bay, Wisconsin. See "Regulation"
below.
The most significant cost item in coffee products is green coffee beans,
which are purchased on world markets. Green coffee bean prices are affected by
the quality and availability of supply, trade agreements among producing and
consuming nations, the unilateral policies of the producing nations, changes in
the value of the United States dollar in relation to certain other currencies
and consumer demand for coffee products.
The price paid for poultry (turkey) and meat cuts (pork, beef, turkey and
chicken), the principal raw materials used in manufacturing Oscar Mayer and
Louis Rich branded products, is the major factor in the cost of these products.
Poultry and meat prices are affected by market demand and supply. Meats for
Oscar Mayer processed products are provided primarily by bulk market purchases.
KGF is also a major user of packaging materials purchased from many
suppliers.
The prices paid for food product raw materials generally reflect external
forces, among which weather conditions and commodity market activities are
significant. Although the prices of the principal raw materials required by KGF
can be expected to fluctuate as a result of government actions and/or market
forces (which would directly affect the cost of products and value of
inventories), such materials are generally in adequate supply and available
from numerous sources.
Regulation
Almost all of KGF's United States food products (and packaging materials
therefor) are subject to regulations administered by the Food and Drug
Administration (the "FDA"), or, with respect to products containing meat and
poultry, the USDA. Among other things, the FDA enforces statutory prohibitions
against misbranded and adulterated foods, establishes ingredients and/or
manufacturing procedures for certain standard foods, establishes standards of
identity for food, determines the safety of food substances and establishes
labelling standards for food products. FDA regulations may, in certain
instances, affect the ability of KGF's United States operating units to develop
and market new products and to utilize technological innovations in the
processing of existing products. The Nutrition Labelling and Education Act of
1991 (the "NLEA") mandates nutrition labelling on a majority of the food
products packaged for sale in the United States. In January 1993, the FDA
adopted rules and regulations under the NLEA, including rules requiring
extensive re-labelling of virtually all of the products of General Foods USA
and Kraft USA. Similar rules and regulations have been adopted by the USDA to
cover meat and poultry products. The effective date for the new requirements is
May 1994. Management believes that compliance with the new requirements will
not have a material adverse impact on the Company's results of operations.
In addition, various states regulate the business of KGF's United States
operating units by licensing dairy plants, enforcing federal and state
standards of identity for food, grading food products, inspecting plants,
regulating certain trade practices in connection with the sale of dairy
products and imposing their own labelling requirements on food products.
9
<PAGE>
The prices paid for grade-A raw milk in the United States are controlled in
most areas by Federal Milk Marketing Orders or state regulatory agencies. Such
orders and agencies establish basic minimum prices, with adjustments based upon
usage and geographic location. In some areas, prices for raw milk also include
additional premiums charged by suppliers. In addition, the USDA sets a support
price, which serves as a floor for the price at which the Commodity Credit
Corporation (the "CCC"), an arm of the USDA, will purchase cheese, butter and
milk powder. From time to time, KGF (as well as other cheese producers) sells
excess cheese production to the CCC.
Almost all of the activities of Kraft General Foods International and Kraft
General Foods Canada are subject to the same kinds of regulation as KGF's
United States businesses. Each of the operations and locations of these units
is subject to local and national and, in some cases, international (such as the
European Community) regulatory provisions. The rules and regulations relate to
labelling, packaging, food content, pricing, marketing and advertising and
related areas.
BEER
Products
Miller's major brands are Miller Lite, which was the largest selling reduced-
calorie beer and second largest selling brand in the United States in 1993;
Miller High Life, which, in 1993, was repositioned as a near-premium beer in 40
states by reducing its price; Miller Genuine Draft, which is one of the fastest
growing premium beers in the United States; Meister Brau and Milwaukee's Best,
sold in the below-premium segment of the United States market; Lowenbrau,
brewed and sold in the United States under a license agreement with Lowenbrau
Munchen AG; Sharp's, a brewed non-alcohol beverage; and Miller Reserve, a
super-premium beer introduced in 1992. Miller Lite, Miller Genuine Draft,
Milwaukee's Best and Miller High Life are among the top ten selling beers in
the United States. Shipment volume of Miller beer and brewed non-alcohol
beverages (including exports) increased 4.3% in 1993 compared with 1992. This
increase resulted principally from the acquisition of Molson Breweries U.S.A.,
Inc. and higher volumes for Miller High Life and Miller Genuine Draft. In 1993,
Miller High Life shipments, in aggregate, increased 11.0%, as a result of being
repositioned as a near-premium beer in 40 states. Miller shipments in the
premium segment (excluding Miller High Life) were up .6%, reflecting volume
growth in Miller Genuine Draft, partially offset by declines in Miller Lite.
Shipments in the below-premium segment were down .9%.
The following table sets forth, based on shipments, the industry's sales of
beer and brewed non-alcohol beverages as estimated by Miller, Miller's unit
sales and its share of industry sales:
<TABLE>
<CAPTION>
YEARS ENDED MILLER'S SHARE
DECEMBER 31 INDUSTRY MILLER OF INDUSTRY
----------- ------------- ------------ --------------
(IN THOUSANDS OF BARRELS) (%)
<S> <C> <C> <C>
1993............................. 197,966 44,024 22.2
1992............................. 197,253 42,145 21.4
1991............................. 196,156 43,556 22.2
</TABLE>
In 1993, Miller acquired a 20% equity interest in Canada's Molson Breweries
and all of the United States import operations of Molson Breweries U.S.A.,
Inc., including United States marketing and distribution rights for Molson
brands.
Distribution, Competition and Raw Materials
Beer products are distributed primarily through independent beer wholesalers.
The United States malt beverage industry is highly competitive, with the
principal methods of competition being product quality, price, distribution,
marketing and advertising. Miller engages in a wide variety of advertising and
sales promotion activities. Barley, hops, corn and water represent the
principal ingredients used in manufacturing Miller's beer products and are
generally available in the market. The production process, which includes
fermentation and aging periods, is conducted throughout the year and at any one
time Miller has on hand
10
<PAGE>
only a small quantity of finished products. Containers (bottles, cans and kegs)
for beer products are purchased from various suppliers.
Regulation
The Alcoholic Beverage Labeling Act of 1988 requires all alcoholic beverages
manufactured for sale in the United States to include the following warning
statement on containers: GOVERNMENT WARNING: (1) According to the Surgeon
General, women should not drink alcoholic beverages during pregnancy because of
the risk of birth defects; (2) Consumption of alcoholic beverages impairs your
ability to drive a car or operate machinery and may cause health problems. The
statute empowers the Bureau of Alcohol, Tobacco and Firearms (the "BATF") to
promulgate regulations to prescribe the size and format of the warning. The
BATF has published a notice in the Federal Register seeking information which
will enable the BATF to report to Congress as to whether the wording of the
warning statement should be amended. In addition, various legislative and
regulatory proposals to prohibit or restrict the advertising and marketing of
alcoholic beverages are being considered. Such warning statement requirements
and any restrictions on advertising and marketing, if enacted, could have an
adverse impact on Miller's sales, but it is not possible to predict their long-
term effects or whether such additional restrictions will be enacted.
The federal excise tax is 32 cents per package of six 12-ounce containers.
Excise taxes, sales taxes and other taxes affecting beer are also levied by
various states, counties and municipalities. In the opinion of management, the
federal excise tax, which doubled in 1991, has had and could continue to have
an adverse effect on sales.
FINANCIAL SERVICES AND REAL ESTATE
Philip Morris Capital Corporation ("PMCC") invests in leveraged and single-
investor leases and other tax-oriented financing transactions and third-party
financial instruments and also engages in various financing activities for
customers and suppliers of the Company's other subsidiaries. Total assets
increased to $5.7 billion at year-end 1993 as compared to $5.3 billion at year-
end 1992, reflecting among other things the net investment of an additional $70
million in finance assets and limited partnerships and $150 million of
unrealized appreciation on securities available for sale recognized pursuant to
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," adopted effective December 31, 1993.
Mission Viejo Company ("Mission Viejo"), a wholly-owned subsidiary of PMCC,
is engaged principally in land planning, development and sales in southern
California and in the Denver, Colorado area.
CUSTOMERS
None of the Company's business segments is dependent upon a single customer
or a few customers, the loss of which would have a material adverse effect on
the Company's results of operations.
EMPLOYEES
At December 31, 1993, the Company employed approximately 173,000 people
worldwide.
TRADEMARKS
Trademarks are of material importance to all three of the Company's consumer
products businesses and are protected by registration or otherwise in the
United States and most other markets where the related products are sold.
ENVIRONMENTAL REGULATION
The Company and its subsidiaries are subject to various federal, state and
local laws and regulations and involved in proceedings thereunder concerning
the discharge of materials into the environment or otherwise related to
environmental protection, including the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act and the Comprehensive Environmental
Response, Compensation and
11
<PAGE>
Liability Act (commonly known as "Superfund"). In 1993, subsidiaries (or former
subsidiaries) of the Company were parties to approximately 134 proceedings
involving potential liability under Superfund and for other environmental
project clean-up costs. The Company and its subsidiaries expect to continue to
make capital and other expenditures in connection with environmental laws and
regulations. Compliance with such laws and regulations, including the payment
of any monetary sanctions resulting from governmental proceedings, and the
making of such expenditures are not expected to have a material adverse effect
on the Company's results of operations, capital expenditures or competitive
position.
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The amounts of operating revenues, operating profit and identifiable assets
attributable to each of the Company's geographic regions and the amount of
export sales from the United States for each of the last three fiscal years are
set forth in note 11 to the Company's consolidated financial statements
incorporated herein by reference to the Company's annual report to stockholders
for the year ended December 31, 1993.
KGF, Miller and subsidiaries of Philip Morris International export coffee
products, grocery products, cheese, processed meats, beer, tobacco and tobacco
related products. In 1993 the value of all exports from the United States by
these subsidiaries amounted to approximately $4.5 billion.
ITEM 2. PROPERTIES.
TOBACCO PRODUCTS
Philip Morris U.S.A. owns nine tobacco manufacturing and processing
facilities -- six in the Richmond, Virginia area, two in Louisville, Kentucky
and one in Cabarrus County, North Carolina. Philip Morris U.S.A. owns or leases
other premises and facilities, including an operations center, a research and
development facility and various administrative facilities in Richmond and an
engineering center in York County, Virginia. Subsidiaries and affiliates of
Philip Morris International own or lease cigarette manufacturing facilities in
28 countries outside the United States.
FOOD PRODUCTS
The Company's subsidiaries have 122 manufacturing and processing facilities,
560 distribution centers and depots and 250 various other facilities in the
United States, as well as 119 foreign manufacturing and processing facilities
in 30 countries and various distribution and other facilities outside the
United States. All significant plants and properties used for production of
food products are owned, although the majority of the domestic distribution
centers and depots are leased.
BEER
Miller currently owns and operates eight breweries, located in Milwaukee,
Wisconsin; Fulton, New York (scheduled to close in 1994); Fort Worth, Texas;
Eden, North Carolina; Albany, Georgia; Irwindale, California; Trenton, Ohio;
and Chippewa Falls, Wisconsin. Miller owns a malting facility, a hops
conversion facility and a can and bottle carrier facility. Miller owns six
distributorships and owns or leases warehouses in several locations. During
1993, Miller sold its can manufacturing plants and, in February 1994, entered
into an agreement to sell its glass-making plant.
GENERAL
The plants and properties owned and operated by the Company's subsidiaries
are maintained in good condition and are believed to be suitable and adequate
for present needs. In the fourth quarter of 1993, the Company provided for the
costs of restructuring its worldwide operations. The charge related primarily
to the downsizing or closure of approximately 40 manufacturing and other
facilities (including the Fulton, New York brewery noted above). Writedowns of
such facilities included in the restructuring charge were $429 million, of
which $141 million, $211 million and $77 million related to tobacco, food and
beer facilities, respectively.
12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
Reference is made to "Tobacco Products -- Smoking and Health and Related
Matters" under Item 1 for a description of certain litigation relating to
smoking and health, to note 15 to the Company's consolidated financial
statements, incorporated herein by reference to the Company's annual report to
stockholders for the year ended December 31, 1993, for a description of certain
pending purported shareholder class actions and to "Environmental Regulation"
under Item 1 for a description of certain proceedings relating to environmental
compliance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
----------------
EXECUTIVE OFFICERS OF THE COMPANY
The following are the executive officers of the Company as of March 1, 1994
(a):
<TABLE>
<CAPTION>
NAME OFFICE AGE
---- ------ ---
<S> <C> <C>
Michael A. Miles........ Chairman of the Board and Chief Executive Officer 54
William Murray.......... President and Chief Operating Officer 58
Geoffrey C. Bible....... Executive Vice President, Worldwide Tobacco 56
John M. Keenan.......... President and Chief Executive Officer of Kraft General
Foods International 57
John N. MacDonough...... Chairman and Chief Executive Officer of Miller 50
Richard P. Mayer........ Chairman and Chief Executive Officer of Kraft General
Foods North America 53
Hans G. Storr........... Executive Vice President and Chief Financial Officer;
Chairman and Chief Executive Officer of PMCC 62
Murray H. Bring......... Senior Vice President and General Counsel 59
Craig L. Fuller......... Senior Vice President 43
Marc S. Goldberg........ Senior Vice President 50
John J. Tucker.......... Senior Vice President 53
Dede Thompson Bartlett.. Vice President and Secretary 50
Bruce S. Brown.......... Vice President 54
George R. Lewis......... Vice President and Treasurer 52
Kathleen M. Linehan..... Vice President 43
Katherine P. Wickham.... Vice President and Controller 45
</TABLE>
- --------
(a) Set forth as part of Part I pursuant to General Instruction G(3) to Form
10-K and Instruction 3 to Item 401(b) of Regulation S-K.
All of the above-mentioned officers, with the exception of Messrs.
MacDonough, Mayer and Fuller and Mrs. Bartlett, have been employed by the
Company in various capacities during the past five years. Mr. MacDonough was
Vice President, Brand Management of Anheuser-Busch, Inc. from 1989 to 1990,
Executive Vice President, Marketing of Anheuser-Busch International, Inc. from
1991 until September 1992, when he became President and Chief Operating Officer
of Miller. He assumed his current position in September 1993. Mr. Mayer was
Chairman of the Board and Chief Executive Officer of Kentucky Fried Chicken
Corporation from 1982 until July 1989, when he became President of General
Foods USA. He assumed his current position in April 1991. Mr. Fuller was Chief
of Staff for then Vice President George Bush from 1985 to 1989. In 1989, he
joined Wexler, Reynolds, Harrison & Schule, Inc. and became its President. In
1990, after Wexler, Reynolds, Harrison & Schule, Inc. merged with Hill and
Knowlton, he held a succession of positions with Hill and Knowlton and became
President and Chief Executive Officer of Hill and Knowlton USA in October 1991.
He assumed his present position in January 1992. Mrs. Bartlett was President
and Director of The Mobil Foundation from 1984 to 1987, Corporate Secretary and
Secretary to the Board of Directors of Mobil Corporation from 1987 to 1990 and
a consultant on board of director issues, corporate governance and public
affairs from 1990 to 1991. She assumed her current position in December 1991.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information called for by Items 5, 6 and 7 is hereby incorporated by
reference to the following captioned paragraphs (at the pages indicated) in the
Company's annual report to stockholders for the year ended December 31, 1993
and made a part hereof:
<TABLE>
<CAPTION>
PAGES IN
ANNUAL
ITEM PARAGRAPH CAPTION IN ANNUAL REPORT REPORT
---- ---------------------------------- --------
<C> <S> <C>
5 Quarterly Financial Data (Unaudited).......................... 43
5 Short-Term Borrowings and Borrowing Arrangements.............. 34
6 Selected Financial Data....................................... 26
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 20-25
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by this Item is hereby incorporated by reference
to the Company's annual report to stockholders for the year ended December 31,
1993 as set forth under the caption "Quarterly Financial Data (Unaudited)" on
page 43 and in the Index to Consolidated Financial Statements and Schedules
(see Item 14) and made a part hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except for the information relating to the executive officers of the Company
set forth in Part I of this Report, the information called for by Items 10, 11,
12 and 13 is hereby incorporated by reference to the Company's definitive proxy
statement in connection with its annual meeting of stockholders to be held on
April 21, 1994, filed with the Securities and Exchange Commission and made a
part hereof.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Index to Consolidated Financial Statements and Schedules
<TABLE>
<CAPTION>
REFERENCE
-----------------------------
FORM 10-K ANNUAL REPORT
ANNUAL REPORT TO STOCKHOLDERS
PAGE PAGE
------------- ---------------
<S> <C> <C>
Data incorporated by reference to the
Company's annual report to stockholders for
the year ended December 31, 1993:
Consolidated Balance Sheets at December 31,
1993 and 1992 -- 28 - 29
Consolidated Statements of Earnings for the
years ended December 31, 1993, 1992 and
1991....................................... -- 30
Consolidated Statements of Stockholders' Eq-
uity for the years ended December 31, 1993,
1992 and 1991.............................. -- 32
Consolidated Statements of Cash Flows for
the years ended December 31, 1993, 1992 and
1991....................................... -- 30 - 31
Notes to Consolidated Financial Statements.. -- 33 - 43
Report of Independent Accountants........... -- 44
Data submitted herewith:
Report of Independent Accountants........... S-1 --
Financial Statement Schedules:
VII-- Guarantees of Securities of Other
Issuers........................... S-2 --
VIII-- Valuation and Qualifying Accounts.. S-3 --
IX-- Short-Term Borrowings ............... S-4 --
X-- Supplementary Income Statement Informa-
tion.................................... S-5 --
</TABLE>
Schedules other than those listed above have been omitted either because the
required information is contained in notes to the consolidated financial
statements or because such schedules are not required or are not applicable.
(b) Reports on Form 8-K: The Company filed a Current Report on Form 8-K,
dated November 24, 1993 in connection with restructuring charges and the
adoption of SFAS No. 112 during the last quarter of the period for which this
Report is filed.
(c) The following exhibits are filed as part of this Report (Exhibit Nos.
10.1-10.24 are management contracts, compensatory plans or arrangements):
<TABLE>
<S> <C>
1.1. Form of Underwriting Agreement, including form of terms agreement.
1.2. Form of First Amendment to Selling Agency Agreement.
3.1. Restated Articles of Incorporation of the Company. (1)
3.2. By-Laws, as amended, of the Company.
4.1. Plan of Exchange and Articles of Incorporation. (2)
4.2. Indenture between the Company and Bankers Trust Company, Trustee (Chemical
Bank, Successor Trustee), dated as of December 1, 1985. (3)
4.3. Tripartite Agreement dated as of February 19, 1986 among the Company, Bank-
ers Trust Company and Chemical Bank. (3)
4.4. First Supplemental Indenture dated as of August 1, 1986 to the Indenture
dated as of December 1, 1985 between the Company and Chemical Bank, Succes-
sor Trustee. (4)
4.5. Second Supplemental Indenture dated as of November 1, 1986 to the Indenture
dated as of December 1, 1985 between the Company and Chemical Bank, Succes-
sor Trustee. (4)
4.6. Amended and Restated Indenture, dated as of April 1, 1988 between the Com-
pany and Chemical Bank, as Trustee. (5)
4.7. First Supplemental Indenture dated as of December 1, 1988 to the Amended
and Restated Indenture, dated as of April 1, 1988, between the Company and
Chemical Bank, as Trustee. (6)
4.8. Indenture dated as of August 1, 1990 between the Company and Chemical Bank,
Trustee. (7)
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
4.9. First Supplemental Indenture dated as of February 1, 1991 to Indenture dat-
ed as of August 1, 1990 between the Company and Chemical Bank, Trustee. (8)
4.10. Second Supplemental Indenture dated as of January 21, 1992 to Indenture
dated as of August 1, 1990 between the Company and Chemical Bank, Trustee.
(9)
4.11. 5-Year Loan and Guaranty Agreement dated as of December 17, 1993 among the
Company, the Banks named therein and Citibank, N.A., as Agent.
4.12. 364-Day Loan and Guaranty Agreement dated as of December 17, 1993 among the
Company, the Banks named therein and Citibank, N.A., as Agent.
4.13. Rights Agreement, dated as of October 25, 1989, between the Company and
First Chicago Trust Company of New York. (10)
4.14. Copies of other instruments defining the rights of holders of long-term
debt of the Company and its subsidiaries are not filed herewith because the
aggregate amount of securities authorized under each of such other instru-
ments is less than 10% of the consolidated assets of the Company and its
subsidiaries. The Company hereby agrees that it will furnish to the Securi-
ties and Exchange Commission a copy of each such other instrument upon the
Commission's request.
10.3. Financial Counseling Program of Philip Morris Incorporated and the Company.
(11)
10.4. Philip Morris Benefit Equalization Plan, as amended. (11)
10.5. Amendments, as of October 25, 1989, to the Philip Morris Benefit Equaliza-
tion Plan, as amended. (10)
10.6. Automobile Policy of Philip Morris Incorporated and the Company. (11)
10.8. Pension Plan for Directors of the Company, effective July 1, 1989, as
amended. (1)
10.9. 1982 Stock Option Plan, as amended. (11)
10.10. The Philip Morris 1987 Long Term Incentive Plan, as amended. (12)
10.12. Form of Executive Master Trust between the Company, Chemical Bank and Handy
Associates. (10)
10.13. Agreement, dated October 12, 1987, between the Company and Murray H. Bring,
as amended.
10.14. Agreement, dated November 1, 1989, between the Company and Murray H. Bring.
(10)
10.17. Deferred Incentive Payment Agreement between the Company and Michael A.
Miles, dated March 8, 1989. (13)
10.18. Amendment, dated November 1, 1989, to the Deferred Incentive Payment Agree-
ment between the Company and Michael A. Miles, dated March 8, 1989. (10)
10.19. Agreement, dated November 1, 1989, between the Company and Michael A.
Miles. (10)
10.20. Form of Employment Agreement between the Company and its executive offi-
cers. (10)
10.22. Supplemental Management Employees' Retirement Plan of the Company, as
amended. (12)
10.23. The Philip Morris 1992 Incentive Compensation and Stock Option Plan. (14)
10.24. 1992 Compensation Plan for Non-Employee Directors, as amended. (4)
12. Statements re computation of ratios.
13. Pages 20-44 of the Company's annual report to stockholders for the year
ended December 31, 1993, but only to the extent set forth in Items 1, 5, 6,
7, 8 and 14 hereof. With the exception of the aforementioned information
incorporated by reference in this Annual Report on Form 10-K, the Company's
annual report to stockholders for the year ended December 31, 1993 is not
to be deemed "filed" as part of this Report.
21. Subsidiaries of the Company.
23. Consent of independent accountants.
24. Powers of attorney.
</TABLE>
- --------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1989.
(2) Incorporated by reference to the Company's Registration Statement on Form
S-14 (No. 2-96149) dated March 1, 1985.
16
<PAGE>
(3) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-6525) dated June 13, 1986.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992.
(5) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-21033) dated April 7, 1988.
(6) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-25906) dated December 8, 1988.
(7) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-36450) dated August 22, 1990.
(8) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-39059) dated February 21, 1991.
(9) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-45210) dated January 22, 1992.
(10) Incorporated by reference to the Company's Current Report on Form 8-K
dated November 8, 1989.
(11) Incorporated by reference to the Company's Registration Statement on Form
8-B dated July 1, 1985.
(12) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1990.
(13) Incorporated by reference to the Company's Form SE dated March 30, 1989,
constituting a part of the Company's Annual Report on Form 10-K for the
year ended December 31, 1988.
(14) Incorporated by reference to the Company's Proxy Statement in connection
with its annual meeting of stockholders held on April 23, 1992, filed on
March 12, 1992.
17
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Philip Morris Companies Inc.
/s/ Michael A. Miles
Date: March 16, 1994 By:_________________________________
(Michael A. Miles,
Chairman of the Board)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:
SIGNATURE TITLE DATE
/s/ Michael A. Miles
____________________________________ Director, Chairman March 16, 1994
of the Board and
(Michael A. Miles) Chief Executive
Officer
/s/ Hans G. Storr
____________________________________ Director, March 16, 1994
Executive Vice
(Hans G. Storr) President and
Chief Financial
Officer
/s/ Katherine P. Wickham
____________________________________ Vice President and March 16, 1994
Controller
(Katherine P. Wickham)
*Elizabeth E. Bailey, Murray H.
Bring, Harold Brown, Jose Antonio
Cordido-Freytes, William H.
Donaldson, Paul W. Douglas, Jane
Evans, Robert E. R. Huntley, Hamish
Maxwell, T. Justin Moore, Jr.,
Rupert Murdoch, William Murray,
John D. Nichols, Richard D.
Parsons, Roger S. Penske, John S.
Reed, John M. Richman, Stephen M.
Wolf,
Directors
/s/ Hans G. Storr March 16, 1994
*By_________________________________
(Hans G. Storr
Attorney-in-fact)
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on our audits of the consolidated financial statements of Philip
Morris Companies Inc. has been incorporated by reference in this Form 10-K from
the 1993 annual report to stockholders of Philip Morris Companies Inc. and
appears on page 44 therein. In connection with our audits of such financial
statements, we have also audited the related financial statement schedules
listed in the index in Item 14(a) on page 15 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand
Coopers & Lybrand
New York, New York
January 24, 1994
S-1
<PAGE>
PHILIP MORRIS COMPANIES INC. AND SUBSIDIARIES
SCHEDULE VII -- GUARANTEES OF SECURITIES OF OTHER ISSUERS
AS OF DECEMBER 31, 1993
(IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C (a) COL. F
-------------- ------------ -------------------------- ------------
AMOUNT
NAME OF ISSUER TITLE OF
OF SECURITIES SECURITIES NATURE OF
GUARANTEED GUARANTEED GUARANTEED AND OUTSTANDING GUARANTEE
-------------- ------------ -------------------------- ------------
Consumer Products:
<S> <C> <C> <C>
Compagnie (pounds)610 $909 Guarantee of
Financiere million principal
Richemont AG 10 1/4% and interest
Sterling
Notes
maturing in
1994
Other (b) Various $ 23 Primarily
notes guarantees
of principal
and interest
Financial Services and
Real Estate:
Various special- Various $130 Primarily
purpose municipal letters of guarantees
districts credit of principal
established in supporting and 210 days
connection with the long-term of interest
development of bonds issued
Highlands Ranch by such
properties of districts
Mission Viejo
Company in Douglas
County, Colorado
</TABLE>
- --------
Notes:
(a) None of the above securities were owned by the Company, held in treasury
of the applicable issuer, or in default. Accordingly, columns D, E and G
have been omitted from this Schedule.
(b) Primarily former subsidiaries of the Company.
S-2
<PAGE>
PHILIP MORRIS COMPANIES INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ---------- --------------------- ---------- ----------
ADDITIONS
---------------------
(1) (2)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ---------- ----------
(a) (b)
<S> <C> <C> <C> <C> <C>
1993:
Consumer Products:
Allowance for dis-
counts............... $ 23 $572 $ -- $577 $ 18
Allowance for doubtful
accounts............. 157 35 2 41 153
Allowance for returned
goods................ 7 134 -- 137 4
---- ---- ---- ---- ----
$187 $741 $ 2 $755 $175
==== ==== ==== ==== ====
Financial Services and
Real Estate:
Provision for losses.. $ 94 $ -- $ -- $ -- $ 94
==== ==== ==== ==== ====
1992:
Consumer Products:
Allowance for dis-
counts............... $ 23 $585 $ -- $585 $ 23
Allowance for doubtful
accounts............. 133 40 26 42 157
Allowance for returned
goods................ 6 55 -- 54 7
---- ---- ---- ---- ----
$162 $680 $ 26 $681 $187
==== ==== ==== ==== ====
Financial Services and
Real Estate:
Provision for losses.. $ 81 $ 13 $ -- $ -- $ 94
==== ==== ==== ==== ====
1991:
Consumer Products:
Allowance for dis-
counts............... $ 22 $550 $ -- $549 $ 23
Allowance for doubtful
accounts............. 164 46 2 79(c) 133
Allowance for returned
goods................ 10 41 -- 45 6
---- ---- ---- ---- ----
$196 $637 $ 2 $673 $162
==== ==== ==== ==== ====
Financial Services and
Real Estate:
Provision for losses.. $ 49 $ 32 $ -- $ -- $ 81
==== ==== ==== ==== ====
</TABLE>
- --------
Notes:
(a) Related to acquisitions.
(b) Represents charges for which allowances were created.
(c) Includes adjustments to Jacobs Suchard acquisition balance sheet of $11
million.
S-3
<PAGE>
PHILIP MORRIS COMPANIES INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------ ------ ------ ------ ------
WEIGHTED WEIGHTED
AVERAGE MAXIMUM AVERAGE AVERAGE
INTEREST AMOUNT AMOUNT INTEREST
BALANCE AT RATE AT OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE END OF END OF DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD PERIOD PERIOD PERIOD PERIOD
--------------------- ---------- -------- ----------- ----------- ----------
(a) (b) (c)
<S> <C> <C> <C> <C> <C>
1993:
Consumer Products:
Bank loans............ $ 276 9.3% $ 276 $ 211 10.1%
Commercial paper...... 2,288 3.4% 4,949 3,752 3.2%
Amount reclassified to
long-term debt....... (2,296)
------
$ 268
======
Financial Services and
Real Estate:
Commercial paper...... $ 929 3.3% $ 932 $ 813 3.1%
======
1992:
Consumer Products:
Bank loans............ $ 158 7.6% $ 338 $ 201 9.2%
Commercial paper...... 1,190 3.5% 2,698 1,528 4.1%
------
$1,348
======
Financial Services and
Real Estate:
Commercial paper...... $ 758 3.4% $ 911 $ 683 3.7%
======
1991:
Consumer Products:
Bank loans............ $ 338 8.9% $1,661 $ 577 9.4%
Commercial paper...... 1,686 5.4% 6,209 3,562 6.5%
Amount reclassified to
long-term debt....... (1,510)
------
$ 514
======
Financial Services and
Real Estate:
Commercial paper...... $ 818 4.9% $ 885 $ 723 6.0%
======
</TABLE>
- --------
Notes:
(a) The Company's credit facilities include a revolving bank credit agreement
which enables the Company to refinance short-term debt on a long-term
basis. Accordingly, short-term borrowings at December 31, 1993 and 1991
intended to be refinanced were reclassified to long-term debt.
(b) The average amount outstanding was computed primarily on a daily average
basis.
(c) The weighted average interest rate is based on the total interest
incurred for the period divided by the average amount outstanding during
the period and presented in Column E.
S-4
<PAGE>
PHILIP MORRIS COMPANIES INC. AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B
-------- --------------------
CHARGED TO
ITEM COSTS AND EXPENSES
---- --------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
1. Maintenance and repairs................................ $ 927 $ 964 $ 948
2. Advertising costs (a).................................. $2,356 $2,419 $2,420
</TABLE>
- --------
Note:
(a) Advertising comprises public media and direct mail expenses only.
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
1.1. Form of Underwriting Agreement, including form of terms agreement.
1.2. Form of First Amendment to Selling Agency Agreement.
3.1. Restated Articles of Incorporation of the Company. (1)
3.2. By-Laws, as amended, of the Company.
4.1. Plan of Exchange and Articles of Incorporation. (2)
4.2. Indenture between the Company and Bankers Trust Company, Trustee (Chemical
Bank, Successor Trustee), dated as of December 1, 1985. (3)
4.3. Tripartite Agreement dated as of February 19, 1986 among the Company, Bank-
ers Trust Company and Chemical Bank. (3)
4.4. First Supplemental Indenture dated as of August 1, 1986 to the Indenture
dated as of December 1, 1985 between the Company and Chemical Bank, Succes-
sor Trustee. (4)
4.5. Second Supplemental Indenture dated as of November 1, 1986 to the Indenture
dated as of December 1, 1985 between the Company and Chemical Bank, Succes-
sor Trustee. (4)
4.6. Amended and Restated Indenture, dated as of April 1, 1988 between the Com-
pany and Chemical Bank, as Trustee. (5)
4.7. First Supplemental Indenture dated as of December 1, 1988 to the Amended
and Restated Indenture, dated as of April 1, 1988, between the Company and
Chemical Bank, as Trustee. (6)
4.8. Indenture dated as of August 1, 1990 between the Company and Chemical Bank,
Trustee. (7)
4.9. First Supplemental Indenture dated as of February 1, 1991 to Indenture dat-
ed as of August 1, 1990 between the Company and Chemical Bank, Trustee. (8)
4.10. Second Supplemental Indenture dated as of January 21, 1992 to Indenture
dated as of August 1, 1990 between the Company and Chemical Bank,
Trustee. (9)
4.11. 5-Year Loan and Guaranty Agreement dated as of December 17, 1993 among the
Company, the Banks named therein and Citibank, N.A., as Agent.
4.12. 364-Day Loan and Guaranty Agreement dated as of December 17, 1993 among the
Company, the Banks named therein and Citibank, N.A., as Agent.
4.13. Rights Agreement, dated as of October 25, 1989, between the Company and
First Chicago Trust Company of New York. (10)
4.14. Copies of other instruments defining the rights of holders of long-term
debt of the Company and its subsidiaries are not filed herewith because the
aggregate amount of securities authorized under each of such other instru-
ments is less than 10% of the consolidated assets of the Company and its
subsidiaries. The Company hereby agrees that it will furnish to the Securi-
ties and Exchange Commission a copy of each such other instrument upon the
Commission's request.
10.3. Financial Counseling Program of Philip Morris Incorporated and the
Company. (11)
10.4. Philip Morris Benefit Equalization Plan, as amended. (11)
10.5. Amendments, as of October 25, 1989, to the Philip Morris Benefit Equaliza-
tion Plan, as amended. (10)
10.6. Automobile Policy of Philip Morris Incorporated and the Company. (11)
10.8. Pension Plan for Directors of the Company, effective July 1, 1989, as
amended. (1)
10.9. 1982 Stock Option Plan, as amended. (11)
10.10. The Philip Morris 1987 Long Term Incentive Plan, as amended. (12)
10.12. Form of Executive Master Trust between the Company, Chemical Bank and Handy
Associates. (10)
10.13. Agreement, dated October 12, 1987, between the Company and Murray H. Bring,
as amended.
10.14. Agreement, dated November 1, 1989, between the Company and Murray H.
Bring. (10)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
10.17. Deferred Incentive Payment Agreement between the Company and Michael A.
Miles, dated March 8, 1989. (13)
10.18. Amendment, dated November 1, 1989, to the Deferred Incentive Payment Agree-
ment between the Company and Michael A. Miles, dated March 8, 1989. (10)
10.19. Agreement, dated November 1, 1989, between the Company and Michael A.
Miles. (10)
10.20. Form of Employment Agreement between the Company and its executive offi-
cers. (10)
10.22. Supplemental Management Employees' Retirement Plan of the Company, as
amended. (12)
10.23. The Philip Morris 1992 Incentive Compensation and Stock Option Plan. (14)
10.24. 1992 Compensation Plan for Non-Employee Directors, as amended. (4)
12. Statements re computation of ratios.
13. Pages 20-44 of the Company's annual report to stockholders for the year
ended December 31, 1993, but only to the extent set forth in Items 1, 5, 6,
7, 8 and 14 hereof. With the exception of the aforementioned information
incorporated by reference in this Annual Report on Form 10-K, the Company's
annual report to stockholders for the year ended December 31, 1993 is not
to be deemed "filed" as part of this Report.
21. Subsidiaries of the Company.
23. Consent of independent accountants.
24. Powers of attorney.
</TABLE>
- --------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1989.
(2) Incorporated by reference to the Company's Registration Statement on Form
S-14 (No. 2-96149) dated March 1, 1985.
(3) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-6525) dated June 13, 1986.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992.
(5) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-21033) dated April 7, 1988.
(6) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-25906) dated December 8, 1988.
(7) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-36450) dated August 22, 1990.
(8) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-39059) dated February 21, 1991.
(9) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-45210) dated January 22, 1992.
(10) Incorporated by reference to the Company's Current Report on Form 8-K
dated November 8, 1989.
(11) Incorporated by reference to the Company's Registration Statement on Form
8-B dated July 1, 1985.
(12) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1990.
(13) Incorporated by reference to the Company's Form SE dated March 30, 1989,
constituting a part of the Company's Annual Report on Form 10-K for the
year ended December 31, 1988.
(14) Incorporated by reference to the Company's Proxy Statement in connection
with its annual meeting of stockholders held on April 23, 1992, filed on
March 12, 1992.
<PAGE>
EXHIBIT 1.1
PHILIP MORRIS COMPANIES INC.
DEBT SECURITIES, WARRANTS TO PURCHASE DEBT SECURITIES
AND CURRENCY WARRANTS
UNDERWRITING AGREEMENT
----------------------
DATED AS OF JANUARY 1, 1994
1. Introductory. Philip Morris Companies Inc., a Virginia corporation
("Company"), proposes to issue and sell from time to time certain of its debt
securities and warrants to purchase certain of its debt securities in an
aggregate principal amount expressed in U.S. dollars or in such foreign
currencies or currency units as the Company shall designate at the time of
offering, and currency warrants representing the right to receive from the
Company the cash value in U.S. dollars of the right to purchase and/or sell a
designated amount of U.S. dollars for a designated amount (the "Base Currency
Amount") of a specified foreign currency or currency unit (a "Base Currency")
as shall be determined by the Company at the time of offering. Such debt
securities, warrants, debt securities subject to such warrants and currency
warrants, registered under the registration statement referred to in Section
2(a), are hereinafter collectively referred to as "Registered Securities".
Registered Securities involved in any offering referred to below are
hereinafter collectively referred to as "Securities", such debt securities that
are Securities are hereinafter referred to as "Purchased Debt Securities",
warrants to purchase debt securities that are Securities are hereinafter
referred to as "Debt Warrants", debt securities subject to warrants that are
Securities are hereinafter referred to as "Warrant Debt Securities", currency
warrants are hereinafter collectively referred to as "Currency Warrants",
Purchased Debt Securities and Warrant Debt Securities are hereinafter
collectively referred to as "Debt Securities" and Purchased Debt Securities,
Debt Warrants and Currency Warrants are hereinafter collectively referred to as
"Purchased Securities". The Debt Securities will be issued under an Indenture,
dated as of August 1, 1990, as supplemented and amended by a First Supplemental
Indenture dated as of February 1, 1991 and a Second Supplemental Indenture
dated as of January 21, 1992 ("Indenture"), between the Company and Chemical
Bank, as Trustee, the Debt Warrants will be issued under a debt warrant
agreement (the "Debt Warrant Agreement"), between the Company and a bank or
trust company, as Debt Warrant Agent, specified in the Terms Agreement referred
to in Section 3 and the Currency Warrants will be issued under a currency
warrant agreement (the "Currency Warrant Agreement"), between the Company and a
bank or trust company, as Currency Warrant Agent, specified in the applicable
Terms Agreement, in one or more series or issues, which may vary as to interest
rates, maturities, redemption provisions, exercise prices, expiration dates,
selling prices, currency or currency units and other terms, with in each case
all such terms for any particular Registered Securities being determined at the
time of sale. Particular Purchased Securities will be sold pursuant to a Terms
Agreement and for resale in accordance with terms of offering determined at the
time of sale.
The firm or firms which agree to purchase the Purchased Securities are
hereinafter referred to as the "Underwriters" of such Purchased Securities, and
the representative or representatives of the Underwriters, if any, specified in
a Terms Agreement referred to in Section 3 are hereinafter referred to as the
"Representatives"; provided, however, that if the Terms Agreement does not
specify any representative of the Underwriters, the term "Representatives", as
used in this Agreement (other than in Sections 2(b), 6 and 7 and the second
sentence of Section 3), shall mean the Underwriters.
2. Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, each Underwriter that:
(a) A registration statement (No. 33-49195), including a prospectus,
relating to the Registered Securities has been filed with the Securities
and Exchange Commission ("Commission") and has become effective. Such
registration statement, as amended at the time of any Terms Agreement
referred to in Section 3, is hereinafter referred to as the "Registration
Statement", and the prospectus included in such Registration Statement, as
supplemented as contemplated by Section 3 to reflect the terms of the
Securities and the terms of offering thereof, including all material
incorporated by reference therein, is hereinafter referred to as the
"Prospectus".
1
<PAGE>
(b) On the effective date of the registration statement relating to the
Registered Securities, such registration statement conformed in all
respects to the requirements of the Securities Act of 1933 ("Act"), the
Trust Indenture Act of 1939 ("Trust Indenture Act") and the rules and
regulations of the Commission ("Rules and Regulations") and did not include
any 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
not misleading, and, on the date of each Terms Agreement referred to in
Section 3 and on each Closing Date as defined in Section 3, the
Registration Statement and the Prospectus will conform in all respects to
the requirements of the Act, the Trust Indenture Act and the Rules and
Regulations, and neither of such documents will include any 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 not
misleading, except that the foregoing does not apply to statements in or
omissions from any of such documents based upon written information
furnished to the Company by any Underwriter through the Representatives, if
any, specifically for use therein.
3. Purchase and Offering of Securities. The obligation of the Underwriters to
purchase the Purchased Securities will be evidenced by an exchange of
telegraphic or other written communications ("Terms Agreement") at the time the
Company determines to sell the Purchased Securities. The Terms Agreement will
incorporate by reference the provisions of this Agreement, except as otherwise
provided therein, and will specify the firm or firms which will be
Underwriters, the names of any Representatives, the principal amount of
Purchased Debt Securities, the number of Debt Warrants and the number of
Currency Warrants to be purchased by each Underwriter, the purchase price to be
paid by the Underwriters and the terms of the Purchased Securities not already
specified in the Indenture, the Debt Warrant Agreement or the Currency Warrant
Agreement, as the case may be, including, but not limited to, interest rate,
maturity, any redemption provisions and any sinking fund requirements, the
exercise price of the Debt Warrants to be purchased, the principal amount of
Warrant Debt Securities issuable upon exercise of one such Debt Warrant, the
date after which such Debt Warrants are exercisable, the expiration date
thereof and the date, if any, such Debt Warrants are detachable and whether any
of the Purchased Debt Securities or Debt Warrants may be sold to institutional
investors pursuant to Delayed Delivery Contracts (as defined below), and in the
event any Currency Warrants are to be sold, the conditions and procedures
relating to exercise, expiration date, Base Currency, Base Currency Amount and
formula for determining Cash Settlement Value (as defined in the Currency
Warrant Agreement). The Terms Agreement will also specify the time and date of
delivery and payment (such time and date, or such other time not later than
seven full business days thereafter as the Representatives and the Company
agree as the time for payment and delivery, being herein and in the Terms
Agreement referred to as the "Closing Date"), the place of delivery and payment
and any details of the terms of offering that should be reflected in the
prospectus supplement relating to the offering of the Securities. The
obligations of the Underwriters to purchase the Purchased Securities will be
several and not joint. It is understood that the Underwriters propose to offer
the Purchased Securities for sale as set forth in the Prospectus. The Purchased
Securities delivered to the Underwriters on the Closing Date will be in fully
registered or bearer form with respect to any Debt Securities, and in fully
registered form with respect to Debt Warrants, in each case in such
denominations and numbers and registered in such names as the Underwriters may
request, and will be represented by a single global Currency Warrant in the
case of Currency Warrants.
If the Terms Agreement provides for sales of Purchased Debt Securities or
Debt Warrants pursuant to delayed delivery contracts, the Company authorizes
the Underwriters to solicit offers to purchase Purchased Debt Securities or
Debt Warrants pursuant to delayed delivery contracts substantially in the form
of Annex I attached hereto ("Delayed Delivery Contracts") with such changes
therein as the Company may authorize or approve. Delayed Delivery Contracts are
to be with institutional investors, including commercial and savings banks,
insurance companies, pension funds, investment companies and educational and
charitable institutions. On the Closing Date the Company will pay, as
compensation, to the Representatives for the accounts of the Underwriters, the
fee set forth in such Terms Agreement in respect of the principal amount of
Purchased Debt Securities and number of Debt Warrants to be sold pursuant to
Delayed Delivery Contracts ("Contract Securities"). The Underwriters will not
have any responsibility in respect of the validity or the performance of
Delayed Delivery Contracts. If the Company executes and delivers Delayed
Delivery
2
<PAGE>
Contracts, the Contract Securities will be deducted from the Securities to be
purchased by the several Underwriters and the aggregate principal amount of
Purchased Debt Securities and number of Debt Warrants, as the case may be, to
be purchased by each Underwriter will be reduced pro rata in proportion to the
principal amount of Purchased Debt Securities or number of Debt Warrants set
forth opposite each Underwriter's name in such Terms Agreement, except to the
extent that the Representatives determine that such reduction shall be
otherwise than pro rata and so advise the Company. The Company will advise the
Representatives not later than the business day prior to the Closing Date of
the Purchased Debt Securities and Debt Warrants that are the Contract
Securities.
4. Certain Agreements of the Company. The Company agrees with the several
Underwriters that it will furnish to Simpson Thacher & Bartlett, counsel for
the Underwriters, one signed copy of the registration statement relating to the
Registered Securities, including all exhibits, in the form it became effective
and of all amendments thereto and that, in connection with each offering of
Securities:
(a) The Company will advise the Representatives promptly of any proposal
to amend or supplement the Registration Statement or the Prospectus and
will afford the Representatives a reasonable opportunity to comment on any
such proposed amendment or supplement; and the Company will also advise the
Representatives promptly of the filing of any such amendment or supplement
and of the institution by the Commission of any stop order proceedings in
respect of the Registration Statement or of any part thereof and will use
its best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any
time to amend the Prospectus to comply with the Act, the Company promptly
will prepare and file with the Commission an amendment or supplement which
will correct such statement or omission or an amendment which will effect
such compliance.
(c) As soon as practicable, but not later than 18 months, after the date
of each Terms Agreement, the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the later of (i) the most recent effective date of
the registration statement relating to the Registered Securities, (ii) the
effective date of the most recent post-effective amendment to the
Registration Statement to become effective prior to the date of such Terms
Agreement and (iii) the date of the Company's most recent Annual Report on
Form 10-K filed with the Commission prior to the date of such Terms
Agreement, which will satisfy the provisions of Section 11(a) of the Act
(including, at the option of the Company, Rule 158 of the Rules and
Regulations under the Act).
(d) The Company will furnish to the Representatives copies of the
Registration Statement, including all exhibits, any related preliminary
prospectus, any related preliminary prospectus supplement, the Prospectus
and all amendments and supplements to such documents, in each case as soon
as available and in such quantities as are reasonably requested.
(e) The Company will arrange for the qualification of the Securities for
sale and the determination of their eligibility for investment under the
laws of such jurisdictions as the Representatives designate and will
continue such qualifications in effect so long as required for the
distribution; provided that the Company will not be required to qualify to
do business in any jurisdiction where it is not now qualified or to take
any action which would subject it to general or unlimited service of
process in any jurisdiction where it is not now subject.
(f) During the period of five years after the date of any Terms
Agreement, the Company will furnish to the Representatives and, upon
request, to each of the other Underwriters, if any, as soon as practicable
after the end of each fiscal year, a copy of its annual report to
stockholders for such year; and the Company will furnish to the
Representatives (i) as soon as available, a copy of each Annual Report on
Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K and
definitive proxy statement of the Company filed with the Commission under
the Securities Exchange Act of 1934 (the
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"Exchange Act") or mailed to stockholders, and (ii) from time to time, such
other information concerning the Company as the Representatives may
reasonably request.
(g) The Company will pay all expenses incident to the performance of its
obligations under this Agreement and will reimburse the Underwriters for
any expenses (including fees and disbursements of counsel) incurred by them
in connection with qualification of the Registered Securities for sale and
determination of their eligibility for investment under the laws of such
jurisdictions as the Representatives may designate and the printing of
memoranda relating thereto, for any fees charged by investment rating
agencies for the rating of the Securities, for the filing fee of the
National Association of Securities Dealers, Inc. relating to the Registered
Securities and for expenses incurred in distributing the Prospectus, any
preliminary prospectuses and any preliminary prospectus supplements to
Underwriters.
(h) For a period beginning at the time of execution of the Terms
Agreement and ending on the Closing Date, if any Debt Securities are being
issued, without the prior consent of the Representatives, the Company will
not offer or contract to sell or, except pursuant to a commitment entered
into prior to the date of the Terms Agreement, sell or otherwise dispose of
any debt securities denominated in the currency or currency unit in which
the Securities are denominated and issued or guaranteed by the Company and
having a maturity of more than one year from the date of issue, or, if any
Currency Warrants are being issued, any currency warrants having the same
Base Currency as any such Currency Warrants.
5. Conditions to the Obligations of the Company and the Underwriters With
Respect to Currency Warrants. If any Currency Warrants are to be purchased
hereunder, the obligations of the Company and the obligations of the
Underwriters hereunder are subject to the conditions that (i) not later than
the date of the applicable Terms Agreement, a United States national securities
exchange (the "Exchange") shall have approved such Currency Warrants for
listing, subject to official notice of issuance, and (ii) as of the date of the
applicable Terms Agreement, the Company's registration statement on Form 8-A
relating to the Securities (the "Form 8-A") shall have become effective under
the Exchange Act.
6. Conditions of the Obligations of the Underwriters. The obligations of the
several Underwriters to purchase and pay for the Purchased Securities will be
subject to the accuracy of the representations and warranties on the part of
the Company herein, to the accuracy of the statements of Company officers made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:
(a) On or prior to the date of the Terms Agreement, the Representatives,
or counsel for the Underwriters, shall have received a letter of Coopers &
Lybrand, confirming that they are independent certified public accountants
within the meaning of the Act and the applicable published Rules and
Regulations thereunder and stating in effect that:
(i) in their opinion, the financial statements and schedules of the
Company audited by them and included in the prospectus contained in the
registration statement relating to the Registered Securities, as
amended at the date of such letter, comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published Rules and Regulations;
(ii) on the basis of performing the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement on Auditing
Standards No. 71, Interim Financial Information ("SAS No. 71") on any
unaudited interim condensed consolidated financial statements of the
Company included in such prospectus, inquiries of officials of the
Company who have responsibility for financial and accounting matters
and other specified procedures, nothing came to their attention that
caused them to believe that (A) the unaudited interim condensed
consolidated financial statements, if any, of the Company included in
such prospectus do not comply as to form in all material respects with
the applicable accounting requirements of the Exchange Act as it
applies to Quarterly Reports on Form 10-Q and the related published
Rules and Regulations or (B) that any material modifications should be
made for them to be in conformity with generally accepted accounting
principles;
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(iii) on the basis of a reading of any unaudited pro forma condensed
combined financial statements of the Company included in such
prospectus, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other specified
procedures, nothing came to their attention that caused them to believe
that the unaudited pro forma condensed combined financial statements
included in such prospectus do not comply in form in all material
respects with the applicable accounting requirements of Rule 11-02 of
Regulation S-X and that the pro forma adjustments, if any, have not
been properly applied to the historical amounts in the compilation of
those statements; and
(iv) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
contained in such prospectus (in each case to the extent that such
dollar amounts, percentages and other financial information are
obtained from accounting records that are subject to the internal
control structure, policies and procedures of the Company's accounting
system or are derived directly from such accounting records by analysis
or computation) with the results obtained from procedures specified in
such letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except as
otherwise specified in such letter.
All financial statements and schedules included in material incorporated by
reference into such prospectus shall be deemed included in such prospectus
for purposes of this subsection.
(b) No stop order suspending the effectiveness of the Registration
Statement or, if any Currency Warrants are being issued, the Form 8-A, or
of any part thereof shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company or
any Underwriter, shall be contemplated by the Commission.
(c) Subsequent to the execution of the Terms Agreement, there shall not
have occurred (i) any change in the capital stock or long-term debt of the
Company and its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which is, in the judgment of the Representatives,
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities on the
terms and in the manner contemplated in the Prospectus; (ii) any
downgrading in the rating of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act); (iii) any suspension or limitation
of trading in securities generally on the New York Stock Exchange or, if
any Currency Warrants are being issued, the Exchange, or any setting of
minimum prices for trading on the New York Stock Exchange or, if
applicable, the Exchange, or any suspension of trading of any securities of
the Company on any United States exchange or in the over-the-counter
market; (iv) any banking moratorium declared by Federal or New York
authorities, or the authorities of any country which is the issuer of a
Base Currency or in whose currency any Purchased Debt Securities or Debt
Warrants are denominated under the applicable Terms Agreement; (v) any
outbreak or escalation of major hostilities in which the United States or
any country which is the issuer of a Base Currency or in whose currency any
Purchased Debt Securities or Debt Warrants are denominated under the
applicable Terms Agreement is involved, any declaration of war by Congress
or any other substantial national or international calamity or emergency
if, in the judgment of the Representatives, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the sale of and
payment for the Securities; or (vi) any action by any governmental
authority or any change, or any development involving a prospective change,
involving currency exchange rates or exchange controls, which makes it
impracticable or inadvisable in the reasonable judgment of the
Representatives to proceed with the public offering or delivery of the
Securities on the terms and in the manner contemplated in the Prospectus.
(d) The Representatives shall have received an opinion, dated the Closing
Date, of Hunton & Williams, counsel for the Company, to the effect that:
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(i) the Company has been duly incorporated and is an existing
corporation in good standing under the laws of the Commonwealth of
Virginia, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus; and the Company is
duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which it owns or leases substantial
properties or in which the conduct of its business requires such
qualification and in which the failure to so qualify would have a
material adverse effect on the Company;
(ii) Philip Morris Incorporated, Philip Morris International Inc. and
Kraft General Foods, Inc. have been duly incorporated and are existing
corporations in good standing under the laws of their respective
jurisdictions of incorporation, with corporate power and authority to
own their respective properties and conduct their respective businesses
as described in the Prospectus; all outstanding shares of capital stock
of Philip Morris Incorporated, Philip Morris International Inc. and
Kraft General Foods, Inc. are owned by the Company, free and clear of
any lien, pledge and encumbrance or claim of any third party;
(iii) the Indenture, any Debt Warrant Agreement and any Currency
Warrant Agreement have been duly authorized, executed and delivered by
the Company; the Indenture has been duly qualified under the Trust
Indenture Act; the Securities have been duly authorized; the Purchased
Securities other than any Contract Securities have been duly executed,
authenticated, issued and delivered; the Indenture, any Debt Warrant
Agreement, any Currency Warrant Agreement and the Securities other than
any Warrant Debt Securities and any Contract Securities constitute, and
any Warrant Debt Securities, when executed, authenticated, issued and
delivered in the manner provided in the Indenture and sold pursuant to
any Debt Warrant Agreement, and any Contract Securities, when executed,
authenticated, issued and delivered in the manner provided in the
Indenture and sold pursuant to Delayed Delivery Contracts, will
constitute, valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and the Securities other than any Warrant Debt
Securities and any Contract Securities conform, and any Warrant Debt
Securities and any Contract Securities, when so issued and delivered
and sold, will conform, to the description thereof contained in the
Prospectus;
(iv) no consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by the Terms Agreement
(including the provisions of this Agreement) in connection with the
issuance or sale of the Purchased Securities by the Company, except
such as have been obtained and made under the Act and the Trust
Indenture Act and such as may be required under state securities laws;
(v) the execution, delivery and performance of the Indenture, the
Terms Agreement (including the provisions of this Agreement), any Debt
Warrant Agreement, any Currency Warrant Agreement and any Delayed
Delivery Contracts and the issuance and sale of the Securities and
compliance with the terms and provisions thereof will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, the charter or by-laws of the Company,
Philip Morris Incorporated, Philip Morris International Inc. or Kraft
General Foods, Inc., or, to the best of the knowledge of such counsel,
the charter or by-laws of any other subsidiary of the Company, any
statute, any rule, regulation or order of any governmental agency or
body or any court having jurisdiction over the Company or any
subsidiary of the Company or any of their properties or any agreement
or instrument to which the Company or any such subsidiary is a party or
by which the Company or any such subsidiary is bound or to which any of
the properties of the Company or any such subsidiary is subject, and
the Company has full power and authority to authorize, issue and sell
the Securities as contemplated by the Terms Agreement (including the
provisions of this Agreement);
(vi) the Registration Statement has become effective under the Act,
and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or of any
part thereof has been issued and no proceedings for that purpose have
been instituted or
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<PAGE>
are pending or contemplated under the Act, and the registration
statement relating to the Registered Securities, as of its effective
date, the Registration Statement and the Prospectus, as of the date of
the Terms Agreement, and any amendment or supplement thereto, as of its
date, complied as to form in all material respects with the
requirements of the Act, the Trust Indenture Act and the Rules and
Regulations; such counsel have no reason to believe that such
registration statement, as of its effective date, or any amendment or
supplement thereto, as of its date, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or that the Prospectus or any amendment or supplement
thereto contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; the descriptions in the Registration Statement and
Prospectus of statutes, legal and governmental proceedings and
contracts and other documents are accurate and fairly present the
information required to be shown; and such counsel do not know of any
legal or governmental proceedings required to be described in the
Prospectus which are not described as required or of any contracts or
documents of a character required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement which are not described and filed as required; it being
understood that such counsel need express no opinion as to the
financial statements or other financial data contained in the
Registration Statement or the Prospectus or any such amendment or
supplement; and
(vii) the Terms Agreement (including the provisions of this
Agreement) and any Delayed Delivery Contracts have been duly
authorized, executed and delivered by the Company.
In rendering such opinion, Hunton & Williams may state that (1) in clause (iii)
with respect to the validity and enforceability of the Indenture, any Debt
Warrant Agreement, any Currency Warrant Agreement and the Securities, and in
clause (iv) and in clause (v) with respect to any statute, rule, regulation or
order of any governmental agency, body or court and the power and authority of
the Company to authorize, issue and sell the Securities, such counsel has
assumed that under the laws of any country in whose currency any Securities are
denominated, if other than in U.S. dollars, that no consent, approval,
authorization, or order of, or filing with any governmental agency, body or
court is required for the consummation of the transactions contemplated
hereunder in connection with the issuance and sale of the Securities and
compliance with the terms and provisions thereof will not result in any breach
or violation of any of the terms and provisions in any statute, rule,
regulation or order of any governmental agency or body or any court, and (2) in
clause (iii) with respect to the enforceability of the Indenture, no opinion is
expressed with respect to Section 516 thereof. Such counsel may note that (a) a
New York statute provides that with respect to a foreign currency obligation a
court of the State of New York shall render a judgment or decree in such
foreign currency and such judgment or decree shall be converted into currency
of the United States at the rate of exchange prevailing on the date of entry of
such judgment or decree and (b) with respect to a foreign currency obligation a
United States Federal court in New York may award judgment in United States
dollars, provided that such counsel expresses no opinion as to the rate of
exchange such court would apply.
(e) The Representatives shall have received from Simpson Thacher &
Bartlett, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the incorporation of the Company, the
validity of the Securities, the Registration Statement, the Prospectus and
other related matters as they may require, and the Company shall have
furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters. In rendering such opinion, Simpson
Thacher & Bartlett may rely as to the incorporation of the Company and all
other matters governed by Virginia law upon the opinion of Hunton &
Williams referred to above.
(f) The Representatives shall have received a certificate, dated the
Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Company in this Agreement
are true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date, that no stop order suspending the
effectiveness of the Registration Statement
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<PAGE>
or of any part thereof has been issued and no proceedings for that purpose
have been instituted or are contemplated by the Commission and that,
subsequent to the date of the most recent financial statements in the
Prospectus, there has been no material adverse change in the financial
position or results of operation of the Company and its subsidiaries except
as set forth in or contemplated by the Prospectus or as described in such
certificate.
(g) The Representatives shall have received a letter, dated the Closing
Date, of Coopers & Lybrand, which reconfirms the matters set forth in their
letter delivered pursuant to subsection (a) of this Section and states in
effect that:
(i) in their opinion, any financial statements or schedules examined
by them and included in the Prospectus and not covered by their letter
delivered pursuant to subsection (a) of this Section comply in form in
all material respects with the applicable accounting requirements of
the Act and the related published Rules and Regulations;
(ii) on the basis of performing the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in SAS No. 71, on any
unaudited interim condensed consolidated financial statements of the
Company included in the Prospectus and not covered by their letter
delivered pursuant to subsection (a) of this Section, reading the
latest available interim financial statements of the Company, inquiries
of officials of the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing came to
their attention that caused them to believe that:
(A) the unaudited interim condensed consolidated financial
statements of the Company, if any, included in the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published Rules
and Regulations or require any material modifications to be made for
them to be in conformity with generally accepted accounting
principles;
(B) at the date of the latest available consolidated balance sheet
of the Company read by such accountants, or at a subsequent
specified date not more than five business days prior to the Closing
Date, there was any decrease in the outstanding common stock, or
consolidated earnings reinvested in the business of the Company
other than any decrease resulting from the declaration of regular
quarterly cash dividends, or any issuance or assumption of long-term
debt by the Company, Philip Morris Incorporated, Philip Morris
International Inc., Kraft General Foods, Inc. or Philip Morris
Capital Corporation (exclusive of any short-term borrowings
reclassified as long-term based upon the Company's ability and
intention to refinance these short-term borrowings on a long-term
basis), or, at the date of the latest available consolidated balance
sheet of the Company read by such accountants, there was any
decrease in consolidated net current assets or net assets, all as
compared with amounts shown on or included in the latest balance
sheet of the Company included in the Prospectus; or
(C) for the period from the date of the latest consolidated
statement of earnings of the Company included in the Prospectus to
the date of the latest available consolidated statement of earnings
of the Company read by such accountants there were any decreases, as
compared with the corresponding period of the previous year, in
consolidated operating revenues, operating income, net earnings or
the historical ratio of earnings to fixed charges of the Company and
consolidated subsidiaries;
except in all cases set forth in clauses (B) and (C) above for
issuances or assumptions or decreases which the Prospectus discloses
have occurred or may occur or which are described in such letter;
(iii) with respect to the unaudited capsule information of the
Company, if any, included in the Prospectus:
(A) on the basis of performing the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in SAS No. 71 on the
unaudited interim condensed consolidated financial statements of the
Company from which such unaudited capsule information was derived, reading
such unaudited capsule information, inquiries of officials of the Company
who have responsibility for financial and
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accounting matters and other specified procedures, nothing came to
their attention that caused them to believe that:
(1) the amounts contained in the unaudited capsule information
included in the Prospectus do not agree with the amounts set
forth in the unaudited interim condensed consolidated financial
statements of the Company from which such amounts were derived;
and
(2) the amounts contained in the unaudited capsule information
included in the Prospectus were not determined on a basis
substantially consistent with that of the corresponding
financial information in the latest audited financial statements
of the Company included in the Prospectus; or
(B) if the procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial
information as described in SAS No. 71 have not been performed on
the unaudited interim condensed consolidated financial statements of
the Company from which such unaudited capsule information was
derived, they have:
(1) read the unaudited capsule information and agreed the
amounts contained therein with the Company's accounting records
from which it was derived; and
(2) inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether the
unaudited capsule information was determined on a basis
substantially consistent with that of the corresponding
financial information in the latest audited financial statements
of the Company included in the Prospectus; and
(iv) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
included in the Prospectus and not covered by their letter delivered
pursuant to subsection (a) of this Section (in each case to the extent
that such dollar amounts, percentages and other financial information
are obtained from accounting records that are subject to the internal
control structure, policies and procedures of the Company's accounting
system or are derived directly from such accounting records by analysis
or computation) with the results obtained from procedures specified in
such letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except as
otherwise specified in such letter.
All financial statements and schedules included in material incorporated by
reference into the Prospectus shall be deemed included in the Prospectus
for the purposes of this subsection.
(h) The Representatives shall have received, so long as financial
statements audited by any independent accountants for or with respect to
any entity acquired by the Company are included in the Prospectus, a
letter, dated the Closing Date, of such accountants confirming that as of a
specified date immediately prior to such acquisition and during the period
covered by the financial statements on which they reported, they were
independent accountants with respect to such entity within the meaning of
the Act and the applicable published Rules and Regulations thereunder and
stating in effect that:
(i) in their opinion, the consolidated financial statements audited
by them and included in the Prospectus comply in form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published Rules and Regulations, with
respect to Registration Statements on Form S-3; and
(ii) on the basis of performing the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in SAS No. 71, inquiries of
officials of the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing came to
their attention that caused them to believe that the unaudited
financial statements of such entity at any date and for any period
ending on or prior to the date of the latest unaudited balance sheet of
such entity included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
9
<PAGE>
and the related published Rules and Regulations or any material
modifications should be made for them to be in conformity with
generally accepted accounting principles.
All financial statements and schedules included in material incorporated by
reference into the Prospectus shall be deemed included in the Prospectus
for purposes of this subsection.
(i) The Representatives shall have received from counsel, satisfactory to
the Representatives, such opinion or opinions, dated the Closing Date, with
respect to compliance with the laws of any country, other than the United
States, in whose currency Purchased Debt Securities or Debt Warrants are
denominated or which is the issuer of a Base Currency, the validity of the
Securities, the Prospectus and other related matters as they may require,
and the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(j) If any Currency Warrants are to be purchased, no order suspending
trading or striking or withdrawing such Currency Warrants from listing and
registration under the Exchange Act shall be in effect, and no proceedings
for such purpose shall be pending before or threatened by the Commission or
by the Exchange.
(k) If applicable to the offering of any Securities, the Representatives
shall have received an opinion from Sutherland, Asbill & Brennan, special
tax counsel for the Company, dated the Closing Date, confirming their
opinion as to United States tax matters set forth in the Prospectus.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as they reasonably request.
7. Indemnification and Contribution. (a) The Company will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus or preliminary prospectus supplement, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives, if any, specifically
for use therein; and provided further that as to any preliminary prospectus
this indemnity agreement shall not inure to the benefit of any Underwriter or
any person controlling that Underwriter on account of any loss, claim, damage
or liability arising from the sale of Purchased Securities to any person by
that Underwriter if that Underwriter failed to send or give a copy of the
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the Act, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact in such preliminary prospectus was corrected in the Prospectus,
unless such failure resulted from non-compliance by the Company with Section
4(d). For purposes of the second proviso to the immediately preceding sentence,
the term Prospectus shall not be deemed to include the documents incorporated
therein by reference, and no Underwriter shall be obligated to send or give any
supplement or amendment to any document incorporated by reference in a
preliminary prospectus or the Prospectus to any person other than a person to
whom such Underwriter has delivered such incorporated documents in response to
a written request therefor.
(b) Each Underwriter will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement,
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the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus or preliminary prospectus supplement, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through the Representatives, if any,
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses
are incurred.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. 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 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total
11
<PAGE>
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section shall be in addition to
any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company, to each officer of the Company who
has signed the Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Purchased Securities under the Terms Agreement
and the aggregate amount of the Purchased Securities that such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10%
of the aggregate amount of the Purchased Securities, the Representatives may
make arrangements satisfactory to the Company for the purchase of such
Purchased Securities by other persons, including any of the Underwriters, but
if no such arrangements are made by the Closing Date, the non-defaulting
Underwriters shall be obligated severally, in proportion to their respective
commitments under this Agreement and the Terms Agreement, to purchase the
Purchased Securities that such defaulting Underwriters agreed but failed to
purchase. If any Underwriter or Underwriters so default and the aggregate
amount of the Purchased Securities with respect to which such default or
defaults occur exceeds 10% of the aggregate amount of the Purchased Securities
and arrangements satisfactory to the Representatives and the Company for the
purchase of such Purchased Securities by other persons are not made within 36
hours after such default, such Terms Agreement will terminate without liability
on the part of any non-defaulting Underwriter or the Company, except as
provided in Section 9. As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this Section. As used
in this Section only, the "aggregate amount" of Purchased Securities shall mean
the aggregate principal amount of any Purchased Debt Securities plus the public
offering price of any Debt Warrants or Currency Warrants included in the
relevant offering of Purchased Securities. Nothing herein will relieve a
defaulting Underwriter from liability for its default. The respective
commitments of the several Underwriters for the purposes of this Section shall
be determined without regard to reduction in the respective Underwriters'
obligations to purchase the amount of Purchased Debt Securities set forth
opposite their names in the Terms Agreement as a result of Delayed Delivery
Contracts entered into by the Company.
The foregoing obligations and agreements set forth in this Section will not
apply if the Terms Agreement specifies that such obligations and agreements
will not apply.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
the Company or its officers and of the several Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made
by or on behalf of any Underwriter, the Company or any of their respective
representatives, officers or directors or any controlling person and will
survive delivery of and payment for the Purchased Securities. If the
obligations of the Underwriters with respect to any offering of Securities are
terminated pursuant to Section 8 or if for any reason the purchase of the
Purchased Securities by the Underwriters under a Terms Agreement is not
consummated, the Company shall remain responsible for the expenses to be paid or
reimbursed by it pursuant to Section 4 and the respective obligations of the
Company and the Underwriters pursuant to Section 7 shall remain in effect. If
for any reason the purchase of the Purchased Securities by the Underwriters is
not consummated other than because of the termination of this Agreement pursuant
to Section 8 or a failure to satisfy the conditions set
12
<PAGE>
forth in Section 6(c), the Company shall reimburse the Underwriters, severally,
for all out-of-pocket expenses (including fees and disbursements of counsel)
reasonably incurred by them in connection with the offering of the Securities.
10. Notices. All communications hereunder will be in writing and, if sent to
the Underwriters, will be mailed, delivered or telegraphed and confirmed to
them at their addresses furnished to the Company in writing for the purpose of
communications hereunder or, if sent to the Company, will be mailed, delivered
or telegraphed and confirmed to it at 120 Park Avenue, New York, New York
10017, Attention: Dede Thompson Bartlett, Vice President and Secretary.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the Company and such Underwriters as are identified in Terms Agreements
and their respective successors and the officers and directors and controlling
persons referred to in Section 6, and no other person will have any right or
obligation hereunder.
12. Applicable Law. This Agreement and the Terms Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
13
<PAGE>
ANNEX I
(Three copies of this Delayed Delivery Contract should be signed and returned
to the address shown below so as to arrive not later than 9:00 A.M.,
New York time, on .......... ........, 19....*.)
DELAYED DELIVERY CONTRACT
-------------------------
[Insert date of initial public offering]
Philip Morris Companies Inc.
c/o [Insert name and address of lead Underwriter]
Attention:
Gentlemen:
The undersigned hereby agrees to purchase from Philip Morris Companies Inc.,
a Virginia corporation ("Company"), and the Company agrees to sell to the
undersigned, [If one delayed closing, insert--as of the date hereof, for
delivery on , 19 ("Delivery Date"),]
$........................................
principal amount of the Company's [Insert title of debt securities] ("Debt
Securities") and
........................................
of the Company's [Insert title of warrants] ("Debt Warrants") (collectively,
the "Securities"), offered by the Company's Prospectus dated , 19 and a
Prospectus Supplement dated , 19 relating thereto, receipt of copies of
which is hereby acknowledged, at % of the principal amount of the Debt
Securities plus accrued interest, if any, and on the further terms and
conditions set forth in this Delayed Delivery Contract ("Contract").
[If two or more delayed closings, insert the following:
The undersigned will purchase from the Company as of the date hereof, for
delivery on the dates set forth below, Debt Securities and Debt Warrants in the
principal amounts and number, respectively, set forth below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT NUMBER
OF DEBT OF DEBT
DELIVERY DATE SECURITIES WARRANTS
------------- ---------------- --------
<S> <C> <C>
........................ .... ....
........................ .... ....
</TABLE>
Each of such delivery dates is hereinafter referred to as a Delivery Date.]
Payment for the Securities that the undersigned has agreed to purchase for
delivery on [the] [each] Delivery Date shall be made to the Company or its
order by certified or official bank check in New York Clearing House (next day)
funds at the office of at .M. on [the] [such] Delivery
Date upon delivery to the undersigned of the Securities to be purchased by the
undersigned [for delivery on such Delivery Date] in definitive fully registered
form and in such denominations or numbers and registered in such names as the
undersigned may designate by written or telegraphic communication addressed to
the Company not less than five full business days prior to [the] [such]
Delivery Date.
- --------
* Insert date which is third full business day prior to Closing Date under
the Terms Agreement.
14
<PAGE>
It is expressly agreed that the provisions for delayed delivery and payment
are for the sole convenience of the undersigned; that the purchase hereunder of
Securities is to be regarded in all respects as a purchase as of the date of
this Contract; that the obligation of the Company to make delivery of and
accept payment for, and the obligation of the undersigned to take delivery of
and make payment for, Securities on [the] [each] Delivery Date shall be subject
only to the conditions that (1) investment in the Securities shall not at [the]
[such] Delivery Date be prohibited under the laws of any jurisdiction in the
United States to which the undersigned is subject and (2) the Company shall
have sold to the Underwriters the total principal amount of the Debt Securities
less the principal amount thereof covered by this and other similar Contracts.
The undersigned represents that its investment in the Securities is not, as of
the date hereof, prohibited under the laws of any jurisdiction to which the
undersigned is subject and which governs such investment.
Promptly after completion of the sale to the Underwriters the Company will
mail or deliver to the undersigned at its address set forth below notice to
such effect, accompanied by a copy of the opinion of counsel for the Company
delivered to the Underwriters in connection therewith.
This Contract will inure to the benefit of and be binding upon the parties
hereto and their respective successors, but will not be assignable by either
party hereto without the written consent of the other.
It is understood that the acceptance of any such Contract is in the Company's
sole discretion and, without limiting the foregoing, need not be on a first-
come, first-served basis. If this Contract is acceptable to the Company, it is
requested that the Company sign the form of acceptance below and mail or
deliver one of the counterparts hereof to the undersigned at its address set
forth below. This will become a binding contract between the Company and the
undersigned when such counterpart is so mailed or delivered.
Yours very truly,
..........................................
(Name of Purchaser)
By .......................................
.......................................
(Title of Signatory)
.......................................
.......................................
(Address of Purchaser)
Accepted, as of the above date.
Philip Morris Companies Inc.
By ..................................
(Insert Title)
15
<PAGE>
PHILIP MORRIS COMPANIES INC.
("COMPANY")
DEBT SECURITIES, WARRANTS TO PURCHASE
DEBT SECURITIES AND CURRENCY WARRANTS
TERMS AGREEMENT
---------------
, 199
Philip Morris Companies Inc.
120 Park Avenue
New York, New York 10017
Attention: Hans G. Storr,
Executive Vice President and Chief Financial Officer
Dear Sirs:
On behalf of the several Underwriters named in Schedule A hereto and for
their respective accounts, we offer to purchase, on and subject to the terms
and conditions of the Underwriting Agreement relating to Debt Securities,
Warrants to Purchase Debt Securities and Currency Warrants dated as of January
1, 1994 ("Underwriting Agreement"), the following securities ("Securities") on
the following terms:
DEBT SECURITIES
Title:
Principal Amount: $
Interest Rate: % from , 199 , payable:
Maturity:
Currency of Denomination:
Currency of Payment:
Form and Denomination:
Overseas Paying Agents:
Optional Redemption:
Sinking Fund:
Delayed Delivery Contracts: [authorized] [not authorized]
Delivery Date:
Minimum Contract:
Maximum aggregate principal amount:
Fee: %
Purchase Price: %, plus accrued interest, or amortized original issue
discount, if any, from 19 .
Expected Reoffering Price:
<PAGE>
DEBT WARRANTS
Number of Debt Warrants to be issued:
Debt Warrant Agreement:
Form of Debt Warrants: Registered
Issuable jointly with Debt Securities: [Yes] [No]
[Number of Debt Warrants issued with each $ principal amount of Debt
Securities:]
[Detachable Date:]
Date from which Debt Warrants are exercisable:
Date on which Debt Warrants expire:
Exercise price of Debt Warrants:
Expected Reoffering price: $
Purchase price: $
Title of Warrant Debt Securities:
Principal amount of Warrant Debt Securities purchaseable upon exercise of one
Debt Warrant:
Interest Rate: % from , 199 , payable:
Maturity:
Currency of Denomination:
Currency of Payment:
Form and Denomination:
Overseas Paying Agents:
Optional Redemption:
Sinking Fund:
<PAGE>
CURRENCY WARRANTS
Title of Currency Warrants:
Type of Currency Warrant:
Number of Currency Warrants to be issued:
Base Currency:
Currency Warrant Agreement:
Number of Warrants issued with each $ principal amount of Debt Securities:
Date from which Currency Warrants are exercisable:
Date on which Currency Warrants expire:
Circumstances causing automatic exercise:
Minimum exercise amount:
Base Currency Amount:
Cash Settlement Value Formula:
Strike price(s) of Currency Warrants:
Expected Reoffering price: $
Purchase price: $
----------------
Names and Addresses of Representatives:
The respective principal amounts of the Debt Securities and number of Debt
Warrants and or Currency Warrants to be purchased by each of the Underwriters
are set forth opposite their names in Schedule A hereto.
The provisions of the Underwriting Agreement are incorporated herein by
reference.
The Closing will take place at A.M., New York City time, on , 199 ,
at the offices of Philip Morris Companies Inc., 120 Park Avenue, New York, New
York.
The Securities will be made available for checking and packaging at the
office of Chemical Bank at least 24 hours prior to the Closing Date.
Please signify your acceptance by signing the enclosed response to us in the
space provided and returning it to us.
Very truly yours,
<PAGE>
SCHEDULE A
DEBT SECURITIES
UNDERWRITER PRINCIPAL AMOUNT
----------- ----------------
DEBT WARRANTS
NUMBER OF DEBT
UNDERWRITER WARRANTS
----------- --------------
CURRENCY WARRANTS
NUMBER OF CURRENCY
UNDERWRITER WARRANTS
----------- ------------------
<PAGE>
EXHIBIT 1.2
Philip Morris Companies Inc.
$1,116,450,000 Medium-Term Notes, Series C
Due from Nine Months to Thirty Years
From Date of Issue
First Amendment to Selling Agency Agreement
-------------------------------------------
February ___, 1994
New York, New York
Salomon Brothers Inc
7 World Trade Center
New York, New York 10048
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281
Lehman Brothers
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285-1200
Dear Sirs:
1. Amendments. Philip Morris Companies Inc., a Virginia corporation
----------
(the "Company"), confirms its agreement with each of you that the Selling Agency
Agreement, dated December 11, 1992, between the Company and you (the "Selling
Agency Agreement"), be hereby amended as follows:
(a) Name Change. The name "Shearson Lehman Brothers Inc." is hereby
-----------
deleted wherever it appears in the Selling Agency Agreement and in the Schedules
and Exhibits thereto and the name "Lehman Brothers Inc." is substituted in lieu
thereof.
(b) Change of Address for Notices. Schedule I to the Selling Agency
-----------------------------
Agreement is hereby amended by deleting the last paragraph thereof in its
entirety and substituting, in lieu thereof, the following paragraph:
"Notices to Lehman Brothers Inc. shall be directed to it at 3 World
Financial Center, 12th Floor, New York, New York 10285-1200, Attention of
Medium-Term Note Department, telecopy: (212) 528-6669. Copies of Pricing
Supplements shall be sent (i) by telecopy to Lehman Brothers Inc., c/o
Smith Barney Shearson Inc., Prospectus Delivery Department, Attention of
Andrea Springer, telecopy: (718) 921-8472,
<PAGE>
2
telephone: (718) 921-8460/1 and (ii) by hand to Lehman Brothers Inc., 3
World Financial Center, 9th Floor, New York, New York 10285-0900,
Attention of Brunnie Vazquez, telephone: (212) 640-8400."
(c) Amendment of Section 5(f). Section 5(f) of the Selling Agency
-------------------------
Agreement is hereby amended by deleting such Section in its entirety and
substituting, in lieu thereof, the following new Section 5(f):
"(f) At the Execution Time, Coopers & Lybrand shall have furnished to
each Agent a letter or letters (which may refer to letters previously
delivered to the Agent), dated as of the Execution Time, in form and
substance satisfactory to the Agents, confirming that they are independent
certified public accountants within the meaning of the Act and the
respective applicable published rules and regulations thereunder and
stating in effect that:
(i) in their opinion, the financial statements and schedules
audited by them and included in the Registration Statements and the
Prospectus relating to the Notes comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Exchange Act and the related published rules and regulations;
(ii) on the basis of performing the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement on Auditing
Standards No. 71, Interim Financial Information ("SAS No. 71") on any
-----------------------------
unaudited interim condensed consolidated financial statements of the
Company included in the Prospectus, inquiries of officials of the
Company who have responsibility for financial and accounting matters
and other specified procedures, nothing came to their attention that
caused them to believe that (A) the unaudited financial statements, if
any, of the Company included in the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the Exchange Act as it applies to Quarterly Reports on
Form 10-Q and the related published rules and regulations or (B) any
material modifications should be made for them to be in conformity
with generally accepted accounting principles;
(iii) on the basis of a reading of the latest available interim
financial statements of the Company, inquiries of officials of the
Company who have responsibility for financial and accounting matters
and other specified procedures, nothing came to their attention that
caused them to believe that:
<PAGE>
3
(A) at the date of the latest available consolidated balance
sheet of the Company read by such accountants, or at a subsequent
specified date not more than five business days prior to the date
of the letter, there was any decrease in the outstanding common
stock or consolidated earnings reinvested in the business of the
Company other than any decrease resulting from the declaration of
regular quarterly cash dividends, or any issuance or assumption
of long-term debt by the Company, Philip Morris Incorporated,
Philip Morris International Inc., Kraft General Foods, Inc. or
Philip Morris Capital Corporation (exclusive of any short-term
borrowings reclassified as long-term based upon the Company's
ability and intention to refinance these short-term borrowings on
a long-term basis), or at the date of the latest available
consolidated balance sheet of the Company read by such
accountants, there was any decrease in consolidated net current
assets or net assets, all as compared with amounts shown on or
included in the latest balance sheet of the Company included in
the Prospectus; or
(B) for the period from the date of the latest consolidated
statement of earnings of the Company included in the Prospectus
to the date of the latest available consolidated statement of
earnings of the Company read by such accountants there were any
decreases, as compared with the corresponding period of the
previous year, in consolidated operating revenues, operating
income, net earnings or the historical ratio of earnings to fixed
charges of the Company and consolidated subsidiaries;
except in all cases set forth in clauses (A) and (B) above for issuances or
assumptions or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter;
(iv) with respect to the unaudited capsule information of the
Company, if any, included in the Prospectus:
(A) on the basis of performing the procedures specified by
the American Institute of Certified Public Accountants for a
review of interim financial information as described in SAS No.
71 on the unaudited interim condensed consolidated financial
statements of the Company from which such unaudited capsule
information was derived, reading such unaudited capsule
information, inquiries of officials of the Company
<PAGE>
4
who have responsibility for financial and accounting matters and
other specified procedures, nothing came to their attention that
caused them to believe that:
(1) the amounts contained in the unaudited capsule
information included in the Prospectus do not agree with the
amounts set forth in the unaudited interim condensed
consolidated financial statements of the Company from which
such amounts were derived; and
(2) the amounts contained in the unaudited capsule
information included in the Prospectus were not determined
on a basis substantially consistent with that of the
corresponding financial information in the latest audited
financial statements of the Company included in the
Prospectus; or
(B) if the procedures specified by the American Institute
of Certified Public Accountants for a review of interim financial
information as described in SAS No. 71 have not been performed on
the unaudited interim condensed consolidated financial statements
of the Company from which such unaudited capsule information was
derived, they have:
(1) read the unaudited capsule information and agreed
the amounts contained therein with the Company's accounting
records from which it was derived; and
(2) inquired of certain officers of the Company who
have responsibility for financial and accounting matters
whether the unaudited capsule information was determined on
a basis substantially consistent with that of the
corresponding financial information in the latest audited
financial statements of the Company included in the
Prospectus;
(v) on the basis of a reading of any unaudited pro forma
condensed combined financial statements of the Company included in the
Prospectus, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that caused them
to believe that the unaudited pro forma condensed combined financial
statements included in the Prospectus do not comply in form in all
material respects with the applicable accounting requirements of
<PAGE>
5
Rule 11-02 of Regulation S-X and that the pro forma reclassifications
and adjustments, if any, have not been properly applied to the
historical amounts in the compilation of those statements; and
(vi) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
contained in the Prospectus (in each case to the extent that such
dollar amounts, percentages and other financial information are
obtained from accounting records that are subject to the internal
control structure, policies and procedures of the Company's accounting
system or are derived directly from such accounting records by
analysis or computation) with the results obtained from procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter.
References to the Prospectus in this paragraph (f) include any
supplement thereto at the date of the letter.
All financial statements and schedules included in material
incorporated by reference into the Prospectus shall be deemed included in
the Prospectus for purposes of this subsection."
(d) Amendment of Section 5(g). Section 5(g) of the Selling Agency
-------------------------
Agreement is hereby amended by deleting such Section in its entirety and
substituting, in lieu thereof, the following new Section 5(g):
"(g) At the Execution Time, each Agent shall have received, so long
as financial statements audited by any independent accountants for or with
respect to any entity acquired by the Company are included in the
Prospectus, a letter or letters of such accountants (which may refer to
letters previously delivered to the Agent), dated as of the Execution Time,
in form and substance satisfactory to the Agents, confirming that as of a
specified date immediately prior to such acquisition and during the period
covered by the financial statements on which they reported, they were
independent accountants with respect to such entity within the meaning of
the Act and the respective applicable published rules and regulations
thereunder and stating in effect that:
(i) in their opinion, the consolidated financial statements
audited by them and included in the Registration Statements and the
Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
<PAGE>
6
published rules and regulations with respect to registration
statements on Form S-3; and
(ii) on the basis of performing the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in SAS No. 71 on the
unaudited financial statements of such entity at any date and for any
period ending on or prior to the date of the latest unaudited balance
sheet of such entity included or incorporated in the Prospectus,
inquiries of officials of the Company who have responsibility for
financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that the
unaudited financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the related published rules and regulations or any material
modifications should be made for them to be in conformity with
generally accepted accounting principles.
All financial statements and schedules included in material incorporated by
reference into the Prospectus shall be deemed included in the Prospectus
for purposes of this subsection.
References to the Prospectus in this paragraph (g) include any
supplement thereto at the date of the letter."
(e) Amendment of Section 8(c). Section 8(c) of the Selling Agency
-------------------------
Agreement is hereby amended by adding, at the end of such Section, the
following:
"No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there
be a final judgment for the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of such settlement or judgment. 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."
<PAGE>
7
2. Limited Effect; Suspension. Except as expressly amended by this
--------------------------
Amendment, the Selling Agency Agreement shall continue to be, and shall remain,
in full force and effect in accordance with its terms. This Amendment does not,
and shall not be deemed to, waive or alter any of the provisions of the
Suspension Agreement, dated July 15, 1993, between the Company and you, and such
agreement shall continue to be, and shall remain, in full force and effect in
accordance with its terms.
3. Applicable Law. This Amendment will be governed by and construed
--------------
in accordance with the laws of the State of New York.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company and you.
Very truly yours,
PHILIP MORRIS COMPANIES INC.
By:_____________________________
The foregoing Amendment is
hereby confirmed and accepted
as of the date hereof.
SALOMON BROTHERS INC
By:___________________________
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By:___________________________
LEHMAN BROTHERS INC.
By:____________________________
<PAGE>
Exhibit 3.2
BY-LAWS
OF
PHILIP MORRIS COMPANIES INC.
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - The annual meeting of the stockholders
for the election of directors and for the transaction of such other business
as may properly come before the meeting, and any postponement or adjournment
thereof, shall be held on such date and at such time as the Board of Directors
may in its discretion determine.
SECTION 2. SPECIAL MEETINGS. - Unless otherwise provided by law,
special meetings of the stockholders may be called by the chairman of the
Board of Directors, the deputy chairman of the Board of Directors (if any) or
the president or any vice chairman of the Board of Directors or by order of
the Board of Directors whenever deemed necessary.
SECTION 3. PLACE OF MEETINGS. - All meetings of the stockholders shall
be held at such place in the Commonwealth of Virginia as from time to time may
be fixed by the Board of Directors.
SECTION 4. NOTICE OF MEETINGS. - Written notice, stating the place,
day and hour and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by mail not less than ten nor
more than sixty days before the date of the meeting (except as a different
time is specified herein or by law), to each stockholder of record having
voting power in respect of the business to be transacted thereat, at his or
her address as it appears on the stock transfer books of the Corporation.
Notice of a stockholders' meeting to act on an amendment of the
Articles of Incorporation, a plan of merger or share exchange, a proposed
sale of all, or substantially all of the Corporation's assets, otherwise than
in the usual and regular course of business, or the dissolution of the
Corporation shall be given, in the manner provided above, not less than
twenty-five nor more than sixty days before the date of the meeting and shall
be accompanied, as appropriate, by a copy of the proposed amendment, plan of
merger or share exchange or sale agreement.
November 24, 1993
<PAGE>
Notwithstanding the foregoing, a written waiver of notice signed by the
person or persons entitled to such notice, either before or after the time
stated therein, shall be equivalent to the giving of such notice. A
stockholder who attends a meeting shall be deemed to have (i) waived
objection to lack of notice or defective notice of the meeting, unless at the
beginning of the meeting he objects to holding the meeting or transacting
business at the meeting, and (ii) waived objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless he objects to considering the matter
when it is presented.
SECTION 5. QUORUM. - At all meetings of the stockholders, unless a
greater number or voting by classes is required by law, a majority of the
shares entitled to vote, represented in person or by proxy, shall constitute
a quorum. If a quorum is present, action on a matter is approved if the votes
cast favoring the action exceed the votes cast opposing the action, unless
the vote of a greater number or voting by classes is required by law or the
Articles of Incorporation, and except that in elections of directors those
receiving the greatest number of votes shall be deemed elected even though
not receiving a majority. Less than a quorum may adjourn.
SECTION 6. ORGANIZATION AND ORDER OF BUSINESS. - At all meetings of
the stockholders the chairman of the Board of Directors or, in his absence,
the deputy chairman of the Board of Directors (if any) or, in the absence of
both, the president, shall act as chairman. In the absence of all of the
foregoing officers or, if present, with their consent, a majority of the
shares entitled to vote at such meeting, may appoint any person to act as
chairman. The secretary of the Corporation or, in his absence, an assistant
secretary, shall act as secretary at all meetings of the stockholders. In
the event that neither the secretary nor any assistant secretary is present,
the chairman may appoint any person to act as secretary of the meeting.
The chairman shall have the right and authority to prescribe such
rules, regulations and procedures and to do all such acts and things as are
necessary or desirable for the proper conduct of the meeting, including,
without limitation, the establishment of procedures for the dismissal of
business not properly presented, the maintenance of order and safety,
limitations on the time allotted to questions or comments on the affairs of
the Corporation, restrictions on entry to such meeting after the time
prescribed for the commencement thereof and the opening and closing of the
voting polls.
At each annual meeting of stockholders, only such business shall be
conducted as shall have been properly brought before the meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
Corporation who shall be entitled to vote at such meeting and who complies
with the notice procedures set
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forth in this Section 6. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the secretary of the Corporation. To be timely, a stockholder's notice
must be given, either by personal delivery or by United States certified
mail, postage prepaid, and received at the principal executive offices of the
Corporation (i) not less than 120 days nor more than 150 days before the
first anniversary of the date of the Corporation's proxy statement in
connection with the last annual meeting of stockholders or (ii) if no annual
meeting was held in the previous year or the date of the applicable annual
meeting has been changed by more than 30 days from the date contemplated at
the time of the previous year's proxy statement, not less than 60 days before
the date of the applicable annual meeting. A stockholder's notice to the
secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to
be brought before the annual meeting, including the complete text of any
resolutions to be presented at the annual meeting, and the reasons for
conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's stock transfer books, of such stockholder
proposing such business, (c) a representation that such stockholder is a
stockholder of record and intends to appear in person or by proxy at such
meeting to bring the business before the meeting specified in the notice, (d)
the class and number of shares of stock of the Corporation beneficially owned
by the stockholder and (e) any material interest of the stockholder in such
business. Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with
the procedures set forth in this Section 6. The chairman of an annual meeting
shall, if the facts warrant, determine that the business was not brought
before the meeting in accordance with the procedures prescribed by this
Section 6, and if he should so determine, he shall so declare to the meeting
and the business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of this Section 6, a
stockholder seeking to have a proposal included in the Corporation's proxy
statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended (including, but not limited to,
Rule 14a-8 or its successor provision). The secretary of the Corporation
shall deliver each such stockholder's notice that has been timely received to
the Board of Directors or a committee designated by the Board of Directors
for review.
SECTION 7. VOTING. - A stockholder may vote either in person or by
proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No stockholder may authorize more than four persons to act
for him, and any proxy shall be delivered to the secretary of the meeting at
or prior to the time designated by the chairman or in the order of business
for so delivering such proxies. No proxy shall be valid after eleven months
from its date,
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unless otherwise provided in the proxy. Each holder of record of
stock of any class shall, as to all matters in respect of which
stock of such class has voting power, be entitled to such vote as
is provided in the Articles of Incorporation for each share of
stock of such class standing in his name on the books of the
Corporation. Unless required by statute or determined by the
chairman to be advisable, the vote on any questions need not be by
ballot. On a vote by ballot, each ballot shall be signed by the
stockholder voting or by such stockholder's proxy, if there be such
proxy.
SECTION 8. INSPECTORS. - At every meeting of the
stockholders for election of directors, the proxies shall be
received and taken in charge, all ballots shall be received and
counted and all questions touching the qualifications of voters,
the validity of proxies, and the acceptance or rejection of votes
shall be decided, by two inspectors. Such inspectors shall be
appointed by the chairman of the meeting. They shall be sworn
faithfully to perform their duties and shall in writing certify to
the returns. No candidate for election as director shall be
appointed or act as inspector.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. - The business and affairs of
the Corporation shall be managed under the direction of the Board
of Directors.
SECTION 2. NUMBER. - The number of directors shall be
twenty (20).
SECTION 3. TERM OF OFFICE AND QUALIFICATION. - Each
director shall serve for the term for which he shall have been
elected and until his successor shall have been duly elected.
SECTION 4. NOMINATION AND ELECTION OF DIRECTORS. - At each
annual meeting of stockholders, the stockholders entitled to vote
shall elect the directors. No person shall be eligible for
election as a director unless nominated in accordance with the
procedures set forth in this Section 4. Nominations of persons for
election to the Board of Directors may be made by the Board of
Directors or any committee designated by the Board of Directors or
by any stockholder entitled to vote for the election of directors
at the applicable meeting of stockholders who complies with the
notice procedures set forth in this Section 4. Such nominations,
other than those made by the Board of Directors or any committee
designated by the Board of Directors, may be made only if written
notice of a stockholder's intent to nominate one or more persons
for election as directors at the applicable meeting of
stockholders has been given,
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either by personal delivery or by United States certified mail,
postage prepaid, to the secretary of the Corporation and received
(i) not less than 120 days nor more than 150 days before the first
anniversary of the date of the Corporation's proxy statement in
connection with the last annual meeting of stockholders, or (ii) if
no annual meeting was held in the previous year or the date of the
applicable annual meeting has been changed by more than 30 days
from the date contemplated at the time of the previous year's proxy
statement, not less than 60 days before the date of the applicable
annual meeting, or (iii) with respect to any special meeting of
stockholders called for the election of directors, not later than
the close of business on the seventh day following the date on
which notice of such meeting is first given to stockholders. Each
such stockholder's notice shall set forth (a) as to the
stockholder giving the notice, (i) the name and address, as they
appear on the Corporation's stock transfer books, of such
stockholder, (ii) a representation that such stockholder is a
stockholder of record and intends to appear in person or by proxy
at such meeting to nominate the person or persons specified in the
notice, (iii) the class and number of shares of stock of the
Corporation beneficially owned by such stockholder, and (iv) a
description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by such stockholder; and (b) as to
each person whom the stockholder proposes to nominate for election
as a director, (i) the name, age, business address and, if known,
residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of
stock of the Corporation which are beneficially owned by such
person, (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election
of directors or is otherwise required by the rules and regulations
of the Securities and Exchange Commission promulgated under the
Securities Exchange Act of 1934, as amended, and (v) the written
consent of such person to be named in the proxy statement as a
nominee and to serve as a director if elected. The secretary of
the Corporation shall deliver each such stockholder's notice that
has been timely received to the Board of Directors or a committee
designated by the Board of Directors for review. Any person
nominated for election as director by the Board of Directors or
any committee designated by the Board of Directors shall, upon the
request of the Board of Directors or such committee, furnish to
the secretary of the Corporation all such information pertaining
to such person that is required to be set forth in a stockholder's
notice of nomination. The chairman of the meeting of stockholders
shall, if the facts warrant, determine that a nomination was not
made in accordance with the procedures prescribed by this Section
4, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
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SECTION 5. ORGANIZATION. - At all meetings of the Board
of Directors, the chairman of the Board of Directors or, in his
absence, the deputy chairman of the Board of Directors (if any) or,
in the absence of both, the president shall act as chairman of the
meeting. The secretary of the Corporation or, in his absence, an
assistant secretary shall act as secretary of meetings of the
Board of Directors. In the event that neither the secretary nor
any assistant secretary shall be present at such meeting, the
chairman of the meeting shall appoint any person to act as
secretary of the meeting.
SECTION 6. VACANCIES. - Any vacancy occurring in the
Board of Directors, including a vacancy resulting from amending
these By-Laws to increase the number of directors by thirty percent
or less, may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of
Directors.
SECTION 7. PLACE OF MEETING. - Meetings of the Board of
Directors, regular or special, may be held either within or without
the Commonwealth of Virginia.
SECTION 8. ORGANIZATIONAL MEETING. - The annual
organizational meeting of the Board of Directors shall be held
immediately following adjournment of the annual meeting of
stockholders and at the same place, without the requirement of any
notice other than this provision of the By-Laws.
SECTION 9. REGULAR MEETINGS: NOTICE. - Regular meetings
of the Board of Directors shall be held at such times and places
as it may from time to time determine. Notice of such meetings
need not be given if the time and place have been fixed at a
previous meeting.
SECTION 10. SPECIAL MEETINGS. - Special meetings of the
Board of Directors shall be held whenever called by order of the
chairman of the Board of Directors, the deputy chairman of the
Board of Directors (if any) or of the president or of two of the
directors. Notice of each such meeting, which need not specify
the business to be transacted thereat, shall be mailed to each
director, addressed to his residence or usual place of business, at
least two days before the day on which the meeting is to be held,
or shall be sent to such place by telegraph, telex or telecopy or
be delivered personally or by telephone, not later than the day
before the day on which the meeting is to be held.
SECTION 11. WAIVER OF NOTICE. - Whenever any notice is
required to be given to a director of any meeting for any purpose
under the provisions of law, the Articles of Incorporation or
these By-Laws, a waiver thereof in writing signed by the person or
persons entitled to such notice, either before or after the time
stated therein, shall be equivalent to the giving of such notice.
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A director's attendance at or participation in a meeting waives
any required notice to him of the meeting unless he at the
beginning of the meeting or promptly upon his arrival objects to
holding the meeting or transacting business at the meeting and
does not thereafter vote for or assent to action taken at the
meeting.
SECTION 12. QUORUM AND MANNER OF ACTING. - Except where
otherwise provided by law, a majority of the directors fixed by
these By-Laws at the time of any regular or special meeting shall
constitute a quorum for the transaction of business at such
meeting, and the act of a majority of the directors present at any
such meeting at which a quorum is present shall be the act of the
Board of Directors. In the absence of a quorum, a majority of
those present may adjourn the meeting from time to time until a
quorum be had. Notice of any such adjourned meeting need not be
given.
SECTION 13. ORDER OF BUSINESS. - At all meetings of the
Board of Directors business may be transacted in such order as
from time to time the Board of Directors may determine.
SECTION 14. COMMITTEES. - In addition to the executive
committee authorized by Article III of these By-Laws, other
committees, consisting of two or more directors, may be designated
by the Board of Directors by a resolution adopted by the greater
number of (i) a majority of all directors in office at the time
the action is being taken or (ii) the number of directors required
to take action under Article II, Section 12 hereof. Any such
committee, to the extent provided in the resolution of the Board
of Directors designating the committee, shall have and may
exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, except
as limited by law.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. HOW CONSTITUTED AND POWERS. - The Board of
Directors, by resolution adopted pursuant to Article II, Section
14 hereof, may designate, in addition to the chairman of the
Board of Directors, one or more directors to constitute an
executive committee, who shall serve during the pleasure of the
Board of Directors. The executive committee, to the extent
provided in such resolution and permitted by law, shall have and
may exercise all of the authority of the Board of Directors.
SECTION 2. ORGANIZATION, ETC. - The executive committee may
choose a chairman and secretary. The executive committee shall
keep a record of its acts and proceedings and report the same from
time to time to the Board of Directors.
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SECTION 3. MEETINGS. - Meetings of the executive
committee may be called by any member of the committee. Notice of
each such meeting, which need not specify the business to be
transacted thereat, shall be mailed to each member of the
committee, addressed to his residence or usual place of business,
at least two days before the day on which the meeting is to be
held or shall be sent to such place by telegraph, telex or
telecopy or be delivered personally or by telephone, not later
than the day before the day on which the meeting is to be held.
SECTION 4. QUORUM AND MANNER OF ACTING. - A majority of
the executive committee shall constitute a quorum for transaction
of business, and the act of a majority of those present at a
meeting at which a quorum is present shall be the act of the
executive committee. The members of the executive committee shall
act only as a committee, and the individual members shall have no
powers as such.
SECTION 5. REMOVAL. - Any member of the executive
committee may be removed, with or without cause, at any time, by
the Board of Directors.
SECTION 6. VACANCIES. - Any vacancy in the executive
committee shall be filled by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. - The officers of the Corporation shall
be a chairman of the Board of Directors, a deputy chairman of the
Board of Directors (if elected by the Board of Directors), a
president, one or more vice chairmen of the Board of Directors (if
elected by the Board of Directors), one or more vice presidents
(one or more of whom may be designated executive vice president or
senior vice president), a treasurer, a controller, a secretary,
one or more assistant treasurers, assistant controllers and
assistant secretaries and such other officers as may from time to
time be chosen by the Board of Directors. Any two or more offices
may be held by the same person.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. -
All officers of the Corporation shall be chosen annually by the
Board of Directors, and each officer shall hold office until his
successor shall have been duly chosen and qualified or until he
shall resign or shall have been removed in the manner hereinafter
provided. The chairman of the Board of Directors, the deputy
chairman of the Board of Directors (if any), the president and the
vice chairmen of the Board of Directors (if any) shall be chosen
from among the directors.
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SECTION 3. VACANCIES. - If any vacancy shall occur among
the officers of the Corporation, such vacancy shall be filled by
the Board of Directors.
SECTION 4. OTHER OFFICERS, AGENTS AND EMPLOYEES - THEIR
POWERS AND DUTIES. - The Board of Directors may from time to time
appoint such other officers as the Board of Directors may deem
necessary, to hold office for such time as may be designated by it
or during its pleasure, and the Board of Directors or the chairman
of the Board of Directors may appoint, from time to time, such
agents and employees of the Corporation as may be deemed proper,
and may authorize any officers to appoint and remove agents and
employees. The Board of Directors or the chairman of the Board of
Directors may from time to time prescribe the powers and duties of
such other officers, agents and employees of the Corporation.
SECTION 5. REMOVAL. - Any officer, agent or employee of
the Corporation may be removed, either with or without cause, by a
vote of a majority of the Board of Directors or, in the case of
any agent or employee not appointed by the Board of Directors, by
a superior officer upon whom such power of removal may be conferred
by the Board of Directors or the chairman of the Board of
Directors.
SECTION 6. CHAIRMAN OF THE BOARD OF DIRECTORS. - The
chairman of the Board of Directors shall preside at meetings of
the stockholders and of the Board of Directors and shall be a
member of the executive committee. He shall be the chief
executive officer of the Corporation and shall be responsible to
the Board of Directors. Subject to the Board of Directors, he
shall be responsible for the general management and control of the
business and affairs of the Corporation. He shall see that all
orders and resolutions of the Board of Directors are carried into
effect. He shall from time to time report to the Board of
Directors on matters within his knowledge which the interests of
the Corporation may require be brought to its notice. He shall do
and perform such other duties from time to time as may be assigned
to him by the Board of Directors.
SECTION 7. DEPUTY CHAIRMAN OF THE BOARD OF DIRECTORS. -
In the absence of the chairman of the Board of Directors, the deputy
chairman of the Board of Directors shall preside at meetings of the
stockholders and of the Board of Directors. He shall be a member of
the executive committee. He shall be responsible to the chairman of
the Board of Directors and shall perform such duties as shall be
assigned to him by the chairman of the Board of Directors. He shall
from time to time report to the chairman of the Board of Directors
on matters within his knowledge which the interests of the Corporation
may require be brought to his notice.
SECTION 8. PRESIDENT. - In the absence of the chairman of
the Board of Directors and the deputy chairman of the Board of
Directors (if any), the president shall preside at meetings of the
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stockholders and of the Board of Directors. He shall be a member
of the executive committee. He shall be the chief operating officer
of the Corporation, responsible to the chairman of the Board of
Directors and shall devote himself to the Corporation's operations
under the basic policies set by the Board of Directors and the
chairman of the Board of Directors. He shall from time to time report
to the chairman of the Board of Directors on matters within his
knowledge which the interests of the Corporation may require be
brought to his notice. In the absence of the chairman of the Board
of Directors and the deputy chairman of the Board of Directors (if
any), he shall have all of the powers and the duties of the
chairman of the Board of Directors. He shall do and perform such
other duties from time to time as may be assigned to him by the
Board of Directors or by the chairman of the Board of Directors.
SECTION 9. VICE CHAIRMEN OF THE BOARD OF DIRECTORS. - In
the absence of the chairman of the Board of Directors, the deputy
chairman of the Board of Directors (if any) and the president, the
vice chairman of the Board of Directors designated for such purpose
by the chairman of the Board of Directors shall preside at meetings
of the stockholders and of the Board of Directors. Each vice chairman
of the Board of Directors shall be responsible to the chairman of the
Board of Directors. Each vice chairman of the Board of Directors shall
from time to time report to the chairman of the Board of Directors on
matters within his knowledge which the interests of the Corporation
may require be brought to his notice. In the absence or inability to
act of the chairman of the Board of Directors, the deputy chairman of
the Board of Directors (if any) and the president, such vice chairman
of the Board of Directors as the chairman of the Board of Directors may
designate for the purpose shall have the powers and discharge the duties
of the chairman of the Board of Directors. In the event of the failure
or inability of the chairman of the Board of Directors to so designate
a vice chairman of the Board of Directors, the Board of Directors may
designate a vice chairman of the Board of Directors who shall have the
powers and discharge the duties of the chairman of the Board of Directors.
SECTION 10. VICE PRESIDENTS. - The vice presidents of the
Corporation shall assist the chairman of the Board of Directors,
the deputy chairman of the Board of Directors, the president and
the vice chairmen of the Board of Directors in carrying out their
respective duties and shall perform those duties which may from
time to time be assigned to them.
SECTION 11. TREASURER. - The treasurer shall have charge
of the funds, securities, receipts and disbursements of the
Corporation. He shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such
banks or trust companies or with such bankers or other
depositaries as the Board of Directors may from time to time
designate. He shall render to the Board of Directors, the
chairman of the Board of Directors, the deputy chairman of the
Board of Directors, the president, the vice chairmen of the Board
of Directors, and the chief financial
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officer, whenever required by any of them, an account of all of
his transactions as treasurer. If required, he shall give a bond
in such sum as the Board of Directors may designate, conditioned
upon the faithful performance of the duties of his office and the
restoration to the Corporation at the expiration of his term of
office or in case of his death, resignation or removal from
office, of all books, papers, vouchers, money or other property
of whatever kind in his possession or under his control belonging
to the Corporation. He shall perform such other duties as from
time to time may be assigned to him.
SECTION 12. ASSISTANT TREASURERS. - In the absence or
disability of the treasurer, one or more assistant treasurers
shall perform all the duties of the treasurer and, when so acting,
shall have all the powers of, and be subject to all restrictions
upon, the treasurer. Each assistant treasurer shall also perform
such other duties as from time to time may be assigned to him.
SECTION 13. SECRETARY. - The secretary shall keep the
minutes of all meetings of the stockholders and of the Board of
Directors in a book or books kept for that purpose. He shall keep
in safe custody the seal of the Corporation, and shall affix such
seal to any instrument requiring it. The secretary shall have
charge of such books and papers as the Board of Directors may
direct. He shall attend to the giving and serving of all notices
of the Corporation and shall also have such other powers and
perform such other duties as pertain to his office, or as the Board
of Directors, the chairman of the Board of Directors, the deputy
chairman of the Board of Directors, the president or any vice
chairman of the Board of Directors may from time to time
prescribe.
SECTION 14. ASSISTANT SECRETARIES. - In the absence or
disability of the secretary, one or more assistant secretaries
shall perform all of the duties of the secretary and, when so
acting, shall have all of the powers of, and be subject to all the
restrictions upon, the secretary. Each assistant secretary shall
also perform such other duties as from time to time may be
assigned to him.
SECTION 15. CONTROLLER. - The controller shall be
administrative head of the controller's department. He shall be
in charge of all functions relating to accounting, auditing and
the preparation and analysis of budgets and statistical reports
and shall establish, through appropriate channels, recording and
reporting procedures and standards pertaining to such matters. He
shall report to the chief financial officer and shall aid in
developing internal corporate policies whereby the business of the
Corporation shall be conducted with the maximum safety, efficiency
and economy, and he shall be available to all departments of the
Corporation for advice and guidance in the interpretation and
application of policies which are within the scope of his
authority. He shall perform such other duties as from time to
time may be assigned to him.
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SECTION 16. ASSISTANT CONTROLLERS. - In the absence or
disability of the controller, one or more assistant controllers
shall perform all of the duties of the controller and, when so
acting, shall have all of the powers of, and be subject to all the
restrictions upon, the controller. Each assistant controller
shall also perform such other duties as from time to time may be
assigned to him.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. CONTRACTS. - The chairman of the Board of
Directors, the deputy chairman of the Board of Directors, the
president, any vice chairman of the Board of Directors, any vice
president, the treasurer and such other persons as the Board of
Directors may authorize shall have the power to execute any
contract or other instrument on behalf of the Corporation; no
other officer, agent or employee shall, unless otherwise in
these By-Laws provided, have any power or authority to bind the
Corporation by any contract or acknowledgement, or pledge its
credit or render it liable pecuniarily for any purpose or to any
amount.
SECTION 2. LOANS. - The chairman of the Board of
Directors, the deputy chairman of the Board of Directors, the
president, any vice chairman of the Board of Directors, any vice
president, the treasurer and such other persons as the Board of
Directors may authorize shall have the power to effect loans and
advances at any time for the Corporation from any bank, trust
company or other institution, or from any corporation, firm or
individual, and for such loans and advances may make, execute and
deliver promissory notes or other evidences of indebtedness of
the Corporation, and, as security for the payment of any and all
loans, advances, indebtedness and liability of the Corporation,
may pledge, hypothecate or transfer any and all stocks,
securities and other personal property at any time held by the
Corporation, and to that end endorse, assign and deliver the
same.
SECTION 3. VOTING OF STOCK HELD. - The chairman of the
Board of Directors, the deputy chairman of the Board of Directors,
the president, any vice chairman of the Board of Directors, any
vice president or the secretary may from time to time appoint an
attorney or attorneys or agent or agents of the Corporation to
cast the votes that the Corporation may be entitled to cast as a
stockholder or otherwise in any other corporation, any of whose
stock or securities may be held by the Corporation, at meetings
of the holders of the stock or other securities of such other
corporation, or to consent in writing to any action by any other
such corporation, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed on behalf of the
Corporation such written proxies, consents, waivers
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or other instruments as such officer may deem necessary or proper
in the premises; or the chairman of the Board of Directors, the
president, any vice chairman of the Board of Directors, any vice
president or the secretary may himself attend any meeting of the
holders of stock or other securities of such other corporation and
thereat vote or exercise any and all powers of the Corporation as
the holder of such stock or other securities of such other
corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Certificates representing shares of the Corporation shall be
signed by the chairman of the Board of Directors, the deputy
chairman of the Board of Directors, or the president of the
Corporation and the secretary or an assistant secretary. Any and
all signatures on such certificates, including signatures of
officers, transfer agents and registrars, may be facsimile.
ARTICLE VII
DIVIDENDS
The Board of Directors may declare dividends from funds of
the Corporation legally available therefor.
ARTICLE VIII
SEAL
The Board of Directors shall provide a suitable seal or
seals, which shall be in the form of a circle, and shall bear
around the circumference the words "Philip Morris Companies Inc."
and in the center the word and figures "Virginia, 1985".
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall be the calendar
year.
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ARTICLE X
AMENDMENTS
The power to alter, amend or repeal the By-Laws of the
Corporation or to adopt new By-Laws shall be vested in the Board of
Directors, but By-Laws made by the Board of Directors may be
repealed or changed by the stockholders, or new By-Laws may be
adopted by the stockholders, and the stockholders may prescribe
that any By-Laws made by them shall not be altered, amended or
repealed by the directors.
ARTICLE XI
EMERGENCY BY-LAWS
If a quorum of the Board of Directors cannot be readily
assembled because of some catastrophic event, and only in such
event, these By-Laws shall, without further action by the Board of
Directors, be deemed to have been amended for the duration of such
emergency, as follows:
SECTION 1. SECTION 6 OF ARTICLE II SHALL READ AS FOLLOWS:
Any vacancy occurring in the Board of
Directors may be filled by the affirmative
vote of a majority of the directors present
at a meeting of the Board of Directors
called in accordance with these By-Laws.
SECTION 2. THE FIRST SENTENCE OF SECTION 10 OF ARTICLE II
SHALL READ AS FOLLOWS:
Special meetings of the Board of Directors
shall be held whenever called by order of
the chairman of the Board of Directors or
of the president or of any vice chairman
of the Board of Directors or of any
director or of any person having the
powers and duties of the chairman of the
Board of Directors, the president or any
vice chairman of the Board of Directors.
SECTION 3. SECTION 12 OF ARTICLE II SHALL READ AS FOLLOWS:
The directors present at any regular or
special meeting called in accordance with
these By-Laws shall constitute a quorum for
the transaction of business at such
meeting, and the action of a majority of
such directors shall be the act of the
Board of Directors, provided, however,
that in the event that only one director
is present at any such meeting no action
except the election of directors shall be
taken until
-14-
<PAGE>
at least two additional directors
have been elected and are in
attendance.
ARTICLE XII
RESTRICTIONS ON TRANSFER
The restrictions on transfer of Rights to purchase Common
Stock contained in the Rights Agreement between the Company and
First Chicago Trust Company of New York, as Rights Agent, dated
as of October 25, 1989, are hereby authorized and imposed by these
By-Laws.
-15-
<PAGE>
EXHIBIT 4.11
U.S. $8,000,000,000
5-YEAR LOAN AND GUARANTY AGREEMENT
Dated as of December 17, 1993
among
PHILIP MORRIS COMPANIES INC.
and
THE BANKS NAMED HEREIN
and
CITIBANK, N.A.
as Agent
-- -----
<PAGE>
(i)
TABLE OF CONTENTS
-----------------
Section Page
------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Defined Terms..................... 1
1.02 Additional Definitions.................... 14
1.03 Computation of Time Periods............... 14
1.04 Accounting Terms.......................... 14
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01 The A Advances............................ 14
2.02 Making the A Advances..................... 15
2.03 The B Advances............................ 18
2.04 Fees...................................... 22
2.05 Reduction of the Commitments.............. 23
2.06 Repayment of A Advances................... 24
2.07 Interest on A Advances.................... 24
2.08 Additional Interest on Eurodollar
Rate Advances........................... 25
2.09 Interest Rate Determination............... 25
2.10 Prepayment of A Advances.................. 25
2.11 Increased Costs........................... 26
2.12 Payments and Computations................. 28
2.13 Taxes..................................... 29
2.14 Sharing of Payments, Etc.................. 31
2.15 Evidence of Debt.......................... 32
ARTICLE III
CONDITIONS OF LENDING
3.01 Condition Precedent to Initial
Advances................................ 32
3.02 Conditions Precedent to Each
A Borrowing............................. 33
3.03 Conditions Precedent to Certain
A Borrowings............................ 34
3.04 Conditions Precedent to Each
B Borrowing............................. 35
3.05 Conditions Precedent to Effectiveness
of this Agreement....................... 35
<PAGE>
(ii)
Section Page
------- ----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of
PM Companies............................ 36
ARTICLE V
COVENANTS OF PM COMPANIES
5.01 Affirmative Covenants..................... 38
5.02 Negative Covenants........................ 41
ARTICLE VI
EVENTS OF DEFAULT
6.01 Events of Default......................... 43
ARTICLE VII
THE AGENT
7.01 Authorization and Action.................. 47
7.02 Agent's Reliance, Etc..................... 47
7.03 Citibank and Affiliates................... 48
7.04 Lender Credit Decision.................... 48
7.05 Indemnification........................... 48
7.06 Successor Agent........................... 49
ARTICLE VIII
GUARANTY
8.01 Guaranty.................................. 49
8.02 Guaranty Absolute......................... 50
8.03 Waivers................................... 50
8.04 Payments Free and Clear of Taxes, Etc..... 51
8.05 No Waiver; Remedies....................... 52
8.06 Continuing Guaranty....................... 53
<PAGE>
(iii)
Section Page
------- ----
ARTICLE IX
SUBSIDIARY BORROWER
9.01 Subsidiary Borrower....................... 53
ARTICLE X
MISCELLANEOUS
10.01 Amendments, Etc........................... 55
10.02 Notices, Etc.............................. 55
10.03 No Waiver; Remedies....................... 56
10.04 Costs, Expenses and Taxes................. 56
10.05 Right of Set-off.......................... 58
10.06 Binding Effect............................ 58
10.07 Assignments and Participations............ 58
10.08 Governing Law............................. 61
10.09 Execution in Counterparts................. 61
Schedule I List of Applicable Lending Offices
Exhibit A Form of B Note
Exhibit B-1 Notice of A Borrowing
Exhibit B-2 Notice of B Borrowing
Exhibit C Assignment and Acceptance
Exhibit D Form of Opinion of Counsel for Philip Morris
Companies Inc.
Exhibit E Form of Opinion of Special Counsel for the
Agent
Exhibit F Notice of Acceptance
<PAGE>
5-YEAR LOAN AND GUARANTY AGREEMENT
Dated as of December 17, 1993
PHILIP MORRIS COMPANIES INC., a Virginia corporation
("PM Companies"), the banks (the "Banks") listed on the
signature pages hereof, and CITIBANK, N.A. ("Citibank"), as
agent (the "Agent") for the Lenders hereunder, agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
---------------------
Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"A Advance" means an advance by a Lender to a Borrower
---------
as part of an A Borrowing by such Borrower consisting of A
Advances of the same Type from each of the Lenders pursuant to
Section 2.01 and refers to a Base Rate Advance, an Adjusted CD
Rate Advance or a Eurodollar Rate Advance, each of which shall
be a Type of A Advance.
"A Borrowing" means a borrowing consisting of
-----------
simultaneous A Advances of the same Type from each of the
Lenders to a Borrower pursuant to Section 2.01.
"Adjusted CD Rate" means, for the Interest Period for
----------------
each Adjusted CD Rate Advance comprising part of the same A
Borrowing, an interest rate per annum equal to the sum of:
(a) the rate per annum obtained by dividing (i) the
rate of interest determined by the Agent to be the average
(rounded upward to the nearest whole multiple of 1/100 of
1% per annum, if such average is not such a multiple) of
the consensus bid rate determined by each of the Reference
Banks for the bid rates per annum, at 9:00 A.M. (New York
City time) (or as soon thereafter as practicable) on the
first day of such Interest Period, of New York certificate
of deposit dealers of recognized standing selected by such
Reference Bank for the purchase at face value of
certificates of deposit of such Reference Bank in an amount
approximately equal to such Reference Bank's Adjusted CD
Rate Advance comprising part
<PAGE>
2
of such A Borrowing and with a maturity equal to such
Interest Period, by (ii) a percentage equal to 100% minus
the Adjusted CD Rate Reserve Percentage (as defined below)
for such Interest Period, plus
(b) the Assessment Rate (as defined below) for such
Interest Period.
The "Adjusted CD Rate Reserve Percentage" for the
-----------------------------------
Interest Period for each Adjusted CD Rate Advance comprising
part of the same A Borrowing means the reserve percentage
applicable on the first day of such Interest Period under
regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve
System in New York City with deposits exceeding one billion
dollars with respect to liabilities consisting of or including
(among other liabilities) U.S. dollar nonpersonal time deposits
in the United States with a maturity equal to such Interest
Period. The "Assessment Rate" for the Interest Period for such
-----------------
Adjusted CD Rate Advance comprising part of the same A
Borrowing means the annual assessment rate estimated by the
Agent on the first day of such Interest Period for determining
the then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of Citibank in the United States.
The Adjusted CD Rate for the Interest Period for each Adjusted
CD Rate Advance comprising part of the same A Borrowing shall
be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks
on the first day of such Interest Period, subject, however, to
------- -------
the provisions of Section 2.09.
"Adjusted CD Rate Advance" means an A Advance which
------------------------
bears interest as provided in Section 2.07(b).
"Advance" means an A Advance or a B Advance.
-------
"Applicable Facility Fee Rate" means for any period a
----------------------------
percentage per annum equal to the percentage set forth below
determined by reference to the higher of (i) the rating of PM
Companies' long-term senior unsecured Debt from Standard &
Poor's Corporation and (ii) the rating of PM Companies'
long-term senior unsecured Debt from Moody's Investors Service,
in each case in effect from time to time during such period:
<PAGE>
3
Long-Term Applicable
Senior Unsecured Facility
Debt Rating Fee Rate
---------------- ----------
A- and A3 (or higher) 0.1250%
BBB and Baa2 or higher,
but lower than A- and A3 0.1875%
Lower than BBB and Baa2 0.2500%;
provided that if no rating is available on any date of
--------
determination from Moody's Investors Service and Standard &
Poor's Corporation or any other nationally recognized
statistical rating organization designated by PM Companies and
approved in writing by the Majority Lenders, the Applicable
Facility Fee Rate shall be 0.25%.
"Applicable Interest Rate Margin" means for any
-------------------------------
Interest Period a percentage per annum equal to the percentage
set forth below determined by reference to the higher of (i)
the rating of PM Companies' long-term senior unsecured Debt
from Standard & Poor's Corporation and (ii) the rating of PM
Companies' long-term senior unsecured Debt from Moody's
Investors Service, in each case from time to time during such
Interest Period:
Long-Term Applicable
Senior Unsecured Interest Rate
Debt Rating Margin
---------------- -------------
A- and A3 (or higher) 0.3000%
BBB and Baa2 or higher,
but lower than A- and A3 0.3750%
Lower than BBB and Baa2 0.5000%;
provided that if no rating is available on any date of
--------
determination from Moody's Investors Service and Standard &
Poor's Corporation or any other nationally recognized
statistical rating organization designated by PM Companies and
approved in writing by the Majority Lenders, the Applicable
Interest Rate Margin shall be 0.50%.
"Applicable Lending Office" means, with respect to
-------------------------
each Lender, such Lender's Domestic Lending Office in the case
of a Base Rate Advance, such Lender's CD Lending Office in the
case of an Adjusted CD Rate Advance, and such Lender's
<PAGE>
4
Eurodollar Lending Office in the case of a Eurodollar Rate
Advance and, in the case of a B Advance, the office of such
Lender notified by such Lender to the Agent with respect to
such B Advance.
"Applicable Usage Fee Rate" means for any period a
-------------------------
percentage per annum equal to 0.1250%.
"Asset Disposition" means any sale, lease, transfer,
-----------------
spin-off or other disposition ("Disposition") to any Person
(including any shareholder of PM Companies), voluntarily or
involuntarily, of any of the Tobacco Assets (whether now owned
or hereafter acquired) of PM Companies and its directly and
indirectly owned subsidiaries, provided that "Asset
-------- -----
Disposition" shall not mean (i) any Disposition of Tobacco
-----------
Assets to PM Companies or any subsidiary directly or indirectly
wholly-owned by PM Companies, (ii) any sale and lease-back of
Tobacco Assets which, together with all such sale and
lease-back transactions occurring from and after September 30,
1993, does not exceed an aggregate amount equal to
$500,000,000, provided that the lease term related to such sale
and lease-back transaction has a duration approximately equal
to the useful life of such Tobacco Assets, (iii) any
Disposition of Tobacco Assets in the ordinary course of
business and (iv) any Disposition which, together with all such
other Dispositions (excluding all Dispositions described in
clauses (i), (ii) and (iii) of this definition) occurring from
and after September 30, 1993, does not exceed an aggregate
amount equal to $1,100,000,000 net after-tax proceeds
calculated in accordance with the provisions of Section
2.05(b).
"Assignment and Acceptance" means an assignment and
-------------------------
acceptance entered into by a Lender and an Eligible Assignee,
and accepted by the Agent, in substantially the form of Exhibit
C hereto.
"B Advance" means an advance by a Lender to a Borrower
---------
as part of a B Borrowing by such Borrower resulting from the
auction bidding procedure described in Section 2.03(a).
"B Borrowing" means a borrowing consisting of
-----------
simultaneous B Advances to a Borrower from each of the Lenders
whose offer to make one or more B Advances as part of such
borrowing has been accepted by such Borrower under the auction
bidding procedure described in Section 2.03(a).
"B Note" means a promissory note of a Borrower payable
------
to the order of any Lender, in substantially the form
<PAGE>
5
of Exhibit A hereto, evidencing the indebtedness of such
Borrower to such Lender resulting from a B Advance to such
Borrower, together with, if such Borrower is a subsidiary of PM
Companies, a guaranty of the Guarantor endorsed thereon,
substantially in the form of Exhibit A hereto.
"B Reduction" has the meaning assigned to that term in
-----------
Section 2.01.
"Base Rate" means, for any Interest Period or any
---------
other period, a fluctuating interest rate per annum as shall be
in effect from time to time which rate per annum shall at all
times be equal to the highest of:
(a) The rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money market
banks, such three-week moving average being determined
weekly on each Monday (or if such day is not a Business
Day, on the next succeeding Business Day) for the
three-week period ending on the previous Friday by Citibank
on the basis of such rates reported by certificate of
deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of
deposit dealers of recognized standing selected by
Citibank, in either case adjusted to the nearest 1/4 of one
percent or, if there is no nearest 1/4 of one percent, to
the next higher 1/4 of one percent; or
(c) for any day 1/2 of one percent per annum above
the Federal Funds Rate.
"Base Rate Advance" means an A Advance which bears
-----------------
interest as provided in Section 2.07(a).
"Borrower" means PM Companies or any subsidiary of PM
--------
Companies with respect to which a Notice of Acceptance has been
given, and whenever in this Agreement the term "Borrower" is
used in the singular, it shall refer to the appropriate
Borrower, or to all Borrowers, as the context may require.
<PAGE>
6
"Borrowing" means an A Borrowing or a B Borrowing.
---------
"Business Day" means a day of the year on which banks
------------
are not required or authorized to close in New York City and,
if the applicable Business Day relates to any Eurodollar Rate
Advance, on which dealings are carried on in the London
interbank market.
"CD Lending Office" means, with respect to any Lender,
-----------------
the office of such Lender specified as its "CD Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such
office is specified, its Domestic Lending Office) or such other
office of such Lender as such Lender may from time to time
specify to PM Companies and the Agent.
"Commitment" has the meaning specified in Section
----------
2.01.
"Consolidated Tangible Assets" means all assets
----------------------------
properly appearing on a consolidated balance sheet of PM
Companies and its subsidiaries after deducting goodwill,
trademarks, patents, other like intangibles, and the minority
interests of other Persons in such subsidiaries, all as
determined in accordance with generally accepted accounting
principles, except that if there has been a material change in
an accounting principle as compared to that applied in the
preparation of the financial statements of PM Companies and its
subsidiaries as at and for the nine months ended September 30,
1993, then such new accounting principle shall not be used in
the determination of Consolidated Tangible Assets. A material
change in an accounting principle is one that in the year of
its adoption changes Consolidated Tangible Assets at such
year-end by more than 10%.
"Debt" means (i) indebtedness for borrowed money or
----
for the deferred purchase price of property or services, or
obligations evidenced by bonds, debentures, notes or similar
instruments, (ii) obligations as lessee under leases which
shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases, and
(iii) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (i) or
(ii) above.
<PAGE>
7
"Domestic Lending Office" means, with respect to any
-----------------------
Lender, the office of such Lender specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in
the Assignment and Acceptance pursuant to which it became a
Lender or such other office of such Lender as such Lender may
from time to time specify to PM Companies and the Agent.
"Eligible Assignee" means (i) a commercial bank
-----------------
organized under the laws of the United States, or any State
thereof, and having total assets in excess of $5,000,000,000;
(ii) a commercial bank organized under the laws of any other
country which is a member of the OECD, or a political
subdivision of any such country, and having total assets in
excess of $5,000,000,000, provided that such bank is acting
through a branch or agency located in the country in which it
is organized or another country which is also a member of the
OECD or the Cayman Islands; (iii) the central bank of any
country which is a member of the OECD; (iv) a commercial
finance company or finance subsidiary of a corporation
organized under the laws of the United States, or any State
thereof, and having total assets in excess of $3,000,000,000;
(v) an insurance company organized under the laws of the United
States, or any State thereof, and having total assets in excess
of $5,000,000,000; (vi) any Bank; and (vii) an affiliate of any
Lender.
"ERISA" means the Employee Retirement Income Security
-----
Act of 1974, as amended from time to time and the regulations
promulgated and the rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
---------------
Title IV of ERISA is a member of any Borrower's or PM
Companies' controlled group, or under common control with such
Borrower or PM Companies, within the meaning of Section 414 of
the Internal Revenue Code of 1986, as amended from time to
time.
"ERISA Event" means (i) the occurrence with respect to
-----------
a Plan of a Reportable Event, within the meaning of Section
4043 of ERISA, unless the 30-day notice requirement with
respect thereto has been waived by the PBGC; (ii) the provision
by the administrator of any Plan of a notice of intent to
terminate such Plan, pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (iii) the cessation
of operations at a facility of any Borrower or PM Companies or
any of their ERISA Affiliates in the circumstances described in
Section 4068(f) of ERISA; (iv) the withdrawal by any Borrower
or PM Companies or any of their
<PAGE>
8
ERISA Affiliates from a Multiple Employer Plan during a plan
year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (v) the conditions set forth in
Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien
upon property or rights to property of any Borrower or PM
Companies or any of their ERISA Affiliates for failure to make a
required payment to a Plan are satisfied; (vi) the adoption of
an amendment to a Plan requiring the provision of security to
such Plan, pursuant to Section 307 of ERISA; or (vii) the
occurrence of any event or condition described in Section 4042
of ERISA that constitutes grounds for the termination of, or
the appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to
------------------------
that term in Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any
-------------------------
Lender, the office of such Lender specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in
the Assignment and Acceptance pursuant to which it became a
Lender (or, if no such office is specified, its Domestic
Lending Office) or such other office of such Lender as such
Lender may from time to time specify to PM Companies and the
Agent.
"Eurodollar Rate" means, for the Interest Period for
---------------
each Eurodollar Rate Advance comprising part of the same A
Borrowing, an interest rate per annum equal to the average
(rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average is not such a multiple) of the rate per
annum at which deposits in U.S. dollars are offered by the
principal office of each of the Reference Banks in London,
England to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of
such Interest Period in an amount approximately equal to such
Reference Bank's Eurodollar Rate Advance comprising part of
such A Borrowing and for a period equal to such Interest
Period. The Eurodollar Rate for the Interest Period for each
Eurodollar Rate Advance comprising part of the same A Borrowing
shall be determined by the Agent on the basis of applicable
rates furnished to and received by the Agent from the Reference
Banks two Business Days before the first day of such Interest
Period, subject, however, to the provisions of Section 2.09.
------- -------
"Eurodollar Rate Advance" means an A Advance which
-----------------------
bears interest as provided in Section 2.07(c).
<PAGE>
9
"Eurodollar Rate Reserve Percentage" of any Lender for
----------------------------------
the Interest Period for any Eurodollar Rate Advance means the
reserve percentage applicable during such Interest Period (or
if more than one such percentage shall be so applicable, the
daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so
applicable) under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirement (including,
without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period.
"Events of Default" has the meaning specified in
-----------------
Section 6.01.
"Federal Bankruptcy Code" means the Bankruptcy Reform
-----------------------
Act of 1978, as amended from time to time.
"Federal Funds Rate" means, for any period, a
------------------
fluctuating interest rate per annum 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 Agent from three Federal
funds brokers of recognized standing selected by it.
"Fixed Charges" means, for any accounting period, the
-------------
sum of (i) interest, whether expensed or capitalized, in
respect of any Debt outstanding during such period, plus (ii)
amortization of debt expense and discount or premium relating
to any Debt outstanding during such period, whether expensed or
capitalized, plus (iii) such portion of rental expense as can
be demonstrated to be representative of the interest factor in
the particular case, all as to be applicable to continuing
operations and determined in accordance with generally accepted
accounting principles, except that if there has been a material
change in an accounting principle as compared to that applied
in the preparation of the financial statements of PM Companies
as at and for the nine months ended September 30, 1993, then
such new accounting principle shall not be used in the
determination of Fixed
<PAGE>
10
Charges. A material change in an accounting principle is one
that, in the year of its adoption, changes Net Income Before
Tax or Fixed Charges for any quarter in such year by more than
10%.
"Guarantor" means PM Companies.
---------
"Guaranty" has the meaning specified in Section 8.01.
--------
"Insufficiency" means, with respect to any Plan, the
-------------
amount of "unfunded benefit liabilities" (as defined in Section
4001(a)(18) of ERISA), if any, for such Plan.
"Interest Period" means, for each A Advance comprising
---------------
part of the same A Borrowing, the period commencing on the date
of such A Advance and ending on the last day of the period
selected by PM Companies pursuant to the provisions below. The
duration of each such Interest Period shall be (a) in the case
of an Adjusted CD Rate Advance, 30, 60, 90 or 180 days, (b) in
the case of a Base Rate Advance, 1, 2, 3 or 6 months and (c) in
the case of a Eurodollar Rate Advance, 1, 2, 3 or 6 months, in
each case as PM Companies may, upon notice received by the
Agent not later than 12:00 Noon (New York City time) on the
third Business Day with respect to a Eurodollar Rate Advance,
on the second Business Day with respect to an Adjusted CD Rate
Advance and on the Business Day with respect to a Base Rate
Advance, prior to the first day of such Interest Period,
select; provided, however, that:
-------- -------
(i) the duration of any Interest Period which
commences before the Termination Date and would otherwise
end after the Termination Date shall end on the Termination
Date;
(ii) Interest Periods commencing on the same date for A
Advances comprising part of the same A Borrowing shall be
of the same duration; and
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, in the case of any Interest
--------
Period for a Eurodollar Rate Advance, that if such extension would
cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day.
<PAGE>
11
"Lenders" means the Banks listed on the signature
-------
pages hereof and each Eligible Assignee that shall become a
party hereto pursuant to Section 10.07.
"Major Plan" means, at any time, a Plan with an
----------
Insufficiency of $10,000,000 or more.
"Major Subsidiary" means any subsidiary (a) more than
----------------
50% of the voting securities of which is owned directly or
indirectly by PM Companies, (b) which is organized and existing
under, or has its principal place of business in, the United
States or any political subdivision thereof, Canada or any
political subdivision thereof, any country which is a member of
the European Economic Community on the date hereof (other than
Greece, Portugal or Spain) or any political subdivision
thereof, Sweden, Switzerland, Norway or Australia or any of
their respective political subdivisions, and (c) which has at
any time total assets (after intercompany eliminations)
exceeding $500,000,000. Notwithstanding the foregoing, Mission
Viejo Company (a California corporation) and any of its
subsidiaries engaged in the business of community development,
commercial real estate development, real estate investment or
related activities shall not be a Major Subsidiary.
"Majority Lenders" means at any time Lenders holding
----------------
at least 66-2/3% of the aggregate unpaid principal amount of
the A Advances then outstanding, or, if no such principal
amount is then outstanding, Lenders having at least 66-2/3% of
the Commitments (provided that, for purposes hereof, neither PM
Companies or any Borrower, nor any of their respective
affiliates, if a Lender, shall be included in (i) the Lenders
holding such amount of the A Advances or having such amount of
the Commitments or (ii) determining the aggregate unpaid
principal amount of the A Advances or the total Commitments).
"Multiemployer Plan" means a "multiemployer plan" as
------------------
defined in Section 4001(a)(3) of ERISA to which any Borrower or
PM Companies or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or
more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan,
----------------------
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of any Borrower or PM Companies or any
ERISA Affiliate and at least one Person other than any
<PAGE>
12
Borrower or PM Companies and its ERISA Affiliates or (ii) was
so maintained and in respect of which any Borrower or PM
Companies or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been
or were to be terminated.
"Net Income Before Tax" means, for any accounting
---------------------
period, income or loss from continuing operations for such
period, as determined in accordance with generally accepted
accounting principles, plus total federal, state and foreign
income taxes which have been included in the determination of
income or loss from continuing operations for such period in
accordance with generally accepted accounting principles and
amounts which, in the determination of income or loss from
continuing operations for such period, have been deducted for
the items referred to in the definition of Fixed Charges in
this Section, except that if there has been a material change
in an accounting principle as compared to that applied in the
preparation of the financial statements of PM Companies as at
and for the nine months ended September 30, 1993, then such new
accounting principle shall not be used in the determination of
Net Income Before Tax. A material change in an accounting
principle is one that, in the year of its adoption, changes Net
Income Before Tax or Fixed Charges for any quarter in such year
by more than 10%.
"1991 Loan Agreement" has the meaning specified in
-------------------
Section 3.05(a).
"Notice of A Borrowing" has the meaning specified in
---------------------
Section 2.02(a).
"Notice of Acceptance" has the meaning specified in
--------------------
Section 9.01(a).
"Notice of B Borrowing" has the meaning assigned to
---------------------
that term in Section 2.03(a).
"Notice of Borrowing" means either a Notice of A
-------------------
Borrowing or a Notice of B Borrowing.
"Obligations" has the meaning specified in Section
-----------
8.01.
"OECD" means the Organization for Economic Cooperation
----
and Development.
"Other Taxes" has the meaning specified in Section
-----------
2.13(b).
<PAGE>
13
"PBGC" means the Pension Benefit Guaranty Corporation
----
or any successor corporation thereto.
"Person" means an individual, partnership, corporation
------
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Philip Morris" means Philip Morris Incorporated, a
-------------
Virginia corporation wholly-owned by PM Companies.
"Plan" means a Single Employer Plan or a Multiple
----
Employer Plan.
"Reference Banks" means Citibank, Mellon Bank N.A.,
---------------
Barclays Bank PLC and Dresdner Bank AG.
"Register" has the meaning specified in Section
--------
10.07(c).
"Significant Plan" means a Plan whose assets have a
----------------
current value in excess of $100,000,000.
"Single Employer Plan" means a single employer plan,
--------------------
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of any Borrower, PM Companies or an
ERISA Affiliate and no Person other than such Borrower or PM
Companies or any of their ERISA Affiliates or (ii) was so
maintained and in respect of which any Borrower or PM Companies
or an ERISA Affiliate could have liability under Section 4069
of ERISA in the event such plan has been or were to be
terminated.
"Termination Date" means December 31, 1998, or the
----------------
earlier date of termination in whole of the Commitments
pursuant to Section 2.05 or Section 6.01.
"Tobacco Assets" means all assets consisting of
--------------
tobacco and tobacco related assets, including, without
limitation, all tobacco inventory, aging warehouses, cigarette
manufacturing facilities, distribution warehouses, trademarks,
tradenames and know-how and which relate to the domestic and
United States export business of PM Companies and its
subsidiaries.
"Type" means, with reference to an A Advance, an
----
Adjusted CD Rate Advance, a Base Rate Advance or a Eurodollar
Rate Advance.
<PAGE>
14
"Withdrawal Liability" shall have the meaning given
--------------------
such term under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Additional Definitions. For purposes
----------------------
of this Agreement, "subsidiary" means, with respect to any
Person, any corporation of which more than 50% of the
outstanding capital stock having voting power to elect a
majority of the Board of Directors of such corporation
(irrespective of whether or not at the time capital stock of
any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned by such Person, by such
Person and one or more other subsidiaries, or by one or more
other subsidiaries.
SECTION 1.03. Computation of Time Periods. In this
---------------------------
Agreement in the computation of periods of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.04. Accounting Terms. All accounting terms
----------------
not specifically defined herein shall be construed in
accordance with generally accepted accounting principles,
except that if there has been a material change in an
accounting principle, including the accounting for
post-employment benefits as prescribed by Statement of
Financial Accounting Standards No. 112, affecting the
definition of an accounting term as compared to that applied in
the preparation of the financial statements of PM Companies as
at and for the nine months ended September 30, 1993, then such
new accounting principle shall not be used in the determination
of the amount associated with that accounting term. A material
change in an accounting principle is one that, in the year of
its adoption, changes the amount associated with the relevant
accounting term for such year by more than 10%.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
---------------------------------
SECTION 2.01. The A Advances. Each Lender severally
--------------
agrees, on the terms and conditions hereinafter set forth, to
make A Advances to any Borrower from time to time on any
Business Day during the period from the date hereof until the
Termination Date in an aggregate amount for all of the
Borrowers not to exceed at any time outstanding the amount set
opposite such Lender's name on the signature pages
<PAGE>
15
hereof or, if such Lender has entered into one or more
Assignments and Acceptances, set forth for such Lender in the
Register maintained by the Agent pursuant to Section 10.07(c),
as such amount may be reduced pursuant to Section 2.05 (such
Lender's "Commitment"), provided that the aggregate amount of
--------
the Commitments of the Lenders shall be deemed to be used from
time to time to the extent of the aggregate amount of the B
Advances then outstanding and such deemed use of the aggregate
amount of the Commitments shall be applied to the Lenders
ratably according to their respective Commitments (each such
deemed use of the aggregate amount of the Commitments being a
"B Reduction"). Each A Borrowing shall be in an aggregate
amount not less than $50,000,000 and shall consist of A
Advances of the same Type made to the same Borrower on the same
day by the Lenders ratably according to their respective
Commitments and one or more A Borrowings may be made on the
same day. Within the limits of each Lender's Commitment, the
Borrowers may borrow, repay pursuant to Section 2.06, prepay
pursuant to Section 2.10(b), and reborrow under this Section
2.01.
SECTION 2.02. Making the A Advances. (a) Each A
---------------------
Borrowing shall be made on notice, given not later than 12:00
Noon (New York City time) on the third Business Day prior to
the date of the proposed A Borrowing in the case of Eurodollar
Rate Advances, on the second Business Day prior to the date of
the proposed A Borrowing in the case of Adjusted CD Rate
Advances, and on the Business Day prior to the date of the
proposed A Borrowing in the case of Base Rate Advances, by PM
Companies to the Agent, which shall give to each Lender prompt
notice thereof by telex or cable. Each such notice of an A
Borrowing (a "Notice of A Borrowing") shall be by telex or
cable, confirmed immediately in writing, in substantially the
form of Exhibit B-1 hereto, specifying therein the requested
(i) date of such A Borrowing, (ii) Type of A Advances
comprising such A Borrowing, (iii) aggregate amount of such A
Borrowing, (iv) Interest Period for each such A Advance, and
(v) name of the Borrower. In the case of a proposed A
Borrowing comprised of Adjusted CD Rate Advances or Eurodollar
Rate Advances, the Agent shall promptly notify each Lender of
the applicable interest rate under Section 2.07(b) or (c).
Each Lender shall, before 11:00 A.M. (New York City time) on
the date of such A Borrowing, make available for the account of
its Applicable Lending Office to the Agent at its address
referred to in Section 10.02, in same day funds, such Lender's
ratable portion of such A Borrowing. After the Agent's receipt
of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds
available to the applicable Borrower at the Agent's aforesaid
address.
<PAGE>
16
(b) Anything in subsection (a) above to the contrary
notwithstanding,
(i) if any Lender shall, at least one Business Day
before the date of any requested A Borrowing, notify the
Agent that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful,
or that any central bank or other governmental authority
asserts that it is unlawful, for such Lender or its
Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or to fund or
maintain Eurodollar Rate Advances hereunder, the right of
PM Companies to select Eurodollar Rate Advances for such A
Borrowing or any subsequent A Borrowing shall be suspended
until such Lender shall notify the Agent that the
circumstances causing such suspension no longer exist, and
each A Advance comprising such requested A Borrowing shall
be a Base Rate Advance. Each Lender agrees that it shall
notify the Agent and PM Companies of any such introduction,
change, interpretation or assertion referred to above
promptly after such Lender becomes aware of the occurrence
thereof;
(ii) if less than two Reference Banks furnish timely
information to the Agent for determining the Adjusted CD
Rate for Adjusted CD Rate Advances, or the Eurodollar Rate
for Eurodollar Rate Advances, comprising any requested A
Borrowing, the right of any Borrower to select Adjusted CD
Rate Advances or Eurodollar Rate Advances, as the case may
be, for such A Borrowing or any subsequent A Borrowing
shall be suspended until the Agent shall notify PM
Companies and the Lenders that the circumstances causing
such suspension no longer exist, and each A Advance
comprising such A Borrowing shall be a Base Rate Advance;
and
(iii) if the Majority Lenders shall, at least one
Business Day before the date of any requested A Borrowing,
notify the Agent that the Eurodollar Rate for Eurodollar
Rate Advances comprising such A Borrowing will not
adequately reflect the cost to such Majority Lenders of
making or funding their respective Eurodollar Rate Advances
for such A Borrowing, the right of PM Companies to select
Eurodollar Rate Advances for such A Borrowing or any
subsequent A Borrowing shall be suspended until the Agent,
after its receipt of notice from such Majority Lenders that
the circumstances causing such suspension no longer exist,
shall notify PM Companies and the Lenders to such effect,
and each A Advance comprising such A Borrowing shall be a
Base Rate Advance.
<PAGE>
17
(c) Each Notice of A Borrowing shall be irrevocable
and binding on PM Companies and, if the Borrower named therein
is not PM Companies, such Borrower. In the case of any A
Borrowing which the related Notice of A Borrowing specifies is
to be comprised of Adjusted CD Rate Advances or Eurodollar Rate
Advances, PM Companies and, if the Borrower named therein is
not PM Companies, such Borrower severally agree to indemnify
each Lender against any loss, cost or expense incurred by such
Lender as a result of any failure to fulfill on or before the
date specified in such Notice of A Borrowing for such A
Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
by such Lender to fund the Advance to be made by such Lender as
part of such A Borrowing when such A Advance, as a result of
such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a
Lender prior to the date of any A Borrowing that such Lender
will not make available to the Agent such Lender's ratable
portion of such A Borrowing, the Agent may assume that such
Lender has made such portion available to the Agent on the date
of such A Borrowing in accordance with subsection (a) of this
Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower thereof on such date
a corresponding amount. If and to the extent that such Lender
shall not have so made such ratable portion available to the
Agent, such Lender and such Borrower severally agree to repay
to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such
amount is made available to such Borrower until the date such
amount is repaid to the Agent, at (i) in the case of such
Borrower, the interest rate applicable at the time to the A
Advances comprising such A Borrowing and (ii) in the case of
such Lender, the Federal Funds Rate. If such Lender shall
repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Lender's A Advance as part of such
A Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the A Advance
to be made by it as part of any A Borrowing shall not relieve
any other Lender of its obligation, if any, hereunder to make
its A Advance on the date of such A Borrowing, but no Lender
shall be responsible for the failure of any other Lender to
make the A Advance to be made by such other Lender on the date
of any A Borrowing.
<PAGE>
18
SECTION 2.03. The B Advances. (a) Each Lender
--------------
severally agrees that any Borrower may make B Borrowings under
this Section 2.03 from time to time on any Business Day during
the period from the date hereof until the date occurring 7 days
prior to the Termination Date in the manner set forth below;
provided that, following the making of each B Borrowing the
--------
aggregate amount of the Advances then outstanding shall not
exceed the aggregate amount of the Commitments of the Lenders
(computed without regard to any B Reduction).
(i) PM Companies may request a B Borrowing under this
Section 2.03 by delivering to the Agent, by telex or cable,
confirmed immediately in writing, a notice of a B Borrowing
(a "Notice of B Borrowing"), in substantially the form of
Exhibit B-2 hereto, specifying the name of the Borrower,
the date and aggregate amount of the proposed B Borrowing,
the maturity date for repayment of each B Advance to be
made as part of such B Borrowing (which maturity date, in
the case of a Notice of B Borrowing delivered pursuant to
clause (A) of this paragraph (i), may not be earlier than
the date occurring 7 days after the date of such B
Borrowing or later than the date occurring 180 days after
the date of such B Borrowing and, in the case of a Notice
of B Borrowing delivered pursuant to clause (B) of this
paragraph (i), may not be earlier than the date occurring
14 days after the date of such B Borrowing or later than
the date occurring 180 days after the date of such B
Borrowing, and in no event may the maturity date for any B
Borrowing be later than the Termination Date), the interest
payment date or dates relating thereto, the interest rate
basis on which the Lenders may make offers to make B
Advances to such Borrower (which basis may be a fixed or floating
rate) and any other terms to be applicable to such B
Borrowing, not later than 10:00 A.M. (New York City time)
(A) at least two Business Days prior to the date of the
proposed B Borrowing, if PM Companies shall specify in the
Notice of B Borrowing that the rates of interest to be
offered by the Lenders shall be fixed rates per annum and
(B) at least four Business Days prior to the date of the
proposed B Borrowing, if PM Companies shall instead specify
in the Notice of B Borrowing the basis to be used by the
Lenders in determining the rates of interest to be offered
by them. The Agent shall in turn promptly notify each
Lender of each request for a B Borrowing received by it by
sending such Lender a copy of the related Notice of
B Borrowing.
<PAGE>
19
(ii) Each Lender may, if, in its sole discretion, it
elects to do so, irrevocably offer to make one or more
B Advances to the Borrower named in any such Notice of
B Borrowing as part of the proposed B Borrowing at a rate
or rates of interest specified by such Lender in its sole
discretion, by notifying the Agent (which shall give prompt
notice thereof to the Borrower), before 10:00 A.M. (New
York City time) (A) on the Business Day prior to the date
of such proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (A) of paragraph
(i) above, and (B) three Business Days before the date of
such proposed B Borrowing, in the case of a Notice of B
Borrowing delivered pursuant to clause (B) of paragraph (i)
above, of the minimum amount and maximum amount of each
B Advance which such Lender would be willing to make as
part of such proposed B Borrowing (which amounts may,
subject to the proviso to the first sentence of this
Section 2.03(a), exceed such Lender's Commitment), the rate
or rates of interest therefor and such Lender's Applicable
Lending Office with respect to such B Advance; provided
--------
that if the Agent in its capacity as a Lender shall, in its
sole discretion, elect to make any such offer, it shall
notify the Borrower of such offer before 9:00 A.M. (New
York City time) on the Business Day prior to the date of
such proposed B Borrowing, in the case referred to in
clause (A) of this paragraph (ii), and three Business Days
before the date of such proposed B Borrowing, in the case
referred to in clause (B) of this paragraph (ii). If any
Lender shall elect not to make such an offer, such Lender
shall so notify the Agent before 10:00 A.M. (New York City
time) on the Business Day prior to the date of such
proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (A) of paragraph
(i) above, and three Business Days before the date of such
proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (B) of paragraph
(i) above, and such Lender shall not be obligated to, and
shall not, make any B Advance as part of such B Borrowing;
provided that the failure of any Lender to give such notice
--------
shall not cause such Lender to be obligated to make any
B Advance as part of such proposed B Borrowing.
(iii) The Borrower named in any such Notice of
B Borrowing shall, in turn, (A) before 12:00 Noon (New York
City time) on the Business Day prior to the date of such
proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (A) of paragraph
(i) above and (B) before 12:00 Noon (New York City time)
<PAGE>
20
three Business Days before the date of such proposed B
Borrowing, in the case of a Notice of B Borrowing delivered
pursuant to clause (B) of paragraph (i) above, either
(A) cancel such B Borrowing by giving the Agent
notice to that effect, or
(B) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above by
giving notice to the Agent of the amount of each
B Advance (which amount shall be equal to or greater
than the minimum amount, and equal to or less than the
maximum amount, notified to such Borrower by the Agent
on behalf of such Lender for such B Advance pursuant
to paragraph (ii) above) to be made by each Lender as
part of such B Borrowing, and reject any remaining
offers made by Lenders pursuant to paragraph (ii)
above by giving the Agent notice to that effect.
The acceptance of offers by such Borrower pursuant to this
clause (B) shall be on the basis of ascending rates of
interest contained in the offers made by Lenders pursuant
to paragraph (ii) above; provided that, in the event that
--------
two or more of such offers contain the same rate of
interest for a greater aggregate principal amount than the
amount specified in such Notice of B Borrowing less the
aggregate principal amount of all such offers containing
lower rates of interest that have been accepted by such
Borrower pursuant to this clause (B), such Borrower shall
have sole discretion (subject to any minimum and maximum amount
specified in any such offer) to accept one or more of the offers
at such rate of interest and to reject any remaining offers at
such rate of interest.
(iv) If the Borrower named in any such Notice of
B Borrowing notifies the Agent that such B Borrowing is
cancelled pursuant to paragraph (iii)(A) above, the Agent
shall give prompt notice thereof to the Lenders and such
B Borrowing shall not be made.
(v) If the Borrower named in any such Notice of
B Borrowing accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(B) above, the
Agent shall in turn promptly notify (A) each Lender which
has made an offer as described in paragraph (ii) above, of
the date and aggregate amount of such B Borrowing and
whether or not any offer or offers made
<PAGE>
21
by such Lender pursuant to paragraph (ii) above have been
accepted by such Borrower, (B) each Lender that is to make a
B Advance as part of such B Borrowing, of the amount of
each B Advance to be made by such Lender as part of such
B Borrowing, and (C) each Lender that is to make a
B Advance as part of such B Borrowing, upon receipt, that
the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III.
Each Lender that is to make a B Advance as part of such
B Borrowing shall, before 12:00 Noon (New York City time)
on the date of such B Borrowing specified in the notice
received from the Agent pursuant to clause (A) of the
preceding sentence or any later time when such Lender shall
have received notice from the Agent pursuant to clause (C)
of the preceding sentence, make available for the account
of its Applicable Lending Office to the Agent at its
address set forth in Section 10.02 such Lender's portion of
such B Borrowing, in same day funds. Upon fulfillment of
the applicable conditions set forth in Article III and
after receipt by the Agent of such funds, the Agent will
make such funds available to such Borrower as soon as
practicable on such date at the Agent's aforesaid address.
Promptly after each B Borrowing the Agent will notify each
Lender of the amount of the B Borrowing, the consequent
B Reduction and the dates upon which such B Reduction
commenced and will terminate.
(b) Each B Borrowing shall be in an aggregate amount
not less than $100,000,000 or an integral multiple of
$1,000,000 in excess thereof and, following the making of each B
Borrowing, the Borrower thereof shall be in compliance with the
limitation set forth in the proviso to the first sentence of
subsection (a) above.
(c) Within the limits and on the conditions set forth
in this Section 2.03, each Borrower may from time to time
borrow under this Section 2.03, repay or prepay pursuant to
subsection (d) below, and reborrow under this Section 2.03,
provided that a B Borrowing shall not be made within three
--------
Business Days of the date of any other B Borrowing.
(d) Each Borrower shall repay to the Agent for the
account of each Lender which has made a B Advance to such
Borrower, or each other holder of a B Note, on the maturity
date of each B Advance made to it (such maturity date being
that specified for repayment of such B Advance in the related
Notice of B Borrowing delivered pursuant to subsection (a)(i)
above or as provided in the B Note evidencing such B Advance)
the then unpaid principal amount of such B Advance. No
<PAGE>
22
Borrower shall have the right to prepay any principal amount of
any B Advance unless, and then only on the terms, specified by
PM Companies for such B Advance in the related Notice of
B Borrowing delivered pursuant to subsection (a)(i) above and
provided in the B Note evidencing such B Advance.
(e) Each Borrower shall pay interest on the unpaid
principal amount of each B Advance made to it from the date of
such B Advance to the date the principal amount of such
B Advance is repaid in full, at the rate of interest for such
B Advance specified by the Lender making such B Advance in its
notice with respect thereto delivered pursuant to subsection
(a)(ii) above, payable on the interest payment date or dates
specified by PM Companies for such B Advance in the related
Notice of B Borrowing delivered pursuant to subsection (a)(i)
above, as provided in the B Note evidencing such B Advance.
(f) The indebtedness of each Borrower resulting from
each B Advance made to such Borrower as part of a B Borrowing
shall be evidenced by a separate B Note of such Borrower
payable to the order of the Lender making such B Advance.
(g) Any notice given to any party under this Section
2.03 shall be in writing, or may be by telephone or telex, in
each case confirmed immediately in writing.
SECTION 2.04. Fees. (a) PM Companies agrees to pay
----
to each Lender a facility fee on the principal amount of such
Lender's Commitment (whether or not unused and without giving
effect to any B Reduction) from the date hereof in the case of
each Bank (unless otherwise agreed to by PM Companies with such
Bank) and from the effective date specified in the Assignment
and Acceptance pursuant to which it became a Lender in the case
of each other Lender until the Termination Date at the
Applicable Facility Fee Rate, in each case payable on the last
day of each March, June, September and December until the
Termination Date and on the Termination Date.
(b) For any period in which the aggregate principal
amount of Advances exceeds an amount equal to 50% of the total
Commitments, PM Companies agrees to pay to each Lender a usage
fee on the excess of (i) the average daily aggregate amount of
Advances made by such Lender outstanding during such period
over (ii) 50% of such Lender's Commitment at the Applicable
Usage Fee Rate, in each case payable in arrears on the last day
of each March, June, September and December occurring during
such period and on the Termination Date, if applicable.
<PAGE>
23
(c) PM Companies agrees to pay to the Agent the
agency fee, arrangement fee and competitive bid fee in the
amounts and at the times set forth in the engagement letter
dated November 24, 1993 from the Agent to PM Companies, as
amended from time to time.
SECTION 2.05. Reduction of the Commitments. (a) PM
----------------------------
Companies shall have the right, upon five Business Days' notice
to the Agent, to terminate in whole or reduce ratably in part
the unused portions of the respective Commitments of the
Lenders, provided that the aggregate amount of the Commitments
--------
of the Lenders shall not be reduced to an amount which is less
than the aggregate principal amount of the B Advances then
outstanding and provided further that each partial reduction
----------------
shall be in the aggregate amount of at least $50,000,000.
(b) In the event that there shall be an Asset
Disposition, the respective Commitments of the Lenders shall be
reduced ratably by an aggregate amount equal to 100% of the net
after-tax proceeds of such Asset Disposition. For the purpose
of this subsection (b) any net after-tax non-cash proceeds or
spin-off shall be valued at (i) the greater of (x) the book
value and (y) the fair market value (as determined in good
faith by the Board of Directors of PM Companies) of the assets
subject to such Asset Disposition, less (ii) the cash proceeds,
if any, received as a result of such Asset Disposition. In the
event that the purchase price of assets subject to an Asset
Disposition is subject to adjustment, as a result of which PM
Companies reasonably believes that the proceeds ultimately to
be received therefrom will be reduced, then until such time as
such adjustment is finalized, for purposes of this subsection
(b) the "net after-tax proceeds" shall include only the amount
of those proceeds actually received by PM Companies or any
affiliate of PM Companies, less an adjustment reserve in an
amount reasonably determined by PM Companies to be equivalent
to such adjustment therein. As soon as such adjustment is
finalized, any further reduction in the Commitments shall be
made as above provided in this subsection (b). Any reduction
pursuant to this subsection (b) shall be effective on a date
selected by PM Companies but in any event no later than the
last day of the calendar quarter during which the Asset
Disposition occurs; provided that any reduction which would be
--------
in amount less than $50,000,000 shall not be made but shall be
included in the calculation of the subsequent reduction or
reductions provided for in this subsection (b) until the
aggregate amount of any such subsequent reduction shall be at
least equal to $50,000,000, and such reduction shall then be
made as above provided in this subsection (b).
<PAGE>
24
SECTION 2.06. Repayment of A Advances. Each Borrower
-----------------------
shall repay the principal amount of each A Advance made to it
by each Lender on the last day of the Interest Period for such A
Advance.
SECTION 2.07. Interest on A Advances. Each Borrower
----------------------
shall pay interest on the unpaid principal amount of each A
Advance made to it by each Lender from the date of such A
Advance until such principal amount shall be paid in full, at
the following rates per annum:
(a) Base Rate Advances. If such A Advance is a Base
------------------
Rate Advance, a rate per annum equal at all times to the
Base Rate in effect from time to time, payable monthly on
the 20th day of each month, and on the date such Base Rate
Advance shall be paid in full; provided that any amount of
--------
principal which is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until
such amount is paid in full, payable on demand, at a rate
per annum equal at all times to 1% per annum plus the Base
Rate in effect from time to time.
(b) Adjusted CD Rate Advances. If such A Advance is
-------------------------
an Adjusted CD Rate Advance, a rate per annum equal at all
times during the Interest Period for such A Advance to the
sum of the Adjusted CD Rate for such Interest Period plus
the Applicable Interest Rate Margin, payable on the last
day of such Interest Period and, if such Interest Period
has a duration of 180 days, on the 90th day of such
Interest Period; provided that any amount of principal
--------
which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the
date on which such amount is due until such amount is paid
in full, payable on demand, at a rate per annum equal at
all times to 1% per annum plus the Base Rate in effect from
time to time.
(c) Eurodollar Rate Advances. If such A Advance is a
------------------------
Eurodollar Rate Advance, a rate per annum equal at all
times during the Interest Period for such A Advance to the
sum of the Eurodollar Rate for such Interest Period plus
the Applicable Interest Rate Margin, payable on the last
day of such Interest Period and, if such Interest Period
has a duration of six months, on the last day of the third
month of such Interest Period; provided that any amount of
--------
principal which is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear
interest, from the date on which
<PAGE>
25
such amount is due until such amount is paid in full,
payable on demand, at a rate per annum equal at all times
to 1% per annum plus the Base Rate in effect from time to
time.
SECTION 2.08. Additional Interest on Eurodollar Rate
--------------------------------------
Advances. Each Borrower shall pay to each Lender, so long as
--------
such Lender shall be required under regulations of the Board of
Governors of the Federal Reserve System to maintain reserves
with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurodollar Rate Advance of such
Lender to such Borrower, from the date of such Advance until
such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by
subtracting (i) the Eurodollar Rate for the Interest Period for
such Advance from (ii) the rate obtained by dividing such
Eurodollar Rate by a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage of such Lender for such
Interest Period, payable on each date on which interest is
payable on such Advance. Such additional interest shall be
determined by such Lender and notified to PM Companies through
the Agent.
SECTION 2.09. Interest Rate Determination. (a) Each
---------------------------
Reference Bank agrees to furnish to the Agent timely
information for the purpose of determining each Adjusted CD
Rate or Eurodollar Rate, as applicable. If any one or more of
the Reference Banks shall not furnish such timely information
to the Agent for the purpose of determining any such interest
rate, the Agent shall determine such interest rate on the basis
of timely information furnished by the remaining Reference
Banks.
(b) The Agent shall give prompt notice to PM
Companies and the Lenders of the applicable interest rate
determined by the Agent for purposes of Section 2.07(a), (b) or
(c), and the applicable rate, if any, furnished by each
Reference Bank for the purpose of determining the applicable
interest rate under Section 2.07(b) or (c).
SECTION 2.10. Prepayment of A Advances. (a) No
------------------------
Borrower shall have the right to prepay any principal amount of
any A Advances other than as provided in subsection (b) below.
(b) Any Borrower may, upon at least four Business
Days' notice to the Agent stating the proposed date and
aggregate principal amount of the prepayment, and if such
notice is given such Borrower shall, prepay the outstanding
<PAGE>
26
principal amounts of A Advances comprising part of the same A
Borrowing in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount
prepaid; provided, however, that (i) each partial prepayment
-------- -------
shall be in an aggregate principal amount not less than
$50,000,000 and (ii) in the event of any such prepayment of an
Adjusted CD Rate Advance or a Eurodollar Rate Advance, such
Borrower shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 10.04(b) hereof.
(c) If any Lender shall notify the Agent of any
introduction, change, interpretation or assertion referred to
in Section 2.02(b)(i), or shall claim payment of increased
costs pursuant to Section 2.11(a) or (c) or payment of any
additional amounts payable pursuant to Section 2.13, PM
Companies may, upon at least five Business Days' notice to the
Agent stating that the Borrowers intend to repay the A Advances
made by such Lender and terminate such Lender's Commitment, and
if such notice is given the Borrowers shall forthwith, on the
date specified in such notice, prepay in full all A Advances
made by such Lender with accrued interest thereon to the date
of such prepayment and all other amounts payable to such Lender
by PM Companies and the other Borrowers hereunder (including,
without limitation, any amounts payable pursuant to Section
10.04(b)), and upon such notice from PM Companies the
Commitment of such Lender to make further A Advances, and the
obligation of PM Companies to pay facility fees to such Lender,
shall terminate.
(d) In the event that there shall be a reduction of
the Commitments pursuant to Section 2.05(b), the Borrowers
shall on the date of such reduction (or as soon thereafter as
the Borrowers can do so without incurring liability to any
Lender pursuant to Section 10.04(b)) repay or prepay ratably A
Advances made as part of the same A Borrowings (together with
interest accrued thereon to such date) to the extent necessary
so that the aggregate principal amount of outstanding A
Advances made by each Lender shall not exceed such Lender's
Commitment, as reduced on such date.
SECTION 2.11. Increased Costs. (a) If, due to
---------------
either (i) the introduction of or any change (other than any
change by way of imposition or increase of reserve
requirements, in the case of Adjusted CD Rate Advances,
included in the Adjusted CD Rate Reserve Percentage or, in the
case of Eurodollar Rate Advances, included in the Eurodollar
Rate Reserve Percentage) in or in the interpretation of any law
or regulation or (ii) the compliance with any guideline or
request from any central bank or other governmental authority
(whether or not having
<PAGE>
27
the force of law), there shall be any increase in the cost to
any Lender of agreeing to make or making, funding or
maintaining Adjusted CD Rate Advances or Eurodollar Rate
Advances, then the Borrower of the affected Advances shall from
time to time, upon demand by such Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such
Lender additional amounts sufficient to compensate such Lender
for such increased cost, provided that before making any such
--------
demand, such Lender shall designate a different Applicable
Lending Office if such designation will avoid the need for, or
reduce the amount of, such increased cost and will not, in the
reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender. A certificate as to the amount
of such increased cost, submitted to PM Companies, such
Borrower and the Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(b) If, in the case of any Adjusted CD Rate Advance,
the Assessment Rate for the Interest Period for such Adjusted
CD Rate Advance shall be less than the annual assessment for
such Interest Period actually paid by such Lender to the
Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of such Lender in the United
States, then the Borrower of the affected Advance shall, upon
demand of such Lender (with a copy of such demand to the
Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for
such increased assessment. A certificate as to the amounts of
such increased assessment, submitted to PM Companies, such
Borrower and the Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(c) In the event that after the date hereof the
implementation of or any change in any law or regulation, or
any guideline or directive (whether or not having the force of
law) or the interpretation or administration thereof by any
central bank or other authority charged with the administration
thereof, imposes, modifies or deems applicable any capital
adequacy or similar requirement (including, without limitation,
a request or requirement which affects the manner in which any
Lender allocates capital resources to its commitments,
including its obligations hereunder) and as a result thereof,
in the sole opinion of such Lender, the rate of return on such
Lender's capital as a consequence of its obligations hereunder
is reduced to a level below that which such Lender could have
achieved but for such circumstances, but reduced to the extent
that Borrowings are outstanding from time to time, then in each
such case upon
<PAGE>
28
demand from time to time PM Companies shall pay to such Lender
such additional amount or amounts as shall compensate such
Lender for such reduction in rate of return, provided that, in
--------
the case of each Lender, such additional amount or amounts
shall not exceed 0.15 of 1% per annum on such Lender's
Commitment. A certificate of such Lender as to any such
additional amount or amounts shall be conclusive and binding
for all purposes, absent manifest error. Except as provided
below, in determining any such amount or amounts each Lender
may use any reasonable averaging and attribution methods.
Notwithstanding the foregoing, each Lender shall take all
reasonable actions to avoid the imposition of, or reduce the
amounts of, such increased costs, provided that such actions,
in the reasonable judgment of such Lender, will not be
otherwise disadvantageous to such Lender, and, to the extent
possible, each Lender will calculate such increased costs based
upon the capital requirements for its commitment hereunder and
not upon the average or general capital requirements imposed
upon such Lender.
SECTION 2.12. Payments and Computations. (a) PM
-------------------------
Companies and each Borrower shall make each payment hereunder
not later than 11:00 A.M. (New York City time) on the day when
due in U.S. dollars to the Agent at its address referred to in
Section 10.02 in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the
payment of principal or interest or fees ratably (other than
amounts payable pursuant to Section 2.02(c), 2.03, 2.08,
2.10(b)(ii) or (c), 2.11, 2.13 or 10.04(b)) to the Lenders for
the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable
to any Lender to such Lender for the account of its Applicable
Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 10.07(d),
from and after the effective date specified in such Assignment
and Acceptance, the Agent shall make all payments hereunder and
under the B Notes in respect of the interest assigned thereby
to the Lender assignee thereunder, and the parties to such
Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) Each Borrower hereby authorizes each Lender, if
and to the extent payment owed to such Lender is not made to
the Agent for the account of such Lender when due hereunder, to
charge from time to time against any or all of such Borrower's
accounts with such Lender any amount so due.
<PAGE>
29
(c) All computations of interest based on the Base
Rate shall be made by the Agent on the basis of a year of 365
or 366 days, as the case may be, and all computations of
interest based on the Adjusted CD Rate, the Eurodollar Rate or
the Federal Funds Rate and of fees shall be made by the Agent,
and all computations of interest pursuant to Section 2.08 shall
be made by a Lender, on the basis of a year of 360 days, in
each case for the actual number of days (including the first
day but excluding the last day) occurring in the period for
which such interest or fees are payable. Each determination by
the Agent (or, in the case of Section 2.08, by a Lender) of an
interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment hereunder shall be stated to
be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of
payment of interest or fees, as the case may be; provided,
--------
however, if such extension would cause payment of interest on
-------
or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the
next preceding Business Day.
(e) Unless the Agent shall have received notice from
any Borrower prior to the date on which any payment is due from
such Borrower to the Lenders hereunder that such Borrower will
not make such payment in full, the Agent may assume that such
Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such date an amount equal
to the amount then due such Lender. If and to the extent that
such Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on
demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. Taxes. (a) Any and all payments by
-----
each Borrower and PM Companies hereunder shall be made, in
accordance with Section 2.12, free and clear of and without
deductions for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, (i) in the case of
---------
each Lender and the Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the
laws of which such Lender or the Agent (as the case may
<PAGE>
30
be) is organized or any political subdivision thereof, (ii) in
the case of each Lender, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision
thereof, and (iii) in the case of each Lender and the Agent,
taxes imposed by the United States by means of withholding tax
if and to the extent that such taxes shall be in effect and
shall be applicable on the date hereof, to payments to be made
to such Lender's Applicable Lending Office or to the Agent (all
such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). If any Borrower or PM Companies shall be required by
law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, (A) the sum payable shall
be increased as may be necessary so that after making all
required deductions (including deductions applicable to
additional sums payable under this Section 2.13) such Lender or
the Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made,
(B) such Borrower and PM Companies shall make such deductions
and (C) such Borrower and PM Companies shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, each Borrower and PM Companies
agrees to pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as "Other
Taxes").
(c) Each Borrower and PM Companies will indemnify
each Lender and the Agent for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this
Section 2.13) paid by such Lender or the Agent (as the case may
be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within 30 days
from the date such Lender or the Agent (as the case may be)
makes written demand therefor.
(d) Within 30 days after the date of any payment
of Taxes, each Borrower and PM Companies will furnish to the
Agent, at its address referred to in Section 10.02, the
original or a certified copy of a receipt evidencing payment
thereof by such Borrower or PM Companies.
<PAGE>
31
(e) Without prejudice to the survival of any other
agreement of any Borrower or PM Companies hereunder, the
agreements and obligations of each Borrower and PM Companies
contained in this Section 2.13 shall survive the payment in
full of principal and interest hereunder.
(f) Prior to the date of the initial Borrowing
hereunder, and from time to time thereafter if requested by any
Borrower, PM Companies or the Agent, each Lender organized
under the laws of a jurisdiction outside the United States
shall provide the Agent, PM Companies and such Borrower with
the forms prescribed by the Internal Revenue Service of the
United States certifying such Lender's exemption from United
States withholding taxes with respect to all payments to be
made to such Lender hereunder. Unless the Borrower, PM
Companies and the Agent have received forms or other documents
satisfactory to them indicating that payments hereunder are not
subject to United States withholding tax or are subject to such
tax at a rate reduced by an applicable tax treaty, such
Borrower, PM Companies or the Agent shall withhold taxes from
such payments at the applicable statutory rate in the case of
payments to or for any Lender organized under the laws of a
jurisdiction outside the United States.
(g) Any Lender claiming any additional amounts
payable pursuant to this Section 2.13 shall use its best
efforts (consistent with its internal policy and legal and
regulatory restrictions) to change the jurisdiction of its
Applicable Lending Office so as to eliminate the amount of any
such costs or additional amounts which may thereafter accrue;
provided that no such change shall be made if, in the
--------
reasonable judgment of such Lender, such change would be
disadvantageous to such Lender.
SECTION 2.14. Sharing of Payments, Etc. If any
------------------------
Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or
otherwise) on account of the A Advances made by it (other than
pursuant to Section 2.02(c), 2.08, 2.10(b)(ii) or (c), 2.11,
2.13 or 10.04(b)) in excess of its ratable share of payments on
account of the A Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such
participations in the A Advances made by them as shall be
necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if
-------- -------
all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each
Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to
<PAGE>
32
the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i)
the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. Each
Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.14 may, to the
fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation.
SECTION 2.15. Evidence of Debt. (a) Each Lender
----------------
shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of each Borrower to
such Lender resulting from each A Advance made to such Borrower
owing to such Lender from time to time, including the amounts
of principal thereof and interest thereon payable and paid to
such Lender from time to time hereunder.
(b) The Register maintained by the Agent pursuant to
Section 10.07(c) shall include a control account, and a
subsidiary account for each Lender, in which accounts (taken
together) shall be recorded (i) the date and amount of each A
Borrowing made hereunder, the Type of Advances comprising such
Borrowing and the Interest Period applicable thereto, (ii) the
terms of each Assignment and Acceptance delivered to and
accepted by it, (iii) the amount of any principal or interest
due and payable or to become due and payable from each Borrower
to each Lender hereunder, and (iv) the amount of any sum
received by the Agent from such Borrower hereunder and each
Lender's share thereof.
(c) The entries made in the Register shall be
conclusive and binding for all purposes, absent manifest error.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to Initial
------------------------------
Advances. The obligation of each Lender to make an Advance on
--------
the occasion of the initial Borrowing by each Borrower is
subject to the condition precedent that the Agent shall have
received on or before the day of such initial Borrowing the
<PAGE>
33
following, each dated such day, in form and substance
satisfactory to the Agent and in sufficient copies for each
Lender:
(a) Certified copies of the resolutions of each of
the Board of Directors of such Borrower and (unless PM
Companies is the Borrower) the Guarantor approving this
Agreement, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, on
behalf of such company or companies with respect to this
Agreement.
(b) A certificate of the Secretary or an Assistant
Secretary of each of such Borrower and (unless PM Companies
is the Borrower) the Guarantor certifying the names and
true signatures of the officers of such company or
companies authorized to sign this Agreement and the other
documents to be delivered on behalf of such company or
companies hereunder.
(c) A favorable opinion of Hunton & Williams, counsel
for PM Companies, substantially in the form of Exhibit D
hereto and as to such other matters as any Lender through
the Agent may reasonably request.
(d) A favorable opinion of Shearman & Sterling,
special counsel for the Agent, substantially in the form of
Exhibit E hereto.
(e) A certificate of the chief financial officer of
PM Companies certifying that as of September 30, 1993 (i)
the aggregate amount of Debt, payment of which is secured
by any lien, security interest or other charge or
encumbrance referred to in clause (iii) of Section 5.02(a)
hereof, does not exceed $400,000,000 and (ii) the aggregate
amount of Debt included in clause (i) of this subsection
(e), payment of which is secured by any lien, security
interest or other charge or encumbrance referred to in
clause (iv) of Section 5.02(a), does not exceed
$200,000,000.
SECTION 3.02. Conditions Precedent to Each
----------------------------
A Borrowing. The obligation of each Lender to make an
-----------
A Advance on the occasion of each A Borrowing (including the
initial A Borrowing) shall be subject to the further conditions
precedent that on the date of such A Borrowing, before and
after giving effect thereto and to the application of the
proceeds therefrom (a) the following statements shall be true
(and each of the giving of the applicable Notice of A Borrowing
and the acceptance by the Borrower named therein
<PAGE>
34
of the proceeds of such A Borrowing shall constitute a
representation and warranty by such Borrower and (unless PM
Companies is the Borrower) the Guarantor that on the date of
such A Borrowing, before and after giving effect thereto and to
the application of the proceeds therefrom, such statements are
true):
(i) The representations and warranties contained in
Section 4.01 (excluding those contained in subsections (e)
and (f) thereof) are correct on and as of the date of such
Borrowing as though made on and as of such date;
(ii) No event has occurred and is continuing, or would
result from such A Borrowing, which constitutes an Event of
Default; and
(iii) If such A Borrowing is in an aggregate principal
amount equal to or greater than $500,000,000 and is being
made in connection with any purchase of shares of such
Borrower's or the Guarantor's capital stock or the capital
stock of any other Person, or any purchase of all or
substantially all of the assets of any Person (whether in
one transaction or a series of transactions) or any
transaction of the type referred to in Section 5.02(b), the
statements in (i) and (ii) above shall also be true on a
pro forma basis as if such transaction or purchase shall
have been completed;
and (b) the Agent shall have received such other approvals,
opinions or documents as any Lender through the Agent may
reasonably request.
SECTION 3.03. Condition Precedent to Certain A
--------------------------------
Borrowings. The obligation of each Lender to make that portion
----------
of an A Advance on the occasion of any A Borrowing (including
the initial A Borrowing) which would increase the aggregate
outstanding amount of A Advances owing to such Lender over the
aggregate amount of such A Advances outstanding immediately
prior to the making of such A Advance shall be subject to the
further condition precedent that on the date of such A
Borrowing, before and after giving effect thereto and to the
application of the proceeds therefrom, the following statement
shall be true (and each of the giving of the applicable Notice
of A Borrowing and the acceptance by the Borrower named therein
of the proceeds of such A Borrowing shall constitute a
representation and warranty by such Borrower and (unless PM
Companies is the Borrower) the Guarantor that on the date of
such A Borrowing, before and after giving effect thereto and to
the application of the
<PAGE>
35
proceeds therefrom, such statement is true): no event has
occurred and is continuing, or would result from such A
Borrowing, which would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
SECTION 3.04. Conditions Precedent to Each
----------------------------
B Borrowing. The obligation of each Lender which is to make a B
-----------
Advance on the occasion of a B Borrowing (including the initial
B Borrowing) to make such B Advance as part of such B Borrowing
is subject to the conditions precedent that (i) at least two
Business Days before the date of such B Borrowing in the case
of a B Borrowing under subsection (a)(i)(A) of Section 2.03 and
at least four Business Days before the date of such B Borrowing
in the case of a B Borrowing under subsection (a)(i)(B) of
Section 2.03, the Agent shall have received the written
confirmatory Notice of B Borrowing with respect thereto, (ii)
on or before the date of such B Borrowing, but prior to such B
Borrowing, the Agent shall have received a B Note of the
Borrower thereof payable to the order of such Lender for each
of the one or more B Advances to be made by such Lender as part
of such B Borrowing, in a principal amount equal to the
principal amount to be evidenced thereby and otherwise on such
terms as were agreed to for such B Advance by such Borrower and
such Lender in accordance with Section 2.03, and (iii) on the
date of such B Borrowing, before and after giving effect
thereto and to the application of the proceeds therefrom, the
following statements shall be true (and each of the giving of
the applicable Notice of B Borrowing and the acceptance by such
Borrower of the proceeds of such B Borrowing shall constitute a
representation and warranty by such Borrower and (unless PM
Companies is the Borrower) the Guarantor that on the date of
such B Borrowing, before and after giving effect thereto and to
the application of the proceeds therefrom, such statements are
true):
(a) The representations and warranties contained in
Section 4.01 are correct on and as of the date of such
B Borrowing as though made on and as of such date; and
(b) No event has occurred and is continuing, or would
result from such B Borrowing, which constitutes an Event of
Default or which would constitute an Event of Default but
for the requirement that notice be given or time elapse or
both.
SECTION 3.05. Conditions Precedent to Effectiveness
-------------------------------------
of this Agreement. This Agreement shall not become effective
-----------------
until:
<PAGE>
36
(a) The Agent shall have received on or before the
date of effectiveness a letter from PM Companies dated on
or before such day, terminating in whole the commitments of
the banks parties to the Loan and Guaranty Agreement dated
as of October 1, 1991, as amended (the "1991 Loan
Agreement") among PM Companies, the banks named therein and
Citibank, as agent, and each of the Banks that is a party
to the 1991 Loan Agreement hereby waives, upon execution of
this Agreement, the five Business Days' notice required by
Section 2.05(a) of the 1991 Loan Agreement relating to the
termination of the commitments under the 1991 Loan
Agreement; and
(b) PM Companies and its subsidiaries shall have
satisfied all of their respective obligations under the
1991 Loan Agreement including, without limitation, the
payment of all fees under such agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of PM
------------------------------------
Companies. PM Companies represents and warrants as follows:
---------
(a) It is a corporation duly organized, validly
existing and in good standing under the laws of Virginia.
(b) The execution, delivery and performance of this
Agreement and the B Notes (including the guaranties
hereunder and under the B Notes) are within its corporate
powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) its charter or
by-laws or (ii) any law, rule, regulation or order of any
court or governmental agency or any contractual restriction
binding on or affecting it.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by it of this Agreement or the B
Notes (including the guaranties hereunder and under the B
Notes).
(d) This Agreement (including the guaranty hereunder)
is, and each of the B Notes (including the guaranties under
the B Notes) when delivered hereunder will be, a legal,
valid and binding obligation of PM Companies enforceable
against PM Companies in accordance
<PAGE>
37
with its terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally and to
the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding
in equity or at law).
(e) The consolidated balance sheet of PM Companies
and its consolidated subsidiaries as at September 30, 1993
and the consolidated statements of earnings of PM Companies
and its consolidated subsidiaries for the nine months then
ended fairly present, subject to year-end audit
adjustments, the consolidated financial condition of PM
Companies and its consolidated subsidiaries as at such date
and the consolidated results of the operations of PM
Companies and its consolidated subsidiaries for the period
ended on such date, all in accordance with generally
accepted accounting principles consistently applied, and,
except as disclosed in PM Companies' quarterly report on
Form 10-Q for the quarter ended September 30, 1993 and its
current report on Form 8-K dated November 24, 1993, since
September 30, 1993, there has been no material adverse
change in such condition or operations.
(f) There is no pending or threatened action or
proceeding affecting it or any of its subsidiaries before
any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or
operations of PM Companies and its subsidiaries taken as a
whole or which purports to affect the legality, validity or
enforceability of this Agreement (including the guaranties
hereunder and under the B Notes).
(g) It owns directly or indirectly 100% of the
capital stock of each other Borrower and 100% of the
capital stock of Philip Morris.
(h) No ERISA Event (other than a reportable event
described in Section 2615.23 of Title 29 of the Code of
Federal Regulations) has occurred nor is any ERISA Event
reasonably expected to occur with respect to any Major
Plan, or any Significant Plan.
(i) Schedule B (Actuarial Information) to the most
recently completed annual report (Form 5500 Series) with
respect to each Plan which is a Major Plan or a Significant
Plan, copies of which have been filed with the Internal
Revenue Service and furnished to each Bank, is complete and
accurate and fairly presents the funding
<PAGE>
38
status of such Plan, and since the date of such Schedule B
there has been no material adverse change in such funding
status; provided that no change in the funding status of
--------
any such Plan shall be deemed to be materially adverse from
that disclosed on such Schedule B unless there is an
Insufficiency which, when aggregated with the Insufficiency
of each other Plan, exceeds $100,000,000.
(j) Neither any Borrower nor PM Companies nor any of
their ERISA Affiliates has incurred or reasonably expects
to incur any Withdrawal Liability under ERISA to any
Multiemployer Plan requiring payments to such Multiemployer
Plan in an annual amount which, when aggregated together
with all other payments required to be made to
Multiemployer Plans as a result of Withdrawal Liabilities
incurred or reasonably expected to be incurred by the
Borrowers, PM Companies and their ERISA Affiliates, exceeds
$25,000,000.
ARTICLE V
COVENANTS OF PM COMPANIES
SECTION 5.01. Affirmative Covenants. So long as any
---------------------
Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, PM Companies will, unless the Majority
Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause
-------------------------
each Major Subsidiary to comply, in all material respects
with all applicable laws, rules, regulations and orders
(such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments
and governmental charges imposed upon it or upon its
property except to the extent contested in good faith),
noncompliance with which would materially adversely affect
its business or credit.
(b) Maintenance of Ratio of Net Income Before Tax to
------------------------------------------------
Fixed Charges. Maintain a ratio of aggregate consolidated
-------------
Net Income Before Tax for the four most recent fiscal
quarters for which consolidated statements of earnings have
been delivered pursuant to Section 5.01(c)(i) or (ii)
hereof to consolidated Fixed Charges for such four most
recent fiscal quarters of not less than 2.5 to 1.0.
<PAGE>
39
(c) Reporting Requirements. Furnish to the Lenders:
----------------------
(i) as soon as available and in any event within
60 days after the end of each of the first three
quarters of each fiscal year of PM Companies, a
consolidated balance sheet of PM Companies and its
consolidated subsidiaries as of the end of such
quarter and consolidated statements of earnings of PM
Companies and its consolidated subsidiaries for the
period commencing at the end of the previous fiscal
year and ending with the end of such quarter,
certified by the chief financial officer of PM
Companies;
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of PM
Companies, a copy of the financial statements for such
year for PM Companies and its consolidated
subsidiaries, audited by Coopers & Lybrand (or other
independent accountants which, as of the date of this
Agreement, are one of the "big six" accounting firms);
(iii) as soon as possible and in any event within
five days after the occurrence of each Event of
Default and each event which, with the giving of
notice or lapse of time, or both, would constitute an
Event of Default, continuing on the date of such
statement, a statement of the chief financial officer
of PM Companies setting forth details of such Event of
Default or event and the action which PM Companies has
taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing
thereof, copies of all reports which PM Companies
sends to any of its shareholders, and copies of all
periodic reports on Forms 10-K, 10-Q and 8-K (or any
successor forms adopted by the Securities and Exchange
Commission) which PM Companies files with the
Securities and Exchange Commission;
(v) as soon as possible and in any event (A)
within 30 days after any Borrower or PM Companies or
any of their ERISA Affiliates knows or has reason to
know that any ERISA Event described in clause (i) of
the definition of ERISA Event (other than a Reportable
Event described in Section 2615.23 of Title 29 of the
Code of Federal Regulations) with respect to any Major
Plan or any Significant Plan
<PAGE>
40
has occurred and (B) within 10 days after any Borrower
or PM Companies or any of their ERISA Affiliates knows
or has reason to know that any other ERISA Event with
respect to any Major Plan or any Significant Plan has
occurred, a statement of the chief financial officer
of PM Companies describing such ERISA Event and the
action, if any, which such Borrower or PM Companies or
such ERISA Affiliate proposes to take with respect
thereto;
(vi) promptly and in any event within two
Business Days after receipt thereof by any Borrower or
PM Companies or any of their ERISA Affiliates from the PBGC,
copies of each notice received by such Borrower or PM
Companies or any such ERISA Affiliate of the PBGC's intention
to terminate any Plan or to have a trustee appointed to
administer any Plan;
(vii) promptly and in any event within 30 days
after the filing thereof with the Internal Revenue
Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series)
with respect to each Major Plan and each Significant
Plan;
(viii) promptly and in any event within five
Business Days after receipt thereof by any Borrower or
PM Companies or any of their ERISA Affiliates from a
Multiemployer Plan sponsor, a copy of each notice
received by such Borrower or PM Companies or any of
their ERISA Affiliates concerning the imposition of
Withdrawal Liability where the aggregate annual
payments for such Withdrawal Liability exceeds
$10,000,000;
(ix) promptly and in any event within 60 days
after the date on which a Plan which is not a Major
Plan or a Significant Plan on the date hereof becomes a
Major Plan or Significant Plan, copies of each
Schedule B (Actuarial Information) to the most recent
Annual Report (Form 5500 Series) filed with the
Internal Revenue Service with respect to such Plan,
together with a statement of the chief financial
officer of PM Companies describing any material
adverse change in the funding status of such Plan
since the date of such Schedule B; and
(x) such other information respecting the
condition or operations, financial or otherwise, of
<PAGE>
41
PM Companies or any Major Subsidiary as any Lender
through the Agent may from time to time reasonably
request.
SECTION 5.02. Negative Covenants. So long as any
------------------
Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, PM Companies will not, without the
written consent of the Majority Lenders:
(a) Liens, Etc. Create or suffer to exist, or permit
----------
any Major Subsidiary to create or suffer to exist, any
lien, security interest or other charge or encumbrance, or any
other type of preferential arrangement, upon or with respect to
any of its properties, whether now owned or hereafter acquired, or
assign, or permit any Major Subsidiary to assign, any right to
receive income, in each case to secure or provide for the payment
of any Debt of any Person, other than (i) purchase money liens or
purchase money security interests upon or in any property acquired
or held by it or any Major Subsidiary in the ordinary course of
business to secure the purchase price of such property or to
secure indebtedness incurred solely for the purpose of financing
the acquisition of such property, (ii) liens or security interests
existing on such property at the time of its acquisition (other
than any such lien or security interest created in contemplation
of such acquisition), (iii) liens or security interests existing
on the date hereof securing Debt, (iv) liens or security interests
on property financed through the issuance of industrial revenue
bonds in favor of the holders of such bonds or any agent or
trustee therefor, (v) liens or security interests existing on
property of any Person acquired by it or any Major Subsidiary,
(vi) liens or security interests securing Debt in an aggregate
amount not in excess of 5% of PM Companies' Consolidated Tangible
Assets, or (vii) liens or security interests upon or with respect
to "margin stock" as that term is defined in Regulation U issued
by the Board of Governors of the Federal Reserve System.
(b) Mergers, Etc. Merge or consolidate with or into,
------------
or convey, transfer, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially all
of the assets of, any Person, or permit any subsidiary
directly or indirectly owned by it to do so, unless,
immediately after giving effect thereto, no Event of
Default or event which, with the
<PAGE>
42
giving of notice or lapse of time, or both, would
constitute an Event of Default would exist and, in the case
of any merger or consolidation to which it is a party, it
is the surviving corporation and, in the case of any merger
or consolidation to which a Borrower other than PM
Companies is a party, the corporation formed by such
consolidation or into which such Borrower shall be merged
shall be a corporation organized and existing under the
laws of the United States of America or any State thereof,
or the District of Columbia, and shall assume such
Borrower's obligations under this Agreement by the
execution and delivery of an instrument in form and
substance satisfactory to the Majority Lenders and a Notice
of Acceptance.
(c) Compliance with ERISA. Permit to exist any
---------------------
occurrence of any Reportable Event (as defined in Title IV
of ERISA), or any other event or condition, which presents a
material risk of termination by the PBGC of any Major Plan.
(d) Maintenance of Ownership of Philip Morris. Sell
-----------------------------------------
or otherwise dispose of any shares of capital stock of
Philip Morris.
(e) Dividends, Etc. Declare and make any dividend
--------------
payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares
of any class of capital stock of PM Companies, or purchase,
redeem or otherwise acquire for value (or permit any of its
subsidiaries to do so) any shares of any class of capital
stock of PM Companies or any warrants, rights or options to
acquire any such shares, now or hereafter outstanding,
except that PM Companies may (i) declare and make any
dividend payment or other distribution payable in common
stock of PM Companies and (ii) declare or pay cash
dividends to its stockholders and purchase, redeem or
otherwise acquire shares of its capital stock or warrants,
rights or options to acquire any such shares for cash if
after giving effect thereto the aggregate amount of such
dividends, purchases, redemptions, retirements and
acquisitions paid or made after October 12, 1993 would be
less than an amount equal to $5,000,000,000 plus 60% of
income from continuing operations or less 60% of loss from
continuing operations (in either case after deduction of
income taxes properly attributable to continuing
operations) and plus 100% of the proceeds from any sale or
issuance of additional shares of its capital stock, in each
case as determined on a cumulative basis and in accordance
with generally
<PAGE>
43
accepted accounting principles, for the period commencing
September 30, 1993 and terminating on the date of such
dividend, purchase, redemption, retirement or acquisition,
except that (A) the effects on deferred taxes of any
changes in tax law as disclosed in any PM Companies annual
report to stockholders and calculated in accordance with
Statement of Financial Accounting Standards No. 106 shall
not be included in the determination of income or loss from
continuing operations and (B) if there has been a material
change in an accounting principle, including the accounting
for post-employment benefits as prescribed by Statement of
Financial Accounting Standards No. 112, as compared to that
applied in the preparation of the financial statements of
PM Companies as at and for the nine months ended
September 30, 1993, then such new accounting principle
shall not be used in the determination of income or loss
from continuing operations; provided that the provisions of
this Section 5.02(e) shall not prevent the payment of any
dividend within sixty days after the date of declaration
thereof, if at the date of declaration thereof such
declaration complied with the provisions of this Section
5.02(e), unless, immediately after giving effect to such
proposed declaration or payment, an Event of Default or
event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default would exist
under any of the provisions of this Agreement other than
this Section 5.02(e). For purposes of this Section
5.02(e), a material change in an accounting principle is
one that in the year of its adoption changes income or loss
from continuing operations for any quarter in such year by
more than 10%.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
-----------------
following events ("Events of Default") shall occur and be
continuing:
(a) Any Borrower or PM Companies shall fail to pay
any principal of, or interest on, any Advance, or PM
Companies shall fail to pay any fees payable under Section
2.04, when the same become due and payable; or
(b) Any representation or warranty made or deemed to
have been made by any Borrower or PM Companies herein
<PAGE>
44
or by any Borrower or PM Companies (or any of their
respective officers) in connection with this Agreement
shall prove to have been incorrect in any material respect
when made or deemed to have been made; or
(c) Any Borrower or PM Companies shall fail to
perform or observe (i) any term, covenant or agreement
contained in Section 5.01(b) or 5.02, or (ii) any other
term, covenant or agreement contained in this Agreement on
its part to be performed or observed if such failure shall
remain unremedied for 10 days after written notice thereof
shall have been given to PM Companies by the Agent or any
Lender; or
(d) Any Borrower or PM Companies or any Major
Subsidiary shall fail to pay any principal of or premium or
interest on any Debt which is outstanding in a principal amount of
at least $50,000,000 in the aggregate (but excluding Debt arising
under this Agreement) of such Borrower or PM Companies or such
Major Subsidiary (as the case may be), when the same becomes due
and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt unless adequate
provision for any such payment has been made in form and substance
satisfactory to the Majority Lenders; or any other event shall
occur or condition shall exist under any agreement or instrument
relating to any such Debt which is outstanding in a principal
amount of at least $100,000,000 in the aggregate and shall
continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt (other than any such Debt owed to a Lender
or an affiliate of a Lender if such event or condition shall
relate solely to a restriction on margin stock, as that term is
defined in Regulation U issued by the Board of Governors of the
Federal Reserve System) unless adequate provision for the payment
of such Debt has been made in form and substance satisfactory to
the Majority Lenders; or any Debt of any Borrower or PM Companies
or any Major Subsidiary which is outstanding in a principal amount
of at least $50,000,000 in the aggregate (but excluding Debt
arising under this Agreement) shall be declared to be due and
payable, or required to be prepaid (other than by a scheduled
required prepayment), redeemed, purchased or defeased, or an offer
to prepay, redeem, purchase or defease such Debt
<PAGE>
45
shall be required to be made, in each case prior to the
stated maturity thereof unless adequate provision for the
payment of such Debt has been made in form and substance
satisfactory to the Majority Lenders; or
(e) Any Borrower or PM Companies or any Major
Subsidiary shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be
instituted by or against any Borrower or PM Companies or
any Major Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its
property, and, in the case of any such proceeding instituted
against it (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of 45 days or
any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against it or the
appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property) shall
occur; or any Borrower or PM Companies or any Major Subsidiary
shall take any corporate action to authorize any of the actions
set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in
excess of $50,000,000 shall be rendered against any
Borrower or PM Companies or any Major Subsidiary and either
(i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a
stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) Any ERISA Event with respect to Plan (a "Subject
ERISA Event") shall have occurred, and, 30 days after
notice thereof shall have been given to PM Companies by any
Lender, (i) such Subject ERISA Event (if correctible) shall
not have been corrected and (ii) the Insufficiency of any
such Plan, when aggregated with the
<PAGE>
46
Insufficiencies (determined as of the date of the Subject
ERISA Event) of all other Plans, if any, which were Plans
on or after the date hereof and with respect to which an
ERISA Event has occurred, exceeds $100,000,000; or
(h) Any Borrower or PM Companies or any of their
ERISA Affiliates shall have made a complete or partial
withdrawal from a Multiemployer Plan and the plan sponsor
of such Multiemployer Plan shall have notified such
withdrawing employer that such employer has incurred a
Withdrawal Liability in an annual amount which, when
aggregated together with all other payments required to be
made to Multiemployer Plans whose plan sponsors have
notified such Borrower, PM Companies or any of their ERISA
Affiliates that a Withdrawal Liability has been incurred by
such Borrower, PM Companies or any of their ERISA
Affiliates under such Multiemployer Plans, exceeds
$25,000,000; or
(i) The guaranty provided by PM Companies under
Article VIII hereof or any guaranty endorsed by PM
Companies on any B Note after delivery thereof under
Section 3.04 shall for any reason cease to be valid and
binding on PM Companies or PM Companies shall so state in
writing;
then, and in any such event, the Agent (i) shall at the
request, or may with the consent, of the Majority Lenders, by
notice to PM Companies and the Borrowers, declare the
obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at
the request, or may with the consent, of the Majority Lenders,
by notice to PM Companies and the Borrowers, declare all the
Advances then outstanding, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and
payable, whereupon the Advances then outstanding, all such
interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by
the Borrowers; provided, however, that in the event of an
-------- -------
actual or deemed entry of an order for relief with respect to
any Borrower, PM Companies or any Major Subsidiary under the
Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the
Advances then outstanding, all such interest and all such
amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrowers.
<PAGE>
47
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender
------------------------
hereby appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto.
As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of
the Debt resulting from the Advances), the Agent shall not be
required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall
be fully protected in so acting or refraining from acting) upon
the instructions of the Majority Lenders, and such instructions
shall be binding upon all Lenders; provided, however, that the
-------- -------
Agent shall not be required to take any action which exposes
the Agent to personal liability or which is contrary to this
Agreement or applicable law. The Agent agrees to give to each
Lender prompt notice of each notice given to it by PM Companies
or any Borrower pursuant to the terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the
---------------------
Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by
it or them under or in connection with this Agreement, except
for its or their own gross negligence or wilful misconduct.
Without limitation of the generality of the foregoing, the
Agent: (i) may treat the Lender that made any Advance as the
holder of the Debt resulting therefrom until the Agent receives
and accepts an Assignment and Acceptance entered into by such
Lender, as assignor, and an Eligible Assignee, as assignee, as
provided in Section 10.07; (ii) may consult with legal counsel
(including counsel for the Borrowers and PM Companies),
independent accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken
in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to
any Lender for any statements, warranties or representations
made in or in connection with this Agreement; (iv) shall not
have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of
this Agreement on the part of any Borrower or PM Companies or
to inspect the property (including the books and records) of
any Borrower or PM Companies; (v) shall not be responsible to
any Lender for the due execution, legality, validity,
<PAGE>
48
enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished
pursuant hereto; and (vi) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent,
certificate or, other instrument or writing (which may be by
telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect
-----------------------
to any Commitment of, or any Advance made by, Citibank or any
of its affiliates, Citibank shall have the same rights and
powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term
"Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Citibank in its individual capacity.
Citibank and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally
engage in any kind of business with, any Borrower, PM
Companies, any of their respective subsidiaries and any Person
who may do business with or own securities of any Borrower or
PM Companies or any such subsidiary, all as if Citibank were
not the Agent and without any duty to account therefor to the
Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender
----------------------
acknowledges that it has, independently and without reliance
upon the Agent or any other Lender and based on the financial
statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate, made its own
credit analysis, and decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and
without reliance upon the 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 decisions in
taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to
---------------
indemnify the Agent (to the extent not reimbursed by PM
Companies or any Borrower), ratably according to the respective
principal amounts of Advances then owing to each of them (or if
no such Advances are at the time outstanding or if any such
Advances are then owing to Persons which are not Lenders,
ratably according to the respective amounts of their
Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent
<PAGE>
49
under this Agreement, provided that no Lender shall be liable
--------
for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses
or disbursements resulting from the Agent's gross negligence or
wilful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including
counsel fees and expenses) incurred by the Agent in connection
with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this
Agreement, to the extent that the Agent is not reimbursed for
such expenses by PM Companies or any Borrower.
SECTION 7.06. Successor Agent. The Agent may resign
---------------
at any time by giving written notice thereof to the Lenders and
PM Companies and may be removed at any time with or without
cause by the Majority Lenders. Upon any such resignation or
removal, the Majority Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so
appointed by the Majority Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving
of notice of resignation or the Majority Lenders' removal of
the retiring Agent, then the retiring Agent may, on behalf of
the Lenders, appoint a successor Agent, which shall be a Lender
having and acting through a New York office, or a commercial
bank organized under the laws of the United States of America
or of any State thereof and having a combined capital and
surplus of at least $500,000,000 which is not a Lender. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this
Article VII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
ARTICLE VIII
GUARANTY
SECTION 8.01. Guaranty. The Guarantor hereby
--------
unconditionally and irrevocably guarantees (the undertaking
<PAGE>
50
of the Guarantor contained in this Article VIII being the
"Guaranty") the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of
each Borrower now or hereafter existing under this Agreement
(other than such obligations under Section 2.03(d) and (e)
which are covered by the guaranty under the B Notes), whether
for principal, interest, fees, expenses or otherwise (such
obligations being the "Obligations"), and any and all expenses
(including counsel fees and expenses) incurred by the Agent or
the Lenders in enforcing any rights under the Guaranty.
SECTION 8.02. Guaranty Absolute. The Guarantor
-----------------
guarantees that the Obligations will be paid strictly in
accordance with the terms of this Agreement, regardless of any
law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the
Agent or the Lenders with respect thereto. The liability of
the Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:
(i) any lack of validity, enforceability or
genuineness of any provision of this Agreement or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
consent to departure from this Agreement;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or
consent to departure from any other guaranty, for all or
any of the Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, a
Borrower or the Guarantor.
This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the
Agent or any Lender upon the insolvency, bankruptcy or
reorganization of a Borrower or otherwise, all as though such
payment had not been made.
SECTION 8.03. Waivers. (a) The Guarantor hereby
-------
waives promptness, diligence, notice of acceptance and any
other notice with respect to any of the Obligations and this
<PAGE>
51
Guaranty and any requirement that the Agent or any Lender
protect, secure, perfect or insure any security interest or
lien or any property subject thereto or exhaust any right or
take any action against a Borrower or any other Person or any
collateral.
(b) The Guarantor hereby irrevocably waives any
claims or other rights that it may now or hereafter acquire
against any Borrower that arise from the existence, payment,
performance or enforcement of the Guarantor's obligations under
this Guaranty or this Agreement, including, without limitation,
any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in
any claim or remedy of the Agent or any Lender against such
Borrower or any collateral, whether or not such claim, remedy
or right arises in equity or under contract, statute or common
law, including, without limitation, the right to take or
receive from such Borrower, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or
security on account of such claim, remedy or right. If any
amount shall be paid to the Guarantor in violation of the
preceding sentence at any time prior to the later of the cash
payment in full of the Obligations and all other amounts
payable under this Guaranty and the Termination Date, such
amount shall be held in trust for the benefit of the Agent and
the Lenders and shall forthwith be paid to the Agent to be
credited and applied to the Obligations and all other amounts
payable under this Guaranty, whether matured or unmatured, in
accordance with the terms of this Agreement and this Guaranty,
or to be held as collateral for any Obligations or other
amounts payable under this Guaranty thereafter arising. The
Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this
Agreement and this Guaranty and that the waiver set forth in
this subsection is knowingly made in contemplation of such
benefits.
SECTION 8.04. Payments Free and Clear of Taxes, Etc.
-------------------------------------
(a) Any and all payments made by the Guarantor hereunder shall
be made in accordance with Section 2.12 (concerning payments)
of this Agreement free and clear of and without deduction for
any and all present or future Taxes. If the Guarantor shall be
required by law to deduct any Taxes from or in respect of any
sum payable hereunder to any Lender or the Agent, (i) the sum
payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable
to additional sums payable under this Section) such Lender or
the Agent (as the case may
<PAGE>
52
be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Guarantor shall make
such deductions and (iii) the Guarantor shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, the Guarantor agrees to pay any
present or future Other Taxes which arise from any payment made
under this Guaranty or from the execution, delivery or
registration of, or otherwise with respect to, this Guaranty.
(c) The Guarantor will indemnify each Lender and the
Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by
such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days from the date such Lender or the
Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, the Guarantor will furnish to the Agent, at its address
referred to in Section 10.02, the original or a certified copy
of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other
agreement of the Guarantor hereunder, the agreements and
obligations of the Guarantor contained in this Section 8.04
shall survive the payment in full of the principal of and
interest on the Advances.
(f) Unless in accordance with Section 2.13(f) a
Borrower, PM Companies and the Agent have received forms and
other documents satisfactory to them indicating that payments
hereunder are not subject to United States withholding tax or
are subject to such tax at a rate reduced by an applicable tax
treaty, the Guarantor or the Agent shall withhold taxes from
such payments at the applicable statutory rate in the case of
payments to or for any Lender organized under the laws of a
jurisdiction outside the United States.
SECTION 8.05. No Waiver; Remedies. No failure on the
-------------------
part of the Agent or any Lender to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right
hereunder, preclude any other or further exercise
<PAGE>
53
thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 8.06. Continuing Guaranty. This Guaranty is a
-------------------
continuing guaranty and shall (i) remain in full force and
effect until payment in full (after the Termination Date) of
the Obligations and all other amounts payable under this
Guaranty, (ii) be binding upon the Guarantor, its successors
and assigns, and (iii) inure to the benefit of and be
enforceable by the Lenders, the Agents and their respective
successors, transferees and assigns.
ARTICLE IX
SUBSIDIARY BORROWER
SECTION 9.01. Subsidiary Borrower. Any domestic or
-------------------
foreign subsidiary of the Guarantor shall have the right to
become a "Borrower" hereunder, and to borrow any unused
Commitments under this Agreement subject to the terms and
conditions hereof applicable to a Borrower and to the following
additional conditions:
(a) PM Companies shall deliver a notice in the form
of Exhibit F hereto (a "Notice of Acceptance") signed by
such subsidiary and countersigned by the Guarantor to the Agent
stating that such subsidiary desires to become a "Borrower" under
this Agreement and agrees to be bound by the terms hereof. From
the time of receipt of such Notice of Acceptance by the Agent,
such subsidiary shall be a "Borrower" hereunder with all of the
rights and obligations of a Borrower hereunder. No Notice of
Acceptance relating to a subsidiary may be revoked as to amounts
owed by such subsidiary to the Lenders under this Agreement or
when a Notice of Borrowing naming such subsidiary has been given
by PM Companies and is effective.
(b) Each Notice of Acceptance shall be accompanied by
an opinion of counsel for PM Companies to the effect of
clause (iv) below and shall contain the following
representations and warranties with respect to such
subsidiary:
(i) The subsidiary is a corporation duly
organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation.
<PAGE>
54
(ii) The execution, delivery and performance by
the subsidiary of any B Notes executed and delivered
and to be executed and delivered by it, this Agreement
and such Notice of Acceptance are within the
subsidiary's corporate powers, have been duly
authorized by all necessary corporate action, and do
not contravene (i) the subsidiary's charter or by-laws
or (ii) any law, rule, regulation or order of any
court or governmental agency or any contractual
restriction binding on or affecting the subsidiary.
(iii) No authorization or approval or other action
by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due
execution, delivery and performance by the subsidiary
of any B Notes executed and delivered and to be
executed and delivered by it, this Agreement or such
Notice of Acceptance.
(iv) This Agreement is, and any B Notes of such
subsidiary when delivered under this Agreement will
be, the legal, valid and binding obligation of the
subsidiary enforceable against the subsidiary in
accordance with their respective terms, subject to the
effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors
rights generally and to the effect of general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(v) There is no pending or threatened action or
proceeding affecting the subsidiary or any of its
subsidiaries before any court, governmental agency or
arbitrator which purports to affect the legality,
validity or enforceability of this Agreement or any B
Note.
(vi) PM Companies owns directly or indirectly
100% of the capital stock of the subsidiary.
(c) For the purposes of Sections 3.02, 3.03 and 3.04,
each of the representations and warranties in the foregoing
Section 9.01(b) shall be deemed to be a representation and
warranty contained in Section 4.01.
<PAGE>
55
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or
---------------
waiver of any provision of this Agreement, nor consent to any
departure by any Borrower or the Guarantor therefrom, shall in
any event be effective unless the same shall be in writing and
signed by the Majority Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no
-------- -------
amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (a) waive
any of the conditions specified in Section 3.01, 3.02 (if and
to the extent that the Borrowing which is the subject of such
waiver would involve an increase in the aggregate outstanding
amount of Advances over the aggregate amount of Advances
outstanding immediately prior to such Borrowing) or 3.03, (b)
increase the Commitments of the Lenders or subject the Lenders
to any additional obligations, (c) reduce the principal of, or
interest on, the A Advances or any fees or other amounts
payable hereunder, (d) postpone any date fixed for any payment
of principal of, or interest on, the A Advances or any fees or
other amounts payable hereunder, (e) change the percentage of
the Commitments or of the aggregate unpaid principal amount of A
Advances, or the number of Lenders which shall be required for
the Lenders or any of them to take any action hereunder, (f)
release the Guarantor from any of its obligations under Article
VIII or (g) amend this Section 10.01; provided further that no
-------- -------
waiver of the conditions specified in Section 3.04 in
connection with any B Borrowing shall be effective unless
consented to by all Lenders making B Advances as part of such B
Borrowing; and provided further that no amendment, waiver or
-------- -------
consent shall, unless in writing and signed by the Agent in
addition to the Lenders required above to take such action,
affect the rights or duties of the Agent under this Agreement
or any A Advance.
SECTION 10.02. Notices, Etc. Except as provided in
------------
Section 2.03(a) or (g), all notices and other communications
provided for hereunder shall be in writing (including
telegraphic, telecopy, telex or cable communication) and
mailed, telegraphed, telecopied, telexed, cabled or delivered,
if to any Borrower, at its address at c/o Philip Morris
Companies Inc., 120 Park Avenue, New York, New York 10017,
Attention: Treasurer; if to the Guarantor, at its address at
120 Park Avenue, New York, New York 10017, Attention:
Secretary; if to any Bank, at its Domestic Lending Office
specified opposite its name on Schedule I
<PAGE>
56
hereto; if to any other Lender, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it
became a Lender; and if to the Agent, at its address at One
Court Square, Long Island City, New York 11120, Attention: John
Sahr; or, as to each party, at such other address as shall be
designated by such party in a written notice to PM Companies or
the Agent and, in the case of any such notice by any Borrower,
PM Companies or the Agent, to each other party hereto. All
such notices and communications shall, when mailed,
telegraphed, telecopied, telexed or cabled, be effective when
deposited in the mails, delivered to the telegraph company,
transmitted by telecopier, confirmed by telex answerback or
delivered to the cable company, respectively, except that
notices and communications to the Agent pursuant to Article II
or VII shall not be effective until received by the Agent.
SECTION 10.03. No Waiver; Remedies. No failure on
-------------------
the part of any Lender or the Agent to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such
right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 10.04. Costs, Expenses and Taxes. (a) PM
-------------------------
Companies agrees to pay on demand all costs and expenses in
connection with the preparation, execution, delivery,
administration (excluding any cost or expenses for
administration related to the Agent's overhead), modification
and amendment of this Agreement and the other documents to be
delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities under this
Agreement, and all costs and expenses of the Lenders and the
Agent, if any (including, without limitation, reasonable
counsel fees and expenses of the Lenders and the Agent), in
connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement and the other
documents to be delivered hereunder.
(b) If any payment of principal of any Adjusted CD
Rate Advance or Eurodollar Rate Advance is made other than on
the last day of the Interest Period for such Advance, as a
result of a payment pursuant to Section 2.10, acceleration of
the maturity of the Advances pursuant to Section 6.01, an
assignment made as a result of a demand by PM Companies
<PAGE>
57
pursuant to Section 10.07(a) or for any other reason, PM
Companies shall, upon demand by any Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such
Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without
limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender
to fund or maintain such Advance. Without prejudice to the
survival of any other agreement of any Borrower or PM Companies
hereunder, the agreements and obligations of each Borrower and
PM Companies contained in Section 2.02(c), 2.08, 2.10(b)(ii) or
(c), 2.11 or this Section 10.04(b) shall survive the payment in
full of principal and interest hereunder.
(c) Each Borrower and the Guarantor jointly and
severally agree to indemnify and hold harmless the Agent and
each Lender and each of their respective affiliates, control
persons, directors, officers, employees, attorneys and agents
(each, an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and disbursements of
counsel) which may be incurred by or asserted against any
Indemnified Party, in each case in connection with or arising
out of, or in connection with the preparation for or defense
of, any investigation, litigation, or proceeding (i) related to
any transaction or proposed transaction (whether or not
consummated) in which any proceeds of any Borrowing are applied
or proposed to be applied, directly or indirectly, by any
Borrower, whether or not such Indemnified Party is a party to
such transaction or (ii) related to any Borrower's or the
Guarantor's entering into this Agreement, or to any actions or
omissions of any Borrower or the Guarantor, any of their
respective subsidiaries or affiliates or any of its or their
respective officers, directors, employees or agents in
connection therewith, in each case whether or not an
Indemnified Party is a party thereto and whether or not such
investigation, litigation or proceeding is brought by the
Guarantor or any Borrower or any other Person; provided,
--------
however, that neither any Borrower nor the Guarantor shall be
-------
required to indemnify any such Indemnified Party from or
against any portion of such claims, damages, losses,
liabilities or expenses that is found in a final,
non-appealable judgment by a court of competent jurisdiction to
have resulted from the gross negligence or wilful misconduct of
such Indemnified Party.
<PAGE>
58
SECTION 10.05. Right of Set-off. Upon (i) the
----------------
occurrence and during the continuance of any Event of Default
and (ii) the making of the request or the granting of the
consent specified by Section 6.01 to authorize the Agent to
declare the Advances due and payable pursuant to the provisions
of Section 6.01, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for
the credit or the account of any Borrower or the Guarantor
against any and all of the obligations of such Borrower or the
Guarantor now or hereafter existing under this Agreement,
irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may
be unmatured. Each Lender agrees promptly to notify the
appropriate Borrower or the Guarantor, as the case may be,
after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect
--------
the validity of such set-off and application. The rights of
each Lender under this Section are in addition to other rights
and remedies (including, without limitation, other rights of
set-off) which such Lender may have.
SECTION 10.06. Binding Effect. This Agreement shall
--------------
become effective when it shall have been executed by PM
Companies and the Agent and when the Agent shall have been
notified by each Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the benefit of
each Borrower, the Guarantor, the Agent and each Lender and
their respective successors and assigns, except that neither
any Borrower nor the Guarantor shall have the right to assign
its rights hereunder or any interest herein without prior
written consent of the Lenders.
SECTION 10.07. Assignments and Participations. (a)
------------------------------
Each Lender may and, if demanded by PM Companies upon at least 5
Business Days' notice to such Lender and the Agent, will assign
to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the A
Advances owing to it); provided, however, that (i) each such
-------- -------
assignment shall be of a constant, and not a varying,
percentage of all of the assigning Lender's rights and
obligations under this Agreement (other than, except in the
case of an assignment made as a result of a demand by PM
Companies pursuant to this Section 10.07(a), any B Advances
owing to such Bank or any B
<PAGE>
59
Notes held by it), (ii) the amount of the Commitment of the
assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event
be less than $25,000,000 and shall be an integral multiple of
$1,000,000, (iii) each such assignment shall be to an Eligible
Assignee, (iv) each such assignment made as a result of a
demand by PM Companies pursuant to this Section 10.07(a) shall
be arranged by PM Companies after consultation with the Agent
and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an
assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such
assignments which together cover all of the rights and
obligations of the assigning Lender under this Agreement, (v)
no Lender shall be obligated to make any such assignment as a
result of a demand by PM Companies pursuant to this Section
10.07(a) unless and until such Lender shall have received one
or more payments from either the Borrowers to which it has
outstanding Advances or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding
principal amount of the Advances owing to such Lender, together
with accrued interest thereon to the date of payment of such
principal amount and all other amounts payable to such Lender
under this Agreement and (vi) the parties to each such
assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, an Assignment and
Acceptance, together with a processing and recordation fee of
$3,000, provided that, if such assignment is made as a result
--------
of a demand by PM Companies under this Section 10.07(a), PM
Companies shall pay or cause to be paid such $3,000 fee;
provided further that nothing in this Section 10.07 shall
-------- -------
prevent or prohibit any Lender from pledging its Advances
hereunder or any B Notes held by it to a Federal Reserve Bank
in support of borrowings by such Lender from such Federal
Reserve Bank. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be
a party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned
by it pursuant to such Assignment and Acceptance, relinquish
its rights (other than those provided under Section 10.04) and
be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be
a party hereto).
<PAGE>
60
(b) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made
in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower or PM
Companies or the performance or observance by any Borrower or
PM Companies of any of their respective obligations under this
Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such
assigning Lender 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 decisions in taking or
not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee
appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of
this Agreement are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address referred
to in Section 10.02 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances owing to,
each Lender from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes,
absent manifest error, and PM Companies, the Borrowers, the
Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes
of this Agreement. The Register shall be available for
inspection by PM Companies or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
<PAGE>
61
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee representing
that it is an Eligible Assignee, the Agent shall, if such
Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice
thereof to PM Companies.
(e) Each Lender may sell participations to one or
more banks or other entities in or to all or a portion of its
rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Advances
owing to it and any B Note or Notes held by it); provided,
--------
however, that (i) such Lender's obligations under this
-------
Agreement (including, without limitation, its Commitment to PM
Companies hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall
remain the holder of any such B Note for all purposes of this
Agreement, and (iv) PM Companies, the other Borrowers, the
Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's
rights and obligations under this Agreement.
(f) Any Lender may, in connection with any assignment
or participation or proposed assignment or participation
pursuant to this Section 10.07, disclose to the assignee or
participant or proposed assignee or participant, any
information relating to PM Companies or any Borrower furnished
to such Lender by or on behalf of PM Companies or any Borrower;
provided that, prior to any such disclosure, the assignee or
--------
participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential information
relating to PM Companies received by it from such Lender.
SECTION 10.08. Governing Law. This Agreement and any
-------------
B Notes shall be governed by, and construed in accordance with,
the laws of the State of New York.
SECTION 10.09. Execution in Counterparts. This
-------------------------
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Agreement.
<PAGE>
62
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
PHILIP MORRIS COMPANIES INC.
By: /s/ George R. Lewis
------------------------
Vice President and
Treasurer
CITIBANK, N.A., as Agent
By:/s/ Paolo de Alessandrini
------------------------
Vice President
<PAGE>
63
THE BANKS
---------
Commitment:
----------
U.S. $466,666,666.63 CITIBANK, N.A.
By: /s/ Paolo de Alessandrini
--------------------------
Vice President
U.S. $333,333,333.33 CHEMICAL BANK
By: /s/ Robert C. Kennedy
--------------------------
Vice President
U.S. $333,333,333.33 CREDIT SUISSE
By: /s/ Robert B. Potter
--------------------------
Associate
By: /s/ Carole A. Lustig
--------------------------
Associate
U.S. $250,000,000.00 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK.
By: /s/ John A. Payne
--------------------------
Managing Director
U.S. $ 50,000,000.00 J.P. MORGAN DELAWARE
By: /s/ David J. Morris
--------------------------
Vice President
<PAGE>
64
U.S. $293,333,333.33 UNION BANK OF SWITZERLAND
By: /s/ Peter B. Yearly
--------------------------
Vice President
By: /s/ James P. Kelleher
--------------------------
Assistant Treasurer
U.S. $286,666,666.67 DEUTSCHE BANK AG NEW YORK
BRANCH AND/OR CAYMAN
ISLAND BRANCHES
By: /s/ Ross A. Howard
--------------------------
Assistant Vice President
By: /s/ Rolf-Peter Mikolayczyk
--------------------------
Director
U.S. $266,666,666.67 ABN AMRO BANK NV, NEW YORK
BRANCH
By: /s/ Laura G. Fazio
--------------------------
Vice President
By: /s/ Margaret P. Hannahoe
--------------------------
Assistant Vice President
U.S. $266,666,666.67 SOCIETE GENERALE
By: /s/ Bruce H. Drossman
--------------------------
Vice President
<PAGE>
65
U.S. $240,000,000.00 SWISS BANK CORPORATION,
NEW YORK AND CAYMAN
ISLANDS BRANCHES
By: /s/ Marcia L. Thatcher
--------------------------
Vice President
By: /s/ Filippe M. Goossens
--------------------------
Associate Director
U.S. $230,000,000.00 THE DAI-ICHI KANGYO BANK,
LTD. - NEW YORK BRANCH
By: /s/ Timothy White
--------------------------
Assistant Vice President
U.S. $226,666,666.67 BANK OF AMERICA NT & SA
By: /s/ John Pocalyko
--------------------------
Vice President
U.S. $226,666,666.67 DRESDNER BANK AG NEW YORK
AND GRAND CAYMAN BRANCHES
By: /s/ J. Michael Leffler
--------------------------
First Vice President
By: /s/ A. Richard Morris
--------------------------
Vice President
6277I/105
<PAGE>
66
U.S. $213,333,333.33 NATIONSBANK OF NORTH
CAROLINA, N.A.
By: /s/ Sally L. Hazard
--------------------------
Senior Vice President
U.S. $200,000,000.00 THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By: /s/ Y. Kawamura
--------------------------
Joint General Manager
U.S. $186,666,666.67 BAYERISCHE HYPOTHEKEN - UND
WECHSEL-BANK, NEW YORK
BRANCH
By: /s/ E.S. Atwell
--------------------------
Assistant Vice President
By: /s/ David Rockwell
--------------------------
First Vice President
U.S. $186,666,666.67 THE CHASE MANHATTAN BANK,
N.A.
By: /s/ Elyse O'Hora
--------------------------
Managing Director
U.S. $186,666,666.67 SANWA BANK LIMITED
By: /s/ Stephen C. Small
--------------------------
Vice President &
Area Manager
6277I/105
<PAGE>
67
U.S. $160,000,000.00 CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By: /s/ Robert Ivosevich
--------------------------
Authorized Signatory
CREDIT LYONNAIS
NEW YORK BRANCH
By: /s/ Robert Ivosevich
--------------------------
Senior Vice President
U.S. $150,000,000.00 THE BANK OF TOKYO TRUST
TRUST CO.
By: /s/ G. Stewart
--------------------------
Vice President &
Deputy Manager
U.S. $150,000,000.00 THE FUJI BANK, LIMITED
By: /s/ Y. Shiotsugu
--------------------------
Vice President & Manager
U.S. $124,666,666.67 BANQUE NATIONALE DE PARIS
NEW YORK BRANCH
By: /s/ Pierre-Nicholas Rogers
--------------------------
Vice President
By: /s/ Robert S. Taylor, Jr.
--------------------------
Senior Vice President
6277I/105
<PAGE>
68
BANQUE NATIONALE DE PARIS
GEORGETOWN BRANCH
By: /s/ Pierre-Nicholas Rogers
--------------------------
Vice President
By: /s/ Robert S. Taylor, Jr.
--------------------------
Senior Vice President
U.S. $116,666,666.67 MIDLAND BANK PLC
By: /s/ Derek Lunt
--------------------------
Corporate Banking Director
U.S. $106,666,666.67 THE BANK OF NEW YORK
By: /s/ Howard F. Bascom, Jr.
--------------------------
Vice President
U.S. $ 90,000,000.00 MELLON BANK N.A.
By: /s/ Diane P. Durnin
--------------------------
Vice President
U.S. $ 90,000,000.00 THE TORONTO-DOMINION BANK
By: /s/ Lisa Allison
--------------------------
Manager
Credit Administration
6277I/105
<PAGE>
69
U.S. $ 83,333,333.33 BAYERISCHE LANDESBANK
GIROZENTRALE
By: /s/ Wilfried Freudenberger
--------------------------
Executive Vice President
and General Manager
By: /s/ Peter Obermann
--------------------------
First Vice President
Manager Corporate Finance
U.S. $ 83,333,333.33 DEUTSCHE GENOSSENSCHAFTSBANK
By: /s/ Karen A. Brinkman
--------------------------
Vice President
By: /s/ John L. Dean
--------------------------
Senior Vice President
U.S. $ 83,333,333.33 ISTITUTO BANCARIO SAN
PAOLO DI TORINO S.P.A.
By: /s/ W. Jones
--------------------------
Vice President
By: /s/ Ettore Viazzo
--------------------------
Vice President
U.S. $ 83,333,333.33 THE SAKURA BANK, LTD.
By: /s/ Y. Terada
--------------------------
VP & AGM
6277I/105
<PAGE>
70
U.S. $ 80,000,000.00 NATIONAL AUSTRALIA BANK
LIMITED
By: /s/ Robert S. Emerson
--------------------------
Vice President
U.S. $ 76,666,666.67 BANQUE PARIBAS
By: /s/ S. Kelly
--------------------------
Group Vice President
By: /s/ Mary T. Finnegan
--------------------------
Vice President
U.S. $ 76,666,666.67 CANADIAN IMPERIAL BANK
COMMERCE
By: /s/ Mary Kate Miller
--------------------------
Authorized Signatory
U.S. $ 76,666,666.67 CONTINENTAL BANK N.A.
By: /s/ Kathryn W. Robinson
--------------------------
Vice President
6277I/105
<PAGE>
71
U.S. $ 76,666,666.67 NORDDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK
BRANCH AND/OR CAYMAN ISLAND
BRANCH
By: /s/ Stephen K. Hunter
--------------------------
Senior Vice President
By: /s/ Stephanie Hoevermann
--------------------------
Vice President
U.S. $ 76,666,666.67 RABOBANK NEDERLAND, NEW YORK
BRANCH
By: /s/ Johannes F. Breukhoven
--------------------------
Vice President
By: /s/ Ian Reece
--------------------------
Vice President & Manager
U.S. $ 76,666,666.67 ROYAL BANK OF CANADA
By: /s/ Linda M. Murrer
--------------------------
Senior Manager
U.S. $ 76,666,666.67 WACHOVIA BANK OF GEORGIA,
N.A.
By: /s/ Linda M. Harris
--------------------------
Senior Vice President
6277I/105
<PAGE>
72
U.S. $ 70,000,000.00 THE BANK OF NOVA SCOTIA
By: /s/ John Campbell
--------------------------
Vice President & Agent
U.S. $ 66,666,666.67 BANCA DI ROMA, NEW YORK
BRANCH
By: /s/ Ralph W. Riehle
--------------------------
First Vice President
By: /s/ T. Howell
--------------------------
Vice President
U.S. $ 66,666,666.67 BANK BRUSSELS LAMBERT,
NEW YORK BRANCH
By: /s/ John Kippax
--------------------------
Vice President
By: /s/ Eric Hollanders
--------------------------
Senior Vice President
Credit Department
U.S. $ 66,666,666.67 THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ James W. Peterson
--------------------------
Vice President
U.S. $ 66,666,666.67 FIRST INTERSTATE BANK OF
CALIFORNIA
By: /s/ Roy H. Roberts
--------------------------
Vice President
By: /s/ David E. Grimes
--------------------------
Vice President
6277I/105
<PAGE>
73
U.S. $ 66,666,666.67 THE MITSUBISHI BANK, LIMITED
NEW YORK BRANCH
By: /s/ J. Bruce Meredith
--------------------------
Senior Vice President
and Manager
U.S. $ 66,666,666.67 THE TOKAI BANK, LIMITED
By: /s/ Masaharu Muto
--------------------------
Deputy General Manager
U.S. $ 66,666,666.67 TRUST COMPANY BANK
By: /s/ Craig W. Farnsworth
--------------------------
Vice President
U.S. $ 66,666,666.67 THE YASUDA TRUST AND
BANKING COMPANY, LIMITED
NEW YORK BRANCH
By: /s/ Neil T. Chau
--------------------------
Vice President
U.S. $ 53,333,333.33 DAIWA BANK LIMITED
By: /s/ Masafumi Asai
--------------------------
Second Vice President
U.S. $ 53,333,333.33 DEN DANSKE BANK
By: /s/ Bent V. Christensen
--------------------------
Vice President
By: /s/ Peter L. Hargraves
--------------------------
Vice President
6277I/105
<PAGE>
74
U.S. $ 53,333,333.33 THE INDUSTRIAL BANK OF
JAPAN, LIMITED, NEW YORK
BRANCH
By: /s/ Junri Oda
--------------------------
Senior Vice President
and Senior Manager
U.S. $ 50,000,000.00 BANCA NAZIONALE DEL LAVORO
S.P.A. - NEW YORK BRANCH
By: /s/ Giuliano Violetta
--------------------------
First Vice President
By: /s/ Giulio Giovine
--------------------------
Vice President
U.S. $ 43,333,333.33 THE FIRST NATIONAL BANK OF
BOSTON
By: /s/ Ellen H. Allen
--------------------------
Director
U.S. $ 40,000,000.00 COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE
By: /s/ Sean Mounier
--------------------------
Vice President
By: /s/ Alain Merle d'Aubigne
--------------------------
Vice President
6277I/105
<PAGE>
75
U.S. $ 40,000,000.00 INTERNATIONALE NEDERLANDEN
BANK N.V., DUBLIN BRANCH
By: /s/ C. Vincent Reilly
--------------------------
Senior General Manager
By: /s/ Vaughn Richtor
--------------------------
General Manager
U.S. $ 40,000,000.00 LLOYDS BANK PLC.
By: /s/ T. Walser
--------------------------
Senior Vice President
By: /s/ Paul Briamonte
--------------------------
Vice President
U.S. $ 34,666,666.67 BANK OF HAWAII
By: /s/ Scott G. Balke
--------------------------
Vice President
U.S. $ 33,333,333.33 BANCA COMMERCIALE
ITALIANA-NEW YORK BRANCH
By: /s/ J. Mimi Welch
--------------------------
Assistant Vice President
By: /s/ Edward C. Bermant
--------------------------
First Vice President
6277I/105
<PAGE>
76
U.S. $ 33,333,333.33 BANK OF MONTREAL
By: /s/ Thruston W. Pettus
--------------------------
Director
U.S. $ 33,333,333.33 BANKERS TRUST COMPANY
By: /s/ Priscilla Newbury
--------------------------
Vice President
U.S. $ 33,333,333.33 FIRST BANK NATIONAL
ASSOCIATION
By: /s/ Mark R. Olmon
--------------------------
Vice President
U.S. $ 33,333,333.33 FIRST FIDELITY BANK, N.A.
NEW JERSEY
By: /s/ Susan Dimmick
--------------------------
Vice President
U.S. $ 33,333,333.33 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ Michael T. Grady
--------------------------
Vice President
6277I/105
<PAGE>
77
U.S. $ 33,333,333.33 GENERALE BANK, NEW YORK
BRANCH
By: /s/ Alain Verschueren
--------------------------
Senior Vice President
By: /s/ Eddie Matthews
--------------------------
Senior Vice President
U.S. $ 33,333,333.33 THE LONG-TERM CREDIT BANK
OF JAPAN, LIMITED
By: /s/ H. Sasaki
--------------------------
Deputy General Manager
U.S. $ 33,333,333.33 THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
By: /s/ Takashi Sugita
--------------------------
Senior Vice President
U.S. $ 33,333,333.33 WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK
AND CAYMAN ISLANDS
BRANCHES
By:/s/ Roland W. Chalons-Browne
--------------------------
Managing Director
By: /s/ Salvatore Battinelli
--------------------------
Vice President
6277I/105
<PAGE>
78
U.S. $ 26,666,666.67 BANCO BILBAO VIZCAYA, S.A.
By: /s/ Adolfo Martinez
--------------------------
Vice President -
Corporate Banking Manager
By: /s/ Ahmad Abouzeid
--------------------------
Vice President -
Credit Manager
U.S. $ 23,333,333.33 CARIPLO - CASSA DI
RISPARMIO DELLE PROVINCIE
LOMBARDE S.P.A.
By: /s/ Giuseppe Zanotti-Fregonara
------------------------------
Senior Vice President
By: /s/ Charles W. Kennedy
--------------------------
Vice President
U.S. $ 23,333,333.33 THE MITSUI TRUST AND BANKING
COMPANY LIMITED
By: /s/ Kiichiro Kondo
--------------------------
Senior Vice President &
Manager
U.S. $ 16,666,666.67 BANCO ESPANOL DE CREDITO, NEW
YORK BRANCH
By: /s/ Fernando Artaza
--------------------------
General Manager
By: /s/ Juan Galan
--------------------------
Senior Vice President
6277I/105
<PAGE>
79
U.S. $ 16,666,666.67 CREDIT COMMERCIAL DE FRANCE
By: /s/ Steven Broad
--------------------------
Senior Vice President
By: /s/ Kathryn Hudson
--------------------------
Assistant Vice President
U.S. $ 16,666,666.67 FLEET BANK
By: /s/ Deane M. Driscoll
--------------------------
Vice President
U.S. $ 16,666,666.67 THE NORTHERN TRUST COMPANY
By: /s/ Deborah W. Thomas
--------------------------
Vice President
U.S. $ 16,666,666.67 THE ROYAL BANK OF SCOTLAND PLC
By: /s/ David Dougan
--------------------------
Vice President
U.S. $ 16,666,666.67 SIGNET BANK /VIRGINIA
By: /s/ J. Charles Link
--------------------------
Senior Vice President
6277I/105
<PAGE>
80
U.S. $ 16,666,666.67 THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By: /s/ Yutaka Itoh
--------------------------
Deputy General Manager
U.S. $ 16,666,666.67 SVENSKA HANDELSBANKEN
By: /s/ Guy Rudberg
--------------------------
Vice President
By: /s/ Kjell Arvidsson
--------------------------
Vice President
U.S. $ 16,666,666.67 THE TOYO TRUST & BANKING CO.,
LTD.
By: /s/ Tomoshige Kimura
--------------------------
Vice President
U.S. $ 16,000,000.00 CRESTAR BANK
By: /s/ Keith Hubbard
--------------------------
Senior Vice President
U.S. $ 13,333,333.33 STATE STREET BANK & TRUST CO.
By: /s/ Patrick K. Armstrong
--------------------------
Vice President
6277I/105
<PAGE>
81
U.S. $ 7,333,333.33 CENTRAL FIDELITY BANK
By: /s/ Harry A. Turton, Jr.
--------------------------
Assistant Vice President
U.S. $ 7,333,333.33 M&I MARSHALL & ILSLEY BANK
By: /s/ Philip M. McGoohan
--------------------------
Vice President
U.S. $ 6,666,666.67 FIRSTAR BANK MILWAUKEE, N.A.
By: /s/ Thomas A. Rave
--------------------------
Vice President
6277I/105
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
ABN AMRO Bank N.V., Laura Fazio AMB AMRO Bank N.V.
New York Branch Vice President Cayman Islands Branch
500 Park Avenue, 2nd Fl. c/o ABN AMRO Bank N.V.
New York, NY 10022 500 Park Avenue, 2nd Fl.
(212) 832-7129 (Facsimile) New York, NY 10022
(212) 832-7129 (Facsimile)
Banca Commerciale Italiana- Sarah Kim
New York Branch Assistant Treasurer
1 William Street
New York, NY 10004
(212) 809-2124 (Facsimile)
Banca Nazionale Del Lavoro Giulio Giovine, V.P.
S.P.A.-New York Branch 25 West 51st Street
New York, NY 10019
(212) 765-2978 (Facsimile)
Banca di Roma, New York Ralph Riehle
Branch First Vice President
100 Wall Street
New York, NY 10005
(212) 607-6421 (Facsimile)
Banco Bilbao Vizcaya, S.A. Juan Urquiola
Account Officer
116 East 55th Street
New York, NY 10022
(212) 826-3107 (Facsimile)
Banco Espanol de Credito, Edna S. Diffoot-Cabrera
New York Branch Assistant Treasurer
630 Fifth Ave
Suite 514
New York, NY 10111
(212) 262-3119 (Facsimile)
Bank Brussels Lambert, John Kippax
New York Branch Vice President
630 Fifth Avenue
New York, NY 10111
(212) 333-5786 (Facsimile)
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Bank of America NT & SA Robert Simpson
1850 Gateway Blvd.
Concord, CA 94520
(510) 675-7531 (Facsimile)
Bank of Hawaii Scott Balke
Vice President
130 Merchant Street, 20th FL
Honolulu, HI 96846
(808) 537-8301 (Facsimile)
Bankers Trust Company Priscilla Newbury
Vice President
280 Park Avenue
New York, NY 10017
(212) 454-2605 (Facsimile)
Bank of Montreal Thruston W. Pettus
Director
430 Park Avenue
New York, NY 10022
(212) 605-1454 (Facsimile)
Banque Nationale de Paris Pierre-Nicholas Rogers Banque Nationale de Paris
New York Branch Vice President Georgetown Branch
Banque Nationale de Paris 499 Park Avenue c/o Banque Nationale de Paris
Georgetown Branch New York, NY 10022 New York Branch
(212) 415-9606 (Facsimile) 499 Park Avenue
New York, NY 10022
(212) 415-9695 (Facsimile)
Banque Paribas Mary T. Finnegan Banque Paribas Grand
Vice President Cayman Branch
787 Seventh Avenue c/o Banque Paribas NY
New York, NY 10019 Park Avenue Plaza
(212) 841-2333 (Facsimile) New York, NY 10055
(212) 841-2333 (Facsimile)
Bayerische Hypotheken - Steve Atwell, A.V.P.
Und Wechsel-Bank, Financial Square
New York Branch 32 Old Slip
New York, NY 10005
(212) 440-0741 (Facsimile)
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Bayerische Landesbank Girozentrale Joanne Cicino
Second Vice President
560 Lexington Ave
New York, NY 10022
(212) 310-9865 (Facsimile)
Canadian Imperial Bank of Mary Kate Miller
Commerce Vice President
425 Lexington Avenue, 6th Fl.
New York, NY 10017
(212) 856-3559/3600 (Facsimile)
Cariplo - Cassa di Risparmio Charles Kennedy
Delle Provincie Lombarde S.P.A. Vice President
650 Fifth Avenue
New York, NY 10019
(212) 603-7840 (Facsimile)
Central Fidelity Bank Harry A. Turton, Jr.
Central Fidelity Bank
Asst. Vice President
P.O. Box 27602
Richmond, VA 23261
(804) 697-6869 (Facsimile)
Chemical Bank Robert P. Kemas
Vice President
270 Park Avenue, 9th Fl.
New York, NY 10017
(212) 270-7138 (Facsimile)
Compagnie Financiere de CIC Sean Mounier
et de L'Union Europeene Vice President
520 Madison Avenue, 37th Fl.
New York, NY 10022
(212) 715-4535 (Facsimile)
Citibank, N.A. Paolo de Alessandrini
399 Park Avenue
8th Floor
New York, NY 10043
(212) 793-3963 (Facsimile)
Continental Bank N.A. Ken Washington
231 S. LaSalle Street
Chicago, IL 60697
(312) 828-5140 (Facsimile)
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Credit Commercial de France Steven Broad
Senior Vice President
450 Park Ave
New York, NY 10022
(212) 832-7469 (Facsimile)
Credit Lyonnais Robert Bostani Credit Lyonnais
Cayman Island Branch Vice President Cayman Island Branch
Credit Lyonnais 1301 Avenue of the Americas c/o Credit Lyonnais NY Branch
New York Branch New York, NY 10019 1301 Avenue of the Americas
(212) 459-3179 (Facsimile) New York, NY 10019
(212) 459-3179
Credit Suisse Robert B. Potter Credit Suisse
12 E. 49th St., 44th FL. Cayman Island Branch
New York, NY 10017 c/o Credit Suisse
(212) 238-5439 (Facsimile) 12 East 49th Street
New York, NY 10017
(212) 238-5439
Crestar Bank Keith A. Hubbard
Senior Vice President
919 East Main Street
Richmond, VA 23219
(804) 782-5413 (Facsimile)
Daiwa Bank Limited Mr. Asai
75 Rockefeller Plaza
New York, NY 10019
(212) 554-7210 (Facsimile)
Den Danske Bank P. Hargraves
Vice President
280 Park Ave
New York, NY 10017
(212) 370-9239 (Facsimile)
Deutsche Bank AG, New York Rolf-Peter Mikolayczyk Rolf-Peter Mikolayczyk
Branch and/or Cayman Island Vice President Cayman Islands Branch
Branches Deutsche Bank AG, New York Branch c/o Deutsche Bank AG
31 West 52nd Street 31 West 52nd Street
New York, NY 10019 New York, NY 10019
(212) 474-8212 (Facsimile) (212) 474-8212 (Facsimile)
Deutsche Genossenschaftsbank Robert B. Herber
Vice President
609 Fifth Avenue
New York, NY 10017-1021
(212) 745-1556 (Facsimile)
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Dresdner Bank AG New York J. Michael Leffler Dresdner Bank AG
and Grand Cayman Branches First Vice President New York or Grand Cayman
Dresdner Bank AG Branch
New York Branch c/o New York Branch
75 Wall Street 75 Wall Street
New York, NY 10005 New York, NY 10005
(212) 574-0130 (Facsimile) (212) 574-0130 (Facsimile)
First Bank National Association Mark R. Olmon
Vice President
601 Second Ave. So.
Minneapolis, MN 55602
(612) 973-0825 (Facsimile)
First Fidelity Bank, N.A. Susan J. Dimmick
New Jersey First Fidelity Bank, N.A.
New Jersey
550 Broad Street
Newark, NJ 07102
(201) 565-6681 (Facsimile)
First Interstate Bank Roy Roberts
of California Vice President
885 Third Avenue, 5th Fl.
New York, NY 10020
(212) 593-5238 (Facsimile)
First Union National Bank Allison Zollicoffer
of North Carolina Vice President
One First Union Center
Charlotte, NC 28202-0745
(704) 374-2802 (Facsimile)
Firstar Bank Robert A. Flosbach
Milwaukee, N.A. Vice President
777 E. Wisconsin Avenue
Milwaukee, WI 53202
(414) 765-5062 (Facsimile)
Fleet Bank Deane M. Driscoll
Vice President
56 East 42nd St.
New York, NY 10017
(212) 907-5633
Generale Bank, New York Branch Florence J. Mauchant
Vice President
520 Madison Avenue, 41st Fl.
New York, NY 10022
(212) 838-7492 (Facsimile)
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Istituto Bancario San Paolo Wendell H. Jones
di Torino S.P.A. 245 Park Avenue
New York, NY 10167
(212) 599-5303 (Facsimile)
Internationale Nederlanden Enda Allen
Bank N.V., Dublin Branch Manager, Financial Services
49 St. Stephen's Green
Dublin 2
(3531) 662-1916 (Facsimile)
Lloyds Bank Plc Theodore Walser, V.P.
199 Water Street
New York, NY 10038
(212) 607-4999 (Facsimile)
M&I Marshall and Ilsey Bank Philip M. McGoohan
Vice President
770 N. Water Street
Milwaukee, WI 53202
(414) 765-7625 (Facsimile)
Mellon Bank N.A. Diane P. Durnin
Vice President
Mellon Bank
65 East 55th Street
New York, NY 10022
(212) 702-5269 (Facsimile)
Midland Bank PLC Derek Lunt
Corporate Banking Dir.
Consumer Industries Grp, Corp.
& Institutional Banking
27-32 Poultry
London EC2P 2BX
The Mitsui Trust and Banking Gerard Machado
Company Limited Asst. Vice President
1 World Financial Center
200 Liberty Street
New York, NY 10281
(212) 945-4171 (Facsimile)
Morgan Guaranty Trust Company Charles R. Pardue Morgan Guaranty Trust Company
of New York Vice President of New York
60 Wall Street Nassau, Bahamas Office
New York, NY 10260-0060 c/o J.P. Morgan Services
(212) 648-5018 500 Stanton Christiana Road
Newark, Delaware 19713
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
J.P. Morgan Delaware David J. Morris
Vice President
902 Market Street
Wilmington, DE 19801
(302) 654-5336 (Facsimile)
National Australia Bank Limited Robert S. Emerson
Vice President
National Australia Bank
200 Park Avenue, 34th Fl.
New York, NY 10166
(212) 983-1969 (Facsimile)
NationsBank of North Lisa McClelland
Carolina, N.A. 1 Nationsbank Plaza
Mail Code NC 1002-19-21
Charlotte, NC 28255
(704) 386-8694 (Facsimile)
Norddeutsche Landesbank Norddeutsche Landesbank
Girozentrale New York Branch Girozentrale New York Branch
and/or Cayman Island Branch Stephanie Hoevermann, A.V.P.
1270 Ave of the Americas
New York, NY 10020
(212) 332-8660 (Facsimile)
Rabobank Nederland, New York Hans F. Breukhoven
Branch Vice President
245 Park Avenue
New York, NY 10167
(212) 916-7837 (Facsimile)
Royal Bank of Canada Grand Cayman (North America
No. 1) Branch
c/o Royal Bank of Canada
New York Operations Center
Pierrepont Plaza
300 Cadman Plaza West
Attn: Manager, Loans Administration
(718) 522-6292/3 (Facsimile)
with a copy to:
Linda M. Murrer
Senior Manager
Financial Square
New York, NY 10005-3531
(212) 809-7468 (Facsimile)
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Sanwa Bank Limited Stephen C. Small
Vice President
Sanwa Bank Limited
55 East 52nd Street
New York, NY 10055
(212) 754-1304 (Facsimile)
Signet Bank/Virginia J. Charles Link
Senior Vice President
800 East Main Street
Richmond, VA 23219
(804) 771-7151 (Facsimile)
Societe Generale Bruce Drossman
Societe Generale
Vice President
50 Rockefeller Plaza
New York, NY 10020
(212) 581-8752 (Facsimile)
State Street Bank & Trust Co. Patrick K. Armstrong
Vice President
225 Franklin Street
Boston, MA 02110
(617) 654-4176 (Facsimile)
Svenska Handelsbanken Kjell Arvidsson
Vice President
599 Lexington Avenue
New York, NY 10022
(212) 326-2725 (Facsimile)
Swiss Bank Corporation, New Marcia L. Thatcher
York and Cayman Islands Director
Branches 10 East 50th Street
New York, NY 10022
(212) 574-3852 (Facsimile)
The Bank of New York Mary Anne Zagroba One Wall Street, 17th Fl.
Vice President New York, NY 10286
The Bank of New York (212) 635-6397/6399 (Facsimile)
One Wall Street, 8th Fl.
(212) 635-1480 (Facsimile)
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
The Bank of Nova Scotia Walter Jackson The Bank of Nova Scotia
Representative International Limited
One Liberty Plaza, 26th Floor Bernard Sunley Building
(212) 225-5091 (Facsimile) Bay Street
P.O. Box N7545
Nassau, Bahamas
(22) 255-5090
The Bank of Tokyo Trust Co. Jean Reilly
Assistant Vice President
The Bank of Tokyo
1251 Ave. of the Americas
New York, NY 10116-3138
(212) 782-6441 (Facsimile)
The Chase Manhattan Bank, N.A. Elyse O'Hora
Managing Director
One Chase Plaza
New York, NY 10081
(212) 552-1041 (Facsimile)
The Dai-Ichi Kangyo Bank, Ltd. Tim White
- New York Branch Assistant Vice President
The Dai-Ichi Kangyo Bank, Ltd.
One World Trade Center
48th Floor
New York, NY 10048
(212) 524-0579 (Facsimile)
The First National Cindy Chen
Bank of Boston Vice President
Bank of Boston
100 Federal Street
Mail Stop 1-21-3
Boston, MA 02110
(617) 434-0601 (Facsimile)
The First National Bank of Stephen McDonald
Chicago Vice President
153 West 51st Street
Suite 4000, 8th Fl.
New York, NY 10019
(212) 373-138- (Facsimile)
The Fuji Bank, Limited Masatoshi Abe
Assistant Treasurer
2 World Trade Center,
79th Fl. USCF I
New York, NY 10048
(212) 321-9407 (Facsimile)
</TABLE>
<PAGE>
10
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
The Industrial Bank of Japan, Hiroshi Masaki, A.V.P.
Limited, New York Branch Karel Pravec, Jr., A.V.P.
Acquisition Finance Dept.
245 Park Avenue
New York, NY 10167
(212) 692-9075 (Facsimile)
The Long-Term Credit Bank of Yumiko Noda
Japan, Limited Vice President & Manager
165 Broadway, 49th Fl.
New York, NY 10006
(212) 608-2371 (Facsimile)
The Mitsubishi Bank, Limited J. Bruce Meredith
New York Branch Sr. Vice President
225 Liberty Street
Two World Financial Center
New York, NY 10281
(212) 667-3562 (Facsimile)
The Mitsubishi Trust and Jill Kato
Banking Corporation, Los Loan Officer
Angeles Agency 801 S. Figueroa St. #2400
Los Angeles, CA 90017
(213) 687-4631 (Facsimile)
The Northern Trust Company Deborah D. Thomas
Vice President
50 S. LaSalle Street
Chicago, IL 60675
(312) 444-3508 (Facsimile)
The Royal Bank of Scotland plc D. Dougan
Vice President
63 Wall Street
New York, NY 10005
(212) 269-8929 (Facsimile)
The Sakura Bank, Ltd. Yoshokazu Nagura
VP and Manager
277 Park Avenue
New York, NY 10172
(212) 888-7651 (Facsimile)
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
The Sumitomo Bank, Limited Harry Musakawi
New York Branch AT
One World Trade Center
Suite 9651
New York, NY 10048
(212) 553-0118 (Facsimile)
The Sumitomo Trust & Banking Karen Ryan
Co., LTD., Los Angeles Agency Assistant Vice President
333 So. Grand Avenue
Suite 5300
Los Angeles, CA 90071
(213) 613-1083 (Facsimile)
The Tokai Bank, Limited William Strackell
Vice President
55 East 52nd Street
Park Avenue Plaza
New York, NY 10055
(212) 754-2171 (Facsmilie)
The Toronto-Dominion Bank Eric I. Skilling
Director, Corporate Accounts The Toronto-Dominion Bank
The Toronto-Dominion Bank 909 Fannin, Suite 1700
31 West 52nd Street Houston, Texas 77010
New York, NY 10019 (713) 951-9921 (Facsimile)
(212) 362-1926 (Facsimile)
The Toyo Trust & Banking Co., Ltd. Gregory W. Blaszczynski
Assistant Treasurer
The Toyo Trust & Banking
Co., Ltd.
437 Madison Avenue - 37th Flr.
New York, NY 10027
(212) 371-4963 (Facsimile)
Trust Company Bank Craig W. Farnsworth
Vice President
711 5th Avenue, 5th Fl.
New York, NY 10023
(212) 371-9386 (Facsimile)
Union Bank of Switzerland Peter B. Yearley
Corporate & Institutional
Banking
299 Park Avenue
New York, NY 10171
(212) 821-3383 (Facsimile)
</TABLE>
<PAGE>
12
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Wachovia Bank of Georgia, N.A. Ms. Sandy MacQuarrie
Vice President
191 Peachtree Street
Atlanta, GA 30303
(404) 332-6898 (Facsimile)
Westdeutsche Landesbank Robert R. Wieszarek, II
Girozentrale, New York and Associate
Cayman Islands Branches 1211 Avenue of the Americas
23rd Floor
New York, NY 10036
(212) 852-6107 (Facsimile)
The Yasuda Trust & Banking Co., Neil T. Chau
Limited, New York Branch Vice President
666 Fifth Avenue
New York, NY 10103
(212) 373-5796 (Facsimile)
</TABLE>
<PAGE>
EXHIBIT A
FORM OF B NOTE
$_____________________ Dated: ____________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of
Borrower] (the "Borrower"), HEREBY PROMISES TO PAY to the order
of [Name of Lender] (the "Lender"), on __________, 19__ the
principal amount of ________________________ Dollars
($________________).
The Borrower promises to pay interest on the unpaid
principal amount thereof from the date hereof until such
principal amount is repaid in full, at the interest rate and
payable on the interest payment date or dates provided below:
Interest Rate: _____% per annum (calculated on the
basis of a year of 360 days for the actual number of days
elapsed).
Interest Payment Date or Dates: _________________.
Both principal and interest are payable in lawful
money of the United States of America to Citibank, N.A. for the
account of the Lender at the office of Citibank, N.A. at One
Court Square, Long Island City, New York 11120, United States
of America, in same day funds, free and clear of and without
any deduction, with respect to the payee named above, for any
and all present and future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect
thereto, excluding any taxes imposed by the United States by
---------
means of withholding tax if and to the extent that such taxes
shall be in effect and shall be applicable, on the date hereof,
to payments to be made by the Borrower hereon.
This Promissory Note is one of the B Notes referred to
in, and is entitled to the benefits of, the 5-Year Loan and
Guaranty Agreement dated as of December 17, 1993 (the "5-Year
Agreement") among PM Companies, the Lender and certain other
lenders parties thereto, and Citibank, N.A., as Agent for the
Lender and such other lenders. The 5-Year Agreement, among
other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events.
The Borrower hereby waives presentment, demand,
protest and notice of any kind. No failure to exercise, and no
delay in exercising, any rights hereunder on the part of the
holder hereof shall operate as a waiver of such rights.
6353I/105
<PAGE>
2
This Promissory Note shall be governed by, and
construed in accordance with, the laws of the State of New
York, United States.
[Name of Borrower]
By:_____________________
Title:
6353I/105
<PAGE>
3
GUARANTY
(Only for B Notes issues by a Borrower other than
PM Companies)
SECTION 1. Guaranty. The undersigned, PHILIP MORRIS
--------
COMPANIES INC., a Virginia corporation (the "Guarantor"),
hereby unconditionally and irrevocably guarantees the punctual
payment when due of all obligations of the Borrower under the
above Promissory Note (the "Note") (such obligations being the
"Obligations"), and any and all expenses (including counsel
fees and expenses) incurred by the holder of the Note in
enforcing any rights under the Note or this Guaranty.
SECTION 2. Guaranty Absolute. The Guarantor
-----------------
guarantees that the Obligations will be paid strictly in
accordance with the terms of the Note, regardless of any law,
rule, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the
holder of the Note with respect thereto. The liability of the
Guarantor under this Guaranty shall be absolute and
unconditional irrespective of (i) any law of validity,
enforceability or genuineness of the Note or any other
agreement or instrument relating thereto; (ii) any change in
the time, manner or place of payment of, or in any other term
of, all or any of the Obligations, or any other amendment or
waiver of or any consent to departure from the Note; (iii) any
exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from
any other guaranty, for all or any of the Obligations; or (iv)
any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower or a
guarantor.
This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be
returned by the Lender upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such
payment has not been made.
SECTION 3. Waiver. (a) The Guarantor hereby waives
------
promptness, diligence, notice of acceptance and any other
notice with respect to any of the Obligations and this Guaranty
and any requirement that the holder of the Note protect,
secure, perfect or insure any security interest or lien or any
property subject thereto or exhaust any right of
6353I/105
<PAGE>
4
take any action against the Borrower or any other person or
entity or any collateral.
(b) The Guarantor hereby irrevocably waives any
claims or other rights that it may now or hereafter acquire
against the Borrower that arise from the existence, payment,
performance or enforcement of the Guarantor's obligations under
this Guaranty or this Note; including, without limitation, the
right to take or receive from the Borrower, directly or
indirectly, in cash or other property or by set-off or in any
other manner, payment or security on account of such claim,
remedy or right. If any amount shall be paid to the Guarantor
in violation of the preceding sentence at any time prior to the
cash payment in full of the Obligations, such amount shall be
held in trust for the benefit of the holder of this Note and
shall forthwith be paid to the holder of this Note to be
credited and applied to the Obligations and all other amounts
payable under this Guaranty, whether matured or unmatured, in
accordance with the terms of this Note and this Guaranty, or to
be held as collateral for any Obligations or other amounts
payable under this Guaranty thereafter arising. The Guarantor
acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Note and
this Guaranty and that the waiver set forth in this subsection
is knowingly made in contemplation of such benefits.
SECTION 4. Payments Free and Clear of Taxes, Etc.
-------------------------------------
Any and all payments made by the Guarantor hereunder to the
payee named in the Note shall be made in accordance with the
Note free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto,
excluding taxes imposed by the United States by means of
withholding tax if and to the extent that such taxes shall be
in effect and shall be applicable, on the date hereof, to
payments to be made by the Guarantor herein.
SECTION 5. No Waiver. No failure to exercise, and no
---------
delay in exercising, any right hereunder on the part of the
holder of the Note shall operate as a waiver of such rights;
nor shall any single or partial exercise of any right
hereunder, preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by
law.
6353I/105
<PAGE>
5
SECTION 6. Continuous Guaranty; Transfer of Note.
-------------------------------------
This Guaranty is a continuing guaranty and shall (i) remain in
full force and effect until payment in full of the Obligations
and all other amounts payable under this Guaranty, (ii) be
binding upon the Guarantor, its successors and assigns, and
(iii) inure to the benefit of and be enforceable by the Lender
and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (iii), the Lender may
assign or otherwise transfer the Note to any other person or
entity, and such other person or entity shall thereupon become
vested with all the rights in respect thereof granted to the
Lender herein or otherwise.
This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of New York, United
States.
IN WITNESS WHEREOF, the Guarantor has caused this
Guaranty to be executed by its officer thereunto duly
authorized on the date first above written.
PHILIP MORRIS COMPANIES, INC.
By__________________________
Title
6353I/105
<PAGE>
EXHIBIT B-1
NOTICE OF A BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the 5-Year Agreement
referred to below
One Court Square
Long Island City, New York 11120
[Date]
Attention:
Gentlemen:
The undersigned, Philip Morris Companies Inc., refers
to the 5-Year Loan and Guaranty Agreement, dated as of December
17, 1993 (the "5-Year Agreement", the terms defined therein
being used herein as therein defined), among Philip Morris
Companies Inc., certain lenders parties thereto and Citibank,
N.A., as Agent for said Lenders, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the 5-Year Agreement
that the undersigned hereby requests an A Borrowing under the
5-Year Agreement, and in that connection sets forth below the
information relating to such A Borrowing (the "Proposed A
Borrowing") as required by Section 2.02(a) of the 5-Year
Agreement:
(i) The Business Day of the Proposed A Borrowing is
____________________, 199__.
(ii) The Type of A Advances comprising the Proposed A
Borrowing is [Adjusted CD Rate Advances] [Base Rate
Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed A Borrowing
is $____________.
(iv) The Interest Period for each A Advance made as
part of the Proposed A Borrowing is [________ days]
[______ month[s]].
(v) The name of the Borrower is _________________.
6353I/105
<PAGE>
2
The undersigned hereby certifies that the following
statements will be true on the date of the Proposed A
Borrowing, before and after giving effect thereto and to the
application of the proceeds therefrom: (a) the representations
and warranties contained in Section 4.01 of the 5-Year
Agreement (excluding those contained in subsections (e) and (f)
thereof) and, if the Borrower is a subsidiary of PM Companies,
Section 9.01(b) of the 5-Year Agreement are correct on and as
of such date as though made on and as of such date, (b) no
event has occurred and is continuing, or would result from the
Proposed A Borrowing, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement
that notice be given or time elapse or both, (c) if such
Proposed A Borrowing is in an aggregate principal amount equal
to or greater than $500,000,000 and is being made in connection
with any purchase of shares of the Borrower's or the
Guarantor's capital stock or the capital stock of any other
Person, or any purchase of all or substantially all of the
assets of any Person (whether in one transaction or a series of
transactions) or any transaction of the type referred to in
Section 5.02(b) of the 5-Year Agreement, the statements in (a)
and (b) above will be true and correct after giving effect to
such transaction or purchase, and (d) the aggregate principal
amount of the Proposed A Borrowing and all other Borrowings to
be made on the same day under the 5-Year Agreement is within
the applicable unused Commitments of the Lenders.
Very truly yours,
PHILIP MORRIS COMPANIES, INC.
By:_________________________
Title:
6353I/105
<PAGE>
EXHIBIT B-2
FORM OF NOTICE OF B BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the 5-Year Agreement
referred to below
One Court Square
Long Island City, New York 11120
Attention:
Gentlemen:
The undersigned, Philip Morris Companies Inc., refers
to the 5-Year Loan and Guaranty Agreement, dated as of December
17, 1993 (the "5-Year Agreement"; the terms defined therein
being used herein as therein defined), among PM Companies,
certain lenders parties thereto (the "Lenders") and Citibank,
N.A., as Agent for the Lenders, and hereby gives you notice
pursuant to Section 2.03 of the 5-Year Agreement that the
undersigned hereby requests a B Borrowing under the 5-Year
Agreement, and in that connection sets forth the terms on which
such B Borrowing (the "Proposed B Borrowing") is requested to
be made:
(A) Date of B Borrowing __________________________
(B) Amount of B Borrowing __________________________
(C) Maturity Date __________________________
(D) Interest Rate Basis __________________________
(E) Interest Payment Date(s) __________________________
(F) Name of Borrower ___________________________
The undersigned hereby certifies that the following
statements will be true on the date of the Proposed B
Borrowing, before and after giving effect thereto and to the
application of the proceeds therefrom: (a) the representations
and warranties contained in Section 4.01 of the 5-Year
Agreement and, if the Borrower is a subsidiary of PM Companies,
Section 9.01(b) of the 5-Year Agreement are correct on and as
of such date as though made on and as of such date, (b) no
event has occurred and is continuing, or would result from the
Proposed B Borrowing, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement
that notice be given or time elapse or both, and (c) the
aggregate principal amount of the Proposed B Borrowing and all
other Borrowings to be made on the same day under the 5-Year
Agreement is within the applicable unused Commitments of the
Lenders.
6353I/105
<PAGE>
2
The undersigned hereby confirms that you are to make
the Proposed B Borrowing available to us in accordance with
Section 2.03(a)(v) of the 5-Year Agreement by crediting the
amount of the Proposed B Borrowing to [be provided].
Dated: __________________, 19__
Very truly yours,
PHILIP MORRIS COMPANIES INC.
By:________________________
Title:
6353I/105
<PAGE>
EXHIBIT C
ASSIGNMENT AND ACCEPTANCE
Dated ________, 199_
Reference is made to the 5-Year Loan and Guaranty
Agreement dated as of December 17, 1993 (the "5-Year
Agreement") among Philip Morris Companies Inc., a Virginia
corporation, the Lenders (as defined in the 5-Year Agreement)
and Citibank, N.A., as Agent for the Lenders (the "Agent").
Terms defined in the 5-Year Agreement are used herein with the
same meaning.
____________ (the "Assignor") and ____________ (the
"Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes
from the Assignor, the percentage interest specified on
Schedule 1 hereto in and to all (other than any B Advances
owing to the Assignor or any B Notes held by it) of the
Assignor's rights and objections under the 5-Year Agreement
as of the date hereof (after giving effect to any other
assignments thereof made prior to the date hereof, whether
or not such assignments have become effective, but without
giving effect to any other assignments thereof also made on
the date hereof), including, without limitation, such
percentage interest in the Assignor's Commitment and the A
Advances owing to the Assignor.
2. The Assignor (i) represents and warrants that as
of the date hereof its Commitment (after giving effect to
other assignments thereof made prior to the date hereof,
whether or not such assignments have become effective, but
without giving effect to any other assignments thereof also
made on the date hereof) is in the dollar amount specified
as the Assignor's Commitment on Schedule 1 hereto and the
aggregate outstanding principal amount of Advances owing to
it (after giving effect to any other assignments thereof
made prior to the date hereof, whether or not such
assignments have become effective, but without giving
effect to any other assignments thereof also made on the
date hereof) is in the dollar amount specified as the
aggregate outstanding principal amount of Advances owing to
the Assignor on Schedule 1 hereto; (ii) represents and
warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such
interest is free
6353I/105
<PAGE>
2
and clear of any adverse claim; (iii) makes no
representation or warranty and assumes no responsibility
with respect to any statements, warranties or
representations made in or in connection with the 5-Year
Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
5-Year Agreement or any other instrument or document
furnished pursuant thereto; and (iv) makes no
representation or warranty and assumes no responsibility
with respect to the financial condition of PM Companies or
any Borrower or the performance or observance by PM
Companies or any Borrower of any of their obligations under
the 5-Year Agreement or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a
copy of the 5-Year Agreement, together with copies of the
financial statements referred to in Section 4.01 thereof
and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to
enter into this Agreement and Acceptance; (ii) agrees that
it will, independently and without reliance upon the Agent,
the Assignor 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 decisions in
taking or not taking action under the 5-Year Agreement;
(iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the
5-Year Agreement as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably
incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by
the terms of the 5-Year Agreement are required to be
performed by it as a Lender; [and] (vi) specifies as its CD
Lending Office, Domestic Lending Office (and address for
notices) and Eurodollar Lending Office the offices set
forth beneath its name on the signature pages hereof [and
(vii) attaches the forms prescribed by the Internal Revenue
Service of the United States certifying as to the
Assignee's status for purposes of determining exemption
from United States withholding taxes with respect to all
payments to be made to the Assignee under the 5-Year
Agreement or such other documents as are necessary to
indicate that all such payments are subject to such rates
at a rate reduced by an applicable tax treaty].*
-------------------
* If the Assignee is organized under the laws of a
jurisdiction outside the United States.
6353I/105
<PAGE>
3
4. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, it will be
delivered to the Agent for acceptance and recording by the
Agent. The effective date for this Assignment and
Acceptance shall be the date of acceptance thereof by the
Agent, unless otherwise specified on Schedule 1 hereto (the
"Effective Date").
5. Upon such acceptance and recording by the Agent,
as of the Effective Date, (i) the Assignee shall be a party
to the 5-Year Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations
of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations
under the 5-Year Agreement.
6. Upon such acceptance and recording by the Agent,
from and after the Effective Date, the Agent shall make all
payments under the 5-Year Agreement in respect of the
interest assigned hereby (including, without limitation,
all payments of principal, interest and fees with respect
thereto) to the Assignee. The Assignor and the Assignee
shall make all appropriate adjustments in payments under
the 5-Year Agreement for periods prior to the Effective
Date directly between themselves.
7. This Assignment and Acceptance shall be governed
by, and construed in accordance with, the laws of the State
of New York.
IN WITNESS WHEREOF, the parties hereto have caused
this Assignment and Acceptance to be executed by their
respective officers thereunto duly authorized, as of the date
first above written, such execution being made on Schedule 1
hereto.
6353I/105
<PAGE>
Schedule I
to
Assignment and Acceptance
Dated ___________ 19__
Section 1.
---------
Percentage Interest ____________%
Section 2.
---------
Assignor's Commitment: $___________
Aggregate Outstanding Principal
Amount of Advances owing to the Assignor: $___________
Section 3.
---------
Effective Date*: ___________, 19__
[NAME OF ASSIGNOR]
By:_______________________
Title:
[NAME OF ASSIGNEE]
By:_______________________
Title:
CD Lending Office:
[Address]
________________
* This date should be no earlier than the date of acceptance
by the Agent.
6353I/105
<PAGE>
2
Domestic Lending Office
(and address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Accepted this ____ day
of ________, 19__
CITIBANK, N.A.
By:_______________________
Title:
6353I/105
<PAGE>
EXHIBIT D
[Form of Opinion of Counsel for Philip Morris Companies Inc.]
[Date of initial Borrowing]
To each of the Lenders parties
to the 5-Year Loan and Guaranty
Agreement dated as of
December 17, 1993 among
Philip Morris Companies Inc.,
said Lenders and Citibank, N.A.,
as Agent, and to Citibank, N.A.,
as Agent
Philip Morris Companies Inc.
----------------------------
Gentlemen:
This opinion is furnished to you pursuant to Section
3.01(c) of the 5-Year Loan and Guaranty Agreement dated as of
December 17, 1993 (the "5-Year Agreement") among Philip Morris
Companies Inc. ("PM Companies"), the Lenders parties thereto
and Citibank, N.A., as Agent for said Lenders. Unless
otherwise defined herein, terms defined in the 5-Year Agreement
are used herein as therein defined.
We have acted as counsel for PM Companies and its
subsidiaries [, including ____________ (the "Borrower"),] in
connection with the preparation, execution and delivery of, and
the initial Borrowing made under, the 5-Year Agreement.
In that connection we have examined:
(1) The 5-Year Agreement.
(2) The documents furnished by PM Companies [and the
Borrower] pursuant to Article III of the 5-Year Agreement.
(3) The [Articles] [Certificate] of Incorporation of
PM Companies [and the Borrower] and all amendments thereto
(the "Charter[s]").
(4) The by-laws of PM Companies [and the Borrower]
and all amendments thereto (the "By-laws").
6353I/105
<PAGE>
2
We have also examined the originals, or copies certified to our
satisfaction, of such corporate records of PM Companies [and
the Borrower], certificates of public officials and of officers
of PM Companies [and the Borrower], and agreements, instruments
and documents, as we have deemed necessary as a basis for the
opinions hereinafter expressed. As to questions of fact
material to such opinions, we have, when relevant facts were
not independently established by us, relied upon certificates
of PM Companies [and the Borrower] or their [respective]
officers or of public officials. We have assumed the due
execution and delivery, pursuant to due authorization, of the
5-Year Agreement by the Lenders parties thereto and the Agent.
Based upon the foregoing and upon such investigation
as we have deemed necessary, we are of the following opinion:
1. PM Companies is a corporation duly organized,
validly existing and in good standing under the laws of
Virginia. [The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of
______________.]
2. The execution, delivery and performance by PM
Companies of the 5-Year Agreement [and the B Notes] are
within PM Companies' corporate powers,* have been duly
authorized by all necessary corporate action, and do not
contravene (i) the Charter[s] or the By-laws or (ii) any
law, rule or regulation applicable to PM Companies [or the
Borrower] (including, without limitation, Regulation X of
the Federal Reserve Board) or (iii) to the best of our
knowledge, any contractual or legal restriction binding on
or affecting PM Companies [or the Borrower]. The B Notes
have been duly executed and delivered on behalf of [PM
Companies] [the Borrower] [,] [and] the 5-Year Agreement
[has] [and the guaranties endorsed on the B Notes have]
been duly executed and delivered on behalf of PM Companies
[and the Notice of Acceptance of the Borrower has been duly
executed and delivered on behalf of the Borrower].
__________________
* If a subsidiary is the Borrower, "The execution,
delivery and performance by PM Companies of the 5-Year
Agreement [and the guaranties endorsed on the B
Notes], and by the Borrower of its Notice of
Acceptance [and the B Notes], are within PM Companies'
and the Borrower's corporate powers".
6353I/105
<PAGE>
3
3. No authorization, approval, or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by PM Companies of the 5-Year
Agreement [or the B Notes] [or the guaranties endorsed on
the B Notes] [or by the Borrower of its Notice of
Acceptance or the B Notes to be executed and delivered on
its behalf].
4. The 5-Year Agreement is the legal, valid and
binding obligation of PM Companies enforceable against PM
Companies in accordance with its terms. [The B Notes
issued on the date hereof [and the guaranties endorsed
thereon] are the legal, valid and binding obligations of
[PM Companies] [the Borrower] [the Borrower and PM
Companies, respectively,] enforceable against [PM
Companies] [the Borrower] [the Borrower and PM Companies,
respectively,] in accordance with their respective terms.]
5. Except as disclosed in the Form 10-K of Philip
Morris for the fiscal year ended December 31, 1992, there
is, to the best of our knowledge, no pending or threatened
action or proceeding against PM Companies [or the Borrower]
or any of [its] [their] subsidiaries before any court,
governmental agency or arbitrator which is likely to have a
material adverse effect upon the financial condition or
operations of PM Companies and its subsidiaries taken as a
whole.
6. PM Companies directly or indirectly owns 100% of
the capital stock of [the Borrower and of] Philip Morris.
The opinions set forth above are subject to the following
qualifications:
(a) Our opinion in paragraph 4 above is subject to
the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors' rights generally.
(b) Our opinion in paragraph 4 above is subject to
the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding
in equity or at law).
Very truly yours,
6353I/105
<PAGE>
EXHIBIT E
[Form of Opinion of Special Counsel for the Agent]
[Date of initial Borrowing]
To the Banks listed on
Exhibit A hereto and
to Citibank, N.A.,
as Agent
Philip Morris Companies Inc.
----------------------------
Gentlemen:
We have acted as special New York counsel to Citibank,
N.A., acting for itself and as Agent, in connection with the
preparation, execution and delivery of, and the initial
Borrowing made under, the 5-Year Loan and Guaranty Agreement
dated as of December 17, 1993 (the "5-Year Agreement") among
Philip Morris Companies Inc. and each of you. Unless otherwise
defined herein, terms defined in the 5-Year Agreement are used
herein as therein defined.
In that connection, we have examined the following
documents:
(1) A counterpart of the 5-Year Agreement, executed
by each of the parties thereto.
(2) The documents furnished pursuant to Article III
of the 5-Year Agreement and listed on Exhibit B hereto,
including the opinion of Hunton & Williams, counsel for PM
Companies and its subsidiaries.
In our examination of the documents referred to above, we have
assumed the authenticity of all such documents submitted to us
as originals, the genuineness of all signatures, the due
authority of the parties executing such documents, and the
conformity to the originals of all such documents submitted to
us as copies. We have also assumed that each of the Banks
parties to the 5-Year Agreement and the Agent has duly executed
and delivered, with all necessary power and authority
(corporate and otherwise), the 5-Year Agreement.
6353I/105
<PAGE>
2
To the extent that our opinions expressed below
involve conclusions as to the matters set forth in paragraphs
1, 2, 3 and 6 of the above-mentioned opinion of Hunton &
Williams, we have assumed without independent investigation the
correctness of the matters set forth in such paragraphs, our
opinion being subject to the assumptions, qualifications and
limitations set forth in such opinion of Hunton & Williams with
respect thereto.
Based upon the foregoing examination of documents and
assumptions and upon such other investigation as we have deemed
necessary, we are of the following opinion:
1. The 5-Year Agreement is, and the guaranties
endorsed on the B Notes when delivered under the Loan
Agreement will be, the legal, valid and binding obligation
of PM Companies enforceable against PM Companies in
accordance with its terms.
2. The B Notes of [PM Companies] [__________] (the
"Borrower"), if any, issued on the date hereof are the
legal, valid and binding obligations of [PM Companies] [the
Borrower] enforceable against [PM Companies] [the Borrower]
in accordance with their respective terms.
3. The opinion of Hunton & Williams, counsel for PM
Companies and its subsidiaries, and the other documents
referred to in item (2) above are substantially responsive
to the requirements of the 5-Year Agreement.
Our opinions in paragraphs 1 and 2 above are subject to the
following qualifications:
(a) Our opinions in paragraphs 1 and 2 above are
subject to the effect of general principles of equity
including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
Further, pursuant to such equitable principles, (i) Section
8.02 of the 5-Year Agreement, which Section provides that
the Guarantor's liability thereunder shall not be affected
by changes in or amendments to the 5-Year Agreement, and
(ii) Section 2 of the guaranty endorsed on the B Notes,
which Section provides that the Guarantor's liability
thereunder shall not be affected by changes in or
amendments to the B Notes, might be enforceable only to the
extent that such changes or amendments were not so material
as to constitute a new contract among the parties.
6353I/105
<PAGE>
3
(b) Our opinions in paragraphs 1 and 2 above are also
subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally.
(c) Our opinions expressed above are limited to the
law of the State of New York and the Federal law of the
United States, and we do not express any opinion herein
concerning any other law. Without limiting the generality
of the foregoing, we express no opinion as to the effect of
the law of any jurisdiction other than the State of New
York wherein any Lender may be located or wherein
enforcement of the 5-Year Agreement or the B Notes may be
sought which limits the rates of interest legally
chargeable or collectible.
Very truly yours,
SHEARMAN & STERLING
6353I/105
<PAGE>
EXHIBIT A
to the Opinion dated _________________, 1991
of Shearman & Sterling
Banks
-----
6353I/105
<PAGE>
EXHIBIT B
to the Opinion dated _________________, 1991
of Shearman & Sterling
Documents
---------
6353I/105
<PAGE>
EXHIBIT F
NOTICE OF ACCEPTANCE
Dated ___________, 199_
The undersigned, ________________, a ________________
corporation and a subsidiary of PM Companies (as defined below)
(the "Subsidiary"), hereby:
1. Confirms that this Notice of Acceptance is being
delivered pursuant to Section 9.01 of that certain 5-Year
Loan and Guaranty Agreement dated as of December 17, 1993
(the "5-Year Agreement", terms defined therein being used
herein with the same meaning), among Philip Morris
Companies Inc. ("PM Companies"), the lenders parties
thereto (the "Lenders") and Citibank, N.A., as agent for
the Lenders (the "Agent").
2. States that the Subsidiary desires to become a
"Borrower" under the Agreement and agrees to be bound by
the terms and provisions of the 5-Year Agreement as a
"Borrower" thereunder.
3. Represents and warrants as follows:
(a) The Subsidiary is a corporation duly
organized, validly existing and in good standing under
the laws of ______________________.
(b) The execution, delivery and performance by
the Subsidiary of the B Notes, if any, executed and
delivered and to be executed and delivered by it, the
5-Year Agreement and this Notice of Acceptance are
within the Subsidiary's corporate powers, have been
duly authorized by all necessary corporate action, and
do not contravene (i) the Subsidiary's charter or
by-laws or (ii) any law, rule, regulation or order of
any court or governmental agency or any contractual
restriction binding on or affecting the Subsidiary.
(c) No authorization or approval or other action
by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due
execution, delivery and performance by the Subsidiary
of the B Notes executed and delivered and to be
executed and delivered by it, the 5-Year Agreement or
this Notice of Acceptance.
6353I/105
<PAGE>
2
(d) The 5-Year Agreement is, and the B Notes of
such Subsidiary if delivered under the 5-Year
Agreement will be, the legal, valid and binding
obligations of the Subsidiary enforceable against the
Subsidiary in accordance with their terms, subject to
the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors' rights generally and to the effect of
general principles of equity (regardless of whether
such enforceability is considered in a proceeding in
equity or at law).
(e) There is no pending or threatened action or
proceeding affecting the Subsidiary or any of its
subsidiaries before any court, governmental agency or
arbitrator which purports to affect the legality,
validity or enforceability of the 5-Year Agreement or
any Note.
(f) PM Companies owns directly or indirectly
100% of the capital stock of the Subsidiary.
4. Delivers with this Notice of Acceptance an opinion
of counsel for PM Companies, pursuant to Section 9.01(b) of
the Agreement, in the form of Schedule 1 hereto.
[(Name of Borrower)]
----------------------------------
By________________________________
Title:
The undersigned, as Guarantor under the Agreement,
hereby confirms and agrees to the foregoing Notice of
Acceptance pursuant to Section 9.01(a) of the Agreement.
PHILIP MORRIS COMPANIES INC.
By________________________________
Title:
6353I/105
<PAGE>
Schedule 1
to
Notice of Acceptance
[OPINION OF COUNSEL FOR PM COMPANIES]
[Date of Notice of Acceptance]
To each of the Lenders parties
to the 5-Year Loan and Guaranty
Agreement dated as of December 17,
1993 among Philip Morris Companies
Inc., said Lenders and Citibank, N.A.,
as Agent, and to Citibank, N.A., as
Agent
Philip Morris Companies Inc.
----------------------------
Gentlemen:
This opinion is furnished to you pursuant to Section
9.01(b) of the 5-Year Loan and Guaranty Agreement, dated as of
December 17, 1993 (the "5-Year Agreement"), among Philip Morris
Companies Inc. ("PM Companies"), the Lenders parties thereto
and Citibank, N.A., as Agent for said Lenders. Unless
otherwise defined herein, terms defined in the 5-Year Agreement
are used herein as therein defined.
We have acted as counsel for PM Companies and its
subsidiary, __________________ (the "Subsidiary"), in
connection with the preparation, execution and delivery of the
Notice of Acceptance by the Subsidiary delivered pursuant to
Section 9.01 of the 5-Year Agreement.
In that connection, we have examined the 5-Year
Agreement, the B Notes, if any, to be executed and delivered by
the Subsidiary and such other agreements, instruments and
documents as we have deemed necessary as a basis for the
opinion expressed below. As to questions of fact material to
such opinion, we have, when relevant facts were not
independently established by us, relied upon certificates of PM
Companies and the Subsidiary or their respective officers or of
public officials. We have assumed the due execution and
delivery, pursuant to due authorization, of the 5-Year
Agreement by the Lenders parties thereto and the Agent.
6353I/105
<PAGE>
2
Based upon the foregoing and upon such investigation
as we have deemed necessary, we are of the opinion that the
5-Year Agreement is, and the B Notes of the Subsidiary if
delivered under the 5-Year Agreement will be, the legal, valid
and binding obligations of the Subsidiary enforceable against
the Subsidiary in accordance with their respective terms,
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors'
rights generally and to the effect of general principles of
equity, including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
Very truly yours,
6353I/105
<PAGE>
EXHIBIT 4.12
U.S. $4,000,000,000
364-DAY LOAN AND GUARANTY AGREEMENT
Dated as of December 17, 1993
among
PHILIP MORRIS COMPANIES INC.
and
THE BANKS NAMED HEREIN
and
CITIBANK, N.A.
as Agent
-- -----
<PAGE>
(i)
TABLE OF CONTENTS
-----------------
Section Page
------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Defined Terms..................... 1
1.02 Additional Definitions.................... 13
1.03 Computation of Time Periods............... 14
1.04 Accounting Terms.......................... 14
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01 The A Advances............................ 14
2.02 Making the A Advances..................... 15
2.03 The B Advances............................ 17
2.04 Fees...................................... 22
2.05 Reduction of the Commitments.............. 23
2.06 Repayment of A Advances................... 23
2.07 Interest on A Advances.................... 24
2.08 Additional Interest on Eurodollar
Rate Advances........................... 25
2.09 Interest Rate Determination............... 25
2.10 Prepayment of A Advances.................. 25
2.11 Increased Costs........................... 26
2.12 Payments and Computations................. 28
2.13 Taxes..................................... 29
2.14 Sharing of Payments, Etc.................. 31
2.15 Evidence of Debt.......................... 32
ARTICLE III
CONDITIONS OF LENDING
3.01 Condition Precedent to Initial
Advances................................ 32
3.02 Conditions Precedent to Each
A Borrowing............................. 33
3.03 Conditions Precedent to Certain
A Borrowings............................ 34
3.04 Conditions Precedent to Each
B Borrowing............................. 35
3.05 Conditions Precedent to Effectiveness
of this Agreement....................... 35
<PAGE>
(ii)
Section Page
------- ----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of
PM Companies............................ 36
ARTICLE V
COVENANTS OF PM COMPANIES
5.01 Affirmative Covenants..................... 38
5.02 Negative Covenants........................ 40
ARTICLE VI
EVENTS OF DEFAULT
6.01 Events of Default......................... 42
ARTICLE VII
THE AGENT
7.01 Authorization and Action.................. 45
7.02 Agent's Reliance, Etc..................... 46
7.03 Citibank and Affiliates................... 46
7.04 Lender Credit Decision.................... 47
7.05 Indemnification........................... 47
7.06 Successor Agent........................... 47
ARTICLE VIII
GUARANTY
8.01 Guaranty.................................. 48
8.02 Guaranty Absolute......................... 48
8.03 Waivers................................... 49
8.04 Payments Free and Clear of Taxes, Etc..... 50
8.05 No Waiver; Remedies....................... 51
8.06 Continuing Guaranty....................... 51
<PAGE>
(iii)
Section Page
------- ----
ARTICLE IX
SUBSIDIARY BORROWER
9.01 Subsidiary Borrower....................... 51
ARTICLE X
MISCELLANEOUS
10.01 Amendments, Etc........................... 53
10.02 Notices, Etc.............................. 54
10.03 No Waiver; Remedies....................... 54
10.04 Costs, Expenses and Taxes................. 55
10.05 Right of Set-off.......................... 56
10.06 Binding Effect............................ 57
10.07 Assignments and Participations............ 57
10.08 Governing Law............................. 60
10.09 Execution in Counterparts................. 60
Schedule I List of Applicable Lending Offices
Exhibit A Form of B Note
Exhibit B-1 Notice of A Borrowing
Exhibit B-2 Notice of B Borrowing
Exhibit C Assignment and Acceptance
Exhibit D Form of Opinion of Counsel for Philip Morris
Companies Inc.
Exhibit E Form of Opinion of Special Counsel for the
Agent
Exhibit F Notice of Acceptance
<PAGE>
364-DAY LOAN AND GUARANTY AGREEMENT
Dated as of December 17, 1993
PHILIP MORRIS COMPANIES INC., a Virginia corporation
("PM Companies"), the banks (the "Banks") listed on the
signature pages hereof, and CITIBANK, N.A. ("Citibank"), as
agent (the "Agent") for the Lenders hereunder, agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
---------------------
Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"A Advance" means an advance by a Lender to a Borrower
---------
as part of an A Borrowing by such Borrower consisting of A
Advances of the same Type from each of the Lenders pursuant to
Section 2.01 and refers to a Base Rate Advance, an Adjusted CD
Rate Advance or a Eurodollar Rate Advance, each of which shall
be a Type of A Advance.
"A Borrowing" means a borrowing consisting of
-----------
simultaneous A Advances of the same Type from each of the
Lenders to a Borrower pursuant to Section 2.01.
"Adjusted CD Rate" means, for the Interest Period for
----------------
each Adjusted CD Rate Advance comprising part of the same A
Borrowing, an interest rate per annum equal to the sum of:
(a) the rate per annum obtained by dividing (i) the
rate of interest determined by the Agent to be the average
(rounded upward to the nearest whole multiple of 1/100 of
1% per annum, if such average is not such a multiple) of
the consensus bid rate determined by each of the Reference
Banks for the bid rates per annum, at 9:00 A.M. (New York
City time) (or as soon thereafter as practicable) on the
first day of such Interest Period, of New York certificate
of deposit dealers of recognized standing selected by such
Reference Bank for the purchase at face value of
certificates of deposit of such Reference Bank in an amount
approximately equal to such Reference Bank's Adjusted CD
Rate Advance comprising part of such A Borrowing and with a
maturity equal to such
<PAGE>
2
Interest Period, by (ii) a percentage equal to 100% minus
the Adjusted CD Rate Reserve Percentage (as defined below)
for such Interest Period, plus
(b) the Assessment Rate (as defined below) for such
Interest Period.
The "Adjusted CD Rate Reserve Percentage" for the
------------------------------------
Interest Period for each Adjusted CD Rate Advance comprising
part of the same A Borrowing means the reserve percentage
applicable on the first day of such Interest Period under
regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve
System in New York City with deposits exceeding one billion
dollars with respect to liabilities consisting of or including
(among other liabilities) U.S. dollar nonpersonal time deposits
in the United States with a maturity equal to such Interest
Period. The "Assessment Rate" for the Interest Period for such
---------------
Adjusted CD Rate Advance comprising part of the same A
Borrowing means the annual assessment rate estimated by the
Agent on the first day of such Interest Period for determining
the then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of Citibank in the United States.
The Adjusted CD Rate for the Interest Period for each Adjusted
CD Rate Advance comprising part of the same A Borrowing shall
be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks
on the first day of such Interest Period, subject, however, to
------- -------
the provisions of Section 2.09.
"Adjusted CD Rate Advance" means an A Advance which
------------------------
bears interest as provided in Section 2.07(b).
"Advance" means an A Advance or a B Advance.
---------------------------
"Applicable Facility Fee Rate" means for any period a
----------------------------
percentage per annum equal to the percentage set forth below
determined by reference to the higher of (i) the rating of PM
Companies' long-term senior unsecured Debt from Standard &
Poor's Corporation and (ii) the rating of PM Companies'
long-term senior unsecured Debt from Moody's Investors Service,
in each case in effect from time to time during such period:
<PAGE>
3
Long-Term Applicable
Senior Unsecured Facility
Debt Rating Fee Rate
---------------- ----------
A- and A3 (or higher) 0.1000%
BBB and Baa2 or higher,
but lower than A- and A3 0.1500%
Lower than BBB and Baa2 0.2000%;
provided that if no rating is available on any date of
--------
determination from Moody's Investors Service and Standard &
Poor's Corporation or any other nationally recognized
statistical rating organization designated by PM Companies and
approved in writing by the Majority Lenders, the Applicable
Facility Fee Rate shall be 0.20%.
"Applicable Interest Rate Margin" means for any
-------------------------------
Interest Period a percentage per annum equal to the percentage
set forth below determined by reference to the higher of (i)
the rating of PM Companies' long-term senior unsecured Debt
from Standard & Poor's Corporation and (ii) the rating of PM
Companies' long-term senior unsecured Debt from Moody's
Investors Service, in each case from time to time during such
Interest Period:
Long-Term Applicable
Senior Unsecured Interest Rate
Debt Rating Margin
---------------- -------------
A- and A3 (or higher) 0.3000%
BBB and Baa2 or higher,
but lower than A- and A3 0.3750%
Lower than BBB and Baa2 0.5000%;
provided that if no rating is available on any date of
--------
determination from Moody's Investors Service and Standard &
Poor's Corporation or any other nationally recognized
statistical rating organization designated by PM Companies and
approved in writing by the Majority Lenders, the Applicable
Interest Rate Margin shall be 0.50%.
"Applicable Lending Office" means, with respect to
-------------------------
each Lender, such Lender's Domestic Lending Office in the case
of a Base Rate Advance, such Lender's CD Lending Office in the
case of an Adjusted CD Rate Advance, and such Lender's
<PAGE>
4
Eurodollar Lending Office in the case of a Eurodollar Rate
Advance and, in the case of a B Advance, the office of such
Lender notified by such Lender to the Agent with respect to
such B Advance.
"Applicable Usage Fee Rate" means for any period a
-------------------------
percentage per annum equal to 0.1250%.
"Asset Disposition" means any sale, lease, transfer,
-----------------
spin-off or other disposition ("Disposition") to any Person
(including any shareholder of PM Companies), voluntarily or
involuntarily, of any of the Tobacco Assets (whether now owned
or hereafter acquired) of PM Companies and its directly and
indirectly owned subsidiaries, provided that "Asset
-------- -----
Disposition" shall not mean (i) any Disposition of Tobacco
-----------
Assets to PM Companies or any subsidiary directly or indirectly
wholly-owned by PM Companies, (ii) any sale and lease-back of
Tobacco Assets which, together with all such sale and
lease-back transactions occurring from and after September 30,
1993, does not exceed an aggregate amount equal to
$500,000,000, provided that the lease term related to such sale
and lease-back transaction has a duration approximately equal
to the useful life of such Tobacco Assets, (iii) any
Disposition of Tobacco Assets in the ordinary course of
business and (iv) any Disposition which, together with all such
other Dispositions (excluding all Dispositions described in
clauses (i), (ii) and (iii) of this definition) occurring from
and after September 30, 1993, does not exceed an aggregate
amount equal to $1,100,000,000 net after-tax proceeds
calculated in accordance with the provisions of Section
2.05(b).
"Assignment and Acceptance" means an assignment and
-------------------------
acceptance entered into by a Lender and an Eligible Assignee,
and accepted by the Agent, in substantially the form of Exhibit
C hereto.
"B Advance" means an advance by a Lender to a Borrower
---------
as part of a B Borrowing by such Borrower resulting from the
auction bidding procedure described in Section 2.03(a).
"B Borrowing" means a borrowing consisting of
-----------
simultaneous B Advances to a Borrower from each of the Lenders
whose offer to make one or more B Advances as part of such
borrowing has been accepted by such Borrower under the auction
bidding procedure described in Section 2.03(a).
"B Note" means a promissory note of a Borrower payable
------
to the order of any Lender, in substantially the form
<PAGE>
5
of Exhibit A hereto, evidencing the indebtedness of such
Borrower to such Lender resulting from a B Advance to such
Borrower, together with, if such Borrower is a subsidiary of PM
Companies, a guaranty of the Guarantor endorsed thereon,
substantially in the form of Exhibit A hereto.
"B Reduction" has the meaning assigned to that term in
-----------
Section 2.01.
"Base Rate" means, for any Interest Period or any
---------
other period, a fluctuating interest rate per annum as shall be
in effect from time to time which rate per annum shall at all
times be equal to the highest of:
(a) The rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money market
banks, such three-week moving average being determined
weekly on each Monday (or if such day is not a Business
Day, on the next succeeding Business Day) for the
three-week period ending on the previous Friday by Citibank
on the basis of such rates reported by certificate of
deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of
deposit dealers of recognized standing selected by
Citibank, in either case adjusted to the nearest 1/4 of one
percent or, if there is no nearest 1/4 of one percent, to
the next higher 1/4 of one percent; or
(c) for any day 1/2 of one percent per annum above
the Federal Funds Rate.
"Base Rate Advance" means an A Advance which bears
-----------------
interest as provided in Section 2.07(a).
"Borrower" means PM Companies or any subsidiary of PM
--------
Companies with respect to which a Notice of Acceptance has been
given, and whenever in this Agreement the term "Borrower" is
used in the singular, it shall refer to the appropriate
Borrower, or to all Borrowers, as the context may require.
<PAGE>
6
"Borrowing" means an A Borrowing or a B Borrowing.
---------
"Business Day" means a day of the year on which banks
------------
are not required or authorized to close in New York City and,
if the applicable Business Day relates to any Eurodollar Rate
Advance, on which dealings are carried on in the London
interbank market.
"CD Lending Office" means, with respect to any Lender,
-----------------
the office of such Lender specified as its "CD Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such
office is specified, its Domestic Lending Office) or such other
office of such Lender as such Lender may from time to time
specify to PM Companies and the Agent.
"Commitment" has the meaning specified in Section
----------
2.01.
"Consolidated Tangible Assets" means all assets
----------------------------
properly appearing on a consolidated balance sheet of PM
Companies and its subsidiaries after deducting goodwill,
trademarks, patents, other like intangibles, and the minority
interests of other Persons in such subsidiaries, all as
determined in accordance with generally accepted accounting
principles, except that if there has been a material change in
an accounting principle as compared to that applied in the
preparation of the financial statements of PM Companies and its
subsidiaries as at and for the nine months ended September 30,
1993, then such new accounting principle shall not be used in
the determination of Consolidated Tangible Assets. A material
change in an accounting principle is one that in the year of
its adoption changes Consolidated Tangible Assets at such
year-end by more than 10%.
"Debt" means (i) indebtedness for borrowed money or
----
for the deferred purchase price of property or services, or
obligations evidenced by bonds, debentures, notes or similar
instruments, (ii) obligations as lessee under leases which
shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases, and
(iii) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (i) or
(ii) above.
<PAGE>
7
"Domestic Lending Office" means, with respect to any
-----------------------
Lender, the office of such Lender specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in
the Assignment and Acceptance pursuant to which it became a
Lender or such other office of such Lender as such Lender may
from time to time specify to PM Companies and the Agent.
"Eligible Assignee" means (i) a commercial bank
-----------------
organized under the laws of the United States, or any State
thereof, and having total assets in excess of $5,000,000,000;
(ii) a commercial bank organized under the laws of any other
country which is a member of the OECD, or a political
subdivision of any such country, and having total assets in
excess of $5,000,000,000, provided that such bank is acting
through a branch or agency located in the country in which it
is organized or another country which is also a member of the
OECD or the Cayman Islands; (iii) the central bank of any
country which is a member of the OECD; (iv) a commercial
finance company or finance subsidiary of a corporation
organized under the laws of the United States, or any State
thereof, and having total assets in excess of $3,000,000,000;
(v) an insurance company organized under the laws of the United
States, or any State thereof, and having total assets in excess
of $5,000,000,000; (vi) any Bank; and (vii) an affiliate of any
Lender.
"ERISA" means the Employee Retirement Income Security
-----
Act of 1974, as amended from time to time and the regulations
promulgated and the rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
---------------
Title IV of ERISA is a member of any Borrower's or PM
Companies' controlled group, or under common control with such
Borrower or PM Companies, within the meaning of Section 414 of
the Internal Revenue Code of 1986, as amended from time to
time.
"ERISA Event" means (i) the occurrence with respect to
-----------
a Plan of a Reportable Event, within the meaning of Section
4043 of ERISA, unless the 30-day notice requirement with
respect thereto has been waived by the PBGC; (ii) the provision
by the administrator of any Plan of a notice of intent to
terminate such Plan, pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (iii) the cessation
of operations at a facility of any Borrower or PM Companies or
any of their ERISA Affiliates in the circumstances described in
Section 4068(f) of ERISA; (iv) the withdrawal by any Borrower
or PM Companies or any of their ERISA Affiliates from a
Multiple Employer Plan during a plan
<PAGE>
8
year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (v) the conditions set forth in
Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien
upon property or rights to property of any Borrower or PM
Companies or any of their ERISA Affiliates for failure to make a
required payment to a Plan are satisfied; (vi) the adoption of
an amendment to a Plan requiring the provision of security to
such Plan, pursuant to Section 307 of ERISA; or (vii) the
occurrence of any event or condition described in Section 4042
of ERISA that constitutes grounds for the termination of, or
the appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to
------------------------
that term in Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any
-------------------------
Lender, the office of such Lender specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in
the Assignment and Acceptance pursuant to which it became a
Lender (or, if no such office is specified, its Domestic
Lending Office) or such other office of such Lender as such
Lender may from time to time specify to PM Companies and the
Agent.
"Eurodollar Rate" means, for the Interest Period for
---------------
each Eurodollar Rate Advance comprising part of the same A
Borrowing, an interest rate per annum equal to the average
(rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average is not such a multiple) of the rate per
annum at which deposits in U.S. dollars are offered by the
principal office of each of the Reference Banks in London,
England to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of
such Interest Period in an amount approximately equal to such
Reference Bank's Eurodollar Rate Advance comprising part of
such A Borrowing and for a period equal to such Interest
Period. The Eurodollar Rate for the Interest Period for each
Eurodollar Rate Advance comprising part of the same A Borrowing
shall be determined by the Agent on the basis of applicable
rates furnished to and received by the Agent from the Reference
Banks two Business Days before the first day of such Interest
Period, subject, however, to the provisions of Section 2.09.
------- -------
"Eurodollar Rate Advance" means an A Advance which
-----------------------
bears interest as provided in Section 2.07(c).
<PAGE>
9
"Eurodollar Rate Reserve Percentage" of any Lender for
----------------------------------
the Interest Period for any Eurodollar Rate Advance means the
reserve percentage applicable during such Interest Period (or
if more than one such percentage shall be so applicable, the
daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so
applicable) under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirement (including,
without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period.
"Events of Default" has the meaning specified in
-----------------
Section 6.01.
"Federal Bankruptcy Code" means the Bankruptcy Reform
-----------------------
Act of 1978, as amended from time to time.
"Federal Funds Rate" means, for any period, a
------------------
fluctuating interest rate per annum 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 Agent from three Federal
funds brokers of recognized standing selected by it.
"Fixed Charges" means, for any accounting period, the
-------------
sum of (i) interest, whether expensed or capitalized, in
respect of any Debt outstanding during such period, plus (ii)
amortization of debt expense and discount or premium relating
to any Debt outstanding during such period, whether expensed or
capitalized, plus (iii) such portion of rental expense as can
be demonstrated to be representative of the interest factor in
the particular case, all as to be applicable to continuing
operations and determined in accordance with generally accepted
accounting principles, except that if there has been a material
change in an accounting principle as compared to that applied
in the preparation of the financial statements of PM Companies
as at and for the nine months ended September 30, 1993, then
such new accounting principle shall not be used in the
determination of Fixed Charges. A material change in an
accounting principle is one
<PAGE>
10
that, in the year of its adoption, changes Net Income Before
Tax or Fixed Charges for any quarter in such year by more than
10%.
"Guarantor" means PM Companies.
---------
"Guaranty" has the meaning specified in Section 8.01.
--------
"Insufficiency" means, with respect to any Plan, the
-------------
amount of "unfunded benefit liabilities" (as defined in Section
4001(a)(18) of ERISA), if any, for such Plan.
"Interest Period" means, for each A Advance comprising
---------------
part of the same A Borrowing, the period commencing on the date
of such A Advance and ending on the last day of the period
selected by PM Companies pursuant to the provisions below. The
duration of each such Interest Period shall be (a) in the case
of an Adjusted CD Rate Advance, 30, 60, 90 or 180 days, (b) in
the case of a Base Rate Advance, 1, 2, 3 or 6 months and (c) in
the case of a Eurodollar Rate Advance, 1, 2, 3 or 6 months, in
each case as PM Companies may, upon notice received by the
Agent not later than 12:00 Noon (New York City time) on the
third Business Day with respect to a Eurodollar Rate Advance,
on the second Business Day with respect to an Adjusted CD Rate
Advance and on the Business Day with respect to a Base Rate
Advance, prior to the first day of such Interest Period,
select; provided, however, that:
-------- -------
(i) the duration of any Interest Period which
commences before the Termination Date and would otherwise
end after the Termination Date shall end on the Termination
Date;
(ii) Interest Periods commencing on the same date for A
Advances comprising part of the same A Borrowing shall be
of the same duration; and
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, in the
--------
case of any Interest Period for a Eurodollar Rate Advance,
that if such extension would cause the last day of such
Interest Period to occur in the next following calendar
month, the last day of such Interest Period shall occur on
the next preceding Business Day.
"Lenders" means the Banks listed on the signature
-------
pages hereof and each Eligible Assignee that shall become a
party hereto pursuant to Section 10.07.
<PAGE>
11
"Major Plan" means, at any time, a Plan with an
----------
Insufficiency of $10,000,000 or more.
"Major Subsidiary" means any subsidiary (a) more than
----------------
50% of the voting securities of which is owned directly or
indirectly by PM Companies, (b) which is organized and existing
under, or has its principal place of business in, the United
States or any political subdivision thereof, Canada or any
political subdivision thereof, any country which is a member of
the European Economic Community on the date hereof (other than
Greece, Portugal or Spain) or any political subdivision
thereof, Sweden, Switzerland, Norway or Australia or any of
their respective political subdivisions, and (c) which has at
any time total assets (after intercompany eliminations)
exceeding $500,000,000. Notwithstanding the foregoing, Mission
Viejo Company (a California corporation) and any of its
subsidiaries engaged in the business of community development,
commercial real estate development, real estate investment or
related activities shall not be a Major Subsidiary.
"Majority Lenders" means at any time Lenders holding
----------------
at least 66-2/3% of the aggregate unpaid principal amount of
the A Advances then outstanding, or, if no such principal
amount is then outstanding, Lenders having at least 66-2/3% of
the Commitments (provided that, for purposes hereof, neither PM
Companies or any Borrower, nor any of their respective
affiliates, if a Lender, shall be included in (i) the Lenders
holding such amount of the A Advances or having such amount of
the Commitments or (ii) determining the aggregate unpaid
principal amount of the A Advances or the total Commitments).
"Multiemployer Plan" means a "multiemployer plan" as
------------------
defined in Section 4001(a)(3) of ERISA to which any Borrower or
PM Companies or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or
more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan,
----------------------
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of any Borrower or PM Companies or any
ERISA Affiliate and at least one Person other than any Borrower
or PM Companies and its ERISA Affiliates or (ii) was so
maintained and in respect of which any Borrower or PM Companies
or any ERISA Affiliate could have liability under Section 4064
or 4069 of ERISA in the event such plan has been or were to be
terminated.
<PAGE>
12
"Net Income Before Tax" means, for any accounting
---------------------
period, income or loss from continuing operations for such
period, as determined in accordance with generally accepted
accounting principles, plus total federal, state and foreign
income taxes which have been included in the determination of
income or loss from continuing operations for such period in
accordance with generally accepted accounting principles and
amounts which, in the determination of income or loss from
continuing operations for such period, have been deducted for
the items referred to in the definition of Fixed Charges in
this Section, except that if there has been a material change
in an accounting principle as compared to that applied in the
preparation of the financial statements of PM Companies as at
and for the nine months ended September 30, 1993, then such new
accounting principle shall not be used in the determination of
Net Income Before Tax. A material change in an accounting
principle is one that, in the year of its adoption, changes Net
Income Before Tax or Fixed Charges for any quarter in such year
by more than 10%.
"1991 Loan Agreement" has the meaning specified in
-------------------
Section 3.05(a).
"Notice of A Borrowing" has the meaning specified in
---------------------
Section 2.02(a).
"Notice of Acceptance" has the meaning specified in
--------------------
Section 9.01(a).
"Notice of B Borrowing" has the meaning assigned to
---------------------
that term in Section 2.03(a).
"Notice of Borrowing" means either a Notice of A
-------------------
Borrowing or a Notice of B Borrowing.
"Obligations" has the meaning specified in Section
-----------
8.01.
"OECD" means the Organization for Economic Cooperation
----
and Development.
"Other Taxes" has the meaning specified in Section
-----------
2.13(b).
"PBGC" means the Pension Benefit Guaranty Corporation
----
or any successor corporation thereto.
"Person" means an individual, partnership, corporation
------
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or
<PAGE>
13
other entity, or a government or any political subdivision or
agency thereof.
"Philip Morris" means Philip Morris Incorporated, a
-------------
Virginia corporation wholly-owned by PM Companies.
"Plan" means a Single Employer Plan or a Multiple
----
Employer Plan.
"Reference Banks" means Citibank, Mellon Bank N.A.,
---------------
Barclays Bank PLC and Dresdner Bank AG.
"Register" has the meaning specified in Section
--------
10.07(c).
"Significant Plan" means a Plan whose assets have a
----------------
current value in excess of $100,000,000.
"Single Employer Plan" means a single employer plan,
--------------------
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of any Borrower, PM Companies or an
ERISA Affiliate and no Person other than such Borrower or PM
Companies or any of their ERISA Affiliates or (ii) was so
maintained and in respect of which any Borrower or PM Companies
or an ERISA Affiliate could have liability under Section 4069
of ERISA in the event such plan has been or were to be
terminated.
"Termination Date" means December 16, 1994, or the
----------------
earlier date of termination in whole of the Commitments
pursuant to Section 2.05 or Section 6.01.
"Tobacco Assets" means all assets consisting of
--------------
tobacco and tobacco related assets, including, without
limitation, all tobacco inventory, aging warehouses, cigarette
manufacturing facilities, distribution warehouses, trademarks,
tradenames and know-how and which relate to the domestic and
United States export business of PM Companies and its
subsidiaries.
"Type" means, with reference to an A Advance, an
----
Adjusted CD Rate Advance, a Base Rate Advance or a Eurodollar
Rate Advance.
"Withdrawal Liability" shall have the meaning given
--------------------
such term under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Additional Definitions. For purposes
----------------------
of this Agreement, "subsidiary" means, with respect to any
Person, any corporation of which more than 50% of the
<PAGE>
14
outstanding capital stock having voting power to elect a
majority of the Board of Directors of such corporation
(irrespective of whether or not at the time capital stock of
any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned by such Person, by such
Person and one or more other subsidiaries, or by one or more
other subsidiaries.
SECTION 1.03. Computation of Time Periods. In this
---------------------------
Agreement in the computation of periods of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.04. Accounting Terms. All accounting terms
----------------
not specifically defined herein shall be construed in
accordance with generally accepted accounting principles,
except that if there has been a material change in an
accounting principle, including the accounting for
post-employment benefits as prescribed by Statement of
Financial Accounting Standards No. 112, affecting the
definition of an accounting term as compared to that applied in
the preparation of the financial statements of PM Companies as
at and for the nine months ended September 30, 1993, then such
new accounting principle shall not be used in the determination
of the amount associated with that accounting term. A material
change in an accounting principle is one that, in the year of
its adoption, changes the amount associated with the relevant
accounting term for such year by more than 10%.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The A Advances. Each Lender severally
--------------
agrees, on the terms and conditions hereinafter set forth, to
make A Advances to any Borrower from time to time on any
Business Day during the period from the date hereof until the
Termination Date in an aggregate amount for all of the
Borrowers not to exceed at any time outstanding the amount set
opposite such Lender's name on the signature pages hereof or,
if such Lender has entered into one or more Assignments and
Acceptances, set forth for such Lender in the Register
maintained by the Agent pursuant to Section 10.07(c), as such
amount may be reduced pursuant to Section 2.05 (such Lender's
"Commitment"), provided that the aggregate amount of the
--------
Commitments of the Lenders shall be
<PAGE>
15
deemed to be used from time to time to the extent of the
aggregate amount of the B Advances then outstanding and such
deemed use of the aggregate amount of the Commitments shall be
applied to the Lenders ratably according to their respective
Commitments (each such deemed use of the aggregate amount of
the Commitments being a "B Reduction"). Each A Borrowing shall
be in an aggregate amount not less than $50,000,000 and shall
consist of A Advances of the same Type made to the same
Borrower on the same day by the Lenders ratably according to
their respective Commitments and one or more A Borrowings may
be made on the same day. Within the limits of each Lender's
Commitment, the Borrowers may borrow, repay pursuant to Section
2.06, prepay pursuant to Section 2.10(b), and reborrow under
this Section 2.01.
SECTION 2.02. Making the A Advances. (a) Each A
---------------------
Borrowing shall be made on notice, given not later than 12:00
Noon (New York City time) on the third Business Day prior to
the date of the proposed A Borrowing in the case of Eurodollar
Rate Advances, on the second Business Day prior to the date of
the proposed A Borrowing in the case of Adjusted CD Rate
Advances, and on the Business Day prior to the date of the
proposed A Borrowing in the case of Base Rate Advances, by PM
Companies to the Agent, which shall give to each Lender prompt
notice thereof by telex or cable. Each such notice of an A
Borrowing (a "Notice of A Borrowing") shall be by telex or
cable, confirmed immediately in writing, in substantially the
form of Exhibit B-1 hereto, specifying therein the requested
(i) date of such A Borrowing, (ii) Type of A Advances
comprising such A Borrowing, (iii) aggregate amount of such A
Borrowing, (iv) Interest Period for each such A Advance, and
(v) name of the Borrower. In the case of a proposed A
Borrowing comprised of Adjusted CD Rate Advances or Eurodollar
Rate Advances, the Agent shall promptly notify each Lender of
the applicable interest rate under Section 2.07(b) or (c).
Each Lender shall, before 11:00 A.M. (New York City time) on
the date of such A Borrowing, make available for the account of
its Applicable Lending Office to the Agent at its address
referred to in Section 10.02, in same day funds, such Lender's
ratable portion of such A Borrowing. After the Agent's receipt
of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds
available to the applicable Borrower at the Agent's aforesaid
address.
(b) Anything in subsection (a) above to the contrary
notwithstanding,
<PAGE>
16
(i) if any Lender shall, at least one Business Day
before the date of any requested A Borrowing, notify the
Agent that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful,
or that any central bank or other governmental authority
asserts that it is unlawful, for such Lender or its
Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or to fund or
maintain Eurodollar Rate Advances hereunder, the right of
PM Companies to select Eurodollar Rate Advances for such A
Borrowing or any subsequent A Borrowing shall be suspended
until such Lender shall notify the Agent that the
circumstances causing such suspension no longer exist, and
each A Advance comprising such requested A Borrowing shall
be a Base Rate Advance. Each Lender agrees that it shall
notify the Agent and PM Companies of any such introduction,
change, interpretation or assertion referred to above
promptly after such Lender becomes aware of the occurrence
thereof;
(ii) if less than two Reference Banks furnish timely
information to the Agent for determining the Adjusted CD
Rate for Adjusted CD Rate Advances, or the Eurodollar Rate
for Eurodollar Rate Advances, comprising any requested A
Borrowing, the right of any Borrower to select Adjusted CD
Rate Advances or Eurodollar Rate Advances, as the case may
be, for such A Borrowing or any subsequent A Borrowing
shall be suspended until the Agent shall notify PM
Companies and the Lenders that the circumstances causing
such suspension no longer exist, and each A Advance
comprising such A Borrowing shall be a Base Rate Advance;
and
(iii) if the Majority Lenders shall, at least one
Business Day before the date of any requested A Borrowing,
notify the Agent that the Eurodollar Rate for Eurodollar
Rate Advances comprising such A Borrowing will not
adequately reflect the cost to such Majority Lenders of
making or funding their respective Eurodollar Rate Advances
for such A Borrowing, the right of PM Companies to select
Eurodollar Rate Advances for such A Borrowing or any
subsequent A Borrowing shall be suspended until the Agent,
after its receipt of notice from such Majority Lenders that
the circumstances causing such suspension no longer exist,
shall notify PM Companies and the Lenders to such effect,
and each A Advance comprising such A Borrowing shall be a
Base Rate Advance.
(c) Each Notice of A Borrowing shall be irrevocable
and binding on PM Companies and, if the Borrower named
<PAGE>
17
therein is not PM Companies, such Borrower. In the case of any
A Borrowing which the related Notice of A Borrowing specifies
is to be comprised of Adjusted CD Rate Advances or Eurodollar
Rate Advances, PM Companies and, if the Borrower named therein
is not PM Companies, such Borrower severally agree to indemnify
each Lender against any loss, cost or expense incurred by such
Lender as a result of any failure to fulfill on or before the
date specified in such Notice of A Borrowing for such A
Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
by such Lender to fund the Advance to be made by such Lender as
part of such A Borrowing when such A Advance, as a result of
such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a
Lender prior to the date of any A Borrowing that such Lender
will not make available to the Agent such Lender's ratable
portion of such A Borrowing, the Agent may assume that such
Lender has made such portion available to the Agent on the date
of such A Borrowing in accordance with subsection (a) of this
Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower thereof on such date
a corresponding amount. If and to the extent that such Lender
shall not have so made such ratable portion available to the
Agent, such Lender and such Borrower severally agree to repay
to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such
amount is made available to such Borrower until the date such
amount is repaid to the Agent, at (i) in the case of such
Borrower, the interest rate applicable at the time to the A
Advances comprising such A Borrowing and (ii) in the case of
such Lender, the Federal Funds Rate. If such Lender shall
repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Lender's A Advance as part of such
A Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the A Advance
to be made by it as part of any A Borrowing shall not relieve
any other Lender of its obligation, if any, hereunder to make
its A Advance on the date of such A Borrowing, but no Lender
shall be responsible for the failure of any other Lender to
make the A Advance to be made by such other Lender on the date
of any A Borrowing.
SECTION 2.03. The B Advances. (a) Each Lender
--------------
severally agrees that any Borrower may make B Borrowings
<PAGE>
18
under this Section 2.03 from time to time on any Business Day
during the period from the date hereof until the date occurring
7 days prior to the Termination Date in the manner set forth
below; provided that, following the making of each B Borrowing
--------
the aggregate amount of the Advances then outstanding shall not
exceed the aggregate amount of the Commitments of the Lenders
(computed without regard to any B Reduction).
(i) PM Companies may request a B Borrowing under this
Section 2.03 by delivering to the Agent, by telex or cable,
confirmed immediately in writing, a notice of a B Borrowing
(a "Notice of B Borrowing"), in substantially the form of
Exhibit B-2 hereto, specifying the name of the Borrower,
the date and aggregate amount of the proposed B Borrowing,
the maturity date for repayment of each B Advance to be
made as part of such B Borrowing (which maturity date, in
the case of a Notice of B Borrowing delivered pursuant to
clause (A) of this paragraph (i), may not be earlier than
the date occurring 7 days after the date of such B
Borrowing or later than the date occurring 180 days after
the date of such B Borrowing and, in the case of a Notice
of B Borrowing delivered pursuant to clause (B) of this
paragraph (i), may not be earlier than the date occurring
14 days after the date of such B Borrowing or later than
the date occurring 180 days after the date of such B
Borrowing, and in no event may the maturity date for any B
Borrowing be later than the Termination Date), the interest
payment date or dates relating thereto, the interest rate
basis on which the Lenders may make offers to make B
Advances to such Borrower (which basis may be a fixed or
floating rate) and any other terms to be applicable to such
B Borrowing, not later than 10:00 A.M. (New York City time)
(A) at least two Business Days prior to the date of the
proposed B Borrowing, if PM Companies shall specify in the
Notice of B Borrowing that the rates of interest to be
offered by the Lenders shall be fixed rates per annum and
(B) at least four Business Days prior to the date of the
proposed B Borrowing, if PM Companies shall instead specify
in the Notice of B Borrowing the basis to be used by the
Lenders in determining the rates of interest to be offered
by them. The Agent shall in turn promptly notify each
Lender of each request for a B Borrowing received by it by
sending such Lender a copy of the related Notice of
B Borrowing.
(ii) Each Lender may, if, in its sole discretion, it
elects to do so, irrevocably offer to make one or more
B Advances to the Borrower named in any such Notice of
<PAGE>
19
B Borrowing as part of the proposed B Borrowing at a rate
or rates of interest specified by such Lender in its sole
discretion, by notifying the Agent (which shall give prompt
notice thereof to the Borrower), before 10:00 A.M. (New
York City time) (A) on the Business Day prior to the date
of such proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (A) of paragraph
(i) above, and (B) three Business Days before the date of
such proposed B Borrowing, in the case of a Notice of B
Borrowing delivered pursuant to clause (B) of paragraph (i)
above, of the minimum amount and maximum amount of each
B Advance which such Lender would be willing to make as
part of such proposed B Borrowing (which amounts may,
subject to the proviso to the first sentence of this
Section 2.03(a), exceed such Lender's Commitment), the rate
or rates of interest therefor and such Lender's Applicable
Lending Office with respect to such B Advance; provided
--------
that if the Agent in its capacity as a Lender shall, in its
sole discretion, elect to make any such offer, it shall
notify the Borrower of such offer before 9:00 A.M. (New
York City time) on the Business Day prior to the date of
such proposed B Borrowing, in the case referred to in
clause (A) of this paragraph (ii), and three Business Days
before the date of such proposed B Borrowing, in the case
referred to in clause (B) of this paragraph (ii). If any
Lender shall elect not to make such an offer, such Lender
shall so notify the Agent before 10:00 A.M. (New York City
time) on the Business Day prior to the date of such
proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (A) of paragraph
(i) above, and three Business Days before the date of such
proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (B) of paragraph
(i) above, and such Lender shall not be obligated to, and
shall not, make any B Advance as part of such B Borrowing;
provided that the failure of any Lender to give such notice
--------
shall not cause such Lender to be obligated to make any
B Advance as part of such proposed B Borrowing.
(iii) The Borrower named in any such Notice of
B Borrowing shall, in turn, (A) before 12:00 Noon (New York
City time) on the Business Day prior to the date of such
proposed B Borrowing, in the case of a Notice of
B Borrowing delivered pursuant to clause (A) of paragraph
(i) above and (B) before 12:00 Noon (New York City time)
three Business Days before the date of such proposed B
Borrowing, in the case of a Notice of B Borrowing delivered
pursuant to clause (B) of paragraph (i) above, either
<PAGE>
20
(A) cancel such B Borrowing by giving the Agent
notice to that effect, or
(B) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above by
giving notice to the Agent of the amount of each
B Advance (which amount shall be equal to or greater
than the minimum amount, and equal to or less than the
maximum amount, notified to such Borrower by the Agent
on behalf of such Lender for such B Advance pursuant
to paragraph (ii) above) to be made by each Lender as
part of such B Borrowing, and reject any remaining
offers made by Lenders pursuant to paragraph (ii)
above by giving the Agent notice to that effect.
The acceptance of offers by such Borrower pursuant to this
clause (B) shall be on the basis of ascending rates of
interest contained in the offers made by Lenders pursuant
to paragraph (ii) above; provided that, in the event that
--------
two or more of such offers contain the same rate of
interest for a greater aggregate principal amount than the
amount specified in such Notice of B Borrowing less the
aggregate principal amount of all such offers containing
lower rates of interest that have been accepted by such
Borrower pursuant to this clause (B), such Borrower shall
have sole discretion (subject to any minimum and maximum
amount specified in any such offer) to accept one or more
of the offers at such rate of interest and to reject any
remaining offers at such rate of interest.
(iv) If the Borrower named in any such Notice of
B Borrowing notifies the Agent that such B Borrowing is
cancelled pursuant to paragraph (iii)(A) above, the Agent
shall give prompt notice thereof to the Lenders and such
B Borrowing shall not be made.
(v) If the Borrower named in any such Notice of
B Borrowing accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(B) above, the
Agent shall in turn promptly notify (A) each Lender which
has made an offer as described in paragraph (ii) above, of
the date and aggregate amount of such B Borrowing and
whether or not any offer or offers made by such Lender
pursuant to paragraph (ii) above have been accepted by such
Borrower, (B) each Lender that is to make a B Advance as
part of such B Borrowing, of the amount of each B Advance
to be made by such Lender as part of such B Borrowing, and
(C) each Lender that is to
<PAGE>
21
make a B Advance as part of such B Borrowing, upon receipt,
that the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III.
Each Lender that is to make a B Advance as part of such
B Borrowing shall, before 12:00 Noon (New York City time)
on the date of such B Borrowing specified in the notice
received from the Agent pursuant to clause (A) of the
preceding sentence or any later time when such Lender shall
have received notice from the Agent pursuant to clause (C)
of the preceding sentence, make available for the account
of its Applicable Lending Office to the Agent at its
address set forth in Section 10.02 such Lender's portion of
such B Borrowing, in same day funds. Upon fulfillment of
the applicable conditions set forth in Article III and
after receipt by the Agent of such funds, the Agent will
make such funds available to such Borrower as soon as
practicable on such date at the Agent's aforesaid address.
Promptly after each B Borrowing the Agent will notify each
Lender of the amount of the B Borrowing, the consequent
B Reduction and the dates upon which such B Reduction
commenced and will terminate.
(b) Each B Borrowing shall be in an aggregate amount
not less than $100,000,000 or an integral multiple of
$1,000,000 in excess thereof and, following the making of each B
Borrowing, the Borrower thereof shall be in compliance with the
limitation set forth in the proviso to the first sentence of
subsection (a) above.
(c) Within the limits and on the conditions set forth
in this Section 2.03, each Borrower may from time to time
borrow under this Section 2.03, repay or prepay pursuant to
subsection (d) below, and reborrow under this Section 2.03,
provided that a B Borrowing shall not be made within three
--------
Business Days of the date of any other B Borrowing.
(d) Each Borrower shall repay to the Agent for the
account of each Lender which has made a B Advance to such
Borrower, or each other holder of a B Note, on the maturity
date of each B Advance made to it (such maturity date being
that specified for repayment of such B Advance in the related
Notice of B Borrowing delivered pursuant to subsection (a)(i)
above or as provided in the B Note evidencing such B Advance)
the then unpaid principal amount of such B Advance. No
Borrower shall have the right to prepay any principal amount of
any B Advance unless, and then only on the terms, specified by
PM Companies for such B Advance in the related Notice of
B Borrowing delivered pursuant to subsection (a)(i) above and
provided in the B Note evidencing such B Advance.
<PAGE>
22
(e) Each Borrower shall pay interest on the unpaid
principal amount of each B Advance made to it from the date of
such B Advance to the date the principal amount of such
B Advance is repaid in full, at the rate of interest for such
B Advance specified by the Lender making such B Advance in its
notice with respect thereto delivered pursuant to subsection
(a)(ii) above, payable on the interest payment date or dates
specified by PM Companies for such B Advance in the related
Notice of B Borrowing delivered pursuant to subsection (a)(i)
above, as provided in the B Note evidencing such B Advance.
(f) The indebtedness of each Borrower resulting from
each B Advance made to such Borrower as part of a B Borrowing
shall be evidenced by a separate B Note of such Borrower
payable to the order of the Lender making such B Advance.
(g) Any notice given to any party under this Section
2.03 shall be in writing, or may be by telephone or telex, in
each case confirmed immediately in writing.
SECTION 2.04. Fees. (a) PM Companies agrees to pay
----
to each Lender a facility fee on the principal amount of such
Lender's Commitment (whether or not unused and without giving
effect to any B Reduction) from the date hereof in the case of
each Bank (unless otherwise agreed to by PM Companies with such
Bank) and from the effective date specified in the Assignment
and Acceptance pursuant to which it became a Lender in the case
of each other Lender until the Termination Date at the
Applicable Facility Fee Rate, in each case payable on the last
day of each March, June, September and December until the
Termination Date and on the Termination Date.
(b) For any period in which the aggregate principal
amount of Advances exceeds an amount equal to 50% of the total
Commitments, PM Companies agrees to pay to each Lender a usage
fee on the excess of (i) the average daily aggregate amount of
Advances made by such Lender outstanding during such period
over (ii) 50% of such Lender's Commitment at the Applicable
Usage Fee Rate, in each case payable in arrears on the last day
of each March, June, September and December occurring during
such period and on the Termination Date, if applicable.
(c) PM Companies agrees to pay to the Agent the
agency fee, arrangement fee and competitive bid fee in the
amounts and at the times set forth in the engagement letter
dated November 24, 1993 from the Agent to PM Companies, as
amended from time to time.
<PAGE>
23
SECTION 2.05. Reduction of the Commitments. (a) PM
----------------------------
Companies shall have the right, upon five Business Days' notice
to the Agent, to terminate in whole or reduce ratably in part
the unused portions of the respective Commitments of the
Lenders, provided that the aggregate amount of the Commitments
--------
of the Lenders shall not be reduced to an amount which is less
than the aggregate principal amount of the B Advances then
outstanding and provided further that each partial reduction
-------- -------
shall be in the aggregate amount of at least $50,000,000.
(b) In the event that there shall be an Asset
Disposition, the respective Commitments of the Lenders shall be
reduced ratably by an aggregate amount equal to 100% of the net
after-tax proceeds of such Asset Disposition. For the purpose
of this subsection (b) any net after-tax non-cash proceeds or
spin-off shall be valued at (i) the greater of (x) the book
value and (y) the fair market value (as determined in good
faith by the Board of Directors of PM Companies) of the assets
subject to such Asset Disposition, less (ii) the cash proceeds,
if any, received as a result of such Asset Disposition. In the
event that the purchase price of assets subject to an Asset
Disposition is subject to adjustment, as a result of which PM
Companies reasonably believes that the proceeds ultimately to
be received therefrom will be reduced, then until such time as
such adjustment is finalized, for purposes of this subsection
(b) the "net after-tax proceeds" shall include only the amount
of those proceeds actually received by PM Companies or any
affiliate of PM Companies, less an adjustment reserve in an
amount reasonably determined by PM Companies to be equivalent
to such adjustment therein. As soon as such adjustment is
finalized, any further reduction in the Commitments shall be
made as above provided in this subsection (b). Any reduction
pursuant to this subsection (b) shall be effective on a date
selected by PM Companies but in any event no later than the
last day of the calendar quarter during which the Asset
Disposition occurs; provided that any reduction which would be
--------
in amount less than $50,000,000 shall not be made but shall be
included in the calculation of the subsequent reduction or
reductions provided for in this subsection (b) until the
aggregate amount of any such subsequent reduction shall be at
least equal to $50,000,000, and such reduction shall then be
made as above provided in this subsection (b).
SECTION 2.06. Repayment of A Advances. Each Borrower
-----------------------
shall repay the principal amount of each A Advance made to it
by each Lender on the last day of the Interest Period for such A
Advance.
<PAGE>
24
SECTION 2.07. Interest on A Advances. Each Borrower
----------------------
shall pay interest on the unpaid principal amount of each A
Advance made to it by each Lender from the date of such A
Advance until such principal amount shall be paid in full, at
the following rates per annum:
(a) Base Rate Advances. If such A Advance is a Base
------------------
Rate Advance, a rate per annum equal at all times to the
Base Rate in effect from time to time, payable monthly on
the 20th day of each month, and on the date such Base Rate
Advance shall be paid in full; provided that any amount of
--------
principal which is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until
such amount is paid in full, payable on demand, at a rate
per annum equal at all times to 1% per annum plus the Base
Rate in effect from time to time.
(b) Adjusted CD Rate Advances. If such A Advance is
-------------------------
an Adjusted CD Rate Advance, a rate per annum equal at all
times during the Interest Period for such A Advance to the
sum of the Adjusted CD Rate for such Interest Period plus
the Applicable Interest Rate Margin, payable on the last
day of such Interest Period and, if such Interest Period
has a duration of 180 days, on the 90th day of such
Interest Period; provided that any amount of principal
--------
which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the
date on which such amount is due until such amount is paid
in full, payable on demand, at a rate per annum equal at
all times to 1% per annum plus the Base Rate in effect from
time to time.
(c) Eurodollar Rate Advances. If such A Advance is a
------------------------
Eurodollar Rate Advance, a rate per annum equal at all
times during the Interest Period for such A Advance to the
sum of the Eurodollar Rate for such Interest Period plus
the Applicable Interest Rate Margin, payable on the last
day of such Interest Period and, if such Interest Period
has a duration of six months, on the last day of the third
month of such Interest Period; provided that any amount of
--------
principal which is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until
such amount is paid in full, payable on demand, at a rate
per annum equal at all times to 1% per annum plus the Base
Rate in effect from time to time.
<PAGE>
25
SECTION 2.08. Additional Interest on Eurodollar Rate
--------------------------------------
Advances. Each Borrower shall pay to each Lender, so long as
--------
such Lender shall be required under regulations of the Board of
Governors of the Federal Reserve System to maintain reserves
with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurodollar Rate Advance of such
Lender to such Borrower, from the date of such Advance until
such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by
subtracting (i) the Eurodollar Rate for the Interest Period for
such Advance from (ii) the rate obtained by dividing such
Eurodollar Rate by a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage of such Lender for such
Interest Period, payable on each date on which interest is
payable on such Advance. Such additional interest shall be
determined by such Lender and notified to PM Companies through
the Agent.
SECTION 2.09. Interest Rate Determination. (a) Each
---------------------------
Reference Bank agrees to furnish to the Agent timely
information for the purpose of determining each Adjusted CD
Rate or Eurodollar Rate, as applicable. If any one or more of
the Reference Banks shall not furnish such timely information
to the Agent for the purpose of determining any such interest
rate, the Agent shall determine such interest rate on the basis
of timely information furnished by the remaining Reference
Banks.
(b) The Agent shall give prompt notice to PM
Companies and the Lenders of the applicable interest rate
determined by the Agent for purposes of Section 2.07(a), (b) or
(c), and the applicable rate, if any, furnished by each
Reference Bank for the purpose of determining the applicable
interest rate under Section 2.07(b) or (c).
SECTION 2.10. Prepayment of A Advances. (a) No
------------------------
Borrower shall have the right to prepay any principal amount of
any A Advances other than as provided in subsection (b) below.
(b) Any Borrower may, upon at least four Business
Days' notice to the Agent stating the proposed date and
aggregate principal amount of the prepayment, and if such
notice is given such Borrower shall, prepay the outstanding
principal amounts of A Advances comprising part of the same A
Borrowing in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount
prepaid; provided, however, that (i) each partial prepayment
-------- -------
shall be in an aggregate principal amount not less
<PAGE>
26
than $50,000,000 and (ii) in the event of any such prepayment
of an Adjusted CD Rate Advance or a Eurodollar Rate Advance,
such Borrower shall be obligated to reimburse the Lenders in
respect thereof pursuant to Section 10.04(b) hereof.
(c) If any Lender shall notify the Agent of any
introduction, change, interpretation or assertion referred to
in Section 2.02(b)(i), or shall claim payment of increased
costs pursuant to Section 2.11(a) or (c) or payment of any
additional amounts payable pursuant to Section 2.13, PM
Companies may, upon at least five Business Days' notice to the
Agent stating that the Borrowers intend to repay the A Advances
made by such Lender and terminate such Lender's Commitment, and
if such notice is given the Borrowers shall forthwith, on the
date specified in such notice, prepay in full all A Advances
made by such Lender with accrued interest thereon to the date
of such prepayment and all other amounts payable to such Lender
by PM Companies and the other Borrowers hereunder (including,
without limitation, any amounts payable pursuant to Section
10.04(b)), and upon such notice from PM Companies the
Commitment of such Lender to make further A Advances, and the
obligation of PM Companies to pay facility fees to such Lender,
shall terminate.
(d) In the event that there shall be a reduction of
the Commitments pursuant to Section 2.05(b), the Borrowers
shall on the date of such reduction (or as soon thereafter as
the Borrowers can do so without incurring liability to any
Lender pursuant to Section 10.04(b)) repay or prepay ratably A
Advances made as part of the same A Borrowings (together with
interest accrued thereon to such date) to the extent necessary
so that the aggregate principal amount of outstanding A
Advances made by each Lender shall not exceed such Lender's
Commitment, as reduced on such date.
SECTION 2.11. Increased Costs. (a) If, due to
---------------
either (i) the introduction of or any change (other than any
change by way of imposition or increase of reserve
requirements, in the case of Adjusted CD Rate Advances,
included in the Adjusted CD Rate Reserve Percentage or, in the
case of Eurodollar Rate Advances, included in the Eurodollar
Rate Reserve Percentage) in or in the interpretation of any law
or regulation or (ii) the compliance with any guideline or
request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any
increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Adjusted CD Rate Advances or
Eurodollar Rate Advances, then the Borrower of the affected
Advances shall from time to time, upon demand by such Lender
(with a copy of
<PAGE>
27
such demand to the Agent), pay to the Agent for the account of
such Lender additional amounts sufficient to compensate such
Lender for such increased cost, provided that before making any
--------
such demand, such Lender shall designate a different Applicable
Lending Office if such designation will avoid the need for, or
reduce the amount of, such increased cost and will not, in the
reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender. A certificate as to the amount
of such increased cost, submitted to PM Companies, such
Borrower and the Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(b) If, in the case of any Adjusted CD Rate Advance,
the Assessment Rate for the Interest Period for such Adjusted
CD Rate Advance shall be less than the annual assessment for
such Interest Period actually paid by such Lender to the
Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of such Lender in the United
States, then the Borrower of the affected Advance shall, upon
demand of such Lender (with a copy of such demand to the
Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for
such increased assessment. A certificate as to the amounts of
such increased assessment, submitted to PM Companies, such
Borrower and the Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(c) In the event that after the date hereof the
implementation of or any change in any law or regulation, or
any guideline or directive (whether or not having the force of
law) or the interpretation or administration thereof by any
central bank or other authority charged with the administration
thereof, imposes, modifies or deems applicable any capital
adequacy or similar requirement (including, without limitation,
a request or requirement which affects the manner in which any
Lender allocates capital resources to its commitments,
including its obligations hereunder) and as a result thereof,
in the sole opinion of such Lender, the rate of return on such
Lender's capital as a consequence of its obligations hereunder
is reduced to a level below that which such Lender could have
achieved but for such circumstances, but reduced to the extent
that Borrowings are outstanding from time to time, then in each
such case upon demand from time to time PM Companies shall pay
to such Lender such additional amount or amounts as shall
compensate such Lender for such reduction in rate of return,
provided that, in the case of each Lender, such additional
--------
amount or amounts shall not exceed 0.15 of 1% per annum on such
<PAGE>
28
Lender's Commitment. A certificate of such Lender as to any
such additional amount or amounts shall be conclusive and
binding for all purposes, absent manifest error. Except as
provided below, in determining any such amount or amounts each
Lender may use any reasonable averaging and attribution
methods. Notwithstanding the foregoing, each Lender shall take
all reasonable actions to avoid the imposition of, or reduce
the amounts of, such increased costs, provided that such
actions, in the reasonable judgment of such Lender, will not be
otherwise disadvantageous to such Lender, and, to the extent
possible, each Lender will calculate such increased costs based
upon the capital requirements for its commitment hereunder and
not upon the average or general capital requirements imposed
upon such Lender.
SECTION 2.12. Payments and Computations. (a) PM
-------------------------
Companies and each Borrower shall make each payment hereunder
not later than 11:00 A.M. (New York City time) on the day when
due in U.S. dollars to the Agent at its address referred to in
Section 10.02 in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the
payment of principal or interest or fees ratably (other than
amounts payable pursuant to Section 2.02(c), 2.03, 2.08,
2.10(b)(ii) or (c), 2.11, 2.13 or 10.04(b)) to the Lenders for
the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable
to any Lender to such Lender for the account of its Applicable
Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 10.07(d),
from and after the effective date specified in such Assignment
and Acceptance, the Agent shall make all payments hereunder and
under the B Notes in respect of the interest assigned thereby
to the Lender assignee thereunder, and the parties to such
Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) Each Borrower hereby authorizes each Lender, if
and to the extent payment owed to such Lender is not made to
the Agent for the account of such Lender when due hereunder, to
charge from time to time against any or all of such Borrower's
accounts with such Lender any amount so due.
(c) All computations of interest based on the Base
Rate shall be made by the Agent on the basis of a year of 365
or 366 days, as the case may be, and all computations of
interest based on the Adjusted CD Rate, the Eurodollar Rate
<PAGE>
29
or the Federal Funds Rate and of fees shall be made by the
Agent, and all computations of interest pursuant to Section
2.08 shall be made by a Lender, on the basis of a year of 360
days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period
for which such interest or fees are payable. Each
determination by the Agent (or, in the case of Section 2.08, by
a Lender) of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder shall be stated to
be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of
payment of interest or fees, as the case may be; provided,
--------
however, if such extension would cause payment of interest on
-------
or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the
next preceding Business Day.
(e) Unless the Agent shall have received notice from
any Borrower prior to the date on which any payment is due from
such Borrower to the Lenders hereunder that such Borrower will
not make such payment in full, the Agent may assume that such
Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such date an amount equal
to the amount then due such Lender. If and to the extent that
such Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on
demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. Taxes. (a) Any and all payments by
-----
each Borrower and PM Companies hereunder shall be made, in
accordance with Section 2.12, free and clear of and without
deductions for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, (i) in the case of
---------
each Lender and the Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the
laws of which such Lender or the Agent (as the case may be) is
organized or any political subdivision thereof, (ii) in the
case of each Lender, taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political
<PAGE>
30
subdivision thereof, and (iii) in the case of each Lender and
the Agent, taxes imposed by the United States by means of
withholding tax if and to the extent that such taxes shall be
in effect and shall be applicable on the date hereof, to
payments to be made to such Lender's Applicable Lending Office
or to the Agent (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower or PM
Companies shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to any Lender or the
Agent, (A) the sum payable shall be increased as may be
necessary so that after making all required deductions
(including deductions applicable to additional sums payable
under this Section 2.13) such Lender or the Agent (as the case
may be) receives an amount equal to the sum it would have
received had no such deductions been made, (B) such Borrower
and PM Companies shall make such deductions and (C) such
Borrower and PM Companies shall pay the full amount deducted to
the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, each Borrower and PM Companies
agrees to pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as "Other
Taxes").
(c) Each Borrower and PM Companies will indemnify
each Lender and the Agent for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this
Section 2.13) paid by such Lender or the Agent (as the case may
be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within 30 days
from the date such Lender or the Agent (as the case may be)
makes written demand therefor.
(d) Within 30 days after the date of any payment
of Taxes, each Borrower and PM Companies will furnish to the
Agent, at its address referred to in Section 10.02, the
original or a certified copy of a receipt evidencing payment
thereof by such Borrower or PM Companies.
(e) Without prejudice to the survival of any other
agreement of any Borrower or PM Companies hereunder, the
agreements and obligations of each Borrower and PM Companies
<PAGE>
31
contained in this Section 2.13 shall survive the payment in
full of principal and interest hereunder.
(f) Prior to the date of the initial Borrowing
hereunder, and from time to time thereafter if requested by any
Borrower, PM Companies or the Agent, each Lender organized
under the laws of a jurisdiction outside the United States
shall provide the Agent, PM Companies and such Borrower with
the forms prescribed by the Internal Revenue Service of the
United States certifying such Lender's exemption from United
States withholding taxes with respect to all payments to be
made to such Lender hereunder. Unless the Borrower, PM
Companies and the Agent have received forms or other documents
satisfactory to them indicating that payments hereunder are not
subject to United States withholding tax or are subject to such
tax at a rate reduced by an applicable tax treaty, such
Borrower, PM Companies or the Agent shall withhold taxes from
such payments at the applicable statutory rate in the case of
payments to or for any Lender organized under the laws of a
jurisdiction outside the United States.
(g) Any Lender claiming any additional amounts
payable pursuant to this Section 2.13 shall use its best
efforts (consistent with its internal policy and legal and
regulatory restrictions) to change the jurisdiction of its
Applicable Lending Office so as to eliminate the amount of any
such costs or additional amounts which may thereafter accrue;
provided that no such change shall be made if, in the
--------
reasonable judgment of such Lender, such change would be
disadvantageous to such Lender.
SECTION 2.14. Sharing of Payments, Etc. If any
------------------------
Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or
otherwise) on account of the A Advances made by it (other than
pursuant to Section 2.02(c), 2.08, 2.10(b)(ii) or (c), 2.11,
2.13 or 10.04(b)) in excess of its ratable share of payments on
account of the A Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such
participations in the A Advances made by them as shall be
necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if
-------- -------
all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each
Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lender's ratable
share (according to the proportion of (i) the amount of such
Lender's required repayment to (ii)
<PAGE>
32
the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. Each
Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.14 may, to the
fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation.
SECTION 2.15. Evidence of Debt. (a) Each Lender
----------------
shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of each Borrower to
such Lender resulting from each A Advance made to such Borrower
owing to such Lender from time to time, including the amounts
of principal thereof and interest thereon payable and paid to
such Lender from time to time hereunder.
(b) The Register maintained by the Agent pursuant to
Section 10.07(c) shall include a control account, and a
subsidiary account for each Lender, in which accounts (taken
together) shall be recorded (i) the date and amount of each A
Borrowing made hereunder, the Type of Advances comprising such
Borrowing and the Interest Period applicable thereto, (ii) the
terms of each Assignment and Acceptance delivered to and
accepted by it, (iii) the amount of any principal or interest
due and payable or to become due and payable from each Borrower
to each Lender hereunder, and (iv) the amount of any sum
received by the Agent from such Borrower hereunder and each
Lender's share thereof.
(c) The entries made in the Register shall be
conclusive and binding for all purposes, absent manifest error.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to Initial
------------------------------
Advances. The obligation of each Lender to make an Advance on
--------
the occasion of the initial Borrowing by each Borrower is
subject to the condition precedent that the Agent shall have
received on or before the day of such initial Borrowing the
following, each dated such day, in form and substance
satisfactory to the Agent and in sufficient copies for each
Lender:
<PAGE>
33
(a) Certified copies of the resolutions of each of
the Board of Directors of such Borrower and (unless PM
Companies is the Borrower) the Guarantor approving this
Agreement, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, on
behalf of such company or companies with respect to this
Agreement.
(b) A certificate of the Secretary or an Assistant
Secretary of each of such Borrower and (unless PM Companies
is the Borrower) the Guarantor certifying the names and
true signatures of the officers of such company or
companies authorized to sign this Agreement and the other
documents to be delivered on behalf of such company or
companies hereunder.
(c) A favorable opinion of Hunton & Williams, counsel
for PM Companies, substantially in the form of Exhibit D
hereto and as to such other matters as any Lender through
the Agent may reasonably request.
(d) A favorable opinion of Shearman & Sterling,
special counsel for the Agent, substantially in the form of
Exhibit E hereto.
(e) A certificate of the chief financial officer of
PM Companies certifying that as of September 30, 1993 (i)
the aggregate amount of Debt, payment of which is secured
by any lien, security interest or other charge or
encumbrance referred to in clause (iii) of Section 5.02(a)
hereof, does not exceed $400,000,000 and (ii) the aggregate
amount of Debt included in clause (i) of this subsection (e),
payment of which is secured by any lien, security interest or
other charge or encumbrance referred to in clause (iv) of Section
5.02(a), does not exceed $200,000,000.
SECTION 3.02. Conditions Precedent to Each
----------------------------
A Borrowing. The obligation of each Lender to make an
-----------
A Advance on the occasion of each A Borrowing (including the
initial A Borrowing) shall be subject to the further conditions
precedent that on the date of such A Borrowing, before and
after giving effect thereto and to the application of the
proceeds therefrom (a) the following statements shall be true
(and each of the giving of the applicable Notice of A Borrowing
and the acceptance by the Borrower named therein of the
proceeds of such A Borrowing shall constitute a representation
and warranty by such Borrower and (unless PM Companies is the
Borrower) the Guarantor that on the date of such A Borrowing,
before and after giving effect thereto and
<PAGE>
34
to the application of the proceeds therefrom, such statements
are true):
(i) The representations and warranties contained in
Section 4.01 (excluding those contained in subsections (e)
and (f) thereof) are correct on and as of the date of such
Borrowing as though made on and as of such date;
(ii) No event has occurred and is continuing, or would
result from such A Borrowing, which constitutes an Event of
Default; and
(iii) If such A Borrowing is in an aggregate principal
amount equal to or greater than $500,000,000 and is being
made in connection with any purchase of shares of such
Borrower's or the Guarantor's capital stock or the capital
stock of any other Person, or any purchase of all or
substantially all of the assets of any Person (whether in
one transaction or a series of transactions) or any
transaction of the type referred to in Section 5.02(b), the
statements in (i) and (ii) above shall also be true on a
pro forma basis as if such transaction or purchase shall
have been completed;
and (b) the Agent shall have received such other approvals,
opinions or documents as any Lender through the Agent may
reasonably request.
SECTION 3.03. Condition Precedent to Certain A
--------------------------------
Borrowings. The obligation of each Lender to make that portion
----------
of an A Advance on the occasion of any A Borrowing (including
the initial A Borrowing) which would increase the aggregate
outstanding amount of A Advances owing to such Lender over the
aggregate amount of such A Advances outstanding immediately
prior to the making of such A Advance shall be subject to the
further condition precedent that on the date of such A
Borrowing, before and after giving effect thereto and to the
application of the proceeds therefrom, the following statement
shall be true (and each of the giving of the applicable Notice
of A Borrowing and the acceptance by the Borrower named therein
of the proceeds of such A Borrowing shall constitute a
representation and warranty by such Borrower and (unless PM
Companies is the Borrower) the Guarantor that on the date of
such A Borrowing, before and after giving effect thereto and to
the application of the proceeds therefrom, such statement is
true): no event has occurred and is continuing, or would
result from such A Borrowing, which would constitute an Event
of Default but for the requirement that notice be given or time
elapse or both.
<PAGE>
35
SECTION 3.04. Conditions Precedent to Each
----------------------------
B Borrowing. The obligation of each Lender which is to make a B
-----------
Advance on the occasion of a B Borrowing (including the initial
B Borrowing) to make such B Advance as part of such B Borrowing
is subject to the conditions precedent that (i) at least two
Business Days before the date of such B Borrowing in the case
of a B Borrowing under subsection (a)(i)(A) of Section 2.03 and
at least four Business Days before the date of such B Borrowing
in the case of a B Borrowing under subsection (a)(i)(B) of
Section 2.03, the Agent shall have received the written
confirmatory Notice of B Borrowing with respect thereto, (ii)
on or before the date of such B Borrowing, but prior to such B
Borrowing, the Agent shall have received a B Note of the
Borrower thereof payable to the order of such Lender for each
of the one or more B Advances to be made by such Lender as part
of such B Borrowing, in a principal amount equal to the
principal amount to be evidenced thereby and otherwise on such
terms as were agreed to for such B Advance by such Borrower and
such Lender in accordance with Section 2.03, and (iii) on the
date of such B Borrowing, before and after giving effect
thereto and to the application of the proceeds therefrom, the
following statements shall be true (and each of the giving of
the applicable Notice of B Borrowing and the acceptance by such
Borrower of the proceeds of such B Borrowing shall constitute a
representation and warranty by such Borrower and (unless PM
Companies is the Borrower) the Guarantor that on the date of
such B Borrowing, before and after giving effect thereto and to
the application of the proceeds therefrom, such statements are
true):
(a) The representations and warranties contained in
Section 4.01 are correct on and as of the date of such
B Borrowing as though made on and as of such date; and
(b) No event has occurred and is continuing, or would
result from such B Borrowing, which constitutes an Event of
Default or which would constitute an Event of Default but
for the requirement that notice be given or time elapse or
both.
SECTION 3.05. Conditions Precedent to Effectiveness
-------------------------------------
of this Agreement. This Agreement shall not become effective
-----------------
until:
(a) The Agent shall have received on or before the
date of effectiveness a letter from PM Companies dated on
or before such day, terminating in whole the commitments of
the banks parties to the Loan and Guaranty Agreement dated
as of October 1, 1991, as amended (the "1991 Loan
<PAGE>
36
Agreement") among PM Companies, the banks named therein and
Citibank, as agent, and each of the Banks that is a party
to the 1991 Loan Agreement hereby waives, upon execution of
this Agreement, the five Business Days' notice required by
Section 2.05(a) of the 1991 Loan Agreement relating to the
termination of the commitments under the 1991 Loan
Agreement; and
(b) PM Companies and its subsidiaries shall have
satisfied all of their respective obligations under the
1991 Loan Agreement including, without limitation, the
payment of all fees under such agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of PM
------------------------------------
Companies. PM Companies represents and warrants as follows:
---------
(a) It is a corporation duly organized, validly
existing and in good standing under the laws of Virginia.
(b) The execution, delivery and performance of this
Agreement and the B Notes (including the guaranties
hereunder and under the B Notes) are within its corporate
powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) its charter or
by-laws or (ii) any law, rule, regulation or order of any
court or governmental agency or any contractual restriction
binding on or affecting it.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by it of this Agreement or the B
Notes (including the guaranties hereunder and under the B
Notes).
(d) This Agreement (including the guaranty hereunder)
is, and each of the B Notes (including the guaranties under
the B Notes) when delivered hereunder will be, a legal,
valid and binding obligation of PM Companies enforceable
against PM Companies in accordance with its terms, subject
to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors' rights generally and to the effect of general
principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or
at law).
<PAGE>
37
(e) The consolidated balance sheet of PM Companies
and its consolidated subsidiaries as at September 30, 1993
and the consolidated statements of earnings of PM Companies
and its consolidated subsidiaries for the nine months then
ended fairly present, subject to year-end audit
adjustments, the consolidated financial condition of PM
Companies and its consolidated subsidiaries as at such date
and the consolidated results of the operations of PM
Companies and its consolidated subsidiaries for the period
ended on such date, all in accordance with generally
accepted accounting principles consistently applied, and,
except as disclosed in PM Companies' quarterly report on
Form 10-Q for the quarter ended September 30, 1993 and its
current report on Form 8-K dated November 24, 1993, since
September 30, 1993, there has been no material adverse
change in such condition or operations.
(f) There is no pending or threatened action or
proceeding affecting it or any of its subsidiaries before
any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or
operations of PM Companies and its subsidiaries taken as a
whole or which purports to affect the legality, validity or
enforceability of this Agreement (including the guaranties
hereunder and under the B Notes).
(g) It owns directly or indirectly 100% of the
capital stock of each other Borrower and 100% of the
capital stock of Philip Morris.
(h) No ERISA Event (other than a reportable event
described in Section 2615.23 of Title 29 of the Code of
Federal Regulations) has occurred nor is any ERISA Event
reasonably expected to occur with respect to any Major
Plan, or any Significant Plan.
(i) Schedule B (Actuarial Information) to the most
recently completed annual report (Form 5500 Series) with
respect to each Plan which is a Major Plan or a Significant
Plan, copies of which have been filed with the Internal
Revenue Service and furnished to each Bank, is complete and
accurate and fairly presents the funding status of such
Plan, and since the date of such Schedule B there has been
no material adverse change in such funding status; provided
--------
that no change in the funding status of any such Plan shall
be deemed to be materially adverse from that disclosed on
such Schedule B unless there is an Insufficiency which,
when aggregated with the Insufficiency of each other Plan,
exceeds $100,000,000.
<PAGE>
38
(j) Neither any Borrower nor PM Companies nor any of
their ERISA Affiliates has incurred or reasonably expects
to incur any Withdrawal Liability under ERISA to any
Multiemployer Plan requiring payments to such Multiemployer
Plan in an annual amount which, when aggregated together
with all other payments required to be made to
Multiemployer Plans as a result of Withdrawal Liabilities
incurred or reasonably expected to be incurred by the
Borrowers, PM Companies and their ERISA Affiliates, exceeds
$25,000,000.
ARTICLE V
COVENANTS OF PM COMPANIES
SECTION 5.01. Affirmative Covenants. So long as any
---------------------
Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, PM Companies will, unless the Majority
Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause
-------------------------
each Major Subsidiary to comply, in all material respects
with all applicable laws, rules, regulations and orders
(such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments
and governmental charges imposed upon it or upon its
property except to the extent contested in good faith),
noncompliance with which would materially adversely affect
its business or credit.
(b) Maintenance of Ratio of Net Income Before Tax to
------------------------------------------------
Fixed Charges. Maintain a ratio of aggregate consolidated
-------------
Net Income Before Tax for the four most recent fiscal
quarters for which consolidated statements of earnings have
been delivered pursuant to Section 5.01(c)(i) or (ii)
hereof to consolidated Fixed Charges for such four most
recent fiscal quarters of not less than 2.5 to 1.0.
(c) Reporting Requirements. Furnish to the Lenders:
----------------------
(i) as soon as available and in any event within
60 days after the end of each of the first three
quarters of each fiscal year of PM Companies, a
consolidated balance sheet of PM Companies and its
consolidated subsidiaries as of the end of such
quarter and consolidated statements of earnings of PM
Companies and its consolidated subsidiaries
<PAGE>
39
for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter,
certified by the chief financial officer of PM
Companies;
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of PM
Companies, a copy of the financial statements for such
year for PM Companies and its consolidated
subsidiaries, audited by Coopers & Lybrand (or other
independent accountants which, as of the date of this
Agreement, are one of the "big six" accounting firms);
(iii) as soon as possible and in any event within
five days after the occurrence of each Event of
Default and each event which, with the giving of
notice or lapse of time, or both, would constitute an
Event of Default, continuing on the date of such
statement, a statement of the chief financial officer
of PM Companies setting forth details of such Event of
Default or event and the action which PM Companies has
taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing
thereof, copies of all reports which PM Companies
sends to any of its shareholders, and copies of all
periodic reports on Forms 10-K, 10-Q and 8-K (or any
successor forms adopted by the Securities and Exchange
Commission) which PM Companies files with the
Securities and Exchange Commission;
(v) as soon as possible and in any event (A)
within 30 days after any Borrower or PM Companies or
any of their ERISA Affiliates knows or has reason to
know that any ERISA Event described in clause (i) of
the definition of ERISA Event (other than a Reportable
Event described in Section 2615.23 of Title 29 of the
Code of Federal Regulations) with respect to any Major
Plan or any Significant Plan has occurred and (B)
within 10 days after any Borrower or PM Companies or
any of their ERISA Affiliates knows or has reason to
know that any other ERISA Event with respect to any
Major Plan or any Significant Plan has occurred, a
statement of the chief financial officer of PM
Companies describing such ERISA Event and the action,
if any, which such Borrower or PM Companies or such
ERISA Affiliate proposes to take with respect thereto;
<PAGE>
40
(vi) promptly and in any event within two
Business Days after receipt thereof by any Borrower or
PM Companies or any of their ERISA Affiliates from the
PBGC, copies of each notice received by such Borrower
or PM Companies or any such ERISA Affiliate of the
PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan;
(vii) promptly and in any event within 30 days
after the filing thereof with the Internal Revenue
Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series)
with respect to each Major Plan and each Significant
Plan;
(viii) promptly and in any event within five
Business Days after receipt thereof by any Borrower or
PM Companies or any of their ERISA Affiliates from a
Multiemployer Plan sponsor, a copy of each notice
received by such Borrower or PM Companies or any of
their ERISA Affiliates concerning the imposition of
Withdrawal Liability where the aggregate annual
payments for such Withdrawal Liability exceeds
$10,000,000;
(ix) promptly and in any event within 60 days
after the date on which a Plan which is not a Major
Plan or a Significant Plan on the date hereof becomes a
Major Plan or Significant Plan, copies of each
Schedule B (Actuarial Information) to the most recent
Annual Report (Form 5500 Series) filed with the
Internal Revenue Service with respect to such Plan,
together with a statement of the chief financial
officer of PM Companies describing any material
adverse change in the funding status of such Plan
since the date of such Schedule B; and
(x) such other information respecting the
condition or operations, financial or otherwise, of PM
Companies or any Major Subsidiary as any Lender
through the Agent may from time to time reasonably
request.
SECTION 5.02. Negative Covenants. So long as any
------------------
Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, PM Companies will not, without the
written consent of the Majority Lenders:
<PAGE>
41
(a) Liens, Etc. Create or suffer to exist, or permit
----------
any Major Subsidiary to create or suffer to exist, any
lien, security interest or other charge or encumbrance, or
any other type of preferential arrangement, upon or with
respect to any of its properties, whether now owned or
hereafter acquired, or assign, or permit any Major
Subsidiary to assign, any right to receive income, in each
case to secure or provide for the payment of any Debt of
any Person, other than (i) purchase money liens or purchase
money security interests upon or in any property acquired
or held by it or any Major Subsidiary in the ordinary
course of business to secure the purchase price of such
property or to secure indebtedness incurred solely for the
purpose of financing the acquisition of such property, (ii)
liens or security interests existing on such property at
the time of its acquisition (other than any such lien or
security interest created in contemplation of such
acquisition), (iii) liens or security interests existing on
the date hereof securing Debt, (iv) liens or security
interests on property financed through the issuance of
industrial revenue bonds in favor of the holders of such
bonds or any agent or trustee therefor, (v) liens or
security interests existing on property of any Person
acquired by it or any Major Subsidiary, (vi) liens or
security interests securing Debt in an aggregate amount not
in excess of 5% of PM Companies' Consolidated Tangible
Assets, or (vii) liens or security interests upon or with
respect to "margin stock" as that term is defined in
Regulation U issued by the Board of Governors of the
Federal Reserve System.
(b) Mergers, Etc. Merge or consolidate with or into,
------------
or convey, transfer, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially all
of the assets of, any Person, or permit any subsidiary
directly or indirectly owned by it to do so, unless,
immediately after giving effect thereto, no Event of
Default or event which, with the giving of notice or lapse
of time, or both, would constitute an Event of Default
would exist and, in the case of any merger or consolidation
to which it is a party, it is the surviving corporation
and, in the case of any merger or consolidation to which a
Borrower other than PM Companies is a party, the
corporation formed by such consolidation or into which such
Borrower shall be merged shall be a corporation organized
and existing under the laws of the United States of America
or any
<PAGE>
42
State thereof, or the District of Columbia, and shall
assume such Borrower's obligations under this Agreement by
the execution and delivery of an instrument in form and
substance satisfactory to the Majority Lenders and a Notice
of Acceptance.
(c) Compliance with ERISA. Permit to exist any
---------------------
occurrence of any Reportable Event (as defined in Title IV
of ERISA), or any other event or condition, which presents a
material risk of termination by the PBGC of any Major Plan.
(d) Maintenance of Ownership of Philip Morris. Sell
-----------------------------------------
or otherwise dispose of any shares of capital stock of
Philip Morris.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
-----------------
following events ("Events of Default") shall occur and be
continuing:
(a) Any Borrower or PM Companies shall fail to pay
any principal of, or interest on, any Advance, or PM
Companies shall fail to pay any fees payable under Section
2.04, when the same become due and payable; or
(b) Any representation or warranty made or deemed to
have been made by any Borrower or PM Companies herein or by
any Borrower or PM Companies (or any of their respective
officers) in connection with this Agreement shall prove to
have been incorrect in any material respect when made or
deemed to have been made; or
(c) Any Borrower or PM Companies shall fail to
perform or observe (i) any term, covenant or agreement
contained in Section 5.01(b) or 5.02, or (ii) any other
term, covenant or agreement contained in this Agreement on
its part to be performed or observed if such failure shall
remain unremedied for 10 days after written notice thereof
shall have been given to PM Companies by the Agent or any
Lender; or
(d) Any Borrower or PM Companies or any Major
Subsidiary shall fail to pay any principal of or premium or
interest on any Debt which is outstanding in a principal
amount of at least $50,000,000 in the aggregate
<PAGE>
43
(but excluding Debt arising under this Agreement) of such
Borrower or PM Companies or such Major Subsidiary (as the
case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such
Debt unless adequate provision for any such payment has
been made in form and substance satisfactory to the
Majority Lenders; or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Debt which is outstanding in a
principal amount of at least $100,000,000 in the aggregate
and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the
effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt
(other than any such Debt owed to a Lender or an affiliate
of a Lender if such event or condition shall relate solely
to a restriction on margin stock, as that term is defined
in Regulation U issued by the Board of Governors of the
Federal Reserve System) unless adequate provision for the
payment of such Debt has been made in form and substance
satisfactory to the Majority Lenders; or any Debt of any
Borrower or PM Companies or any Major Subsidiary which is
outstanding in a principal amount of at least $50,000,000
in the aggregate (but excluding Debt arising under this
Agreement) shall be declared to be due and payable, or
required to be prepaid (other than by a scheduled required
prepayment), redeemed, purchased or defeased, or an offer
to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated
maturity thereof unless adequate provision for the payment
of such Debt has been made in form and substance
satisfactory to the Majority Lenders; or
(e) Any Borrower or PM Companies or any Major
Subsidiary shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be
instituted by or against any Borrower or PM Companies or
any Major Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for
relief or the
<PAGE>
44
appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its
property, and, in the case of any such proceeding
instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a
period of 45 days or any of the actions sought in such
proceeding (including, without limitation, the entry of an
order for relief against it or the appointment of a
receiver, trustee, custodian or other similar official for
it or for any substantial part of its property) shall
occur; or any Borrower or PM Companies or any Major
Subsidiary shall take any corporate action to authorize any
of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in
excess of $50,000,000 shall be rendered against any
Borrower or PM Companies or any Major Subsidiary and either
(i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a
stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) Any ERISA Event with respect to Plan (a "Subject
ERISA Event") shall have occurred, and, 30 days after
notice thereof shall have been given to PM Companies by any
Lender, (i) such Subject ERISA Event (if correctible) shall
not have been corrected and (ii) the Insufficiency of any
such Plan, when aggregated with the Insufficiencies
(determined as of the date of the Subject ERISA Event) of
all other Plans, if any, which were Plans on or after the
date hereof and with respect to which an ERISA Event has
occurred, exceeds $100,000,000; or
(h) Any Borrower or PM Companies or any of their
ERISA Affiliates shall have made a complete or partial
withdrawal from a Multiemployer Plan and the plan sponsor
of such Multiemployer Plan shall have notified such
withdrawing employer that such employer has incurred a
Withdrawal Liability in an annual amount which, when
aggregated together with all other payments required to be
made to Multiemployer Plans whose plan sponsors have
notified such Borrower, PM Companies or any of their ERISA
Affiliates that a Withdrawal Liability has been incurred by
such Borrower, PM Companies or any of their ERISA
Affiliates under such Multiemployer Plans, exceeds
$25,000,000; or
<PAGE>
45
(i) The guaranty provided by PM Companies under
Article VIII hereof or any guaranty endorsed by PM
Companies on any B Note after delivery thereof under
Section 3.04 shall for any reason cease to be valid and
binding on PM Companies or PM Companies shall so state in
writing;
then, and in any such event, the Agent (i) shall at the
request, or may with the consent, of the Majority Lenders, by
notice to PM Companies and the Borrowers, declare the
obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at
the request, or may with the consent, of the Majority Lenders,
by notice to PM Companies and the Borrowers, declare all the
Advances then outstanding, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and
payable, whereupon the Advances then outstanding, all such
interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by
the Borrowers; provided, however, that in the event of an
-------- -------
actual or deemed entry of an order for relief with respect to
any Borrower, PM Companies or any Major Subsidiary under the
Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the
Advances then outstanding, all such interest and all such
amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrowers.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender
------------------------
hereby appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto.
As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of
the Debt resulting from the Advances), the Agent shall not be
required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall
be fully protected in so acting or refraining from acting) upon
the instructions of the Majority Lenders, and such instructions
shall be binding upon all Lenders; provided, however, that the
-------- -------
Agent shall not
<PAGE>
46
be required to take any action which exposes the Agent to
personal liability or which is contrary to this Agreement or
applicable law. The Agent agrees to give to each Lender prompt
notice of each notice given to it by PM Companies or any
Borrower pursuant to the terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the
---------------------
Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by
it or them under or in connection with this Agreement, except
for its or their own gross negligence or wilful misconduct.
Without limitation of the generality of the foregoing, the
Agent: (i) may treat the Lender that made any Advance as the
holder of the Debt resulting therefrom until the Agent receives
and accepts an Assignment and Acceptance entered into by such
Lender, as assignor, and an Eligible Assignee, as assignee, as
provided in Section 10.07; (ii) may consult with legal counsel
(including counsel for the Borrowers and PM Companies),
independent accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken
in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to
any Lender for any statements, warranties or representations
made in or in connection with this Agreement; (iv) shall not
have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of
this Agreement on the part of any Borrower or PM Companies or
to inspect the property (including the books and records) of
any Borrower or PM Companies; (v) shall not be responsible to
any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished
pursuant hereto; and (vi) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent,
certificate or, other instrument or writing (which may be by
telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect
-----------------------
to any Commitment of, or any Advance made by, Citibank or any
of its affiliates, Citibank shall have the same rights and
powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term
"Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Citibank in its individual capacity.
Citibank and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally
engage in any kind of business with, any
<PAGE>
47
Borrower, PM Companies, any of their respective subsidiaries
and any Person who may do business with or own securities of
any Borrower or PM Companies or any such subsidiary, all as if
Citibank were not the Agent and without any duty to account
therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender
----------------------
acknowledges that it has, independently and without reliance
upon the Agent or any other Lender and based on the financial
statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate, made its own
credit analysis, and decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and
without reliance upon the 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 decisions in
taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to
---------------
indemnify the Agent (to the extent not reimbursed by PM
Companies or any Borrower), ratably according to the respective
principal amounts of Advances then owing to each of them (or if
no such Advances are at the time outstanding or if any such
Advances are then owing to Persons which are not Lenders,
ratably according to the respective amounts of their
Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent under
this Agreement, provided that no Lender shall be liable for any
--------
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or
wilful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including
counsel fees and expenses) incurred by the Agent in connection
with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this
Agreement, to the extent that the Agent is not reimbursed for
such expenses by PM Companies or any Borrower.
SECTION 7.06. Successor Agent. The Agent may resign
---------------
at any time by giving written notice thereof to the
<PAGE>
48
Lenders and PM Companies and may be removed at any time with or
without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the
right to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Majority Lenders, and shall
have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation or the
Majority Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a Lender having and acting
through a New York office, or a commercial bank organized under
the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least
$500,000,000 which is not a Lender. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Article VII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
ARTICLE VIII
GUARANTY
SECTION 8.01. Guaranty. The Guarantor hereby
--------
unconditionally and irrevocably guarantees (the undertaking of
the Guarantor contained in this Article VIII being the
"Guaranty") the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of
each Borrower now or hereafter existing under this Agreement
(other than such obligations under Section 2.03(d) and (e)
which are covered by the guaranty under the B Notes), whether
for principal, interest, fees, expenses or otherwise (such
obligations being the "Obligations"), and any and all expenses
(including counsel fees and expenses) incurred by the Agent or
the Lenders in enforcing any rights under the Guaranty.
SECTION 8.02. Guaranty Absolute. The Guarantor
-----------------
guarantees that the Obligations will be paid strictly in
accordance with the terms of this Agreement, regardless of any
law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the
Agent or the Lenders with respect thereto. The liability
<PAGE>
49
of the Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:
(i) any lack of validity, enforceability or
genuineness of any provision of this Agreement or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
consent to departure from this Agreement;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or
consent to departure from any other guaranty, for all or
any of the Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, a
Borrower or the Guarantor.
This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the
Agent or any Lender upon the insolvency, bankruptcy or
reorganization of a Borrower or otherwise, all as though such
payment had not been made.
SECTION 8.03. Waivers. (a) The Guarantor hereby
-------
waives promptness, diligence, notice of acceptance and any
other notice with respect to any of the Obligations and this
Guaranty and any requirement that the Agent or any Lender
protect, secure, perfect or insure any security interest or
lien or any property subject thereto or exhaust any right or
take any action against a Borrower or any other Person or any
collateral.
(b) The Guarantor hereby irrevocably waives any
claims or other rights that it may now or hereafter acquire
against any Borrower that arise from the existence, payment,
performance or enforcement of the Guarantor's obligations under
this Guaranty or this Agreement, including, without limitation,
any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in
any claim or remedy of the Agent or any Lender against such
Borrower or any collateral, whether or not such claim, remedy
or right arises in equity or under contract, statute or common
law, including, without limitation, the right to take or
receive from such Borrower, directly or indirectly, in cash or
other property or by set-off or in any
<PAGE>
50
other manner, payment or security on account of such claim,
remedy or right. If any amount shall be paid to the Guarantor
in violation of the preceding sentence at any time prior to the
later of the cash payment in full of the Obligations and all
other amounts payable under this Guaranty and the Termination
Date, such amount shall be held in trust for the benefit of the
Agent and the Lenders and shall forthwith be paid to the Agent
to be credited and applied to the Obligations and all other
amounts payable under this Guaranty, whether matured or
unmatured, in accordance with the terms of this Agreement and
this Guaranty, or to be held as collateral for any Obligations
or other amounts payable under this Guaranty thereafter
arising. The Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements
contemplated by this Agreement and this Guaranty and that the
waiver set forth in this subsection is knowingly made in
contemplation of such benefits.
SECTION 8.04. Payments Free and Clear of Taxes, Etc.
-------------------------------------
(a) Any and all payments made by the Guarantor hereunder shall
be made in accordance with Section 2.12 (concerning payments)
of this Agreement free and clear of and without deduction for
any and all present or future Taxes. If the Guarantor shall be
required by law to deduct any Taxes from or in respect of any
sum payable hereunder to any Lender or the Agent, (i) the sum
payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable
to additional sums payable under this Section) such Lender or
the Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made,
(ii) the Guarantor shall make such deductions and (iii) the
Guarantor shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with
applicable law.
(b) In addition, the Guarantor agrees to pay any
present or future Other Taxes which arise from any payment made
under this Guaranty or from the execution, delivery or
registration of, or otherwise with respect to, this Guaranty.
(c) The Guarantor will indemnify each Lender and the
Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by
such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days
<PAGE>
51
from the date such Lender or the Agent (as the case may be)
makes written demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, the Guarantor will furnish to the Agent, at its address
referred to in Section 10.02, the original or a certified copy
of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other
agreement of the Guarantor hereunder, the agreements and
obligations of the Guarantor contained in this Section 8.04
shall survive the payment in full of the principal of and
interest on the Advances.
(f) Unless in accordance with Section 2.13(f) a
Borrower, PM Companies and the Agent have received forms and
other documents satisfactory to them indicating that payments
hereunder are not subject to United States withholding tax or
are subject to such tax at a rate reduced by an applicable tax
treaty, the Guarantor or the Agent shall withhold taxes from
such payments at the applicable statutory rate in the case of
payments to or for any Lender organized under the laws of a
jurisdiction outside the United States.
SECTION 8.05. No Waiver; Remedies. No failure on the
-------------------
part of the Agent or any Lender to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right
hereunder, preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.06. Continuing Guaranty. This Guaranty is a
-------------------
continuing guaranty and shall (i) remain in full force and
effect until payment in full (after the Termination Date) of
the Obligations and all other amounts payable under this
Guaranty, (ii) be binding upon the Guarantor, its successors
and assigns, and (iii) inure to the benefit of and be
enforceable by the Lenders, the Agents and their respective
successors, transferees and assigns.
ARTICLE IX
SUBSIDIARY BORROWER
SECTION 9.01. Subsidiary Borrower. Any domestic or
-------------------
foreign subsidiary of the Guarantor shall have the right to
become a "Borrower" hereunder, and to borrow any unused
Commitments under this Agreement subject to the terms and
<PAGE>
52
conditions hereof applicable to a Borrower and to the following
additional conditions:
(a) PM Companies shall deliver a notice in the form
of Exhibit F hereto (a "Notice of Acceptance") signed by
such subsidiary and countersigned by the Guarantor to the
Agent stating that such subsidiary desires to become a
"Borrower" under this Agreement and agrees to be bound by
the terms hereof. From the time of receipt of such Notice
of Acceptance by the Agent, such subsidiary shall be a
"Borrower" hereunder with all of the rights and obligations
of a Borrower hereunder. No Notice of Acceptance relating
to a subsidiary may be revoked as to amounts owed by such
subsidiary to the Lenders under this Agreement or when a
Notice of Borrowing naming such subsidiary has been given
by PM Companies and is effective.
(b) Each Notice of Acceptance shall be accompanied by
an opinion of counsel for PM Companies to the effect of
clause (iv) below and shall contain the following
representations and warranties with respect to such
subsidiary:
(i) The subsidiary is a corporation duly
organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation.
(ii) The execution, delivery and performance by
the subsidiary of any B Notes executed and delivered
and to be executed and delivered by it, this Agreement
and such Notice of Acceptance are within the
subsidiary's corporate powers, have been duly
authorized by all necessary corporate action, and do
not contravene (i) the subsidiary's charter or by-laws
or (ii) any law, rule, regulation or order of any
court or governmental agency or any contractual
restriction binding on or affecting the subsidiary.
(iii) No authorization or approval or other action
by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due
execution, delivery and performance by the subsidiary
of any B Notes executed and delivered and to be
executed and delivered by it, this Agreement or such
Notice of Acceptance.
<PAGE>
53
(iv) This Agreement is, and any B Notes of such
subsidiary when delivered under this Agreement will
be, the legal, valid and binding obligation of the
subsidiary enforceable against the subsidiary in
accordance with their respective terms, subject to the
effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors rights generally and to the effect of
general principles of equity (regardless of whether
such enforceability is considered in a proceeding in
equity or at law).
(v) There is no pending or threatened action or
proceeding affecting the subsidiary or any of its
subsidiaries before any court, governmental agency or
arbitrator which purports to affect the legality,
validity or enforceability of this Agreement or any B
Note.
(vi) PM Companies owns directly or indirectly
100% of the capital stock of the subsidiary.
(c) For the purposes of Sections 3.02, 3.03 and 3.04,
each of the representations and warranties in the foregoing
Section 9.01(b) shall be deemed to be a representation and
warranty contained in Section 4.01.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or
---------------
waiver of any provision of this Agreement, nor consent to any
departure by any Borrower or the Guarantor therefrom, shall in
any event be effective unless the same shall be in writing and
signed by the Majority Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no
-------- -------
amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (a) waive
any of the conditions specified in Section 3.01, 3.02 (if and
to the extent that the Borrowing which is the subject of such
waiver would involve an increase in the aggregate outstanding
amount of Advances over the aggregate amount of Advances
outstanding immediately prior to such Borrowing) or 3.03, (b)
increase the Commitments of the Lenders or subject the Lenders
to any additional obligations, (c) reduce the principal of, or
interest on, the A Advances or any fees or other amounts
payable hereunder, (d) postpone any date fixed
<PAGE>
54
for any payment of principal of, or interest on, the A Advances
or any fees or other amounts payable hereunder, (e) change the
percentage of the Commitments or of the aggregate unpaid
principal amount of A Advances, or the number of Lenders which
shall be required for the Lenders or any of them to take any
action hereunder, (f) release the Guarantor from any of its
obligations under Article VIII or (g) amend this Section 10.01;
provided further that no waiver of the conditions specified in
-------- -------
Section 3.04 in connection with any B Borrowing shall be
effective unless consented to by all Lenders making B Advances
as part of such B Borrowing; and provided further that no
-------- -------
amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Lenders required above
to take such action, affect the rights or duties of the Agent
under this Agreement or any A Advance.
SECTION 10.02. Notices, Etc. Except as provided in
------------
Section 2.03(a) or (g), all notices and other communications
provided for hereunder shall be in writing (including
telegraphic, telecopy, telex or cable communication) and
mailed, telegraphed, telecopied, telexed, cabled or delivered,
if to any Borrower, at its address at c/o Philip Morris
Companies Inc., 120 Park Avenue, New York, New York 10017,
Attention: Treasurer; if to the Guarantor, at its address at
120 Park Avenue, New York, New York 10017, Attention:
Secretary; if to any Bank, at its Domestic Lending Office
specified opposite its name on Schedule I hereto; if to any
other Lender, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender;
and if to the Agent, at its address at One Court Square, Long
Island City, New York, 11120, Attention: John Sahr; or, as to
each party, at such other address as shall be designated by
such party in a written notice to PM Companies or the Agent
and, in the case of any such notice by any Borrower, PM
Companies or the Agent, to each other party hereto. All such
notices and communications shall, when mailed, telegraphed,
telecopied, telexed or cabled, be effective when deposited in
the mails, delivered to the telegraph company, transmitted by
telecopier, confirmed by telex answerback or delivered to the
cable company, respectively, except that notices and
communications to the Agent pursuant to Article II or VII shall
not be effective until received by the Agent.
SECTION 10.03. No Waiver; Remedies. No failure on
-------------------
the part of any Lender or the Agent to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such
right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided
<PAGE>
55
are cumulative and not exclusive of any remedies provided by
law.
SECTION 10.04. Costs, Expenses and Taxes. (a) PM
-------------------------
Companies agrees to pay on demand all costs and expenses in
connection with the preparation, execution, delivery,
administration (excluding any cost or expenses for
administration related to the Agent's overhead), modification
and amendment of this Agreement and the other documents to be
delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities under this
Agreement, and all costs and expenses of the Lenders and the
Agent, if any (including, without limitation, reasonable
counsel fees and expenses of the Lenders and the Agent), in
connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement and the other
documents to be delivered hereunder.
(b) If any payment of principal of any Adjusted CD
Rate Advance or Eurodollar Rate Advance is made other than on
the last day of the Interest Period for such Advance, as a
result of a payment pursuant to Section 2.10, acceleration of
the maturity of the Advances pursuant to Section 6.01, an
assignment made as a result of a demand by PM Companies
pursuant to Section 10.07(a) or for any other reason, PM
Companies shall, upon demand by any Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such
Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without
limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender
to fund or maintain such Advance. Without prejudice to the
survival of any other agreement of any Borrower or PM Companies
hereunder, the agreements and obligations of each Borrower and
PM Companies contained in Section 2.02(c), 2.08, 2.10(b)(ii) or
(c), 2.11 or this Section 10.04(b) shall survive the payment in
full of principal and interest hereunder.
(c) Each Borrower and the Guarantor jointly and
severally agree to indemnify and hold harmless the Agent and
each Lender and each of their respective affiliates, control
persons, directors, officers, employees, attorneys and agents
(each, an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and disbursements of
<PAGE>
56
counsel) which may be incurred by or asserted against any
Indemnified Party, in each case in connection with or arising
out of, or in connection with the preparation for or defense
of, any investigation, litigation, or proceeding (i) related to
any transaction or proposed transaction (whether or not
consummated) in which any proceeds of any Borrowing are applied
or proposed to be applied, directly or indirectly, by any
Borrower, whether or not such Indemnified Party is a party to
such transaction or (ii) related to any Borrower's or the
Guarantor's entering into this Agreement, or to any actions or
omissions of any Borrower or the Guarantor, any of their
respective subsidiaries or affiliates or any of its or their
respective officers, directors, employees or agents in
connection therewith, in each case whether or not an
Indemnified Party is a party thereto and whether or not such
investigation, litigation or proceeding is brought by the
Guarantor or any Borrower or any other Person; provided,
--------
however, that neither any Borrower nor the Guarantor shall be
-------
required to indemnify any such Indemnified Party from or
against any portion of such claims, damages, losses,
liabilities or expenses that is found in a final,
non-appealable judgment by a court of competent jurisdiction to
have resulted from the gross negligence or wilful misconduct of
such Indemnified Party.
SECTION 10.05. Right of Set-off. Upon (i) the
----------------
occurrence and during the continuance of any Event of Default
and (ii) the making of the request or the granting of the
consent specified by Section 6.01 to authorize the Agent to
declare the Advances due and payable pursuant to the provisions
of Section 6.01, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for
the credit or the account of any Borrower or the Guarantor
against any and all of the obligations of such Borrower or the
Guarantor now or hereafter existing under this Agreement,
irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may
be unmatured. Each Lender agrees promptly to notify the
appropriate Borrower or the Guarantor, as the case may be,
after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect
--------
the validity of such set-off and application. The rights of
each Lender under this Section are in addition to other rights
and remedies (including, without limitation, other rights of
set-off) which such Lender may have.
<PAGE>
57
SECTION 10.06. Binding Effect. This Agreement shall
--------------
become effective when it shall have been executed by PM
Companies and the Agent and when the Agent shall have been
notified by each Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the benefit of
each Borrower, the Guarantor, the Agent and each Lender and
their respective successors and assigns, except that neither
any Borrower nor the Guarantor shall have the right to assign
its rights hereunder or any interest herein without prior
written consent of the Lenders.
SECTION 10.07. Assignments and Participations. (a)
------------------------------
Each Lender may and, if demanded by PM Companies upon at least 5
Business Days' notice to such Lender and the Agent, will assign
to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the A
Advances owing to it); provided, however, that (i) each such
-------- -------
assignment shall be of a constant, and not a varying,
percentage of all of the assigning Lender's rights and
obligations under this Agreement (other than, except in the
case of an assignment made as a result of a demand by PM
Companies pursuant to this Section 10.07(a), any B Advances
owing to such Bank or any B Notes held by it), (ii) the amount
of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of
the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $25,000,000 and shall be an
integral multiple of $1,000,000, (iii) each such assignment
shall be to an Eligible Assignee, (iv) each such assignment
made as a result of a demand by PM Companies pursuant to this
Section 10.07(a) shall be arranged by PM Companies after
consultation with the Agent and shall be either an assignment
of all of the rights and obligations of the assigning Lender
under this Agreement or an assignment of a portion of such
rights and obligations made concurrently with another such
assignment or other such assignments which together cover all
of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any
such assignment as a result of a demand by PM Companies
pursuant to this Section 10.07(a) unless and until such Lender
shall have received one or more payments from either the
Borrowers to which it has outstanding Advances or one or more
Eligible Assignees in an aggregate amount at least equal to the
aggregate outstanding principal amount of the Advances owing to
such Lender, together with accrued interest thereon to the date
of payment of such principal amount and all other amounts
payable to such Lender under this Agreement and (vi) the
parties to each such assignment shall execute and deliver to
the Agent, for
<PAGE>
58
its acceptance and recording in the Register, an Assignment and
Acceptance, together with a processing and recordation fee of
$3,000, provided that, if such assignment is made as a result
--------
of a demand by PM Companies under this Section 10.07(a), PM
Companies shall pay or cause to be paid such $3,000 fee;
provided further that nothing in this Section 10.07 shall
-------- -------
prevent or prohibit any Lender from pledging its Advances
hereunder or any B Notes held by it to a Federal Reserve Bank
in support of borrowings by such Lender from such Federal
Reserve Bank. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be
a party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned
by it pursuant to such Assignment and Acceptance, relinquish
its rights (other than those provided under Section 10.04) and
be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be
a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made
in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower or PM
Companies or the performance or observance by any Borrower or
PM Companies of any of their respective obligations under this
Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such
documents and information as
<PAGE>
59
it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations
which by the terms of this Agreement are required to be
performed by it as a Lender.
(c) The Agent shall maintain at its address referred
to in Section 10.02 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances owing to,
each Lender from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes,
absent manifest error, and PM Companies, the Borrowers, the
Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes
of this Agreement. The Register shall be available for
inspection by PM Companies or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee representing
that it is an Eligible Assignee, the Agent shall, if such
Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice
thereof to PM Companies.
(e) Each Lender may sell participations to one or
more banks or other entities in or to all or a portion of its
rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Advances
owing to it and any B Note or Notes held by it); provided,
--------
however, that (i) such Lender's obligations under this
-------
Agreement (including, without limitation, its Commitment to PM
Companies hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall
remain the holder of any such B Note for all purposes of this
Agreement, and (iv) PM Companies, the other Borrowers, the
Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's
rights and obligations under this Agreement.
<PAGE>
60
(f) Any Lender may, in connection with any assignment
or participation or proposed assignment or participation
pursuant to this Section 10.07, disclose to the assignee or
participant or proposed assignee or participant, any
information relating to PM Companies or any Borrower furnished
to such Lender by or on behalf of PM Companies or any Borrower;
provided that, prior to any such disclosure, the assignee or
--------
participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential information
relating to PM Companies received by it from such Lender.
SECTION 10.08. Governing Law. This Agreement and any
-------------
B Notes shall be governed by, and construed in accordance with,
the laws of the State of New York.
SECTION 10.09. Execution in Counterparts. This
-------------------------
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
PHILIP MORRIS COMPANIES INC.
By: /s/ George R. Lewis
-----------------------------
Vice President and
Treasurer
CITIBANK, N.A., as Agent
By:/s/ Paolo de Alessandrini
------------------------------
Vice President
<PAGE>
61
THE BANKS
---------
Commitment:
----------
U.S. $233,333,333.37 CITIBANK, N.A.
By: /s/Paolo de Alessandrini
------------------------------
Vice President
U.S. $166,666,666.67 CHEMICAL BANK
By: /s/ Robert C. Kennedy
------------------------------
Vice President
U.S. $166,666,666.67 CREDIT SUISSE
By: /s/ Robert B. Potter
------------------------------
Associate
By: /s/ Carole A. Lustig
------------------------------
Associate
U.S. $125,000,000.00 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ John A. Payne
------------------------------
Managing Director
U.S. $ 25,000,000.00 J.P. MORGAN DELAWARE
By: /s/ David J. Morris
------------------------------
Vice President
<PAGE>
62
U.S. $146,666,666.67 UNION BANK OF SWITZERLAND
By: /s/ Peter B. Yearly
-----------------------------
Vice President
By: /s/ James P. Kelleher
-----------------------------
Assistant Treasurer
U.S. $143,333,333.33 DEUTSCHE BANK AG NEW YORK
BRANCH AND/OR CAYMAN
ISLAND BRANCHES
By: /s/ Ross A. Howard
-----------------------------
Assistant Vice President
By: /s/ Rolf-Peter Mikolayczyk
-----------------------------
Director
U.S. $133,333,333.33 ABN AMRO BANK NV, NEW YORK
BRANCH
By: /s/ Laura G. Fazio
-----------------------------
Vice President
By: /s/ Margaret P. Hannahoe
-----------------------------
Assistant Vice President
U.S. $133,333,333.33 SOCIETE GENERALE
By: /s/ Bruce H. Drossman
-----------------------------
Vice President
<PAGE>
63
U.S. $120,000,000.00 SWISS BANK CORPORATION,
NEW YORK AND CAYMAN
ISLANDS BRANCHES
By: /s/ Marcia L. Thatcher
-----------------------------
Vice President
By: /s/ Filippe M. Goossens
-----------------------------
Associate Director
U.S. $115,000,000.00 THE DAI-ICHI KANGYO BANK,
LTD. - NEW YORK BRANCH
By: /s/ Timothy White
-----------------------------
Assistant Vice President
U.S. $113,333,333.33 BANK OF AMERICA NT & SA
By: /s/ John Pocalyko
-----------------------------
Vice President
U.S. $113,333,333.33 DRESDNER BANK AG NEW YORK
AND GRAND CAYMAN BRANCHES
By: /s/ J. Michael Leffler
-----------------------------
First Vice President
By: /s/ A. Richard Morris
-----------------------------
Vice President
<PAGE>
64
U.S. $106,666,666.67 NATIONSBANK OF NORTH
CAROLINA, N.A.
By: /s/ Sally L. Hazard
-----------------------------
Senior Vice President
U.S. $100,000,000.00 THE SUMITOMO BANK, LIMITED
By: /s/ Y. Kawamura
-----------------------------
Joint General Manager
U.S. $ 93,333,333.33 BAYERISCHE HYPOTHEKEN - UND
WECHSEL-BANK, NEW YORK
BRANCH
By: /s/ E. S. Atwell
-----------------------------
Assistant Vice President
By: /s/ David Rockwell
-----------------------------
First Vice President
U.S. $ 93,333,333.33 THE CHASE MANHATTAN BANK,
N.A.
By: /s/ Elyse O'Hora
-----------------------------
Managing Director
U.S. $ 93,333,333.33 SANWA BANK LIMITED
By: /s/ Stephen C. Small
-----------------------------
Vice President &
Area Manager
<PAGE>
65
U.S. $ 80,000,000.00 CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By: /s/ Robert Ivosevich
-----------------------------
Authorized Signatory
CREDIT LYONNAIS
NEW YORK BRANCH
By: /s/ Robert Ivosevich
-----------------------------
Senior Vice President
U.S. $ 75,000,000.00 THE BANK OF TOKYO TRUST
TRUST CO.
By: /s/ G. Stewart
-----------------------------
Vice President &
Deputy Manager
U.S. $ 75,000,000.00 THE FUJI BANK, LIMITED
By: /s/ Y. Shiotsugu
-----------------------------
Vice President & Manager
U.S. $ 62,333,333.33 BANQUE NATIONALE DE PARIS
NEW YORK BRANCH
By: /s/ Pierre-Nicholas Rogers
-----------------------------
Vice President
By: /s/ Robert S. Taylor, Jr.
-----------------------------
Senior Vice President
<PAGE>
66
BANQUE NATIONALE DE PARIS
GEORGETOWN BRANCH
By: /s/ Pierre-Nicholas Rogers
-----------------------------
Vice President
By: /s/ Robert S. Taylor, Jr.
-----------------------------
Senior Vice President
U.S. $ 58,333,333.33 MIDLAND BANK PLC
By: /s/ Derek Lunt
-----------------------------
Corporate Banking Director
U.S. $ 53,333,333.33 THE BANK OF NEW YORK
By: /s/ Howard F. Bascom, Jr.
-----------------------------
Vice President
U.S. $ 45,000,000.00 MELLON BANK N.A.
By: /s/ Diane P. Durnin
-----------------------------
Vice President
U.S. $ 45,000,000.00 THE TORONTO-DOMINION BANK
By: /s/ Lisa Allison
-----------------------------
Manager
Credit Administration
<PAGE>
67
U.S. $ 41,666,666.67 BAYERISCHE LANDESBANK
GIROZENTRALE
By: /s/ Wilfried Freudenberger
-----------------------------
Executive Vice President
and General Manager
By: /s/ Peter Obermann
-----------------------------
First Vice President
Manager Corporate Finance
U.S. $ 41,666,666.67 DEUTSCHE GENOSSENSCHAFTSBANK
By: /s/ Karen A. Brinkman
-----------------------------
Vice President
By: /s/ John L. Dean
-----------------------------
Senior Vice President
U.S. $ 41,666,666.67 ISTITUTO BANCARIO SAN
PAOLO DI TORINO S.P.A.
By: /s/ W. Jones
-----------------------------
Vice President
By: /s/ Ettore Viazzo
-----------------------------
Vice President
U.S. $ 41,666,666.67 THE SAKURA BANK, LTD.
By: /s/ Y. Terada
-----------------------------
VP & AGM
<PAGE>
68
U.S. $ 40,000,000.00 NATIONAL AUSTRALIA BANK
LIMITED
By: /s/ Robert S. Emerson
-----------------------------
Vice President
U.S. $ 38,333,333.33 BANQUE PARIBAS
By: /s/ S. Kelly
-----------------------------
Group Vice President
By: /s/ Mary T. Finnegan
-----------------------------
Vice President
U.S. $ 38,333,333.33 CANADIAN IMPERIAL BANK
COMMERCE
By: /s/ Mary Kate Miller
-----------------------------
Authorized Signatory
U.S. $ 38,333,333.33 CONTINENTAL BANK N.A.
By: /s/ Kathryn W. Robinson
-----------------------------
Vice President
<PAGE>
69
U.S. $ 38,333,333.33 NORDDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK
BRANCH AND/OR CAYMAN ISLAND
BRANCH
By: /s/ Stephen K. Hunter
-----------------------------
Senior Vice President
By: /s/ Stephanie Hoevermann
-----------------------------
Vice President
U.S. $ 38,333,333.33 RABOBANK NEDERLAND, NEW YORK
BRANCH
By: /s/ Johannes F. Breukhoven
-----------------------------
Vice President
By: /s/ Ian Reece
-----------------------------
Vice President & Manager
U.S. $ 38,333,333.33 ROYAL BANK OF CANADA
By: /s/ Linda M. Murrer
-----------------------------
Senior Manager
U.S. $ 38,333,333.33 WACHOVIA BANK OF GEORGIA,
N.A.
By: /s/ Linda M. Harris
-----------------------------
Senior Vice President
<PAGE>
70
U.S. $ 35,000,000.00 THE BANK OF NOVA SCOTIA
By: /s/ John Campbell
-----------------------------
Vice President & Agent
U.S. $ 33,333,333.33 BANCO DI ROMA
By: /s/ Ralph W. Riehle
-----------------------------
First Vice President
By: /s/ T. Howell
-----------------------------
Vice President
U.S. $ 33,333,333.33 BANK BRUSSELS LAMBERT,
NEW YORK BRANCH
By: /s/ John Kippax
-----------------------------
Vice President
By: /s/ Eric Hollanders
-----------------------------
Senior Vice President
Credit Department
U.S. $ 33,333,333.33 THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ James W. Peterson
-----------------------------
Vice President
U.S. $ 33,333,333.33 FIRST INTERSTATE BANK OF
CALIFORNIA
By: /s/ Roy H. Roberts
-----------------------------
Vice President
By: /s/ David E. Grimes
-----------------------------
Vice President
<PAGE>
71
U.S. $ 33,333,333.33 THE MITSUBISHI BANK, LIMITED
NEW YORK BRANCH
By: /s/ J. Bruce Meredith
-----------------------------
Senior Vice President
and Manager
U.S. $ 33,333,333.33 THE TOKAI BANK, LIMITED
By: /s/ Masaharu Muto
-----------------------------
Deputy General Manager
U.S. $ 33,333,333.33 TRUST COMPANY BANK
By: /s/ Craig W. Farnsworth
-----------------------------
Vice President
U.S. $ 33,333,333.33 THE YASUDA TRUST AND
BANKING COMPANY, LIMITED
NEW YORK BRANCH
By: /s/ Neil T. Chau
-----------------------------
Vice President
U.S. $ 26,666,666.67 DAIWA BANK LIMITED
By: /s/ Masafumi Asai
-----------------------------
Second Vice President
U.S. $ 26,666,666.67 DEN DANSKE BANK
By: /s/ Bent V. Christensen
-----------------------------
Vice President
By: /s/ Peter L. Hargraves
-----------------------------
Vice President
<PAGE>
72
U.S. $ 26,666,666.67 THE INDUSTRIAL BANK OF
JAPAN, LIMITED, NEW YORK
BRANCH
By: /s/ Junri Oda
-----------------------------
Senior Vice President
and Senior Manager
U.S. $ 25,000,000.00 BANCA NAZIONALE DEL LAVORO
S.P.A. - NEW YORK BRANCH
By: /s/ Giuliano Violetta
-----------------------------
First Vice President
By: /s/ Giulio Giovine
-----------------------------
Vice President
U.S. $ 21,666,666.67 THE FIRST NATIONAL BANK OF
BOSTON
By: /s/ Ellen H. Allen
-----------------------------
Director
U.S. $ 20,000,000.00 COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE
By: /s/ Sean Mounier
-----------------------------
Vice President
By: /s/ Alain Merle d'Aubigne
-----------------------------
Vice President
<PAGE>
73
U.S. $ 20,000,000.00 INTERNATIONALE NEDERLANDEN
BANK N.V., DUBLIN BRANCH
By: /s/ C. Vincent Reilly
-----------------------------
Senior General Manager
By: /s/ Vaughn Richtor
-----------------------------
General Manager
U.S. $ 20,000,000.00 LLOYDS BANK PLC.
By: /s/ T. Walser
-----------------------------
Senior Vice President
By: /s/ Paul Briamonte
-----------------------------
Vice President
U.S. $ 17,333,333.33 BANK OF HAWAII
By: /s/ Scott G. Balke
-----------------------------
Vice President
U.S. $ 16,666,666.67 BANCA COMMERCIALE
ITALIANA-NEW YORK BRANCH
By: /s/ J. Mimi Welch
-----------------------------
Assistant Vice President
By: /s/ Edward C. Bermant
-----------------------------
First Vice President
<PAGE>
74
U.S. $ 16,666,666.67 BANK OF MONTREAL
By: /s/ Thruston W. Pettus
-----------------------------
Director
U.S. $ 16,666,666.67 BANKERS TRUST COMPANY
By: /s/ Priscilla Newbury
-----------------------------
Vice President
U.S. $ 16,666,666.67 FIRST BANK NATIONAL
ASSOCIATION
By: /s/ Mark R. Olmon
-----------------------------
Vice President
U.S. $ 16,666,666.67 FIRST FIDELITY BANK, N.A.
NEW JERSEY
By: /s/ Susan Dimmick
-----------------------------
Vice President
U.S. $ 16,666,666.67 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ Michael T. Grady
-----------------------------
Vice President
<PAGE>
75
U.S. $ 16,666,666.67 GENERALE BANK, NEW YORK
BRANCH
By: /s/ Alain Verschueren
-----------------------------
Senior Vice President
By: /s/ Eddie Matthews
-----------------------------
Senior Vice President
U.S. $ 16,666,666.67 THE LONG-TERM CREDIT BANK
OF JAPAN, LIMITED
By: /s/ H. Sasaki
-----------------------------
Deputy General Manager
U.S. $ 16,666,666.67 THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
By: /s/ Takashi Sugita
-----------------------------
Senior Vice President
U.S. $ 16,666,666.67 WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK
AND CAYMAN ISLANDS
BRANCHES
By: /s/ Roland W. Chalons-Browne
-----------------------------
Managing Director
By: /s/ Salvatore Battinelli
-----------------------------
Vice President
<PAGE>
76
U.S. $ 13,333,333.33 BANCO BILBAO VIZCAYA, S.A.
By: /s/ Adolfo Martinez
-----------------------------
Vice President -
Corporate Banking Manager
By: /s/ Ahmad Abouzeid
-----------------------------
Vice President -
Credit Manager
U.S. $ 11,666,666.67 CARIPLO - CASSA DI
RISPARMIO DELLE PROVINCIE
LOMBARDE S.P.A.
By: /s/Giuseppe Zanotti-Fregonara
-----------------------------
Senior Vice President
By: /s/ Charles W. Kennedy
-----------------------------
Vice President
U.S. $ 11,666,666.67 THE MITSUI TRUST AND BANKING
COMPANY LIMITED
By: /s/ Kiichiro Kondo
-----------------------------
Senior Vice President &
Manager
U.S. $ 8,333,333.33 BANCO ESPANOL DE CREDITO, NEW
YORK BRANCH
By: /s/ Fernando Artaza
-----------------------------
General Manager
By: /s/ Juan Galan
-----------------------------
Senior Vice President
<PAGE>
77
U.S. $ 8,333,333.33 CREDIT COMMERCIAL DE FRANCE
By: /s/ Steven Broad
-----------------------------
Senior Vice President
By: /s/ Kathryn Hudson
-----------------------------
Assistant Vice President
U.S. $ 8,333,333.33 FLEET BANK
By: /s/ Deane M. Driscoll
-----------------------------
Vice President
U.S. $ 8,333,333.33 THE NORTHERN TRUST COMPANY
By: /s/ Deborah W. Thomas
-----------------------------
Vice President
U.S. $ 8,333,333.33 THE ROYAL BANK OF SCOTLAND PLC
By: /s/ David Dougan
-----------------------------
Vice President
U.S. $ 8,333,333.33 SIGNET BANK /VIRGINIA
By: /s/ J. Charles Link
-----------------------------
Senior Vice President
<PAGE>
78
U.S. $ 8,333,333.33 THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By: /s/ Yutaka Itoh
-----------------------------
Deputy General Manager
U.S. $ 8,333,333.33 SVENSKA HANDELSBANKEN
By: /s/ Guy Rudberg
-----------------------------
Vice President
By: /s/ Kjell Arvidsson
-----------------------------
Vice President
U.S. $ 8,333,333.33 THE TOYO TRUST & BANKING CO.,
LTD.
By: /s/ Tomoshige Kimura
-----------------------------
Vice President
U.S. $ 8,000,000.00 CRESTAR BANK
By: /s/ Keith Hubbard
-----------------------------
Senior Vice President
U.S. $ 6,666,666.67 STATE STREET BANK & TRUST CO.
By: /s/ Patrick K. Armstrong
-----------------------------
Vice President
<PAGE>
79
U.S. $ 3,666,666.67 CENTRAL FIDELITY BANK
By: /s/ Harry A. Turton, Jr.
-----------------------------
Assistant Vice President
U.S. $ 3,666,666.67 M&I MARSHALL & ILSLEY BANK
By: /s/ Philip M. McGoohan
-----------------------------
Vice President
U.S. $ 3,333,333.33 FIRSTAR BANK MILWAUKEE, N.A.
By: /s/ Thomas A. Rave
-----------------------------
Vice President
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
ABN AMRO Bank N.V., Laura Fazio AMB AMRO Bank N.V.
New York Branch Vice President Cayman Islands Branch
500 Park Avenue, 2nd Fl. c/o ABN AMRO Bank N.V.
New York, NY 10022 500 Park Avenue, 2nd Fl.
(212) 832-7129 (Facsimile) New York, NY 10022
(212) 832-7129 (Facsimile)
Banca Commerciale Italiana- Sarah Kim
New York Branch Assistant Treasurer
1 William Street
New York, NY 10004
(212) 809-2124 (Facsimile)
Banca Nazionale Del Lavoro Giulio Giovine, V.P.
S.P.A.-New York Branch 25 West 51st Street
New York, NY 10019
(212) 765-2978 (Facsimile)
Banca di Roma, New York Ralph Riehle
Branch First Vice President
100 Wall Street
New York, NY 10005
(212) 607-6421 (Facsimile)
Banco Bilbao Vizcaya, S.A. Juan Urquiola
Account Officer
116 East 55th Street
New York, NY 10022
(212) 826-3107 (Facsimile)
Banco Espanol de Credito, Edna S. Diffoot-Cabrera
New York Branch Assistant Treasurer
630 Fifth Ave
Suite 514
New York, NY 10111
(212) 262-3119 (Facsimile)
Bank Brussels Lambert, John Kippax
New York Branch Vice President
630 Fifth Avenue
New York, NY 10111
(212) 333-5786 (Facsimile)
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Bank of America NT & SA Robert Simpson
1850 Gateway Blvd.
Concord, CA 94520
(510) 675-7531 (Facsimile)
Bank of Hawaii Scott Balke
Vice President
130 Merchant Street, 20th FL
Honolulu, HI 96846
(808) 537-8301 (Facsimile)
Bankers Trust Company Priscilla Newbury
Vice President
280 Park Avenue
New York, NY 10017
(212) 454-2605 (Facsimile)
Bank of Montreal Thruston W. Pettus
Director
430 Park Avenue
New York, NY 10022
(212) 605-1454 (Facsimile)
Banque Nationale de Paris Pierre-Nicholas Rogers Banque Nationale de Paris
New York Branch Vice President Georgetown Branch
Banque Nationale de Paris 499 Park Avenue c/o Banque Nationale de Paris
Georgetown Branch New York, NY 10022 New York Branch
(212) 415-9606 (Facsimile) 499 Park Avenue
New York, NY 10022
(212) 415-9695 (Facsimile)
Banque Paribas Mary T. Finnegan Banque Paribas Grand
Vice President Cayman Branch
787 Seventh Avenue c/o Banque Paribas NY
New York, NY 10019 Park Avenue Plaza
(212) 841-2333 (Facsimile) New York, NY 10055
(212) 841-2333 (Facsimile)
Bayerische Hypotheken - Steve Atwell, A.V.P.
Und Wechsel-Bank, Financial Square
New York Branch 32 Old Slip
New York, NY 10005
(212) 440-0741 (Facsimile)
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Bayerische Landesbank Girozentrale Joanne Cicino
Second Vice President
560 Lexington Ave
New York, NY 10022
(212) 310-9865 (Facsimile)
Canadian Imperial Bank of Mary Kate Miller
Commerce Vice President
425 Lexington Avenue, 6th Fl.
New York, NY 10017
(212) 856-3559/3600 (Facsimile)
Cariplo - Cassa di Risparmio Charles Kennedy
Delle Provincie Lombarde S.P.A. Vice President
650 Fifth Avenue
New York, NY 10019
(212) 603-7840 (Facsimile)
Central Fidelity Bank Harry A. Turton, Jr.
Central Fidelity Bank
Asst. Vice President
P.O. Box 27602
Richmond, VA 23261
(804) 697-6869 (Facsimile)
Chemical Bank Robert P. Kemas
Vice President
270 Park Avenue, 9th Fl.
New York, NY 10017
(212) 270-7138 (Facsimile)
Compagnie Financiere de CIC Sean Mounier
et de L'Union Europeene Vice President
520 Madison Avenue, 37th Fl.
New York, NY 10022
(212) 715-4535 (Facsimile)
Citibank, N.A. Paolo de Alessandrini
399 Park Avenue
8th Floor
New York, NY 10043
(212) 793-3963 (Facsimile)
Continental Bank N.A. Ken Washington
231 S. LaSalle Street
Chicago, IL 60697
(312) 828-5140 (Facsimile)
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Credit Commercial de France Steven Broad
Senior Vice President
450 Park Ave
New York, NY 10022
(212) 832-7469 (Facsimile)
Credit Lyonnais Robert Bostani Credit Lyonnais
Cayman Island Branch Vice President Cayman Island Branch
Credit Lyonnais 1301 Avenue of the Americas c/o Credit Lyonnais NY Branch
New York Branch New York, NY 10019 1301 Avenue of the Americas
(212) 459-3179 (Facsimile) New York, NY 10019
(212) 459-3179
Credit Suisse Robert B. Potter Credit Suisse
12 E. 49th St., 44th FL. Cayman Island Branch
New York, NY 10017 c/o Credit Suisse
(212) 238-5439 (Facsimile) 12 East 49th Street
New York, NY 10017
(212) 238-5439
Crestar Bank Keith A. Hubbard
Senior Vice President
919 East Main Street
Richmond, VA 23219
(804) 782-5413 (Facsimile)
Daiwa Bank Limited Mr. Asai
75 Rockefeller Plaza
New York, NY 10019
(212) 554-7210 (Facsimile)
Den Danske Bank P. Hargraves
Vice President
280 Park Ave
New York, NY 10017
(212) 370-9239 (Facsimile)
Deutsche Bank AG, New York Rolf-Peter Mikolayczyk Rolf-Peter Mikolayczyk
Branch and/or Cayman Island Vice President Cayman Islands Branch
Branches Deutsche Bank AG, New York Branch c/o Deutsche Bank AG
31 West 52nd Street 31 West 52nd Street
New York, NY 10019 New York, NY 10019
(212) 474-8212 (Facsimile) (212) 474-8212 (Facsimile)
Deutsche Genossenschaftsbank Robert B. Herber
Vice President
609 Fifth Avenue
New York, NY 10017-1021
(212) 745-1556 (Facsimile)
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Dresdner Bank AG New York J. Michael Leffler Dresdner Bank AG
and Grand Cayman Branches First Vice President New York or Grand Cayman
Dresdner Bank AG Branch
New York Branch c/o New York Branch
75 Wall Street 75 Wall Street
New York, NY 10005 New York, NY 10005
(212) 574-0130 (Facsimile) (212) 574-0130 (Facsimile)
First Bank National Association Mark R. Olmon
Vice President
601 Second Ave. So.
Minneapolis, MN 55602
(612) 973-0825 (Facsimile)
First Fidelity Bank, N.A. Susan J. Dimmick
New Jersey First Fidelity Bank, N.A.
New Jersey
550 Broad Street
Newark, NJ 07102
(201) 565-6681 (Facsimile)
First Interstate Bank Roy Roberts
of California Vice President
885 Third Avenue, 5th Fl.
New York, NY 10020
(212) 593-5238 (Facsimile)
First Union National Bank Allison Zollicoffer
of North Carolina Vice President
One First Union Center
Charlotte, NC 28202-0745
(704) 374-2802 (Facsimile)
Firstar Bank Robert A. Flosbach
Milwaukee, N.A. Vice President
777 E. Wisconsin Avenue
Milwaukee, WI 53202
(414) 765-5062 (Facsimile)
Fleet Bank Deane M. Driscoll
Vice President
56 East 42nd St.
New York, NY 10017
(212) 907-5633
Generale Bank, New York Branch Florence J. Mauchant
Vice President
520 Madison Avenue, 41st Fl.
New York, NY 10022
(212) 838-7492 (Facsimile)
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Istituto Bancario San Paolo Wendell H. Jones
di Torino S.P.A. 245 Park Avenue
New York, NY 10167
(212) 599-5303 (Facsimile)
Internationale Nederlanden Enda Allen
Bank N.V., Dublin Branch Manager, Financial Services
49 St. Stephen's Green
Dublin 2
(3531) 662-1916 (Facsimile)
Lloyds Bank Plc Theodore Walser, V.P.
199 Water Street
New York, NY 10038
(212) 607-4999 (Facsimile)
M&I Marshall and Ilsey Bank Philip M. McGoohan
Vice President
770 N. Water Street
Milwaukee, WI 53202
(414) 765-7625 (Facsimile)
Mellon Bank N.A. Diane P. Durnin
Vice President
Mellon Bank
65 East 55th Street
New York, NY 10022
(212) 702-5269 (Facsimile)
Midland Bank PLC Derek Lunt
Corporate Banking Dir.
Consumer Industries Grp, Corp.
& Institutional Banking
27-32 Poultry
London EC2P 2BX
The Mitsui Trust and Banking Gerard Machado
Company Limited Asst. Vice President
1 World Financial Center
200 Liberty Street
New York, NY 10281
(212) 945-4171 (Facsimile)
Morgan Guaranty Trust Company Charles R. Pardue Morgan Guaranty Trust Company
of New York Vice President of New York
60 Wall Street Nassau, Bahamas Office
New York, NY 10260-0060 c/o J.P. Morgan Services
(212) 648-5018 500 Stanton Christiana Road
Newark, Delaware 19713
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
J.P. Morgan Delaware David J. Morris
Vice President
902 Market Street
Wilmington, DE 19801
(302) 654-5336 (Facsimile)
National Australia Bank Limited Robert S. Emerson
Vice President
National Australia Bank
200 Park Avenue, 34th Fl.
New York, NY 10166
(212) 983-1969 (Facsimile)
NationsBank of North Lisa McClelland
Carolina, N.A. 1 Nationsbank Plaza
Mail Code NC 1002-19-21
Charlotte, NC 28255
(704) 386-8694 (Facsimile)
Norddeutsche Landesbank Norddeutsche Landesbank
Girozentrale New York Branch Girozentrale New York Branch
and/or Cayman Island Branch Stephanie Hoevermann, A.V.P.
1270 Ave of the Americas
New York, NY 10020
(212) 332-8660 (Facsimile)
Rabobank Nederland, New York Hans F. Breukhoven
Branch Vice President
245 Park Avenue
New York, NY 10167
(212) 916-7837 (Facsimile)
Royal Bank of Canada Grand Cayman (North America
No. 1) Branch
c/o Royal Bank of Canada
New York Operations Center
Pierrepont Plaza
300 Cadman Plaza West
Attn: Manager, Loans Administration
(718) 522-6292/3 (Facsimile)
with a copy to:
Linda M. Murrer
Senior Manager
Financial Square
New York, NY 10005-3531
(212) 809-7468 (Facsimile)
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Sanwa Bank Limited Stephen C. Small
Vice President
Sanwa Bank Limited
55 East 52nd Street
New York, NY 10055
(212) 754-1304 (Facsimile)
Signet Bank/Virginia J. Charles Link
Senior Vice President
800 East Main Street
Richmond, VA 23219
(804) 771-7151 (Facsimile)
Societe Generale Bruce Drossman
Societe Generale
Vice President
50 Rockefeller Plaza
New York, NY 10020
(212) 581-8752 (Facsimile)
State Street Bank & Trust Co. Patrick K. Armstrong
Vice President
225 Franklin Street
Boston, MA 02110
(617) 654-4176 (Facsimile)
Svenska Handelsbanken Kjell Arvidsson
Vice President
599 Lexington Avenue
New York, NY 10022
(212) 326-2725 (Facsimile)
Swiss Bank Corporation, New Marcia L. Thatcher
York and Cayman Islands Director
Branches 10 East 50th Street
New York, NY 10022
(212) 574-3852 (Facsimile)
The Bank of New York Mary Anne Zagroba One Wall Street, 17th Fl.
Vice President New York, NY 10286
The Bank of New York (212) 635-6397/6399 (Facsimile)
One Wall Street, 8th Fl.
(212) 635-1480 (Facsimile)
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
The Bank of Nova Scotia Walter Jackson The Bank of Nova Scotia
Representative International Limited
One Liberty Plaza, 26th Floor Bernard Sunley Building
(212) 225-5091 (Facsimile) Bay Street
P.O. Box N7545
Nassau, Bahamas
(22) 255-5090
The Bank of Tokyo Trust Co. Jean Reilly
Assistant Vice President
The Bank of Tokyo
1251 Ave. of the Americas
New York, NY 10116-3138
(212) 782-6441 (Facsimile)
The Chase Manhattan Bank, N.A. Elyse O'Hora
Managing Director
One Chase Plaza
New York, NY 10081
(212) 552-1041 (Facsimile)
The Dai-Ichi Kangyo Bank, Ltd. Tim White
- New York Branch Assistant Vice President
The Dai-Ichi Kangyo Bank, Ltd.
One World Trade Center
48th Floor
New York, NY 10048
(212) 524-0579 (Facsimile)
The First National Cindy Chen
Bank of Boston Vice President
Bank of Boston
100 Federal Street
Mail Stop 1-21-3
Boston, MA 02110
(617) 434-0601 (Facsimile)
The First National Bank of Stephen McDonald
Chicago Vice President
153 West 51st Street
Suite 4000, 8th Fl.
New York, NY 10019
(212) 373-138- (Facsimile)
The Fuji Bank, Limited Masatoshi Abe
Assistant Treasurer
2 World Trade Center,
79th Fl. USCF I
New York, NY 10048
(212) 321-9407 (Facsimile)
</TABLE>
<PAGE>
10
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
The Industrial Bank of Japan, Hiroshi Masaki, A.V.P.
Limited, New York Branch Karel Pravec, Jr., A.V.P.
Acquisition Finance Dept.
245 Park Avenue
New York, NY 10167
(212) 692-9075 (Facsimile)
The Long-Term Credit Bank of Yumiko Noda
Japan, Limited Vice President & Manager
165 Broadway, 49th Fl.
New York, NY 10006
(212) 608-2371 (Facsimile)
The Mitsubishi Bank, Limited J. Bruce Meredith
New York Branch Sr. Vice President
225 Liberty Street
Two World Financial Center
New York, NY 10281
(212) 667-3562 (Facsimile)
The Mitsubishi Trust and Jill Kato
Banking Corporation, Los Loan Officer
Angeles Agency 801 S. Figueroa St. #2400
Los Angeles, CA 90017
(213) 687-4631 (Facsimile)
The Northern Trust Company Deborah D. Thomas
Vice President
50 S. LaSalle Street
Chicago, IL 60675
(312) 444-3508 (Facsimile)
The Royal Bank of Scotland plc D. Dougan
Vice President
63 Wall Street
New York, NY 10005
(212) 269-8929 (Facsimile)
The Sakura Bank, Ltd. Yoshokazu Nagura
VP and Manager
277 Park Avenue
New York, NY 10172
(212) 888-7651 (Facsimile)
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
The Sumitomo Bank, Limited Harry Musakawi
New York Branch AT
One World Trade Center
Suite 9651
New York, NY 10048
(212) 553-0118 (Facsimile)
The Sumitomo Trust & Banking Karen Ryan
Co., LTD., Los Angeles Agency Assistant Vice President
333 So. Grand Avenue
Suite 5300
Los Angeles, CA 90071
(213) 613-1083 (Facsimile)
The Tokai Bank, Limited William Strackell
Vice President
55 East 52nd Street
Park Avenue Plaza
New York, NY 10055
(212) 754-2171 (Facsmilie)
The Toronto-Dominion Bank Eric I. Skilling
Director, Corporate Accounts The Toronto-Dominion Bank
The Toronto-Dominion Bank 909 Fannin, Suite 1700
31 West 52nd Street Houston, Texas 77010
New York, NY 10019 (713) 951-9921 (Facsimile)
(212) 362-1926 (Facsimile)
The Toyo Trust & Banking Co., Ltd. Gregory W. Blaszczynski
Assistant Treasurer
The Toyo Trust & Banking
Co., Ltd.
437 Madison Avenue - 37th Flr.
New York, NY 10027
(212) 371-4963 (Facsimile)
Trust Company Bank Craig W. Farnsworth
Vice President
711 5th Avenue, 5th Fl.
New York, NY 10023
(212) 371-9386 (Facsimile)
Union Bank of Switzerland Peter B. Yearley
Corporate & Institutional
Banking
299 Park Avenue
New York, NY 10171
(212) 821-3383 (Facsimile)
</TABLE>
<PAGE>
12
<TABLE>
<CAPTION>
BANK DOMESTIC LENDING OFFICE CD LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---- ----------------------- ----------------- -------------------------
(IF OTHER THAN DOMESTIC (IF OTHER THAN DOMESTIC
----------------------- -----------------------
LENDING OFFICE) LENDING OFFICE)
--------------- ---------------
<S> <C> <C> <C>
Wachovia Bank of Georgia, N.A. Ms. Sandy MacQuarrie
Vice President
191 Peachtree Street
Atlanta, GA 30303
(404) 332-6898 (Facsimile)
Westdeutsche Landesbank Robert R. Wieszarek, II
Girozentrale, New York and Associate
Cayman Islands Branches 1211 Avenue of the Americas
23rd Floor
New York, NY 10036
(212) 852-6107 (Facsimile)
The Yasuda Trust & Banking Co., Neil T. Chau
Limited, New York Branch Vice President
666 Fifth Avenue
New York, NY 10103
(212) 373-5796 (Facsimile)
</TABLE>
<PAGE>
EXHIBIT A
FORM OF B NOTE
$_____________________ Dated: ____________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of
Borrower] (the "Borrower"), HEREBY PROMISES TO PAY to the order
of [Name of Lender] (the "Lender"), on __________, 19__ the
principal amount of ________________________ Dollars
($________________).
The Borrower promises to pay interest on the unpaid
principal amount thereof from the date hereof until such
principal amount is repaid in full, at the interest rate and
payable on the interest payment date or dates provided below:
Interest Rate: _____% per annum (calculated on the
basis of a year of 360 days for the actual number of days
elapsed).
Interest Payment Date or Dates: __________________.
Both principal and interest are payable in lawful
money of the United States of America to Citibank, N.A. for the
account of the Lender at the office of Citibank, N.A. at One
Court Square, Long Island City, New York 11120, United States
of America, in same day funds, free and clear of and without
any deduction, with respect to the payee named above, for any
and all present and future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect
thereto, excluding any taxes imposed by the United States by
---------
means of withholding tax if and to the extent that such taxes
shall be in effect and shall be applicable, on the date hereof,
to payments to be made by the Borrower hereon.
This Promissory Note is one of the B Notes referred to
in, and is entitled to the benefits of, the 364-Day Loan and
Guaranty Agreement dated as of December 17, 1993 (the "364-Day
Agreement") among PM Companies, the Lender and certain other
lenders parties thereto, and Citibank, N.A., as Agent for the
Lender and such other lenders. The 364-Day Agreement, among
other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events.
The Borrower hereby waives presentment, demand,
protest and notice of any kind. No failure to exercise, and no
delay in exercising, any rights hereunder on the part of the
holder hereof shall operate as a waiver of such rights.
<PAGE>
2
This Promissory Note shall be governed by, and
construed in accordance with, the laws of the State of New
York, United States.
[Name of Borrower]
By:_____________________
Title:
6355I/105
<PAGE>
3
GUARANTY
(Only for B Notes issues by a Borrower other than
PM Companies)
SECTION 1. Guaranty. The undersigned, PHILIP MORRIS
--------
COMPANIES INC., a Virginia corporation (the "Guarantor"),
hereby unconditionally and irrevocably guarantees the punctual
payment when due of all obligations of the Borrower under the
above Promissory Note (the "Note") (such obligations being the
"Obligations"), and any and all expenses (including counsel
fees and expenses) incurred by the holder of the Note in
enforcing any rights under the Note or this Guaranty.
SECTION 2. Guaranty Absolute. The Guarantor
-----------------
guarantees that the Obligations will be paid strictly in
accordance with the terms of the Note, regardless of any law,
rule, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the
holder of the Note with respect thereto. The liability of the
Guarantor under this Guaranty shall be absolute and
unconditional irrespective of (i) any law of validity,
enforceability or genuineness of the Note or any other
agreement or instrument relating thereto; (ii) any change in
the time, manner or place of payment of, or in any other term
of, all or any of the Obligations, or any other amendment or
waiver of or any consent to departure from the Note; (iii) any
exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from
any other guaranty, for all or any of the Obligations; or (iv)
any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower or a
guarantor.
This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be
returned by the Lender upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such
payment has not been made.
SECTION 3. Waiver. (a) The Guarantor hereby waives
------
promptness, diligence, notice of acceptance and any other
notice with respect to any of the Obligations and this Guaranty
and any requirement that the holder of the Note protect,
secure, perfect or insure any security interest or lien or any
property subject thereto or exhaust any right of
6355I/105
<PAGE>
4
take any action against the Borrower or any other person or
entity or any collateral.
(b) The Guarantor hereby irrevocably waives any
claims or other rights that it may now or hereafter acquire
against the Borrower that arise from the existence, payment,
performance or enforcement of the Guarantor's obligations under
this Guaranty or this Note; including, without limitation, the
right to take or receive from the Borrower, directly or
indirectly, in cash or other property or by set-off or in any
other manner, payment or security on account of such claim,
remedy or right. If any amount shall be paid to the Guarantor
in violation of the preceding sentence at any time prior to the
cash payment in full of the Obligations, such amount shall be
held in trust for the benefit of the holder of this Note and
shall forthwith be paid to the holder of this Note to be
credited and applied to the Obligations and all other amounts
payable under this Guaranty, whether matured or unmatured, in
accordance with the terms of this Note and this Guaranty, or to
be held as collateral for any Obligations or other amounts
payable under this Guaranty thereafter arising. The Guarantor
acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Note and
this Guaranty and that the waiver set forth in this subsection
is knowingly made in contemplation of such benefits.
SECTION 4. Payments Free and Clear of Taxes, Etc.
-------------------------------------
Any and all payments made by the Guarantor hereunder to the
payee named in the Note shall be made in accordance with the
Note free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto,
excluding taxes imposed by the United States by means of
---------
withholding tax if and to the extent that such taxes shall be
in effect and shall be applicable, on the date hereof, to
payments to be made by the Guarantor herein.
SECTION 5. No Waiver. No failure to exercise, and no
---------
delay in exercising, any right hereunder on the part of the
holder of the Note shall operate as a waiver of such rights;
nor shall any single or partial exercise of any right
hereunder, preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by
law.
6355I/105
<PAGE>
5
SECTION 6. Continuous Guaranty; Transfer of Note.
-------------------------------------
This Guaranty is a continuing guaranty and shall (i) remain in
full force and effect until payment in full of the Obligations
and all other amounts payable under this Guaranty, (ii) be
binding upon the Guarantor, its successors and assigns, and
(iii) inure to the benefit of and be enforceable by the Lender
and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (iii), the Lender may
assign or otherwise transfer the Note to any other person or
entity, and such other person or entity shall thereupon become
vested with all the rights in respect thereof granted to the
Lender herein or otherwise.
This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of New York, United
States.
IN WITNESS WHEREOF, the Guarantor has caused this
Guaranty to be executed by its officer thereunto duly
authorized on the date first above written.
PHILIP MORRIS COMPANIES, INC.
By__________________________
Title
6355I/105
<PAGE>
EXHIBIT B-1
NOTICE OF A BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the 364-Day Agreement
referred to below
One Court Square
Long Island City, New York 11120
[Date]
Attention:
Gentlemen:
The undersigned, Philip Morris Companies Inc., refers
to the 364-Day Loan and Guaranty Agreement, dated as of
December 17, 1993 (the "364-Day Agreement", the terms defined
therein being used herein as therein defined), among Philip
Morris Companies Inc., certain lenders parties thereto and
Citibank, N.A., as Agent for said Lenders, and hereby gives you
notice, irrevocably, pursuant to Section 2.02 of the 364-Day
Agreement that the undersigned hereby requests an A Borrowing
under the 364-Day Agreement, and in that connection sets forth
below the information relating to such A Borrowing (the
"Proposed A Borrowing") as required by Section 2.02(a) of the
364-Day Agreement:
(i) The Business Day of the Proposed A Borrowing is
____________________, 199__.
(ii) The Type of A Advances comprising the Proposed A
Borrowing is [Adjusted CD Rate Advances] [Base Rate
Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed A Borrowing
is $____________.
(iv) The Interest Period for each A Advance made as
part of the Proposed A Borrowing is [________ days]
[______ month[s]].
(v) The name of the Borrower is _________________.
6355I/105
<PAGE>
2
The undersigned hereby certifies that the following
statements will be true on the date of the Proposed A
Borrowing, before and after giving effect thereto and to the
application of the proceeds therefrom: (a) the representations
and warranties contained in Section 4.01 of the 364-Day
Agreement (excluding those contained in subsections (e) and (f)
thereof) and, if the Borrower is a subsidiary of PM Companies,
Section 9.01(b) of the 364-Day Agreement are correct on and as
of such date as though made on and as of such date, (b) no
event has occurred and is continuing, or would result from the
Proposed A Borrowing, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement
that notice be given or time elapse or both, (c) if such
Proposed A Borrowing is in an aggregate principal amount equal
to or greater than $500,000,000 and is being made in connection
with any purchase of shares of the Borrower's or the
Guarantor's capital stock or the capital stock of any other
Person, or any purchase of all or substantially all of the
assets of any Person (whether in one transaction or a series of
transactions) or any transaction of the type referred to in
Section 5.02(b) of the 364-Day Agreement, the statements in (a)
and (b) above will be true and correct after giving effect to
such transaction or purchase, and (d) the aggregate principal
amount of the Proposed A Borrowing and all other Borrowings to
be made on the same day under the 364-Day Agreement is within
the applicable unused Commitments of the Lenders.
Very truly yours,
PHILIP MORRIS COMPANIES, INC.
By:_________________________
Title:
6355I/105
<PAGE>
EXHIBIT B-2
FORM OF NOTICE OF B BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the 364-Day Agreement
referred to below
One Court Square
Long Island City, New York 11120
Attention:
Gentlemen:
The undersigned, Philip Morris Companies Inc., refers
to the 364-Day Loan and Guaranty Agreement, dated as of
December 17, 1993 (the "364-Day Agreement"; the terms defined
therein being used herein as therein defined), among PM
Companies, certain lenders parties thereto (the "Lenders") and
Citibank, N.A., as Agent for the Lenders, and hereby gives you
notice pursuant to Section 2.03 of the 364-Day Agreement that
the undersigned hereby requests a B Borrowing under the 364-Day
Agreement, and in that connection sets forth the terms on which
such B Borrowing (the "Proposed B Borrowing") is requested to
be made:
(A) Date of B Borrowing _________________________
(B) Amount of B Borrowing _________________________
(C) Maturity Date _________________________
(D) Interest Rate Basis _________________________
(E) Interest Payment Date(s) _________________________
(F) Name of Borrower __________________________
The undersigned hereby certifies that the following
statements will be true on the date of the Proposed B
Borrowing, before and after giving effect thereto and to the
application of the proceeds therefrom: (a) the representations
and warranties contained in Section 4.01 of the 364-Day
Agreement and, if the Borrower is a subsidiary of PM Companies,
Section 9.01(b) of the 364-Day Agreement are correct on and as
of such date as though made on and as of such date, (b) no
event has occurred and is continuing, or would result from the
Proposed B Borrowing, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement
that notice be given or time elapse or both, and (c) the
aggregate principal amount of the Proposed B Borrowing and all
other Borrowings to be made on the same day under the 364-Day
Agreement is within the applicable unused Commitments of the
Lenders.
6355I/105
<PAGE>
2
The undersigned hereby confirms that you are to make
the Proposed B Borrowing available to us in accordance with
Section 2.03(a)(v) of the 364-Day Agreement by crediting the
amount of the Proposed B Borrowing to [be provided].
Dated: ___________________, 19__
Very truly yours,
PHILIP MORRIS COMPANIES INC.
By:________________________
Title:
6355I/105
<PAGE>
EXHIBIT C
ASSIGNMENT AND ACCEPTANCE
Dated ________, 199_
Reference is made to the 364-Day Loan and Guaranty
Agreement dated as of December 17, 1993 (the "364-Day
Agreement") among Philip Morris Companies Inc., a Virginia
corporation, the Lenders (as defined in the 364-Day Agreement)
and Citibank, N.A., as Agent for the Lenders (the "Agent").
Terms defined in the 364-Day Agreement are used herein with the
same meaning.
____________ (the "Assignor") and ____________ (the
"Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes
from the Assignor, the percentage interest specified on
Schedule 1 hereto in and to all (other than any B Advances
owing to the Assignor or any B Notes held by it) of the
Assignor's rights and objections under the 364-Day
Agreement as of the date hereof (after giving effect to any
other assignments thereof made prior to the date hereof,
whether or not such assignments have become effective, but
without giving effect to any other assignments thereof also
made on the date hereof), including, without limitation,
such percentage interest in the Assignor's Commitment and
the A Advances owing to the Assignor.
2. The Assignor (i) represents and warrants that as
of the date hereof its Commitment (after giving effect to
other assignments thereof made prior to the date hereof,
whether or not such assignments have become effective, but
without giving effect to any other assignments thereof also
made on the date hereof) is in the dollar amount specified
as the Assignor's Commitment on Schedule 1 hereto and the
aggregate outstanding principal amount of Advances owing to
it (after giving effect to any other assignments thereof
made prior to the date hereof, whether or not such
assignments have become effective, but without giving
effect to any other assignments thereof also made on the
date hereof) is in the dollar amount specified as the
aggregate outstanding principal amount of Advances owing to
the Assignor on Schedule 1 hereto; (ii) represents and
warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such
interest is free
6355I/105
<PAGE>
2
and clear of any adverse claim; (iii) makes no
representation or warranty and assumes no responsibility
with respect to any statements, warranties or
representations made in or in connection with the 364-Day
Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
364-Day Agreement or any other instrument or document
furnished pursuant thereto; and (iv) makes no
representation or warranty and assumes no responsibility
with respect to the financial condition of PM Companies or
any Borrower or the performance or observance by PM
Companies or any Borrower of any of their obligations under
the 364-Day Agreement or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a
copy of the 364-Day Agreement, together with copies of the
financial statements referred to in Section 4.01 thereof
and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to
enter into this Agreement and Acceptance; (ii) agrees that
it will, independently and without reliance upon the Agent,
the Assignor 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 decisions in
taking or not taking action under the 364-Day Agreement;
(iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the
364-Day Agreement as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably
incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by
the terms of the 364-Day Agreement are required to be
performed by it as a Lender; [and] (vi) specifies as its CD
Lending Office, Domestic Lending Office (and address for
notices) and Eurodollar Lending Office the offices set
forth beneath its name on the signature pages hereof [and
(vii) attaches the forms prescribed by the Internal Revenue
Service of the United States certifying as to the
Assignee's status for purposes of determining exemption
from United States withholding taxes with respect to all
payments to be made to the Assignee under the 364-Day
Agreement or such other documents as are necessary to
indicate that all such payments are subject to such rates
at a rate reduced by an applicable tax treaty].*
___________________
* If the Assignee is organized under the laws of a
jurisdiction outside the United States.
6355I/105
<PAGE>
3
4. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, it will be
delivered to the Agent for acceptance and recording by the
Agent. The effective date for this Assignment and
Acceptance shall be the date of acceptance thereof by the
Agent, unless otherwise specified on Schedule 1 hereto (the
"Effective Date").
5. Upon such acceptance and recording by the Agent,
as of the Effective Date, (i) the Assignee shall be a party
to the 364-Day Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its
obligations under the 364-Day Agreement.
6. Upon such acceptance and recording by the Agent,
from and after the Effective Date, the Agent shall make all
payments under the 364-Day Agreement in respect of the
interest assigned hereby (including, without limitation,
all payments of principal, interest and fees with respect
thereto) to the Assignee. The Assignor and the Assignee
shall make all appropriate adjustments in payments under
the 364-Day Agreement for periods prior to the Effective
Date directly between themselves.
7. This Assignment and Acceptance shall be governed
by, and construed in accordance with, the laws of the State
of New York.
IN WITNESS WHEREOF, the parties hereto have caused
this Assignment and Acceptance to be executed by their
respective officers thereunto duly authorized, as of the date
first above written, such execution being made on Schedule 1
hereto.
6355I/105
<PAGE>
Schedule I
to
Assignment and Acceptance
Dated ___________ 19__
Section 1.
---------
Percentage Interest ____________%
Section 2.
---------
Assignor's Commitment: $___________
Aggregate Outstanding Principal
Amount of Advances owing to the Assignor: $___________
Section 3.
---------
Effective Date*: ___________, 19__
[NAME OF ASSIGNOR]
By:_______________________
Title:
[NAME OF ASSIGNEE]
By:_______________________
Title:
CD Lending Office:
[Address]
________________
* This date should be no earlier than the date of acceptance
by the Agent.
6355I/105
<PAGE>
2
Domestic Lending Office
(and address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Accepted this ____ day
of ________, 19__
CITIBANK, N.A.
By:______________________
Title:
6355I/105
<PAGE>
EXHIBIT D
[Form of Opinion of Counsel for Philip Morris Companies Inc.]
[Date of initial Borrowing]
To each of the Lenders parties
to the 364-Day Loan and Guaranty
Agreement dated as of
December 17, 1993 among
Philip Morris Companies Inc.,
said Lenders and Citibank, N.A.,
as Agent, and to Citibank, N.A.,
as Agent
Philip Morris Companies Inc.
----------------------------
Gentlemen:
This opinion is furnished to you pursuant to Section
3.01(c) of the 364-Day Loan and Guaranty Agreement dated as of
December 17, 1993 (the "364-Day Agreement") among Philip Morris
Companies Inc. ("PM Companies"), the Lenders parties thereto
and Citibank, N.A., as Agent for said Lenders. Unless
otherwise defined herein, terms defined in the 364-Day
Agreement are used herein as therein defined.
We have acted as counsel for PM Companies and its
subsidiaries [, including ____________ (the "Borrower"),] in
connection with the preparation, execution and delivery of, and
the initial Borrowing made under, the 364-Day Agreement.
In that connection we have examined:
(1) The 364-Day Agreement.
(2) The documents furnished by PM Companies [and the
Borrower] pursuant to Article III of the 364-Day Agreement.
(3) The [Articles] [Certificate] of Incorporation of
PM Companies [and the Borrower] and all amendments thereto
(the "Charter[s]").
(4) The by-laws of PM Companies [and the Borrower]
and all amendments thereto (the "By-laws").
6355I/105
<PAGE>
2
We have also examined the originals, or copies certified to our
satisfaction, of such corporate records of PM Companies [and
the Borrower], certificates of public officials and of officers
of PM Companies [and the Borrower], and agreements, instruments
and documents, as we have deemed necessary as a basis for the
opinions hereinafter expressed. As to questions of fact
material to such opinions, we have, when relevant facts were
not independently established by us, relied upon certificates
of PM Companies [and the Borrower] or their [respective]
officers or of public officials. We have assumed the due
execution and delivery, pursuant to due authorization, of the
364-Day Agreement by the Lenders parties thereto and the Agent.
Based upon the foregoing and upon such investigation
as we have deemed necessary, we are of the following opinion:
1. PM Companies is a corporation duly organized,
validly existing and in good standing under the laws of
Virginia. [The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of
______________.]
2. The execution, delivery and performance by PM
Companies of the 364-Day Agreement [and the B Notes] are
within PM Companies' corporate powers,* have been duly
authorized by all necessary corporate action, and do not
contravene (i) the Charter[s] or the By-laws or (ii) any
law, rule or regulation applicable to PM Companies [or the
Borrower] (including, without limitation, Regulation X of
the Federal Reserve Board) or (iii) to the best of our
knowledge, any contractual or legal restriction binding on
or affecting PM Companies [or the Borrower]. The B Notes
have been duly executed and delivered on behalf of [PM
Companies] [the Borrower] [,] [and] the 364-Day Agreement
[has] [and the guaranties endorsed on the B Notes have]
been duly executed and delivered on behalf of PM Companies
[and the Notice of Acceptance of the Borrower has been duly
executed and delivered on behalf of the Borrower].
__________________
* If a subsidiary is the Borrower, "The execution,
delivery and performance by PM Companies of the
364-Day Agreement [and the guaranties endorsed on the B
Notes], and by the Borrower of its Notice of
Acceptance [and the B Notes], are within PM Companies'
and the Borrower's corporate powers".
6355I/105
<PAGE>
3
3. No authorization, approval, or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by PM Companies of the 364-Day
Agreement [or the B Notes] [or the guaranties endorsed on
the B Notes] [or by the Borrower of its Notice of
Acceptance or the B Notes to be executed and delivered on
its behalf].
4. The 364-Day Agreement is the legal, valid and
binding obligation of PM Companies enforceable against PM
Companies in accordance with its terms. [The B Notes
issued on the date hereof [and the guaranties endorsed
thereon] are the legal, valid and binding obligations of
[PM Companies] [the Borrower] [the Borrower and PM
Companies, respectively,] enforceable against [PM
Companies] [the Borrower] [the Borrower and PM Companies,
respectively,] in accordance with their respective terms.]
5. Except as disclosed in the Form 10-K of Philip
Morris for the fiscal year ended December 31, 1992, there
is, to the best of our knowledge, no pending or threatened
action or proceeding against PM Companies [or the Borrower]
or any of [its] [their] subsidiaries before any court,
governmental agency or arbitrator which is likely to have a
material adverse effect upon the financial condition or
operations of PM Companies and its subsidiaries taken as a
whole.
6. PM Companies directly or indirectly owns 100% of
the capital stock of [the Borrower and of] Philip Morris.
The opinions set forth above are subject to the following
qualifications:
(a) Our opinion in paragraph 4 above is subject to
the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors' rights generally.
(b) Our opinion in paragraph 4 above is subject to
the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding
in equity or at law).
Very truly yours,
6355I/105
<PAGE>
EXHIBIT E
[Form of Opinion of Special Counsel for the Agent]
[Date of initial Borrowing]
To the Banks listed on
Exhibit A hereto and
to Citibank, N.A.,
as Agent
Philip Morris Companies Inc.
----------------------------
Gentlemen:
We have acted as special New York counsel to Citibank,
N.A., acting for itself and as Agent, in connection with the
preparation, execution and delivery of, and the initial
Borrowing made under, the 364-Day Loan and Guaranty Agreement
dated as of December 17, 1993 (the "364-Day Agreement") among
Philip Morris Companies Inc. and each of you. Unless otherwise
defined herein, terms defined in the 364-Day Agreement are used
herein as therein defined.
In that connection, we have examined the following
documents:
(1) A counterpart of the 364-Day Agreement, executed
by each of the parties thereto.
(2) The documents furnished pursuant to Article III
of the 364-Day Agreement and listed on Exhibit B hereto,
including the opinion of Hunton & Williams, counsel for PM
Companies and its subsidiaries.
In our examination of the documents referred to above, we have
assumed the authenticity of all such documents submitted to us
as originals, the genuineness of all signatures, the due
authority of the parties executing such documents, and the
conformity to the originals of all such documents submitted to
us as copies. We have also assumed that each of the Banks
parties to the 364-Day Agreement and the Agent has duly
executed and delivered, with all necessary power and authority
(corporate and otherwise), the 364-Day Agreement.
6355I/105
<PAGE>
2
To the extent that our opinions expressed below
involve conclusions as to the matters set forth in paragraphs
1, 2, 3 and 6 of the above-mentioned opinion of Hunton &
Williams, we have assumed without independent investigation the
correctness of the matters set forth in such paragraphs, our
opinion being subject to the assumptions, qualifications and
limitations set forth in such opinion of Hunton & Williams with
respect thereto.
Based upon the foregoing examination of documents and
assumptions and upon such other investigation as we have deemed
necessary, we are of the following opinion:
1. The 364-Day Agreement is, and the guaranties
endorsed on the B Notes when delivered under the Loan
Agreement will be, the legal, valid and binding obligation
of PM Companies enforceable against PM Companies in
accordance with its terms.
2. The B Notes of [PM Companies] [__________] (the
"Borrower"), if any, issued on the date hereof are the
legal, valid and binding obligations of [PM Companies] [the
Borrower] enforceable against [PM Companies] [the Borrower]
in accordance with their respective terms.
3. The opinion of Hunton & Williams, counsel for PM
Companies and its subsidiaries, and the other documents
referred to in item (2) above are substantially responsive
to the requirements of the 364-Day Agreement.
Our opinions in paragraphs 1 and 2 above are subject to the
following qualifications:
(a) Our opinions in paragraphs 1 and 2 above are
subject to the effect of general principles of equity
including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
Further, pursuant to such equitable principles, (i) Section
8.02 of the 364-Day Agreement, which Section provides that
the Guarantor's liability thereunder shall not be affected
by changes in or amendments to the 364-Day Agreement, and
(ii) Section 2 of the guaranty endorsed on the B Notes,
which Section provides that the Guarantor's liability
thereunder shall not be affected by changes in or
amendments to the B Notes, might be enforceable only to the
extent that such changes or amendments were not so material
as to constitute a new contract among the parties.
6355I/105
<PAGE>
3
(b) Our opinions in paragraphs 1 and 2 above are also
subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally.
(c) Our opinions expressed above are limited to the
law of the State of New York and the Federal law of the
United States, and we do not express any opinion herein
concerning any other law. Without limiting the generality
of the foregoing, we express no opinion as to the effect of
the law of any jurisdiction other than the State of New
York wherein any Lender may be located or wherein
enforcement of the 364-Day Agreement or the B Notes may be
sought which limits the rates of interest legally
chargeable or collectible.
Very truly yours,
SHEARMAN & STERLING
6355I/105
<PAGE>
EXHIBIT A
to the Opinion dated _________________, 1991
of Shearman & Sterling
Banks
-----
6355I/105
<PAGE>
EXHIBIT B
to the Opinion dated _________________, 1991
of Shearman & Sterling
Documents
---------
6355I/105
<PAGE>
EXHIBIT F
NOTICE OF ACCEPTANCE
Dated ___________, 199_
The undersigned, ________________, a ________________
corporation and a subsidiary of PM Companies (as defined below)
(the "Subsidiary"), hereby:
1. Confirms that this Notice of Acceptance is being
delivered pursuant to Section 9.01 of that certain 364-Day
Loan and Guaranty Agreement dated as of December 17, 1993
(the "364-Day Agreement", terms defined therein being used
herein with the same meaning), among Philip Morris
Companies Inc. ("PM Companies"), the lenders parties
thereto (the "Lenders") and Citibank, N.A., as agent for
the Lenders (the "Agent").
2. States that the Subsidiary desires to become a
"Borrower" under the Agreement and agrees to be bound by
the terms and provisions of the 364-Day Agreement as a
"Borrower" thereunder.
3. Represents and warrants as follows:
(a) The Subsidiary is a corporation duly
organized, validly existing and in good standing under
the laws of ______________________.
(b) The execution, delivery and performance by
the Subsidiary of the B Notes, if any, executed and
delivered and to be executed and delivered by it, the
364-Day Agreement and this Notice of Acceptance are
within the Subsidiary's corporate powers, have been
duly authorized by all necessary corporate action, and
do not contravene (i) the Subsidiary's charter or
by-laws or (ii) any law, rule, regulation or order of
any court or governmental agency or any contractual
restriction binding on or affecting the Subsidiary.
(c) No authorization or approval or other action
by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due
execution, delivery and performance by the Subsidiary
of the B Notes executed and delivered and to be
executed and delivered by it, the 364-Day Agreement or
this Notice of Acceptance.
6355I/105
<PAGE>
2
(d) The 364-Day Agreement is, and the B Notes of
such Subsidiary if delivered under the 364-Day
Agreement will be, the legal, valid and binding
obligations of the Subsidiary enforceable against the
Subsidiary in accordance with their terms, subject to
the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors' rights generally and to the effect of
general principles of equity (regardless of whether
such enforceability is considered in a proceeding in
equity or at law).
(e) There is no pending or threatened action or
proceeding affecting the Subsidiary or any of its
subsidiaries before any court, governmental agency or
arbitrator which purports to affect the legality,
validity or enforceability of the 364-Day Agreement or
any Note.
(f) PM Companies owns directly or indirectly
100% of the capital stock of the Subsidiary.
4. Delivers with this Notice of Acceptance an opinion
of counsel for PM Companies, pursuant to Section 9.01(b) of
the Agreement, in the form of Schedule 1 hereto.
[(Name of Borrower)]
----------------------------------
By________________________________
Title:
The undersigned, as Guarantor under the Agreement,
hereby confirms and agrees to the foregoing Notice of
Acceptance pursuant to Section 9.01(a) of the Agreement.
PHILIP MORRIS COMPANIES INC.
By________________________________
Title:
6355I/105
<PAGE>
Schedule 1
to
Notice of Acceptance
[OPINION OF COUNSEL FOR PM COMPANIES]
[Date of Notice of Acceptance]
To each of the Lenders parties
to the 364-Day Loan and Guaranty
Agreement dated as of December 17,
1993 among Philip Morris Companies
Inc., said Lenders and Citibank, N.A.,
as Agent, and to Citibank, N.A., as
Agent
Philip Morris Companies Inc.
----------------------------
Gentlemen:
This opinion is furnished to you pursuant to Section
9.01(b) of the 364-Day Loan and Guaranty Agreement, dated as of
December 17, 1993 (the "364-Day Agreement"), among Philip
Morris Companies Inc. ("PM Companies"), the Lenders parties
thereto and Citibank, N.A., as Agent for said Lenders. Unless
otherwise defined herein, terms defined in the 364-Day
Agreement are used herein as therein defined.
We have acted as counsel for PM Companies and its
subsidiary, __________________ (the "Subsidiary"), in
connection with the preparation, execution and delivery of the
Notice of Acceptance by the Subsidiary delivered pursuant to
Section 9.01 of the 364-Day Agreement.
In that connection, we have examined the 364-Day
Agreement, the B Notes, if any, to be executed and delivered by
the Subsidiary and such other agreements, instruments and
documents as we have deemed necessary as a basis for the
opinion expressed below. As to questions of fact material to
such opinion, we have, when relevant facts were not
independently established by us, relied upon certificates of PM
Companies and the Subsidiary or their respective officers or of
public officials. We have assumed the due execution and
delivery, pursuant to due authorization, of the 364-Day
Agreement by the Lenders parties thereto and the Agent.
6355I/105
<PAGE>
2
Based upon the foregoing and upon such investigation
as we have deemed necessary, we are of the opinion that the
364-Day Agreement is, and the B Notes of the Subsidiary if
delivered under the 364-Day Agreement will be, the legal, valid
and binding obligations of the Subsidiary enforceable against
the Subsidiary in accordance with their respective terms,
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors'
rights generally and to the effect of general principles of
equity, including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
Very truly yours,
6355I/105
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated October 12, 1987, between PHILIP MORRIS
COMPANIES INC., a Virginia corporation with its principal office at 120 Park
Avenue, New York, New York 10017 (the "Company"), and MURRAY H. BRING, residing
at 7013 Heatherhill Road, Bethesda, Maryland 20817 ("Bring").
WHEREAS, the incumbent Senior Vice President and General Counsel of the
Company ("Incumbent") will retire from those positions in June 1988; and
WHEREAS, the Company wishes to have Bring succeed the Incumbent upon the
latter's retirement, and to that end has induced Bring to agree to relinquish
his senior partnership in a prominent Washington, D.C. law firm and to join the
Company at its headquarters in New York City in anticipation of his succession
to the position of Senior Vice President and General Counsel;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:
1. Term of Employment. The Company will employ Bring and Bring will work
------------------
for the Company for a term commencing on January 1, 1988, or on such earlier
date as the parties hereto agree, and ending on December 31, 1992, subject to
renewal as provided in Section 8(a) hereof. Such
-1-
<PAGE>
period of employment, as from time to time renewed, is hereinafter referred to
as the "term hereof."
2. Duties. During the initial phase of the term hereof, from January 1,
------
1988, or such earlier date as the parties hereto agree, to the date of
retirement of the Incumbent, Bring shall be an Associate General Counsel of the
Company, performing such executive duties as may be assigned to him by the Chief
Executive Officer of the Company, or his or her designee. Upon the retirement
of the Incumbent, and for the duration of the term hereof, Bring shall be, and
perform the duties of Senior Vice President and General Counsel, and shall
perform such other duties as Bring and the Chief Executive Officer of the
Company, or his or her designee, shall mutually agree upon. Bring shall report
to the President of the Company. The Company will use its best efforts to cause
Bring to be a management nominee for election to its Board of Directors at the
Annual Meeting to be held in the Spring of 1989.
3. Full Time Employment. During the term hereof, Bring will devote
--------------------
substantially all his time during regular business hours, best efforts and
attention (periods of vacation, sickness, and permitted leaves of absence
excepted) to the business of the Company, its divisions, subsidiaries and
affiliates.
-2-
<PAGE>
4. Compensation. During the term hereof:
------------
(a) The Company shall pay Bring a monthly salary at the rate of not less
than $300,000 per year ("Base Compensation") for his services. Bring's salary
grade on commencement of his employment hereunder shall be Salary Grade 26.
With respect to future increases in Base Compensation during the term hereof,
Bring shall receive increases commensurate with those given to senior executives
of his level based on performance standards as determined in the discretion of
the Chief Executive Officer and the Board of Directors.
(b) Bring shall participate in and receive benefits under employee benefit
programs of the Company applicable to his then salary grade in accordance with
their terms as in effect from time to time, including, without limitation,
profit sharing, disability, survivor income, insurance, vacation, matching gift,
tuition assistance, scholarship awards and other so-called "fringe benefit"
plans or arrangements. He shall also be eligible to participate in the
incentive compensation program and The Philip Morris 1987 Long Term Incentive
Plan. To the extent that any of the foregoing plans or arrangements requires a
period of accredited service before a specified benefit accrues, the Company
will provide Bring the equivalent of such accredited
-3-
<PAGE>
service, if he is eligible for such benefit in every respect other than the
required period of accredited service. To the extent that any of the foregoing
plans or arrangements is geared to the Philip Morris Salaried Employees
Retirement Plan ("Plan"), all calculations will be in accordance with the
provisions of Section 4(c) hereof. Amounts awarded under any incentive
compensation program shall be determined under the terms of such program in the
discretion of the committee administering such program, subject to the terms
hereinafter set forth.
(c) Bring shall also participate in the Plan, and shall accrue, for
purposes thereof, two years of accredited service for each year of service to
age 60, and three years of accredited service for each year of service from age
60 through 65 ("presumptive accredited service"). Commencing at age 60, Bring
shall be entitled to a full retirement benefit of not less than $150,000 per
year, payable upon his retirement for the remainder of his life only, regardless
of whether his years of accredited service or other entitlements so warrant,
provided, however, that Bring shall be entitled to such retirement benefit prior
- -------- -------
to age 60 if the Company shall breach this Agreement or otherwise terminate this
Agreement without cause at any time during the term hereof or any renewal period
provided for in Section 8(a) hereof.
-4-
<PAGE>
In the event of such breach or termination by the Company, payment of the
retirement benefit shall commence at the time the Company shall cease paying the
compensation provided for in Section 4(a). Notwithstanding the foregoing, the
$150,000 per year minimum retirement benefit hereunder shall be offset by the
annual retirement benefit provided to Bring under the Plan. To the extent that
the retirement benefit hereunder exceeds that which may be provided under the
terms of the Plan, such amount shall be paid from general corporate assets. The
said minimum retirement benefit shall not apply if Bring shall voluntarily leave
the employ of the Company prior to reaching age 60. In such case, the minimum
retirement benefit shall be the greater of $50,000 per year, or the amount that
would be payable under the Plan calculated according to the presumptive
accredited service which has accrued pursuant to the provisions of this Section
4(c). In determining the benefit which may become due to Bring under the Plan,
accredited service shall be calculated on the basis of the presumptive
accredited service which has accrued pursuant to the provisions of this Section
4(c). In the event that Bring becomes eligible for a retirement benefit before
120 months of service have accrued, the "five-year average compensation"
referred to in the Plan will be calculated on the basis of Bring's highest
compensation
-5-
<PAGE>
during 60 consecutive months of accredited service, or if there are less than 60
consecutive months of accredited service, then on the basis of compensation
during as many months of accredited service as have been accrued.
(d) On June 1, 1988 the Company shall, pursuant to The Philip Morris 1987
Long Term Incentive Plan, grant to Bring (i) a non-qualified option to purchase
10,000 shares of the Company's Common Stock ("Stock"), and (ii) awards of 5,000
shares of Stock, which awards may be of restricted Stock or deferred Stock or
both in such proportions as Bring shall elect by notice to the Company. The
terms of such option and the conditions and restrictions applicable thereto
shall be determined by the Compensation Committee but in no event shall the
option price be greater than the fair market value at the date of grant. If, at
any time during the period commencing on the date of execution hereof and
terminating on the date or dates the options or awards of stock shall be granted
to Bring, the Company shall reclassify, split, reverse split, or pay a stock
dividend on the stock, the number and kind of shares of stock issuable upon
exercise of the options or awards pursuant to the provisions of this Section
4(d) shall be appropriately and equitably adjusted by the Compensation Committee
in good faith to take into account the occurrence of such event or
-6-
<PAGE>
events. The option and awards granted by this Section 4(d) are part of the
inducement for Bring to accept the employment contemplated by this Agreement and
shall be in addition to any grants and awards which may be from time to time
conferred by the Compensation Committee on the senior executives of the Company,
for which Bring shall also be eligible.
(e) If, subsequent to the execution of this Agreement, the Company shall
adopt any employee benefit program or plan, or any policy with respect thereto,
the terms of which would be more beneficial to Bring than the provisions hereof,
Bring shall be entitled to such more beneficial terms, notwithstanding the
provisions hereof.
(f) If the term hereof shall end and Bring shall continue in the employ of
the Company without an agreement, the provisions of Section 4(c) and 5(a) shall
survive termination of this Agreement and remain in effect during the period of
such continued employment.
5. Non-Competition.
---------------
(a) Bring agrees that, during the term hereof and for two years after
termination of Bring's employment with the Company, he will not, directly or
indirectly, alone, as an employee, agent, independent contractor, lender,
consultant, owner, partner or joint venturer, or as an officer, director,or
stockholder of any corporation, or otherwise, be employed by, participate, be
-7-
<PAGE>
engaged in or be connected with any business within the continental United
States of America which competes, directly or indirectly, with the Company or
any of its affiliates, except that if Bring is no longer employed by the Company
on an active full-time basis, this provision shall not preclude Bring's practice
of law with a bona fide law firm regardless of its clientele; provided, however,
-------- -------
that Bring personally shall not perform services for any of such law firm's
clientele which are engaged in or are connected with any business within the
continental United States of America which competes, directly or indirectly,
with the Company or any of its affiliates. Ownership of 1% or less of the stock
or other securities of a corporation, the stock of which is listed on a national
securities exchange or is quoted on the NASDAQ National Market shall not
constitute a breach of this Paragraph, so long as Bring does not in fact have
the power to control, or direct the management of, or is not otherwise
associated with such corporation.
(b) Bring will hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data of the Company or
affiliates of the Company obtained by Bring during negotiation of this Agreement
and his employment by the Company (whether or not developed by him) which shall
not be generally known to the
-8-
<PAGE>
public or recognized as standard practice (other than as a result of disclosures
by Bring); will not, from and after the date of execution of this Agreement,
during his employment hereunder or after termination of such employment, use or
reveal, communicate or divulge, directly or indirectly, any such information,
knowledge or data to any person, firm or corporation other than the Company, an
affiliate of the Company, or persons, firms or corporations designated by the
Company; and will not solicit, interfere with or endeavor to entice away any
customer or employee of the Company or any of its affiliates.
6. Relocation. As full reimbursement to Bring for his expenses in
----------
relocating to the New York Metropolitan Area, the Company shall pay to him, in
addition to all other compensation hereunder, (i) an amount equal to 15% of his
Base Compensation for the first year of his employment, and (ii) an amount equal
to 10% of his Base Compensation for each of the four following years. In
addition, the Company will reimburse Bring for the costs of relocating his
residence from the Washington Metropolitan Area to the New York Metropolitan
Area in accordance with the Company's normal relocation policy, including all
moving and storage costs. In addition, if expended by Bring, the Company will
reimburse Bring for temporary housing costs, necessitated by complica-
-9-
<PAGE>
tions involved in relinquishing possession of his current residence and taking
possession of a new residence for up to $5,000 per month for not more than two
months.
7. Expense Reimbursement. The Company will reimburse Bring for his
---------------------
appropriate and reasonable business expenses incurred or associated with the
business of the Company during the term of his employment hereunder, in
accordance with the Company's customary policies in this regard applicable to
executives of his level.
8. Termination.
-----------
(a) The term of this Agreement shall commence on January 1, 1988, or on
such earlier date as the parties hereto agree, and expire on December 31, 1992.
The term shall be automatically renewed for successive one-year periods
thereafter if this Agreement is still in force immediately prior to such
renewal, unless terminated as of the end of the initial term or any subsequent
one-year period by written notice to that effect by either party to the other
not less than six months prior to the end of such term or period, as the case
may be.
(b) Notwithstanding any other provision of this Agreement, in the event of
the death or disability (as such term is defined in The Philip Morris Long Term
Disability Plan) of Bring after January 1, 1988 or such earlier
-10-
<PAGE>
commencement date if the parties hereto have so agreed, Bring's employment with
the Company shall terminate as of the date of such death or disability and
compensation to Bring hereunder shall immediately cease, except that Bring or
his estate shall be entitled to all accrued and unpaid salary through the date
of death or disability and Bring or his designated beneficiaries shall be
entitled to any other benefits which may be due Bring at the time of his death
or disability. If there shall be a bona fide dispute as to the disability of
Bring which cannot be resolved in accordance with the terms of The Philip Morris
Long Term Disability Plan, the issue shall be submitted to the Dean of the
Cornell University Medical School whose decision shall be binding and conclusive
on the parties.
(c) If Bring shall die or become disabled prior to January 1, 1988 or such
earlier commencement date if the parties hereto have so agreed, this Agreement
(other than the provisions of Sections 5(b), 6 (if any relocation costs have
actually been expended by Bring prior to January 1, 1988), 9 and 10 hereof in
the event Bring shall become disabled) shall terminate, and the Company shall
have no liability or obligations of any kind to Bring, his wife, beneficiary or
his estate.
-11-
<PAGE>
(d) Bring may be discharged for cause only by reason of one or more of the
following occurrences:
(i) his conviction by a court of competent jurisdiction of, or a plea
of guilty or nolo contendere to, a crime involving moral turpitude or a
---------------
felony, whether or not committed during the term hereof;
(ii) his commission of an act of fraud upon, a breach of his
fiduciary duty to, or materially evidencing bad faith toward, the Company
or;
(iii) a breach by him of any material duty or obligation imposed upon
him by this Agreement, as to which the Company shall have given him 30
days' notice and which breach shall not have been cured within such 30-day
period.
In the cases aforesaid, the Company may terminate the employment of Bring
hereunder by notice to Bring to such effect, such termination to be effective as
of the date specified in such notice, which date shall not be less than 30 days
after the date on which such notice shall have been given to Bring. Such notice
shall be accompanied by a payment of accrued unpaid salary to Bring through the
termination date of his employment. Any rights and benefits Bring may have
under employee benefit and fringe benefit plans and programs of the Company
(including The Philip Morris 1987 Long Term Incentive Plan and the Plan) shall
be determined in accordance with the terms of such plans and programs. Except
as provided in this Section 8(d), if Bring's employment shall be terminated for
cause pursuant to this Section 8(d), the Company shall have
-12-
<PAGE>
no further obligations to Bring under this Agreement, including, without
limitation, any obligations with respect to the minimum retirement benefit
provided in Section 4(c) hereof. In addition, the stock options and awards
provided in Section 4(d) hereof shall be terminated except to the extent
exercised prior to the date on which notice of termination of employment for
cause shall have been given to Bring. Any notice of discharge for cause which
shall have been determined to have been given improperly shall not be deemed to
have any effect whatsoever.
(e) If during the term hereof, (i) the Company at any time shall fail
to fulfill any of its material obligations hereunder, or (ii) Bring shall not,
as provided in Section 2, be vested by the Company (or any of its major
subsidiaries) with the powers and responsibilities normally vested in the
Company's Senior Vice President and General Counsel (except by reason of Bring's
refusal of such powers and responsibilities), Bring at his option may give
notice of such condition to the Company. If the Company does not, within 60
days after the service of such notice, cure such condition, Bring at his option
may forthwith terminate this Agreement, and this Agreement shall thereupon be
deemed to have been breached and terminated by the Company without cause.
-13-
<PAGE>
9. Remedies.
--------
(a) The Company and Bring recognize that the service to be rendered
under this Agreement by Bring is of a special, unique, unusual, extraordinary
and intellectual character, which gives it peculiar value which cannot be
reasonably or adequately compensated in damages in an action at law; and a
breach by Bring of this Agreement would cause the Company irreparable injury.
In the event of a breach by Bring of the provisions of Section 5 hereof, or if
Bring shall, without the written consent of the Company, leave its employ and
perform services in breach of Section 5 hereof or for any person, firm or
corporation or for his own account in violation of the provisions of this
Agreement, then the Company shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, either in law or
at equity, to obtain damages for any breach of this Agreement, or to enforce the
specific performance hereof by Bring, or to enjoin Bring from performing
services in breach of Section 5 hereof or for any such other person, firm or
corporation or for his own account. Nothing herein contained shall be in lieu
of, or be construed deprive the Company of any other remedies which may be
available to it.
(b) If the Company shall breach this Agreement or terminate this
Agreement without cause, the Company shall
-14-
<PAGE>
remain obligated to pay compensation to Bring and provide the benefits set forth
in Section 4 hereof (or their equivalent including an amount equal to 50% of
Bring's annual Base Compensation at the time of termination as a payment in lieu
of annual incentive compensation) to Bring at the times and in the manner herein
provided through the end of the then term hereof as though no such termination
shall have occurred; provided, however, that the obligations of the Company set
-------- -------
forth in Sections 4(a) and 4(b) hereof shall immediately cease if Bring shall
become self-employed, or directly or indirectly be employed by, perform services
for (other than on a solely voluntary basis), or become gainfully associated
with any person, firm, corporation, or other entity.
10. Miscellaneous
-------------
A. Successors, Assigns, Etc.
-------------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and any successors to substantially all of the business of the
Company, and any such successor shall be bound to the provisions hereof as fully
as if it were originally named the Company herein. Neither this Agreement nor
any rights hereunder shall be assignable by Bring, and if Bring shall encumber
or dispose of the right to receive any payments hereunder, the Company, at its
option, may terminate this Agreement forthwith, and
-15-
<PAGE>
thereupon it shall have no further liability hereunder. Nothing herein contained
shall permit the Company, without the consent of Bring, to assign this contract
to any entity other than an affiliated company or one which acquires
substantially all of the business of the Company.
B. Further Assurances
------------------
Each party agrees, without further consideration, to execute and
deliver such documents and take such action as may be reasonably necessary to
carry out the intent and purposes of this Agreement.
C. Notices
-------
Any notice or other communication hereunder shall be in writing and
shall be delivered against receipt, or mailed by registered, or certified first
class mail, with postage prepaid, as follows:
(a) If to the Company at:
120 Park Avenue
New York, New York 10017
Attention: President
(b) If to Bring at:
c/o Arnold & Porter
1200 New Hampshire Avenue, N.W.
Washington, D.C. 20036
-16-
<PAGE>
unless prior to the giving of such notice or other communication the party
giving the communication shall have actually received from the party to be given
the communication a proper notice of a new address, in which event such new
address shall be used unless similarly changed.
D. Amendments
----------
This Agreement may be amended only by a written instrument duly
executed by or on behalf of each of the parties hereto.
E. Section and Other Headings
--------------------------
The section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this, Agreement.
F. Applicable Law
--------------
This Agreement is being delivered in the State of New York and shall
be governed by, construed and enforced in accordance with the laws of such
State, without giving effect to conflict of laws.
-17-
<PAGE>
G. Entire Agreement
----------------
This Agreement sets forth the entire agreement and understanding of
the parties with respect to the transactions contemplated hereby and supersedes
all prior agreements, arrangements and understandings relating to the subject
matter hereof.
H. Counterparts
------------
This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which taken together shall constitute one and the
same instrument.
I. No Waiver
---------
No waiver shall be deemed to be made by either party of any of its or
his rights hereunder unless the same shall be in writing, and each waiver, if
any, shall be a waiver only with respect to the specific instance involved and
shall in no way impair the rights of the waiving party or the obligations of the
other party in any other respect at any other time.
J. Validity
--------
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity
-18-
<PAGE>
or enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above mentioned.
PHILIP MORRIS COMPANIES INC.
By /s/ WILLIAM J. O'CONNOR
------------------------------
/s/ MURRAY H. BRING
------------------------------
MURRAY H. BRING
-19-
<PAGE>
PHILIP MORRIS
COMPANIES INC.
120 PARK AVENUE, NEW YORK, N.Y. 10017
JOHN J. TUCKER (212) 880-4060
Senior Vice President
Human Resources and Administration
October 5, 1993
Murray H. Bring
Philip Morris Companies Inc.
120 Park Avenue
New York, NY 10017
Dear Murray:
Your employment agreement, dated October 12, 1987, is hereby amended by adding
at the end of Section 4(c) thereof the following:
"In addition to the other benefits provided hereunder, should you die,
become permanently disabled, or be terminated by the Company other than for
cause prior to reaching your sixty-fifth birthday, or should you continue
working as an employee of the Company until you reach your sixty-fifth
birthday, the period of accredited service which will be used in
calculating your retirement benefit under the Philip Morris Salaried
Employees Retirement Plan, as provided for under this Section 4(c), shall
be augmented by additional presumptive accredited service of six years in
recognition of the years you were engaged in private law practice at the
law firm of Arnold & Porter."
/s/ John J. Tucker
------------------
John J. Tucker
/kw
Agreed:
/s/ Murray H. Bring
- ----------------------
Murray H. Bring
<PAGE>
EXHIBIT 12
PHILIP MORRIS COMPANIES INC. AND SUBSIDIARIES
Computation of Ratios of Earnings to Fixed Charges
(Dollars in millions)
___________________
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1992 1991 1990 1989
------ ------- ------ ------ ------
Earnings before
income taxes and
cumulative effect
of accounting changes $6,196 $ 8,608 $6,971 $6,311 $5,058
Add (Deduct):
Equity in net earnings of
less than 50% owned
affiliates (164) (107) (95) (90) (62)
Dividends from less than
50% owned affiliates 151 125 72 71 34
Fixed charges 1,716 1,736 1,899 1,941 1,971
Interest capitalized, net
of amortization (13) (3) (11) - (8)
------ ------- ------ ------ ------
Earnings available for
fixed charges $7,886 $10,359 $8,836 $8,233 $6,993
====== ======= ====== ====== ======
Fixed charges:
Interest incurred:
Consumer products $1,502 $ 1,525 $1,711 $1,754 $1,810
Financial services and
real estate 87 95 83 93 91
------ ------- ------ ------ ------
1,589 1,620 1,794 1,847 1,901
Portion of rent expense
deemed to represent
interest factor 127 116 105 94 70
------ ------- ------ ------ ------
Fixed charges $1,716 $ 1,736 $1,899 $1,941 $1,971
====== ======= ====== ====== ======
Ratio of earnings to
fixed charges 4.6 6.0 4.7 4.2 3.5
====== ======= ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operating Results--Operating Revenues
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Tobacco $25,973 $25,677 $23,840
Food 30,372 29,048 28,178
Beer 4,154 3,976 4,056
Financial services and
real estate 402 430 384
------- ------- -------
Total $60,901 $59,131 $56,458
======= ======= =======
</TABLE>
Operating Results--Operating Income
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Tobacco $ 4,910 $ 7,193 $ 6,463
Food 2,608 2,769 2,016
Beer 215 258 299
Financial services and
real estate 249 219 178
------- ------- -------
Operating profit 7,982 10,439 8,956
Unallocated corporate
expenses (395) (380) (334)
------- ------- -------
Total $ 7,587 $10,059 $ 8,622
======= ======= =======
</TABLE>
Operating profit in the first quarter of 1994 is expected to be lower than in
the first quarter of 1993.
On February 23, 1994, the Board of Directors increased the Company's regular
quarterly dividend 6.2% to $.69 per common share from $.65 per share. The new
annualized dividend rate is $2.76 per share.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits." The cumulative effect at January 1, 1993 of adopting
SFAS No. 112 reduced 1993 net earnings by $477 million ($.54 per share), net of
$297 million of income tax benefits. Adoption of SFAS No. 112 did not
materially reduce 1993 earnings before cumulative effect of accounting change.
(See Note 13 to the Consolidated Financial Statements.)
Price and cost pressures in all segments of the Company's business require
continuing and accelerated emphasis on reducing costs to improve profitability.
In the fourth quarter of 1993, a number of cost reducing proposals were approved
by the Board of Directors, which resulted in the Company's providing for the
costs of restructuring its worldwide operations to significantly reduce its cost
structure and improve its future growth, profitability and cash flow. The charge
related primarily to the downsizing or closure of approximately 40 manufacturing
and other facilities over the next three years. This restructuring charge
reduced earnings before income taxes, net earnings and earnings per share by
$741 million, $457 million and $.52, respectively. Included in this charge were
asset write-downs of $429 million, with the remainder of the charge representing
anticipated cash expenditures to be made over the next few years to be funded
with cash provided by operating activities. The Company expects the
restructuring plan to begin lowering operating costs in 1994 and to generate
approximately $600 million in annual after-tax savings by 1997. The Company
expects a payback period of approximately three years. Savings from the planned
actions will be used for both business-building initiatives and profit
improvement. Over the next three years, the Company intends to reduce its
workforce by approximately 8%, or 14,000 positions. It is anticipated that the
SFAS No. 112 reserve is adequate to provide for the costs associated with this
workforce reduction.
On April 2, 1993, the Company's domestic tobacco subsidiary ("PM U.S.A.")
announced that during the second quarter of 1993 it would implement an extensive
promotional program to reduce the average retail price of Marlboro cigarettes.
This action, which represented a major shift in its domestic tobacco pricing
strategy, was intended to restore lost market share and improve long-term
profitability.
The market share results of the Marlboro brand price promotion exceeded
expectations. On July 20, 1993, PM U.S.A. announced certain actions designed to
continue its share recovery strategy. Specifically, PM U.S.A. created a two
category pricing structure for its tobacco brands, premium and discount,
effective August 9, 1993. In the premium segment, PM U.S.A. converted its
Marlboro retail price promotion into an equivalent wholesale list price
reduction that applied to all its other premium brands as well. This action was
taken to enable PM U.S.A. to take advantage of the marketing efficiencies
provided by a list price reduction, as opposed to supporting continuous price
promotions. PM U.S.A. believes that its experience with the Marlboro promotion
demonstrated that a narrowed price gap between PM U.S.A.'s premium and discount
brands would help restore Marlboro's market share and sustain its competitive
position with respect to its other brands by encouraging a market environment in
which consumers make purchasing decisions based on brand preference rather than
on price alone. This pricing strategy has begun to achieve its objectives (see
further discussion in domestic tobacco operating results). In the discount
segment, PM U.S.A. raised the net list price of its deep discount products.
Other discount brands are being offered at the same net list prices. During the
third quarter of 1993, wholesale and retail distributors were compensated for
the effect of price decreases on their inventory, at a cost of approximately
$200 million to PM U.S.A. The overall effect of these price changes has been to
lower profit margins on sales of premium brands that will not be offset entirely
by higher volume. These lower margins are expected to continue until such time
as there are sustained improvements in the competitive environment. On November
9, 1993, a major competitor increased the average price of its
20
<PAGE>
domestic brands by $2.00 per thousand. On November 11, 1993, PM U.S.A.
announced that it was also increasing the average price of all its brands by
$2.00 per thousand.
Effective January 1, 1993, the federal excise tax on cigarettes increased from
$10 per thousand ($.20 per pack) to $12 per thousand ($.24 per pack). As part of
its health care reform proposal, the federal administration has included a
$37.50 per thousand ($.75 per pack) increase in the federal excise tax effective
October 1, 1994. It is anticipated that the higher excise taxes, if implemented,
would result in volume declines for PM U.S.A. and the cigarette industry and
might cause further shifts from the premium segment to the discount segment. In
addition, legislation or other governmental action is proposed periodically,
both in the United States and abroad, that not only would increase excise taxes
but also would further curtail the advertisement and use of tobacco and beer
products. Any or all of the foregoing, if implemented, would have an adverse
impact on the Company's volume, operating revenues and operating profit, the
amounts of which cannot be determined.
As part of the U.S. federal budget passed in August 1993, Congress has
required, effective January 1, 1994, that domestic cigarette manufacturers use
at least 75% American-grown tobacco, which is more expensive than imported
tobacco, in their products. Due to the high content of American-grown tobacco
(approximately 65% in 1993) already used in PM U.S.A.'s products and those
exported by PM International, this new requirement is not expected to have a
material adverse impact on tobacco results of operations.
The new federal income tax law became effective during 1993, retroactive to
January 1, 1993. As a result, 1993 earnings per share reflect a $.05 per share
reduction to reflect the higher tax rate.
In November 1992, the U.S. Food and Drug Administration issued new labeling
requirements for food products, effective May 1994. Compliance with the new
requirements will not have a material adverse impact on the Company's results of
operations.
1993 Compared with 1992
Operating revenues for 1993 increased $1.8 billion (3.0%). As a result of the
previously discussed domestic tobacco business strategies and the restructuring
charge, operating profit, as defined for segment reporting purposes (operating
income excluding unallocated corporate expenses), decreased $2.5 billion
(23.5%). Excluding domestic tobacco and the restructuring charge, operating
profit increased 12.6% over 1992.
Amortization of goodwill increased 9.2%, to $569 million in 1993, due
primarily to acquisitions during 1993. Interest and other debt expense, net,
decreased $60 million (4.1%) in 1993, due primarily to lower rates and higher
interest income, partially offset by higher average outstanding debt during the
year.
Earnings before cumulative effect of accounting change decreased in 1993 by
$1.4 billion (27.8%), due to decreased operating profit ($2.5 billion),
partially offset by lower interest and other debt expense, net ($60 million) and
a lower income tax provision ($1.0 billion).
Net earnings and earnings per share for 1993 were as follows:
<TABLE>
<CAPTION>
Net Earnings E.P.S. %
(in millions) Earnings per Share Decrease
-------- --------- --------
<S> <C> <C> <C>
Net earnings excluding
restructuring and SFAS No. 112 $ 4,043 $ 4.60 (15.6)%
SFAS No. 112--incremental charge (18) (.02)
------- -------
Net earnings--ongoing basis 4,025 4.58
Restructuring provision (457) (.52)
------- -------
3,568 4.06
SFAS No. 112--cumulative
adjustment (477) (.54)
------- -------
Net earnings--as reported $ 3,091 $ 3.52 (35.4)%
======= =======
</TABLE>
Earnings per share for 1993, excluding the impact of restructuring and the
adoption of SFAS No. 112, decreased 15.6%, due to a decrease in earnings of
18.1% to $4.0 billion, partially offset by fewer shares outstanding. As a result
of the Company's share repurchase program, the weighted average number of shares
outstanding decreased to 878 million in 1993 from 906 million in 1992.
1992 Compared with 1991
Operating revenues for 1992 increased $2.7 billion (4.7%) and operating profit
increased $1.5 billion (16.6%). Operating revenues and operating profit in all
business segments, except beer, increased over 1991.
Amortization of goodwill increased 4.4%, to $521 million in 1992, due
primarily to acquisitions during 1992. Interest and other debt expense, net,
decreased $200 million (12.1%) in 1992, due primarily to lower rates, lower
average outstanding debt during the year and higher interest income.
Effective January 1, 1991, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," for its U.S.
retiree benefit plans. The Company expects to adopt SFAS No. 106 for its non-
U.S. plans in 1995 and, based upon preliminary estimates, does not anticipate
that the effects of adoption will be significant. (See Note 14 to the
Consolidated Financial Statements.)
In 1991, the Company provided for the costs of restructuring its worldwide
food operations. The charge related to consolidation of manufacturing and
distribution facilities, exiting from certain unprofitable business lines and
other related overhead cost reductions. This restructuring charge reduced
earnings before income taxes, net earnings and earnings per share by $455
million, $275 million and $.30, respectively.
Earnings before cumulative effect of accounting change increased in 1992 by
$1.0 billion (25.8%), due to increased operating profit ($1.5 billion) and lower
interest and other debt expense, net ($200 million), partially offset by a
higher income tax provision ($625 million).
Earnings per share before cumulative effect of accounting change for 1992
increased 28.5%, from $4.24 to $5.45, due to higher earnings and fewer shares
outstanding. Excluding the 1991 charge for restructuring the Company's worldwide
food operations, earnings per share before cumulative effect of accounting
change increased 20.0% from $4.54 in 1991. As a result of the Company's share
repurchase program, the weighted average number of shares outstanding decreased
to 906 million during 1992 from 925 million in 1991.
21
<PAGE>
Operating Results by Business Segment
Tobacco--Operating Revenues
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Domestic tobacco $10,227 $12,010 $11,589
International tobacco 15,746 13,667 12,251
------- ------- -------
Total $25,973 $25,677 $23,840
======= ======= =======
</TABLE>
Tobacco--Operating Profit
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Domestic tobacco $2,808 $5,185 $4,774
International tobacco 2,360 2,018 1,694
Amortization of goodwill (13) (10) (5)
Restructuring charges (245)
------ ------ ------
Total $4,910 $7,193 $6,463
====== ====== ======
</TABLE>
1993 Compared with 1992
During 1993, domestic cigarette industry volume continued to shift from the
premium segment to the discount segment, although the trend began to reverse in
the third quarter of 1993. The premium and discount segments for 1993 accounted
for approximately 63% and 37%, respectively, of the domestic cigarette industry,
as compared with 70% and 30%, respectively, in 1992. Reference is made to the
discussion on page 20 of actions taken by PM U.S.A. in response to the highly
price sensitive market environment.
PM U.S.A.'s domestic volume was 194.7 billion units, a decrease of 9.1%
compared with an industry decline of 9.0%. PM U.S.A.'s market share was 42.2%,
stable with 1992. In the premium segment, volume in PM U.S.A.'s brands decreased
16.2%, compared with a 17.6% decrease for the industry, resulting in a market
share gain of .9% share point to 49.7%. The Marlboro family's volume was down
15.4 billion units (12.4%), accounting for a 23.5% share of the total industry,
as compared with a 24.4% share in 1992. However, PM U.S.A. believes that much of
the decline in Marlboro and other premium brands was due to wholesale inventory
reductions, compared to prior years when wholesale inventories were maintained
at higher levels in anticipation of price increases. The foregoing volume and
market share data are based on shipments. Since the implementation of the
strategy announced on April 2 and subsequent actions taken by PM U.S.A. (see
page 20), Nielsen retail sales data, a more accurate reflection of consumer
buying habits than shipment data, indicates a share gain for Marlboro, growing
from its low point of 21.5% in March to 26.6% in December. Commencing with the
Company's 1993 Annual Report to stockholders, PM U.S.A. has elected to report
its retail market shares using an expanded Nielsen Survey, which indicates
Marlboro retail share was 22.1% in March and 26.8% in December, an increase of
4.7 share points.
In the discount segment, PM U.S.A.'s shipments increased 20.1% to 49.8 billion
units, resulting in a gain of 2.3 share points in this segment to 29.4%.
In 1993, PM U.S.A.'s operating revenues decreased 14.8%, due primarily to
volume decreases ($1.1 billion), unfavorable product mix ($530 million) and
price decreases ($517 million, including approximately $200 million to
compensate wholesale and retail distributors for the effects of price decreases
on their inventories), partially offset by the increase in federal excise taxes
($387 million). Operating profit decreased 45.8% from 1992, due primarily to
higher marketing, administration and research costs ($850 million, substantially
all of which related to promotions of Marlboro), volume decreases ($743
million), price decreases ($517 million) and unfavorable product mix ($452
million), partially offset by cost decreases ($206 million). The cost decreases
in 1993 include a $105 million favorable impact from inventory calculations.
International tobacco operating revenues increased 15.2%, due primarily to
higher foreign excise taxes ($1.0 billion, including those for previously
unconsolidated operations and acquisitions), favorable volume/mix ($663
million), the consolidation of previously unconsolidated operations ($435
million), price increases ($166 million) and the impact of acquisitions ($79
million), partially offset by currency movement ($287 million). Total 1993
international unit volume, including U.S. exports, increased 38.5 billion units
(9.2%) to 459.7 billion units. Volume gains were recorded in most markets
including Italy, Germany, France, Turkey, Central and Eastern Europe, Japan and
Argentina. The Company's market share trends remain positive in all its major
international markets. Marlboro's international volume continued to grow,
increasing 3.5% to 240.1 billion units. U.S. export volume increased 3.6% to
114.4 billion units. International tobacco operating profit increased 16.9% due
primarily to volume/mix increases ($302 million), price increases, net of cost
increases ($155 million), the consolidation of previously unconsolidated
operations ($89 million) and the impact of acquisitions ($22 million), partially
offset by higher marketing expenses ($103 million) and currency movement ($52
million).
1992 Compared with 1991
In 1992, PM U.S.A.'s domestic tobacco operating revenues increased 3.6%, due
primarily to price increases ($1.2 billion), partially offset by volume
decreases ($367 million) and unfavorable product mix ($348 million). PM U.S.A.'s
domestic volume (based on shipments) decreased 6.4 billion units (2.9%) to 214.3
billion units. The domestic cigarette industry's volume decreased approximately
0.5% in 1992 and PM U.S.A.'s market share (based on shipments) decreased to
42.3%, down 1.1 share points from 1991. PM U.S.A.'s volume in the full price
segment decreased 5.7%, compared with a 7.3% decrease for the industry. The
Marlboro family's volume was down 7.3 billion units (5.6%) from 1991, resulting
in a 24.4% market share as compared with a 25.8% market share in 1991. The
discount segment of the market continued to grow and accounted for 30.2% of the
U.S. cigarette industry in 1992, compared with 25% in 1991. In 1992, industry
discount shipments increased 20%; shipments of PM U.S.A.'s discount brands
increased 10.5% to 41.5 billion units, resulting in a 27.1% share of this
segment in 1992, compared with 29.5% in 1991. The deep discount subsegment more
than doubled in 1992 to a 14.9% share of the total industry, an increase of 8.4
share points over 1991. PM U.S.A.'s share of this subsegment was 30.5% in 1992
and 29.4% in 1991, represented by shipments of 23.1 billion units, as compared
to 9.8 billion units in 1991. In 1992, PM U.S.A.'s operating profit increased
8.6%, due primarily to price increases ($1.2 billion), partially offset by
unfavorable product mix, volume decreases ($243 million) and higher marketing
expenses ($154 million).
22
<PAGE>
International tobacco operating revenues increased 11.6%, due primarily to
higher foreign excise taxes ($740 million), price increases ($286 million),
currency movement ($278 million) and the impact of acquisitions ($154 million).
Total 1992 international unit volume, including exports, increased 3.9 billion
units (0.9%) to 421.2 billion units, due primarily to higher volume in France,
Central and Eastern Europe, the Middle East, Japan and Argentina. These gains
were partially offset by lower exports to Russia and volume shortfalls due to
local problems in certain key markets. Due to an inability to negotiate
financing arrangements, no export shipments were made under the 1992 contract
with the Russian government, as compared to 19.0 billion units in 1991; however,
new export business to the private sector in Russia and other former Soviet
Republics commenced in the third quarter of 1992, resulting in shipments of 7.1
billion units. Problems in key markets included an unfavorable excise tax
structure in Germany, a strike by government workers in Italy, and retail price
gaps between imported cigarettes and local monopoly products in Turkey. These
issues were largely resolved in the first quarter of 1993. U.S. export volume
increased 3.6% to 110.4 billion units. International tobacco operating profit
increased 19.1%, due primarily to price increases, net of cost increases ($282
million), currency movement ($98 million) and the impact of acquisitions ($21
million), partially offset by higher marketing expenses ($83 million).
Food--Operating Revenues
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
North American food $20,940 $20,325 $20,244
International food 9,432 8,723 7,934
------- ------- -------
Total $30,372 $29,048 $28,178
======= ======= =======
</TABLE>
Food--Operating Profit
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
North American food $2,404 $2,194 $2,071
International food 1,114 1,083 891
Amortization of
goodwill (553) (508) (491)
Restructuring charges (357) (455)
------- ------- -------
Total $2,608 $2,769 $2,016
======= ======= =======
</TABLE>
1993 Compared with 1992
In 1993, North American food operating revenues increased 3.0%, due primarily to
price increases ($404 million), volume increases ($260 million) and the impact
of acquisitions, net of dispositions ($21 million), partially offset by currency
movement ($88 million). Volume gains were recorded in cereals and frozen pizza,
due primarily to acquisitions, and in cheese, processed meats, bakery, frozen
meals, foodservice and Canadian operations. Volume declined in beverages and in
turkey products. Operating profit increased 9.6%, due primarily to price
increases and lower product costs (aggregating $329 million), volume increases
($33 million) and the impact of acquisitions, net of dispositions ($16 million),
partially offset by higher marketing expenses ($195 million) and currency
movement ($13 million).
International food operating revenues in 1993 increased 8.1%, due primarily to
the impact of acquisitions ($1.0 billion), volume increases ($423 million) and
the consolidation of previously unconsolidated subsidiaries ($159 million),
partially offset by currency movement ($884 million). All major core categories
showed volume growth versus prior year, particularly confectionery, which
benefited from acquisitions, new product introductions and line extensions.
Market share for the core confectionery and coffee businesses continued to show
positive trends. Operating profit increased 2.9%, due primarily to volume
increases ($178 million), acquisitions ($153 million) and lower product costs
($104 million), partially offset by currency movement ($202 million), higher
marketing expenses ($162 million) and 1992 gains on sales of assets ($47
million).
1992 Compared with 1991
In 1992, North American food operating revenues increased 0.4%, due primarily to
volume increases ($144 million) and the impact of an acquisition in the fourth
quarter of 1991 ($98 million), partially offset by price decreases ($94 million)
and currency movement ($63 million). Volume increased in beverages (due to an
acquisition in the fourth quarter of 1991), cereals, cheese, red meat products,
desserts and frozen pizza, as well as in the foodservice operations. Partially
offsetting these volume gains were volume declines in turkey products and frozen
dinners. Volumes continued to be impacted by the recession as consumers traded
down from premium products. However, the Company reduced prices on certain
cheese and processed meat products, and management believes that these price
decreases may have contributed to higher volumes in certain of these products in
the second half of 1992. During 1992, the Company sold its interest in a
Canadian joint venture for a gain of $137 million. In addition, the Company
provided $77 million for the costs of certain product discontinuances, an early
retirement program, and reorganization of distribution and customer service
centers. The gain and these charges were included in marketing, administration
and research costs.
International food operating revenues in 1992 increased 9.9%, due primarily to
currency movement ($381 million), the impact of acquisitions ($199 million) and
price increases ($135 million). International food volume was up slightly from
1991. Volume in 1991 was unusually high due to Gulf War hoarding and the
expansion into eastern Germany. The increase in 1992 reflected strengthening of
the Company's position in coffee and the impact of acquisitions, while the
recessionary environments in Europe and Australia adversely affected grocery
volume. Confectionery volumes were also impacted by an unusually hot summer in
Europe. Operating profit increased 21.5%, due primarily to price increases, net
of cost increases ($126 million), gains on sales of assets ($47 million),
currency movement ($30 million) and the impact of acquisitions ($23 million).
Beer
1993 Compared with 1992
Operating revenues in 1993 increased 4.5%, due primarily to the acquisition of
Molson Breweries U.S.A. Inc. ($164 million) and shipment volume increases,
excluding Molson brands ($45 million), partially offset by price/mix decreases
($57 million). During the second quarter of 1993, the Company
23
<PAGE>
acquired a 20% equity interest in Molson Breweries in Canada and 100% of Molson
Breweries U.S.A. Unit volume (based on shipments) increased 4.3% to 44.0 million
barrels, up 1.1% excluding Molson brands, compared with U.S. malt beverage
industry shipments, which were up slightly during the year. During 1993,
consumer trade-down patterns were evident in the industry as sales in the
premium category declined. Accordingly, the Company reduced the price of Miller
High Life in many markets during the year. Shipment volume gains were recorded
in Miller High Life, reflecting such price reductions, and in the Miller Genuine
Draft brand family. Shipments of Miller Lite declined, but by a lesser
percentage than that experienced in recent years, reflecting concentrated
marketing efforts to slow its decline. Market share of the U.S. malt beverage
industry (based on shipments) was 22.2% in 1993 compared with 21.4% in 1992.
Operating profit, excluding the $139 million impact of the 1993 restructuring,
increased 37.2%, due primarily to lower product costs ($84 million), a 1992
provision for workforce reduction programs ($25 million), higher volume,
excluding Molson brands ($19 million) and the impact of acquisitions ($19
million), partially offset by price/mix decreases ($57 million).
1992 Compared with 1991
Operating revenues in 1992 decreased 2.0%, due to volume decreases ($131
million), offset by price increases ($51 million). Volume decreased 3.2%, to
42.1 million barrels (based on shipments), compared with U.S. malt beverage
industry shipments, which were flat for the year. Consumer trade-down patterns
in 1992 were evident in the industry as sales in the premium category declined,
while sales in the below premium categories increased. The year also saw intense
price promoting throughout the industry. The Company's volumes decreased due
primarily to a planned reduction of distributor inventories, a cool summer and
the recession in the United States. Continuing declines in Miller Lite and
Miller High Life were partially offset by increases in the Miller Genuine Draft
brand family. Concentrated marketing efforts were undertaken in 1992 to slow the
decline of Miller Lite. Market share of the U.S. malt beverage industry (based
on shipments) was 21.4% in 1992 compared with 22.4% in 1991. Operating profit in
1992 decreased 13.7%, due primarily to volume decreases ($53 million) and higher
marketing expenses ($52 million), partially offset by price increases. During
1992, the Company recorded a provision of $25 million for workforce reduction
programs.
Financial Services and Real Estate
1993 Compared with 1992
Operating revenues from financial services and real estate decreased 6.5% and
operating profit increased 13.7% in 1993. Operating revenues from financial
services decreased 5.9%, due primarily to lower average finance assets.
Operating profit from financial services increased 31.1%, due primarily to an
adjustment to the leveraged lease portfolio for the effects of the increase in
the federal income tax rates (due to the nature of leveraged lease accounting,
this increase in operating profit was more than offset in the provision for
income taxes; however, it had no material impact on the Company's net earnings),
lower provision for losses and lower interest expense versus 1992. Operating
revenues and operating profit from real estate operations decreased from 1992
levels, due primarily to decreased California sales.
1992 Compared with 1991
Operating revenues and operating profit from financial services and real estate
increased 12.0% and 23.0%, respectively, in 1992. In financial services,
operating revenues and operating profit increased in 1992, due primarily to
increased investments in finance assets and a lower provision for losses,
partially offset by higher interest expense resulting from higher debt balances
over 1991 levels. Operating revenues and operating profit from real estate
operations in 1992 increased from 1991 levels, due primarily to increased
residential land sales.
Financial Review
Cash Provided and Used
Net Cash Provided by Operating Activities
Cash provided by operating activities increased $85 million (1.2%) to $7.0
billion in 1993, due primarily to less cash used for working capital items in
1993, partially offset by lower earnings. Working capital items declined $1.4
billion at December 31, 1993, as compared with December 31, 1992. The decrease
reflects lower domestic tobacco receivables and inventories in 1993, as well as
higher accrued marketing and accounts payable. The Company generally follows
asset and liability management practices designed to minimize its investment in
working capital. This does not impair operational capability or flexibility, due
to the availability of the Company's credit facilities. The Company expects that
cash from operations and available credit facilities will continue to be
sufficient to meet the future needs of the business.
Free cash flow is a measure of excess cash generated by a company and is
available for debt repayment, share repurchase and acquisitions. The Company
defines free cash flow as cash provided by operating activities less capital
expenditures, dividends paid to stockholders and net investments in finance
assets. In 1993, consolidated free cash flow totaled $3.0 billion, as compared
to $2.5 billion in 1992. The increase was due primarily to lower net investments
in finance assets.
Neither the adoption of SFAS No. 112 nor the provision for restructuring had a
material impact on the Company's operating cash flow in 1993.
Cash provided by operating activities of $6.9 billion in 1992 increased by
$623 million (10.0%), due primarily to higher earnings, partially offset by more
cash used for working capital items in 1992.
Net Cash Used in Investing Activities
Cash used in investing activities of $4.2 billion increased in 1993 by $1.3
billion (43.4%). The increase reflects a $2.1 billion increase in cash used for
acquisitions, net of dispositions, and a $731 million decrease in cash used for
net investments in finance assets. Capital expenditures were $1.6 billion in
1993, approximately 59% and 33% of which related to food operations and tobacco
operations, respectively, primarily for modernization of manufacturing
facilities. Capital expenditures are estimated to be $1.8 billion in 1994 and a
total of $8.2 billion for the five-year period 1994-1998, of which approximately
63% and 65%, respectively, are projected for
24
<PAGE>
food operations and approximately 32% and 27%, respectively, are projected for
tobacco operations.
In 1993, cash used for net investments in finance assets was $70 million, as
compared with $801 million in 1992 and $628 million in 1991.
During 1993, the Company acquired Freia Marabou a.s, a Scandinavian
confectionery company, at a cost of $1.3 billion, a North American ready-to-eat
cold cereals business at a cost of $448 million and The Terry's Group, a United
Kingdom confectionery company for $295 million. In addition, the Company
acquired a 20% equity interest in Molson Breweries in Canada and 100% of Molson
Breweries U.S.A., at a cost of $320 million. Also, the Company acquired 98% of
Kazakhstan cigarette manufacturer Almaty Tobacco Kombinat from the Government of
the Republic of Kazakhstan at a cost of approximately $300 million. The Company
also increased its investment in food and tobacco operations in other regions of
Central and Eastern Europe.
During 1993, the Company sold its ice cream business, Birds Eye frozen
vegetables business and beer can manufacturing plants. The proceeds from the
sales of these businesses aggregated $498 million.
Net Cash Used in Financing Activities
Debt
The Company's total debt was $18.2 billion at December 31, 1993 and 1992 and
$16.9 billion at December 31, 1991.
During 1993, total consumer products debt increased $95 million. The increase
represented $1.2 billion of net issuance of short-term debt, partially offset by
$1.1 billion of net repayment of long-term borrowings. During 1992, total
consumer products debt increased $980 million. The increase represented $1.7
billion of net issuance of long-term debt, partially offset by $683 million of
net repayment of short-term borrowings. During 1991, total consumer products
debt decreased by $1.9 billion. The decrease represented $4.1 billion of net
repayment of short-term borrowings and currency translation of $159 million,
partially offset by $2.4 billion of net issuance of long-term debt.
Fixed rate debt comprised approximately 83% and 90% of consumer products debt
at December 31, 1993 and 1992, respectively. The average interest rate on total
consumer products debt was approximately 7.6% and 8.4% during 1993 and 1992,
respectively. At December 31, 1993, the average interest rate on total consumer
products debt, including the impact of currency swap agreements discussed below,
was approximately 7.5%.
The Company has entered into currency and related interest rate swap
agreements to manage exposure to currency movements. The aggregate principal
amount of currency swap agreements outstanding at December 31, 1993 and 1992 was
$1.4 billion and $1.8 billion, respectively, of which $1.2 billion and $1.3
billion related to consumer products debt at December 31, 1993 and 1992,
respectively.
The Company continually monitors its foreign currency exposure. It acts to
manage such exposure, when deemed prudent, through various hedging transactions.
At December 31, 1993, the Company's credit facilities amounted to
approximately $16.0 billion, of which approximately $15.7 billion were unused.
Included in these facilities is a revolving credit facility for $8 billion
expiring in 1998, which enables the Company to refinance short-term debt on a
long-term basis, and a $4 billion credit facility expiring in December 1994.
These facilities are used to support the Company's commercial paper borrowings
and are available for acquisitions and other corporate purposes. The Company
expects to continue to refinance long-term and short-term debt from time to
time. The nature and amount of the Company's long-term and short-term debt and
the proportionate amount of each can be expected to vary as a result of future
business requirements, market conditions and other factors.
The Company's credit ratings by Moody's at December 31, 1993, 1992 and 1991
were "P-1" in the commercial paper market and "A2" for long-term obligations.
The Company's credit ratings by Standard & Poor's at December 31, 1993, 1992 and
1991 were "A-1" in the commercial paper market and "A" for long-term debt
obligations.
Equity and Dividends
During the first quarter of 1993, the Company repurchased 17.3 million shares of
its common stock at an aggregate cost of $1.2 billion; no shares were
repurchased in the remainder of 1993. These purchases were made in accordance
with the Company's November 1991 announcement of its intention to spend up to
$2.0 billion to repurchase common stock in open market transactions; in May
1992, the Board of Directors authorized an additional $3.0 billion for such
purchases. Through December 31, 1993, cumulative purchases under the program
totaled 51.9 million shares at a cost of $3.9 billion. On February 23, 1994, the
Board of Directors extended through December 30, 1994, the existing authority to
repurchase the Company's shares, which was scheduled to expire in May 1994. The
Company announced that it will resume repurchases under this authority.
At December 31, 1993, the ratio of consumer products debt to total equity was
1.41, compared with 1.29 at December 31, 1992. The Company's ratio of total debt
to total equity at December 31, 1993 was 1.56 compared with 1.45 at December 31,
1992. The increase in these ratios primarily reflects the impact of the
restructuring charge, the adoption of SFAS No. 112, share repurchases and
unfavorable movement in the currency translation adjustment account. Excluding
the impact of the restructuring charge and the adoption of SFAS No. 112, the
ratios of consumer products debt and total debt to equity at December 31, 1993
would have been 1.30 and 1.44, respectively.
Dividends paid in 1993 increased 13.0% over 1992, reflecting the increase in
dividends declared, partially offset by fewer shares outstanding. Dividends paid
per share increased 16.9% in 1993.
Return on average stockholders' equity was 25.6% in 1993 and 39.4% in 1992.
Excluding the cumulative effect of the adoption of SFAS No. 112, the return on
average stockholders' equity would have been 28.9% in 1993. The decrease from
1992 reflects lower earnings, due to the change in domestic tobacco business
strategy and the restructuring charge for worldwide operations, as well as the
impact of treasury stock acquired pursuant to the common stock repurchase
program.
Contingencies
See Note 15 to the Consolidated Financial Statements for discussion of
contingencies.
25
<PAGE>
Selected Financial Data--Fifteen-Year Review
(in millions of dollars, except per share data)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Summary of Operations:
Operating revenues $ 60,901 $ 59,131 $ 56,458
United States export sales 4,105 3,797 3,061
Cost of sales 26,771 26,082 25,612
Federal excise taxes on products 3,081 2,879 2,978
Foreign excise taxes on products 7,199 6,157 5,416
Operating income 7,587 10,059 8,622
Interest and other debt expense, net (consumer products) 1,391 1,451 1,651
Earnings before income taxes and cumulative effect of
accounting changes 6,196 8,608 6,971
Pretax profit margin 10.2% 14.6% 12.3%
Provision for income taxes $ 2,628 $ 3,669 $ 3,044
Earnings before cumulative effect of accounting changes 3,568 4,939 3,927
Cumulative effect of accounting changes (477) (921)
Net earnings 3,091 4,939 3,006
Earnings per share before cumulative effect of accounting
changes 4.06 5.45 4.24
Per share cumulative effect of accounting changes (.54) (.99)
Net earnings per share 3.52 5.45 3.25
Dividends declared per share 2.60 2.35 1.91
Weighted average shares (millions) 878 906 925
Capital expenditures (consumer products) $ 1,592 $ 1,573 $ 1,562
Depreciation (consumer products) 1,042 963 938
Property, plant and equipment, net (consumer products) 10,463 10,530 9,946
Inventories (consumer products) 7,358 7,785 7,445
Total assets 51,205 50,014 47,384
Total long-term debt 15,221 14,583 14,213
Total debt--consumer products 16,364 16,269 15,289
--financial services and real estate 1,792 1,934 1,611
Total deferred income taxes 2,168 2,248 1,803
Stockholders' equity 11,627 12,563 12,512
Common dividends declared as a % of net earnings 73.8% 43.0% 58.7%
Book value per common share $ 13.26 $ 14.07 $ 13.60
Market price of common share--high/low 77 5/8-45 86 5/8-69 1/2 81 3/4-48 1/4
Closing price of common share at year-end 55 5/8 77 1/8 80 1/4
Price/earnings ratio at year-end 14 14 19
Number of common shares outstanding at year-end (millions) 877 893 920
Number of employees 173,000 161,000 166,000
</TABLE>
<TABLE>
<CAPTION>
1990 1989
---- ----
<S> <C> <C>
Summary of Operations:
Operating revenues $ 51,169 $ 44,080
United States export sales 2,928 2,288
Cost of sales 24,430 21,868
Federal excise taxes on products 2,159 2,140
Foreign excise taxes on products 4,687 3,608
Operating income 7,946 6,789
Interest and other debt expense, net (consumer products) 1,635 1,731
Earnings before income taxes and cumulative effect of
accounting changes 6,311 5,058
Pretax profit margin 12.3% 11.5%
Provision for income taxes $ 2,771 $ 2,112
Earnings before cumulative effect of accounting changes 3,540 2,946
Cumulative effect of accounting changes
Net earnings 3,540 2,946
Earnings per share before cumulative effect of accounting
changes 3.83 3.18
Per share cumulative effect of accounting changes
Net earnings per share 3.83 3.18
Dividends declared per share 1.55 1.25
Weighted average shares (millions) 925 927
Capital expenditures (consumer products) $ 1,355 $ 1,246
Depreciation (consumer products) 876 755
Property, plant and equipment, net (consumer products) 9,604 8,457
Inventories (consumer products) 7,153 5,751
Total assets 46,569 38,528
Total long-term debt 16,121 14,551
Total debt--consumer products 17,182 14,887
--financial services and real estate 1,560 1,538
Total deferred income taxes 2,083 1,732
Stockholders' equity 11,947 9,571
Common dividends declared as a % of net earnings 40.5% 39.3%
Book value per common share $ 12.90 $ 10.31
Market price of common share--high/low 52-36 45 1/2-25
Closing price of common share at year-end 51 3/4 41 5/8
Price/earnings ratio at year-end 14 13
Number of common shares outstanding at year-end (millions) 926 929
Number of employees 168,000 157,000
</TABLE>
See notes to the consolidated financial statements regarding the 1993 adoption
of SFAS No. 112, the 1993 restructuring of the Company's worldwide operations,
the 1991 adoption of SFAS No. 106 and the 1991 restructuring of food operations.
In 1990, the Company acquired Jacobs Suchard AG. Consolidated results of the
Company include the operating results of Jacobs Suchard AG since its
acquisition.
In 1989, the Company charged $179 million, primarily for the cost of combining
Kraft and General Foods. In addition, the Company sold its equity investment in
Rothmans International p.l.c. for a pretax gain of $455 million. The net impact
of these items was an increase to net earnings of $152 million, or $.16 per
share.
26
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
1988 1987 1986 1985 1984
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$ 31,273 $ 27,650 $ 25,542 $ 16,158 $ 14,102
1,863 1,592 1,193 923 925
13,565 12,183 11,901 6,709 5,840
2,127 2,085 2,075 2,049 2,041
3,755 3,331 2,653 1,766 1,635
4,397 3,990 3,537 2,664 1,908
670 646 772 311 276
3,727 3,344 2,765 2,353 1,632
11.9% 12.1% 10.8% 14.6% 11.6%
$ 1,663 $ 1,502 $ 1,287 $ 1,098 $ 743
2,064 1,842 1,478 1,255 889
273
2,337 1,842 1,478 1,255 889
2.22 1.94 1.55 1.31 .91
.29
2.51 1.94 1.55 1.31 .91
1.01 .79 .62 .50 .43
932 951 954 959 981
$ 1,024 $ 718 $ 678 $ 347 $ 298
608 564 514 367 341
8,648 6,582 6,237 5,684 4,014
5,384 4,154 3,836 3,827 2,653
36,960 21,437 19,482 18,712 9,880
16,812 5,983 6,887 8,035 2,239
16,442 6,355 6,889 7,887 2,566
1,504 1,378 1,141 944 436
1,559 2,044 1,519 1,233 907
7,679 6,823 5,655 4,737 4,093
40.3% 40.6% 39.9% 38.1% 46.8%
$ 8.31 $ 7.21 $ 5.94 $ 4.96 $ 4.21
25 1/2-20 1/8 31 1/8-18 1/8 19 1/2-11 11 7/8-9 10 3/8-7 3/4
25 1/2 21 3/8 18 11 10 1/8
11 11 11 8 11
924 947 951 955 971
155,000 113,000 111,000 114,000 68,000
</TABLE>
<TABLE>
<CAPTION>
1983 1982 1981 1980 1979
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$ 13,256 $ 11,720 $ 10,886 $ 9,822 $ 8,303
970 978 834 702 521
5,665 5,532 5,253 4,675 3,857
1,983 1,180 1,169 1,105 1,037
1,527 1,435 1,411 1,389 1,122
1,840 1,547 1,312 1,144 1,096
230 244 232 205 190
1,610 1,303 1,080 939 906
12.1% 11.1% 9.9% 9.6% 10.9%
$ 706 $ 521 $ 420 $ 390 $ 398
904 782 660 549 508
904 782 660 549 508
.90 .78 .66 .55 .51
.90 .78 .66 .55 .51
.36 .30 .25 .20 .16
1,008 1,005 999 997 996
$ 566 $ 918 $ 1,019 $ 751 $ 629
294 250 211 178 133
4,381 4,178 3,583 2,806 2,214
2,599 2,834 2,922 2,499 2,235
9,908 9,756 9,180 7,362 6,379
2,549 3,776 3,499 2,598 2,448
3,054 3,728 3,804 2,800 2,507
141 83 3 1 9
825 627 455 327 234
4,034 3,663 3,234 2,837 2,471
40.5% 38.6% 37.9% 36.3% 30.6%
$ 4.03 $ 3.64 $ 3.22 $ 2.84 $ 2.48
9-6 3/4 8 1/2-5 1/2 6 7/8-5 1/4 6-3 5/8 4 7/8-3 7/8
9 7 1/2 6 1/8 5 3/8 4 1/2
10 9 9 9 8
1,000 1,007 1,003 998 996
68,000 72,000 72,000 72,000 65,000
</TABLE>
27
<PAGE>
Consolidated Balance Sheets
(in millions of dollars, except per share data)
<TABLE>
<CAPTION>
at December 31, 1993 1992
---- ----
<S> <C> <C>
Assets
Consumer products
Cash and cash equivalents $ 182 $ 1,021
Receivables, net 3,982 4,147
Inventories:
Leaf tobacco 3,030 3,139
Other raw materials 1,695 1,790
Finished product 2,633 2,856
------- -------
7,358 7,785
Other current assets 1,286 953
------- -------
Total current assets 12,808 13,906
Property, plant and equipment,
at cost:
Land and land improvements 709 747
Buildings and building equipment 4,600 4,453
Machinery and equipment 10,494 10,063
Construction in progress 1,127 1,249
------- -------
16,930 16,512
Less accumulated depreciation 6,467 5,982
------- -------
10,463 10,530
Goodwill and other intangible assets
(less accumulated amortization of
$2,727 and $2,182) 19,746 18,523
Other assets 2,529 1,758
------- -------
Total consumer products assets 45,546 44,717
Financial services and real estate
Finance assets, net 4,869 4,622
Real estate held for development
and sale 489 489
Other assets 301 186
------- -------
Total financial services and real
estate assets 5,659 5,297
------- -------
Total Assets $51,205 $50,014
======= =======
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Liabilities
Consumer products
Short-term borrowings $ 268 $ 1,348
Current portion of long-term debt 1,738 1,514
Accounts payable 3,137 2,401
Accrued liabilities:
Marketing 1,619 1,461
Taxes, except income taxes 860 1,268
Employment costs 874 915
Other 2,618 1,963
Income taxes 1,853 1,810
Dividends payable 572 583
------- -------
Total current liabilities 13,539 13,263
Long-term debt 14,358 13,407
Deferred income taxes 361 701
Accrued postretirement health care
costs 2,031 1,995
Other liabilities 4,622 3,785
------- -------
Total consumer products liabilities 34,911 33,151
Financial services and real estate
Short-term borrowings 929 758
Long-term debt 863 1,176
Deferred income taxes 2,706 2,187
Other liabilities 169 179
------- -------
Total financial services and real
estate liabilities 4,667 4,300
------- -------
Total liabilities 39,578 37,451
Contingencies (Note 15)
Stockholders' Equity
Common stock, par value $1.00 per
share (935,320,439 shares issued) 935 935
Earnings reinvested in the business 15,718 14,867
Currency translation adjustments (711) (34)
------- -------
15,942 15,768
Less cost of treasury stock
(58,229,749 and 42,563,254 shares) 4,315 3,205
------- -------
Total stockholders' equity 11,627 12,563
Total Liabilities and ------- -------
Stockholders' Equity $51,205 $50,014
======= =======
</TABLE>
29
<PAGE>
Consolidated Statements of Earnings
(in millions of dollars, except per share data)
<TABLE>
<CAPTION>
for the years ended December 31, 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Operating revenues $60,901 $59,131 $56,458
Cost of sales 26,771 26,082 25,612
Excise taxes on products 10,280 9,036 8,394
------- ------- -------
Gross profit 23,850 24,013 22,452
Marketing, administration and research costs 15,694 13,433 13,331
Amortization of goodwill 569 521 499
------- ------- -------
Operating income 7,587 10,059 8,622
Interest and other debt expense, net 1,391 1,451 1,651
------- ------- -------
Earnings before income taxes and cumulative
effect of accounting changes 6,196 8,608 6,971
Provision for income taxes 2,628 3,669 3,044
------- ------- -------
Earnings before cumulative effect of
accounting changes 3,568 4,939 3,927
Cumulative effect of changes in method of
accounting (See Notes 13 and 14) (477) (921)
------- ------- -------
Net earnings $ 3,091 $ 4,939 $ 3,006
======= ======= =======
Per share data:
Earnings before cumulative effect of
accounting changes $ 4.06 $ 5.45 $ 4.24
Cumulative effect of accounting changes (.54) (.99)
------- ------- -------
Net earnings $ 3.52 $ 5.45 $ 3.25
======= ======= =======
</TABLE>
Consolidated Statements of Cash Flows
(in millions of dollars)
<TABLE>
<CAPTION>
for the years ended December 31, 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash Provided By (Used In) Operating Activities
Net earnings--Consumer products $2,960 $4,799 $2,889
--Financial services and real estate 131 140 117
------ ------ ------
Net earnings 3,091 4,939 3,006
Adjustments to reconcile net earnings to operating
cash flows:
Consumer products
Depreciation and amortization 1,619 1,542 1,497
Cumulative effect of accounting changes 774 1,487
Deferred income tax provision (benefit) (430) 137 (715)
Gains on sales of businesses (46) (162) (5)
Restructuring charges 741 455
Cash effects of changes, net of the effects from
acquired and divested companies:
Receivables, net 105 (57) (139)
Inventories 396 (304) (468)
Accounts payable 700 (421) 395
Income taxes 121 368 443
Other working capital items (736) 30 (212)
Other 203 331 140
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
[GRAPHIC OMITTED]
Consolidated Statements of Cash Flows
(continued)
<TABLE>
<CAPTION>
for the years ended December 31, 1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Financial services and real estate
Cumulative effect of accounting change $ -- $ -- $ 6
Deferred income tax provision 461 446 357
Decrease in real estate receivables 34 68 58
Increase in real estate held for development
and sale (2) (22) (57)
Other (64) (13) 11
-------- -------- --------
Net cash provided by operating activities 6,967 6,882 6,259
Cash Provided By (Used In) Investing Activities
Consumer products
Purchase of businesses, net of acquired cash (3,161) (727) (162)
Proceeds from sales of businesses 553 255 29
Capital expenditures (1,592) (1,573) (1,562)
Other 49 (98) 9
Financial services and real estate
Investments in finance assets (597) (1,577) (936)
Proceeds from other finance assets 527 776 308
-------- -------- --------
Net cash used in investing activities (4,221) (2,944) (2,314)
-------- -------- --------
Net cash provided by operating and investing
activities 2,746 3,938 3,945
Cash Provided By (Used In) Financing Activities
Consumer products
Net issuance (repayment) of short-term
borrowings 1,220 (683) (4,129)
Long-term debt proceeds 1,027 3,832 3,850
Long-term debt repaid (2,154) (2,130) (1,486)
Financial services and real estate
Net issuance (repayment) of short-term
borrowings 171 (60) 94
Long-term debt proceeds 585
Long-term debt repaid (290) (208) (12)
Purchase of treasury stock (1,218) (2,449) (703)
Dividends paid (2,291) (2,028) (1,678)
Issuance of shares 39 115 119
Other (34)
-------- -------- --------
Net cash used in financing activities (3,530) (3,026) (3,945)
Effect of exchange rate changes on cash and cash
equivalents (55) (17) (20)
-------- -------- --------
Cash and cash equivalents:
(Decrease) increase (839) 895 (20)
Balance at beginning of year 1,021 126 146
-------- -------- --------
Balance at end of year $ 182 $ 1,021 $ 126
======== ======== ========
Cash paid: Interest--Consumer products $ 1,391 $ 1,362 $ 1,465
======== ======== ========
--Financial services
and real estate $ 81 $ 70 $ 76
======== ======== ========
Income taxes $ 2,092 $ 2,717 $ 2,229
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
31
<PAGE>
Consolidated Statements of Stockholders' Equity
(in millions of dollars, except per share data)
<TABLE>
<CAPTION>
Earnings Currency Cost of Total
Common Reinvested in Translation Treasury Stockholders'
Stock the Business Adjustments Stock Equity
------- ------------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1991 $935 $10,960 $ 561 $ (509) $11,947
Net earnings 3,006 3,006
Exercise of stock options/units and issuance of other
stock awards (172) 298 126
Cash dividends declared ($1.91 per share) (1,765) (1,765)
Currency translation adjustments (108) (108)
Stock purchased (703) (703)
Other 9 9
---- ------- ----- ------- -------
Balances, December 31, 1991 935 12,038 453 (914) 12,512
Net earnings 4,939 4,939
Exercise of stock options and issuance of other stock
awards (5) 200 195
Cash dividends declared ($2.35 per share) (2,125) (2,125)
Currency translation adjustments (487) (487)
Stock purchased (2,509) (2,509)
Stock issued in connection with an acquisition 20 18 38
---- ------- ----- ------- -------
Balances, December 31, 1992 935 14,867 (34) (3,205) 12,563
Net earnings 3,091 3,091
Exercise of stock options and issuance of other stock
awards (51) 108 57
Cash dividends declared ($2.60 per share) (2,280) (2,280)
Currency translation adjustments (677) (677)
Stock purchased (1,218) (1,218)
Net unrealized appreciation on securities 91 91
---- ------- ----- ------- -------
Balances, December 31, 1993 $935 $15,718 $(711) $(4,315) $11,627
==== ======= ===== ======= =======
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
[GRAPHIC OMITTED]
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies:
Basis of presentation:
The consolidated financial statements include all significant subsidiaries.
Balance sheet accounts are segregated by two broad types of business. Consumer
products assets and liabilities are classified as either current or non-current,
whereas financial services and real estate assets and liabilities are
unclassified, in accordance with respective industry practices.
Cash and cash equivalents:
Cash equivalents include demand deposits with banks and all highly liquid
investments with original maturities of three months or less.
Inventories:
Inventories are stated at the lower of cost or market. The last-in, first-out
("LIFO") method is used to cost substantially all domestic inventories. The cost
of other inventories is determined by the average cost or first-in, first-out
methods. It is a generally recognized industry practice to classify the total
amount of leaf tobacco inventory as a current asset although part of such
inventory, because of the duration of the aging process, ordinarily would not be
utilized within one year.
Income taxes:
Effective January 1, 1993, the Company adopted the method of accounting for
income taxes prescribed by Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes." The Company previously had accounted for
income taxes in accordance with the method prescribed by SFAS No. 96,
"Accounting for Income Taxes." See Note 10.
Depreciation and amortization:
Depreciation is recorded by the straight-line method. Substantially all
goodwill and other intangible assets are amortized by the straight-line method,
principally over 40 years.
Currency and related interest rate swap agreements:
Foreign currency fluctuations due to currency swap agreements are offset
against the related foreign exchange gains and losses on foreign currency
denominated assets and liabilities. The interest differential to be paid or
received is included in interest and other debt expense, net.
Postretirement benefits other than pensions:
Effective January 1, 1991, the Company adopted the method of accounting for
postretirement benefits other than pensions prescribed by SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." See
Note 14.
Postemployment benefits:
Effective January 1, 1993, the Company adopted the method of accounting for
postemployment benefits prescribed by SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." See Note 13.
Note 2. Acquisitions and Divestitures:
During 1993, the Company acquired Freia Marabou a.s, a Scandinavian
confectionery company, at a cost of $1.3 billion, a North American ready-to-eat
cold cereals business at a cost of $448 million and The Terry's Group, a United
Kingdom confectionery company for $295 million. In addition, the Company
acquired a 20% equity interest in Molson Breweries in Canada and 100% of Molson
Breweries U.S.A., at a cost of $320 million. The Company also increased its
investment in tobacco and food operations in Central and Eastern Europe. The
effects of these, and other smaller acquisitions, were not significant to the
Company's 1993 results of operations.
During 1993, the Company sold its ice cream business, Birds Eye frozen
vegetables business and beer can manufacturing plants. The proceeds from the
sales of these businesses aggregated $498 million.
During 1992, the Company purchased several businesses at a total cost of $765
million, consisting of cash of $727 million and $38 million in shares of the
Company's common stock. The effects of these acquisitions were not significant
to the Company's 1992 results of operations.
Note 3. Restructurings:
In the fourth quarter of 1993, the Company provided for the costs of
restructuring its worldwide operations. The charge related primarily to the
downsizing or closure of approximately 40 manufacturing and other facilities.
This restructuring charge reduced 1993 earnings before income taxes, net
earnings and earnings per share by $741 million, $457 million and $.52,
respectively.
33
<PAGE>
Note 3. Restructurings (continued)
In 1991, the Company provided for the costs of restructuring its worldwide
food operations. The charge related to consolidation of manufacturing and
distribution facilities, exiting from certain unprofitable business lines and
other related overhead cost reductions. This restructuring charge reduced 1991
earnings before income taxes, net earnings and earnings per share by $455
million, $275 million and $.30, respectively.
Note 4. Inventories:
The cost of approximately 54% of inventories in 1993 and 56% of inventories in
1992 was determined using the LIFO method. The stated LIFO values of inventories
were approximately $1.0 billion lower than the current cost of inventories at
December 31, 1993 and 1992.
Note 5. Short-Term Borrowings and Borrowing Arrangements:
At December 31, the Company's short-term borrowings and related average
interest rates consisted of the following:
<TABLE>
<CAPTION>
1993 1992
(in millions) Amount Average Amount Average
Outstanding Year-End Rate Outstanding Year-End Rate
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Consumer products:
Bank loans $ 276 9.3% $ 158 7.6%
Commercial paper 2,288 3.4% 1,190 3.5%
Amount reclassified as long-term
debt (2,296)
------- ------
$ 268 $1,348
======= ======
Financial services and real estate:
Commercial paper $ 929 3.3% $ 758 3.4%
======= ======
</TABLE>
The fair values of the Company's short-term borrowings at December 31, 1993
and 1992, based upon market rates, approximate the amounts disclosed above.
The Company maintains credit facilities with a number of lending institutions,
amounting to approximately $16.0 billion at December 31, 1993. Approximately
$15.7 billion of these facilities were unused at December 31, 1993. These
facilities are used to support the Company's commercial paper borrowings and are
available for acquisitions and other corporate purposes.
The Company's credit facilities include revolving bank credit agreements
totaling $12.0 billion. An agreement for $4.0 billion expires in December 1994,
and an agreement for $8.0 billion expires in 1998 enabling the Company to
refinance short-term debt on a long-term basis. Accordingly, short-term
borrowings intended to be refinanced were reclassified as long-term debt at
December 31, 1993.
Certain of these facilities limit payment of cash dividends and the purchase,
redemption or retirement of capital shares and/or require maintenance of a fixed
charges coverage ratio. At December 31, 1993, approximately $5.2 billion of
earnings reinvested in the business was free of such restrictions.
Note 6. Long-Term Debt:
At December 31, the Company's long-term debt consisted of the following:
<TABLE>
<CAPTION>
(in millions) 1993 1992
------ ------
<S> <C> <C>
Consumer products:
Short-term borrowings, reclassified $ 2,296 $ --
Notes, 4.33% to 9.88% (average effective rate 8.30%), due through 2004 11,441 12,280
Debentures, 6.0% to 8.5% (average effective rate 10.89%), $1.3 billion face
amount, due through 2017 973 1,048
Foreign currency obligations:
Swiss franc, 3.94% to 7.35%, due through 2000 836 867
Deutsche mark, 2.75% to 6.0%, due through 1997 176 359
Other 98 95
Other 276 272
------- -------
16,096 14,921
Less current portion of long-term debt (1,738) (1,514)
------- -------
$14,358 $13,407
======= =======
Financial services and real estate:
Eurodollar notes, 6.75% and 6.625% (average rate 6.7%), due 1997 and 1999 $ 399 $ 399
Zero coupon bonds, 13.3% effective rate, $200 million face amount, due 1994 190 167
Foreign currency obligations:
Swiss franc, 4 3/4%, due 1996 107 248
Other 167 262
Other 100
------- -------
$ 863 $ 1,176
======= =======
</TABLE>
34
<PAGE>
Aggregate maturities of long-term debt, excluding short-term borrowings
reclassified as long-term debt, are as follows:
<TABLE>
<CAPTION>
Consumer Financial Services
(in millions) Products and Real Estate
- ------------- -------- ------------------
<S> <C> <C>
1994 $1,738 $200
1995 708
1996 1,832 107
1997 1,888 367
1998 1,939
1999-2003 5,098 200
2004-2008 439
</TABLE>
The revolving credit facility under which the consumer products short-term debt
was reclassified as long-term debt expires in 1998 and any amounts then
outstanding mature.
Based on market quotes, where available, or interest rates currently available
to the Company for issuance of debt with similar terms and remaining maturities,
the aggregate fair value of consumer products and financial services and real
estate long-term debt, including current portion of long-term debt, at December
31, 1993 was $18.1 billion. The aggregate fair value of such debt at December
31, 1992 did not differ materially from the total amounts disclosed above.
The Company has entered into currency and related interest rate swap
agreements with third parties to manage exposure to currency movements. As a
result, the currency denominations and effective interest rates of debt may
differ from those set forth in this note.
The Company had currency and related interest rate swap agreements with
aggregate principal amounts of $1.4 billion and $1.8 billion at December 31,
1993 and 1992, respectively. At December 31, 1993, aggregate maturities were as
follows (in millions): 1994--$300; 1996--$350 and 1997--$737.
The Company is exposed to credit loss in the event of nonperformance by other
parties to the swap agreements. However, such exposure was not material at
December 31, 1993, and the Company does not anticipate nonperformance.
Note 7. Capital Stock:
Shares of authorized common stock are 4 billion; issued, treasury and
outstanding were as follows:
<TABLE>
<CAPTION>
Issued Treasury Outstanding
------ -------- -----------
<S> <C> <C> <C>
Balances, January 1, 1991 935,320,439 (9,101,348) 926,219,091
Exercise of stock options/units and issuance
of other stock awards 3,661,650 3,661,650
Purchased (10,029,500) (10,029,500)
----------- ---------- -----------
Balances, December 31, 1991 935,320,439 (15,469,198) 919,851,241
Exercise of stock options and issuance of
other stock awards 5,037,244 5,037,244
Purchased (32,622,855) (32,622,855)
Shares issued in connection with an
acquisition 491,555 491,555
----------- ---------- -----------
Balances, December 31, 1992 935,320,439 (42,563,254) 892,757,185
Exercise of stock options and issuance of
other stock awards 1,612,405 1,612,405
Purchased (17,278,900) (17,278,900)
----------- ------------ -----------
Balances, December 31, 1993 935,320,439 (58,229,749) 877,090,690
=========== =========== ===========
</TABLE>
At December 31, 1993, 53,936,151 shares of common stock were reserved for stock
options, stock units and other stock awards and 10,000,000 shares of Serial
Preferred Stock, $1.00 par value, were authorized, none of which have been
issued.
In 1989, the Company distributed rights for each outstanding share of its
common stock. The rights are not exercisable and trade automatically with the
common stock until ten days after public announcement that any person has
acquired 10% or more of the Company's common stock or ten business days after
any person announces a tender offer for 10% or more of the Company's common
stock.
When exercisable, unless a person has acquired 10% or more of the Company's
shares, each right entitles the holder to buy from the Company one share of
common stock for the
35
<PAGE>
Note 7. Capital Stock (continued)
exercise price (currently $150). If the Company is thereafter involved in a
business combination, the rights will entitle holders to buy shares of the
acquiring company having a value of twice the exercise price. If any person
acquires 10% or more of the Company's common stock, the rights will entitle
holders (other than such person) to buy shares of the Company's common stock
having a market value of twice the exercise price. Following the acquisition by
any person of more than 10% but less than 50% of the Company's shares, the
Company may exchange one share of common stock for each right (other than rights
held by such person).
The Company may redeem the rights for $.01 per right before any person
acquires 10% or more of the Company's common stock. The rights expire on October
25, 1999 unless earlier redeemed or exchanged. At December 31, 1993, 989,256,590
shares of common stock were reserved for issuance upon exercise of the rights.
Note 8. Stock Plans:
Under the Philip Morris 1992 Incentive Compensation and Stock Option Plan, the
Company may grant to eligible employees stock options, stock appreciation
rights, restricted stock and annual incentive and long-term performance cash
awards. Up to 37 million shares of common stock are authorized for grant, of
which no more than 9 million shares may be awarded as restricted stock. Stock
options are granted at an exercise price no less than fair market value on the
date of the grant.
At December 31, 1993 and 1992, options and units were exercisable for
21,723,491 shares and 18,358,604 shares, respectively. Shares available to be
granted at December 31, 1993 and 1992 were 23,900,470 and 32,073,120,
respectively.
Options/units activity was as follows for the years ended December 31,
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balances, beginning of year 23,802,744 24,284,910 22,348,561
Granted 8,433,540 5,548,270 5,951,794
Exercised (1,821,944) (5,872,571) (3,891,191)
Cancelled (378,659) (157,865) (124,254)
------------- ------------ ------------
Balances, end of year 30,035,681 23,802,744 24,284,910
============= ============ ============
Range of exercise prices at year-end $8.67-$100.00 $7.26-$69.25 $6.43-$47.00
Weighted average grant price per share $ 49.09 $ 75.63 $ 62.96
============= ============ ============
</TABLE>
From time to time, the Company grants shares of restricted stock to officers and
key employees, giving them in most instances all of the rights of stockholders,
except that they may not sell, assign, pledge or otherwise encumber such shares,
and such shares are subject to forfeiture in certain events. No shares of
restricted stock were granted in 1993 or 1992. In 1991, the Company granted
150,000 shares of restricted stock. At December 31, 1993, 388,000 shares remain
subject to restrictions and will become unrestricted in varying amounts through
1996.
Note 9. Earnings per Share:
Earnings per common share have been calculated on the weighted average number of
shares of common stock outstanding for each year, which was 878,120,884,
906,177,803 and 925,123,394 for 1993, 1992 and 1991, respectively.
Note 10. Pretax Earnings and Provision for Income Taxes:
As discussed in Note 1, the Company adopted SFAS No. 109 effective January 1,
1993. SFAS No. 109 is a modification of SFAS No. 96, which had been the
accounting standard previously followed by the Company. The effect of adoption
of SFAS No. 109 was immaterial to the Company's 1993 financial position and
results of operations.
Pretax earnings and provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Pretax earnings:
United States $4,078 $6,367 $5,166
Outside United States 2,118 2,241 1,805
------ ------ ------
Total pretax earnings $6,196 $8,608 $6,971
====== ====== ======
Provision for income
taxes:
United States federal:
Current $1,199 $1,630 $1,764
Deferred 278 514 119
------ ------ ------
1,477 2,144 1,883
State and local 311 464 355
------ ------ ------
Total United States 1,788 2,608 2,238
------ ------ ------
Outside United States:
Current 830 992 711
Deferred 10 69 95
------ ------ ------
Total outside United
States 840 1,061 806
------ ------ ------
Total provision for
income taxes $2,628 $3,669 $3,044
====== ====== ======
</TABLE>
At December 31, 1993, applicable United States federal income taxes and foreign
withholding taxes have not been provided on approximately $3.8 billion of
accumulated earnings of foreign subsidiaries that are expected to be permanently
reinvested abroad. If these amounts were not considered permanently reinvested,
additional deferred income taxes of approximately $229 million would have been
provided.
36
<PAGE>
The effective income tax rate on pretax earnings differed from the U.S.
federal statutory rate for the following reasons:
<TABLE>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Provision computed at U.S. federal
statutory rate 35.0% 34.0% 34.0%
Increases resulting from:
State and local income taxes, net of
federal tax benefit 3.3 3.6 3.5
Rate differences--foreign operations 0.6 1.9 2.4
Goodwill amortization 3.0 2.0 2.4
Other 0.5 1.1 1.4
---- ---- ----
Provision for income taxes 42.4% 42.6% 43.7%
==== ==== ====
</TABLE>
The tax effects of temporary differences which gave rise to consumer products
deferred income tax assets and liabilities consisted of the following:
<TABLE>
<CAPTION>
December 31,
(in millions) 1993 1992
------- -------
<S> <C> <C>
Deferred income tax assets:
Accrued postretirement and postemployment
benefits $ 995 $ 670
Accrued liabilities 464 432
Restructuring reserves 472 270
Other 445 379
------- -------
Gross deferred income tax assets 2,376 1,751
Valuation allowance (62)
------- -------
Total deferred income tax assets 2,314 1,751
Deferred income tax liabilities:
Property, plant and equipment (1,573) (1,634)
Prepaid pension costs (203) (178)
------- -------
Total deferred income tax liabilities (1,776) (1,812)
------- -------
Net deferred income tax asset (liability) $ 538 $ (61)
======= =======
</TABLE>
Financial services and real estate temporary differences are primarily
attributable to deferred income tax liabilities from investments in finance
leases.
Note 11. Segment Reporting:
Tobacco, food, beer, and financial services and real estate are the major
segments of the Company's operations. The Company's consolidated operations
outside the United States, which are principally in the tobacco and food
businesses, are organized into geographic regions by segment, with Europe the
most significant. Intersegment transactions are not reported separately since
they are not material.
For purposes of segment reporting, operating profit is operating income
exclusive of certain unallocated corporate expenses. See Note 2 regarding
acquisitions and divestitures and Note 3 regarding restructurings. The 1993
restructuring resulted in a reduction of tobacco, food and beer operating profit
of $245 million, $357 million and $139 million, respectively. Substantially all
goodwill amortization is attributable to the food segment.
Identifiable assets are those assets applicable to the respective industry
segments. Reportable segment data were as follows:
<TABLE>
<CAPTION>
Data by Segment for the years
ended December 31, (in millions) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Operating revenues:
Tobacco $25,973 $25,677 $23,840
Food 30,372 29,048 28,178
Beer 4,154 3,976 4,056
Financial services and real estate 402 430 384
------- ------- -------
Total operating revenues $60,901 $59,131 $56,458
======= ======= =======
Operating profit:
Tobacco $ 4,910 $ 7,193 $ 6,463
Food 2,608 2,769 2,016
Beer 215 258 299
Financial services and real estate 249 219 178
------- ------- -------
Total operating profit 7,982 10,439 8,956
Unallocated corporate expenses 395 380 334
------- ------- -------
Operating income $ 7,587 $10,059 $ 8,622
======= ======= =======
Identifiable assets:
Tobacco $ 9,523 $ 9,479 $ 8,648
Food 33,253 32,672 31,622
Beer 1,706 1,545 1,608
Financial services and real estate 5,659 5,297 4,538
------- ------- -------
50,141 48,993 46,416
Other assets 1,064 1,021 968
------- ------- -------
Total assets $51,205 $50,014 $47,384
======= ======= =======
</TABLE>
37
<PAGE>
Note 11. Segment Reporting (continued)
<TABLE>
<CAPTION>
Data by Segment for the years
ended December 31, (in millions) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Depreciation expense:
Tobacco $ 342 $ 291 $ 294
Food 538 507 480
Beer 140 141 139
Financial services and real estate 1
Capital additions:
Tobacco $ 527 $ 460 $ 438
Food 944 947 955
Beer 92 134 144
</TABLE>
<TABLE>
<CAPTION>
Data by Geographic Region for the
years ended December 31, (in millions) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Operating revenues:
United States
--domestic $34,282 $35,304 $34,829
--export 4,105 3,797 3,061
Europe 18,304 17,388 16,029
Other 4,210 2,642 2,539
------- ------- -------
Total operating revenues $60,901 $59,131 $56,458
======= ======= =======
Operating profit:
United States $ 5,695 $ 8,146 $ 7,028
Europe 1,689 1,764 1,523
Other 598 529 405
------- ------- -------
Total operating profit 7,982 10,439 8,956
Unallocated corporate expenses 395 380 334
------- ------- -------
Operating income $ 7,587 $10,059 $ 8,622
======= ======= =======
Identifiable assets:
United States $34,522 $35,187 $34,302
Europe 12,766 12,195 10,616
Other 2,853 1,611 1,498
------- ------- -------
50,141 48,993 46,416
Other assets 1,064 1,021 968
------- ------- -------
Total assets $51,205 $50,014 $47,384
======= ======= =======
</TABLE>
Note 12. Pension Plans:
The Company and its subsidiaries sponsor noncontributory defined benefit pension
plans covering substantially all U.S. employees. The plans provide retirement
benefits for salaried employees based generally on years of service and
compensation during the last years of employment. Retirement benefits for hourly
employees generally are a flat dollar amount for each year of service. The
Company funds these plans in amounts consistent with the funding requirements of
federal law and regulations.
Pension coverage for employees of the Company's non-U.S. subsidiaries is
provided, to the extent deemed appropriate, through separate plans, many of
which are governed by local statutory requirements. The plans provide pension
benefits that are based primarily on years of service and employees' salaries
near retirement. The Company provides for obligations under such plans by
depositing funds with trustees or purchasing insurance policies. The Company
records liabilities for unfunded foreign plans.
U.S. Plans
Net pension (income) cost consisted of the following:
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during
the year $ 151 $ 163 $ 148
Interest cost on projected benefit
obligation 362 359 337
Return on assets
--actual (796) (345) (1,152)
--deferred gain (loss) 314 (119) 726
Amortization of net gain upon adoption
of SFAS No. 87 (28) (28) (28)
Other (income) cost (47) 16
------- ------- -------
Net pension (income) cost $ (44) $ 46 $ 31
======= ======= =======
</TABLE>
During 1993, the Company sold businesses and instituted early retirement and
workforce reduction programs affecting participants in its pension plans. The
resultant curtailment gains reduced pension cost by $47 million. During 1992,
the Company instituted early retirement and workforce reduction programs
affecting certain U.S. employees. Additional pension expense of $59 million
related to these programs was offset by settlement and curtailment gains of $43
million.
The funded status of U.S. plans at December 31 was as follows:
<TABLE>
<CAPTION>
(in millions) 1993 1992
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation--vested $ 3,702 $ 3,167
--nonvested 349 297
------- -------
4,051 3,464
Benefits attributable to projected salaries 588 1,034
------- -------
Projected benefit obligation 4,639 4,498
Plan assets at fair value 6,099 5,611
------- -------
Excess of assets over projected benefit
obligation 1,460 1,113
Unamortized net gain upon adoption of SFAS No. 87 (197) (229)
Unrecognized prior service cost 149 177
Unrecognized net gain from experience differences (882) (560)
------- -------
Prepaid pension cost $ 530 $ 501
======= =======
</TABLE>
38
<PAGE>
The projected benefit obligation at December 31, 1993, 1992 and 1991 was
determined using an assumed discount rate of 7.5%, 8.0% and 8.0%, respectively,
and assumed compensation increases of 4% at December 31, 1993 and 6% and 7% at
December 31, 1992 and 1991. The assumed long-term rate of return on plan assets
was 9% at December 31, 1993, 1992 and 1991. Plan assets consist principally of
common stock and fixed income securities.
The Company and certain of its subsidiaries sponsor deferred profit-sharing
plans covering certain salaried, non-union and union employees. Contributions
and costs are generally determined as a percentage of consolidated pretax
earnings, as defined by the plans. Certain other subsidiaries of the Company
also maintain defined contribution plans. Amounts charged to expense for defined
contribution plans totaled $214 million, $229 million and $220 million in 1993,
1992 and 1991, respectively.
Non-U.S. Plans
Net pension cost consisted of the following:
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Service cost--benefits earned during the year $ 63 $ 59 $ 54
Interest cost on projected benefit obligation 138 133 122
Return on assets
--actual (153) (78) (134)
--deferred gain (loss) 55 (21) 40
Amortization of net gain upon adoption of
SFAS No. 87 (1) (1) (2)
----- ----- -----
Net pension cost $ 102 $ 92 $ 80
===== ===== =====
</TABLE>
The funded status of the non-U.S. plans at December 31 was as follows:
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
(in millions) 1993 1992 1993 1992
------ ------ ------ ------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefit
obligation
--vested $ 947 $ 791 $ 520 $ 480
--nonvested 94 94 54 61
------ ------ ------ ------
1,041 885 574 541
Benefits attributable to projected salaries 254 295 109 105
------ ------ ------ ------
Projected benefit obligation 1,295 1,180 683 646
Plan assets at fair value 1,408 1,224 44 42
------ ------ ------- ------
Plan assets in excess of (less than) projected
benefit obligation 113 44 (639) (604)
Unamortized net (gain) loss upon adoption of SFAS
No. 87 (24) (15) 6 6
Unrecognized net (gain) loss from experience
differences (30) 12 7 24
------ ------ ------ ------
Prepaid (accrued) pension cost $ 59 $ 41 $ (626) $ (574)
====== ====== ====== ======
</TABLE>
The assumptions used in 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Discount rates 5.0% to 12.0% 5.5% to 12.0%
Compensation increases 3.5% to 11.0% 5.0% to 11.0%
Long-term rates of return on plan assets 5.0% to 12.0% 4.8% to 12.0%
</TABLE>
Plan assets consist primarily of common stock and fixed income securities.
39
<PAGE>
Note 13. Postemployment Benefits:
Effective January 1, 1993, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This Statement requires the Company to
accrue the costs of postemployment benefits, other than pensions and
postretirement health care benefits, over the working lives of employees. The
Company previously had expensed the cost of these benefits, which are
principally severance and disability, when the related event occurred.
The cumulative effect at January 1, 1993 of adopting SFAS No. 112, which was
calculated on an undiscounted basis, reduced 1993 net earnings by $477 million
($.54 per share), net of $297 million of income tax benefits. Adoption of SFAS
No. 112 did not materially reduce 1993 earnings before cumulative effect of
accounting change.
Note 14. Postretirement Benefits Other Than Pensions:
Effective January 1, 1991, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," for its U.S.
retiree benefit plans. Under SFAS No. 106, the Company accrues the estimated
cost of retiree benefit payments, other than pensions, during employees' active
service periods. The Company previously had expensed the cost of these benefits,
which are principally related to health care, as claims were incurred.
The Company elected to recognize this change in accounting on the immediate
recognition basis. The cumulative effect as of January 1, 1991 of adopting SFAS
No. 106 was a decrease in 1991 net earnings of $921 million ($.99 per share).
The Company expects to adopt SFAS No. 106 for its non-U.S. plans in 1995 and,
based upon preliminary estimates, does not anticipate that the effects of
adoption will be significant. Net postretirement health care costs for non-U.S.
plans in 1993, 1992 and 1991 were expensed as incurred.
U.S. Plans
The Company and its U.S. subsidiaries provide health care and other benefits to
substantially all retired employees, their covered dependents and beneficiaries.
Generally, employees who have attained age 55 and who have rendered 5 to 10
years of service are eligible for these benefits. Certain health care plans are
contributory; other benefit plans are noncontributory.
Net postretirement health care cost consisted of the following:
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 59 $ 70 $ 68
Interest cost on accumulated postretirement benefit obligation 159 168 148
Amortization of unrecognized net loss from experience differences 2
Amortization of unrecognized prior service cost (16) (6)
Net gain resulting from early retirement and workforce reduction
programs (59)
---- ---- ----
Net postretirement health care cost $143 $234 $216
==== ==== ====
</TABLE>
During 1993, the Company sold businesses and instituted early retirement and
workforce reduction programs affecting participants in its postretirement health
care plans. The resultant settlement and curtailment gains of $79 million were
partially offset by additional expense of $20 million.
The Company's postretirement health care plans currently are not funded. The
status of the plans at December 31 was as follows:
<TABLE>
<CAPTION>
(in millions) 1993 1992
------ ------
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit
obligation:
Retirees $1,279 $1,016
Fully eligible active plan participants 182 256
Other active plan participants 644 887
------ ------
2,105 2,159
Unrecognized net loss from experience differences (162) (137)
Unrecognized prior service cost 198 71
------ ------
Accrued postretirement health care costs $2,141 $2,093
====== ======
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 10.5% in 1992, 10.0% in 1993 and 9.5% in
1994, gradually declining to 6.0% by the year 2001 and remaining at that level
thereafter. A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated postretirement benefit
obligation as of December 31, 1993 and net postretirement health care cost for
the year then ended by approximately 15%.
The accumulated postretirement benefit obligations at December 31, 1993, 1992
and 1991 were determined using assumed discount rates of 7.5%, 8.0% and 8.0%,
respectively.
40
<PAGE>
Non-U.S. Plans
Postretirement health care coverage for employees of the Company's non-U.S.
subsidiaries is provided, to the extent deemed appropriate, through separate
plans. The cost of these benefits, which has not been significant for the years
ended December 31, 1993, 1992 and 1991, is expensed as claims are incurred.
Note 15. Contingencies:
There is litigation pending against the leading United States cigarette
manufacturers seeking compensatory and, in some cases, punitive damages for
cancer and other health effects alleged to have resulted from cigarette smoking
or exposure to cigarette smoking. Philip Morris Incorporated ("PM Inc."), a
wholly-owned subsidiary of the Company, is a defendant in some of these actions.
Among the defenses to certain of this litigation raised by PM Inc. is
preemption by the Federal Cigarette Labeling and Advertising Act, as amended
(the "Act"). On June 24, 1992, the United States Supreme Court held that the
Act, as enacted in 1965, does not preempt common law damage claims but that the
Act, as amended in 1969, preempts claims arising after 1969 against cigarette
manufacturers "based on failure to warn and the neutralization of federally
mandated warnings to the extent that those claims rely on omissions or
inclusions in advertising or promotions." The Court also held that the 1969 Act
does not preempt claims based on express warranty, fraudulent misrepresentation
or conspiracy. The Court also held that claims for fraudulent concealment were
preempted except "insofar as those claims relied on a duty to disclose...facts
through channels of communication other than advertising or promotion." (The
Court did not consider whether such common law damage claims were valid under
state law.) The Court's ruling affirmed in part, and reversed in part, a 1990
decision of the Court of Appeals for the Third Circuit, holding that the Act
preempted claims arising after 1965 that challenged the adequacy of the
federally mandated warning or the propriety of cigarette manufacturers'
advertising and promotional activities. The Court's decision was announced by a
plurality opinion. The effect of the decision on pending and future cases will
be the subject of further proceedings in the lower federal and state courts.
Additional similar litigation could be encouraged if legislative proposals to
eliminate the federal preemption defense, pending in Congress since 1991, were
enacted. It is not possible to predict whether any such legislation will be
enacted.
PM Inc. believes, and it has been so advised by counsel, that it has a number
of valid defenses to all smoking and health cases, including, but not limited
to, those defenses based on preemption under the Supreme Court decision referred
to above. All such cases are, and will continue to be, vigorously defended. It
is not possible to predict the outcome of this litigation. Litigation is
subject to many uncertainties, and it is possible that some of these actions
could be decided unfavorably to PM Inc. An unfavorable outcome of a pending
action could encourage the commencement of additional similar litigation.
On April 2, 1993, the Company and several of its officers were named as
defendants in the first of a number of purported shareholder class actions which
have been consolidated in the United States District Court for the Southern
District of New York. These lawsuits allege that the Company violated federal
securities laws by making false and misleading statements concerning the effects
of discount cigarettes on PM Inc.'s premium tobacco business prior to April 2,
1993, the date upon which PM Inc. announced revisions in its marketing and
pricing strategies for its premium and discount brands. The Company will defend
these lawsuits vigorously.
Management believes that the ultimate outcome of all pending litigation
matters should not have a material adverse effect on the Company's financial
position. However, management is unable to make a meaningful estimate of the
amount or range of loss that could result from an unfavorable outcome of all
pending litigation. It is possible that the Company's results of operations or
cash flows in a particular quarterly or annual period could be materially
affected by the ultimate adverse outcome of certain pending litigation matters.
The Company is contingently liable for payment of (Pounds)610 million notes
maturing in 1994, sold with recourse in 1989.
Note 16. Additional Information:
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Years ended December 31:
Depreciation expense $1,042 $ 963 $ 939
====== ====== ======
Rent expense $ 380 $ 348 $ 314
====== ====== ======
Research and development expense $ 421 $ 410 $ 396
====== ====== ======
Interest and other debt expense, net:
Interest expense $1,478 $1,513 $1,696
Interest income (87) (62) (45)
------ ------ ------
$1,391 $1,451 $1,651
====== ====== ======
Interest expense of financial services
and real estate operations included in
cost of sales $ 87 $ 95 $ 83
====== ====== ======
</TABLE>
Note 17. Financial Services and Real Estate Operations:
Philip Morris Capital Corporation ("PMCC") is a wholly-owned subsidiary of the
Company. PMCC has investments in third-party leveraged and direct finance
leases and securities of third parties and engages in various financing
activities for customers and suppliers of the Company's subsidiaries.
Additionally, PMCC is engaged through its wholly-owned subsidiary, Mission Viejo
Company, in land planning, development and sales.
Pursuant to a support agreement, the Company has agreed to retain ownership of
100% of the voting stock of PMCC and make periodic payments to PMCC to the
extent necessary to ensure that earnings available for fixed charges equal at
least 1.25 times its fixed charges. No payments were required in 1993, 1992 or
1991.
41
<PAGE>
Note 17.Financial Services and
Real Estate Operations (continued)
Condensed balance sheet data at December 31 follows:
<TABLE>
<CAPTION>
(in millions) 1993 1992
------- -------
<S> <C> <C>
Assets
Finance leases $5,314 $5,240
Other investments 1,440 1,402
------ ------
6,754 6,642
Less unearned income and
allowances 1,861 1,988
------ ------
Finance assets, net 4,893 4,654
Real estate held for development
and sale 489 489
Goodwill, net of accumulated
amortization 37 38
Other assets 284 148
------ ------
Total assets $5,703 $5,329
====== ======
Liabilities and stockholder's
equity
Short-term borrowings $ 929 $ 758
Long-term debt 863 1,384
Deferred income taxes 2,706 2,187
Other liabilities 169 186
Stockholder's equity 1,036 814
------ ------
Total liabilities and
stockholder's equity $5,703 $5,329
====== ======
</TABLE>
The amounts shown above include receivables and payables with the Company and
its other subsidiaries as follows:
<TABLE>
<CAPTION>
(in millions) 1993 1992
------ ------
<S> <C> <C>
Finance assets, net $ 24 $ 32
Other assets $ 20
Long-term debt $ 208
Other liabilities $ 7
</TABLE>
These amounts were eliminated in the Company's consolidated balance sheets.
Finance leases consist of a portfolio of investments in transportation,
satellite transponders, power generation, manufacturing equipment and facilities
and real estate. Rentals receivable for leveraged leases represent unpaid
rentals less principal and interest on third-party nonrecourse debt.
Effective December 31, 1993, PMCC adopted the method of accounting prescribed
by SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Under SFAS No. 115, PMCC's investment securities, included in other
investments, are classified as available for sale and are recorded at fair
value, with unrealized gains and losses included as a component of stockholders'
equity. Prior to December 31, 1993, investments in marketable equity securities
were recorded at the lower of cost or market value with market value adjustments
included as a component of stockholders' equity.
Other investments also include real estate and commercial receivables, the
total estimated fair values of which, at December 31, 1993 and 1992,
approximated the amounts disclosed above. Fair values were estimated by
discounting projected cash flows using the current rates for similar loans to
borrowers with similar credit ratings and maturities.
Condensed income statement data follows for the years ended December 31,
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Revenues:
Financial services $276 $294 $269
Real estate 134 146 125
---- ---- ----
Total revenues 410 440 394
Expenses:
Financial services 105 141 141
Real estate 90 93 83
---- ---- ----
Total expenses 195 234 224
Equity in earnings of limited partnership
investments 8
---- ---- ----
Earnings before income taxes and cumulative
adjustments 223 206 170
Cumulative pretax adjustments related to
leveraged leases 23
---- ---- ----
Earnings before income taxes and cumulative
effect of accounting change 246 206 170
Provision for income taxes:
Current year 75 66 49
Cumulative adjustments related to leveraged
leases 40
---- ---- ----
Total provision for income taxes 115 66 49
---- ---- ----
Earnings before cumulative effect of
accounting change 131 140 121
Cumulative effect of change in method of
accounting for postretirement benefits other
than pensions (4)
---- ---- ----
Net earnings $131 $140 $117
==== ==== ====
</TABLE>
PMCC's portfolio of leveraged leases was recalculated using a 35% federal income
tax rate, retroactive to January 1, 1993. A cumulative adjustment was recorded
that increased earnings before income taxes and cumulative effect of accounting
change, increased the provision for income taxes and decreased net earnings by
$23 million, $40 million and $17 million, respectively.
42
<PAGE>
Note 18. Quarterly Financial Data (Unaudited):
<TABLE>
<CAPTION>
1993 Quarters
(in millions, except per share data) 1st 2nd 3rd 4th
------- -------- ------- -------
<S> <C> <C> <C> <C>
Operating revenues $15,189 $ 15,789 $15,209 $14,714
======= ======== ======= =======
Gross profit $ 5,935 $ 6,277 $ 5,926 $ 5,712
======= ======== ======= =======
Earnings before cumulative effect of
accounting change $ 1,214 $ 1,048 $ 967 $ 339
Cumulative effect of change in method of
accounting (477)
------- -------- ------- -------
Net earnings $ 737 $ 1,048 $ 967 $ 339
======= ======== ======= =======
Per share data:
Earnings before cumulative effect of
accounting change $ 1.38 $ 1.19 $ 1.11 $ .38
Cumulative effect of accounting change (.54)
------- -------- ------- -------
Net earnings $ .84 $ 1.19 $ 1.11 $ .38
======= ======== ======= =======
Dividends declared $ .65 $ .65 $ .65 $ .65
======= ======== ======= =======
Market price--high $77 5/8 $64 3/4 $51 3/8 $59 3/8
--low $60 5/8 $45 $45 3/8 $45 1/2
</TABLE>
Effective January 1, 1993, the Company changed its method of accounting for
postemployment benefits. This change in accounting reduced previously reported
net earnings by $4 million in the first quarter, $5 million in the second
quarter ($.01 per share) and $4 million in the third quarter. See Note 13.
During the fourth quarter of 1993, the Company provided $741 million pretax,
$457 million after tax, for the costs of restructuring its worldwide operations.
The pretax charge was included in marketing, administration and research costs.
See Note 3.
<TABLE>
<CAPTION>
1992 Quarters
(in millions, except per share data) 1st 2nd 3rd 4th
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenues $14,051 $15,155 $15,005 $14,920
======= ======= ======= =======
Gross profit $ 5,522 $ 6,382 $ 6,098 $ 6,011
======= ======= ======= =======
Net earnings $ 1,099 $ 1,353 $ 1,291 $ 1,196
======= ======= ======= =======
Per share data:
Net earnings $ 1.20 $ 1.48 $ 1.44 $ 1.34
======= ======= ======= =======
Dividends declared $ .525 $ .525 $ .650 $ .650
======= ======= ======= =======
Market price--high $82 1/2 $79 7/8 $86 5/8 $84 7/8
--low $72 5/8 $69 1/2 $73 7/8 $74
</TABLE>
The sum of quarterly per share amounts does not equal the annual amount due to
changes in shares outstanding during the year.
During the second quarter of 1992, the Company sold its interest in a Canadian
joint venture for a pretax gain of $137 million, $82 million after tax. In
addition, the Company provided $144 million pretax, $89 million after tax, for
costs of discontinuing certain products, an early retirement program, and
reorganization of distribution and customer service centers. The pretax gain, as
well as the pretax charges, was included in marketing, administration and
research costs.
------------------
The principal stock exchange, on which the Company's common stock (par value $1
per share) is listed, is the New York Stock Exchange. At January 31, 1994 there
were approximately 164,400 holders of record of the Company's common stock.
43
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
Philip Morris Companies Inc.:
We have audited the accompanying consolidated balance sheets of Philip Morris
Companies Inc. and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Philip Morris
Companies Inc. and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in Notes 1, 13 and 14 to the consolidated financial statements,
the Company adopted in 1993 the method of accounting for postemployment benefits
prescribed by Statement of Financial Accounting Standards No. 112, and in 1991
adopted the method of accounting for postretirement benefits other than pensions
prescribed by Statement of Financial Accounting Standards No. 106.
/s/ Coopers & Lybrand
Coopers & Lybrand
New York, New York
January 24, 1994
Company Report on Financial Statements
The consolidated financial statements and all related financial information
herein are the responsibility of the Company. The financial statements, which
include amounts based on judgments, have been prepared in accordance with
generally accepted accounting principles. Other financial information in the
annual report is consistent with that in the financial statements.
The Company maintains a system of internal controls that it believes provides
reasonable assurance that transactions are executed in accordance with
management's authorization and properly recorded, that assets are safeguarded,
and that accountability for assets is maintained. The system of internal
controls is characterized by a control-oriented environment within the Company,
which includes written policies and procedures, careful selection and training
of personnel, and audits by a professional staff of internal auditors.
Coopers & Lybrand, independent accountants, have audited and reported on the
Company's consolidated financial statements. Their audits were performed in
accordance with generally accepted auditing standards.
The Audit Committee of the Board of Directors, composed of six non-management
directors, meets periodically with Coopers & Lybrand, the Company's internal
auditors and management representatives to review internal accounting control,
auditing and financial reporting matters. Both Coopers & Lybrand and the
internal auditors have unrestricted access to the Audit Committee and may meet
with it without management representatives being present.
44
<PAGE>
GRAPHICS APPENDIX LIST FOR EXHIBIT 13
Where
Description of Graphic Graphic Appears
- ---------------------- ---------------
Graphic image of a globe with various brand names of Pages 20,27,29,
products of the Company superimposed upon the globe 31 and 33
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Certain active subsidiaries of the Company and their subsidiaries as of
December 31, 1993 are listed below. The names of certain subsidiaries, which
considered in the aggregate would not constitute a significant subsidiary, have
been omitted.
<TABLE>
<CAPTION>
STATE OR
COUNTRY OF
NAME ORGANIZATION
---- -------------------------
<S> <C>
AB Estrella................................................ Sweden
AB Kraft Jacobs Suchard Lietuva............................ Lithuania
AB Malaco.................................................. Sweden
AB Marabou................................................. Sweden
AB Slotts.................................................. Sweden
AG Chocolat Tobler......................................... Switzerland
Ajinomoto General Foods, Inc. ............................. Japan
Alfred Bird & Sons (Ireland) Limited....................... Ireland
Alimentos Kraft de Venezuela, C.A. ........................ Venezuela
The All American Gourmet Company .......................... Delaware
A/O Almaty Tobacco Company................................. Kazakhstan
A/O Krasnadortabakprom..................................... Russia
A/O Philip Morris NEVA..................................... Russia
A/S Freia.................................................. Norway
A/S Freia Husholdning...................................... Norway
A/S Maarud................................................. Norway
A/S Malaco................................................. Norway
Aura Finanziaria S.r.l. ................................... Italy
Beijing Kraft Food Corporation Limited..................... China
Boboli Co. ................................................ Delaware
Bouyea-Fassetts, Inc. ..................................... Delaware
Cafe Grand Mere S.A. ...................................... France
Callard & Bowser-Suchard, Inc. ............................ Delaware
Capri Sun, Inc. ........................................... Delaware
C.A. Tabacalera Nacional................................... Venezuela
Charles Freihofer Baking Company, Inc. .................... New York
Chocolat Tobler Ltd........................................ United Kingdom
Churny Company, Inc. ...................................... Delaware
Coffee HAG (UK) Ltd. ...................................... United Kingdom
Comptoir de la Confiserie & Cie ........................... France
Consolidated Beverage Distributors, Inc. .................. California
Cote d'Or Espana S.A. ..................................... Spain
Cote d'Or Italia S.R.L. ................................... Italy
Cote d'Or (Netherlands) BV................................. Netherlands
Dansk Estrella A/S......................................... Denmark
Dart & Kraft Finance N.V. ................................. Netherlands Antilles
Di Giorno Foods Co. ....................................... Delaware
Dong Suh Foods............................................. Korea
Egri Dohanygyar kft. ...................................... Hungary
El Gallito Industrial, S.A. ............................... Costa Rica
Entenmann's, Inc. ......................................... Delaware
Estrella Holding A/S....................................... Denmark
</TABLE>
21-1
<PAGE>
<TABLE>
<CAPTION>
STATE OR
COUNTRY OF
NAME ORGANIZATION
---- -------------------------
<S> <C>
Estrella Invest AB......................................... Sweden
Fabriques de Tabac Reunies S.A............................. Switzerland
Fastighets AB Sigismund.................................... Sweden
Fattorie Osella S.p.A. .................................... Italy
Franklin Baker Company of the Philippines ................. Philippines
Freia Choklad & Konfektyr AB............................... Sweden
Freia Chokolade A/S........................................ Denmark
Freia Marabou Danmark A/S.................................. Denmark
Freia Marabou Finance Ltd. ................................ Ireland
Freia Marabou Suchard A.S.................................. Norway
Freia Marabou Sverige AB................................... Sweden
FTR Holding S.A. .......................................... Switzerland
Gardners Good Foods, Inc. ................................. New Jersey
General Foods Bakery Companies, Inc. ...................... Delaware
General Foods Credit Corporation........................... Delaware
General Foods Limited ..................................... United Kingdom
General Foods Manufacturing Corporation of Mexico.......... Delaware
General Foods Norway A/S................................... Norway
Genfo AG................................................... Switzerland
Goldene Tasse Vertriebs G.m.b.H............................ Germany
Goteborgs Kex AB........................................... Sweden
Grant Holdings, Inc. ...................................... Pennsylvania
Grundstucksgemeinschaft Jacobs Suchard G.b.R. ............. Germany
Guangtong Food Company Ltd................................. China
HAG GF AG.................................................. Germany
HAG GF Vertriebs G.m.b.H................................... Germany
HAG GF Vertriebs G.m.b.H. & Co. Offene Handelsgesellschaft. Germany
HAG GF Vertriebs & Marketing Corporation................... Delaware
Heinrich Jessens Chokladefabrik A/S........................ Denmark
Herzjunge-Kasewerk G.m.b.H................................. Germany
HNB Investment Corp. ...................................... Delaware
Immobliare Asiago SRL...................................... Italy
Industrial Quesera Menorquina Jacobs Suchard S.A. ......... Spain
Industrial Quesera Menorquina (Portugal) Produtos
Alimentares LDA........................................... Portugal
Jack's Frozen Pizza, Inc. ................................. Wisconsin
Jacob Leinenkugel Brewing Company, Inc. ................... Wisconsin
Jacobs Caffe S.r.L. ....................................... Italy
Jacobs Erzeugnisse G.m.b.H................................. Germany
Jacobs Export & Industrial Sales G.m.b.H. ................. Germany
Jacobs Kaffee Gesellschaft m.b.H........................... Austria
Jacobs Suchard Berlin G.m.b.H. & Co. KG ................... Germany
Jacobs Suchard Beteiligungs Ges.m.b.H. .................... Austria
Jacobs Suchard Budapest Ges.m.b.H.......................... Hungary
Jacobs Suchard China Ltd. ................................. Hong Kong
Jacobs Suchard Cote d'Or Export SA......................... Belgium
Jacobs Suchard Cote d'Or Nederland B.V. ................... Netherlands
Jacobs Suchard CS spol.s.r.o. ............................. Czech Republic
Jacobs Suchard Dadak A.S. ................................. Czech Republic
Jacobs Suchard Erzeugnisse G.m.b.H. & Co. KG............... Germany
</TABLE>
21-2
<PAGE>
<TABLE>
<CAPTION>
STATE OR
COUNTRY OF
NAME ORGANIZATION
---- -------------------------
<S> <C>
Jacobs Suchard Figaro A.S................................... Slovak Republic
Jacobs Suchard Finance...................................... Switzerland
Jacobs Suchard France S.A. ................................. France
Jacobs Suchard G.m.b.H. .................................... Germany
Jacobs Suchard Grundst. verwaltung.......................... Germany
Jacobs Suchard Holding...................................... France
Jacobs Suchard International Finance (Cayman) Ltd. ......... Cayman Islands
Jacobs Suchard Limited...................................... United Kingdom
Jacobs Suchard Management and Consulting AG ................ Switzerland
Jacobs Suchard Manufacturing & Co. G.m.b.H. KG ............. Germany
Jacobs Suchard Pavlides S.A. ............................... Greece
Jacobs Suchard Poland Limited............................... Poland
Jacobs Suchard Service...................................... France
Jacobs Suchard Service AG................................... Switzerland
Jacobs Suchard Service G.m.b.H. & Co. KG ................... Germany
Jacobs Suchard Singapore PTE Ltd. .......................... Singapore
Jacobs Suchard SRL.......................................... Italy
Jacobs Suchard Tobler SA ................................... Switzerland
Johann Jacobs G.m.b.H. ..................................... Germany
J.W. Darboven G.m.b.H. ..................................... Germany
J. Wundermann AB............................................ Sweden
Ka-Tee Ka AG ............................................... Switzerland
Kaffee HAG AG .............................................. Switzerland
Kaffee Handels G.m.b.H. .................................... Germany
The Kenco Coffee Company Limited............................ United Kingdom
Kibon S.A. ................................................. Brazil
Kraft Chorzele.............................................. Poland
Kraft Food Ingredients Corp. ............................... Delaware
Kraft Foodservice Holding Corporation ...................... Delaware
Kraft Foodservice, Inc. .................................... Delaware
Kraft Foods (Ireland) Limited............................... Ireland
Kraft Foods Limited......................................... Australia
Kraft Foods Limited......................................... United Kingdom
Kraft General Foods AB...................................... Sweden
Kraft General Foods A/S..................................... Denmark
Kraft General Foods (Asia-Pacific) Limited ................. Hong Kong
Kraft General Foods (Australia) Limited..................... Australia
Kraft General Foods Canada Inc. ............................ Canada
Kraft General Foods Europe G.m.b.H. ........................ Germany
Kraft General Foods France S.A. ............................ France
Kraft General Foods G.m.b.H. ............................... Germany
Kraft General Foods Hellas S.A. ............................ Greece
Kraft General Foods (Holdings) Limited...................... United Kingdom
Kraft General Foods Holdings Norway, Inc. .................. Delaware
Kraft General Foods, Inc. .................................. Delaware
Kraft General Foods International, Inc. .................... Delaware
Kraft General Foods International Services, Inc. ........... Delaware
Kraft General Foods (Ireland) Limited....................... Ireland
Kraft General Foods Limited ................................ United Kingdom
</TABLE>
21-3
<PAGE>
<TABLE>
<CAPTION>
STATE OR
COUNTRY OF
NAME ORGANIZATION
---- -------------------------
<S> <C>
Kraft General Foods Manufacturing Corporation.............. Delaware
Kraft General Foods de Mexico, S.A. de C.V. ............... Mexico
Kraft General Foods Nederland BV........................... Netherlands
Kraft General Foods New Zealand Limited ................... New Zealand
Kraft General Foods Norge A.S. ............................ Norway
Kraft General Foods (Philippines) Inc. .................... Philippines
Kraft General Foods (Puerto Rico), Inc. ................... Puerto Rico
Kraft General Foods S.A. .................................. Spain
Kraft General Foods S.r.L. ................................ Italy
Kraft General Foods (Thailand) Ltd. ....................... Thailand
Kraft General Foods (U.S.A.) Pte. Ltd. .................... Singapore
Kraft GF G.m.b.H. ......................................... Germany
Kraft Holdings Limited..................................... United Kingdom
Kraft Jacobs Suchard AG.................................... Switzerland
Kraft Jacobs Suchard Bulgaria Limited...................... Bulgaria
Kraft Jacobs Suchard R & D, Inc. .......................... Delaware
Kraft Japan, K.K. ......................................... Japan
Kraft Korea Inc. .......................................... Korea
Krema Limited.............................................. Ireland
Lagerman (U.K.) Ltd. ...................................... United Kingdom
La Vosgienne SETED......................................... France
Malaco A/S................................................. Denmark
Malmo Lakritsfabrik AB..................................... Sweden
Marabou G.m.b.H. .......................................... Germany
Marsa Kraft General Foods Sabanci Gida Sanayi Ve Ticaret
A.S. ..................................................... Turkey
Massalin Particulares...................................... Argentina
Maxam Food Products Pty. Ltd. ............................. Australia
Maxpax International G.m.b.H. ............................. Germany
Maxpax France S.A. ........................................ France
Maxpax (UK) Limited........................................ United Kingdom
MBC Holdings, Inc. ........................................ Wisconsin
Merido Genussmittel G.m.b.H. .............................. Germany
Metropolitan Cheese Distributing Corporation............... New York
Miller Brewing Company..................................... Wisconsin
Miller Brewing 1855, Inc................................... Delaware
Mirabell Salzburger Confiserie-und Bisquit Gesellschaft
m.b.H. ................................................... Austria
Mission Viejo Company...................................... California
Monerris Planelles S.A. ................................... Spain
Monthelado S.A. ........................................... Argentina
Nike Industria Alirentare S.r.l............................ Italy
N.V. Kraft General Foods S.A. ............................. Belgium
Oroweat Bakers Limited..................................... Canada
Oscar Mayer Foods Corporation.............................. Delaware
Oy Estrella AB............................................. Finland
OY Marabou Ab.............................................. Finland
Phenix Leasing Corporation................................. Delaware
Phenix Management Corporation.............................. Delaware
Philip Morris Asia Incorporated............................ Delaware
Philip Morris Belgium S.A. ................................ Belgium
</TABLE>
21-4
<PAGE>
<TABLE>
<CAPTION>
STATE OR
COUNTRY OF
NAME ORGANIZATION
---- -------------------------
<S> <C>
Philip Morris Capital Corporation.......................... Delaware
Philip Morris Europe S.A. ................................. Delaware
Philip Morris G.m.b.H. .................................... Germany
Philip Morris Holland B.V. ................................ Netherlands
Philip Morris Incorporated................................. Virginia
Philip Morris International Finance Corporation............ Delaware
Philip Morris International Inc. .......................... Delaware
Philip Morris Kabushiki Kaisha............................. Japan
Philip Morris Korea C.H. .................................. Korea
Philip Morris Latin America Inc. .......................... Delaware
Philip Morris Limited...................................... Australia
Philip Morris Management Corp. ............................ New York
Philip Morris Marketing S.A. .............................. Delaware
Philip Morris Products Inc. ............................... Virginia
Philip Morris Sales Inc. .................................. Delaware
PHILSA Philip Morris Sabanci Sigara ve Tutunculuk Sanayi ve
Ticaret, A.S. ............................................ Turkey
P.M. Beverage Holdings, Inc................................ Delaware
PMCC Leasing Corporation................................... Delaware
Premierfoods Corporation................................... Taiwan
Q-Refres-Ko S.A............................................ Brazil
Ridg's Finer Foods, Inc. .................................. Delaware
Rye Ventures, Inc. ........................................ New York
S.A. Jacobs Suchard--Cote d'Or N.V. ....................... Belgium
SICMA (Societe Industrielle pour la Construction de
Materials Automatiques)................................... France
Skandinavisk Kaffekompagni A.p.S. ......................... Denmark
Societa Immobiliare Modenese S.p.A. ....................... Italy
Suchard Argentina S.A. .................................... Argentina
Suchard Schokolade Ges.m.b.H. ............................. Austria
Suchard Tobler Vertriebs G.m.b.H. ......................... Germany
Suchard Unterstutzungskasse Gesellschaft m.b.H. ........... Austria
Swebiscuits AB............................................. Sweden
Tabacalera Centroamericana S.A. ........................... Guatemala
Tabacalera Costarricense S.A. ............................. Costa Rica
Tabak A.S. ................................................ Czech Republic
Taloca AG.................................................. Switzerland
Terry's Suchard Limited.................................... United Kingdom
Tombstone Pizza Corporation ............................... Delaware
Velveta Milch Werke G.m.b.H. .............................. Germany
Vict Th. Engwall & Co., Inc. .............................. Delaware
Votesor BV................................................. Netherlands
Zaklady Przemyslu Cukiemiczego "Olza" SA................... Poland
</TABLE>
21-5
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 12 to the registration statement of Philip Morris Companies Inc. (the
"Company") on Form S-14 (File No. 2-96149) and in the Company's registration
statements on Form S-3 (File Nos. 33-21033, 33-34940 and 33-49195) and Form S-8
(File Nos. 33-1479, 33-1480, 33-10218, 33-13210, 33-14561, 33-17870, 33-37115,
33-38781, 33-39162, 33-40110 and 33-48781) of our reports dated January 24,
1994, on our audits of the consolidated financial statements and financial
statement schedules of the Company as of December 31, 1993 and 1992, and for the
years ended December 31, 1993, 1992, and 1991, which reports are included or
incorporated by reference in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand
New York, New York
March 16, 1994
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Elizabeth E. Bailey
-----------------------------
ELIZABETH E. BAILEY
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Murray H. Bring
-----------------------------
MURRAY H. BRING
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Harold Brown
-----------------------------
HAROLD BROWN
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Jose Antonio Cordido-Freytes
--------------------------------
JOSE ANTONIO CORDIDO-FREYTES
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ William H. Donaldson
-----------------------------
WILLIAM H. DONALDSON
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Paul W. Douglas
-----------------------------
PAUL W. DOUGLAS
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Jane Evans
-----------------------------
JANE EVANS
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Robert E. R. Huntley
-----------------------------
ROBERT E. R. HUNTLEY
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Hamish Maxwell
-----------------------------
HAMISH MAXWELL
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company") does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Michael A. Miles
-----------------------------
MICHAEL A. MILES
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ T. Justin Moore, Jr.
-----------------------------
T. JUSTIN MOORE, JR.
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Rupert Murdoch
-----------------------------
RUPERT MURDOCH
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ William Murray
-----------------------------
WILLIAM MURRAY
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ John D. Nichols
-----------------------------
JOHN D. NICHOLS
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Richard D. Parsons
-----------------------------
RICHARD D. PARSONS
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Roger S. Penske
-----------------------------
ROGER S. PENSKE
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ John S. Reed
-----------------------------
JOHN S. REED
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ John M. Richman
-----------------------------
JOHN M. RICHMAN
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Hans G. Storr
-----------------------------
HANS G. STORR
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents That the undersigned, a Director of Philip
Morris Companies Inc., a Virginia corporation (the "Company"), does hereby
constitute and appoint Michael A. Miles, Hans G. Storr and Murray H. Bring, or
any one or more of them, his/her true and lawful attorney, for him/her and in
his/her name, place and stead, to execute, by manual or facsimile signature,
electronic transmission or otherwise, the Annual Report on Form 10-K of the
Company for the year ended December 31, 1993 and any amendments or supplements
to said Annual Report and to cause the same to be filed with the Securities and
Exchange Commission, together with any exhibits, financial statements and
schedules included or to be incorporated by reference therein, hereby granting
to said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite or desirable to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things which said attorneys
may do or cause to be done by virtue of these presents.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
this 23rd day of February, 1994.
/s/ Stephen M. Wolf
-----------------------------
STEPHEN M. WOLF
